What’s Next with D&O and COVID-19 Coverage?

Allison Zamani

The principal focus in considering insurance coverage for COVID-19-related losses and liabilities has, thus far, primarily concerned business interruption coverage. But there are many other types of coverage that could come into play as businesses recover. Among the various other types of insurance coverage that could be implicated is Directors & Officers (“D&O”) liability insurance.

In the simplest terms, D&O insurance is meant to protect a company’s directors and officers from claims alleging that a mistake, bad judgment, or other malfeasance in operating a business has caused the business to suffer some form of loss or to incur some form of liability. These various circumstances are embodied in the definitions of what D&O policies refer to as “Wrongful Acts.” A typical “Wrongful Acts” definition includes the breach of a duty, neglect, error, misstatement, misleading statement, omission, or act of a director and/or officer of a company. Securities litigation and, to a more limited extent, regulatory investigations are the classic types of claims that arise from conduct typically encompassed within a “Wrongful Act” definition. There are generally three parts to a D&O policy, called Side A, B, and C coverage. Side A coverage is for “Wrongful Acts” committed by directors and/or officers that the company does not or cannot indemnify. Side B coverage exists to reimburse the company for indemnity payments the company makes on behalf of directors and/or officers for their “Wrongful Acts.” Finally, Side C coverage insures the company itself when it is sued. For public companies, Side C coverage is typically triggered only by securities claims. Privately held companies may be covered for a broader range of claims involving the “Wrongful Acts” of directors and officers. D&O Insurance covers not only indemnity payments but also defense costs, i.e. the costs necessary to respond to any litigation or investigation.

As far as COVID-19 is concerned, decisions that companies have made in order to operate under these difficult circumstances may be called into question as things return to “normal.” For example, companies have had to respond to the challenges of the pandemic and to issue public statements about that response. These actions could potentially prompt securities litigation (direct and derivative securities claims) and class actions to the extent that companies and/or a company’s directors and officers have allegedly failed to respond adequately or have made false statements to shareholders and/or the public. Similarly, a company’s financial reports may come under scrutiny, particularly if the company suffered a substantial loss as a result of COVID-19.

Continue reading “What’s Next with D&O and COVID-19 Coverage?”

COVID-19 Coverage Litigation Update: Will Your Claim Be Batched with Others for Resolution?

Robert N. Lane* and Linda Kornfeld

Part 1

So far, traditional first-party property insurers have taken hardline “no coverage” positions for COVID-19 business interruption claims. As a result, policyholders nationwide (and even around the world) have been left to contemplate whether to press their coverage claims through litigation, or stay on the sidelines and watch as others develop the issues. Those policyholders already in coverage litigation or considering filing suit should be aware of the debate between policyholders and their insurers regarding how to manage the coverage suits that have been filed in many different courts in many different states around the country. To be sure, there are currently nearly 700 lawsuits pending in federal and state courts nationwide (most of which thus far involve small businesses) seeking rulings regarding whether business interruption losses associated with COVID19 are covered by traditional first-party property policies. Of those 700 cases, almost 200 of them are identified as putative class actions. Continue reading “COVID-19 Coverage Litigation Update: Will Your Claim Be Batched with Others for Resolution?”

Don’t Let Jury Trials Vanish Further Amidst the Coronavirus Pandemic

Jared Zola

A trial team and I were asked recently whether we would prefer to postpone an in-person jury trial several months or conduct the trial now via Zoom. We responded with a resounding, “in person.”

Not a single one of us is immune to the coronavirus COVID-19 pandemic. We’ve all suffered loss. Some much more tragic and permanent than others, but no one can honestly say that her or his life is unchanged. Some things that seemed normal earlier this year and before then may never go back to the way they were. Will we fly cross-country to conduct a four-hour deposition in person, even when it is safe to do so? Maybe; depends on the witness. Will we for an in-person meeting with colleagues? Maybe not.

