A Delaware court shut down Clear Channel’s bid to force AIG to cover millions in SEC investigation costs, in a ruling issued June 30.
This case came out of trouble that started in January 2018, when Clear Channel Outdoor Holdings, Inc. found out that an employee at its then-majority-owned subsidiary, Clear Media Limited, had misappropriated funds. That led to internal investigations and a delay in financial reporting, which triggered the attention of the Securities and Exchange Commission. By August 2018, the SEC had launched a formal investigation. During that probe, the SEC asked Clear Channel to sign an agreement to extend the statute of limitations for potential enforcement action. Clear Channel agreed, and the SEC’s investigation wrapped up in September 2023 with a settlement that didn’t involve any admission of wrongdoing by Clear Channel.
Clear Channel looked to its $20 million directors and officers (D&O) policy with Illinois National Insurance Company (AIG) to pick up the tab for more than $26 million in legal fees and other costs linked to the SEC investigation. The company argued that the SEC’s request to extend the statute of limitations, known as a tolling request, triggered coverage. AIG said no, pointing to policy language that drew a firm line between covered claims and investigations of an organization, which the policy explicitly excluded.
The Delaware Superior Court agreed with AIG. While the policy did cover certain written demands, including tolling requests, it only did so when they qualified as a “Securities Claim.” The court found that investigations of an organization, like the SEC probe of Clear Channel, were specifically excluded from that definition. Since the tolling request was part of that investigation, there was no coverage.
For insurance professionals, this ruling drives home the importance of knowing exactly what’s covered under D&O policies. It shows how exclusions for investigations can leave corporate insureds without coverage for significant costs — and why every word in a policy matters when regulatory investigations come into play.