Wrongful Act

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Much has been written about the explosive growth in merger objection litigation in recent years. A less common but increasingly frequent type of merger-related litigation is appraisal rights litigation. In these types of lawsuits an investor exercises his or her statutory right for a judicial determination of the value of his or her stock. These kinds of cases present their own sets of issues and challenges.

Among the recurring issues is the question of whether or not the costs a company incurs in an appraisal proceeding are covered under a D&O insurance policy; traditionally, D&O carriers have argued that appraisal proceedings are not covered under their policies because the request for an appraisal proceeding does not involve an alleged “Wrongful Act.” However, an August 2, 2017 memo by Peter Gillon and Benjamin Tievsky of the Pillsbury law firm  (here) argues that in many cases this coverage analysis is inaccurate and that in fact there should be coverage under the D&O policy for the expenses incurred in an appraisal proceeding.
Continue Reading D&O Insurance and Delaware Appraisal Rights Proceedings

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.
Continue Reading D&O Insurance: Securing Coverage for Books and Records Requests

coloradoAmong the most frequently recurring D&O insurance coverage issues is the question of the carrier’s obligation to pay for costs incurred in connection with an informal SEC investigation. Indeed over the years, numerous policy revisions have been adopted in various forms by various carriers to address certain aspects of this issue. Yet the issues continue to arise, as shown most recently in District of Colorado Judge Robert E. Blackburn’s August 4, 2016 opinion (here), in which he held that the D&O policy at issue did not provide coverage for the insured company’s expenses incurred in responding to an informal SEC investigation. The opinion raises a number of issues, as discussed below.
Continue Reading No D&O Insurance Coverage for Costs of Responding to Informal SEC Investigation

GaIn  a recent post in which I discussed the “basic value proposition” of D&O insurance, I noted that among the five indispensable elements required in order for coverage under a D&O insurance policy to exist is the requirement that a Claim for an alleged Wrongful Act against an Insured Person acting in an Insured Capacity. The prerequisite that the Insured Person must have been acting in an Insured Capacity at the time of the alleged Wrongful Act arises from the fact that individuals act in a number of different capacities; it is only conduct undertaken in their capacity as an officer or director of the insured company for which the insurance policy provides coverage.

A June 22, 2015 decision by the Eleventh Circuit, applying Georgia law, provides a good illustration of how an individual might be acting in multiple capacities, and underscores the fact that the insurance under a D&O policy is only available when the insured was acting in his or her capacity as a director or officer of the insured company. The case presents some interesting policy wording lessons. A copy of the Eleventh Circuit’s opinion can be found here.
Continue Reading D&O Insurance: A Question of “Capacity”

Does a D&O insurance policy provide coverage for attorneys’ fees awarded in settlement of a breach of contract class action? That was the question before the court in an insurance coverage action brought by the Screen Actors Guild (SAG) against its D&O insurer. In a July 11, 2013 decision, Central District of California Judge Dolly …