Cases involving D&O policies do not usually appear on the annual top 10 list. They do not arise as frequently as those involving commercial general liability and professional liability policies. In addition, unlike a CGL policy's frequent use of standard terms and conditions, D&O policy wording can vary. Thus, a case addressing a D&O issue, despite its importance to the parties involved, may not be influential on future disputes. Thus, such cases lack the factor that is critical in the selection process.

But the Delaware Supreme Court's decision in In re: Verizon Insurance Coverage Appeals, No. 558 (Del. Oct. 31, 2019) does not suffer this shortcoming. The high court of the first state narrowed entity-based defense and indemnity coverage that is often added to D&O policies for "securities claims" involving both insured directors and the companies they run.

Specifically, in a unanimous panel decision, the court held that the term "securities claims" was unambiguous and reached only laws and regulations typically understood to apply to the purchase and sale of securities (e.g., the 1934 Act; Rule 13A; and state equivalents) and applied only to laws, regulations or rules that had the primary purpose of regulating securities.

As a decision that defines a term that goes to the heart of a specific category of D&O coverage, it made the cut here. In addition, with minimal law on the issue, and given Delaware's importance in all things corporate law, its likelihood of being influential on other courts is enhanced. Verizon is likely to speak loudly to other courts around the country addressing this issue. Can you hear me now?

Hanging on the court's decision in the Verizon case was $48 million in defense costs for which Verizon was seeking recovery. Verizon had been sued by a bankruptcy trustee, on behalf of creditors of a bankrupt public company, that had been a Verizon spin-off. It was alleged that Verizon saddled the spun-off company with excessive debt.

For Verizon to be covered for its defense costs, under certain Executive and Organizational Liability policies, the trustee's claim needed to be a "securities claim," defined under the policies as a "Claim" against an "Insured Person" "[a]lleging a violation of any federal, state, local or foreign regulation, rule or statute regulating securities (including, but not limited to, the purchase or sale or offer or solicitation of an offer to purchase or sell securities)."

The court described the parties' competing positions as follows:

"The Insurers claim that the trustee in the U.S. Bank complaint did not raise a violation of any 'regulation, rule or statute regulating securities' because the words 'regulating securities' limits coverage to specific securities activities, as opposed to matters of general applicability. . . . As the Insurers argue, under the Superior Court's interpretation, 'regulations, rules or statutes' would encompass a variety of non-security related claims."

"Verizon argues that the plain language of the Securities Claim definition includes claims alleging a violation of 'any . . . regulation, rule or statute regulating securities (including but not limited to, the purchase or sale . . . [of] securities.' According to Verizon, the use of the word 'any' shows the parties did not intend to exclude common law 'rules' or claims that do not 'specifically' or 'principally' regulate securities."

The court concluded that "regulations, rules, or statutes," as used in the definition of "securities claim" "must be directed specifically towards securities laws for 'regulating securities' to have meaning."

With this decision made, the court turned to the matter at hand, examined each claim made against Verizon, and concluded that the claims for violation of fiduciary duties, unlawful distribution of dividends, fraudulent transfer under the Texas Uniform Fraudulent Transfer Act and unjust enrichment do not involve securities regulation, and, hence, are not "securities claims" as defined under the policies.

Verizon will be fine. $48 million is what my monthly wireless bill from them feels like.