It’s now accepted wisdom that virtually all public company mergers and acquisitions will be challenged with at least one lawsuit—over 95% of them are. A less well-publicized form of challenge—and one that is both fascinating and perplexing for those interested in securities litigation—is the unique creature of Delaware law known as the appraisal proceeding. Under Delaware General Corporation Law §262, shareholders dissenting from a merger on grounds that the share price they’ll receive is inadequate “shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock.” If the court finds that the deal price is lower than fair market value, the acquiring corporation must pay the difference to the dissenting shareholders, plus interest. The court may also award their attorneys’ and experts’ fees, which can be significant. This process has created a cottage industry of “appraisal arbitrage,” in which hedge funds purchase shares in hopes of securing a higher price for those shares through appraisal. Fortunately, D&O insurance might be available to cover the acquired company’s defense and other costs.
The startup guys in the hit television series Silicon Valley might be surprised to learn that the California legislature has expanded the scope of mandatory Workers’ Comp coverage to include their corporate officers, directors and working partners. The new law, effective January 1, 2017, sweeps in a broad range of individuals, unless they file a written opt-out. These changes to the California Labor Code are creating confusion for some businesses regarding which employees must now be included on workers’ comp insurance coverage. The consequences of noncompliance can be severe, and businesses would be well-advised to ensure that they have secured the necessary additional coverage or obtained the necessary opt-outs from affected officers, directors, and working partners.
Fashion is sexy; insurance is not. So it’s easy to think of the two separately. But there are many points of intersection. Some of those intersections are not industry-specific: like other industries, fashion—design houses, retailers, textile manufacturers, modeling agencies—carries property, D&O, cyber, and many other lines of insurance. But unique aspects of the fashion world, and recent litigation trends affecting it, underscore the importance for the fashion industry to understand insurance in order to maximize successful recovery of insurance assets. Here, we comment briefly on three areas: IP, employment, and antitrust.
The news has been rife of late with announcements of intended mergers, including Amazon and Whole Foods, Sprint and Comcast, and the National Enquirer and Time Inc., to name a few. Although such deals are nothing new, the use of representations and warranties insurance (R&W insurance) is increasingly becoming a key component in the decision-making process for buyers and sellers alike. R&W insurance provides coverage for breach of representations or warranties contained in deal documents in addition to, or as a replacement for, indemnity provisions. R&W policies allow buyers and sellers to shift enough of the risk to third-party insurers to provide the certainty necessary to close the deal.
In a typical transaction, the seller agrees to indemnify the buyer for losses resulting from breaches of reps and warranties, usually subject to a cap. The seller will often commit to placing an agreed upon amount in escrow to secure its indemnification obligation. However, tying up funds in escrow can sometimes present a significant obstacle to closing the deal.
A great deal of premium exchanges hands to buy the Difference in Condition (DIC) or “drop-down” component of excess Side A DIC coverage. Yet policyholders, brokers, and to a large extent, D&O liability carriers have surprisingly little understanding of just how that standard coverage feature is triggered—or how it works in practice. Recent experience with the drop-down provision suggests that it can be a highly valuable tool to help resolve disputes in which one or more carriers is refusing to meet its coverage obligations. But triggering the coverage is fraught with difficulties.
If the White Rabbit in Alice in Wonderland bought insurance and suffered a loss he almost certainly would be an unhappy customer. Why? Recall his famous opening line in the Disney version of the story: “I’m late, I’m late for / A very important date. / No time to say hello, good-bye, / I’m late, I’m late, I’m late.” In the world of insurance claims—often compared to Wonderland—being late is an increasingly intolerable trait. Indeed, even the diligent may find themselves upside down and out of luck.
Policyholders today usually are aware that insurance policies contain some form of notice provision. Nonetheless, the many different forms of timing provisions and the varying requirements the law places upon them can be bewildering and can lead to unexpected and unsatisfactory results.
We are pleased to share with our readers the recent awards and accolades Pillsbury’s Insurance Recovery & Advisory group has earned:
The practice was ranked in Washington, DC for Insurance: Policyholder, and we had several individual rankings, including:
Insurance: Policyholder; Washington, DC:
- Peter Gillon
- David F. Klein
- Mark J. Plumer
Insurance: Dispute Resolution: Policyholder; Nationwide:
- Mark J. Plumer
Insurance: Dispute Resolution: Policyholder; New York:
- Joseph Jean
- Tamara Bruno
- Vincent E. Morgan (Band 1)
The Flint, Mich., water crisis returned to the news recently as criminal charges were brought against additional government employees resulting from the crisis. Meanwhile, a federal court in Pennsylvania recently issued a ruling in an insurance case that, like Flint, related to alleged contamination in drinking water stemming from corroded pipes. The decision rejects two insurers’ attempts to avoid coverage and serves as a good reminder of some fundamental insurance law principles—the duty to defend is broad, ambiguous policy language usually is construed against the insurer, and policies should be interpreted in favor of their purpose to provide coverage. It is also a reminder that the pollution exclusion is not nearly as all-encompassing as insurers like to think it is.
We put lights on the front of trains so we can see them approaching in a tunnel. And we buy insurance for the accidents that occur despite such precautions. General contractors try to manage their project risks by taking precautions to avoid accidents, but they also require subcontractors to name them as “additional insureds” on their general liability or project-specific insurance should an accident happen. Suppose you’ve done that. An accident follows: Your subcontractor injures a person on the project site as a result of your own workers’ failure to warn. You’re covered, right? Better slow down.
An all-too-common problem in the construction industry occurs when a company that is supposed to name another company as an additional insured on its policy fails to do so. The company that expects to be an additional insured (typically an owner or upstream contractor) sometimes does not follow through to ensure that it is actually added to the policy through an endorsement, or may rely on a Certificate of Insurance, which is not proof of coverage.