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

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