In Riconda v. Liberty Insurance Underwriters, Inc., the Supreme Court of Suffolk County, New York examined a motion to set aside a $2.8 million verdict entered against a directors & officers insurer in a coverage dispute. The litigation concerned the sale of a corporation in which the purchase price was never paid, and the purchasing entity ultimately declared bankruptcy. The owner who sold the corporation instituted an action against the directors and officers of the purchasing entity for fraud, self-dealing, and breach of fiduciary duty. The directors and officers sought a defense from their directors & officers liability insurer, which declined coverage. The underlying action was ultimately settled, with one of the defendant officers entering into a confession of judgment in the plaintiff’s favor and assigning his rights under the directors & officers policy to the plaintiff.
The plaintiff subsequently brought a coverage action against the insurer. The insurer contended that the underlying matter fell within an exclusion pertaining to actions brought against the insured entity by directors and/or officers of that entity. Throughout the litigation, the plaintiff contended that the sale of his corporation never completely closed, and that his ownership of the corporation was never transferred to the acquiring entity. As noted above, the matter proceeded to trial and resulted in a $2.8 million jury verdict.
In examining the defendant insurer’s motion to set aside the verdict, the Court noted that the positions taken by the plaintiff in the insurance litigation were inconsistent with the positions taken by the plaintiff in the underlying litigation against the directors and officers. While the plaintiff claimed during the insurance litigation that the sale of his company never closed, the plaintiff asserted in the underlying litigation that the sale was completed, although he never received payment. The Court found that the doctrine of judicial estoppel barred the plaintiff from asserting that the sale had not closed for the purposes of the insurance litigation.
During trial, the plaintiff’s counsel conceded that if the deal had closed, the policy exclusion would apply, as the plaintiff remained employed as the president of his corporation and was therefore an officer of the insured entity. The Court therefore granted the defendant’s motion to set aside the verdict, and entered judgment in the defendant’s favor as a matter of law.