additional consideration

The so-called “Bump-Up” Exclusion found in many D&O insurance policies typically excludes coverage for claims alleging that the insured company, as the acquiror, underpaid or sought to underpay for the acquisition of a target company. However, in a recent decision following a bench trial, in which the court interpreted an unusually worded exclusion that arguably applied to preclude coverage whether or not the insured company was the acquiror or the acquisition target, the court held that the exclusion unambiguously precluded coverage for the settlement of a claim that the directors of Onyx Pharmaceuticals, the insured company, had breached their duties by accepting an inadequate amount for the sale of their company. The judge’s opinion is a cautionary tale for anyone involved in the placement of D&O insurance and also has important implications about the wording of the bump-up exclusion. A copy of the court’s December 30, 2022, post-trial Final Statement of Decision can be found here.

Continue Reading Exclusion Bars Coverage for Insured Company’s Acquisition Underpayment