Current Month (April 2026)
Delaware Court Upholds D&O Insurance Coverage in a De-SPAC Case
In a recent decision in View Operating Corporation v. StarStone Specialty Insurance Company, No. N25C-08-064 SKR CCLD, 2026 WL 895939 (Del. Super. Ct. Mar. 30, 2026), the Delaware Superior Court rejected an insurer’s argument that directors and officers (“D&O”) coverage under a private D&O policy should be precluded by a “public offering” exclusion. The case follows a de-SPAC merger that resulted in an SEC investigation and multiple lawsuits, including a securities class action, a shareholder derivative litigation, and an SEC civil action, all centered around misrepresentations and governance issues in connection with the merger process. The plaintiff, the post-de-SPAC company, whose indemnification obligations towards its directors and officers were triggered by these lawsuits, sought coverage from its D&O insurance carriers. One of the carriers in the insurance tower of five, StarStone Specialty Insurance Company, declined coverage, pointing to the public offering exclusion.
Two interesting issues were raised and decided by the court in favor of the plaintiff. First was the question of whether the “public offering” exclusion had to be limited to the pre-merger company that purchased the policy or whether it could be expanded to include its parent and/or the post-merger entity into which it evolved. Policy language was as follows: “Insurer shall not pay Loss . . . on account of any Claim alleging, based upon, arising out of, or attributable to any public offering of equity securities of the Company.” The insurer’s argument was that although the company itself did not engage in a public offering of securities, other entities into which it evolved as a result of the merger did, and therefore, the exclusion should stand. The court disagreed based (1) upon plain reading of the policy, which specifically listed the company as the only entity that was subject to the exclusion, and (2) on a long line of Delaware precedent that would interpret any ambiguity in policy wording against the carrier and in favor of the insured.
The second question centered around the timing of insurer’s duty to pay. The insurer claimed that it was not obligated to pay until the company actually reimbursed the officer as part of its indemnification obligations. The court disagreed, finding that the insurer’s interpretation was inconsistent with the policy’s purpose and with existing Delaware law. The court held that the policy’s requirement to pay the claim was triggered as soon as the company’s indemnity obligation towards its officer was triggered and that the insurer could not delay such payment until the company actually sent the check to the officer.
This case seems to indicate that while on one hand Delaware courts in the past five years have issued several decisions holding firmly against SPAC sponsor and management teams and for SPAC shareholders, they seem to be holding firmly on the side of the D&O insureds (those same SPAC sponsor and management teams) and against the D&O insurance carriers.
