Meaningful Linkage Between Notice & Class Action Requires Coverage
Post 4992
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The Supreme Court of Delaware, En Banc, dealt with an insurance coverage dispute where Alexion Pharmaceuticals, Inc. appealed a decision from the Superior Court of Delaware.
In Re Alexion Pharmaceuticals, Inc. Insurance Appeals, Nos. 154, 2024, 157, 2024, Supreme Court of Delaware, en banc (February 4, 2025).
ISSUE
The issue before the Supreme Court was whether a Securities and Exchange Commission (SEC) investigation disclosed to Alexion’s insurers is related to a later securities class action brought against the company. The Superior Court found that the two were unrelated. The Supreme Court reversed this decision, finding that the securities class action arose out of the circumstances disclosed by Alexion to its first tower insurers.
FACTS
Alexion Pharmaceuticals, Inc. develops therapies for people living with rare disorders. Alexion was insured under two claims-made director and officer (“D&O”) liability insurance programs covering different periods. The first program provided $85 million of coverage for claims made between June 27, 2014 and June 27, 2015 (“Tower 1”). The second program provided $105 million of coverage for claims made between June 27, 2015 and June 27, 2017 (“Tower 2”). The two towers consist largely of the same insurers located in the same coverage layers. Both towers are structured as ABC directors and officers policies covering securities claims against the company. Each tower is composed of a primary policy and follow-form excess policies.
NOTICE REQUIRED BY POLICIES
The Insureds first became aware of facts or circumstances which may reasonably give rise to a future Claim covered under this Policy, and if the Insureds give written notice to the Insurer during the Policy Period a description of the anticipated Wrongful Act allegations.
Soliris is an “orphan drug” developed by Alexion that treats rare genetic diseases. In 2017, Soliris had about 11,000 customers worldwide. Soliris had a retail price of $500,000 to $700,000 for each patient. The SEC Investigation Order raised possible violations of the federal securities laws.
On June 18, 2015, Alexion sent its Tower 1 insurers a notice (“2015 Notice”) disclosing Alexion’s receipt of the SEC Subpoena. Alexion also stated that the SEC Subpoena “seeks information related to Alexion’s recalls of specific lots of Soliris and related securities disclosures.”
On July 2, 2020, Alexion settled with the SEC for about $21.5 million (“SEC Settlement”). On September 12, 2023, Alexion settled the Securities Class Action for $125 million (“Securities Class Action Settlement”) more than the available limits.
ANALYSIS
The Supreme Court agreed that “meaningful linkage” is the appropriate standard of comparison. Alexion’s 2015 Notice was not a claim. Chubb accepted Alexion’s 2015 Notice “as a notice of circumstance that may give rise to a claim.”
The Supreme Court concluded that the Securities Class Action was meaningfully linked to the wrongful acts disclosed in the 2015 Notice. Both involve the same alleged wrongdoing and the Securities Class Action alleged the same wrongdoing investigated by the SEC and disclosed by Alexion in the 2015 Notice.
Both SEC investigations involved the same Wrongful Act – Alexion’s grantmaking activities. A meaningful linkage exists between the Securities Class Action and the SEC investigation as disclosed by Alexion in its 2015 Notice. Under the policies of both towers, the Securities Class Action claim is deemed to have been first made at the time the 2015 Notice was received by Chubb – during the Tower 1 coverage period. Therefore, coverage is under Tower 1. Applying the Prior Notice Exclusion provision of Tower 2, no coverage is available under Tower 2. The judgment of the Superior Court was reversed.
ZALMA OPINION
Claims made policies require reports of potential claims. Alexion told its insurers about a potential claim under its Tower 1 and was entitled to coverage for the suit that followed. The prior notice exclusion eliminated coverage for tower 2. Parties, and judges, must read the policy wording before making a decision on coverage and since there was a “meaningful linkage” between the notice and the actual claim, coverage was available under Tower 1 and not Tower 2 as established by the Supreme Court.
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Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
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Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
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In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...
