D & O

September 20.2011

Investigation Costs May Be Covered By D&O Policy

The Second Circuit recently issued a decision in MBIA Inc. v. Fed. Ins. Co., 2011 U.S. App. LEXIS 13402 (2d Cir., July 1, 2011), finding coverage for investigative costs associated with: 1) a subpoena issued by the New York Attorney General; 2) a formal order issue by the SEC; and 3) related derivative actions. The company’s D&O policy provided coverage for “Securities Loss” for which an insured becomes legally obligated to pay as the result of a “Securities Claim.” Securities Claim was defined as “a formal or informal administrative or regulatory proceeding or inquiry commenced by the filing of a...

Read the Article | Comments (0) | TrackBack | Posted in D & O

December 20.2010

Court Finds Defense Coverage Under D&O Policy Where Dispute Whether Officer was Acting on Behalf of Company

The Ninth Circuit recently reaffirmed the California legal standards that mandate that insurers defend their insureds where the insured would reasonably expect a defense, and that a third party plaintiff’s factual allegations, not its legal conclusions, govern the duty to defend. Goerner v. Axis Reinsurance Co., 2010 U.S. App. LEXIS 21624 (Oct. 20, 2010, 9th Cir. unpublished). In Goerner, the plaintiff was insured under a D&O policy issued by Axis in his role as the CEO of his employer entity. Specifically, the policy provided defense and indemnity “for ‘any actual or alleged error’ committed by an insured individual ‘in his...

Read the Article | Comments (0) | TrackBack | Posted in D & O

May 03.2010

Federal Court Rejects Insurer’s Discretion in Terminating the Duty to Reimburse Defense Costs Under a Directors and Officers Liability Policy

Last month, the Fifth Circuit reaffirmed what has been axiomatic in California since at least Gray v. Zurich, 65 Cal. 2d 263, 278 (1966): People buy liability policies for peace of mind, expecting to be defended in case they are sued. Any potential for coverage at all, therefore, triggers the duty to defend, and the duty is not dependent on the “malleable, changeable and amendable” pleadings in the underlying action. In Pendergest-Holt v. Lloyd’s, 600 F.3d 562 (2010), the Fifth Circuit extended this principle to the duty to reimburse defense costs under a D&O policy. It held that insurers may...

Read the Article | Comments (0) | TrackBack | Posted in D & O

March 16.2010

Preparing for a Mediation Involving Coverage Issues

Adequate preparation is essential for any mediation, and mediations involving insurance coverage issues are no exception. Whether the focus of the mediation is the insurance coverage dispute itself, or whether the insurer is attending a mediation of the underlying action (with an expectation that it will fund any settlement), the insured can and should take certain steps to ensure a more productive session. 1) Select the right mediator Only the attorneys handling the case can judge which mediator has the right style and temperament to handle their specific matter. An additional consideration, however, should be whether the mediator has some...

Read the Article | Comments (4) | TrackBack | Posted in Construction Insurance, D & O, General Liability Policies, Intellectual Property Claims, Pollution Claims, Property Insurance, Risk Management

March 03.2010

New Cases Find Coverage Under D&O Policies For A Company’s Special Investigation Committee Costs

In the recent spate of backdating lawsuits, and in the current wave of financial institution litigation, Directors & Officers (D&O) liability carriers have almost uniformly taken the position that the costs of a company’s Special Investigation (or Litigation) Committee (SC) are not covered “Loss.” Two cases in 2009 – the first to address this issue – concluded otherwise. A company faced with allegations of wrongdoing by its directors or officers may choose to form a Special Committee of independent directors to investigate the allegations and make a determination of their merits. Many cases involve an SC that is formed in...

Read the Article | Comments (0) | TrackBack | Posted in D & O

January 21.2009

Identical Financial Advice Can Constitute Separate Claims

These days, putting your money in the stock market isn’t for the faint of heart. Even before the recent economic downturn, many individuals were turning to financial advisors to give them the inside scoop on the best stocks, funds, and bonds. But what happens when those investments perform poorly? Or when it comes to light that a particular advisor has been giving the same bad advice to his clients for years? For insurance purposes, does giving the same advice to two different investors count as one act or two? One recent Ninth Circuit decision sheds light on the increasingly important...

Read the Article | Comments (0) | TrackBack | Posted in D & O, Financial Crisis

January 12.2009

All May Not Be Lost In The Financial Crisis: Bankrupt Defendants’ D&O Insurance

The current financial crisis has led to a number of corporate bankruptcies. Lehman’s filing in September 2008 – the largest bankruptcy case the U.S.has ever seen – is one obvious example. There are bound to be many more bankruptcies in 2009 as the financial crisis chew up more struggling businesses. As the Lehman bankruptcy shows, corporate bankruptcies can give rise to numerous claims for mismanagement, waste and inaccurate financial disclosures. Plaintiffs may assume that all, or nearly all, the money available to satisfy their claims has either evaporated or will be divided among thousands of creditors. But, plaintiffs might be...

Read the Article | Comments (0) | TrackBack | Posted in D & O, Financial Crisis

December 22.2008

Traps to Avoid when Settling Lawsuits with Claimant

The California District Court of Appeals has come out with a couple decisions in the last two years which present serious traps for an insured when settling a case with the underlying claimant or separately with one layer of coverage. Two such cases are Qualcomm and Aerojet. We will be discussing these cases, as well as thoughts regarding how to deal with them, in upcoming blogs. As part of that process, we hope to solicit the thoughts and experiences of readers as well. There are any number of ways to approach the difficulties presented by these cases, as well as...

Read the Article | Comments (0) | TrackBack | Posted in D & O, General Liability Policies

December 18.2008

Confidentiality of Communications with Carriers

I spoke recently on a Webinar sponsored by Strafford Publications, entitled "Attorney-Client Privilege in Jeopardy in Insurance Litigation." One issue addressed was whether communications between the policyholder counsel and the carrier are privileged when the insured has independent Cumis counsel. In the Cumis setting, the insured hires its own independent defense counsel, which represents only the insured and has no attorney-client relationship with the insurer. If Cumis counsel provides the insurer with information or an assessment of the merits and risks of the litigation, is that communication privileged, or may it be discovered by the opposing party in the litigation?...

Read the Article | Comments (0) | TrackBack | Posted in D & O, General Liability Policies