Improper Profit Exclusion

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A frequently recurring D&O insurance coverage question is whether the insurance policy provides insurance against claimed damages that are restitutionary in nature. The argument against coverage is under a public policy principle that the insured persons should not be able to obtain insurance protection against the return of so-called ill-gotten gains. This question was considered again in a recent insurance coverage decision out of a Connecticut trial court. In a decision that apparently is one of first impression in Connecticut, the court held both that the policy’s uninsurability clause and the policy’s personal benefit exclusion precluded coverage for the amount of a stipulated judgment in the underlying action. A copy of the Connecticut court’s August 23, 2024, opinion can be found here.Continue Reading Ct. Court Holds Restitutionary Damages Uninsurable

The financial press is already reporting that many of the nearly 600 SPACs currently searching for merger targets may be unable to find suitable merger targets. Indeed, famous investor Bill Ackerman, unable to find a suitable merger target for his largest-ever SPAC, Pershing Square Tontine Holdings, has already thrown in the towel and liquidated the $4 billion SPAC. With hundreds of SPACs facing the end of their search period in this and the next two quarters, there are likely to be many other SPACs that choose to liquidate in the coming months.

One question I have had about this likelihood is whether or not there is a risk of litigation as SPACs redeem investors’ shares. On the one hand, litigation seemingly should be unlikely as investors are getting their money back. Where’s the harm? On the other hand, in our litigious society, the possibility of litigation always seems to be lurking whenever things don’t work out as planned. While the circumstances involved are very case-specific, a lawsuit filed last week in the Delaware Chancery Court, provides of an example of the kind of end-game squabble that could arise as more SPACs liquidate in the coming months.
Continue Reading SPAC Unable to Find Merger Target Caught Up in Pre-Liquidation Litigation

In a unpublished August 30, 2017 opinion (here), the Ninth Circuit affirmed a district court ruling that a trial court verdict that a hospital system had violated the antitrust laws was not an adjudication sufficient to trigger the improper profit exclusion in the hospital system’s D&O insurance policy, and therefore that the hospital system was entitled to reimbursement of its expenses incurred in defending the antitrust suit. The decision provides a useful illustration of the way that the final adjudication provisions found in the conduct exclusions of most current D&O insurance policy operates. The Wiley Rein law firm’s Executive Summary Blog’s September 5, 2017 post discussing the Ninth Circuit opinion can be found here.
Continue Reading D&O Insurance: Antitrust Verdict Does Not Trigger Policy’s Improper Profit Exclusion