In the current challenging economic circumstances, corporate directors and officers face a daunting array of potential liability exposures. In the following guest post, Arlene Levitin, Esq., Claims Officer, Complex Management Liability, NAS Financial Lines Claims, Liberty Mutual Insurance;, and Bonnie Hoffman, Esq., Hangley Aronchick Segal Pudlin & Shiller, propose three ways that through careful planning directors and officers can reduce their potential liability risks. I would like to thank Arlene and Bonnie 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 Arlene and Bonnie’s article.Continue Reading Guest Post: Planning for D&O Lawsuits: 3 Tips for Reducing Risks for Directors and Officers
Most D&O insurance policies preclude loss resulting from fraudulent or criminal misconduct. However, most policies specify that the exclusion applies only if there has been a judicial determination that the precluded misconduct has taken place. What specific judicial determination is required in order to trigger the exclusion is a matter of policy wording. In an interesting recent ruling, Southern District of New York Judge Denise Cote reaffirmed her prior conclusion that a credit union executive’s criminal conviction precluded coverage for the executive’s cost of appeal – even though his appeal remains pending and even though the applicable policy had the “final adjudication” language. A copy of Judge Cote’s October 18, 2022 opinion can be found here.
Continue Reading Court Holds Fraud Exclusion with “Final Adjudication” Language Precludes Coverage for Post-Conviction Appeal
In a development that undoubtedly will be discussed among D&O insurance professionals for months to come, the Delaware Supreme Court issued an opinion last week in the long-running Dole Foods insurance coverage battle. Many D&O insurance industry observers will not be surprised to learn that the Delaware Court’s opinion is favorable to policyholders. As discussed below, the opinion (and the many rulings in the court below in this dispute) may encourage insurers to consider possible policy wording revisions. A copy of the Delaware Supreme Court’s March 3, 2021 opinion can be found here.
Continue Reading Del. Sup. Ct. Rules for Insureds in Long-Running Dole Foods D&O Insurance Coverage Dispute
Over the course of several years in which the marketplace for D&O insurance has been highly competitive, the scope of coverage available has continued to evolve and expand. Terms and conditions are available today that were not available even a short time ago, as carriers attempt to distinguish themselves in a crowded marketplace. The marketplace is a buyer’s market, but in order to ensure that corporate insurance buyers obtain the best coverage available, it is important for them to understand the options available. In an interesting December 6, 2017 Law 360 column entitled “D&O Insurance Coverage Tips for Financial Institutions” (here) Robert Long and Nanci Weissgold of the Alston & Bird law firm examined the issues and options involving several key areas of D&O liability insurance coverage.
Continue Reading Key D&O Insurance Policy Wording Issues and Coverage Concerns
Most D&O insurance policies have conduct exclusions precluding coverage for fraudulent, criminal, or willful misconduct. However, mere allegations are insufficient to trigger this exclusion. If allegations alone were enough, then many claims that would otherwise be covered under the policy would be precluded from coverage, because many D&O claims involve allegations of fraudulent, criminal, or willful misconduct. These days, the conduct exclusions in most D&O policies require a judicial determination in order for the exclusion’s preclusive effect to be triggered. Exactly what is constitutes a sufficient judicial determination is a matter of policy wording. A recent California intermediate appellate court considered a policy that required a “final adjudication” in order for the exclusion to be triggered and determined that the exclusion did not apply to preclude coverage while the insured person’s appeal remained pending, despite the insured person’s criminal securities fraud conviction. The opinion provides an interesting insight into operation of the conduct exclusion with wording of a type found these days in many D&O insurance policies.
Continue Reading D&O Insurance: Convictions, Appeals, and the Conduct Exclusion
In an August 27, 2015 post-trial opinion (discussed here), Delaware Vice-Chancellor Travis Laster found that Dole Foods CEO David Murdock, and the company’s General Counsel and Chief Operating Officer, C. Michael Carter, had committed “fraud” in connection with a November 2013 “going private” transaction. However, according to a December 21, 2016 Delaware Superior Court decision in the subsequent insurance coverage litigation, because Laster’s findings of fraud were not part of the subsequent post-settlement final judgment in the case, the fraud exclusion in Dole’s D&O insurance program did not preclude coverage for the settlement. Anyone interested in understanding how the fraud exclusion in a D&O policy operates will want to read this opinion. A copy of the Delaware Superior Court opinion can be found here.
Continue Reading D&O Insurance: Despite Trial Court “Fraud” Determination, Fraud Exclusion Not Triggered
A recurring theme on this blog is the problem that the late provision of notice creates for policyholders. Insurers frequently will seek to deny coverage when the policyholder does not provide timely notice of claim. As anyone with day-to-day claims involvement knows, there are a lot of reasons why policyholders fail to provide timely notice of claim. Sometimes the delayed notice is the result of a conscious decision, as, for example, when the policyholder decides that the claim isn’t all that serious. Sometimes, the failure to provide timely notice is the result of an oversight, as, for example, when the policyholder fails to recognize that the matter might be covered by insurance. That this type of oversight might happen is hardly surprising, since even very sophisticated business managers may not be fully aware of what their insurance might cover. When this happens, you would hope that the company’s attorneys would be looking out for them and would ask about the company’s insurance, as a way to help their clients to maximize available insurance protection.
As illustrated by a recent case from New York, it is an all-too-frequent occurrence that a company’s outside counsel fails to ask about the insurance or to inquire whether insurance might be available to protect the company. In discussing the New York case here, I have no interest in encouraging claims against companies’ counsel. Rather, my hope is that by highlighting these issues I will encourage both policyholders and their counsel to include the discussion of insurance into their standard routines at the outset of a claim, as a way to help ensure that policyholders avoid late notice problems and take full advantage of the insurance coverage for which they have paid. A copy of the May 11, 2016 New York intermediate appellate court case, Soni v. Pryor, can be found here. A June 14, 2016 memo from the Pullman & Comley law firm about the decision can be found here.
Continue Reading The Need for Law Firms to Advise Their Clients About Potentially Available Insurance
One of the standard features of D&O insurance policy is the fraud exclusion, which these days typically provides that the exclusion is triggered only after a “final” judicial determination that the precluded conduct has occurred. But what is it that makes a determination “final”?
On June 23, 2015, in a decision that has a number of important implications, the New York (New York County) Supreme Court, Appellate Division, First Department, applying New York law, held that the imposition of a post-conviction criminal sentencing constitutes a “final judgment” that not only triggered the fraud exclusion in a D&O insurance policy but also required the convicted individual to reimburse the carrier for amounts it had already paid – even though the individual’s appeal of his criminal conviction was pending.
As discussed below, the court’s opinion has some important lessons for D&O insurance practitioners. A copy of the court’s opinion can be found here.
Continue Reading D&O Insurance: A “Final” Analysis
In the latest round in the long-running battle over whether there is D&O insurance coverage for the amounts Bear Stearns paid in settlement of an SEC enforcement action for alleged market timing, the D&O insurers may have finally found an issue on which they may be allowed to try to dispute coverage. Even though, in …
In a detailed April 23, 2014 opinion (here), Eastern District of Virginia Judge Liam O’Grady, applying Virginia law, held that the guilty pleas of executives of Protection Strategies, Inc. triggered four separate exclusions in the D&O coverage section of PSI’s management liability policy and that the management liability insurer was entitled to …