In what is an unfortunate sign of the times, Springpoint Senior Living, Inc. recently sued its insurers in New Jersey federal court claiming they abruptly stopped covering Springpoint’s defense costs after doing so for nearly a decade.  A copy of the complaint can be found here. Springpoint’s allegations are emblematic of a growing trend among insurers taking drastic measures to avoid coverage, which is no doubt in response to the tightening economic conditions and looming recession around the globe. 
Continue Reading A Sign of the Times: Policyholder Forced to Sue Insurers to Resume Payment of Defense Costs

Boston-based partner Geoffrey Fehling has been recognized for his extensive experience and insights into emerging issues affecting directors and officers liability and other specialty lines insurance coverage by being selected to Law360’s 2022 Editorial Advisory Board for Insurance Authority Specialty Lines. As a member of the board, he will provide counsel to the legal newswire

Policyholders must be mindful of expansive causation language in policy exclusions that could pose significant—and sometimes unforeseen—hurdles to obtaining coverage for D&O claims. In TriPacific Capital Advisors, LLC v. Federal Insurance Co., a California federal court recently ruled that a D&O insurer had no duty to defend an investment firm’s $8.5 million employment suit because coverage was barred by the policy’s broad contract exclusion, which applied not only to breach of contract claims but also any claims “arising from” contractual liability owed by the company.
Continue Reading Broad Contract Exclusion Dooms Investment Firm’s $8.5 Million D&O Claim

The Delaware legislature recently passed an amendment to the statute governing Delaware corporations’ ability to indemnify directors and officers. That statute—8 Del. Law 145—provides that Delaware corporations “may” purchase “insurance” to insure liability of their directors, officers, employees, and agents “whether or not the corporation would have the power to indemnify such person against such liability.” The recent amendment clarifies that “insurance” includes captive insurance. It states: “For purposes of this subsection, insurance shall include any insurance provided directly or indirectly (including pursuant to any fronting or reinsurance arrangement) by or through a captive insurance company organized and licensed in compliance with the laws of any jurisdiction . . . .”
Continue Reading Delaware Corporations May Use Captives to Insure Non-Indemnifiable Loss

From event-driven litigation and event cancellations to securities claims and regulatory enforcement actions, the COVID-19 pandemic has led to a number of directors and officers liability exposures extending far beyond business interruption losses. The first wave of COVID-19 securities suits, for example, focused on allegations that companies made false and misleading statements or failed to disclose in securities filings how they responded to the pandemic (in the case of several cruise lines) or stood to benefit from it (in the case of pharmaceutical companies). Most, but not all, of those suits were dismissed on early motions. In all cases, however, those companies and individuals would have benefited from robust D&O liability insurance coverage.
Continue Reading New Year, New COVID-19 Securities Claims Present Continued D&O Exposures

2022 has kicked off with several new whistleblower awards, as the SEC announced earlier this week that it had awarded more than $4 million to whistleblowers who provided information and assistance in two government actions—one for misconduct occurring overseas and a second where the whistleblower’s assistance directly led to the success of the covered action.
Continue Reading Following Record-Setting Year, SEC Opens 2022 With $4 Million in New Whistleblower Awards: Is Your D&O Policy Prepared to Respond?

We have written over the past year about a string of pro-policyholder decisions from Delaware courts. One policyholder, however, recently had its claims dismissed based on application of Delaware law, based on one of 2020’s important D&O cases that limited coverage for appraisal actions initiated by stockholders pursuant to Title 8, Section 262 of the Delaware Code. In Stillwater Mining Co. v. National Union, the Delaware Superior Court explained that Stillwater had seized upon the Court’s 2019 opinion in Solera Holdings v. XL Specialty, which had held that a Section 262 appraisal action constituted a “securities claim” because it alleged a “violation” of state statutory or common law regulating securities. The policyholder alleged in its complaint that Delaware law governed the D&O policy, but when the Delaware Supreme Court reversed Solera, Stillwater “pivoted” to the view that Montana law, rather than Delaware law, governed the policy.

Continue Reading Rare Imbalance?—Delaware’s “Center of Gravity” in D&O Policies Dooms Mining Co.’s Appraisal Coverage Claim, But Supreme Court Appraisal Review Looms Large

Policyholders have scored another victory in the Delaware Superior Court, this time on the issue of whether a “mergers and acquisition” endorsement required payment of a higher retention in two securities class actions. In August, we reported that, in CVR Refining, LP v. XL Specialty Insurance Co., No. N21C-01-260 EMD CCLD, 2021 WL 3523925 (Del. Super. Ct. Aug. 11, 2021), a Delaware Superior Court judge upheld a policyholder’s preferred forum in Delaware, denying five insurers’ motion to dismiss or stay the Delaware coverage action filed after the insurers had filed suit preemptively in Texas.
Continue Reading Policyholder Prevails (Again) in Delaware D&O Retention Dispute

The Central District of California recently rejected an attempt by Federal Insurance Company, a Chubb company, to avoid its duty to defend its insureds in an $8.5 million lawsuit with a former employee.

TriPacific Capital Advisors, LLC acquired Directors and Officers (D&O) coverage from Federal and Employment Practices Liability (EPL) coverage from Travelers Insurance Company. While those policies were in effect, a former TriPacific employee sued the company and its president, Geoffrey Fearns, for a variety of employment-related causes of action concerning his termination and compensation. TriPacific and Fearns tendered notice to both insurers, seeking indemnification and defense costs. Both policies contained a duty to defend.  While Travelers agreed to defend under a reservation of rights, Federal denied coverage based on multiple grounds, including its policy’s “other insurance” provision, contending that the provision rendered its policy “excess” to the Travelers policy.  Federal also argued that TriPacific had not satisfied the D&O policy’s $150,000 self-insured retention and, thus, coverage had not been implicated, in any event. TriPacific maintained that neither the SIR nor the “other insurance” provision pertained to Federal’s duty to defend and brought suit to enforce the duty to defend.
Continue Reading Potential Coverage Garners Total Defense: “Other Insurance” Provision Does Not Relieve Insurer’s Duty to Defend

Last month, the US District Court for the District of Connecticut granted an insurer’s motion for summary judgment in the case of Connecticut Municipal Electric Energy Cooperative v. National Union Fire Insurance Company of Pittsburgh, PA, No. 3:19cv839 (JBA), finding that there was no coverage under a directors & officers policy for defense costs associated with responding to a government subpoena. Last week, in line with our commentary, which highlighted several critical flaws in the court’s initial ruling, the court reversed itself and granted reconsideration, finding that there actually is coverage.
Continue Reading Court Corrects its Own Error in Win for D&O Policyholders