A federal appeals court on Wednesday overturned a lower court ruling in Towers Watson & Co.’s favor in a directors’ and officers’ liability insurance dispute with American International Group Inc. and other insurers related to its 2015 merger with Willis Group Holdings PLC, which created Willis Towers Watson PLC.
The decision of the Fourth United States Circuit Court of Appeals in Richmond, Virginia, i Towers Watson & Co. v. National Union Fire Insurance Co . in Pittsburgh, PA, et al., but said it dismissed the case on narrow grounds, and there are other issues the lower court could still consider on remand.
The focus of the litigation was the “bump up provision”
; in Towers Watson’s D&O coverage, where AIG unit National Union was the primary underwriter.An unequal exclusion generally excludes coverage for losses arising from judgments or settlements in connection with claims against the insured seeking an increase or “step-up” of the consideration paid for it.
Towers Watson shareholders filed multiple lawsuits against former Willis Towers Watson CEO John Haley and others, alleging that the investors received a below-market compensation price for their shares in the merger, the ruling said.
They ultimately settled for $90 million, $75 million in Virginia and $15 million in a consolidated Delaware suit, according to the ruling.
When Towers Watson requested indemnity coverage from its insurers, they refused, citing the strong exclusion.
Towers Watson filed a lawsuit in US District Court in Alexandria, Virginia, which determined in 2021 that the strong exclusion “does not unequivocally” exclude indemnity coverage for the underlying settlements.
“However, in doing so, the court adopted an overly narrow reading of the exclusion, finding ambiguity where no one leaves and ascribing special meanings to policy forms that the parties did not reasonably intend,” a three-judge appeals panel said in vacating that district court’s ruling and remanding the case for continued processing.
The ruling says two remaining claims that Towers Watson may choose to raise on appeal are that the waiver was inapplicable because it refers to “an entity,” which should not include Towers Watson, and that the settlements did not effectively increase the price of the deal required by the waiver.
Attorneys in the case did not respond to requests for comment.
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