Francis Kean
Noona Barlow

On this site, I try to keep my readers up to date on the latest developments in the world of directors’ and officers’ liability and insurance. Every now and then, it is worth taking a step back and asking the basic questions, such as, what should directors know about their D&O insurance? The following guest post, written by Francis Kean and Noona Barlow, Partners in the Financial Lines team at McGill and Partners, in conjunction with Airmic, answer some of the basic questions. This Guide was originally published by Airmic to coincide with its 2021 annual conference and is available on its website. The article’s authors are based in the UK and so the article is written from a UK perspective, but many of the article’s insights are largely applicable in the US as well. I would like to thank the authors and Airmic for allowing me to publish this article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article. Continue Reading Guest Post: Boardroom Guide to D&O Insurance

Michael W. Peregrine

Russia’s invasion of Ukraine will have many ramifications, some of which may only become apparent over the course of years . For those of us whose job is to worry about the liability exposures of corporate directors and officers, one question has been whether the developments in Ukraine will have legal implications for companies and their executives. Among other concerns for companies and their executives is the sanction regimes that the governments of the U.S., U.K. and other countries have put in place.  In the following guest post, Michael W. Peregrine, a partner at McDermott Will & Emery LLP, examines at the corporate governance implications for U.S. companies arising from the sanctions. A version of this article previously was published by Forbes. I would like to thank Michael for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Michael’s article. Continue Reading Guest Post: The Globalization of Corporate Governance

On March 21, 2022, the SEC, by a 3-1 vote along party lines, approved the issuance of proposed rule changes that, if adopted, would require all registered companies, including foreign issuers, to make specified disclosures related to climate change and greenhouse gas emissions in their registration statements and in annual SEC filings (such as reports on Form 10-K). As discussed below, the proposed disclosure requirements have already provoked significant commentary. The SEC’s 534-page proposed rule release can be found here. The SEC’s fact sheet about the proposed rules can be found here. The SEC’s March 21, 2022 press release about the proposed rules can be found here. Continue Reading Thinking About the SEC’s Proposed Climate Change Disclosure Requirements

In January of this year, when the Delaware Chancery Court sustained the Delaware state court direct action filed against the directors and officers of the SPAC that had acquired MultiPlan Corp., I speculated that the Court’s ruling would encourage other disgruntled SPAC investors to bring similar Delaware direct actions against SPAC management.

 

Consistent with my speculation, on March 18, 2022, a plaintiff shareholder filed a direct action for breach of fiduciary duty against certain former directors of officers of Decarbonization Plus Acquisition Corporation, a special purpose acquisition company (SPAC), that in July 2021 merged with Hyzon Motors USA to form Hyzon Motors Inc. The claim is brought on behalf of SPAC investors who were entitled to redeem their shares at the time of the merger.  The plaintiff claims that the defendants’ misrepresentations about the merger deprived the plaintiff class of their right to make an informed redemption decision. The claims asserted on behalf of the investors are not only very similar to the allegations previously raised in the MultiPlan litigation, but the new complaint expressly quotes the dismissal motion denial ruling in the MultiPlan ruling. As discussed below, this latest lawsuit may indicate a likely future direction for SPAC related litigation. A copy of the complaint in the new Delaware state court direct action can be found here. Continue Reading Investors Bring SPAC-Related Direct Fiduciary Breach Action Relating to Hyzon Motors Merger

As I have noted in prior posts, one of the most significant securities litigation phenomenon over recent months has been the rise of lawsuits involving special purpose acquisition corporations (SPACs). Last week, two more of these SPAC-related suits were filed. Although the new lawsuits have features in common with many of the prior SPAC-related suits, they also have several interesting distinctive attributes as well, as discussed below. Continue Reading More Securities Lawsuits Filed Against Post-SPAC-Merger Companies

