The Dallas Morning News has published a commentary by Gravely PC founder Marc Gravely on a key insurance case before the Texas Supreme Court that could impact businesses across the state.
“Insurance companies at odds with Texas businesses,” published in the Nov. 25 edition of the newspaper, urges the court to protect the state’s businesses and business leaders in its decision.
The case, In Re Illinois National Insurance Company, raises the issue of whether and under what circumstances directors and officers of Texas businesses can count on directors and officers (D&O) insurance coverage, including, Mr. Gravely says, “when circumstances make the indemnity agreements worthless or unenforceable, such as when the enterprise is bankrupt.”
When Illinois National filed for bankruptcy, company leaders could no longer depend on the company’s indemnity agreement to protect them from claims against them and the company. They agreed to settle by limiting the claimants’ recovery to available insurance coverage.
But Illinois National and other insurance companies involved assert that the settlement is not binding and that unless directors and officers of the bankrupt company put themselves at risk, the insurance policies are worthless and ineffective.
In the commentary, Mr. Gravely writes, “The Dallas Regional Chamber understands that the insurance companies’ argument is not simply unreasonable. It’s dangerous for Texas businesses. Our firm, Gravely PC, filed an amicus or ‘friend of the court’ brief on behalf of the Dallas Chamber with the Texas Supreme Court, maintaining that if the court accepts the insurance industry contention, Texas businesses will no longer be in a position to attract qualified individuals to serve on boards or in management positions.”
Mr. Gravely also details why the insurance industry’s position would hurt a company’s ability to avoid protracted litigation by reaching a settlement agreement, which have long been favored in Texas law.
“The Texas Supreme Court has the opportunity to clarify that Texas law favors Texas businesses, both small and large, that insurance coverage is vital, available and effective to protect directors and officers, and that settlements are preferable to extended litigation. The Dallas Regional Chamber urges it to do so.”
To read the full commentary, click here.