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As I noted in a prior post (here), Delaware’s legislature recently enacted a new legislation to permit Delaware corporations to put captive insurance in place as an alternative to traditional D&O insurance. In the following guest post, Richard Porter, Head of Financial Lines, Chubb Bermuda, Jarrod Schlesinger, Head of Public Company Management Liability, Chubb N.A. Financial Lines, and Dan Bailey, Member of Bailey Cavalieri LLC, take a look at the Delaware captive legislation and raise a number of concerns about the new law. A version of this article was previously published by Chubb on its website and can be accessed here. 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.
Continue Reading Guest Post: Proceed with Caution: Concerns About Delaware’s New Captive Statute

Within the D&O marketplace, the SPAC and De-SPAC space has been difficult over the last 18 to 24 months. Pricing for D&O insurance for SPACs and De-SPACs has been extraordinarily high. In addition, the insurers are only willing to provide coverage at all with extraordinarily high self-insured retentions (SIRs). These difficult marketplace conditions have caused many buyers to consider possible insurance alternatives, such as Side-A only insurance programs. The high SIRs also raise practical questions about how the elevated retentions will be funded in the event of the claim. The possible alternative insurance structures and the questions about funding the elevated retentions in turn raise a host of complicated issues about indemnification and advancement, particularly concerning the obligations of the go-forward De-SPAC company to provide indemnification and advancement for post-merger claims against former directors and officers of the SPAC.

Anyone who has had to try to think about these complicated indemnification and advancement issues will want to review the recent Delaware Chancery Court decision in action brought by a former SPAC officer and director, Marlene Krauss, to try to enforce her advancement rights against the post-merger De-SPAC company, 180 Life Sciences Corp. In a detailed opinion, Vice Chancellor Will basically held that Krauss was entitled to advancement except with respect to claims brought against Krauss for conduct in her capacities other than as a director or officer of the SPAC. Although D&O insurance is not addressed in the Opinion, the Vice Chancellor’s rulings arguably have important insurance implications, for example, with respect to the availability of Side A coverage and the funding of SIRs. The Vice Chancellor’s March 7, 2022 Opinion can be found here.
Continue Reading Thinking About SPACs, De-SPACs, and Indemnification and Advancement

A recurring issue in recent years has been the question of whether there is coverage under D&O insurance for a shareholder appraisal action. Based on differences in policy wording, the analysis of the issue has turned on a variety of different questions. In a July 2021 ruling (discussed here), a Delaware Superior Court Judge had held that there was no coverage under the D&O insurance policy at issue because the underlying appraisal action was not an action “for” a Wrongful Act, as was required under the policy in order for there to be coverage. Now in a brief opinion the Delaware Supreme Court has affirmed the lower court’s decision, leaving in place the ruling that the policy at issue does not provide coverage for the underlying appraisal action. The Delaware Supreme Court’s March 3, 2022 opinion in the Jarden case can be found here.
Continue Reading Del. Supreme Court Affirms Coverage Denial for Appraisal Action

In a development that has set the D&O insurance industry commentariat abuzz, on January 27, 2022, the Delaware General Assembly passed Senate Bill No. 203, which amends the Delaware General Corporation Law (DGCL) to permit Delaware corporations to put captive insurance in place as an alternative to traditional D&O insurance. The legislation awaits the signature of Delaware Governor John Carney, who reportedly has already said he will sign it. As discussed below, the legislation has several interesting features, but the more interesting question is what the practical impact of the legislation will be.
Continue Reading Delaware Legislature Passes Bill Allowing Use of Captives for D&O Insurance

Readers of this blog will be interested to know that in a recent D&O insurance coverage dispute, the Delaware Superior Court actually handed the D&O insurers a win — a rare development indeed in Delaware’s courts. However, the D&O insurers won by successfully arguing that Delaware law governed the insurance dispute; the ultimate outcome may have been due in part to the fact that the losing policyholder was in the uncomfortable position of trying to argue that another jurisdiction’s law controlled after all after having first argued that Delaware law applied. There are a lot of twists and turns to this case, but, as discussed below, the outcome of this case arguably is far from reassuring to D&O insurers, even though the insurers prevailed in this case.
Continue Reading Rare D&O Insurer Win in Delaware Court, But Should D&O Insurers Celebrate?

