Hunton & Williams insurance partner, Syed Ahmad, was quoted twice in Law360 concerning significant insurance cases to watch in 2018. On January 1, 2018, Ahmad noted that Pitzer College v. Indian Harbor Insurance Co., pending in the California Supreme Court, “can be significant for coverage disputes in California because the California rule could override the law of the state that would apply otherwise, even if the parties agreed to another state’s law governing,” On January 9, 2018, Ahmad was again asked by Law360 to comment on key D&O cases that will likely be decided in 2018. Ahmad noted that in Patriarch Partners LLC v. Axis Insurance Co., pending in the Second Circuit Court of Appeals, Patriarch’s appeal presents an unusual situation in which a policyholder is arguing that various developments in an ongoing SEC investigation don’t constitute a claim under a D&O policy, in order to avoid the application of an exclusion. In other circumstances, it may be favorable for a policyholder to assert that a preliminary step in an SEC probe is a claim, so as to maximize coverage. According to Ahmad, the district court didn’t fully address how, in the context of the specific policy language at issue, a non-public order by the SEC could qualify as a claim. “As Patriarch argues, ‘until an agency makes a demand upon the target under legal compulsion, there may be no way for a policyholder to even know that it is being investigated, that an order authorizing investigation has been issued against it or what the order of investigation says,'” Ahmad said, quoting from Patriarch’s appellate brief.
The frequency and magnitude of Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. § 78dd-1, et seq.) investigations and claims continue to grow. Last month, the U.S. Securities and Exchange Commission announced that Halliburton Co. had agreed to pay $29.2 million in fines and penalties to settle allegations that its operations in Angola and Iraq violated the FCPA’s books and records and internal accounting controls provisions. In its press release, Halliburton vowed that it had “continuously enhanced its global ethics and compliance program” since first receiving an anonymous tip in December 2010, but the recent settlement serves as a reminder that even the most robust compliance program cannot guarantee that FCPA violations will not occur.
Bear Stearns’ insurers were recently dealt a fatal blow, when the trial court granted Bear Stearns’ motion for summary judgment and denied all insurers’ motions (and defenses). See J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., 2017 N.Y. Slip Op. 27127, 11 (N.Y. Sup. Ct. 2017). The court found that the documentary and testamentary evidence presented by Bear Sterns overwhelmingly demonstrated that Bear Stearns’ misconduct profited their customers instead of resulting in Bear Stearns’ own “ill-gotten gains.” The court also found the settlement amounts reached by Bear Stearns in the SEC action and the private civil suits to be reasonable.