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BT Policyholder Protection Blog
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02 Jan 2018 Sold! Close Your M&A Deal Confidently by Funding Post-Closing Liabilities Through Insurance

  When a company merges with another entity and becomes a single entity, or where a company is acquired by another organization, it is critical that both parties understand their insurance programs to ensure that transactional risks are properly covered. Companies sometimes do not give adequate consideration to the possibility of future claims following a merger or sale, and do not place into the deal a funding mechanism for post-closing claims.   This article offers some ideas to consider when planning an insurance solution to such claims as part of due diligence.   Tail policies cover actions taken before the closing   If you sit on the board of a company, the completion of an M&A deal does not insulate you from being sued for…

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26 Dec 2017 Payback: Can Settlements of False Claims Act Claims Be Covered Under D&O Policies?

In recent years, corporations have seen a dramatic upswing in claims alleging violation of the federal False Claims Act (FCA). Dating from the Civil War, the FCA at one time was a sporadically used civil law that made government contractors liable for fraudulent claims on the government. After the law was reformed in the 1980s to make it easier for individuals to sue on behalf of the government, employees and shareholders of corporations transacting with the federal government began viewing it as a powerful whistleblower statute.   With the increase in lawsuits alleging violations of the FCA, insurance companies have become more aggressive in denying outright any obligation to pay settlements of FCA claims on the grounds that they seek uninsured restitution or disgorgement. Contrary…

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15 Nov 2017 Tenth Circuit Holds that Governmental Investigation of Potential Criminal Violations is Not a ‘Claim’ Under a D&O Policy

  D&O insurance policies are key components of a corporation’s risk transfer portfolio, purchased to protect it against lawsuits presenting significant liability exposure to itself and its key officers and directors.   In recent years, as an alternative to targeted formal litigation and discovery in uncovering corporate wrongdoing, federal and state governments have increasingly utilized informal investigations. This trend has created an expensive new financial exposure in the business world, particularly for large corporations, which are often the targets of such inquiries, and corresponding questions about how D&O insurance policies cover such costs. Although many D&O policies have evolved to explicitly protect policyholders from the costs of responding to government investigations, many have not been amended, forcing courts to determine whether the existing language is…

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10 Sep 2015 NEW JUSTICE DEPARTMENT MEMO HIGHLIGHTS NEED FOR REVIEW OF SIDE “A” D&O COVERAGE

Heightened Liability Concerns for Individuals   On Sept. 9, 2015, the U.S. Department of Justice (DOJ) issued a memo to all U.S. attorneys and other enforcement bureaus (such as the FBI) providing guidance on the pursuit of individuals responsible for corporate wrongdoing. In essence, the memo says that the government is no longer going after only corporations; it will now also be focusing on those individuals within corporations responsible for corporate wrongdoing. The memo provides specific guidance for taking on these individuals. For example, it states that in order to qualify for cooperation credit, corporations must now provide all relevant facts relating to the individuals responsible for the misconduct and it states that absent extraordinary circumstances or approved departmental policy, the DOJ will not release…

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24 Jul 2015 Quality Egg Appeal Serves as a Reminder to Look for Cracks in D&O Coverage for Responsible Corporate Officers

Earlier this week, Peter and Austin DeCoster submitted their opening briefs in their appeal of the three-month prison sentence they each received for pleading guilty to misdemeanor violations of the federal Food Drug and Cosmetic Act (FDCA). You may recall that the DeCosters owned Quality Egg, LLC, the Iowa-based egg production company that had a salmonella outbreak in 2010 that resulted in a recall of millions of eggs and, according to the court’s order on the DeCosters’ sentencing motions, sickened thousands of consumers. In connection with that outbreak, the DeCosters pled guilty to a charge of introducing adulterated food into interstate commerce in violation of the FDCA.   Although there was a dispute as to whether and how much the DeCosters actually knew about the…

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18 Feb 2015 RECENT CASE LAW ILLUSTRATES IMPORTANCE OF WORDING FOR “FINAL ADJUDICATION” REQUIREMENT IN D&O EXCLUSIONS

Directors and officers and management and professional liability policies generally contain so-called “conduct exclusions,” which exclude coverage for deliberate fraud, willful violation of a statute, the gaining of a profit to which the insured was not entitled and similar conduct. Most policies today, however, require a “final adjudication” for these exclusions to apply. Disputes frequently arise between insureds and insurance companies about what constitutes a final adjudication and what that adjudication must contain to exclude coverage.   Several courts have held that a settlement does not constitute a final adjudication within the meaning of these exclusions. For example, in U.S. Bank N.A. v. Indian Harbor Ins. Co. (D. Minn. Dec. 16, 2014), a federal court in Minnesota applying Delaware law held that coverage was not…

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24 Nov 2014 SOFT INSURANCE MARKET

For those policyholders approaching year end renewals, bear in mind that the insurance, and importantly the reinsurance, markets remain soft. A lack of major 2014 hurricane activity and other catastrophic casualty losses have left the insurance market soft and driven down the internal costs of insurance (such as the cost of reinsurance premiums). Casualty insurers are posting major profits and are actively seeking new policyholder markets.   At renewal, policyholders should be presented with multiple, competitive options for casualty insurance by their brokers. Keep in mind that policyholders are in a strong position to negotiate terms and conditions of their insurance, including choice of their own defense counsel and scope of D&O coverage in particular. As the financial claims fallout from the recession has essentially…

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26 Jun 2014 Insurance Coverage and Risk Mitigation for the In-House Practitioner

  On June 25, 2014, Charlie Edwards and Kara Cleary, from Barnes & Thornburg’s Policyholder Insurance Recovery Group, gave a presentation to in-house counsel and other corporate representatives regarding insurance coverage and risk management.     The CLE, called “Insurance Coverage and Risk Mitigation for the In-House Practitioner,”  addressed insurance issues and other risk transfer provisions that often get little attention in business transactions.  The topics addressed included the transferability of insurance rights in buy/sell transactions, tips for drafting contractual insurance requirements, as well as hot topics in Directors and Officers liability and recommendations to reduce risk to your company.     For those who missed the presentation, you can request the materials by emailing Charlie Edwards or Kara Cleary.        Charles EdwardsCharles P. Edwards is co-chair of…

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23 May 2014 “Circumstance Reporting” Can Preserve D&O Coverage

  Many directors and officers liability policies are written on a “claims made and reported” basis. This means that the policy covers only claims that are asserted against the insured and reported to the insurer while the policy is in effect, or within a short grace period provided after the policy expires. The requirement that claims be reported while the policy is in effect can create practical and legal difficulties. This is particularly true when events that might end up resulting in a claim happen near the end of a policy period.   For instance, the insureds can be placed in a difficult situation when they receive communications that expressly or implicitly threaten to assert a claim, but the communications do not rise to the…

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09 May 2014 Insurance And White Collar Defense: If You Don’t Have One, You May Not Be Able To Have The Other

This post appeared originally on the Government Enforcement Exposed (the “GEE”) blog.   The BUGA (“Big Ugly Government Agency”) has just metaphorically pounded on the door of your company, howling about civil and criminal charges, mind-blowing fines and penalties, debarment, seizing your first-born and otherwise threatening your existence. So you seek out a phenomenal white collar firm to defend you and yours and lo, they recommend a vigorous internal investigation, leading to the formation of a rock solid defense that, if needs be, can be deployed to defend against BUGA from here to the Supreme Court and back again.   It will, however, cost a lot of money to defend yourself. But, like many a modern company, you have insurance coverage that, you believe, will fund…

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