On April 20, 2023, the U.S. District Court for the Northern District of California granted a preliminary injunction in a closely watched D&O coverage case. The court directed the insurer to advance the defense costs of Carlos Watson, Ozy Media's CEO. The case is Clear Blue Specialty Insurance Co. v. Ozy Media Inc. et al.
The dispute arose from a D&O Employment Practices Liability and Fiduciary Liability insurance policy issued by Clear Blue Specialty Insurance Company to Defendants Carlos Watson, Samir Rao, and Ozy Media, which Ozy applied for on August 5, 2021. The application required the applicant to inform the insurer in writing of any material changes in the answers to the questions in the application prior to the policy inception date. Ozy answered "no" to application questions asking if Ozy or any person within the company had been involved in state or federal antitrust litigation, or had been involved in any civil, criminal or administrative proceeding alleging violation of any federal or state securities laws within the last three years. According to the application, the policy would have been voided in the event of any material misrepresentation or omission in the application or other submitted materials. The application also specified that any facts or situations not disclosed would be excluded from coverage.
On October 4, 2021, two months after the insurance became effective, a company called Lifeline Legacy Holdings LLC which invested in Ozy, filed a complaint against Ozy and Rao alleging violations of federal securities laws, the California Corporations Code, and fraud by concealment arising from a stock purchase agreement. The suit alleged that at the time that Lifeline invested in Ozy, Ozy and Rao were aware of an unlawful incident, which occurred on February 2, 2021, in which Rao impersonated a Youtube executive while in a phone call meeting with Goldman Sachs. During that meeting, Rao allegedly reported Ozy had been successful on the Youtube platform in order to convince Goldman Sachs to invest in Ozy. During the call, Sachs representatives discovered the impersonation attempt and refused to proceed with the investment. Ozy did not mention the impersonation attempt or any pending repercussions for those actions on the insurance application.
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