Delaware Delivers Another "Bump-Up Exclusion" Win To D&O Policyholders

Earlier this year, the Delaware Supreme Court delivered the latest win for policyholders in a string of battles regarding so-called “Bump-Up Exclusions” in directors and officers (D&O) liability insurance policies. The ruling carries lessons in this fiercely contested area.

Disputes over Bump-Up Exclusions have been heavily litigated in recent years, as we have detailed in our treatise, the Policyholder’s Guide to the Law of Insurance Coverage (§ 11.06[D][5]). The wordings of these exclusions vary, but in general they purport to preclude coverage for settlements that effectively increase the allegedly inadequate price or consideration that was paid to acquire an entity. In Illinois National Insurance Co. v. Harman International Industries, Inc., Delaware’s high court considered a version that excluded, in relevant part, “any amount of any judgment or settlement representing the amount by which such price or consideration is effectively increased.”¹