"D&O"/Advancement/Indemnity Issues

Given the current regulatory enforcement environment, an increasingly important responsibility of the general counsel is to advise the corporation, and its officers and directors, on the application and extent of insurance/advancement and indemnification protections. Several new cases demonstrate how important this responsibility can be.

For example, an August 4 decision of a federal district court in Colorado concluded that a company's then-existing D&O policy did not provide coverage for the costs incurred by the company in responding to an SEC investigation. Based upon the nature of the SEC inquiry, the court determined that it did not reflect the allegation of a "Wrongful Act" by the company as required in order to constitute a "Claim" under the policy. Rather, the court interpreted that it was an investigation to determine whether the company had indeed violated the law.