The first half of 2023 brought a blockbuster reversal for Towers Watson's insurers regarding a so-called bump-up exclusion's applicability, along with a policyholder win in Delaware that could shake up directors and officers coverage for special purpose acquisition companies and yet another Merck win in its long-running cyber coverage dispute.
Here, Law360's Insurance Authority breaks down the most important specialty lines rulings so far this year.
Towers Watson Reversal May Spur Language Debate
The Fourth Circuit in May reversed a trial court decision forcing Towers Watson's insurers to cover settlements of shareholder suits stemming from the company's merger with Willis, saying that the transaction was an acquisition that might trigger a bump-up exclusion. The reversal opens the door to a spirited debate over whether the insurers can prove if the exclusion applies to Towers Watson as the target company in the transaction, attorneys said.
... the history of the bump-up exclusion should indicate that it cannot apply to the target company in a corporate transaction, said Raymond Mascia, a partner with Anderson Kill who represents policyholders. According to Mascia, the insurance industry was concerned that buyers would intentionally lowball purchase prices and then try to use directors and officers insurance payouts to supplement the purchase price by settling the resulting lawsuits by target company shareholders.
"The bump-up exclusion cannot apply to a claim against the seller company, because the seller doesn't pay for its own acquisition and therefore can't give rise to the liability the bump-up exclusion, by its own terms, seeks to exclude," Mascia said.
To read this full article, click here (subscription required).