The 4th U.S. Circuit Court of Appeals on Wednesday agreed with a lower-court judge that Towers Watson & Co.’s directors and officers liability insurers are not required to cover the $90 million settlement of two shareholder class actions that followed its 2015 merger with Willis Group Holdings PLC.
The three-judge panel in Towers Watson v. National Union Fire Insurance Co. of Pittsburgh, Pa. et al. said the allegations in the class actions constituted a claim under Towers Watson’s D&O policies and were subject to a “bump up” exclusion because they alleged inadequate consideration in the transaction.
The appeals court also ruled that the insurers were not obligated to cover $17 million in attorneys fees.
Towers Watson sued American International Group Inc. unit National Union and other insurers in 2020, seeking a court order saying they were obligated to cover settlements of $75 million and $15 million for the shareholder class actions. A federal trial court judge in Alexandria, Virginia, initially ruled in favor of Towers Watson.
The insurers appealed and the 4th Circuit reversed the ruling in May 2023.
After the case was returned to the trial court, the judge ruled in favor of the insurers in May 2024, saying the class actions constituted a claim because they alleged that Towers Watson did not give adequate consideration when acquiring Willis. Towers appealed.
The court heard arguments May 6.
A spokesperson for Towers Watson declined to comment.
Representatives for AIG and the other insurers did not respond to requests for comment.