Drugs company Valeant scored a preliminary victory in a lawsuit over whether it is owed $150mn in coverage from directors’ and officers’ (D&O) insurers for a claim involving a failed acquisition of Botox manufacturer Allergan.
A New Jersey federal judge largely rejected motions by the insurers to throw out key parts of the lawsuit seeking to establish coverage liability for the 2013-2014 policy period and allege breach of contract.
Valeant’s primary policy for the period in question was underwritten by AIG Canada and supported by a 12-layer excess-of-loss (XoL) stack stretching to $150mn.
In his ruling filed earlier this month, US District Judge Michael Shipp denied a motion put by Temple Insurance, and joined by MS Amlin, to dismiss core aspects of Valeant’s complaint.
The Canadian drug manufacturer sued its insurers in late 2017 in New Jersey state court after it struggled to obtain coverage for legal costs as well as unspecified damages arising from class actions. All told, it sought more than $325mn for multiple years of coverage. The lawsuit was later moved to federal court.
The motion at issue in the April ruling related to the 2013-2014 policy year, and Temple and MS Amlin’s liabilities as excess insurers for a portion of the tower, over denial of coverage for legal costs.
The judge allowed the case to move forward on a count of declaratory judgment that insurers “on a several basis are required to pay the costs plaintiffs have incurred and continue to incur, in defending against” the claims. The judge also declined to throw out a breach of contract claim.
“The court, accordingly, finds there is a real controversy between Valeant and Temple, two adverse parties, regarding whether Temple breached the Temple policy in the manner Valeant identified in the complaint,” the judge said in his April ruling.
The company, which manufactures drugs including Jublia and Xifaxan, attracted several class action suits after it lost out in a M&A battle to acquire Botox-maker Allergan.
In December 2014, former Allergan shareholders filed a class action against Valeant companies, Valeant's former chief executive Michael Pearson and New York hedge fund Pershing Square. The suit was settled for $290mn in December 2017.
According to the class action, Valeant executives allegedly violated federal regulations and agreed to acquire shares of Allergan based on non-public information.
Multiple Lloyd’s underwriters are potentially on risk for a claim made by Valeant for legal defence costs falling in the 2013-14 policy year.
Lloyd’s carriers including MS Amlin syndicate 3210, QBE syndicate 1886, AmTrust syndicate 1861, Allied World syndicate 2232 and CV Starr 1919 all have lines of between $10mn and $20mn on the XoL reinsurance tower.
MS Amlin, CV Starr and AmTrust declined to comment.
Allied World and AIG did not respond to a request for comment.
Valeant, which last year rebranded as Bausch Health, did not respond to a request for comment.