The New York Supreme Court, Appellate Division, First Department’s June 23 decision in Dupree v. Scottsdale Ins. Co., Case No. 653412-11, highlights the importance of negotiating favorable language in a fraud exclusion, a standard feature in D&O liability insurance policies that precludes coverage for claims arising out of fraudulent or criminal acts committed by the insured, typically as determined by a final adjudication in the underlying action.

In Dupree, the insured, Rodney Watts, sought coverage for defense of a criminal action alleging (i) conspiracy to commit bank fraud, (ii) bank fraud, and (iii) making false statements. Scottsdale paid for Watts’ defense through his conviction and sentencing pursuant to a preliminary injunction. Scottsdale, however, sought to be relieved of its obligation to pay for Watts’ subsequent appeal – and to recoup defense costs it had already paid – based on the operation of the policy’s fraud exclusion, which became operable only upon a “final judgment” against the insured. The question before the court was simple enough: when is a judgment final for purposes of triggering the fraud exclusion? In particular, is a judgment final during the pendency of an appeal?

Continue Reading New York Court Narrowly Construes “Final Judgment” Language In Fraud Exclusion: Does Your D&O Policy Protect You Through An Appeal?

Businesses in the dietary supplement supply chain are taking cover after the New York Attorney General (NYAG) ordered four major retailers to cease and desist the sale and alleged mislabeling of certain herbal supplements. After genetically testing store-brand product samples of Ginko Biloba, St. John’s Wort, Ginseng, Garlic, Echinacea, and Saw Palmetto, the NYAG alleged that the supplements were unrecognizable or contained substances other than those disclosed on their packaging labels. Class action lawsuits already have been filed, and the NYAG directed the targeted retailers to provide it with detailed information regarding the manufacturing, testing, and procurement of the herbal supplements, and announced that it may bring charges for alleged deceptive practices in advertising.
Continue Reading Pursuing Insurance Coverage for Alleged Mislabeling of Dietary and Herbal Supplement Products