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Navigating D&O Fiduciary Duties in the Zone of Insolvency

Avoiding and Defending Fiduciary Duty Claims and Maximizing D&O Insurance Coverage

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

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Wednesday, September 21, 2022

Recorded event now available

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This CLE course will provide bankruptcy counsel with a review of fiduciary duties of loyalty and due care owed by directors and officers to the corporation and shareholders as a company heads into insolvency and when creditors may enforce those duties. The webinar will offer strategies to avoid and defend against breach of fiduciary duty lawsuits and analyze the impact of bankruptcy and insolvency on existing D&O insurance coverage.


When companies fail, whether due to market forces, macroeconomic trends, bad luck, or other problems, management and officers are frequently blamed for that failure--often in the form of a claim for breach of fiduciary duty or similar allegation. This is especially true if assets have been transferred to address the situation.

Shareholders and creditors frequently challenge actions taken by a company that led to financial insolvency. Directors and officers must head off such claims because a breach of duty by directors and officers can lead to lawsuits against the corporation. Case law guides directors and officers of companies facing bankruptcy on their fiduciary duties and offers practical steps for directors and officers to shield themselves from liability.

When a business becomes insolvent and officers and directors are sued, legal battles arise over whether the proceeds of a D&O policy belong to the estate or the individual directors and officers. Though they may have assumed they had adequate coverage, directors and officers may face significant out-of-pocket legal fees to establish their right to insurance proceeds.

Listen as our authoritative panel of attorneys explains the fiduciary duties of directors and officers when a company faces insolvency and offers their differing perspectives on how to identify the existence of a potential claim against the former directors and officers, interpret the applicable insurance policy, and how to investigate, prosecute and, if possible, resolve such claims. The panel will also address strategies to avoid and defend against breach of fiduciary duty lawsuits, including D&O insurance coverage issues that arise in bankruptcy.



  1. D&O duties from "facing" to "filing" bankruptcy
    1. What is the Zone of Insolvency?
    2. Does insolvency create new duties?
    3. Shareholders versus creditors as the beneficiary of fiduciary duties
    4. Who can bring a derivative action? When?
    5. Conflicts between stockholder and creditor interests
    6. Are fiduciary duties different for portfolio and other controlled companies?
    7. Sources of D&O liability other than fiduciary duties
  2. Available protections for directors
    1. Are the days of easy releases over?
    2. General defensive practices for directors
    3. Oversight duties and Caremark liability
    4. The controversy surrounding independent restructuring directors– best practices today
    5. Corporate indemnification in bankruptcy
    6. LLCs and other “light duty” corporate forms
  3. D&O insurance coverage
    1. D&O insurance proceeds: who owns?
    2. Recommendations on pre-chapter 11 D&O coverage (extensions, tail, etc.)
    3. Policy “gotchas” and exclusions
    4. Effect of the automatic stay on an insurer's ability to advance defense costs
    5. Policy provisions that provide maximum protection to directors and officers
    6. Settlements that limit recoveries to “only insurance”
  4. The resolution of fiduciary duty claims in a liquidation
  5. The resolution of fiduciary duties claims in a reorganization
    1. Plan releases and their limits
    2. Standing to investigate and settle
    3. Alternatives to plan releases


The panel will review these and other key issues:

  • What strategies can counsel for directors and officers employ to avoid breach of fiduciary duty lawsuits?
  • How are fiduciary duty claims best addressed as part of chapter 11 planning?
  • What D&O insurance policy provisions provide maximum protection for directors and officers in the event of the company's bankruptcy?


Cunha, Andrea
Andrea R. Cunha

K&L Gates

Ms. Cunha is a partner in the Austin office and a member of the firm's health care and FDA practice Group. She...  |  Read More

Dietderich, Andrew
Andrew G. Dietderich

Sullivan & Cromwell

Mr. Dietderich is co-head of S&C’s Global Finance & Restructuring Group. His practice focuses on the...  |  Read More

Koenig, Brian
Brian J. Koenig

Koley Jessen

In his commercial bankruptcy and financially-distressed transactions practice, Mr. Koenig counsels a variety of clients...  |  Read More

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