A Delaware court held that a D&O insurer had no obligation to fund a shareholder merger settlement because the payment constituted an increase in merger consideration barred by the policy's bump-up exclusion.

The coverage dispute stemmed from a reverse triangular merger of two entities, both owned by the same controlling shareholder family. After the merger, minority shareholders alleged that the transaction process was unfair and that they received inadequate consideration for their shares. The insured’s sought coverage for the settlement and the carriers denied arguing that the D&O policy’s bump-up exclusion applied. The exclusion stated that "Loss" did not include any amount that "represents, or is substantially equivalent to, an increase in the consideration paid" in an acquisition of more than fifty percent of an entity's ownership interests or voting rights.

The insured argued that the settlement reflected a business decision to avoid the risks and costs of litigation rather than compensation for an allegedly inadequate merger price. The insured also contended that the merger did not qualify as an "acquisition" because the same controlling shareholder remained in control.

The court disagreed and emphasized that the proper inquiry focuses on what the settlement actually represented rather than the parties' stated motivations for settling. The court looked at the underlying litigation and determined that the shareholder action sought recovery based on allegations that the merger consideration was inadequate and the settlement closely aligned with the plaintiffs' damages analysis. The court also noted that the matter settled after extensive discovery and on the eve of trial, making it less likely that the payment merely reflected avoided litigation expenses. Taken together, the court concluded that the settlement represented, or was at least substantially equivalent to, an increase in merger consideration within the meaning of the bump-up exclusion.

The court also concluded that the transaction constituted an acquisition under the policy. Although the insured argued that there had been no meaningful change in corporate control, the court found that the policy language did not require a change of control. Instead, the exclusion applied whenever a transaction resulted in the acquisition of more than 50% of the target company's securities or voting rights. The exclusion applied regardless of whether ultimate control remained with the same controlling shareholder.

A court determined that a D&O policy’s Lending Services sublimit controlled over the policy's broader D&O limits because the claims ultimately arose out of, or involved, lending activities.

A bank sought coverage from its D&O carrier for two related proceedings arising from its issuance of Small Business Administration loans to finance purchases of carbon capture and utilization units, which were allegedly part of a Ponzi scheme. The carrier acknowledged that the matters fell within the policy’s coverage but maintained that they were subject to a specialized "Lending Services" coverage limitation rather than the broader D&O limits otherwise available.

The policy's Lending Services Endorsement provided:

The Insurer's maximum Limit of Liability under this Policy with respect to all Claims arising out of or in any way involving Lending Services shall not exceed the Limit of Liability provided under the Lender Liability Insuring Agreement, Broad Form Lender Liability Insuring Agreement or Broad Form Company Insuring Agreement, whichever is so attached to this Policy, regardless as to whether a shared or separate limit is specified in Item 8. of the Declarations for any Insuring Agreement provided to the Insured under this Policy. 

The bank argued the Endorsement's sub-limit was available in addition to the limit for claims implicating both coverages, such that the total limits available for the claim should be the combined Main and Broad Form limits. According to the bank, the allegations against the directors and officers went beyond lending activities, triggering the broader D&O limits in addition to the Lending Services coverage.

The court sided with the carrier, determining that the Policy explicitly capped coverage for all Claims "arising out of or in any way involving Lending Services," regardless of any separate or shared limits identified elsewhere in the policy. The Policy broadly defined "Lending Services" to include services "involving or relating to" an extension of credit or loan servicing. Because the underlying proceedings centered on loans the bank made to finance the purchases, the court concluded they plainly involved Lending Services.

A federal appellate court, applying Michigan law, held that a malpractice carrier properly denied coverage after the Insured, a law firm, failed to satisfy the reporting requirements contained in its claims-made professional liability policy. The ruling emphasized that the reporting provisions in a claims-made policy will be enforced according to their plain language. 

The underlying matter arose after the Insured allegedly committed legal malpractice while representing a client in a medical malpractice action. Following a settlement of that matter and assignment of the Insured’s right, the client sought coverage under the Insured’s professional liability program. The dispute centered on whether the Insured’s notice of potential claim during a purchased two-year extended reporting period was sufficient to preserve coverage for a later-filed malpractice claim.

The Carrier’s policy provided coverage for claims first made and reported during the policy period or an applicable extended reporting period. The policy also contained a “notice of potential claim” provision, which permitted a subsequently asserted claim to relate back to the policy only if the Insured became aware of the potential claim and provided written notice to the Carrier during the policy period. The Insured did not report the actual malpractice claim until well after both the policy period and the extended reporting period had expired. Instead, the Insured argued that its earlier notice of a potential claim during the extended reporting period satisfied the policy’s notice requirements and preserved coverage.

The court rejected that argument, concluding that the policy expressly distinguished between the policy period and the extended reporting period. The court highlighted that the “notice of potential claim” provision unambiguously required potential claims to be reported during the policy period and that reporting such a claim during the extended reporting period did not preserve coverage for a later actual claim. Because the Insured first notice the potential claim after the policy period had expired, it failed to satisfy the policy's express notice condition precedent. 

An English court reinforced the potential reach of “war exclusions” within commercial policies and held that a war does not need to be the proximate cause of damage for the exclusion to be triggered. Instead, the exclusion is read broadly and only requires a war to be the significant cause of an insured’s property damage in order to be applied. The court also held that insurers are not required to prove the identities of the perpetrators of the alleged damage.

This decision stems from the destruction of two natural gas pipelines located within an ongoing war zone. The insured, who owned and operated the pipelines alleged that deliberate explosives were placed near the pipelines and caused them to become inoperable. The explosives were believed to be a form of sabotage against one of the countries in the conflict and was an attempt to halt their ability to pump gas into other regions. The actual perpetrator, however, has not been identified but it was suspected that at least three possible state actors could have carried out the attack.

Following the significant cause framework, the court held that all of the suspected state actors had a casual link to the ongoing war and that was enough to trigger the exclusion. Per the exclusion’s language, any damage caused both directly and indirectly by a war was precluded from coverage.