A federal appellate court has upheld a lower court ruling in favor of a Chubb Ltd. entity in disputes over an executive protection portfolio portfolio that includes a shareholding plan.
Kilgore, Texas-based Martin Resource Management Corp., a professional services company that has an ESOP plan, purchased such insurance from the Chubb unit Federal Insurance Co., according to Monday's ruling by the Fifth U.S. District Court in St. Louis. Louis and Martin Resource Management Corp. v. Federal Insurance Co.
In 2017, Martin employees filed two underlying class actions against the company's designated third party professional trustee for ESOP, Wilmington, Delaware-based Wilmington Trust NA
The disputes alleged that Martin had improperly lent or contributed money to ESOP, who then used the borrowed funds to buy shares from Martin and its insiders at an inflated price, the verdict said.
Wilmington was the only name Ndant in that dispute, who did not allege any misconduct by Martin, the verdict said. The disputes were resolved for an undisclosed amount in October 2020, it said. Martin paid to defend Wilmington in this dispute in accordance with the trust agreement.
In response to Wilmington's demands, Martin sought coverage under the section on trust in its policy. The Federal initially agreed to pay Wilmington's defense costs, but then decided that the claims were not covered by the policy.
Martin then brought an action in the United States District Court in Tyler, Texas, which ruled in favor of the insurer. The lower court was approved by a unanimous panel for appeal by three judges.
"A careful, simple reading" of the coverage's insurance clause shows that "coverage is only available if a claim of confidence is made against an insured for a wrongful act by an insured," the judgment said.
"The claims, as set forth by Wilmington , are facially insufficient to trigger the insurance clause, which requires that a & # 39; Fiduciary Claim … be made against (Martin) … for a wrongful act committed … by (Martin) ", the judgment said.
The Federal has stated, "that Martin had not been designated as a defendant in these acts and that there were no allegations of misconduct against Martin in the complaints," the appeals court panel said, in upholding the lower court's ruling.
Lawyers in the case did not respond on request for comment.