One of the perennial questions for D&O insurance buyers and their advisors is: What is the right amount of insurance to buy? In the following guest post, Francis Kean, Partner in the Financial Lines Team at McGill and Partners, takes a look at a recent court judgment in which the court raised serious questions about a company’s limits selection and proposes five lessons that may be drawn from the case. I would like to thank Francis 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 site’s readers. Please contact me directly if you would like to submit a guest post. Here is Francis’s article. Continue Reading Guest Post: Are Companies Buying Enough Directors & Officers Insurance?
Most public company D&O insurance policies provide coverage for the corporate entity only for “Securities Claims.” But what constitutes a “Securities Claim”? That is the question the Delaware Supreme Court addressed in a recent appeal of an insurance coverage dispute in which a bankruptcy trustee had sued Verizon for breach of fiduciary duty, unlawful payment of a dividend, and violation of the uniform fraudulent transfer act. The trial court had entered summary judgment for Verizon, ruling that the bankruptcy trustee’s claims represented “Securities Claims” within the meaning of the policy. In an October 31, 2019 decision (
D&O insurance policyholders sometimes bridle when the insurers take steps to try to rein in burgeoning defense expense. In that situation, the D&O insurers will often try to remind the policyholder that because defense expense erodes the limit of liability, it is in everyone’s interest for defense expense to be monitored closely. An unusual coverage action in the Western District of New York reversed the usual concerns about insurer defense cost control. The policyholder sued its D&O insurer for breach of contract, bad faith, and intentional infliction of emotional distress not for failing to pay defense costs or full defense costs, but rather for allowing the policyholder’s defense expenses incurred in an underlying criminal action to exhaust the applicable limit of liability. While it is hardly a surprise that a court concluded that an insurer that paid out its full limits cannot be held liable for breach of contract – much less bad faith or infliction of emotional distress –there are still a number of interesting aspects to this dispute and to the court’s ruling. 
As part of our beat here at the The D&O Diary, we read a lot of judicial opinions. We are quite accustomed to the fact that the case outcomes can be and often are all over the map. Just the same, every now and then we read a decision that really makes us scratch our heads. That was our reaction when we read Southern District of Mississippi Chief Judge 
The criminal trial in which Jerry Sandusky, the former defensive coordinator of Penn State’s football team, stands accused of sexually abusing at least 10 boys over a 15-year period 
The automatic stay in bankruptcy may be lifted to permit MF Global’s D&O and E&O insurers advance the defense expenses of individual defendants in the underlying litigation arising out of the company collapse, notwithstanding the objections of the failed company’s commodities customers, according to an April 10, 2011 ruling from Southern District of New York