Hunton Insurance Recovery Blog

In a recent client alert, Hunton insurance attorneys Geoffrey B. Fehling and Charlotte E. Leszinske discuss D&O insurance considerations for shareholder derivative liability claims.  A recent complaint filed in the federal court alleges that an opportunistic investor used his status as a shareholder to pressure the company into business deals that would benefit him personally, on threat of a derivative action.  See Maddox Defense, Inc. v. Envirotech Vehicles, Inc. v. Diveroli, et al., No. 26-cv-2992.  The shareholder is alleged to have held himself out as the company’s representative in a lucrative government contract, and when things went south, sued.  He then allegedly offered to drop the lawsuit if the company entered into different contracts to its detriment and his benefit.

The decision underscores the importance of maintaining D&O liability insurance to protect against shareholder lawsuits, especially those brought derivatively on behalf of the company, as those claims can pose unique challenges on indemnification, exclusions, and other coverage issues.