(Article from Insurance Law Alert, January 2026)
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Holding
Under Delaware law, settlements satisfied through the issuance of stock may qualify as covered “losses” under directors and officers liability policies. AMC Ent. Holdings, Inc. v. XL Specialty Ins. Co., No. N23C-05-045, 2025 Del. Super. LEXIS 84 (Del. Super. Ct. Feb. 28, 2025) aff’d, sub nom. Midvale Indem. Co. v. AMC Ent. Holdings, Inc., No. 206, 2025 (Del. Dec. 9, 2025).
Background
AMC resolved a shareholder litigation by issuing shares of its common stock to the plaintiff-shareholders. AMC sought indemnity for the settlement from its primary directors and officers (D&O) insurer, which denied coverage on the ground that payment in stock did not constitute a covered loss under the policies. AMC then sued its D&O insurers, including excess insurer Midvale, seeking a declaratory judgment that the stock-based settlement was a covered “loss.” The Delaware Superior Court granted summary judgment in AMC’s favor on this issue. On appeal, the Delaware Supreme Court affirmed, relying on the trial court’s reasoning discussed below.
Decision
The trial court held that coverage was owed for AMC’s settlement losses, notwithstanding that the settlement was satisfied through the issuance of stock rather than cash. The policies defined “Loss” to include “damages, judgments, settlements, pre-judgment and post-judgment interest, or other amounts (including punitive, exemplary or multiplied damages, where insurable by law) that any Insured is legally obligated to pay.”
Midvale argued that the issuance of stock did not constitute a covered “Loss” because stock is not money and therefore cannot be “paid” within the meaning of the policies. AMC countered that the “Loss” definition contains no language limiting its application to cash payments.
The court agreed with AMC. It emphasized that the policy language does not restrict “Loss” to cash payments or monetary amounts and declined to read such a limitation into the contract. The court further explained that Delaware law treats stock as “a form of currency” that can be exchanged or used for a wide range of corporate purposes, including satisfying obligations and settling claims.
Applying the principle that words used in different provisions of the same agreement are presumed to have the same meaning, the court found additional support in the policy’s “bump-up” exclusion, which used the term “paid” in a context that encompasses stock consideration. The court also rejected Midvale’s argument that coverage should be unavailable because insurers cannot themselves “pay” stock on AMC’s behalf. The court observed that the policies require the insurers to indemnify AMC for covered losses, not to directly fund the settlement. This case was remanded for further proceedings regarding the consent-to-settle requirements under the policy.
Comments
The court found, under the specific policy language at issue, that covered “Loss” was not limited to cash payments. Policyholders may seek to rely on this ruling to argue that other non-traditional forms of consideration, such as cryptocurrency, fall within broadly worded loss definitions.