Article ID: 49aeb5ff8cf701707eac189b9d2ba9e121f4dfabc9e0c710b2f09f81ec7470f7
Source ID: secondary:businessinsurance.com
Published At: -
Extraction Method: trafilatura
URL: https://www.businessinsurance.com/delaware-high-court-curbs-do-bump-up-exclusion/
Body Text
The Delaware Supreme Court on Tuesday affirmed a ruling requiring insurers to cover a technology company’s $28 million directors and officers liability insurance claim, rejecting the argument that a “bump-up” exclusion precluded coverage. In the underlying transaction in Illinois National Insurance Co. and Federal Insurance Co. v. Harman International Industries Inc., Harman agreed to merge with Samsung in 2016. As part of the “reverse triangle” merger, Samsung subsidiary Silk Delaware was created and merged with Harman, which then merged with Samsung. Securities class-action plaintiffs accused Harman of issuing a materially false and misleading proxy statement to secure shareholder support for an undervalued acquisition. Harman later settled the suit and sought coverage from its insurers. The insurers denied coverage, citing the bump-up exclusion in the policy, which barred coverage for a settlement if the lawsuit alleged the deal price was too low and the settlement effectively increased what shareholders were paid. A state high court majority agreed with the American International Group and Chubb units that the underlying settlement alleged inadequate consideration for an acquisition but disagreed with their assertion that the settlement represented an effective increase in consideration for the deal. “Because the bump-up provision requires satisfaction of both requirements, we affirm the Superior Court’s judgment that the bump-up provision does not exclude coverage of this settlement amount,” the court wrote. “This is an important win for D&O policyholders, who for years have been deprived of the coverage they purchased to address the risk of litigation arising from M&A transactions,” said Orrie Levy, a partner at Cohen Ziffer Frenchman & McKenna, who represented Harman. Two dissenting justices disagreed with the majority’s conclusion that the settlement amount did not constitute an effective price increase for the transaction. AIG declined to comment. Chubb did not immediately respond to requests for comment.
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