Murtha Cullina LLP’s Post

This term at the Supreme Court, questions involving insurance are more prevalent than I recall in most terms. Recently, the Court heard arguments in a case involving bankruptcy and asbestos and an insurer. Today, in the final argument of its March sitting, the Court will hear arguments addressing this issue: "Whether the proceeds of a life-insurance policy taken out by a closely held corporation on a shareholder in order to facilitate the redemption of the shareholder's stock should be considered a corporate asset when calculating the value of the shareholder's shares for purposes of the federal estate tax." #Insurance #CotterOnCourt #SCOTUS Donald Patrick Eckler Adam Feldman, J.D., Ph.D.

Second Circuit affirms insurer's denial under D&O policy exclusion for claims that could not exist "but for" a "contractual liability or obligation." The contractual exclusion continues to be one of the most important in speciality lines. It precludes coverage not only for breach of contract counts, but also where the claim could not exist but for the underlying contractual obligation. The underlying suit concerned allegations an owner, chairman, and CEO of a closely held corporation transferred shares to family trusts in violation of a right of first refusal and stock transfer provisions in shareholder agreements. The count of the complaint in dispute sought declaratory relief that the shareholder agreement remained in effect and governed the rights of the shareholders and that an agreement purporting to terminate the shareholder agreement was invalid. The Second Circuit found the insured "neglects to engage with any analysis in earnest" under the NY "but for" test for an exclusionary clause. The insured argued the count was based on the Board's abdication of its corporate and fiduciary duties to shareholders by allegedly rubberstamping the owner/chairman's actions or wrongfully concealing them. But the Second Circuit found that the count at issue "not only alleges the existence of facts showing that Appellants violated the terms of the Class A Shareholder Agreement, but the claim relies on that agreement for its theory of harm—demonstrating that the claim could not exist but for Joseph's alleged violation of the agreement's right of first refusal and stock transfer provisions." Accordingly, in a Summary Order, the Second Circuit held the insurer had no duty to defend or indemnify the insured under the policy. #insurancecoverage #Directorsandofficers #insurance #contractexclusion

Interesting potential liability implications for #plansponsors whose plan advisers are in-house RIAs of broker-dealers. #401kplans #riskmanagement #fiduciaryliability #fiduciaryresponsibility #revenuesharing

There is a longstanding belief that the longer a claim is worked up, the more an insurer will be willing to pay to settle it. To maximize the value of their clients’ claims, plaintiff lawyers are incentivized to litigate cases to the point of finally receiving what they believe to be the “courthouse steps” offer. Until then, both sides engage in a game of litigation chicken, negotiating from artificial positions, waiting for their opponent to budge first. This mutual posturing doesn’t only increase the costs for both sides, it also increases the amount needed to reach settlement as the costs incurred by the plaintiff lawyer ultimately reduce the net settlement to be recovered by their client. And during this game of chicken, the parties’ true, unexaggerated settlement positions are never compared. Not once. So while the parties may be negotiating from positions that are “too far apart,” their true positions may actually overlap. Why don’t the parties just tell each other their true position and see if there is an overlap? Because no one wants to show their cards! Negotiators know that if they were to reveal their true position, it would just become their opponent’s new floor or ceiling to negotiate against. Just ask any adjuster or attorney you know! This stalemate keeps them locked in an unnecessary spending frenzy without resolution in sight. StreamSettle gives parties a safe place to test their true positions for overlap without showing their cards. StreamSettle blindly compares the parties’ true positions, which remain concealed unless they trigger a settlement. The process is simple: if the streamed offer exceeds the streamed demand, the claim settles at the midpoint of the values entered. If it doesn’t, the parties have lost nothing and have revealed nothing. Of course there are cases that need to be tried, but for the large majority of cases, StreamSettle’s on-demand comparison provides both sides with the most efficient route to settlement. We’re hoping to bring practicality to negotiations and save both sides a bunch of money along the way. Let’s go! Joe Jones

Texas district courts have issued orders halting the effective date of the U.S. Department of Labor’s (DOL) 2024 Fiduciary Rule and related amendments to several Prohibited Transaction Exemptions, previously scheduled to take effect on September 23, 2024. The Eastern and Northern District Courts of Texas have each delayed the 2024 Fiduciary Rule's implementation, citing conflicts with the DOL's regulatory authority under ERISA, as well as concerns about the DOL exceeding its statutory authority, the inefficiency of remand, and the potential waste of judicial resources. Counsels Jason Rothschild and Matthew Behrens, associate Rachel Lee, and partners Brian Jebb and Gillian Emmett Moldowan analyze the Texas district courts' decisions, examine ongoing legal challenges, and provide insights for investment advisors and investors on the potential business impacts of the delay and strategies for staying compliant. Read more here: https://lnkd.in/eEGDgBvv hashtag #AOShearman

