Delaware Court Holds Bump-Up Clause Bars Coverage For Shareholder Settlement

In a win for Wiley’s client, the Delaware Superior Court, applying Delaware law, concluded that a so-called “bump-up clause” in a D&O policy bars coverage for a settlement paid to shareholders alleging that their shares were undervalued in the insured’s reverse triangular merger because the settlement “represents” or is “substantially equivalent to” an increase in consideration. MSG Networks Inc. v. Federal Ins. Co., C.A. No. N23C-01-103 PRW CCLD (Del. Super. Ct. June 11, 2026). 

The insured combined with another entertainment company controlled by the same family in a stock-for-stock reverse triangular merger and became that company’s wholly-owned subsidiary. Following the transaction, shareholders alleged that the merger process was unfair and that their shares had been undervalued. The insured sought coverage for the settlement under its D&O insurance. The insurers denied coverage based on a carveout from the policy’s definition of “Loss” for any amount that represents, or is