A Supreme Court of California securities fraud decision sounds a warning to corporate policyholders to review their directors' and officers' (“D&O”) insurance policies. In Small v. Fritz Cos.,
D&O Insurance and 'Holding Claims'
A Supreme Court of California securities fraud decision sounds a warning to corporate policyholders to review their directors' and officers' ("D&O") insurance policies. In <i>Small v. Fritz Cos.<i>, 132 Cal. Rptr.2d 490 (Cal. 2003), the court upheld the validity of securities "holding claims" — claims seeking redress for persons induced to hold stock instead of selling it. Unlike typical securities fraud claims, the claims in this case did not involve the purchase or sale of securities. D&O policies usually link the availability of entity coverage for the corporation to a "securities claim" having been filed against the corporation. Unfortunately, some policies define "securities claim" narrowly in a manner that arguably does not include coverage for "holding claims." In light of the California decision, policyholders should insist that their policies define "securities claims" broadly in a manner that does include "holding claims."
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