Ninth Circuit Holds There Is Question of Fact on Nature of Shareholder Settlement
Insurance Law Update
The Ninth U.S. Circuit Court of Appeals reversed in part a district court’s grant of summary judgment to an insurer concerning whether an underlying settlement constituted uninsurable “restitutionary” relief, holding that material issues of fact warranted further inquiry.
In Pan Pacific Retail Properties Inc., et al. v. Gulf Insurance Company, et al., ---F.3d ---, 2006 WL 3026057 (9th Cir. (Cal.) Oct. 26, 2006), Pan Pacific Retail Properties Inc. and Western Properties sought indemnity coverage under their respective directors & officers liability policies for settlement of an underlying shareholder lawsuit arising from a merger whereby Pan Pacific acquired all of Western’s stock. The Western shareholders alleged that the companies failed to negotiate the highest price for the stock.
The Ninth Circuit held that, in the absence of any evidentiary findings on the precise nature of the exposures settled, and where appellants submitted evidence of an alternate damages theory that contemplated potentially non-restitutionary damages, there remained a genuine issue of fact as to whether the settlement involved any non-restitutionary claims for which there would be coverage.