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More than 90% of public companies purchase "entity coverage" as part of their directors' and officers' (D&O) insurance policies. Entity coverage protects the company itself — as opposed to its directors and officers — against securities claims. During the last 2 years, however, it would have been difficult for the director of any public company to avoid hearing that entity coverage creates an undue risk of depriving the director of D&O coverage if the company for which he or she serves files for bankruptcy. One major D&O insurer distributed a paper containing this gratuitous advice to the directors of every public company in the country. Many legal seminars and D&O coverage proposals prepared by brokers also warn of this danger. Not surprisingly, CEOs and general counsel often are questioned by their boards about D&O coverage in the event of bankruptcy.

With the flurry of major insurance decisions pertaining to long-tail tort claims in the early 1990s, practitioners appear to take New York law largely for granted when assessing trigger and allocation issues. True enough, the basics are now "well settled": an "injury in fact" trigger (<i>American Home Products Corp. v. Liberty Mut. Ins. Co.</i>, 748 F.2d 760 (2nd Cir. 1984) ("<i>AHP</i>")); an emphatic rejection of the so-called "all sums" approach to allocation (<i>Consolidated Edison Co. v. Allstate Ins. Co.</i>, 746 N.Y.S.2d 622 (N.Y. 2002)); and adoption of a <i>pro rata</i> methodology, (<i>Stonewall Insurance Company v. Asbestos Claims Management Corporation</i> 73 F.3d 1178, 1192 n.5 (2nd Cir. 1995) (citing <i>Owens-Illinois v. United Ins. Co.</i>, 138 N.J. 437 (N.J. 1994)); <i>Con Ed</i>, 746 N.Y.S.2d 622). All that said, we expect to see highly significant elaborations or refinements of the real world meaning of "injury in fact," and these open issues may have consequences for a wide range of major claims.

The purpose of insurance is to insure. In attempting to see that this purpose is achieved, courts have developed the following rules of construction that are beyond dispute. First, grants of coverage are broadly construed. <i>See, e.g., Federal Home Loan Mtg. Corp. v. Scottsdale Ins. Co.</i>, 316 F.3d 431, 444 (3d Cir. 2003); <i>Community Found. for Jewish Educ. v. Federal Ins. Co.</i>, 16 Fed. Appx. 462, 465 (7th Cir. 2001); <i>Blum v. Allstate Ins. Co.</i>, No. 4:03CV401 CDP, 2003 WL 23009136, at *2 (E.D. Mo. Dec. 15, 2003). Second, exclusions to coverage are strictly construed. <i>See, e.g., Auto-Owners Ins. Co. v. Churchman</i>, 489 N.W.2d 431 (Mich. 1992); <i>Napoli, Kaiser &amp; Bern, LLP v. Westport Ins. Co.</i>, No. 02 Civ. 7931 (JGK), 2003 WL 22952171, at *7 (S.D.N.Y. Dec. 15, 2003); <i>Dursham v. Nationwide Ins. Co.</i>, 92 F. Supp.2d 353 (D. Vt. 2000). Third, if there is any doubt as to whether coverage exists, such doubts should be resolved in favor of the existence of coverage. <i>See, e.g., American Bumper &amp; Mfg. Co. v. Hartford Fire Ins. Co.</i>, 550 N.W.2d 475, 481 (Mich. 1996); <i>Hecla Mining Co. v. New Hampshire Ins. Co.</i>, 811 P.2d 1083, 1090 (Colo. 1991). All of these doctrines, while generally recognized, result in endless disputes between the insurance purchasers (policyholders) and insurance sellers (insurance companies) on a daily basis when the specific facts of a claim develop. But one recurring scenario is not addressed by these broad maxims of insurance law: What should a court do with the insurance contract that is, by its very nature, internally structured so that there is an inherent conflict that renders a determination of available coverage ambiguous before a claim is even presented?

Highlight of the latest insurance cases from around the country.

Certain defects in the regulations under the Arthur Wishart Act (Franchise Disclosure), 2000 (the "Wishart Act") have been apparent to many in Canada's franchise community since the Wishart Act came into full effect on Jan. 31, 2001. Now, the Ontario government, through the Ministry of Consumer and Business Services, has released amendments to the regulations under the Wishart Act effective March 22, 2004.

Highlights of the latest franchising cases from around the country.

Like the end of any relationship, the termination of a franchise can be an ordeal. In some instances, franchisors may unwittingly complicate the process by failing to safeguard their own rights or by violating statutory protections afforded to the franchisee. In franchising, the best-laid plans for termination are laid early and consider issues related to franchise law and litigation.

Highlights of the latest franchising news from around the country.

Cases of interest to you and your practice.

The Federal Reserve Board and the New York Department of Banking have adopted a strict-review standard in their evaluation of the effectiveness of the Anti-Money Laundering (AML) compliance programs of financial institutions. Recent enforcement actions demonstrate that regulators pay particular attention to the effectiveness of Suspicious Activity Reporting (SAR) and Currency Transaction Reporting (CTR) as key components. In addition, an effective audit program must focus on the other essentials: Know Your Customer (KYC), Training, and Testing. How can you be sure that the institution you advise is prepared for a money laundering audit?