private company D&O insurance

As the number of Telephone Consumer Protection Act (TCPA) class actions has risen in recent years, one recurring question has been whether or not there is coverage under the defendant companies’ D&O insurance policies for these claims.  The specific issue is whether or not D&O policy’s “invasion of privacy” exclusion precludes coverage for TCPA claims. In the latest ruling to address these issues, Southern District of Florida Judge Robin L. Rosenberg, applying Florida law, held that, in light of the specific allegations in the underlying TCPA action, coverage for the claim was precluded by the exclusion. Judge Rosenberg’s ruling is consistent with other rulings, but does also raise some interesting issues. Judge Rosenberg’s May 30, 2019 order can be found here. A June 7, 2019 post on the Wiley Rein law firm’s Executive Summary Blog can be found here.
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Everyone involved in any way in D&O insurance transactions has seen an insurance buyer choose to buy a policy that while less expensive provides narrower coverage. Sometimes the price difference might be slight, sometimes the difference could be significant. But the fact is, the most expensive policy is the one that doesn’t provide coverage when it should, and in the event of a claim, narrower coverage can translate into a claims denial.  Anyone who wants to see what this might look like in action will want to consider the recent ruling out of the Middle District of Florida, in which the court held that the securities exclusion in a private company D&O insurance policy precluded coverage for an underlying claim against the policyholder and certain of its directors and officer. The January 2, 2019 decision in the case can be found here. A January 25, 2019 post on the Wiley Rein law firm’s Executive Summary Blog about the decision can be found here.
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Those of us immersed in the world of directors and officers could not imagine becoming involved in any sort of business organization without the protection and benefit of D&O insurance. Just the same, I have fairly regular conversations with officials and executives at closely held companies who see no need for the insurance, on their belief that without outside investors, their company faces no risk of incurring a D&O claim. However, long experience tells me that D&O insurance should be a part of every organization’s insurance program, regardless of its ownership.
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board roomExecutives at companies whose securities are publicly traded typically don’t need to be persuaded that their company needs D&O insurance. They understand that the exposures public companies face make D&O insurance indispensable. However, the view of some private company managers may be different, particularly for officials at companies whose shares are very closely held. These company officials may believe their company has little risk of getting hit with a D&O lawsuit and as a result conclude that they don’t need D&O insurance. However, the reality is that D&O insurance is an indispensable part of every company’s risk management arsenal, whether or not a company’s shares are listed.
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Ninth CircuitRegular readers know that one of my hobby-horse issues is what I perceive as insurers’ overbroad application of the professional services exclusion typically found in private company D&O insurance policies, particularly with respect to policyholders in services businesses. Because of this long-standing concern, I was interested to see that a policyholders’ rights group has filed an amicus brief in the Ninth Circuit in support of a policyholder’s appeal of a district court ruling that coverage under a D&O insurance policy for the underlying claim was precluded by the professional services exclusion. While the amicus brief may help focus the appellate court on the problems involved in what is a recurring situation, the larger point may be that as an industry we need to address a problem that affects all industry participants.
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marylandRegular readers know that one of my recurring  private company D&O insurance coverage concerns has to do with the professional services exclusion and the way many carriers seek to phrase, interpret, and apply the exclusion, particularly with respect to insured companies engaged in service businesses. My concern is that all too often the exclusion is written over-broadly and applied over-broadly in a way that threatens to entirely swallow up coverage under the policy. A July 28, 2016 coverage decision by District of Maryland Judge J. Frederick Motz expressly addresses several of my recurring concerns about the professional services exclusion, as I discuss further below. A copy of the July 28, 2016 opinion can be found here.
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nystateIPO activity so far this year is well off the pace compared to this time a year ago. According to Renaissance Capital, as of last Friday, there have only been 16 IPOs in 2016, compared to 45 at this point last year, representing a decline of 71%. Indeed, when cybersecurity firm Secure Works Corp. completed its IPO last Thursday, it was the first tech IPO in over four months – and its debut was less than encouraging, as the offering priced below the targeted range. In an environment like this, companies whose strategies included an IPO may find that their plan to go public is simply no longer a realistic – or even desirable – option.

Among the many consequences that may befall a company whose IPO plans are sidetracked is the possibility that it may face claims from disappointed investors who assert that the company and its senior officials should be held liable to them for their losses arising from the company’s failure to launch. As discussed below, a recently filed lawsuit underscores the susceptibility of pre-IPO companies to these kinds of claims, which in turn highlights some important D&O insurance considerations for these kinds of companies.
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In general, and at least in the United States, executives at public companies don’t need to be convinced that their companies need to have D&O insurance. That is not always true with officials at private companies. Some officials at some private companies – particularly very closely held private companies – are skeptical that they need

There is a great deal of information available about the liabilities of publicly traded companies, as well as about the D&O insurance implications arising from those liabilities. It can be a bit of a challenge to locate the same of information concerning private companies. For that reason, it is fortunate that Advisen and AIG have

The SEC has commenced an enforcement action against a private company and its former Chairman and CEO in connection with the company’s repurchase of company shares from company employees and others prior to the company’s acquisition.

The action involves Stiefel Laboratories, which prior to its April 2009 acquisition by GlaxoSmithKline for $68,000 a share