Owens Corning v. National Union Fire Insurance Co.
United States Court of Appeals for the Sixth Circuit
257 F.3d 484 (2001)
Owens Corning (plaintiff), a Delaware corporation, took out a directors and officers insurance policy with National Union Insurance (National Union) (defendant). Under the policy, National Union agreed to reimburse Owens Corning for any indemnification it paid to its directors and officers arising from claims against the directors and officer for wrongful acts, to the extent that the indemnification was made in accordance with the law. Owens Corning’s bylaws permitted the corporation to indemnify its officers and directors to the maximum extent allowed by law. In 1991, a group of shareholders filed a class action lawsuit against Owens Corning and six of its officers and directors, alleging that they had misrepresented the company’s financial state. In 1995, Owens Corning settled the lawsuit for roughly $10 million, and reimbursed the officers and directors for their defense costs. Owens Corning then sought reimbursement from National Union for the indemnification. National Union refused to pay. Owens Corning sued National Union, seeking a declaratory judgment that National Union owed Owens Corning under the insurance contract. The trial court found in favor of Owens Corning. It held that the indemnification was mandatory under Delaware General Corporation Law (DGCL) § 145(c), therefore triggering National Union’s obligation to reimburse. National Union appealed, arguing that the indemnification was unlawful.
Rule of Law
Holding and Reasoning (Boggs, J.)