In my review of SPAC-related litigation on this site, I have mostly focused on SPAC-related securities litigation. However, there have been other types of SPAC-related lawsuits filed, including SPAC-related breach of fiduciary duty direct actions filed in Delaware courts (as discussed for example here). On January 3, 2022, Delaware Vice Chancellor Lori W. Will entered an opinion in one of these direct action breach of fiduciary duty cases – the closely-watched MultiPlan action – denying the defendants’ motion to dismiss and holding that though Delaware courts “have not previously had an opportunity to consider the application of our law in the SPAC context,” well-established Delaware legal principles led the court “despite the novel issues presented” to conclude that the plaintiffs have pleaded “viable, non-exculpated claims against the SPAC’s controlling stockholder and directors.”

As discussed below, the court’s ruling is a landmark ruling addressing governance concerns relating to potential conflicts of interest between a SPAC’s sponsors and directors and officers and its public shareholders. A copy of the January 3, 2022 opinion can be found here.
Continue Reading Del. Court Dismissal Denial Has Important SPAC-Related Litigation Implications

A standard feature of virtually every commercial contract is a choice-of-law clause. The general perception is that these types of clauses help facilitate settlement and reduce litigation costs. There is, however, one type of contract the usually omits choice-of law-clauses – insurance policies. Throughout the insurance industry and across most lines of coverage, insurance policies lack choice of law clauses. The reasons why insurance policies omit provisions that are standard for virtually every other type of commercial contract is the subject of an interesting new paper from University of North Carolina Law Professor John F. Coyle, entitled “The Mystery of the Missing Choice-of-Law Clause.” Coyle’s paper raises a number of interesting questions, some of which may be relevant as some insurers consider the question of whether they many need to add choice of law clauses to their policies. A copy of Professor Coyle’s December 2, 2021 paper can be found here.
Continue Reading Why Don’t Insurance Policies Have Choice-of-Law Clauses?

In a November 30, 2021 opinion (here), a Delaware Superior Court judge, applying Delaware law, held that the later investigations of the insured policyholder by two regulatory agencies were unrelated to an earlier investigation of the company by one of the agencies. In making this “relatedness” determination, the court declined to apply the “fundamentally identical” standard that some Delaware courts have applied to relatedness issues, but instead applied a “meaningful linkage” test. Because relatedness disputes are so frequent, and because Delaware’s court increasingly are becoming the forum in which insurance disputes are addressed, this court’s adoption of the revised relatedness standard court have important implications.
Continue Reading D&O Insurance: Delaware Court Applied “Meaningful Linkage” Interrelated Claims Test

Several years ago, when it became clear that plaintiffs’ lawyers were going to file merger objection lawsuits in connection with essentially every M&A transaction, the D&O insurers responded by adding a separate, larger retention for M&A-related claims. The larger M&A-related claim retention quickly became pretty much a standard feature of public company D&O insurance policies. However, because the M&A claim retention is in many instances substantially larger than the retention that would otherwise apply, the question of whether the larger retention applies to a particular claim can be a significant one. In a recent case, the Delaware Superior Court addressed a D&O insurance coverage dispute in which, among other things, the insurers and the policyholder disagreed on whether the larger M&A-related claim retention applied to the underlying litigation. In an interesting November 23, 2021 opinion (here), Delaware Superior Court Judge Eric Davis held that the larger M&A retention did not apply.
Continue Reading Court Holds Larger M&A-Related Retention Does Not Apply to Securities Claim

In the latest example of claimants seeking to assert the newly revitalized type of claim for breach of the duty of oversight against corporate boards, plaintiff shareholders have filed a derivative lawsuit in Delaware Chancery Court against certain past and current directors of technology company SolarWinds, based on the massive cybersecurity incident involving the company’s software and systems discovered in December 2020. As discussed below, there are several interesting features of this lawsuit in light of recent developments involving claims for alleged breaches of the duty of oversight. A copy of the heavily redacted publicly available version of the plaintiffs’ complaint against the SolarWinds board can be found here.
Continue Reading Cybersecurity-Related Breach of the Duty of Oversight Claim Filed Against SolarWinds Board