May 23, 2019
D&O Insurance: $222 Million Settlement a “Loss” Under Policy
Vice Chancellor Laster’s 2015 decision to tag Dole Food’s CEO & another executive with a $148 million judgment for breaching their fiduciary duties in connection with its going private transaction was one of that year’s most noteworthy Chancery Court rulings. While Dole’s CEO & 40% shareholder David Murdock ultimately agreed to a settlement calling for him to pay the entire amount of the judgment, he sought to recover under the company’s D&O policy. After all, you don’t get rich enough to write a check this big by writing checks this big. . .
As you might imagine, the insurers weren’t too excited about being asked to pick up the tab for this settlement & one in a related federal case – which brought the grand total to $222 million – and filed a lawsuit claiming that they weren’t liable for them. Earlier this month, the Delaware Superior Court ruled on competing motions for summary judgment by each of the parties. Here’s an excerpt from a recent Morris James blog summarizing each party’s position:
The defendants then were sued by six of their excess insurance carriers, seeking a declaratory judgment that they did not have to fund the settlement. Among other reasons, the insurers asserted that the settlement payment representing the actual fair value of the merger consideration did not constitute a “Loss” under the policy.
Defendants counterclaimed seeking declaratory judgment that the insurers breached the policies by refusing to pay for the Court of Chancery settlement as well as the settlement in San Antonio Fire & Police Pension Fund v. Dole Food Co., Inc., No. 1:15-CV-01140 (D. Del.).
The Court granted in part and denied in part the summary judgment motions. The Court applied the rules of interpretation applicable to insurance policies, and determined that the settlement payments constituted a “Loss” covered under the policy. But it also held that genuine issues of material fact remained as to whether the insureds breached their own obligations under the contract. For more details on the case, see this Hunton Andrews Kurth blog.
– John Jenkins