D&O CARRIERS NOT RESPONSIBLE FOR LOSSES SUSTAINED IN FRAUDULENT CONVEYANCE ACTIONS
A New Jersey federal judge ruled that an asset purchase agreement and a quota share reinsurance agreement did not obligate Hartford Fire Insurance Company (“Hartford”) and Twin City Insurance Company (“Twin City”) to step into the shoes of an insolvent insurer and provide coverage to Plaintiff for losses sustained in defending three fraudulent conveyance actions. The underlying fraudulent conveyance actions alleged that an ex-CEO played a shell game with the assets of GAF (the predecessor in interest to G-I) to shield itself from liability in pending asbestos litigation. The present action was originally filed against Reliance, but after Reliance filed for bankruptcy, Plaintiffs joined Hartford and Twin City, alleging that Defendants purchased the assets and renewal rights to Reliance’s D&O book of business and seeking coverage pursuant to that policy.
Ruling on competing summary judgment motions, the District Court said that Hartford and Twin City had no coverage obligation reasoning, among other things, that the “underlying fraudulent conveyance actions constitute a single claim that was first made under the Reliance Policy and before the inception of the Hartford/Twin City Policy” and that the Hartford/Twin City Policy and the Reliance Policy were two separate and distinct policies. G-I Holdings v. Hartford Fire Ins. Co., Case No. 00-6189 (D.N.J., Mar. 16, 2007).
