Towers Watson Reversal Bolsters Bump-Up Exclusions

Law360 Insurance Authority / Abraham Gross

  • May 10, 2023

Insurance companies litigating the scope of the "bump-up" exclusion in directors and officers policies received another boost with the Fourth Circuit's reversal of a decision forcing insurers for Towers Watson to cover settlements of shareholder suits stemming from the company's merger with Willis.


Raymond Mascia Jr., a shareholder in Anderson Kill's insurance recovery practice, said that rulings like Towers Watson encourage insurers to stray from what he says was the original purposes of the exclusion, which was to dissuade acquiring companies from underpricing and then using their coverage to pay off shareholder suits.

"It's definitely going to embolden the insurance industry to deny claims based on the exclusion and it's probably going to embolden them to expand the exclusion beyond this original intent and language," he told Law360.

Decisions like Ceradyne and others, which bolster terms in the exclusion beyond the definition of an "acquisition," are making it more difficult for policyholders to push back against carriers' application, according to experts.


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