Business Law

Business Law News 2017, Issue 3

Bankruptcy and the "Insured vs. Insured" Exclusion in Directors and Officers Liability Insurance Policies

Feliciano M. Ferrer and Kavita Gupta1

Feliciano M. Ferrer is a partner in Gupta Ferrer LLP. Mr. Ferrer specializes in civil and commercial litigation in the bankruptcy, federal, and state courts. He also has significant experience representing clients in all aspects of restructuring matters, including debtors, trustees, and individual commercial creditors.

Kavita Gupta is a partner is Gupta Ferrer LLP. Ms. Gupta’s practice focuses on representing a variety of debtors and creditors in all phases of complex distressed financial situations, including out-of-court workouts and Chapter 11 cases. Ms. Gupta has served as a trustee in numerous corporate and individual cases.

In 2016, 26% of private companies reported that claims had been filed against their directors and officers within the last three years and that the average and maximum reported resulting losses for such claims were $387,000 and $17 million, respectively.2 Therefore, given the potential of such claims, an attorney advising a company experiencing financial difficulties may wish to review its D&O liability insurance policy ("D&O Policy") and understand the issues that may arise under that policy if the company files a bankruptcy case.

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