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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

Last week, we published a client alert discussing the importance of cyber and directors and officers liability insurance for companies and their executives to guard against cyber-related exposures.  In today’s ever-changing threat landscape, all organizations are at risk of damaging cyber incidents, and resulting investigations and lawsuits, underscoring the importance of utilizing all tools in a company’s risk mitigation toolkit, including insurance, to address these exposures. Continue Reading Reducing Risks from Cyber Incidents with Cyber and D&O Insurance

Hardly a day passes without hearing about another major cyber incident. Recent studies show that cybersecurity incidents are becoming more common, but they are also costly, with some reports estimating an average cost of $9.44 million for breaches in the US. In recognition of this mounting problem, government agencies continue to ramp up enforcement and issue new rules, regulations and other guidance aimed at curbing cyber risks. Last week, the SEC adopted final rules requiring registered entities to periodically disclose material cybersecurity incidents and annually disclose their cybersecurity risk management, strategy and governance plans. In announcing the new rules, the SEC specifically noted that “an ever-increasing share of economic activity is dependent on electronic systems.” According to SEC Chair Gary Gensler, “Whether a company loses a factory in a fire—or millions of files in a cybersecurity incident—it may be material to investors.” Continue Reading SEC Adopts New Rules Requiring Disclosure of Cyber Incidents

We recently posted about Nevada becoming the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions—resulting in what is called “eroding” or “wasting” policies—reduce the policy’s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit. Continue Reading Nevada’s Changing Liability Insurance Landscape—State Insurance Regulator Issues Emergency Regulation and Guidance Addressing Controversial “Defense-Within-Limits” Legislation

The Fifth Circuit recently held that Blue Bell Creameries’ commercial general liability (CGL) insurers do not have a duty to defend the ice cream company in a shareholder lawsuit, which arose from a Listeria outbreak. The decision underscores the importance of coordination of different coverages and policies across insurance programs, as well as the potential perils policyholders may face if forced to seek recovery for certain losses under non-traditional policies.Continue Reading The Scoop On The Fifth Circuit’s Ruling Against Blue Bell Ice Cream

Nevada recently became the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions—resulting in what’s called “eroding” or “wasting” policies—reduce the policy’s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit. These provisions are commonly included in errors and omissions (E&O), directors and officers (D&O) and other management liability policies. This is in contrast to other policies, most commonly commercial general liability policies, which provide defense “outside of limits” where defense costs do not reduce the policy’s limit. Continue Reading An Uncharted Frontier: Nevada First State to Prohibit Defense-Within-Limits Provisions

Directors and officers should take note of a recent decision from the US Bankruptcy Court for the Southern District of New York concerning access to D&O insurance policy proceeds.  In In re SVB Financial Group, Case No. 23-10367 (Bankr. S.D.N.Y. May 22, 2023)[1], the Bankruptcy Court found cause to lift the automatic stay to allow directors and officers to access the proceeds of SVB Financial Group’s (“SVB”) directors and officers (“D&O”) insurance policies to pay for legal costs incurred in responding to investigations and defending litigation.  Moreover, it declined to impose a “soft cap” on the advance of defense costs. Continue Reading Hard on Soft Caps – Bankruptcy Court Declines to Limit Access to D&O Insurance