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

Barry Buchman

Michael Scanlon

As I have noted in prior posts on this site (most recently here), the so-called “bump up” exclusion in D&O insurance policies is a frequent source of coverage litigation between D&O insurance policyholders and their insurers. The “bump up” exclusion precludes coverage for increased amounts participants in an M&A transaction agree to pay in the transaction in order to settle a M&A-related lawsuit. In the following guests post, Barry Buchman and Michael Scanlon take a look at the issues that can arise in disputes over the application of the “bump up” exclusion and consider the practical consequences. Barry is partner and Michael is counsel in the insurance recovery group at the Haynes and Boone law firm. I would like to thank Barry and Michael 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: Avoiding Bumps in the Road to Coverage: Limitations on the “Bump-Up Exclusion”

A federal district court, applying Virginia law, has held that the “Bump-Up” exclusion in a D&O insurance policy does not unambiguously apply to preclude coverage for the settlements of underlying actions relating to the 2016 merger of Towers Watson and Willis. The court construed the exclusion narrowly and based on a reasonable interpretation most favorable to the insured, Towers Watson, determined that the settlements  were not excluded from the definition of Loss under the Bump-Up exclusion.  A copy of the court’s October 5, 2021 opinion can be found here.
Continue Reading Court Holds Bump-Up Exclusion Does Not Unambiguously Preclude Coverage

It is not uncommon for coverage disputes to arise in connection with D&O insurance claims, but every now and then there is a coverage dispute so broad that it constitutes a veritable D&O insurance coverage curriculum. That was certainly the case in what a Delaware Superior Court judge called the “sprawling insurance coverage dispute” between a unit of Northrup Grumman and its predecessors-in-interest’s D&O insurers. The coverage dispute arose out of underlying claims relating to the 2015 merger of Alliant Techsystems, Inc and Orbital Sciences Corporation to form Orbital ATK, Inc. The court’s lengthy opinion on the parties’ cross-motions for summary judgment and for judgment on the pleadings covers a wide variety of recurring D&O insurance coverage issues and makes for interesting reading for anyone involved with D&O insurance. The Delaware Superior Court’s February 2, 2021 opinion in the Northrup Grumman case can be found here.
Continue Reading Delaware Court Addresses “Sprawling” Northrup Grumman D&O Insurance Coverage Dispute

In a recent decision following a bench trial, a California state court judge held that a D&O insurance policy’s “bump up” exclusion applies to preclude coverage for the settlement of claims by shareholders of the acquired company who claimed they had received inadequate consideration for their acquired shares. The judge’s decision, which reflected her reading of the specific exclusionary language involved as well as the testimony of several witnesses about the meaning of the provision, is interesting in that the “bump up” exclusion fights usually involve claims against the acquirer for paying inadequate consideration, not claims that the acquired company’s investors received inadequate consideration.

The court’s opinion is detailed but merits a full reading. The Court’s October 1, 2020 decision can be found here. (It should be noted that, under applicable procedural rules, the court’s decision is “tentative,” meaning that the parties have 15 days in which to file objections.)
Continue Reading “Bump-Up” Exclusion Blocks Coverage for Inadequate Consideration Paid for Insured Company’s Acquisition