The Nebraska Supreme Court has upheld language in a directors and officers liability insurance policy that excludes protection against actions by a regulator.

In its March 6 ruling the court upheld a lower court decision against the Nebraska Department of Insurance in an action brought by then Insurance Director Tim Wagner.

Mr. Wagner as the liquidator of Amwest insurance company had sought to make a recovery from two Amwest D&O policies with $5 million limits. Mr. Wagner had also brought an action against the Amwest directors and officers alleging that their misconduct had bankrupted the company.

United National Insurance one of two insurers had contested the late Mr. Wagner's efforts to invalidate exclusion of policy language that said in part it did not "apply to any claims brought by or on behalf of, any insurance regulatory agency or supervisory authority including but not limited to any state or local insurance department…"

Lawyers for Bala Cynwyd, Pa.-based United National, Michael P. Comiskey and Hugh S. Balsam, partners based Locke Lord Bissell & Liddell Chicago office, said the case was the first by any state Supreme Court upholding a regulatory exclusion as applied to insurance regulators.

Mr. Wagner had argued that the exclusion, which precluded coverage under the policy for the lawsuit he had brought against Amwest's former directors and officers, did not apply to him when he was acting in the capacity as liquidator and that the exclusion was void as against public policy.

The Nebraska Supreme Court affirmed the Lancaster County District Court's ruling, finding that the exclusion applied to the liquidator and that it comported with public policy.

"This case is significant for United National and the insurance industry, both for its precedential value and because it was an all-or-nothing decision about whether the Insurance Director was entitled to the $5 million policy limits," said Mr. Comiskey, who handled the case in the trial court. Mr. Balsam wrote the appellate brief and argued the case before the Nebraska Supreme Court.

Special Reports /

Neb. High Court Backs A D & O Policy Exclusion

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