The United States District Court for the Southern District of
New York, applying New York law, has held that one Insured cannot
use consent and cooperation provisions in a D&O insurance
policy to block coverage for another Insured's settlement in a
bankruptcy adversary proceeding. Modell v.
Argonaut Ins. Co., 2024 WL 495135 (S.D.N.Y. Feb. 8,
2024).
A sporting goods company filed for bankruptcy under Chapter 11
of the Bankruptcy Code. As part of its plan of reorganization, a
litigation trustee was appointed. The litigation trustee commenced
an adversary proceeding against certain former directors and
officers of the company. The former directors and officers tendered
the adversary proceeding to the company's D&O carrier,
which accepted coverage subject to a reservation of rights. One of
the former officers reached a settlement at mediation, which the
Insurer agreed to fund. The policy provided that the Insureds had
the right to: select the defense attorney or to
