District Court Holds No D&O Insurance Coverage For Attorneys' Fees And Costs Incurred In Voluntary Response To SEC Investigation

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In Office Depot, Inc. v. National Union Fire Insurance Co. of Pittsburgh, Pa., No. 09-80554-CIV-MARRA, 2010 WL 4065416 (S.D. Fla. Oct. 15, 2010), the United States District Court for the Southern District of Florida recently concluded that Office Depot, Inc. (“Office Depot” or the “Company”) could not recover $23 million in attorneys’ fees and costs incurred in voluntarily responding to a Securities & Exchange Commission (“SEC”) investigation and in conducting an internal investigation and audit. The court held that these fees and costs did not fall within the policy’s definition of loss “arising from” a covered “Securities Claim” made against the Company or a covered “Claim” made against one of its officers, directors or employees. Companies with policy language similar to that in Office Depot thus take a calculated risk, when committing resources towards voluntary cooperation with the SEC or an internal investigation, that insurance coverage for the attorneys’ fees or costs incurred will not be available.

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