In MusclePharm Corp. v. Liberty Insurance Underwriters, Inc. the Tenth Circuit recently held that a corporation was not entitled to coverage under a directors and officers (D&O) insurance policy related to an informal investigation by the SEC. The decision in MusclePharm is significant because the Tenth Circuit broke with authority from other circuit courts holding that the company's tender was not a “claim” because the SEC's informal investigation was not a “formal administrative or regulatory proceeding,” the SEC did not request any “non-monetary relief,” and the SEC ostensibly did not allege any “wrongful act” against the insured. In contrast, decisions in other circuit courts hold that a “wrongful act” can be implied due to the serious and specific nature of government investigations and further, that the SEC's demand for documents or testimony qualifies as a demand for “non-monetary relief.” For more information, see: http://www.businessinsurance.com/article/00010101/NEWS06/912316604/Liberty-Mutual-unit-not-obligated-to-pay-informal-SEC-probe-costs.
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