Last week, a California federal judge held that a D&O liability insurer must advance subpoena-related defense costs on behalf of two former biotech directors and officers after the insurer could not provide conclusive evidence that the subpoenas alleged actual wrongdoing by the individuals after the company’s merger, as required to trigger the policy’s “Change in Control” exclusion. See AmTrust Int’l Underwriters DAC, Plaintiff, v. 180 Life Sciences Corp., et al., N.D. Cal. No. 22-CV-03844-BLF, 2024 WL 557724 (N.D. Cal. Feb. 12, 2024). The decision highlights the interplay of two significant D&O coverage issues—government investigations and M&A transactions—and underscores why policyholders must pay close attention to how their liability insurance policies may be impacted by a merger, acquisition, asset sale or similar deal.Continue Reading Government Investigations and M&A Transactions: Recent California Case Highlights Potential D&O Coverage Gaps

D&O, E&O, and other professional liability insurers often raise the insurability, or rather “uninsurability” loss defense. Consistent with our prior analysis of the ways the Ohio district court erred in assessing insurability, the Sixth Circuit’s recent decision in Huntington National Bank v. AIG outlines how courts should evaluate insurability defenses, particularly in the absence of public policy rendering a loss uninsurable.Continue Reading Sixth Circuit Holds Settlement for Fraudulent Transfers Insurable Under Ohio Law

As previewed in part 1 of our AI Policyholder’s Guide, we now discuss how businesses can assess their AI risk to ensure that they are properly positioned to secure insurance coverage should those risks come to fruition. Because no two businesses will have the same AI risk profile, businesses should consider undertaking organization-wide AI risk audits to evaluate their unique AI risk profile.

Understanding the nature of AI-focused legal risk is not only important for business planning, but essential to crafting a comprehensive AI-specific risk management plan. Indeed, because insurance is often underwritten relative to specific risks, knowing the risks to be insured is a prerequisite to procuring the right type of coverage with terms most suitable to a given risk profile.
Continue Reading The Hunton Policyholder’s Guide to Artificial Intelligence: The Importance of Auditing AI Risk  

Most modern liability insurance policies have provisions addressing whether different claims are “related” (or “interrelated”) for assessing potential coverage. Because the answer of whether two claims are “related” depends heavily on the facts giving rise to the underlying claims, the policy language, and applicable law, questions about relatedness can lead to significant insurance coverage disputes.Continue Reading Tenth Circuit: Remain Thoughtful About Whether Your Insurance Claims Are Related

Last week, the Delaware Insurance Commissioner announced a series of process and regulatory improvements to the state’s captive regime. Building upon last year’s significant amendments to DGCL 145(g) expressly permitting captives to cover D&O liability, Bulletin No. 14 outlines several requirements for captives to write Side A D&O policies for Delaware corporations, including several process changes intended to improve approval timelines and speed to market.Continue Reading Delaware Issues Regulatory Guidance, Process Improvements, for D&O Captives

Major sneaker brands have capitalized on new trends in technology and social media to hype sneaker culture. As sneakers become more popular, sneaker collections increase in value, thus increasing financial exposure for collectors and other entities in the sneaker industry. One might first think of theft, authentication, fire, floods, or market valuation as the general risks associated with sneaker collections. But many sneaker companies have made headlines over the past few years with numerous lawsuits against other sneaker companies and entities with issues ranging from traditional patent battles to exhaustive fights against counterfeiters. Often overlooked by collectors and sneaker companies alike, insurance can and does play a critical role in helping both collectors and companies faced with unexpected liability related to sneaker culture.Continue Reading Solefully Designed: Insurance Coverage in the Sneaker Industry

The Delaware Supreme Court recently affirmed a grant of summary judgment in favor of a mortgage lender who sought coverage for a government investigation under its management liability insurance policy, in the case ACE American Ins. Co. v. Guaranteed Rate, Inc., No. 360, 2022 (Del.). We previously reported on the trial court’s grant of summary judgment to the policyholder and ruling in favor of the policyholder on cross-motions for judgment on the pleadings. The Supreme Court rejected the insurers’ arguments that it had no duty to defend the policyholder in connection with a $15 million False Claims Act (FCA) investigation and settlement.
Continue Reading Delaware Supreme Court Affirms that D&O Insurer Must Cover Settlement of Alleged False Claims Act Violations

As explained in a recent alert, now is the time for public companies to adopt compliant clawback policies. This is because the US Securities and Exchange Commission (SEC) recently approved final rules on June 9, 2023, that required national securities exchanges like the New York Stock Exchange (NYSE) and the Nasdaq to implement new listing standards requiring public companies to institute compliant incentive-based compensation clawback policies. The NYSE and Nasdaq rules require listed companies to adopt clawback policies by December 1, 2023, which policies must apply to incentive compensation awarded after October 2, 2023. As public companies prepare to adopt compliant policies before the December 1, 2023 deadline, they should not only consider the clawback policy itself, but also the overlap between that policy and any applicable directors and officers (D&O) liability insurance. Doing so is important to address the potential new exposures created by the new SEC rules.
Continue Reading Executive Compensation Clawback Policies: Now Is the Time to Consider Insurance

Courts nationwide have issued a wide range of decisions on insurance coverage for lawsuits arising out of the opioid epidemic under commercial general liability policies. On August 17, 2023, a North Carolina federal court illustrated why coverage is also available under Directors and Officers (D&O) liability insurance policies. In The North Carolina Mutual Whole Company v. Federal Insurance Company, No. 1:22-CV-553, 2023 WL 5312234 (M.D.N.C.), the court determined a drug wholesaler’s D&O policy provides coverage for more than one hundred underlying lawsuits, rejecting the insurer’s argument that two exclusions, the contract and professional services exclusions, barred coverage.Continue Reading D&O Can Be a Source of Coverage for Opioid Suits