A federal district court ruled in favor of Willis Towers Watson PLC on Tuesday in directors and officers litigation it filed against insurers including an American International Group Inc. unit seeking coverage for two settlements reached in the Willis and Towers Watson merger.

The key issue in the decision by the U.S. District Court in Alexandria, Virginia, in Towers Watson & Co. n/k/a/ WTW Delaware Holdings LLC v. National Union Fire Insurance Co. of Pittsburgh, PA, et al. concerned the so-called “bump-up" exclusion in the coverage.

Bump-up exclusions, which are common in D&O policies, exclude judgments or settlements that effectively increase the price of an acquisition. They are designed to address situations in which there is a concern the acquirers have intentionally agreed to pay too low of a price with the idea their insurers will pay up later in response to subsequent shareholder litigation.

After Towers Watson and Willis agreed to merge in June 2015, shareholder litigation was later filed in response in Virginia and Delaware. The suits were eventually settled for a total of $90 million, according to the lawsuit.

Towers Watson had purchased $80 million of insurance coverage for the January 2015 to January 2016 period that consisted of a primary policy insured by AIG unit National Union and six layers of excess coverage provided by other insurers, according to the ruling.

 The insurers refused to fund the settlements based on the bump-up exclusion, and Willis filed suit, seeking a declaration the settlements were within its coverage’s scope.

The “dispositive coverage issue” is whether the bump-up exclusion “unambiguously applies to the settlements,” the ruling said, concluding that it does not.

Willis “never actually ‘acquired’ any of the stock of the former Towers Watson Shareholders,” the ruling said. Rather, the two companies delisted their outstanding publicly traded shares and Towers Watson shareholders received a certificate entitling them to newly issued Willis shares, the ruling said.

The merger “was hardly comparable to the straightforward takeover of one company by another suggested by the Bump-Up exclusion and therefore is reasonably viewed as something other than ‘the acquisition’ reference in the Bump-Up Exclusion,” the ruling said.

“In sum, the issue is not whether the Bump-Up Exclusion can be reasonably understood to include the business combination between Towers Watson and Willis but whether that is the only reasonable reading,” the ruling said.

Based on the policy language, the merger’s structure, and differences between a takeover acquisition and merger under Delaware law, “there is a reasonable, narrow reading of the Bump-Up exclusion that excludes the Merger; and under Virginia’s applicable principles of insurance contract interpretation, that narrow construction prevails as the construction providing broader coverage,” it said, in holding Willis is entitled to coverage for the settlements.

Attorneys did not respond to requests for comment.