Jeld-Wen Fires Back at Insurance Providers Seeking Coverage for LossesJuly 16th, 2021 by Drew Vass
After crafting a deal for $40 million to settle a class action suit with investors, door and window manufacturer Jeld-Wen Inc. entered a dispute with insurance providers Travelers Casualty and Surety Company of America (Travelers) and Old Republic Insurance Company, alleging that at least one of them is obligated to issue pay outs for excess liability insurance policies.
In April 2021, Travelers filed a complaint against Jeld-Wen and 14 individuals (including Jeld-Wen executives and other representatives) demanding a jury trial, alleging that there is no coverage available to Jeld-Wen under an excess executive and organization liability insurance policy for a securities class action, a stockholder derivative action and three books and records demands. The securities class action alleges violations of federal securities laws, officials for Travelers say, resulting from misrepresentations and omissions made in securities filings and earnings calls relating to the door maker’s violation of federal antitrust laws.
The antitrust violations were the subject of antitrust lawsuits that preceded the securities class action, the insurance provider suggests, and “were noticed by Jeld-Wen under another executive and organization liability policy that preceded the excess policy’s inception,” the insurance provider alleges. Meanwhile, a derivative action is “premised upon allegations that are materially identical” to those in the securities class action, and books and records demands are “likewise premised on the lawsuits brought against Jeld-Wen based on antitrust violations, as well as the securities class action,” the complaint says. Before Jeld-Wen’s excess policy incepted, three federal antitrust lawsuits were brought against the company, “each of them alleging violations of federal antitrust laws,” the complaint says.
Jeld-Wen fired back this week by filing counter claims against Travelers and a third-party complaint against Old Republic Insurance Company. In its counterclaims against the insurance providers, Jeld-Wen seeks $10 million, “as a result of Travelers’ breach of its directors and officers excess liability insurance policy issued to Jeld-Wen for the 2019-20 policy period.” Should the court determine that Travelers doesn’t owe coverage, Jeld-Wen alternatively seeks a judgment against Old Republic, “as a result of Old Republic’s breach of its directors and officers excess liability insurance policy issued to Jeld-Wen for the 2018-19 policy period,” court documents state.
“This is an insurance coverage dispute concerning whether Travelers or Old Republic owes coverage for losses incurred in connection with a securities action asserted against Jeld-Wen and certain of its directors and officers,” the company’s counter claims declare.
According to court documents, Travelers issued a policy for fifth layer directors and officers (D&O) excess liability insurance in Jeld-Wen’s 2019-20 tower of directors and officers liability insurance, which protects the personal assets of corporate directors and officers, as well as their spouses, in the event they are sued for wrongful acts while managing companies. Old Republic issued a fifth layer D&O excess liability policy in the company’s 2018-19 tower of D&O liability insurance, the counter claim says.
“Jeld-Wen is obligated to indemnify its directors and officers to the fullest extent permitted by law,” the company’s counter claims suggest.
According to court documents, in 2021 Jeld-Wen agreed to settle a securities action “with the consent of its insurers.” The amount of that settlement, combined with defense costs, is “sufficient to fully exhaust Travelers’ fifth layer of coverage in the 2019-20 Tower,” the company’s counter claims state, adding, “When the opportunity presented to settle the securities action on reasonable terms, Travelers alone refused to pay.”
In the interests of its directors and officers, Jeld-Wen agreed to provisionally fund a portion of the settlement, officials say. Under an agreement reached with Travelers, Jeld-Wen and Travelers would each provisionally fund half of Travelers’ $10 million coverage, while awaiting a court determination for liabilities, the company claims. “In reality, however, this coverage dispute is between Travelers and Old Republic,” Jeld-Wen’s counter claims allege. In the event that Old Republic is correct in alleging that the securities action is covered under the 2019-20 tower, “then Travelers will owe its $10 million policy limit and will be required to reimburse Jeld-Wen for its $5 million contribution to the Securities Settlement,” Jeld-Wen’s counter suggests.
Under a set of four claims, the company is first seeking judgment in the amount of $10 million against Travelers. Under a second claim for relief, the company seeks a declaration that the securities action and the securities settlement are covered under the 2019-20 Travelers Policy. A third and alternate claim seeks judgment in the amount of $10 million against Old Republic, plus costs, interest and attorney fees, while a fourth alternate claim seeks declaration that the securities action and the securities settlement are covered under the 2018-19 Old Republic policy.
One way or another, the company seeks for an insurance provider to pick up part of its legal tab.