While attorneys are proving every day that many parts of our profession can be performed remotely, we must closely guard the sanctity of jury trials from the coronavirus pandemic. Criminal and civil jury trials are the backbone of the American system of justice; our ultimate safeguard of civil liberties. The American jury trial is a constitutional right. I’m all for adapting to the present situation. But the thought of a “virtual” trial by jury is a bridge too far—and presents a serious risk of eroding one of the most fundamental American rights. Continue reading “Don’t Let Jury Trials Vanish Further Amidst the Coronavirus Pandemic”

Blank Rome Attys Talk COVID-19 Insurance Coverage Battles

Blank Rome LLP insurance recovery partners Jim Murray and Linda Kornfeld recently spoke with Law360 about how their practice group has been tackling clients’ claims for business loss coverage amid the COVID-19 crisis, while adjusting to the new normal of working from home.

How has your practice group adapted to the pandemic?

Murray: Our group consists of 32 of us now in several offices, including New York, Washington, D.C., and Los Angeles. We collaborate and pitch work as a group. We are not limited by offices. I have not had a single case at Blank Rome that has not included at least one lawyer from one of the other offices.

Our group would typically have a monthly meeting of 45 minutes to an hour, where we discuss key cases and developments. We had always done that by video in our offices. When the pandemic hit and we finally ended up closing, we went from 14 offices to 1,000 home offices. For the insurance group, though, it was in some respects business as usual, as we continued with those meetings, bumping them up to every Friday instead of every month. We limit the meetings now to 30 minutes, and every week we have a speaker talk about one of their cases. We have had a lot of discussion about coronavirus cases, what we will and will not be doing in this area.

Kornfeld: It has really been a great thing to have such a close group in this pandemic situation. In my career, I have never been involved in any situation of this scope, where everyone in the group is thinking about the same issues at the same time. 9/11, Hurricane Katrina, Hurricane Sandy and other large-scale events in the past were geographically specific, where this event is impacting most everyone everywhere.

We are all reading insurance policies on a daily basis and analyzing those policies. We have such strong friendships that we are on the phone with each other all the time, trading ideas about policy language and potential arguments. Since we are such a tightly knit group, we have been able to use that fact to bring sophistication of analysis and thought to bear. We are putting all these smart coverage brains together and focusing at the same time on this specific issue, coverage for the pandemic. The level of intellectual discussion has been a silver lining of this situation.

For the firm as a whole, across all practice areas, we have been in much closer contact. Most everyone’s clients have had some issue relating to the pandemic.

In their full interview with Law360, Jim and Linda further discuss:

  • What pandemic-related work has the group been doing?
  • What do you think of efforts to centralize COVID-19 coverage cases?
  • How have you been spending time outside work?

To read the full article, please click here.

“Blank Rome Attys Talk COVID-19 Insurance Coverage Battles,” by Jeff Sistrunk was published in Law360 on June 17, 2020.

 

CANCELED: Guidance for Policyholders on Event Cancellation Insurance in the Wake of COVID-19

Dominique A. Meyer

Across the globe, governments and public health officials are banning large gatherings and imploring citizens to practice “social distancing” in order to slow and prevent the spread of the coronavirus outbreak, or “COVID-19.” As a result, festivals, sporting events, conferences, and community celebrations are being canceled or postponed, leaving event organizers of all sizes—from major production companies, to would-be newly-weds—wondering how to recoup their substantial losses.

The pandemic has led to an unprecedented number of high-profile event cancellations and the potential for billions of dollars in lost income and other damages to the entertainment and sports industries. Just last week, concert giants Live Nation and AEG Presents suspended all tour engagements in North America, and world-famous gatherings like the Coachella Valley Music Festival and Stagecoach Music Festival were postponed until October. The threat of the virus has also taken its toll on professional sports—both the National Basketball Association and the National Hockey League suspended the remainder of their 2019–2020 seasons, and the National Collegiate Athletic Association canceled its March Madness tournament altogether. Not even “America’s favorite pastime” has been immune from the effects of the virus—Major League Baseball postponed the start of its 2020 season indefinitely. The economic cost of these cancellations is certain to be substantial. Continue reading “CANCELED: Guidance for Policyholders on Event Cancellation Insurance in the Wake of COVID-19”

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