Article ID: a124f0ab91d9ca51d6b52313934fe5bc86197fa66854b46b0ac4480e48ff2fca
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URL: https://www.businessinsurance.com/delaware-judge-sides-with-insurers-in-do-bump-up-coverage-fight/
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Delaware judge sides with insurers in D&O ‘bump-up’ coverage fight - Business Insurance Skip to content Register for free Search Search Log In Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Delaware judge sides with insurers in D&O ‘bump-up’ coverage fight by Richard Sine Claims Disputes , D&O , Mergers and Acquisitions AIG , Axa Jun 30, 2026 A group of insurers led by Axa XL has won a ruling from a Delaware court finding that a $48.5 million shareholder settlement isn’t covered under a directors and officers liability policy, adding to the growing body of case law on a heavily contested provision in D&O insurance. The case centers on a so-called “bump-up exclusion,” a policy provision that has generated a wave of litigation in recent years as companies settle shareholder lawsuits over merger pricing. MSG Networks Inc. v. Federal Insurance Company was unsealed by Delaware’s Superior Court on June 24. The dispute arose after Madison Square Garden Networks, based in New York, merged with Madison Square Garden Entertainment (now Sphere Entertainment), which operates venues including Madison Square Garden. The merger was partly intended to help MSG Entertainment build Las Vegas’s Sphere, among other projects. After the 2021 merger, MSG Networks shareholders sued in Delaware’s Court of Chancery, alleging the deal undervalued their stock. MSG Networks settled for $48.5 million in 2023. A group of insurers, including XL Specialty (a unit of Axa XL), U.S. Specialty Insurance, National Union Fire Insurance (a unit of American International Group), Endurance American Insurance (a unit of Sompo), and Homesite Insurance argued the bump-up clause in Madison Square Garden Networks’ policy barred coverage for the settlement. Bump-up exclusions are common in D&O policies and generally bar coverage for settlement amounts that represent an increase in the consideration shareholders received in an acquisition. Insurers include these clauses because they don’t want their policies to effectively fund the purchase price of a deal. If a company underpays for an acquisition and later settles a lawsuit by paying shareholders more, insurers argue that payment is really part of the deal price, not a covered loss like a legal judgment or settlement of liability. Judge Paul R. Wallace found that while there was evidence that the MSG Networks settlement represented an avoidance of costs or litigation risks, there was “substantial — and more compelling — evidence that the Settlement actually and intentionally represents an increase in consideration.” Judge Wallace cited a statement by the Court of Chancery that the settlement represented “a meaningful benefit” calculated as “an 8.8 percent premium to deal price to minority or public stockholders.” The judge rejected MSG Network’s argument that the merger needed to involve a change in control to qualify as an “acquisition” under the policy, writing that the bump-up clause “never mentions change in control and isn’t ambiguous.” The court further ruled that attorneys’ fees paid out of the settlement fund were also excluded from coverage, since the entire fund existed to benefit the shareholders. The decision adds to a developing split among courts nationally on how bump-up clauses should be interpreted, following recent rulings from the Delaware Supreme Court and the Fourth Circuit Court of Appeals on similar provisions. 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