Delaware Supreme Court Defines “Securities Claims”
Insured, Verizon, sued its primary and excess directors and officers (D&O) liability carriers seeking a declaratory judgment and alleging breach of contract. The insured alleged its insurers failed to pay all defense costs, $48 million, in a bankruptcy trustee's suit alleging breach of fiduciary duty, promoter liability, unlawful distribution of dividends and fraudulent transfer in connection with a tax-free “spin-off” transaction of a print and electronic directories business to stockholders. The Delaware Supreme Court sided with the D&O insurers finding the underlying claims were not “securities claims” covered by the policy. In doing so, the influential state high court engaged in a detailed analysis to define the term “securities claims” for the purposes of D&O coverage.