Tuesday, October 26, 2010

First Circuit holds that company is entitled to coverage for claim against its directors and officers for unfair stock redistribution

About a year ago I wrote several posts about Genzyme Corp. v. Fed. Ins. Co., 657 F.Supp.2d 282 (D. Mass. 2009) , a case concerning coverage for settlement of a shareholder claim for unfair stock redistribution. Judge Gertner of the U.S. District Court held that there was no coverage.

In Genzyme Corp. v. Fed. Ins. Co., __ F.3d __, 2010 WL 3991739, the First Circuit has reversed in part, and remanded. It disagreed with Judge Gertner's conclusion that coverage for the loss is barred as a matter of public policy. It also held that while the policy's "Bump-Up" clause does not cover the amount paid by the corporation to settle the claims against it, the policy does cover any settlement amounts paid under an indemnification obligation with respect to the directors and officers. Because a portion of the claim may have been paid to settle claims against directors and officers, the First Circuit remanded the case to the District Court to consider the question of allocation.

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