A New York appeals court Tuesday ruled a prior act exclusion in a directors and officers policy issued by a Travelers Cos. Inc. unit to Xerox Corp. does not apply to bar coverage for two settlements resolving suits brought by a shareholder over the proposed purchase of Xerox by Fujifilm Holdings Corp.

The three-judge appellate panel of the First Department of New York’s Supreme Court, Appellate Division, in Xerox Corp. v. Travelers Casualty and Surety Co. of America, overturned the trial judge’s decision denying the parties’ competing summary judgment motions on the applicability of the exclusion.

Xerox had two towers of directors and officers policies. Travelers was the second excess insurer on the first tower, which was comprised of “run off” policies. The first tower provided coverage for exposure arising from the spinoff of a Xerox entity and did not offer coverage for claim arising on Jan. 1, 2017, or after, court records show.

The second tower of D&O coverage consisted of policies issued by Chubb Ltd. unit Federal Insurance Co., which was the primary insurer, and excess insurers XL Group Ltd. and Travelers. Chubb’s policy included a prior acts exclusion that barred coverage for acts occurring prior to January 2017.

Darwin Deason, Xerox’s third largest shareholder, filed two lawsuits against Xerox and its board members related to a proposed purchase by Fuji.

Xerox notified the insurers of the suits in February 2018, seeking coverage under the second tower. The suits were settled in May 2018, and Chubb and XL committed their policy limits to cover the settlement and defense costs. Neither insurer cited the prior acts exclusion. Travelers, on the other hand, refused to pay invoices for the remaining settlement amount and defense costs based on the prior acts exclusion.

Xerox sued Travelers in June 2019, asserting claims for breach of contract, bad faith and negligent misrepresentation. The parties each moved for summary judgment, and the trial judge denied both motions. Travelers appealed.

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