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
Hunton partner, Syed Ahmad , was quoted yesterday in a Law360 feature discussing how corporate policyholders can maximize their D&O insurance coverage. As Ahmad explains, “[g]iven the ever-changing regulatory landscape, directors and officers are getting involved in matters earlier and earlier and in a wider range of situations than before.” As a consequence, directors and officers should be looking for insurance that affords the broadest possible protection against the most diverse range of claims that the company is likely to face. One way to achieve this is use of a broad definition of “claim.” As Ahmad explains, “[t]he definition of ‘claim’ should cover as many of these potential scenarios as possible.” Another strategy is to narrow the scope of potentially applicable exclusions. In this instance, Ahmad explains in the context of the often-applied “insured v. insured” exclusion, policyholders should “[s]eek to carve out from the exclusion employment claims, bankruptcy proceedings and whistleblower claims,” as these claims do not suggest the sort of collusiveness that the exclusion was originally intended to dissuade.