A Delaware court has issued a partial victory to insurers in one of the first directors’ and officers’ liability insurance cases related to special purpose vehicle acquisitions to reach a verdict.
Social Capital Hedosophia Holdings Corp. III was a publicly traded SPAC that merged with privately held Clover Health Investments Co. in January 2021, according to the February 6 ruling by the Delaware Superior Court in Wilmington i Clover Health Investments Corp. et al. v. Berkley Insurance Co . a. al.
Prior to the merger, Social Capital purchased D&O coverage from Sompo Holdings Inc. unit Endurance Risk Solutions Assurance Co., Lloyd’s underwriters and Fairfax Financial Holdings Ltd. unit Hudson Insurance Co., with Sompo unit Endurance issuing the primary tail policy.
The tail policies disappeared with the merger, but an endorsement adjusted the policy period to end on January 7, 2017.
The new company, Franklin, Tenn.-based Clover Health, obtained D&O coverage from units of WR Berkley Corp., Axa XL and Fairfax Financial unit Allied World Specialty Insurance Co., with Berkley issuing the primary “go-forward” policy .
The size of the insurance provided was obscured in the judgment.
Clover Health is seeking coverage for a securities class action, various shareholder derivative suits, a shareholder complaint filed under Delaware law and an investigation by the Securities and Exchange Commission.
Endurance admitted coverage to directors in some of these cases and denied coverage to others, as well as to the SEC investigation.
Go-forward insurer Berkley denied coverage to certain former directors and officers of Social Capital named among the individual defendants.
Clover Health filed a lawsuit in June 2022, seeking various assurances from both tail insurance and insurance companies. Svansförsäkringbolagen filed a motion to dismiss in August 2022.
The court held that tail insurers are required to advance all defense costs of securities actions and derivative actions, subject to their respective retentions and limitations.
The ruling denied the insurers’ motion to dismiss with respect to coverage for the SEC investigation, citing conflicting policy language, and said it would allow discovery on the issue.
It granted the defendants’ motion to dismiss the claim for breach of the implied covenant of good faith and fair dealing.
Attorneys in the case had no comment or did not respond to a request for comment.