D&O Insurance: Company in Receivership, Insurer Can Advance Defense Expense, But Limits Exhausted?

An issue that frequently comes up when companies are in bankruptcy or in other forms of receivership is whether the companies’ D&O insurer can advance payment of individuals’ defense costs over the receiver’s objections. In a recent case, a Northern District of Texas judge has ruled that the individual defendants in an SEC enforcement action are entitled to have their defense expenses advanced notwithstanding the asset stay in the proceeding and despite the receiver’s objections. However the policy’s limits of liability are all but exhausted, which raises its own set of issues, as discussed below. Northern District of Texas Judge Sydney Fitzwater’s June 6, 2018 opinion in the case can be found here.   Background Breitling Energy Company and related entities were in the oil and gas production business. In 2016, the Securities and Exchange Commission (SEC) filed an enforcement action against the companies and certain of its directors…

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