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Insurance Coverage for Pre-Closing Liabilities: Enforcing the Successor's Rights to Predecessor's Coverage

Transferring Liabilities and Insurance Coverage in Business Transactions

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Tuesday, August 1, 2023

Recorded event now available

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This CLE webinar will discuss how a successor company acquires and enforces insurance coverage obtained by its predecessor for claims materializing after--perhaps years after--the transfer. The panel will begin by reviewing whether insurance claims or policies can be assigned to another party as part of a business deal (or in litigation) and the impact of no-assignment or change of control clauses. Then, the program will discuss when the rights to coverage are freely transferable or transferred automatically. Finally, the presenters will explore whether an insurance company's contention that coverage for a pre-transaction occurrence cannot be assigned might support a claim of bad faith.

Description

Buying and selling companies, corporate assets, or subsidiaries often involves transferring liabilities. When an insurance claim arises after the sale, litigation often ensues over whether the general liability or D&O insurance coverage obtained by the seller follows the liability and allows the buyer to recover. These issues are particularly crucial in the context of SPAC and de-SPAC transactions.

Insurers may invoke no-assignment or change of control clauses to resist having to provide a defense, but they are subject to several exceptions. Insurers may also assert that the transfer increased their original risk and therefore releases their obligations. When both seller and buyer are sued, insurers may contend they are only obligated to defend one, not both. The form of the transaction--asset sale, stock purchase, merger, Bankruptcy Code Section 363 sale--can have a significant impact on these issues.

Policyholders often contend that they are being required to litigate settled coverage issues unfairly and have begun to question whether an insurance company's contention that coverage for a pre-transaction occurrence cannot be assigned might support a claim of bad faith.

Listen as this experienced panel guides counsel through how a successor company can preserve and enforce occurrence-based liability insurance coverage procured by its predecessor for claims materializing after--perhaps years after--the closing

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Outline

  1. Overview
  2. Corporate transactions where issues arise
  3. Coverage for long-tail liabilities / occurrence-based claims
  4. Coverage for management liability claims / claims made
  5. Case law developments
  6. Questions

Benefits

The panel will discuss these and other key issues:

  • What are incurred but not yet reported losses?
  • Do long-tail benefits have to be expressly conveyed?
  • When is an insured's claim to coverage assignable without insurer consent?
  • If a successor company assumes the liability of a target, does the insurance coverage procured by the predecessor follow the liability, allowing the acquirer to recover?
  • Is the creation of a subsidiary from the assets of a corporation enough like a dissolution or distribution to shareholders that a court would conclude that insurance rights in such a transaction are transferred by operation of law?
  • If a corporation purchases the stock of a subsidiary that is one of the insureds under an insurance program, does that subsidiary bring with it the rights to that insurance?

Faculty

Browning, Charles
Charles W. Browning
Partner
Plunkett Cooney

Mr. Browning is a partner and Co-leader of the firm's Insurance Coverage Practice Group, overseeing the...  |  Read More

Englert, Joseph
Joseph M. Englert
Partner
McGuireWoods

Mr. Englert is a partner in our Atlanta office and a member of the firm’s Commercial Litigation department. His...  |  Read More

Ginsberg, Michael H.
Michael H. (Mike) Ginsberg
Partner
Jones Day

Mr. Ginsberg is a trial lawyer who represents policyholders in disputes with insurance companies regarding coverage for...  |  Read More

Killian, Eugene
Eugene Killian, Jr.
Partner
The Killian Firm

Admitted to the Bar in New Jersey and New York, Mr. Killian has repeatedly been named one of New Jersey's...  |  Read More

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