Many D&O insurance policies contain specific prior litigation exclusions precluding coverage for claims made during the policy year related to proceedings commenced prior to the policy inception. A question that can arise is the issue of what type of prior proceedings or actions triggers this exclusion. The Second Circuit recently considered whether a Maryland attorney general’s office’s letter threatening that it “may” bring an enforcement action triggered an exclusion precluding coverage for a claim “involving” any prior “demand, suit or other proceeding.” In a March 7, 2016 summary order (here), the appellate court, applying New York law, affirmed the district court’s ruling that the AG’s prior letter was a “demand,” and therefore that the policy unambiguously precluded coverage for the insured’s defense fees incurred in a later U.S. Department of Justice action.
Continue Reading D&O Insurance: Regulator’s Previous Threat to File Action Triggers Prior Litigation Exclusion