Directors & Officers

Representative D&O insurance litigation matters include:

• In May 2013, the Court of Appeals for the Ninth Circuit affirmed a November 2011 Opinion and Order from the Western District of Washington on a case of first impression, finding no coverage for two directors’ breach of financial guarantees despite the fact that the D&O policy did not include a “breach of contract” exclusion. The Ninth Circuit agreed with the District Court that there could be no coverage because the directors were acting in their personal capacity both when they signed guarantees for a commercial loan and when they subsequently refused to honor the guarantees when the company defaulted.
• In January 2014, Gordon & Rees secured a significant victory regarding coverage for fraudulent transfer claims in the complex claims department of the San Francisco Superior Court. The insured, a private equity firm (and its portfolio company), sued the insurers in its D&O tower seeking coverage for a $300+ million settlement of fraudulent transfer claims brought by the trustee for a bankrupt subsidiary which had been acquired as part of a leveraged buyout. The insurers disclaimed coverage for the settlement, in part, on the grounds that the trustee’s claim sought uninsurable restitution and was uninsurable under California Insurance Code section 533 (which precludes coverage for willful conduct). The insured argued that the fraudulent transfers were not per se uninsurable, that coverage for ill-gotten gains could not be disclaimed absent a prior adjudication as specified in the policy’s profit exclusion, and that Section 533 did not apply. Following a Phase I trial, the Court substantially affirmed the insurers’ position, including that restitution was indeed uninsurable under California law.
• In May of 2016, after several years of threated litigation, convinced policy holder counsel to withdraw claims for coverage pursuant to a private company D&O policy relating to an explosion at a chemical facility in Florida where there were allegations of spoliation of evidence and operation of an unsafe facility, allegedly directed by offers and directors of the company.
• In August 2008, jury trial before the U.S District Court of Connecticut, successfully defended a major insurance company from bad faith allegations arising from a D&O policy issued to national stock brokerage concerning awareness of financial fraud and theft being committed by employee brokers that had been subject to a FINRA arbitration.
• Currently representing a national insurance company in ongoing disputes in Mississippi, Georgia and Florida concerning claims for coverage pursuant to a D&O policy issued to a publicly traded company involved in outsourced private prison and probation services that is being sued in class actions claiming widespread violations of affected persons’ constitutional rights.
• Currently representing a major insurance company in a D&O coverage dispute with a non-profit involved in grading and valuing gemstones and running a university that offers instruction in gemstone grading.
• Represented a national insurance company in a D&O coverage dispute involving a publicly traded company whose board was sued in 2015 by its former CFO who asserted whistleblower status after being terminated by the board. Coverage was denied. Before service of the complaint, Gordon & Rees successfully brokered a confidential settlement agreement and secured a withdrawal of the declaratory judgment action in the U.S. District Court N.D. of Texas.