Are Dendreon BoD and Mitch Gold, JJ and others covered by D&O insurance?

What happens in the event they are sued or the Feds go after them? Do D&O insurance proceeds go back to Dendreon to pay creditors and D&O have to wait in like like everyone else? Does this mean D&O have to pay damages out of their own pockets?

 

606 people have looked at this and not one has a legitimate answer.

 

If the Feds go after them, they have to pay that out-of-pocket as you cannot insure against criminal prosecution. On private suits, it all depends on how the policy is written (and there is no standard form like there is for car insurance), but typically the policy will pay for any covered event so long as the policy is in force. Now that the company is BK they won't have the money to keep the policy in force or to buy "tail" coverage.

 

But can they insure against SEC civil fines? Are you sure D&O doesn't cover them for the time the policy was in effect? They committed acts when the policy was in effect.

 

It depends on the exact nature of the SEC fine, but generally fines are not covered either. This is similar to what happens if you are caught speeding in an employer owned vehicle; legally that fine is on you because breaking the traffic laws cannot be part of a legitimate job requirement.

As for the D&O policy, there are two types of insurance policies. One is occurrences-based and those cover any event that happens during the policy period. Most car insurance, for example, is an occurrence policy. The other is claims-made policies which cover events that happen so long as claims are made while the policy is in force. Most commercial policies have gone to a claims-made basis due to the sting of events like asbestos litigation or environmental damage that can arise twenty years or more after the policy term; costs that were never factored into the premiums.

The remedy for an expiring claims-made policy is to buy separate tail coverage that continues to pay after the policy expires for events that happened while the policy was still in force but where the claim was made after the policy period (i.e. a suit against MG for acts committed in 2011 but not filed until 2016). However, buying tail policies is not an option for a bankrupt company so the executives have to rely on their personal umbrella policies for coverage.