Bump-Up Clause Bumps Shareholder Settlement Out Of D&O Coverage

A Delaware Superior Court, applying Delaware law, held that a D&O policy’s bump-up clause precluded coverage for an underlying settlement because the settlement effectively represented an increase in merger consideration. Zayo Grp. Holdings, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 2026 WL 2254784 (Del. Super. Ct. Aug. 5, 2026).

The insured communications infrastructure provider was acquired by a private investment consortium through a reverse triangular merger. The insured entity was taken private, and shareholders received thirty-five dollars per share. Following the acquisition, former shareholders sued the insured entity’s CEO, alleging that he had breached his fiduciary duties by depressing the company’s value and failing to disclose information suggesting that the buyer was willing to pay a higher price per share. The parties settled, with payment to the former shareholders calculated on a per-share basis. The company’s D&O insurer denied coverage on the ground