One of the perennial issues involving D&O insurance coverage in the bankruptcy context is the question whether the directors and officers of the corporate debtor can tap the insurance policy to pay their defense expenses in connection with claims filed against them in their capacities as executives of the corporate entity. These issues have arisen once again in the bankruptcy proceedings of the corporate parent of Silicon Valley Bank, SVB Financial Group, where the bank’s directors and officers found themselves compelled to petition the bankruptcy court to lift the stay in bankruptcy in order for the bank’s insurers to pay the individuals’ defense expenses.
While there is nothing novel about the bankruptcy court’s order granting the stay, both the high-profile nature of the proceedings and the critical importance of the issues involved warrant taking a closer look at what unfolded in that case. A copy of the bankruptcy court’s May 22, 2023, order in the case can be found here. An August 23, 2023, memo from the Foley Hoag law firm about the court’s decision can be found here.