In an interesting decision that touches on a number of basic D&O insurance coverage issues, a federal district court judge applying Oklahoma law has ruled that a company’s management liability insurance policy does not provide coverage for legal expenses a former company executive incurred in a declaratory judgment action that had been filed by another company executive to determine the parties’ rights under a profit sharing agreement. The court concluded that there was no coverage because the individual seeking coverage had not been named as a defendant in the lawsuit by reason of his status as an insured person. Even more interestingly, the court concluded further that, even though the individual had been named as a defendant in the declaratory judgment lawsuit, he had not incurred “Defense Expenses” in the lawsuit, and therefore suffered no “Loss.” Western District of Oklahoma Judge David Russell’s June 30, 2020 redacted opinion in the insurance coverage action can be found here.
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Who is D&O Insurance For?
In an interesting opinion, the Fifth Circuit has set aside a settlement and related bar order that had been approved by the district court in litigation arising out of the Stanford Financial Ponzi scheme scandal. The appellate court said that the district court lacked authority to approve the settlement in light of several of its features, including its provisions cutting off the claims of several former Stanford Financial employees and managers to the defunct firm’s insurance policies’ proceeds. As discussed below, the circumstances surrounding the settlement raise serious questions about the intended purpose of D&O insurance. The Fifth Circuit’s June 17, 2019 opinion in the case can be found here.
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D&O Insurance: Securing Coverage for Books and Records Requests
The right of shareholders to demand inspection of companies’ books and records is of course nothing new. What is new is the increased frequency of books and records demands, often as a result of courts’ requirement for prospective shareholder claimants to investigate alleged misconduct of corporate executives before filing a lawsuit. The scope of the books and records requests is also expanding as well. These developments raise a number of D&O insurance coverage issues, which in turn has led to the rise of a variety of policy wording alternatives, as discussed in a recent paper.
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Bankruptcy Court Lifts Stay to Allow D&O Insurer to Pay Individuals’ Defense Expenses
As those involved in D&O Insurance claims well know, a recurring D&O insurance problem is the question of whether or not the D&O insurer for a bankrupt company can pay the costs of the bankrupt company’s former directors and officers incurred in defending claims against them. Disputes arise when the individuals seek to have the …
Kiwi Supreme: Claimants’ “Charge” on D&O Insurance Blocks Payment of Directors’ Defense Costs
In a December 23, 2013 ruling that will be surprising and unwelcome to D&O insurers and their insureds in New Zealand (and perhaps elsewhere) , the New Zealand Supreme Court has reversed the holding of an intermediate appellate court and ruled that, by operation of a statutory “charge” on insurance in favor of third party…
D&O Insurance: So What is a “Securities Claim”?
The modern public company D&O insurance policy provides coverage not only for the directors and officers of the company but also for the company itself – however, in the public company D&O insurance policy, the entity coverage applies only to securities claims, a limitation that sometimes leads to disputes whether or not a particular matter…
New Zealand Appellate Court Overturns Controversial Decision Blocking D&O Defense Cost Reimbursement
An appellate court in New Zealand has “quashed” the controversial ruling of a lower court ruling that former directors of the defunct Bridgecorp companies are not entitled to defense expense reimbursement under the companies’ D&O insurance policy where the companies’ liquidators have raised (but not yet proven) claims against them exceeding the policy’s limits of…