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D&O Insurance: The Basic Value Proposition

I make it my business on this blog to try to write about the latest developments and current trends in the world of D&O, but I think that every now and then it is a good idea to step back and take a look at the bigger picture. For example, let’s consider the standard D&O Insurance policy...

U.S. Trade Sanctions and D&O Insurance

As part of its conduct of foreign affairs and of its national security program, the U.S. government has instituted a series of economic and trade sanctions against a number of countries and a long list of designated individuals . The various sanctions programs are administered by the Office of Foreign...

Thinking About Excess D&O Insurance

In many cases, companies’ D&O insurance programs are structured in several layers, with one or more policies of excess of insurance written over top of a primary layer. The excess insurance is often said to be written on a “follow form” basis, meaning that the primary policy’s...

D&O Insurance: The Major Shareholder Exclusion

An exclusion sometimes found in D&O insurance policies precludes coverage for claims made by shareholders who have a specified percentage of ownership in the insured company. This type of exclusion is called a Major Shareholder Exclusion (or, sometimes, the Principal Shareholder Exclusion). An interesting...

D&O Insurance: Regulatory Exclusion Precludes Coverage for Relator’s Qui Tam Action

As I have noted in prior posts, “ qui tam actions” under the False Claims Act often fit uncomfortably with typical D&O insurance policy terms and provisions. For example, the procedure whereby qui tam actions are filed but not immediately served raise questions of the claims made date...

D&O Insurance: Professional Liability Exclusion Precludes Coverage for D&O Claims Against Ponzi Schemer’s Bank

In a coverage dispute arising out of the long-running Rothstein Ponzi scheme scandal , a Southern District of Florida judge, applying Florida law, has held that the professional services exclusion in the Rothstein bank’s D&O insurance policy precluded coverage for claims brought against the...

Fourth Circuit: Guilty Pleas Trigger D&O Policy Exclusion and Insurer’s Right to Seek Recoupment of Previously Paid Defense Expenses

It sometimes comes as a surprise to some policyholders that D&O carriers contend that they have the right to try to recover amounts they have paid as defense expenses if it turns out that coverage for a claim is precluded by a policy exclusion. However, an insurer’s right of defense expense...

D&O Insurance: Debtor-in-Possession Claims and the Insured vs. Insured Exclusion

The traditional Insured vs. Insured exclusion found in many D&O insurance policies is a frequent source of claims disputes, particularly in the bankruptcy context . As its name suggests, the Insured vs. Insured exclusion precludes coverage for claims brought by one Insured against another Insured...

Criminal Proceedings, D&O Insurance and Corporate Indemnities

Here’s the scenario: A former company CEO faces criminal charges for alleged bribery in which he was involved while he was at the company. The company’s D&O insurance provides funding for his defense, but the amount of the insurance available proves to be insufficient to take him through...

Next Up: A Home Depot Data Breach-Related D&O Lawsuit?

After claimants filed shareholders’ data breach-related derivative suits against the boards of Target ( here ) and Wyndham Worldwide ( here ), a number of commentators (including me) asked whether we could see a wave of cybersecurity related D&O lawsuits. Interestingly, since these two lawsuits...

Another U.S. Securities Suit Arising From Overseas Corruption Investigation

In an earlier post , I noted that a significant factor driving securities litigation filings so far this year has been the rising number of U.S. securities lawsuits involving non-U.S. companies. A number of different factors are contributing to the filing of these suits, but among the factors is the...

Petrobras Securities Suit: Judge Rakoff Rejects Company’s “Adverse Interest” Argument; Rules Brazilian Investors Must Arbitrate Brazilian Securities Law Claims

In an interesting opinion addressing several of the critical issues in the U.S. securities lawsuit arising out of Petrobras bribery scandal, on July 30, 2015, Southern District of New York Judge Jed Rakoff denied in part and grated in part the defendants’ motions to dismiss. Among other things...

Tenth Circuit: D&O Insurance Policy’s Insured vs. Insured Exclusion Unambiguously Precludes Coverage for FDIC’s Failed Bank Claims

In an important decision concerning D&O insurance coverage in connection with failed bank claims, the Tenth Circuit, applying Kansas law, held that a D&O policy’s insured vs. insured exclusion unambiguously precluded coverage for claims brought by the FDIC as receiver of a failed bank against...

