In a recent legal development, Towers Watson’s insurers have been relieved from covering $90 million in settlements related to two shareholder lawsuits.

These lawsuits were filed in connection with the company’s merger with Willis Group Holdings PLC in 2016. The ruling was delivered by Judge Anthony J. Trenga, of the U.S. District Court for the Eastern District of Virginia, who concluded that the settlements effectively increased the consideration for the merger and were thus excluded from the company’s directors and officers policy, reported Law360.

The crux of the dispute revolved around the “bump-up” exclusion in the policy of primary insurer AIG unit National Union Fire Insurance Co. of Pittsburgh, Pa., and other excess insurers. This provision denies coverage for a settlement that effectively increases the price or consideration for an acquisition. Towers Watson contended that the settlements were paid for the underlying claims that the company’s misrepresentations and breach of fiduciary duties led to shareholder losses.

Judge Trenga disagreed, stating that the exclusion focused on whether the former Towers Watson shareholders were paid additional monies because the amount they received in the merger was inadequate.

The judge also dismissed Towers Watson’s alternative argument to allow coverage for $17 million in attorney fees and other costs. He ruled that these expenses also represented an increase in consideration and nothing in the exclusion limited it to the net benefit to shareholders.

This ruling follows a series of legal twists in Towers Watson’s coverage fight. In October 2021, Judge Trenga ruled that the exclusion didn’t apply to the settlements as it wasn’t clear that the “reverse triangular merger” was considered an “acquisition.” However, a 4th U.S. Circuit Court of Appeals panel disagreed in May of last year, stating that Towers Watson’s transition to a wholly owned subsidiary of the new parent company, Willis Towers Watson, met the plain meaning of the term “acquisition.”

Scorecard: Towers Watson’s insurers, including AIG unit National Union Fire Insurance Co. of Pittsburgh, Pa., and other excess insurers, are not required to cover $90 million in settlements related to shareholder lawsuits stemming from the company’s merger with Willis.

Takeaway: This case underscores the importance of clear and precise language in insurance policies, particularly regarding exclusions. Insurers and insured entities must ensure they fully understand the terms of their policies to avoid costly legal disputes. &

The post Insurers Not Liable for Towers Watson’s Shareholder Settlements appeared first on Risk & Insurance.