HNRK Coverage Corner

On November 27, 2020, Justice Masley of the New York County Commercial Division issued a decision in Alvarez v. XL Specialty Ins. Co., 2020 NY Slip Op 33917(U), holding that a lawsuit against the insureds was not wholly excluded from coverage under a D&O policy where only one part of the lawsuit involved “Wrongful Acts” at issue in an earlier lawsuit that was covered under a prior policy period.

The underlying lawsuit in Alvarez was an action by the Creditors’ Committee of Sears Holdings Corp. against former officers and directors, alleging 35 causes of action, arising from three ...

On February 3, 2020, Justice Sherwood of the New York County Commercial Division issued a decision in Alexander v. Starr Surplus Lines Ins. Co., 2020 NY Slip Op 30297(U), granting a preliminary injunction directing a D&O insurer to advance defense costs to a former corporate officer for an investor lawsuit alleging fraudulent inducement.

The insurer (Starr) argued that coverage was barred by a Major Shareholder Exclusion, which provided that the policy would not cover any claim “made by the individual(s) or entity(ies) that own or control . . . 10% or more of the outstanding voting ...

On April 25, 2019, Justice Sherwood of the New York County Commercial Division issued a decision in Westchester Fire Ins. Co. v. Schorsch, 2019 NY Slip Op 31188(U), holding that a D&O policy's “insured versus insured” exclusion did not preclude coverage for claims against corporate officers by a Creditor Trust. In Schorsch, corporate officers sought coverage under the corporation’s D&O policies for claims brought against them by a Creditor Trust set up in the corporation’s Chapter 11 bankruptcy proceedings.  Two of the excess insurers disclaimed coverage based on an ...

On December 6, 2018, the Second Circuit issued a decision in Patriarch Partners, LLC v. Axis Ins. Co., Case No. 17-3022, holding that a Warranty Statement executed in connection with the issuance of an Excess D&O policy barred coverage because the insured had knowledge prior to the issuance of the policy of “facts or circumstances that would reasonably be expected to result in a Claim.”

The coverage dispute in this case arose from an SEC investigation of Patriarch Partners, a private equity investment firm.  The investigation began as an “informal inquiry”, but on June 3, 2011 ...

On September 10, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Freedom Specialty Ins. Co. v. Platinum Mgt. (NY), LLC, 2018 NY Slip Op 32233(U), denying a D&O insurers’ motion for summary judgment based on a prior and pending litigation exclusion (the “PPL Exclusion”). Freedom Specialty is a D&O coverage litigation arising from a criminal securities fraud prosecution in the EDNY against officers of Platinum Partners, a New York hedge fund.

Last December, Justice Sherwood issued a preliminary injunction directing three excess D&O ...