Insurance coverage battles involving special-purpose acquisition companies, the Seventh Circuit's take on False Claims Act-related coverage disputes and the Delaware high court's take on whether appraisal actions are securities claims have set up 2022 as another big year for director and officer insurance rulings.
Here, Law360 breaks down top D&O insurance cases and trends to watch this year.
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The lower court said the underlying appraisal action was not covered because it did not seek a remedy for a wrongful act. The policies only cover a securities claim involving a wrongful act that occurred prior to the merger, Judge LeGrow said. The judge also agreed with the insurers that the appraisal demands did not constitute claims under the policies.
"One of the issues that's a little complex in the SPAC situation is the accounting for warrants for stock," said William G. Passannante, co-chair of Anderson Kill's insurance recovery group. "We'll see claims where the ultimate public shareholder investors will look back at the transaction and say that the warrants improperly diluted my shares or that there was insufficient disclosure about the warrant or fee structure."
"The policy language says a claim includes a written demand for monetary and nonmonetary relief. And there's no doubt a demand for appraisal, under Delaware law, is a demand for nonmonetary relief, period," said Passannante of Anderson Kill, who filed an amicus brief on behalf of United Policyholders in the case.
Passannante said the underlying action is covered because the D&O policy does not have any exclusions for appraisal proceedings.
"If you look at the history of appraisal in Delaware, there literally have been hundreds and hundreds of appraisal actions," he said. "D&O insurance companies know that appraisal actions are part of the merger of the securities litigation framework, and they didn't exclude them."
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