In April 2017, white collar and securities attorneys, as well as potential defendants, cheered the Supreme Court’s unanimous opinion in Kokesh v. SEC, which held that civil disgorgement, when imposed as part of a Securities and Exchange Commission (“SEC”) enforcement proceeding, is a “penalty” and therefore subject to a five-year statute of limitations. At the time, Kokesh was hailed as limiting the size of future disgorgement awards, in some cases dramatically. However, the court’s categorization of SEC disgorgement as a “penalty” may have much wider ripple effects that could jeopardize billions of dollars in potential future insurance recoveries. This ripple effect first manifested itself in J.P. Morgan Sec., Inc. v. Vigilant Ins. Co., where New York’s intermediate appellate court recently held that an SEC disgorgement settlement was no longer a covered “loss” under the defendant’s insurance policy, because Kokesh recategorized such disgorgements as non-covered “penalties.” Continue reading “Insurers Seize on Kokesh Ruling to Disclaim Coverage for SEC Disgorgement”
Businesses are increasingly purchasing dedicated cyber insurance policies to address their cyber and data security exposures. To date, however, many of the judicial decisions addressing insurance for cyber exposures have done so under other, more traditional, types of insurance policies such as commercial general liability (“CGL”) and commercial property policies. Some of these rulings have disappointed policyholders by concluding that such non-cyber insurance policies do not cover cyber exposures. But a recent decision by the United States Court of Appeals for the Fifth Circuit demonstrates that certain non-cyber policies potentially afford coverage for cyber exposures. In Spec’s Family Partners, Ltd. v Hanover Insurance Co., No. 17-20263, 2018 U.S. App. LEXIS 17246 (5th Cir. June 25, 2018), the court of appeals found that a contractual liability exclusion in a management liability policy did not excuse the insurer of its duty to defend its policyholder, a private company, against a claim arising out of a payment card data breach. Continue reading “Seeking Insurance Coverage for Data Breach Claims? A Recent Case Confirms that Certain D&O Policies Potentially Provide Coverage”
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”
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”
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.
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?
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”