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A New York trial court
recently granted summary judgment to a group of excess D&O insurers seeking a declaration that their policies do not cover settlements and consent judgments the defendants paid in connection with underlying securities actions. The decision emphasizes the insured capacity limitation in the D&O policy definition of a “wrongful act” and also reinforces that amounts paid as disgorgement are uninsurable as a matter of New York law.
Continental Casualty Co., Argonaut Insurance Co., Freedom Specialty Insurance Co., and QBE Insurance Co. were part of a tower of D&O coverage issued to AR Capital LLC. AR Capital and other defendants Bellevue Capital Partners, Nicholas Schorsch, Edward Weil, William Kahane, and Peter Budko sought coverage from the insurers for their share of amounts paid to settle multiple consolidated securities class actions, a derivative litigation, and an SEC enforcement action.
Below are high-level takeaways on each topic.
Securities Filings Remain Elevated Despite the Pandemic
Despite unprecedented disruptions to the court system from the COVID-19 pandemic, plaintiffs continued to bring securities class actions at elevated levels in 2020 a sign that filings will remain high in the year ahead. Based on data from Cornerstone Research through September 30, 2020, plaintiffs were on pace to file approximately 375 federal and state securities class actions through the end of the year. Although lower than the more than 400 actions filed in each of the previous three years, this figure substantially exceeds the 261 cases brought, on average, between 2010 and 2019.
Key Points:
On February 9, 2021, the New York Appellate Division, First Department, affirmed the dismissal of a defamation action brought by Eros International plc, an Indian media company, against several short sellers based on a series of investor reports, tweets and public statements questioning the accuracy of Eros’s reported financials.
In affirming the decision below, the court agreed that the investors’ statements were constitutionally protected opinion based on each statement’s disclosure of underlying facts and the use of speculative language.
The decision emphasizes that critical statements concerning third parties must be made carefully and joins a growing body of precedent protecting investment analysts from lawsuits aimed at chilling free speech.
A court in New York has ruled that falsely claiming a person is gay can no longer be considered defamation per se because of changing social attitudes. (Envato Elements)
Falsely claiming a person is gay can no longer be considered defamation per se because of changing attitudes towards the LGBT+ community, a New York court has ruled.
Defamation occurs when a false statement is made that injures a person’s reputation and causes them to suffer damages – but defamation per se is when that false statement is considered to be so harmful that the plaintiff does not have to prove they suffered damages.