definition of loss

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One of the perennial D&O insurance issues involves the question whether “disgorgement” amounts awarded in SEC proceedings represent “penalties” for which insurance coverage is precluded. In the latest example of a case involving these issues, the Delaware Superior Court recently held, in reliance on the statutory provisions defining the SEC’s authority to seek monetary remedies, that the disgorgement amounts and prejudgment interest awarded against the media company Clear Channel are not “penalties” for which coverage is precluded. As discussed below, the court’s analysis of the issues, and its reference to the relevant statutory provisions, is both detailed and instructive.

Continue Reading Del. Court: SEC Disgorgement Not a “Penalty” for Which Coverage is Barred

If a defendant company settles a shareholder lawsuit by issuing stock rather than by paying cash, does the settlement represent “Loss” within the meaning of the company’s D&O insurance policy? Earlier this year, a Delaware court said it does. Now, the Delaware Supreme Court has affirmed the lower court, for the reasons stated by the lower court. As discussed below, these rulings raise some interesting issues. The Delaware Supreme Court’s December 9, 2025, order affirming the lower court can be found here.

Continue Reading Does Issuance of Stock to Settle a Shareholder Suit Constitute “Loss”?
Umesh Pratapa

The typical U.S. D&O insurance policy does not provide coverage for fines and penalties. The standard definition of Loss in U.S. D&O insurance policies provides that Loss does not include “fines, penalties, and matters deemed uninsurable under applicable law.” The situation may be different in some countries outside the U.S. In the following guest post, Umesh Pratapa, considers the question of the extent to which D&O policies may under certain circumstances provide coverage for fines and penalties. Umesh is the Author of the handbook on D&O liability insurance published by Institute of Directors (IOD), India, and Consultant – liability insurance. I would like to thank Umesh 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 Umesh’s article.

Continue Reading Guest Post: D&O Insurance – Coverage for Penalties: New Insights from Recent Australian Judgement

The typical D&O insurance policy provides coverage, subject to all of its terms and conditions, for an insured’s payment of “Loss.” The policy typically provides that “Loss” includes settlements. But what happens if in settling a lawsuit a policyholder issues stock rather than paying cash? Does the stock issuance represent “Loss” within the meaning of the policy? In an interesting recent opinion, the Delaware Superior Court held that AMC Entertainment Holding’s issuance of stock in connection with the settlement of a stockholders’ claim did represent “Loss” within the meaning of the applicable policy. As discussed below, the court’s opinion raises some interesting questions. The Delaware court’s February 28, 2025, opinion can be found here.

Continue Reading Is Stock Issuance in Connection with a Settlement “Loss”?

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

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”

The IPO market has been in the doldrums since 2021, but there are promising signs that IPO activity could be on the rebound in 2024. Given the potential for the return of significant IPO activity, it is worth noting that IPO transactions entail certain risks, including in particular for the IPO companies’ private equity backers, as discussed in the following guest post written by Michelle Grimaldi, Assistant Vice President, Claims, Fair American Insurance and Reinsurance Company; Elan Kandel, Member, Bailey Cavalieri LLC; and James Talbert, Associate, Bailey Cavalieri LLC. 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.

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Continue Reading Guest Post: Looking Ahead: Risks Attendant to a Potential Rebound in the IPO Market for Private Equity

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

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 here.
Continue Reading Delaware Court Holds D&O Insurance Covers Fraudulent Transfer Claim Settlement

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 here.
Continue Reading Del. Court Narrows Godiva’s Insurers’ Defenses in Dispute Over Coverage for Consumer Protection Claims