A third-layer excess directors and officers insurer may need to defend a biotech company against a federal securities class action, a Delaware state court judge said Monday.

The Delaware Superior Court judge, in Immunomedics Inc. v. Hudson Insurance Co,. rejected the Fairfax Financial Holdings Ltd. unit’s arguments that it properly refused to defend the Gilead Sciences Inc. subsidiary pursuant to a related claims provision, a prior notice exclusion and a specific litigation exclusion.

Immunomedics developed IMMU-1332, a Food and Drug Administration-approved treatment for breast cancer patients. The biotech company obtained multiple layers of D&O coverage, the first of which was provided by American International Group Inc. unit National Union Fire Insurance Co. of Pittsburgh, Pa., court records show.

XL Group Ltd. and Bermuda-based Argo Group provided layers of D&O coverage before a $5 million policy issued by Hudson was triggered. The policies all followed the same form as the primary policy issued by AIG.

Immunomedics notified AIG in 2018 of the securities class action Odeh et al.  v. Immunomedics Inc. et al., filed in federal court in New Jersey. AIG defended Immunomedics until its policy limits were exhausted, and XL and Argonaut also provided a defense.

Hudson, however, refused to defend Immunomedics against the Odeh action, arguing that it was related to a 2017 shareholder suit — venBio Select Advisor LLC v. Goldenberg, et al. — filed in Delaware Chancery Court.  

Immunomedics sued Hudson, seeking an order requiring it to provide a defense, and the parties filed competing motions for summary judgment.

Hudson asserted that there were sufficient links between the Odeh and venBio suits to trigger the related claims provision and prior notice exclusion. The insurer also argued that the specific litigation exclusion applied because there were sufficient links between Odeh and a 2016 securities class action named Fergus v. Immunomedics Inc. et al.

The judge disagreed, finding that the suits each involved different parties, time periods, theories of liability, evidence and damages.

Representatives for the parties did not respond to requests for comment.