A New York appeals court has turned down a request from Lloyd's underwriters to reargue, or take to the state's highest court, a ruling that kept directors and officers coverage alive for the company, formerly known as Lordstown Motors.
The Appellate Division, First Department, denied the motion for reargument and leave to appeal to the New York Court of Appeals on September 22, according to Stark Novus Financial, the electric vehicle maker's successor company. The order leaves in place the court's June decision that the primary D&O insurer could not rely on a retroactive date exclusion to deny coverage outright.
The underwriters issued a claims-made D&O policy running from October 23, 2020, to October 23, 2021. Its retroactive date exclusion barred claims arising from wrongful acts committed before the policy began. It also barred claims arising from later conduct that was interrelated with, or shared a common nexus with, those earlier acts.
The company and its directors and officers faced securities class actions, shareholder derivative suits, demands to inspect books and records, an SEC investigation and an inquiry by the US Attorney's Office for the Southern District of New York. The suits alleged that the company had misrepresented the status of vehicle orders. In 2022 the primary insurer told the company that none of these matters were covered, according to the company's annual filing, citing the retroactive date exclusion.
The underwriters sued in New York state court for a declaration of no coverage, and in 2025 the trial court granted them summary judgment. On appeal, the First Department found that some of the alleged conduct could fall within the exclusion. However, it held that the insurers had not shown that every cause of action was barred. Because some claims could stand without relying on pre-policy acts, the court found the insurers still had to advance defense costs. It added that this duty held even if they ultimately owed no indemnity.
The ruling doesn't settle how much the company will recover. Stark Novus said the specific claims to which the exclusion does not apply, and the amount of past defense spending that can be reimbursed, are yet to be determined. Several of the underlying matters are also still ongoing.
The company said it and Lordstown together have spent tens of millions of dollars on the matters for which it sought coverage, mostly between 2021 and 2023. The primary layer carries a $5 million limit. The company said at least $45 million of excess Side ABC coverage sits above it.
The case is a reminder of how much weight a retroactive date can carry on a claims-made D&O program. This is particularly true for a company whose public life begins at the same moment its policy does, and whose alleged misconduct starts before that date. If claims allege a continuous course of conduct, insurers can argue that the entire claim relates back to excluded acts.
Brokers placing programs for newly public companies, especially those coming out of a merger, should pay close attention to where the retroactive date sits and how broadly the related-acts language is drafted.
The First Department's reasoning gives policyholders a counterweight. A prior acts exclusion cannot defeat the duty to advance defense costs unless the insurer can show that every cause of action depends on excluded conduct. For brokers handling a denial on a mixed claim, that is a strong argument to raise before the matter reaches court.
