INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Claimant went to the wrong party
Claimant went to the wrong party
Brent King (King), a receiver assigned to Empirical Prime, LLC, sought coverage from Texas Insurance Company (TIC) under a directors and officers liability (D&O) policy. King’s assignment occurred after Empirical defaulted on a loan.
King’s appointment was the result of action taken by Enterprise Bank, which held Empirical’s defaulted loan. King began communications with TIC, but he was unsuccessful in his objective to secure insurance protection. His next action was to file a lawsuit against the insurer, alleging that TIC was guilty of breach of contract and that its refusal to pay was vexatious. TIC’s response to King was to file its own motion, requesting that King’s suit be dismissed.
The district court that heard their dispute was not persuaded by King’s complaint. It not only ruled in favor of the insurer, but the court also struck down King’s request to amend his complaint. King immediately appealed.
At the heart of the legal matter were the actions of Empirical’s governing board. While TIC’s directors and officers liability policy was in force, the insured company arranged for a loan from Enterprise Bank. One important condition of the loan was a requirement that Empirical not add any further loans. The company agreed to the financial constraint and then, to everyone’s detriment, ignored it.
The actions of Empirical’s directors included securing millions of dollars in additional loans, securing the funds from a variety of other banks, (allegedly) supplying misleading as well as false information (incorrect/altered financial statements) to lenders, and improper handling and distribution of funds.
The higher court took its own look at what had been previously decided. Surprisingly, the problem was not what was done, but the manner in which King acted. The lower courts determined that the receiver failed to make a proper claim. In light of that finding, he had no plausible grounds.
As it turns out, King sent two letters to TIC asking for coverage on behalf of Empirical. He was the party that shared all the details of the misconduct of the directors. However, from the insurer’s perspective, it had no obligation to respond. According to the relevant definitions under the D&O policy, the request did not qualify. It was a demand rather than a required claim.
The original court agreed with TIC that King failed to assert that Empirical (or its officers) held a legal obligation to pay for the financial consequences of its actions. This was critical, as no judgment against Empirical took place from a third party. Therefore, no loss, again as defined under the policy, was triggered. Once King learned of his error, he asked to amend his complaint. The lower court denied permission.
After giving consideration of the dispute and the lower court’s rationale, the higher court made its own determination. It saw the situation in the same manner. In essence, King attempted to seek coverage as if the policy were obligated to provide coverage on a first-party basis. The D&O policy only provided protection on a third-party basis. No third-party claim was asserted. Further, no third party ever alleged or pursued a loss/judgment. Thus, the higher court agreed that King’s arguments lacked merit as well as standing. The lower court ruling in favor of TIC was affirmed.
Brent King v. Texas Insurance Co.—U.S. Court of Appeals for the Eighth Circuit—No. 25-3401—July 30, 2026.
