Edwards Angell Palmer & Dodge LLP continues its live blogging from the PLUS D&O Symposium. There were several interesting points discussed during the third panel discussion today, including the following:
- Special Litigation Committees (SLC) should not be paid by insurers. The interest of the insurer and the independent nature of the SLC create conflict (apparent if not real). The SLC is charged with recommending whether to bring claims against other D&O's, so the erosion of policy limits by an SLC to institute an action against an insured is an issue.
- Public policy is sometimes stretched to form the basis of a denial, which may be inconsistent with the policy's intent. It is rare that public policy will preclude coverage.
- Bump-Up exclusions, if they apply to the entity and individuals are named as defendants, are difficult to apply against the individuals. Bump-Up actions always allege a breach of fiduciary duty and seek as damages the adjustment of the purchase price. They are regularly filed with the announcement of a deal and are pursued after the deal closes. These are high-frequency, low-severity claims that need to be addressed at the underwriting stage. The appetite of the plaintiffs' bar to try to justify a fee in Bump-Up cases has grown in recent times, and fee awards are also growing (particularly when the cases are venued outside of Delaware).
- An agreement by a company to pay plaintiffs' counsel's fees in the absence of any fee shifting is a gratuitous payment and does not constitute Loss. This issue is really a negotiation point between the insured and insurer.
- Shaving Limits endorsements are not significantly changing carrier behavior, but are instilling more confidence in coverage positions taken.