Earlier today, Blawgletter described an Eighth Circuit decision relating to insurance for acts and omissions of corporate directors and officers. That case involved coverage for the direct liability of Ds and Os to third parties ("Side A" D&O coverage). Many D&O policies also protect the companies themselves for amounts they pay under by-law provisions requiring them to indemnify the Ds and Os ("Side B" coverage).
Fascinating, no? In our defense, Blawgletter mentions Side B because a Third Circuit ruling today discussed the indemnification obligations to which Side B applies. The court affirmed a judgment against a standard-setting organization (the "ASTM") for the costs of defending and settling a case arising from ASTM’s establishment of standards for underground storage tanks. The court rejected arguments that the business judgment rule shielded ASTM’s decision to deny indemnification, that the by-law’s exclusion of intentional acts applied, that the conduct in question didn’t occur "by reason of" work for the organization, and that the defense and the settlement cost too much. Am. Soc. for Testing & Materials v. Corrpro Cos., Inc., No. 05-4164 (3rd Cir. Mar. 6, 2007).
Blawgletter hopes that ASTM has Side B coverage. How else will it pay the $1.4 million (plus attorneys’ fees) that the district court awarded and the Third Circuit upheld?
Barry Barnett
