Delaware Court Ruling Strengthens D&O Insurance Coverage for Policyholders

On January 27, 2026, the Delaware Supreme Court made a landmark decision favoring policyholders by ruling that directors and officers (D&O) insurance policies must cover a $28 million settlement paid by Harman International Industries Inc. This ruling followed stockholder litigation related to its acquisition by Samsung Electronics Co., Ltd. The decision affirmed the Superior Court's findings, stating that the Bump-Up Provision in the D&O policy did not exclude coverage, countering the insurers' assertions that the settlement represented an increase in merger consideration.

The court's analysis concentrated on the configuration of the Bump-Up Provision, which negates coverage if the claim suggests inadequate acquisition consideration and if the settlement enhances this amount. Although the securities claims fulfilled the initial criterion, the Supreme Court determined that the insurers failed to verify that the $28 million settlement raised the dilution consideration. Consequently, the Bump-Up Provision was deemed inapplicable for excluding coverage.

Implications for Post-Closing Shareholder Lawsuits

For businesses facing post-closing shareholder lawsuits or similar disputes, this verdict reaffirms the applicability of D&O insurance, provided insurers cannot substantiate that a settlement increases consideration under a bump-up exclusion. The ruling clarifies that courts demand precise alignment between policy exclusions and actual losses, rather than relying on generic insurer interpretations.

Impact on Policy Drafting and Renewal

The Harman decision underscores how slight variations in policy drafting can significantly impact coverage decisions. Terms like "representing," "effectively," and "consideration" greatly affect the resolution of disputes, highlighting the need for diligent policy reviews and renegotiations during renewals. Engaging legal counsel for thorough policy evaluation can prevent reliance on potentially misleading insurer interpretations, demonstrating the variability and substantial financial implications of policy provisions.