An issue frequently raised in coverage disputes involving claims-made liability insurance policies is determining whether certain pre-lawsuit events or disputes constitute a “claim” sufficient to trigger coverage.
Unlike occurrence-based liability policies that respond in the policy year or years during which the coverage-triggering event occurred (e.g., the years in which a person sustained injury in an asbestos bodily injury claim), a claims-made liability insurance policy is triggered upon the insured’s receipt of a claim. Upon an insured providing notice of a claim, its insurers may dispute whether the notice-triggering event constitutes a “claim” at all. Continue reading “Federal Court Says Subpoena Is a “Claim” Triggering Insurance Coverage”
Amy J. Spencer
With the “opioid epidemic” at an all-time high—and the resulting news coverage and public awareness also at an all-time high—now is the time for pharmaceutical companies, pharmacists, hospitals, doctors, first responders, and employers to review their professional liability and general liability insurance policies and any other potentially applicable policies such as products liability and directors and officers (“D&O”) insurance. Continue reading “Insurance Coverage for the Opioid Crisis”
Justin F. Lavella and Kyle P. Brinkman
Last month the United States Court of Appeals for the Sixth Circuit issued its anticipated decision in Indian Harbor Insurance v. Zucker, affirming a 2016 decision from a federal district court in Michigan that an Insured v. Insured (“IVI”) exclusion bars coverage for a claim brought by a post-bankruptcy litigation trustee for the benefit of the insured debtors’ creditors. The district court’s Indian Harbor decision was driven largely by the mistaken conclusion that a post-bankruptcy trustee is an ordinary assignee of the debtor company—an insured—and therefore purportedly stands in the shoes of the insured debtor for purposes of the IVI exclusion. As we described at the time, that decision, however, ignores the fundamentally different nature of transfers pursuant to Bankruptcy Code Section 1123 when compared to ordinary assignments pursuant to state contract law and the fact that a post-bankruptcy trustee assumes special powers as an estate representative. Unfortunately, after appeal, this issue still remains unresolved.
Continue reading “Policyholders (and the Courts) Continue to Ignore Section 1123 When Analyzing Insured v. Insured Exclusions”
Many corporate executives generously serve as directors and officers of nonprofit organizations. While they are undoubtedly inundated with meetings and workshops focusing on corporate risk management at their day job, they may not consider potential liability arising from their philanthropic work. Just as a corporate director may face lawsuits, even those lacking merit, for allegedly breaching fiduciary obligations to shareholders, so, too, a nonprofit director may face similar allegations of wrongdoing for a broad range of activities including, for example, allegedly permitting the mismanagement of funds or approving an employee’s termination. Even if the director ultimately prevails after a trial on the merits, the nonprofit may not possess the financial means to indemnify her or his legal fees. Before any such issue threatens financial well-being, it is prudent for any individual joining a nonprofit organization to take the time to make sure the nonprofit has appropriate insurance coverage. So what is appropriate coverage?
Continue reading “Corporate Executives Beware: You Need Insurance Protection When Serving on a Nonprofit Board”
James R. Murray, Jared Zola, and Kyle P. Brinkman
Companies facing shareholder derivative suits should be wary of their directors’ and officers’ liability (“D&O”) insurers attempting to avoid providing coverage for settlements or judgments based on “bump-up” or “inadequate consideration” exclusions. The historic purpose of the exclusion is to prevent insureds from negotiating an unfairly-low price when purchasing another entity or completing intracompany transactions and then using insurance proceeds to supplement that price to come up with the fair market value. Continue reading “Don’t Let Your D&O Insurer “Bump” a Covered Claim”
Jared Zola and Frank M. Kaplan
As a wise person once said, “It’s déjà vu all over again.” Anyone who thought wage-and-hour lawsuits would be a short-lived lawsuit du jour of the plaintiffs’ bar have been proven wrong. Claimants filed more than 8,900 FLSA cases in federal court last year, a 30 percent increase from 2011. In light of the continued trend and recent legislation that has the potential to expand liability to individuals acting on an employer’s behalf, employers should take a hard look at the insurance assets available to protect against these potential liabilities.
California’s new statute, the Fair Day’s Pay Act, has the potential to implicate a “person acting on behalf of an employer” to liability for the company’s allegedly improper wage-and-hour practices. Labor Code § 558.1 (eff. Jan. 1, 2016). New York amended its existing Business Corporation Law § 630, effective January 19, 2016, to extend potential liability for unpaid wages to the top 10 shareholders of privately held corporations incorporated in New York and foreign corporations. While employers and individuals are armed with a wide array of defenses, the potential risks warrant a close look at what insurance assets a company has available to offset any potential liabilities in this continuously growing area. Continue reading “Wage-and-Hour Policies May Be a Useful Asset to Fill Potential Coverage Gaps”
Justin F. Lavella and Kyle P. Brinkman
The Insured v. Insured (“IVI”) exclusion is a frequent and important issue for directors & officers (“D&O”) liability coverage, particularly where the bankruptcy of an insured entity may blur the lines of who is an insured and who is acting on behalf of an insured. Nevertheless, because the exclusion generally bars coverage for a claim made against an insured individual that is “brought or maintained by or on behalf of” the insured entity, whether the IVI exclusion applies is often the single most important coverage issue for the many claims often asserted against a debtor’s former directors and officers in bankruptcy.
Although the applicability of the IVI exclusion to bankruptcy-related claims has been litigated several times and often decided in favor of insurers, none of those cases has addressed the critical question of the primacy of Bankruptcy Code Section 1123, and how this provision may prevent application of the exclusion in such circumstances. Therefore, as insurers become more emboldened by their prior victories, debtors, their former directors and officers, as well as their bankruptcy and coverage counsel should be careful to consider Section 1123 both when drafting the debtor’s plan of reorganization and in any subsequent insurance coverage litigation. Continue reading “The Insured v. Insured Exclusion and Section 1123: the Primacy of Bankruptcy Law and the Importance of Planning Ahead”