Topic: D&O Liability

The Seventh Circuit Rules that an Insurance Contract’s Exclusion of Any “Multiplied Damages” Does Not Mean the Multiplier Used to Enhance an Award of Attorney Fees

In a flawed opinion handed down in Carolina Casualty Insurance Co. v. Merge Healthcare Solutions, the Seventh Circuit ordered an insurance company to pay $3.15 million for attorney fees awarded to the plaintiffs who sued the company’s insured. Some shareholders sued Amicas, Inc. and its officers, who were insured by Carolina Casualty Insurance Co. under a D&O policy. 

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Morgan Keenan Settlement Shows Risk to Mutual Fund Directors When Valuing Mortgage-Backed Securities

In mid-June, eight former fund directors of Morgan Keenan & Co. settled allegations with the Securities and Exchange Commission that they had failed to exercise proper oversight with respect to mutual funds that had overvalued mortgage-backed securities during the 2007-08 housing market collapse. The settlement comes two years after Morgan Keenan agreed to pay $200 million to settle similar SEC claims against the firm itself and two employees who managed the funds. 

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Second Circuit: Excess D&O Coverage Not Triggered Until Underlying Limits Exhausted by Actual Payment

On June 4, 2013, the Second Circuit Court of Appeals in Ali v. Federal Insurance Company, et al., No. 11-5000-cv, affirmed a lower court’s decision declaring that the coverage obligations of excess D&O insurers are not implicated until the underlying insurance has been exhausted by actual payment of loss, even when the underlying carriers are insolvent. The appeal was taken from the United States District Court for the Southern District of New York. 

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With Securities Case Dismissal, Another Loss in the Southern District for LIBOR Plaintiffs

On Monday, Southern District of New York Judge Shira Scheindlin dismissed the entire suit in Gusinsky v. Barclays, without leave to amend and with prejudice. The plaintiffs, holders of American Depository Shares in Barclays Bank, had brought claims under Section 10(b) and Rule 10b-5 of the ’34 Act against Barclays, and Section 20(a) control person liability claims against individual directors of the bank for the bank’s role in the manipulation of LIBOR. 

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Court Holds That Professional Services Exclusion In D&O Policy Applies To Broker-Dealer’s Distribution of REITs

A federal court, applying New York law, recently held that a “professional services” exclusion in a D&O policy applied to lawsuits against a broker-dealer arising out of its underwriting and marketing of shares issued by a set of real estate investment trusts (or “REITs”). See David Lerner Assocs. v. Philadelphia Indem. Ins. Co., No. 2:12-cv-01609-JFB-AKT (E.D.N.Y. Mar. 29, 2013). 

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