On May 3, the 7th U.S. Circuit Court of Appeals sided with the policyholder, resolving an insurance coverage dispute over a $100 million settlement related to claims under the federal Anti-Kickback Statute and the federal False Claims Act. Read on for analysis of this decision, which tries to clarify the difference between compensatory damages, which
Fiduciary Liability
Financial Institutions and Bank Directors and Officers in the Crosshairs – Are Their Insurance Policies Really Primed and Ready?
With bank stability and the related stock market rout now dominating the headlines for the first time since the 2008 financial crisis, are financial institutions’ D&O and bankers’ professional liability / E&O (“BPL”) liability policies ready to help backstop coverage, or potentially full of holes? Coming out of a hard market where insurers carefully and quietly pulled back some policy enhancements over the course of several years, now is the time for financial institutions to review their insurance policies to identify and fill any significant gaps and holes in their executive risk coverages. The last two weeks demonstrate that financial institutions, as well as their directors and officers, face the risks of receivership, government investigations, securities lawsuits, and personal liability following a bank failure or stock rout in the face of financial stability concerns. Continue Reading Financial Institutions and Bank Directors and Officers in the Crosshairs – Are Their Insurance Policies Really Primed and Ready?
New York’s Highest Court Sides With Insured: $140M Disgorgement Payment Is Covered Loss
On Nov. 23, 2021, the New York Court of Appeals sided with the policyholder, resolving a decades-long insurance coverage dispute, J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., __ N.E.3d __, 2021 N.Y. Slip Op. 06528, 2021 WL 5492781 (Nov. 23, 2021). It held that a $140 million disgorgement payment to the Securities and Exchange Commission (SEC) was a covered “loss” rather than an uninsurable “penalt[y]” under the error and omissions/professional liability policies at issue.
The 6-1 majority opinion is a landmark decision on the insurability of disgorgement and restitution damages that will likely have ramifications for policyholders seeking to recover similar losses from their insurers in disputes in New York and throughout the country.Continue Reading New York’s Highest Court Sides With Insured: $140M Disgorgement Payment Is Covered Loss
Delaware Court Holds Parties Cannot Negotiate Away Fraudulent Inducement Claims
In an Aug. 12, 2021, opinion, the Delaware Chancery Court examined two seller-friendly purchase agreement provisions and held that public policy and Delaware law prevented the seller from invoking the provisions to block well-pled allegations of fraudulent inducement.
Online HealthNow, Inc. and Bertelsmann, Inc. v. CIP OCL Investments, LLC, et al. addressed allegations that the stock purchase agreement at issue was obtained through false and fraudulent statements contained in the agreement made by the seller and related entities. The agreement contained two provisions that were the focus of the court’s opinion. The first, the agreement’s survival clause, stated that all of the representations and warranties in the agreement would “terminate effective as of the Closing and shall not survive the Closing for any purpose,” effectively ending the statute of limitations period at the time of closing. The second, the non-recourse provision, noted that claims arising out of the purchase agreement could be asserted only against the parties to the agreement itself.Continue Reading Delaware Court Holds Parties Cannot Negotiate Away Fraudulent Inducement Claims