Is a company’s action against a corporate executive to recover the costs of defense the company advanced on his behalf “restitutionary” in nature and are the amounts involved therefore precluded from coverage under the D&O insurance policy’s definition of Loss? In an opinion that undoubtedly will gladden the hearts of policyholder-side advocates, a California appellate court held that it is not. As discussed below, there are a number of interesting features to the court’s opinion. The California Court of Appeals’ November 12, 2024 opinion can be found here.Continue Reading CA Court: Suit to Recover Executive’s Defense Fees not “Restitutionary”
In the latest development a long-running D&O insurance coverage dispute, a Delaware Court has held that Verizon’s D&O insurance program covers the company’s $95 million settlement of a bankruptcy Trustee’s fraudulent transfer claim. In reaching this conclusion, the Court held, among other things, that the fraudulent transfer claim was a “Securities Claim” within the meaning of Verizon’s primary D&O insurance policy. The specifics of the court’s analysis of this issue underscores how complicated the question of what constitutes a “Securities Claim” can be. A copy of Delaware Superior Court Judge Eric Davis’s October 20, 2022 opinion can be found 
Yet another Delaware court has issued a noteworthy management liability insurance coverage opinion. In a detailed September 12, 2022 opinion in a dispute between Godiva Chocolatier and its management liability insurers over coverage for underlying consumer protection claims against the company, Delaware Superior Court Judge Mary M. Johnston rejected many – but not all — of the insurers’ coverage defenses. A copy of Judge Johnston’s opinion can be found 
In the following guest, Yaminah Williams, Assistant Vice President, Hiscox USA, Alicia Garcia, Claims Counsel, Hiscox USA, Katherine Hausmann, Senior Complex Claims Specialist, Hiscox USA, Elan Kandel, Member, Bailey Cavalieri LLC and James Talbert, Associate, Bailey Cavalieri LLC, review the key 2001 D&O insurance coverage decisions. I would like to thank the authors 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.
In the latest development in the long-running saga involving the efforts by J.P. Morgan to obtain D&O insurance coverage for the $140 million “disgorgement” that its predecessor-in-interest, Bear Stearns, paid to settle SEC market-timing allegations, the New York Court of Appeals (the state’s highest court) has reversed the intermediate appellate court’s ruling that the payment represented a “penalty” for which coverage is precluded. The Court of Appeals rejected the intermediate appellate court’s conclusion, made in reliance on the U.S. Supreme Court’s 2017 Kokesh decision, that a “disgorgement” payment to the SEC is a “penalty.” The Court of Appeals held that Kokesh did not control, and that because the payment was compensatory in nature, it did not represent a “penalty” for which coverage is precluded under the policies. The Court’s November 24, 2021 opinion can be found 
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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.
Many traditional liability insurance policies contain provisions specifying that in the event of a claim the insurer has the duty to defend the insured. However, many management liability insurance policies do not impose a duty on the insurer to defend the insured; rather, these policies usually provide that insureds will defend themselves, with the obligation on the insurer to advance defense costs as they are incurred, subject to all of the policy’s terms and conditions. However, because defense obligations under the more traditional duty to defend arrangement are well established and more familiar to many courts, courts sometimes attempt to resolve issues arising under duty to advance policies by referring to principles established with regard to duty to defend policies.