Among the challenges to D&O policies coverage it is to be able to asses whether certain acts do amount or not to to a claims that triggers the duty of the insurer to defend.
- A recent USA case shows an extreme situation where, even though the claim had been filed (and was pending a “reflection legal period granted to Government to decide whether to join the plaintiff), such filing was not considered to be a Claims “first made”. The case delivers an interpretation revlevant to D&O policies, in relation with filed claims which have not yet been served upon the defendant-insured.
- The USA federal False Claims Act imposes liability on those who breach public sector laws (government) and allows third-parties to bring so-called qui tam actions, liability claims under the FCA; so that the third-party can receive a portion of the recovery (if the Qui Tam Action is successful) . –As the Qui Tam is filed it remains sealed for at least sixty days (unserved on the defendant ) to allow the Public Authorities to decide if they also oursue the Action or if they decline to do so) . As a result there is sometime a time lag between the date the qui tam action complaint is filed and the date it is served on the defendant. This present a challenge for D&O insurance.
For more information, please see the excellent comment in D&O Diary, "Management Liability Insurance: If a Qui Tam Action is a Claim, When is it “First Made”?, 08 April 2015, 13:12:26, by Kevin LaCroix) about the 3rd April 2015 Decision of a Northern District of California Judge: As the qui tam had not been served, it did not amount to a “first claim” in the sense of “First made claims inD&O Policies” ,so the insurer is under no obligation to advance defense expenses.