Appeals court overturns insurers’ D&O defense win
- August 30, 2025
- Posted by: Web workers
- Category: Finance
The 9th U.S. Circuit Court of Appeals said Monday that a federal judge in Las Vegas erred when applying Nevada law to decide that an American International Group Inc. unit and two excess insurers were not required to provide directors and officers defense coverage to a policyholder.
The three-judge appeals panel in EB Holdings II Inc. et al. v. Illinois National Insurance Co. said Texas law was applicable to the insurers’ contention that the policyholder’s failure to include $1.6 billion in financial liabilities on a policy renewal application was a material misrepresentation relieving them of their coverage obligations.
Under Texas law, Illinois National Insurance Co. and excess insurers Continental Casualty Co. and Federal Insurance Co. are required to prove EB Holdings II Inc.’s intent to deceive and that Illinois National gave notice of its refusal to be bound by the policy within 90 days of discovering the application error.
When seeking to renew its D&O policy from Illinois National for the 39th time in 2015, Dallas-based EBH failed to complete spaces for information about its financial liabilities. In a 2013 renewal application, EBH listed $1.4 billion in debt, but Illinois National still approved the application and provided coverage, court records show.
EB Holdings and its president, Howard Meyers, were sued in 2016 by Golden Tree Group Master Fund Ltd. for fraud. Illinois National, Chubb unit Federal and CNA Financial Corp. unit Continental each denied coverage.
EB Holdings sued the insurers in federal court in Nevada for breach of contract, bad faith and violations of fair claims practices laws in Nevada and Texas. The parties filed competing motions for summary judgment and the trial judge sided with the insurers after finding that Nevada law applied to their material misrepresentation defense.
EB Holdings appealed, arguing that Texas law should apply because the underwriting process for the policy took place there and because it is incorporated in Texas.
Representatives for the parties did not respond to requests for comment.
