Policyholder Wins Due to New York's Broad Defense Obligation

The US District Court Southern District of New York has found in favor of a policyholder in a case which reaffirms an insurer’s broad defense obligation, holding that an insurer could not evade coverage on the grounds that the insureds were not acting in an insured capacity. The case is Spicer v. Nat’l Union Fire Ins. Co., No. 1:20-cv-3784-GHW, 2021 U.S. Dist. LEXIS 125513 (S.D.N.Y. July 3, 2021).

National Union Fire Insurance Company (National Union) provided directors and officers liability coverage for the executives of Aegis Defense Services. The policy did not extend coverage to the parent company, Hestia B.V. (Hestia). The plaintiffs, Timothy Simon Spicer, Jeffrey Paul Day, and Mark Bullough, were all executives of Aegis and shareholders of Hestia. The plaintiffs were involved in Hestia’s sale to Gardaworld, who sued the plaintiffs for alleged misrepresentations made in connection with the sale, the plaintiffs each demanded that National Union fund their defense in the lawsuit as was required by the D&O insurance policy. The policy provided coverage for a “Wrongful Act” which is defined to include “any breach of duty, neglect, error, misstatement, misleading statement, omission or act by such Executive or Employee in their respective capacities as such . . . .”