One of the key elements to establish coverage under a directors and officers insurance policy is the existence of claim is for actions undertaken by an insured individual in an insured capacity – that is, in his or her capacity as a director or officer of the company. Things in life are never simple, and lawsuits often allege that corporate director or officer defendants were acting in multiple capacities – that is, both in their capacity as a director or officer and in other capacities as well. These multiple capacity claims often present policy interpretation and coverage issues under D&O insurance policies.
In a recent case, the District Court of North Dakota (applying North Dakota law) held that coverage under a D&O insurance policy does not apply to a claim alleging that the insured defendant was acting in multiple capacities. The court also held that the Insured vs. Insured exclusion precluded coverage where the claimants included both insured persons and individuals that were not insured persons. The decision raises some interesting policy language and policy interpretation issues. A copy of May 18, 2018 decision by District of Massachusetts Judge William G. Young, sitting by designation in the District of Nevada, can be found here.
Continue Reading D&O Insurance: Coverage Precluded for Insured Director Acting in Multiple Capacities
A frequently recurring claim that many companies face is a lawsuit brought by a competitor after the company hires the competitor’s former employee. Depending on how the competitor’s lawsuit is framed, these kinds of claims can be an awkward fit with the defendant company’s D&O insurance policy. A recent insurance coverage dispute in Delaware state court illustrates the kinds of coverage issues that can sometimes arise in connection with these claims. As discussed below, there are ways that D&O insurance policies can be revised to try to address at least some of the coverage issues. Delaware Superior Court Judge Eric Davis’s May 2, 2018 in the insurance coverage litigation can be found 
In a recent insurance coverage lawsuit arising out of an underlying dispute over who was responsible for the lapse of a key man life insurance policy, a court determined that coverage for the attorneys’ fees a management consulting firm incurred in defending against the underlying claim was precluded by the failure to maintain insurance exclusion in the consulting firm’s professional liability insurance policy. Because coverage disputes involving a failure to maintain insurance exclusion are relatively rare, the court’s decision provides an opportunity to consider the exclusion and how it might affect the availability of coverage in certain claims situations.
Over the last few days, I have published several posts looking back at 2017. In addition to looking back, this is also the time of year for looking forward as well. Among other things to watch out for this year is a series of D&O insurance coverage cases that are now pending in the appellate courts. In a January 9, 2018 article (
Insurance policies are of course written documents, dependent upon standard conventions of grammar and usage in order to establish their meaning. A recent unpublished opinion from the Ninth Circuit wrestled with the grammar rules involved when an insurance application’s question and answer created a double negative. Even though a literal reading of the application question using the relevant grammar rules arguably establishes the applicant answered the question truthfully, a majority held that the overall context of the question established that the applicant did not answer the question truthfully, and therefore that the insurer was entitled to rescind the policy based on the application misrepresentation. The dissent disagreed, contending that in light of the application question’s actual wording, the applicant had completed the question truthfully, and therefore that the insurer was not entitled to rescission. The Ninth Circuit’s January 2, 2018 opinion in the case can be found 
A standard exclusion found in most private company directors and officers insurance policies precludes coverage for claims brought by one insured against another insured – the so-called Insured vs. Insured exclusion. The exclusion typically includes several coverage carve-backs preserving coverage for certain types of claims for which the exclusion would otherwise preclude coverage. One relatively standard coverage carve-back preserves coverage for claims brought by a former director or officer after the individual’s service to the company terminated. While the inclusion of this type of coverage carve-back is fairly standard, the wording of the carve-back can and sometimes does vary in ways that can significantly affect whether or not coverage is available for particular claims.
As litigation under the Telephone Consumer Protection Act (TCPA) has proliferated in recent years, one of the recurring questions has been whether the defendants have insurance coverage for these kinds of claims. The insurance questions have in turn generated insurance coverage litigation, primarily with respect to the defendants’ CGL insurance policies, but also with respect to their D&O insurance policies as well. One closely watched recent case involved a D&O insurance dispute arising out of a TCPA claim against the Los Angeles Lakers. The district court had held that the Lakers’ D&O insurance policy did not cover the TCPA claim and the Lakers’ appealed. On August 23, 2017, in a decision that is sure to attract both attention and perhaps further skirmishing on these issues, a divided Ninth Circuit panel affirmed the district court’s holding, concluding that the invasion of privacy exclusion in the Lakers’ D&O insurance policy precluded coverage for the claim. The Ninth Circuit’s opinion can be found 
The right of shareholders to demand inspection of companies’ books and records is of course nothing new. What is new is the increased frequency of books and records demands, often as a result of courts’ requirement for prospective shareholder claimants to investigate alleged misconduct of corporate executives before filing a lawsuit. The scope of the books and records requests is also expanding as well. These developments raise a number of D&O insurance coverage issues, which in turn has led to the rise of a variety of policy wording alternatives, as discussed in a recent paper.
In the current world, cyber security is critical for every organization. Cyber insurance is an important part of every organization’s cybersecurity program. In the following guest post, a Senior Associate in D’Amato & Lynch, LLP’s Fidelity Bond Practice Group, examines how business can best match their cyber insurance to their cyber security needs. I would like to thank David for his willingness to allow me to publish his article as a guest post. 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 David’s guest post.
During the bank failure wave that followed the global financial crisis, one of the recurring questions was whether or not the failed banks’ D&O insurance policies’ insured vs. insured exclusion precluded coverage for the FDIC’s liability claims as receiver for the failed bank against the banks’ former directors and officers . As I noted in