Much of the commentary on insurance issues arising from the COVID-19 crisis, including multiple posts on this blog, understandably has focused on recovery under first-party property policies providing business interruption coverage for losses incurred due to office closures, government orders, extra expenses, and other direct costs experienced by employers. There is a much broader

Insurance companies can become insolvent. This is an ongoing issue in Puerto Rico following hurricanes Irma and Maria. In addition to Real Legacy Assurance Company’s insolvency, Puerto Rico’s Insurance Commissioner reportedly fined various insurers for delays in handling claims. Even if your insurance company is insolvent, it may have purchased reinsurance. While the general rule

In MF Global Holdings Ltd. et al. v. Allied World Assurance Co. Ltd. et al., No. 1:16-ap-01251 (Bankr. S.D.N.Y. Aug. 24, 2017), the United States Bankruptcy Court for the Southern District of New York ordered MF Global Holdings Ltd. and Allied World Assurance Co. Ltd. to arbitrate their $15 million errors-and-omissions coverage dispute in Hamilton, Bermuda. MF Global initiated an adversary proceeding against Allied World in the bankruptcy court after Allied World had refused to pay MF Global for amounts that MF Global returned to its customers’ accounts as part of a settlement of claims against MF Global’s former managers and directors. Allied World denied coverage under its “Bermuda Form” errors-and-omissions policy, claiming that this procedure was tantamount to deposit insurance, and not professional liability insurance, which is what errors-and-omissions coverage typically provides.
Continue Reading Court Order Sending Coverage Dispute To Arbitration Overseas Demonstrates The Potential Consequences Of Purchasing “Bermuda Form” And Other International Coverages

A case decided last week by the Sixth Circuit illustrates the importance of seeking bankruptcy claim policy amendments when placing D&O coverage. Indian Harbor Ins. Co. v. Zucker (6th Cir. Jun. 20, 2017) involved the application of the insured-vs.-insured exclusion and specifically, whether the policy’s insured-vs.-insured exclusion precluded coverage for a claim brought by a company’s liquidating trust, to which the company’s claims had been assigned by the company as debtor-in-possession after the company filed for bankruptcy. After the company’s claims were assigned to the liquidating trust, the trustee sued several of the company’s former executives for breach of fiduciary duty.
Continue Reading Sixth Circuit Rules That Insured-vs.-Insured Exclusion Bars Coverage for Liquidation Trustee’s Claim