Monthly Archives: April 2009

Lexis’ Insurance Law Blog Features My Post Regarding Independent Director Liability Insurance Policies

This month, the featured topic over at the Lexis Insurance Law Center is “Current Topics are Misrepresentation and D&O/Professional Liability/Financial Crisis.”  Karen Yotis, who does a terrific job running the ILC, has been kind enough to feature one of my pieces, Extra Insurance Coverage for Outside Directors in Times of Financial Uncertainty: An Overview of Independent Director Liability Policies, which you can find by clicking here.

In the introduction of the piece, I give an overview of Individual Director Liability insurance policies, and explain that:

In these times of financial uncertainty, outside directors on corporate boards of directors may request that the companies’ boards companies purchase Individual Director Liability (IDL) insurance for them. Generally speaking, IDL insurance is just for outside or independent directors of a company and, depending on the form in which it is written, may offer independent directors additional insurance protection if the corporate policyholder’s insurers were to attempt to deny or rescind coverage under the policyholder’s directors and officers insurance policy.
I also note that:
There is a dearth of case law on this issue, but commentary on Delaware corporate law, for example, suggests that it would be appropriate for a corporation to buy IDL policies for its outside directors; the intent of the drafters of Section 145(g) of the Delaware Corporation Law appears to recognize that Delaware corporations may purchase insurance for their executives’ benefits, allowing “corporation[s] to do directly what [they] had been doing indirectly for years: reimbursing directors for premiums they paid personally to maintain such insurance.” E. Norman Veasey, Jesse A. Finkelstein & C. Stephen Bigler, Delaware Supports Directors with a Three-Legged Stool of Limited Liability, Indemnification, and Insurance, 42 Bus. Law. 399, 419 (1987). Thus, if a policyholder chose to purchase IDL policies for its independent directors, a policyholder could argue that it was replicating what independent directors could have done previously under Delaware law (i.e., purchase their own individual policies).
I advise independent directors and officers and corporate policyholders that:
A policyholder should consider whether the proposed policy forms, whether individual or group, provide natural person-specific or position-specific coverage. IDL insurance may be flexible on this issue, possibly tailored to the insured’s requests to provide coverage for all independent directors, board committee members, or even individual board members. For example, National Union (an AIG insurance company) stated in a 2004 article that when writing its “IDL Premier” policy, which usually “insure[d] all non-executive directors,” “the definition of ‘insured’ can be amended to include only a limited number of individuals (such as the audit committee) or even only one individual (such as the financial expert).” D&O Insurance in 2003/2004, Briefing Paper, 1449 PLI/Corp 439, 456 (2004).

For additional analysis and advice, click on over to the original post at the Insurance Law Center.

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Disclaimer:

This blog is for informational purposes only. This may be considered attorney advertising in some states. The opinions on this blog do not necessarily reflect those of the author’s law firm and/or the author’s past and/or present clients. By reading it, no attorney-client relationship is formed. If you want legal advice, please retain an attorney licensed in your jurisdiction. The opinions expressed here belong only the individual contributor(s). © All rights reserved. 2009.

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Conflicts, mediation, and contingent business interruption insurance.

Attorney-mediator Victoria Pynchon recently posted that “you must create disputes to resolve conflicts.”  And from there, she cites my post about contingent business interruption insurance coverage.  Vickie explains that ADR professional should not see all conflicts as bad:

Most people think ADR professionals believe that all conflicts are bad. Quite the contrary.  Those of us who are trained and practiced in dispute resolution understand that conflict must ripen into one or more disputes for society to evolve along the arc of justice.

She continues, explaining that:

To “make room” for those “contradictory forces” we often must raise a ruckus or ask for something we never believed we might be entitled to.  Say, gay marriage.

She concludes by citing to my post about contingent business interruption insurance coverage.  How does she get there?  She reminds corporate policyholders that decades ago:

Corporations once had a cozy, apparently non-conflictual relationship with their carriers because no one questioned the carriers when they said a claim wasn’t covered.

Corporate policyholders, however, would be well-advised to consider closely an insurer’s denial of coverage.  Vickie  concludes that her “stream of consciousness” took her on the path to my post, which explains what contingent business interruption insurance is, and why “In insurance coverage litigation regarding contingent business interruption losses, it is important to turn a critical eye on insurers’ arguments if they have denied coverage.”

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Disclaimer:

This blog is for informational purposes only. This may be considered attorney advertising in some states. The opinions on this blog do not necessarily reflect those of the author’s law firm and/or the author’s past and/or present clients. By reading it, no attorney-client relationship is formed. If you want legal advice, please retain an attorney licensed in your jurisdiction. The opinions expressed here belong only the individual contributor(s). © All rights reserved. 2009.

Ensuring Contingent Business Interruption Coverage

Today, Insurance Law360 published a piece that I wrote regarding contingent business interruption coverage.  Are you wondering what is contingent business interruption insurance, and whether your business needs it?  I gave an overview of the coverage in the article:

First, an overview of contingent business interruption coverage. “Regular business-interruption insurance replaces profits lost as a result of physical damage to the insured’s plant or other equipment; contingent business-interruption coverage goes further, protecting the insured against the consequences of suppliers’ problems.” Archer Daniels Midland Co. v. Hartford Fire Ins. Co., 243 F.3d 369, 371 (7th Cir. 2001) (“Archer v. Hartford”).

Often times, however, when policyholders ask their insurers to cover losses stemming from contingent business interruption, the insurers refuse, asserting that there must have been a “total cessation” of business operations.  Insurers consistently argue that if there was no “total cessation” of business operations, they are not obligated to provide contingent business interruption coverage.  The insurers’ arguments, however, are wrong.  As I conclude in the article (advice that applies to many situations in which insurers have denied coverage for claims for their corporate policyholders):

In insurance coverage litigation regarding contingent business interruption losses, it is important to turn a critical eye on insurers’ arguments if they have denied coverage.

For the full article, click on over to Insurance Law360.com.

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Disclaimer:

This blog is for informational purposes only. This may be considered attorney advertising in some states. The opinions on this blog do not necessarily reflect those of the author’s law firm and/or the author’s past and/or present clients. By reading it, no attorney-client relationship is formed. If you want legal advice, please retain an attorney licensed in your jurisdiction. The opinions expressed here belong only the individual contributor(s). © All rights reserved. 2009.