More overlap in case facts needed to deny D&O coverage, Delaware court says
The claim was initially denied because a policy provision excluded coverage for related claims.
The fact that a single drug’s development is at the center of multiple lawsuits against Gilead Sciences subsidiary Immunomedics Inc. doesn’t mean a D&O insurance provider can’t provide coverage in each case, Delaware Superior Court Judge Paul R. Wallace decided on March 18, 2024.
Wallace granted the California-based biotech company’s motion for partial summary judgment and denied a cross-motion from Hudson Insurance Co., finding a breach of fiduciary duty suit and a later-filed securities class action were distinctive enough to not be considered related claims.
Hudson provided third-layer excess liability coverage for Immunomedics, and the company requested coverage under those policies for lawsuits it faced related to the development of its flagship metastatic breast cancer treatment drug, IMMU-132.
Hudson refused to cover the costs requested, claiming two lawsuits in question triggered a policy provision barring coverage for related claims, and Immunomedics filed its Superior Court suit in August 2023. The insurer claimed the disparate events in the cases were all part of a broader pattern of misconduct surrounding efforts to commercialize IMMU-132
A derivative suit, referred to as The Fergus Action in court documents, was filed in 2017 by Immunomedics’ largest shareholder, venBio Select Advisor, focused on the Immunomedics’ board’s activity leading up to the company’s annual meeting in 2016. A securities class action was filed after Immunomedics experienced a data breach at the plant where IMMU-132 was set to be manufactured if granted FDA approval. The second suit was referred to as The Odeh Action in court papers.
Fergus concerns actions by Immunomedics management in May and June 2016, which also don’t line up with the data breach focused timeline in the Odeh case. The Odeh action has to do with events beginning in January 2018 when the data breach occurred.
Wallace disagreed with Hudson’s argument that a theme of investors being damaged by mismanaged commercialization of IMMU-132 is enough for a Delaware court to find “meaningful linkage” between multiple lawsuits.
“Not so. Hudson’s broad interpretation of ‘meaningful linkage’ proposes barring coverage for the Odeh action simply because it shares background facts with the venBio action. This court requires more than that to establish a meaningful link,” the opinion stated.
Both lawsuits state claims based on specific time periods, and there’s no overlap on those, Wallace stated. Additionally, with a new board of directors put in place in spring 2017, the two cases don’t name the same individual defendants, with none of the officers or directors named in the securities action in the same roles as defined in the breach of fiduciary duty action.
“At bottom, the venBio action and the Odeh action contain different parties alleging different wrongful acts in different time periods relying on differing evidence and claiming different damages,” Wallace wrote.
The court decided there similarly wasn’t enough overlap between the securities suit and another that had been filed earlier to rule in Hudson’s favor.
Wallace wrote that the coverage dispute is similar to one pursued by Pfizer in which the Superior Court ruled in 2019 that the theme of multiple claims involving the same drug’s development didn’t override that the facts of the claims were distinctive.
Counsel for Hudson did not immediately respond for comment on the decision.
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