In a recent decision in an insurance coverage dispute, the Delaware Superior Court granted the insurers’ motions to dismiss, holding that coverage under two towers of insurance was precluded, respectively, by the No Action clause and the Past Acts Exclusion. Insurance coverage practitioners and observers will find this decision interesting in and of itself, for what it says about the relevant policy provisions, and as a general matter, as an example of a Delaware court coverage decision. As discussed below, the decision arguably is an expectations-defying example of an insurer-friendly Delaware court coverage decision. A copy of the court’s May 9, 2024 decision opinion can be found here.Continue Reading Del. Court Dismisses Coverage Suit Based on No Action, Prior Acts Clauses
Past Acts Exclusion
Delaware Court Addresses “Sprawling” Northrup Grumman D&O Insurance Coverage Dispute
It is not uncommon for coverage disputes to arise in connection with D&O insurance claims, but every now and then there is a coverage dispute so broad that it constitutes a veritable D&O insurance coverage curriculum. That was certainly the case in what a Delaware Superior Court judge called the “sprawling insurance coverage dispute” between a unit of Northrup Grumman and its predecessors-in-interest’s D&O insurers. The coverage dispute arose out of underlying claims relating to the 2015 merger of Alliant Techsystems, Inc and Orbital Sciences Corporation to form Orbital ATK, Inc. The court’s lengthy opinion on the parties’ cross-motions for summary judgment and for judgment on the pleadings covers a wide variety of recurring D&O insurance coverage issues and makes for interesting reading for anyone involved with D&O insurance. The Delaware Superior Court’s February 2, 2021 opinion in the Northrup Grumman case can be found here.
Continue Reading Delaware Court Addresses “Sprawling” Northrup Grumman D&O Insurance Coverage Dispute
D&O Insurance: Prior Acts Exclusion Precludes Coverage for Post-Past Acts Date Conduct
In a noteworthy decision that raises a number of interesting issues, District of Minnesota Judge Ann D. Montgomery, applying Minnesota law, held that a company’s excess D&O insurance policy’s prior acts exclusion precludes coverage for the entirety of claims asserted against the company, even with respect to wrongful acts alleged to have taken place after the prior acts date. This case involves a number of twists and turns, while raising some important questions. Judge Montgomery’s June 4, 2019 opinion in the case can be found here. The Wiley Rein law firm’s June 20, 2019 post about the ruling on its Executive Summary Blog can be found here.
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Coverage Complications for Prior Acts Under Claims Made Insurance Policies
Theoretically, claims made insurance coverage applies to claims made during the policy period regardless of when the underlying acts took place. The claims made arrangement contrasts with the framework under an occurrence policy, where coverage applies according to when the underlying acts took place, regardless of when the claim is made. But even though claims made coverage is intended to apply to claims made during the policy period, there are sometimes claims made policy provisions that can preclude coverage for some or all of the past acts alleged. These coverage limiting provisions can under certain circumstances substantially limit the past acts coverage available under a claims made policy.
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Though Fraudulent Transfers Took Place During the Policy Period, Past Acts Exclusion Still Precludes Coverage
A prior acts exclusion in a bank holding company’s D&O insurance policy precludes coverage for claims based on allegedly fraudulent transfers made to a banking subsidiary during the policy period, because the transfers arose out of wrongful acts that occurred prior to the policy’s past acts date, according to a recent decision by the Eleventh Circuit, applying Florida law. The appellate court reasoned that, though the transfers occurred during the policy period, what made the transfers fraudulent was the company’s insolvency, which arose from officer misconduct that took place prior to the policy’s past acts date. The case provides an interesting example to consider past acts coverage in claims made policies.
Continue Reading Though Fraudulent Transfers Took Place During the Policy Period, Past Acts Exclusion Still Precludes Coverage