Monday, June 24, 2024 - 4:00 PM - 5:00 PM EDT Join us with Martin Shenkman and Jonathan G. Blattmachr for a discussion of the Supreme Court holding in Connelly, which requires that redemption agreements be reconsidered. On June 6, 2024, the U.S. Supreme Court issued a unanimous opinion on a closely held business valuation case that will have significant impact on many family and closely held businesses. Connelly v. United States, U.S., No. 23-146, Opinion 6/6/24. The case addressed the valuation of stock in a closely held business and held that the obligation of an entity to buy a deceased equity owner’s shares does not reduce the value of the insurance proceeds received by the entity to fund the buyout. The Supreme Court’s ruling resolves the conflict between the Connelly case and Estate of Blount v. Commissioner which had reached the opposite conclusion. Register here: https://bit.ly/4c71phg In this webinar, we will discuss the Connelly decision, along with the following questions: >> Based on this new development, what should practitioners be telling clients now? >> Will every redemption agreement be adversely affected? Should redemption agreements be restructured as cross-purchase agreements instead? >> Should more insurance be purchased to address potential estate taxes? >> And finally, how will the reduction in the exemption in 2026 exacerbate the negative repercussions of Connelly? Can't attend the webinar? Please register and a recording of the presentation will be sent to you. Register here: https://bit.ly/4c71phg #Connelly #BuySell #BusinessBuyout #CloselyHeldBusiness #FamilyBusiness #SuccessionPlanning #BusinessSuccession #EstateTaxValuation #LifeInsurance #InsuranceProceeds #Redemption #CrossPurchase #Fiduciary #TrustServices #PeakTrustCompany

Marsh’s sister company NERA just released Recent Trends in #SecuritiesClassActionLitigation: 2023 Full-Year Review, the latest edition of its annual study. The report provides an in-depth analysis of the dismissal and settlement trends and presents new analyses related to current topics impacting the public #DirectorsandOfficersLiability insurance marketplace.   Highlights from the 2023 report include: - After a four-year decline, 2023 saw an increase in new federal Securities Class Action suits, with 228 new cases filed, a rise from the 206 cases filed in 2022. - This is slightly above the historical average from 1995 – 2015, before the spike in Merger Objection cases dramatically increased statistics for a five year period. - Of the 228 cases filed, 31% included an allegation related to missed earnings guidance and 29% included an allegation related to misled future performance. - Aggregate plaintiffs’ attorneys’ fees and expenses totaled $972 million, accounting for 24.9% of the 2023 aggregate settlement value.  206 standard cases, which contain alleged violations of Rule 10b-5, Section 11, and/or Section 12, accounted for most new filings in 2023. - Median Investor Losses were $923 million, the second highest recorded value during the past decade.   

Business owners traditionally used insurance proceeds to repurchase a deceased owner's interest at the current fair market value. However, a recent Supreme Court decision has altered this approach. In our latest DE Insight, Keith E. Phillis, Esq. and Michael J. Raposa, Esq. advise shareholders of closely held businesses on how to avoid substantial estate tax liabilities. #SCOTUS #TaxLaw #TaxAttorney #DEInsights #BusinessSuccession #SuccessionPlanning #EstateTax #EstateTaxes https://hubs.ly/Q02C51cR0

Two Pennsylvania advisors — a father and son team — recently achieved a major victory with the help of HLBS Law and AdvisorLaw! The Story: Both advisors, with spotless records and decades of experience, were terminated from their firm on the same day for allegedly opening accounts without client consent. (Spoiler alert: it wasn't true!) They hired HLBS Law to fight for expungement through FINRA Dispute Resolution. The Outcome: The FINRA Panel ruled in favor of the advisors! The termination disclosures on their records will be replaced, and the false accusations will be removed. Woodbury Financial Services was ordered to pay over $500,000 in damages and fees! Justice Served! ⚖️This case highlights the importance of fighting for your reputation. If you've been unfairly terminated, AdvisorLaw can help. Contact us today for a consultation! #FINRA #Expungement #FinancialAdvisor #ReputationMatters #AdvisorLaw

A landmark Supreme Court ruling in Connelly v. IRS highlights the importance of well-structured buy-sell agreements for business owners. Discover why now is the time to review and update your buy-sell arrangements to protect your business: https://bit.ly/4dfeF3n #businessplanning