Van Winkle • Baten Dispute Resolution

Recission action was brought by Insurer insuring D&O policies to another insurance company. The recission was based on alleged financial misrepresentations in the application for a renewal policy. The Insured had multiple securities actions filed against it as a result of a restatement of income and other matters. The Insurer claimed that the Insured knew about, but did not disclose, the improper accounting which in part led to the restatement. The Insured filed a counterclaim breach of contract for failure to pay the policy limits and for bad faith, alleging that the Insurer never relied on the financial information, that the Insured’s accountants had approved the accounting methods and that the Insurer used the threat – and eventually the reality – of the recission simply as a strategy to reduce the expectations of the claimants in the underlying suit which settled for mid to high eight figures.