Definition of Securities Claim

In the following guest post, Alison Finn, Claims Counsel, DWF Claims; Elan Kandel, Member, Bailey Cavalieri; and James Talbert, Associate, Bailey Cavalieri, take a look at the most important management and professional liability coverage decisions for 2019, involving the perennial coverage issues for insurers and policyholders. I would like to thank Alison, Elan, and James 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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As the number of shareholder appraisal lawsuits increased a few years ago, a recurring question has been whether or not a company’s D&O insurance covers the company’s costs incurred in defending an appraisal action. In a recent decision, a Delaware Superior Court judge rejected a number of the recurring coverage defenses on which insurers rely in disputing coverage for appraisal action costs and expenses. The Court’s opinion in the Solera Holdings case contains several very interesting rulings, some of which could be relevant even outside of the appraisal action context. A copy of the Delaware Superior Court’s July 31, 2019 opinion can be found here.
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As I have detailed on this blog (most recently here), due to two Delaware court decisions — the Delaware Supreme Court’s 2015 decision in Corwin v. KKR Financial Holdings LLC  (here) and the Delaware Chancery Court’s January 2016 court decision in the In re Trulia Shareholder litigation (here)—deal litigation that in the past would have been filed in Delaware is now being filed elsewhere. But while the deal litigation in Delaware generally may be declining, in recent years there has been a significant uptick in Delaware appraisal litigation. As these cases have become more common in recent years, the question of whether or not D&O insurance covers the costs companies incur in defending appraisal actions has become increasingly common as well. Indeed, in the October 11, 2017 Advisen Quarterly D&O Claims Trends Webinar (refer here), the question of D&O insurance coverage for appraisal claim-related defense expenses was a key topic of conversation. In the following post, I review the issues involved in the question of whether or not a D&O insurance covers the costs defendants incur in defending appraisal claims.
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Much has been written about the explosive growth in merger objection litigation in recent years. A less common but increasingly frequent type of merger-related litigation is appraisal rights litigation. In these types of lawsuits an investor exercises his or her statutory right for a judicial determination of the value of his or her stock. These kinds of cases present their own sets of issues and challenges.

Among the recurring issues is the question of whether or not the costs a company incurs in an appraisal proceeding are covered under a D&O insurance policy; traditionally, D&O carriers have argued that appraisal proceedings are not covered under their policies because the request for an appraisal proceeding does not involve an alleged “Wrongful Act.” However, an August 2, 2017 memo by Peter Gillon and Benjamin Tievsky of the Pillsbury law firm  (here) argues that in many cases this coverage analysis is inaccurate and that in fact there should be coverage under the D&O policy for the expenses incurred in an appraisal proceeding.
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