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New York Court Finds Securities Settlements Not Covered by D&O Policies Due to Insured Capacity and Uninsurable Loss Issues | Carlton Fields


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. ....

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