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.
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