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No Public Policy Against Insurer Funding Settlements of Claims Seeking Disgorgement
by Nancy Randolph Kornegay

Casenote: Burks v. XL Specialty Insurance Co., 2015 WL 6949610, —S.W.3d—(Tex. App.—Houston [14th Dist.], Nov. 10, 2015).

                  There are not a lot of Texas appellate-court decisions on D&O coverage issues. This very recent decision could end up being quite significant. Burks and XL Specialty have since settled, so this is the final decision on the coverage issues involved.

Burks was the CFO of an energy company insured under a D&O policy issued by XL Specialty. The energy company ultimately reorganized through a Chapter 11 bankruptcy.  As part of that reorganization, the plan agent sought recovery from Burks of compensation, bonuses, and benefits transferred to him prior to the Chapter 11 reorganization. Burks requested defense expenses and coverage, which XL Specialty denied on the following bases: (1) the plan agent’s claim was brought outside the policy period and did not relate back to any prior claims made within the policy period; (2) XL had no duty to defend because the plan agent’s claim sought disgorgement, which was not covered under the policy’s “loss” definition; and (3) XL Specia...(Continue)

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