In an interesting decision that explores the standard to be used in determining whether an earlier claim and a later claim are interrelated, the Delaware Supreme Court has affirmed a lower court ruling that a later filed opt-out action is related to a securities lawsuit earlier filed against First Solar, and therefore that the opt-out action is not covered under the D&O insurance program in place at the time the opt-out action was filed. Interestingly, the Supreme Court affirmed the lower court even though the appellate court held that the lower court had erroneously applied a “fundamentally identical” standard to the relatedness question rather than the relatedness standard defined by the policies. The Delaware Supreme Court’s March 16, 2022 opinion can be found here. Continue Reading Del. Supreme Court: Opt-Out Action “Related” to Securities Class Action, Precluding Coverage

One trend I have noted on this site in recent years is the proclivity of plaintiffs’ lawyers to file securities class action lawsuits or shareholder derivative lawsuits in the wake of antitrust regulatory or enforcement actions. These kinds of lawsuits tend to cluster in specific industries as antitrust enforcement authorities concentrate on alleged anticompetitive behavior in those sectors. One industry that recently was the focus of both regulatory action and securities litigation is the poultry production industry.

 

As discussed here, beginning in 2016 companies in this industry that found themselves the subject of antitrust enforcement actions were hit with follow on securities litigation. In connection with one of those suits involving poultry producer Pilgrim’s Pride the court recently granted the defendants’ motion to dismiss. Both the lawsuit and the court’s ruling are significant given the current Presidential administration’s ramped-up antitrust enforcement approach and the possibility for resulting follow-on D&O claims. The Court’s March 8, 2022 order in the Pilgrim’s Pride case can be found here. Continue Reading Antitrust Enforcement Follow-On Securities Suit Against Pilgrim’s Pride Dismissed

As I noted in a prior post (here), Delaware’s legislature recently enacted a new legislation to permit Delaware corporations to put captive insurance in place as an alternative to traditional D&O insurance. In the following guest post, Richard Porter, Head of Financial Lines, Chubb Bermuda, Jarrod Schlesinger, Head of Public Company Management Liability, Chubb N.A. Financial Lines, and Dan Bailey, Member of Bailey Cavalieri LLC, take a look at the Delaware captive legislation and raise a number of concerns about the new law. A version of this article was previously published by Chubb on its website and can be accessed here. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article. Continue Reading Guest Post: Proceed with Caution: Concerns About Delaware’s New Captive Statute

Within the D&O marketplace, the SPAC and De-SPAC space has been difficult over the last 18 to 24 months. Pricing for D&O insurance for SPACs and De-SPACs has been extraordinarily high. In addition, the insurers are only willing to provide coverage at all with extraordinarily high self-insured retentions (SIRs). These difficult marketplace conditions have caused many buyers to consider possible insurance alternatives, such as Side-A only insurance programs. The high SIRs also raise practical questions about how the elevated retentions will be funded in the event of the claim. The possible alternative insurance structures and the questions about funding the elevated retentions in turn raise a host of complicated issues about indemnification and advancement, particularly concerning the obligations of the go-forward De-SPAC company to provide indemnification and advancement for post-merger claims against former directors and officers of the SPAC.

 

Anyone who has had to try to think about these complicated indemnification and advancement issues will want to review the recent Delaware Chancery Court decision in action brought by a former SPAC officer and director, Marlene Krauss, to try to enforce her advancement rights against the post-merger De-SPAC company, 180 Life Sciences Corp. In a detailed opinion, Vice Chancellor Will basically held that Krauss was entitled to advancement except with respect to claims brought against Krauss for conduct in her capacities other than as a director or officer of the SPAC. Although D&O insurance is not addressed in the Opinion, the Vice Chancellor’s rulings arguably have important insurance implications, for example, with respect to the availability of Side A coverage and the funding of SIRs. The Vice Chancellor’s March 7, 2022 Opinion can be found here. Continue Reading Thinking About SPACs, De-SPACs, and Indemnification and Advancement

Sarah Abrams
Steven Kane

In the following guest post, Sarah Abrams, Head of Professional Liability Claims Bowhead Specialty Underwriters, Inc., and Steven Kane, Head of Financial Institutions Underwriting, Bowhead Specialty Underwriters, Inc., take a look at insurance coverage issues that could arise in connection with the separation of a principal or partner from a private equity firm. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors from topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article. Continue Reading Guest Post: Private Equity Divorce, Carried Interest, and Insurance Response