The Problem With a Broadly Worded Professional Service Exclusion in a Service Firm’s D&O Insurance Policy

In a recent post ( here ), I discussed a recent federal district court ruling in which the court broadly interpreted the professional services exclusion in a bank’s D&O insurance policy in order to preclude coverage under the policy for a claim that had been made against the bank and certain...

Cal. Supreme Court: Insurer May Seek to Recover Directly From Independent Counsel Allegedly Excessive or Unreasonable Fees

On August 10, 2015, in an opinion that has already garnered a great deal of attention and commentary, the California Supreme Court ruled that an insurer that funded the payment for its insured of independent counsel (or “Cumis” counsel as independent counsel are known in California) in defense...

Fourth Circuit Affirms Dismissal of All Claims Against Failed Bank’s Directors, Revives Negligence Claims Against Bank’s Officers

On August 18, 2015, in an interesting opinion that takes a close look at exculpatory bylaw issues and the business judgment rule under North Carolina law, the Fourth Circuit affirmed in part and reversed in part the district court’s dismissal of the failed bank lawsuit the FDIC had filed against...

Ninth Circuit: Professional Services Exclusion Precludes Coverage Under Payroll Services Firm’s Management Liability Insurance Policy

The problems that can arise from the wording of the professional services exclusion in the D&O insurance policy of a service company are perennial issues and a recurring topic on this blog (see most recently here ). In an unpublished August 18, 2015 opinion ( here ), the Ninth Circuit affirmed the...

The Short-Termism Debate: Are There D&O Liability Issues Involved, Too?

In recent months, commentators from across the political spectrum, largely in response to perceived excesses of activist investors, have called for changes to discourage “ short-termism ” – that is, the perceived excessive focus of businesses on short-term results rather long-term value...

What to Watch Now in the World of D&O

Every year just after Labor Day, I take a step back and survey the most important current trends and developments in the world of Directors’ and Officers’ liability and D&O insurance. This year’s survey is set out below. Once again, there are a host of things worth watching in the...

D&O Insurance: The Question of Coverage for TCPA Claims

The Telephone Consumer Protection Act (TCPA) has proven to be a fruitful source of consumer class action litigation. Plaintiffs’ lawyers are attracted by the potentially lucrative recoveries under the statue, and indeed several recent settlements in TCPA class action lawsuits have run into the...

D&O Insurance: Insured vs. Insured Exclusion Applies Even When Claimants Include Both Insureds and Non-Insureds?

The Insured vs. Insured Exclusion is a standard D&O insurance policy provision. The exclusion precludes coverage for clams brought by one “Insured Person” against another “Insured Person.” But what happens when the claimants suing an Insured Person include both individuals...

Defense Costs Paid Under Reservation of Rights Do Not Erode Fiduciary Liability Policy’s Limit of Liability?

As part of our beat here at the The D&O Diary , we read a lot of judicial opinions. We are quite accustomed to the fact that the case outcomes can be and often are all over the map. Just the same, every now and then we read a decision that really makes us scratch our heads. That was our reaction...

SEC Enforcement Actions Against Outside Directors

From time to time, the SEC reiterates its view of the critical gatekeeper role companies’ outside directors play in safeguarding investors’ interests. Nevertheless, it has been relatively rare for SEC to pursue enforcement actions against outside directors based on an alleged failure to fulfill...

The “Myth” of Outside Director Liability and the Critical Importance of D&O Insurance

In the world of corporate governance, there are a number of common presumptions about board structure and practices. However, according to a recent paper, many of these presumptions may in fact represent corporate governance “myths.” In their September 30, 2015 paper entitled “Seven...

Ninth Circuit: Embezzler Executive’s Knowledge Can Be Imputed to Company in Innocent Third Party-Filed Securities Suit

For purposes of determining the scienter of a corporate entity defendant under the federal securities laws, a company’s executives’ knowledge generally is imputed to company. There is an exception to these general principles – the “ adverse interest exception ” – which...