Archive for the ‘Financial Institutions’ Category

New Jersey Supreme Court Affirms Viability of Late Notice Defense Under Claims-Made Policies

Friday, February 12th, 2016

By William Brennan, Sedgwick New York

In a decision released yesterday, the New Jersey Supreme Court held that an insurer could deny coverage under a claims-made directors and officers policy based on the insured’s late notice, without any evidence of prejudice to the insurer.

In Templo Fuente De Vida Corp., et al. v. National Union Fire Insurance Co., ___ A.3d ___, 2016 WL 529602 (N.J. Feb. 11, 2016), the underlying plaintiffs brought a number of claims against First Independent Financial Group. (“First Independent”) in the wake of a failed real estate deal for which First Independent had promised to provide funding, only to come up empty when the closing date rolled around.  First Financial’s D&O policy with National Union required it to provide notice of claims “as soon as practicable” and within the policy period.  Yet First Financial did not notify National Union of this claim until six months after it had been served, and after it had retained counsel and filed an answer.  National Union promptly disclaimed on grounds of late notice.  In the ensuing coverage litigation brought by the underlying plaintiffs, to whom First Financial assigned its insurance claim, the trial court granted National Union summary judgment on the basis of the late notice defense, brushing aside the plaintiffs’ arguments that National Union should be required to demonstrate prejudice arising from the late notice.  After an affirmance by the New Jersey Appellate Division, the issue arrived at the Supreme Court.

The New Jersey Supreme Court acknowledged that New Jersey does require insurers to show prejudice in order to make out a late notice defense, but noted that this principle applied only to occurrence policies.  The Court emphasized that it approached occurrence and claims-made policies differently due to its belief that the “vast majority” of policyholders with occurrence policies were unsophisticated consumers buying adhesion contracts, while claims-made policyholders, especially for D&O policyholders like First Independent, were sophisticated insureds advised by sophisticated brokers.  Given this background, the Court found that the National Union policy at issue, including its notice requirement, “sufficiently conformed to the objectively reasonable expectations of the insured, and, hence, did not violate the public policy of New Jersey.”  It therefore enforced the prompt notice requirement as written, without imposing a further “prejudice” requirement.

New Frontiers for Financial Institution and Directors & Officers Insurance

Tuesday, September 1st, 2015

By Andrew Milne, Sedgwick London

Recent years have shown that regulators in developing countries are becoming more active in investigating corporate misfeasance and improper conduct of directors.

In India, action has been taken in recent months by the Securities and Exchange Board of India, the Serious Frauds Investigation Office, and the Central Bank of India against former executives and the founder of Satyam Computer Services for false accounting and pocketing wrongful gains from share transactions.  Regulators have imposed bans on the individuals’ involvement in capital markets, issued orders requiring them to repay millions of dollars to Satyam, and brought criminal proceedings against them.

In Brazil, a massive corruption scandal involving contract fixing and bribery at the state oil company Petrobras has caused, among other things, the arrest of 18 Petrobras employees and a wide ranging investigation being commenced by Brazil’s securities commission, Comissao de Valores Mobiliaros, into the conduct of Petrobras’ directors and the directors of a number of companies awarded construction contacts by Petrobras.

Although these corporate scandals could be seen as outliers, it appears more likely they mark an increased trend for regulators in India, Brazil and other developing jurisdictions in asserting firmer action against the directors and officers of companies involved in corporate misfeasance and corruption.  This is partly driven by the growth of the middle class and demands for improved governance at the public and corporate levels, as well as tougher sanctions for those who fail to adhere to the standards expected.

Indeed, recent legislation passed in both jurisdictions should have the effect of tightening the regulatory regime faced by companies and their directors with the Indian Companies Act of 2013 establishing for the first time the duties of independent directors, and the Brazilian Clean Companies Act of 2014 subjecting Brazilian companies (and foreign entities with Brazilian offices) to civil and administrative sanctions for bribery of domestic or foreign public officials.

These developments should lead to an increase in the demand for FI and D&O coverage, and may create opportunities for insurers to increase their market share through increasing their customer base.  However, insurers should be cautious and consider seeking appropriate advice so that they properly understand the coverage, claims, and regulatory issues that may arise from accepting risks in developing nations.

Eye on Insurance: A Look Back at 2013 and Forward to 2014

Monday, February 3rd, 2014

2013 was a year characterized by continued pressure on the financial sector, a new regulatory landscape and further challenges for the insurance industry branching into emerging risks and economies. The lawyers in our London office authored this update which reviews the key developments and trends for various classes of business during 2013, together with commentary on what we can expect from 2014.

To view and download a PDF copy, click here.

Here We Go Again? Financial Institutions Face Heightened Regulatory Scrutiny Over Forex and Other Unregulated Rates

Thursday, January 16th, 2014

In May 2012, Sedgwick Chicago’s Eric Scheiner and Jennifer Quinn Broda wrote an article for the PLUS Journal on the investigations into the manipulation of the London InterBank Offered Rate (Libor) and the civil actions that followed.   As a follow-up to their article on Libor manipulation, Eric and Jennifer have published a second article focusing on alleged manipulation in the Forex market.  Specifically, they look at how the Forex market works, the conduct at issue and the special role “chat rooms” may be playing with regard to the investigations. They also discuss the ongoing investigations and litigation, as well as the potential coverage implications these investigations and civil suits may have on insurers.  Their latest article can also be found in the current issue of the PLUS Journal and in the D&O Diary.

Download a PDF of the article here.

Sedgwick Speaks
Sedgwick’s insurance attorneys regularly present to clients and other industry professionals on a wide range of topics. Click here to see a list of upcoming Sedgwick events and scheduled speaking engagements of our attorneys and here to see prior speaking engagements of our attorneys.

Our Firm
Sedgwick provides trial, appellate, litigation management, counseling, risk management and transactional legal services to the world’s leading companies. With more than 370 attorneys in offices throughout North America and Europe, Sedgwick's collective experience spans the globe and virtually every industry. more >

Search
Subscribe
Subscribe via RSS Feed
Receive email updates: