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© 2015 Zuckerman Spaeder LLP

Showing 14 posts in Insurance.

Seeking Coverage Under Your D&O Insurance Policy: What Is A Claim And When Was It Made?

Companies buy directors & officers (“D&O”) insurance policies with the intention of providing protection for key individuals in a corporate structure.  The recent decision BioChemics, Inc. v. AXIS Reinsurance Co., from the U.S. District Court for the District of Massachusetts, illustrates the importance of the terms of the policy in determining what is covered, what is not, and when you should notify the insurer of a potential claim.

As we’ve previously discussed, an insurance policy can provide more reliable protection for the indemnification rights of the directors and officers in times of financial distress, because corporations plagued by regulatory or other legal problems frequently suffer financial setbacks.  However, when a corporation is the subject of an official investigation, determining exactly what constitutes the start of a covered “claim” may be a matter of some delicacy.  Read More ›

Government Investigations: The Treacherous Path to Obtaining (and Keeping!) Defense Costs Paid Under D&O Policies

Bridge in disrepairFor my first foray into blog-writing, allow me to tell a cautionary tale intersecting two of my favorite topics: defending companies and individuals in government investigations and Directors and Officers (D&O) Liability Coverage. As a contract junkie who enjoys reading, interpreting, and arguing contract language, parsing through various interrelated D&O policy provisions to glean favorable language for my white collar clients offers hours of amusement (lest ye be worried about me, I do have other hobbies).  D&O policies can be effectively used to defray defense costs incurred due to a government investigation.  The trick is keeping the money. 

The recent suit between Protection Strategies, Inc. (PSI) and Starr Indemnity & Liability Co. in the Eastern District of Virginia, case 1:13-cv-00763-LO-IDD, illustrates how difficult keeping the money can be. PSI is an Arlington, Va.-based defense contractor. In January 2012, PSI received a subpoena from the NASA Office of the Inspector General and a search warrant issued by the United States District Court for the Eastern District of Virginia.  On February 1, 2012, the NASA OIG executed the search warrant at PSI’s headquarters.  In addition to the company itself, several of PSI’s current and former officers were informed that they were also targets of the NASA OIG investigation. PSI retained Dickstein Shapiro to represent it and hired separate counsel to represent the individual targets and other company employees. Read More ›

Can You “Negligently” Fire Someone?

Insurance Claim Form - REJECTEDThe answer to that question, at least according to the Ninth Circuit Court of Appeals, is “no.” 

It seems straightforward, but getting to that “no” requires a little bit of an understanding of insurance – in this case, directors’ and officers’ (“D&O”) insurance.  A D&O policy was at issue in this case, Forest Meadows Owners Assoc. v. State Farm Ins. Co., in which the policyholder – a condominium association – was sued by an employee it had fired, and sought coverage from its insurer.   Read More ›

Employment Disputes And Insurance Are Among Our Favorite Things

Times SquareWhen the dog bites

When the bee stings

When I'm feeling sad

I simply remember my favorite things

And then I don't feel so bad.

Just from looking at the lyrics, your mind will automatically add in the tune.  Rodgers & Hammerstein wrote it, Mary Martin, Julie Andrews, and even Carrie Underwood have performed it: the classic song “My Favorite Things” from The Sound of Music (which for mysterious reasons is now associated with Christmas, even though the musical isn’t about Christmas at all). 

But I bet few people know how I interpret the song.  I’m an insurance coverage lawyer – so my favorite things aren’t brown paper packages tied up with string or schnitzel or bright copper kettles.  My favorite things (or, at least, the things I use every day) include principles that – if some thought is given to them before a claim comes about, or in presenting the claim when it happens – can help executives and the companies that hire and fire them have access to the right insurance for the disputes that develop between them.  So, in that spirit, this post looks at some of those executive-employment-related insurance issues that we’ve reviewed throughout this year. They’re all things that business leaders should think on as they consider a company’s insurance strategy.  You could think of it as a cream-colored pony with an insurance treatise on its back.  But I’ll make it much more appealing than some book – more like a crisp apple streudel.   Read More ›

Will Fiduciary Liability Insurance Cover Severance Agreement Payments If The Company Can’t Make Them?

We write frequently about severance pay for executives – a subject near and dear to the hearts, and wallets, of executives and the companies that hire and fire them.  Today, we’re going to take this a step further – beyond the severance agreement itself – and look at an interesting case that raises the question of whether a company’s severance payments to an executive are covered losses under that company’s fiduciary liability insurance if the company becomes unable to make those payments. 

