Public company D&O insurance policies provide entity coverage (that is, insurance for the benefit of the insured organization) only for “Securities Claims.” But what is a “Securities Claim”? That is the question that Delaware’s courts have grappled with in a long-running dispute between the telecommunications company Verizon and its insurers.
The Delaware Superior Court had
Earlier this week (here), I noted the securities class action lawsuit that a plaintiff shareholder filed against AT&T in the wake of the Wall Street Journal’s series of articles about the network of lead telephone cables in the U.S. Now, another plaintiff has initiated a separate but parallel lawsuit against Verizon. This latest lawsuit, which was filed by the same plaintiff law firm as filed the AT&T lawsuit, alleges that Verizon was aware of but failed to disclose to investors the risks and hazards the company faced owing to its ownership of the lead telephone cables. A copy of the August 1, 2023, complaint against Verizon can be found here.Continue Reading Verizon Hit with Lead Telephone Cable-Related Securities Suit
As I noted in a recent post (here), a recurring public company D&O insurance coverage issue is whether a claim in which a company is involved qualifies as a “Securities Claim.” This question matters because D&O insurance provides coverage for the corporate entity (as opposed to the insured directors and officers) only for “Securities Claims” as that term is defined in the policy. In a recent decision, a Delaware Superior Court judge concluded that a bankruptcy trustee’s fraudulent transfer claim against Verizon Communications and related entities came within the applicable D&O insurance policy definition of “Securities Claim.” The coverage dispute illustrates the intricate issues that can arise in determining whether a claim qualifies as a “Securities Claim.” A copy of the Court’s February 23, 2021 Opinion can be found here.
Continue Reading D&O Insurance: Bankruptcy Trustee’s Fraudulent Transfer Claim is a “Securities Claim”
Public company D&O insurance policies typically provide coverage for the corporate entity only for “Securities Claims.” A recent case in the Delaware Superior Court involved the question of whether a bankruptcy trustee’s claim related to Verizon’s multi-billion dollar spinoff of its electronic directories business was a “Securities Claim.” In an interesting and detailed opinion dated March 2, 2017 and released March 15, 2017 (here), Judge William C. Carpenter, Jr. ruled that the bankruptcy trustee’s claim was a “Securities Claim” within the meaning of the Verizon’s D&O insurance policy and therefore that Verizon’s insurers were liable of the costs incurred in defending against the trustee’s claim. The opinion makes for interesting reading for anyone interested in how these kinds of disputes can arise, and also has some important practical lessons.
Continue Reading D&O Insurance: When Is a Claim a “Securities Claim”?