Case Involving Indemnification Insurance Coverage
In Louisiana World Exposition, Inc., 832 F.2d 1391 (5th Cir. 1987), the court held that the corporate owner of a directors' and officers' insurance policy did not have an interest in the liability proceeds payable to its directors and officers. Louisiana World Exposition, Inc., 832 F.2d 1391.
The policy at issue in that case provided coverage for the liability of the directors and officers, and also separately provided coverage for the legal obligation of the corporation to indemnify the directors and officers. Id. at 1398.
There was a single policy limit applicable to both the indemnification and the liability protection, so that any payment of liability proceeds reduced the available indemnification coverage. Id.
Yet, any payment under the liability coverage also reduced the amount of potential indemnification claims for which the corporation could be liable, so that the corporation's exposure was reduced to the same extent the policy limits were reduced. Id. at 1400.
Thus, there was no potential for increasing the corporation's exposure by payment of liability proceeds.
For this reason, the court determined that the corporate policy owner had no interest in the liability proceeds.
Texas and other states require a corporation to indemnify its directors and officers in certain circumstances. See TEX. REV. CIV. STAT. ANN. art. 2.02-1 (Vernon Supp. 2000).