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ARTICLE · 23 OCTOBER 2024

D&O Policy Coverage: Specificity Matters In Bankruptcy Context

Proskauer Rose LLP
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A recent decision by the United States Bankruptcy Court for the Southern District of Texas in In re Walker County Hospital Corporation serves as an important...

United StatesInsolvency/Bankruptcy/Re-Structuring
Charles A. Dale
Charles A. Dale
Nathan Lander
Nathan Lander
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A recent decision by the United States Bankruptcy Court for the Southern District of Texas in In re Walker County Hospital Corporation serves as an important reminder to clients that are purchasing or renewing directors and officers ("D&O") insurance coverage that the "Insured versus Insured" exclusion must contain the broadest possible exceptions for claims brought against directors and officers following a bankruptcy filing. Without the specific policy language, current and former directors and officers may be exposed to personal liability.

After Walker County Hospital (the "Hospital") filed for bankruptcy, in its capacity as debtor-in-possession, the Hospital sued its former chief executive officer (the "CEO") for breach of fiduciary duty claims. The CEO tendered the claims to the Hospital's D&O insurer and demanded that the insurer provide a defense against the claims. The insurer denied coverage, relying on the "Insured versus Insured" exclusion ("IvI

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