A federal appeals court affirmed a lower court ruling in favor of CNA Financial Corp. and Travelers Cos. Inc. units Monday in directors and officers liability insurance litigation stemming from two heavy mining equipment manufacturers’ merger.
Milwaukee-based Joy Global Inc. and Chicago-based Komatsu America Corp. agreed to merge in 2016, according to the ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Komatsu Mining Corp. v. Columbia Casualty Co. and Travelers Casualty and Surety Co. of America.
Joy Global sent investors a set of disclosures under federal securities law, the ruling said. Ensuing litigation filed against Joy Global contended the company had violated securities law by not disclosing some internal projections of the company’s future growth that could have been used to negotiate for a price higher than the one Joy Global agreed to accept, the ruling said.
The litigation was settled for about $21 million, but who pays for the settlement remains unresolved, the ruling said. Meanwhile, the transaction closed, with the surviving firm called Komatsu Mining.
The insurers filed suit in U.S. District Court in Milwaukee over the issue of the settlement, which ruled in their favor. They were affirmed by a unanimous three-judge appeals court ruling.
Under their coverage, insurers must defend security and state-law suits, at their expense, but need not indemnify the insured, including directors and officers and Joy Global, “for any amount of any judgment or settlement of any Inadequate Consideration Claim other than Defense Costs,” the ruling said, citing policy language.
The plaintiff in the case had made an “inadequate consideration claim” under the policy definition, the ruling said, in affirming the lower court.
Attorneys in the case did not respond to requests for comment.