USA – NEW YORK Trends and Developments Contributed by: Ian Boczko and Sunny S. Jeon, Wachtell, Lipton, Rosen & Katz
Introduction The past year saw courts continue to wrestle with recurring insurance-law themes: The scope of D&O exclusions, the insurability of restitutionary remedies, the treatment of regulatory settlements, and the extent to which sophisticated commercial parties may shape coverage outcomes through policy wording and forum-selection provisions. New York courts gener- ally continued to construe exclusions narrowly and enforce contractual risk-allocation provisions, while Delaware courts issued several decisions likely to influence coverage disputes nationwide. Fraudulent Transfer Claims in Bankruptcy Are Not Insurable In Scottsdale Insurance Co . v McGrath , a federal dis - trict court applying New York law held that a bank- ruptcy trustee’s fraudulent-transfer claims did not seek a covered “loss” under a management liability policy because the trustee sought only the return of funds allegedly transferred to the insured. 2025 WL 2509190, at *19-20 (S.D.N.Y. Sep. 2, 2025). The court characterised the remedy as restitutionary rather than compensatory and concluded that under New York law, the recovery of wrongfully transferred funds was uninsurable as a matter of law. Although arising in the bankruptcy context, the deci- sion reflects New York’s longstanding distinction between covered damages and restitutionary relief. See, eg, Vigilant Ins . Co . v Credit Suisse First Bos . Corp ., 10 A.D.3d 528, 528 (1st Dep’t 2004) (“The risk of being directed to return improperly acquired funds is not insurable.”). The ruling suggests that directors, officers, and other insureds facing claims seeking only the return of allegedly improper transfers may confront significant coverage obstacles, even in the absence of allegations of personal fraud. New York courts remain reluctant to treat restitution- ary remedies as insurable loss. Policyholders con- fronting fraudulent-transfer claims should evaluate at the outset whether the claimant seeks compensatory damages, restitution, or both.
Court Rejects Expansive Reading of D&O Policy’s Subsequent Acts Exclusion In AmTrust Financial Services , Inc . v Forge Underwrit- ing Ltd ., a federal district court applying New York law declined to dismiss a coverage action based on a D&O policy’s “subsequent acts” exclusion. 823 F. Supp. 3d 397 (S.D.N.Y. 2026). The underlying securi- ties action arose from the policyholder’s statements that it would maintain certain preferred stock as pub- licly traded while otherwise taking the company pri- vate. Two months after the take-private transaction, the company announced that it would delist the pre- ferred stock. The insurer argued that the post-transaction deci- sion to delist preferred stock triggered the exclusion because it occurred after the policy’s cutoff date. The court disagreed, finding that the alleged “wrongful act” identified in the underlying securities action was that the policyholder’s pre-transaction statements were false and misleading, while the later delisting merely functioned as a corrective disclosure. Further, even if the term “wrongful act” was ambiguous because of the broad “based upon, arising out of, … in any way involving” lead-in language, the court held that ambi- guity would likely cut against the insurer, precluding dismissal. Id. at 401. The decision underscores that even broadly worded exclusions remain tied to the misconduct actually alleged in the underlying complaint. Courts applying New York law continue to construe exclusions narrow- ly and place a substantial burden on insurers seeking to bar coverage, particularly at the pleadings stage. New York Choice-of-Law Clause Enforced Despite Texas Insurance Statutes In Danaby Rentals , Inc . v Mt . Hawley Insurance Co ., a federal district court in New York enforced a policy’s New York choice-of-law provision notwithstanding the insured’s argument that Texas insurance stat- utes required the application of Texas law. 2026 WL 440758, at *5-8 (S.D.N.Y. Feb. 17, 2026). The insured argued that New York General Obligations Law § 5-1401 – which permits parties to a contract involv- ing a transaction of USD250,000 or more to agree that New York law will govern without requiring a traditional choice-of-law analysis – was trumped by
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