It’s a neat case from a lot of perspectives, even if there aren’t too many clear answers.  It’s an interesting issue for companies that enter into severance agreements and then can’t follow through with the money due to a bankruptcy.  Today’s case is especially relevant for us at Suits by Suits because the policyholder is a law firm that – gasp! – went into liquidation, and the executive claiming the severance benefits is a former partner at the firm.  Personally, I like it because the focus of my work is insurance coverage disputes like this – figuring out what’s covered (or not) under insurance policies. Read More ›

Everything Has A Limit, Jerry Sandusky Edition – Part 1 ‎

‎“Everything has its limit - iron ore cannot be educated into gold,” Mark Twain famously said.  In this two-part series, we’re ‎going to explore one limit on protection from risk using insurance.

We’ve written frequently about the need for companies and their executives to protect themselves from lawsuits using insurance and indemnification.  In our writing on SuitsbySuits, the most common types of insurance we discuss are directors’ and officers’ insurance (which protects directors, officers, and sometimes companies against litigation arising out of the directors’ and officers’ work on behalf of the company) and employment practices liability insurance (which defends companies and executives against litigation arising from employment discrimination, wrongful termination, and other types of claims). 

Insurance is a good way to transfer the risk of certain types of claims to an insurer, and it’s something company executives need to consider.  But, as Twain reminded us, everything has its limit.  This series of posts is about an executive at a charitable foundation, who found one limit of the foundation’s directors and officers’ (D&O) and employment practices liability insurance last week – when a court held that the insurer didn’t have to pay his legal bills in cases against him, because those cases arose out of actions he took outside of his role as an executive.  Technically speaking, he was not an “insured person” under the policies. 

Sounds generic, right?  What’s so interesting about this? Read More ›

Everything Has A Limit, Jerry Sandusky Edition – Part 2‎

In Part One of this series, we gave the background to the insurance coverage dispute between Jerry Sandusky and Federal Insurance Company, which wrote D&O and employment practices liability insurance to The Second Mile, a charity Sandusky founded.  I explained how Sandusky was seeking coverage under those policies for the criminal and civil cases against him, and how, in response, Federal filed suit, arguing that it did not have to indemnify or defend him because he was not “acting in his capacity” as an executive of Second Mile when the alleged sexual abuse happened. 

Last week, the court held that Federal did not have a duty to reimburse Sandusky’s defense costs, as we’ll explain below.  But first, let me get on my insurance-lawyer soapbox and explain a couple of key terms.  Insurance in its most common form (and certainly the policies Federal wrote here) does two things: 1) indemnify someone, or some business, for judgments or settlements against them in civil cases, and 2) defend someone, or some business – or pay defense costs  in civil (and, in rare cases, criminal) matters.  Indemnity and defense are two distinct obligations that the insurer has.  Read More ›

EPLI: If You Hire Or Manage People And You Don’t Know What That Stands For, You ‎Should Probably Read This, Part 2‎

EPLIIn Part One of this series, we looked at insurance for employment-related claims against business owners and managers.  Specifically, we looked at employment practices liability insurance (“EPLI”), and I suggested you find out if your company has this coverage – which, if you’re doing any of the hiring, firing, or supervising, is something you should know.      

Assuming your company (or entity – employment-related claims hit not-for-profits as well) has EPLI, then you need to ask some more questions to really understand what it covers and how it will work.  And the time to consider this is before you may potentially have a claim for coverage under it.  Read More ›

EPLI: If You Hire Or Manage People And You Don’t Know What That Stands For, You ‎Should Probably Read This: Part 1‎

InsuranceThere are things we’re all supposed to do before a catastrophe occurs, to help prevent that catastrophe or minimize the harm from it.  This list would include changing the batteries in your smoke detectors, or making sure your car is kept in good repair, or seeing the dentist every so often for a thorough teeth cleaning. 

If you are an executive or a business owner with any role in hiring or managing others, I’m about to add one more suggestion to that list: check to figure out if you have insurance for employment-related allegations for which you may, in some circumstances, be held personally liable.  Read More ›

It's A Wonderful Life...Or It Will Be If George And Uncle Billy Can Get Their Legal Fees Paid, Part 2

Holiday WreathFrom the script for It’s A Wonderful Life (1946):


                        Hope you enjoy it.

               George suddenly sees the old cigar lighter on the counter.

               He closes his eyes and makes a wish.


                        Oh... Oh. Wish I had a million


               As he snaps the lighter the flame springs up.


                        Hot dog!

Can George’s wish for a million dollars (or more) actually be granted, when he and Uncle Billy may need it the most?  Read More ›