A federal appeals court upheld a lower court’s ruling in favor of CNA Financial Corp. and Travelers Cos. Inc. units Monday in disputes over directors’ and officers’ liability insurance arising from the merger of two heavy mining equipment manufacturers.
Milwaukee-based Joy Global Inc. and Chicago-based Komatsu America Corp. agreed to merge in 2016, according to the ruling by the 7th US Circuit Court of Appeals in Chicago in Komatsu Mining Corp. v. Columbia Casualty Co . and Travelers Casualty and Surety Co. of America.
Joy Global sent investors a set of disclosures required by federal securities laws, the ruling said. Subsequent litigation against Joy Global alleged that the company had violated securities laws by failing to disclose any internal projections of the company̵7;s future growth that could have been used to negotiate a price higher than what Joy Global agreed to accept, the ruling said.
The dispute was settled for about $21 million, but who will pay for the settlement remains unresolved, the ruling said. Meanwhile, the transaction was closed, with the surviving company being called Komatsu Mining.
The insurers filed suit in US District Court in Milwaukee over the issue of the settlement, which ruled in their favor. They were upheld by a unanimous decision of three judges of the Court of Appeal.
Under their coverage, insurers must defend security and government suits, at their expense, but are not required to reimburse the insured, including directors and officers and Joy Global, “for any amount of any judgment or settlement of any insufficient consideration other than defense costs,” the ruling said, citing the policy language.
The plaintiff in the case had made an “inadequate consideration claim” under the policy definition, the ruling said, affirming the lower court.
Attorneys in the case did not respond to requests for comment.