Judge says D&O policies cover whistleblower lawsuit

A Delaware trial judge said Tuesday a Chicago-based real estate management company’s directors and officers liability insurers must defend against a whistleblower suit accusing it of submitting false certifications and information about its rent rates for Section 8 housing.

New Castle Superior Court Judge Meghan Adams said in Pangea Equity Partners LP et al. v. Great American Insurance Group et al. that a breach of contract exclusion was inapplicable because the underlying lawsuit involved alleged regulatory violations rather than Pangea’s agreements with the U.S. Department of Housing and Urban Development.

The judge said the duty to defend is broad and that exclusions should be interpreted narrowly. She also said there was only a “tenuous connection” between the allegations in the whistleblower suit and the housing assistance payment contracts Pangea had with the Chicago Housing Authority.

Pangea obtained primary and excess D&O policies from Great American and Allianz Global Risks U.S. Insurance Co. The breach of contract exclusion was in the policy’s Side C coverage.