A Delaware court ruled on August 5, 2026 that a bump-up exclusion wiped out coverage for Zayo Group's $27 million settlement.
The Superior Court of Delaware granted the insurers summary judgment and denied Zayo's competing motion, in a dispute that came down to one policy provision - the bump-up exclusion. For anyone working coverage claims, it is worth a look.
The story starts in May 2019, when Digital Colony Partners and the EQT Infrastructure IV Fund - together, "Consortium B" - acquired Zayo, a global communications-infrastructure company behind fiber networks, data centers and 5G small-cell sites. Shareholders got $35 in cash per share, and the company went private.
Former public shareholders then sued Zayo's then-chief executive in the Delaware Court of Chancery, claiming he had breached his fiduciary duties by taking steps that lowered the sale price before the deal. The court largely dismissed the case, but let one claim survive: that the executive failed to disclose a conversation showing Consortium B would pay more than $35 a share. He denied any allegations of wrongdoing, fault, or liability, and the parties settled for $27,125,000. He was the defendant in that underlying case, not in the insurance fight.
Zayo's insurers declined to pay the settlement. Primary carrier National Union Fire Insurance Company of Pittsburgh, PA had reimbursed certain defense costs, but it and excess carriers ACE American and Arch refused the settlement. They leaned on the policy's bump-up clause, which excludes from Loss "any amount of any judgment or settlement representing the amount by which such price or consideration is effectively increased."
The court found the exclusion applied. The settlement was paid per share, only to holders who owned stock at closing - which, the judge said, made it an effective increase in the deal price rather than mere litigation avoidance. That came to roughly 12 cents a share.
Zayo's separate claim that National Union acted in bad faith also failed. With no breach of the policy, the court said, there could be no bad faith.
The takeaway sits in the court's reasoning: the mechanics of a settlement - who gets paid, and how - can be what triggers a bump-up exclusion.
