bump up exclusion

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One of the most hotly – and frequently – contested D&O insurance coverage issues involves the question of the preclusive effect of the policy’s Bump-Up provision. There have been a host of decisions in recent years addressing this issue, with some finding in favor of coverage and some ruling against coverage. In the latest in this series of cases, the Delaware Superior Court held that the Bump-Up provision precluded coverage for the settlement of litigation arising out of the acquisition of Madison Square Garden Networks. As discussed below, the decision raises some interesting questions about the Bump-Up provision and how it is to be applied. A copy of the June 24, 2026, opinion in the case can be found here.

Continue Reading Del. Court: Bump-Up Provision Bars Coverage for Shareholder Settlement

Because the so-called “bump up” exclusion typically found in D&O insurance policies is a frequently litigated policy term, industry observers were closely watching Fourth Circuit’s consideration of the question whether the exclusion applies to the settlement of litigation relating to Towers Watson’s January 2016 merger with Willis Group Holdings. On May 28, 2025, the appellate court held that the exclusion precludes coverage for the $90 million settlement of the underlying litigation. As discussed below, the appellate court’s decision likely will not put an end to disputes about the applicability of the exclusion. A copy of the Fourth Circuit’s May 28 decision can be found here.

Continue Reading 4th Circ.: Bump-Up Exclusion Bars Towers Watson Settlement Coverage

The preclusive effect of the “bump-up” exclusion typically found in most D&O insurance policies has been frequently litigated topic. In the following guest post, Barry Buchman, Michael Scanlon, and Jake Todd review recent case law developments relating to the scope of the bump-up exclusion’s preclusive effect. Buchman is a partner, Scanlon is a counsel, and Todd is an associate in the insurance recovery group of Haynes and Boone, LLP. This article is an update of the authors’ prior guest post about the bump-up exclusion on this site, here. I would like to thank the authors for allowing me to publish their author as a guest post on this site. I welcome guest post submissions from responsible authors on 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: Bump-Up Exclusion: Recent Delaware Decisions Support Policyholders

One of the recurring D&O insurance coverage issues is whether or not the so-called “bump-up” exclusion precludes coverage for amounts paid in settlement of post-merger litigation. The outcome of these disputes is often a reflection of several situation-specific factors, including the specific policy language involved, the nature of the underlying transaction, the claims alleged in the underlying litigation, the features of the settlement, and the applicable law. All of these factors came into play in a recent Delaware Superior Court decision in which the court held that the primary policy’s bump-up exclusion does not preclude coverage for the settlement of the lawsuit relating to the 2017 merger of Harman International Industries and Samsung’s American division. The court’s January 3, 2025 opinion, as amended in a January 7, 2025 corrected opinion, can be found here.

Continue Reading Del. Court: Bump Up Exclusion Doesn’t Bar Coverage for Post-Merger Suit Settlement

Readers may have seen the news this past week that WTW has filed an appeal to the Fourth Circuit of the district court’s holding that the bump-up exclusion in its D&O insurance policy precludes coverage for the settlement of the post-closing lawsuit filed  the company’s merger with Towers Watson. This appeal is in fact the second time this coverage lawsuit has made its way to the Fourth Circuit. This appeal will be closely watched not only because of the parties involved, but also because, as discussed in a recent memo from the Cooley law firm, issues surrounding the bump-up exclusion increasingly have been the source of litigated coverage disputes, and indeed questions concerning the exclusion are increasingly common. For reasons discussed below, I think there are important issues about this exclusion that the D&O insurance industry should be discussing.

Continue Reading The Bump-Up Exclusion and Coverage for Post-Close M&A Lawsuits

On March 6, 2024, in a decision that has attracted a lot of attention in the business press, the Eastern District of Virginia, applying Virginia law, held that the bump-up exclusion in Towers Watson’s D&O insurance policy precludes coverage for the $90 million paid in settlement of claims relating to the firm’s January 2016 merger with Willis Group Holdings. As discussed below, the court’s ruling highlights recurring issues concerning the wording of the bump-up exclusion. A copy of the March 6, 2024, opinion can be found here.

Continue Reading Bump-Up Exclusion Precludes Coverage for Merger-Related Claims Settlement

In the wake of the 2019 merger of Viacom and CBS that formed ViacomCBS (later renamed Paramount Global), former shareholders of both CBS and Viacom filed separate D&O liability lawsuits. As discussed here, the CBS shareholders’ lawsuit settled $165.5 million. The separate Viacom shareholders’ lawsuit settled for $122.5 million, and now the battle has shifted to insurance coverage litigation in which the Viacom’s excess insurers contend that coverage for the settlement is precluded by the primary policy’s Bump-Up Provision.

In an interesting August 10, 2023, opinion, Delaware Superior Court Judge Sheldon K. Rennie, applying Delaware law, granted Viacom’s motion for partial summary judgment, holding that the Bump-Up Provision does not preclude coverage for the settlement. As discussed below, Judge Rennie’s holding turned on the nature of the transaction in which Viacom and CBS merged, and, even more significantly, on the contrast between the wording of the Bump-Up Provision, on the one hand, and other policy provisions dealing with merger situations, on the other hand. A copy of Judge Rennie’s opinion can be found here.

Continue Reading Bump-Up Provision Does Not Bar Viacom Shareholders’ Suit Settlement Coverage

It is frequently the case that my posts on this site occasion so little commentary that I often wonder whether anyone is reading them at all. Every now and then, though, one of my posts seems to stir things up a little bit. That was clearly the case with respect to a recent post in which I commented about the bump-up exclusion – the post has provoked quite a bit of conversation. In light of subsequent discussions I have had about the post, it appears that I should revisit some of the issues discussed in the post. For starters, I have revised parts of the prior post to take into account some of the observations about the post that have been made to me. In addition, I also note the following.

Continue Reading More Thoughts About the Bump Up Exclusion

For the second time in recent days, a court has held that a D&O insurance policy provision operates to preclude coverage for claims against an insured company and its executives that the consideration to be paid for the acquisition of the insured company is inadequate. The Seventh Circuit in a recent decision held that the “inadequate consideration” exclusion (sometimes referred to as the “bump-up” exclusion) in the applicable D&O insurance precludes coverage for a claim that disclosure in the company’s proxy statement omitted information that could have been used to negotiate a higher price. As discussed below, the policy wording at issue was relevant to the outcome. The Seventh Circuit’s January 23, 2023, opinion in the Komatsu Mining Corp. case can be found here.

Continue Reading “Inadequate Consideration” Exclusion Precludes Coverage for Underpayment of Insured Company’s Acquisition

The so-called “Bump-Up” Exclusion found in many D&O insurance policies 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 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. EDITOR’S NOTE: This post was revised on February 12, 2023.

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