Delaware Court: SEC Disgorgement Not a Penalty for D&O Insurance
A Delaware Superior Court ruled SEC disgorgement payments are insurable under D&O policies.
Why it matters: The decision clarifies insurance coverage for SEC settlements, affecting risk assessment and client advice on D&O policy interpretation. Legal professionals working with companies facing SEC enforcement now have critical Delaware precedent guiding coverage strategies for disgorgement awards.
- On April 28, 2026, Clear Channel Outdoor Holdings won summary judgment against AIG in Delaware.
- The court held that a $16.4 million disgorgement and $3.8 million interest paid to resolve SEC claims are insurable losses.
- Judge Winston stated the D&O policy distinguishes penalties (excluded) from disgorgement (not excluded).
- The court rejected arguments that covering disgorgement violates Delaware public policy.
The Delaware Superior Court’s April 28, 2026 decision found that Clear Channel’s $16.4 million SEC disgorgement settlement and $3.8 million prejudgment interest must be covered under AIG’s D&O insurance policy. This resolves a long-running dispute over coverage for settlements arising from Foreign Corrupt Practices Act allegations involving a Clear Channel subsidiary in China.
- The court’s opinion distinguishes civil monetary penalties—excluded by policy language—from disgorgement, which the policy does not explicitly bar. Judge Patricia A. Winston wrote: “Read as a whole, the Policy covers SEC settlements for disgorgement and excludes them only for civil monetary penalties.”
- AIG had argued that insuring disgorgement payments ran counter to public policy, but the court cited Delaware Supreme Court precedent reinforcing that contracts should be honored unless overriding policy concerns exist.
- The SEC’s enforcement action targeted alleged bribery and weak accounting controls in Clear Channel’s Chinese operations, raising core D&O insurance implications for global companies facing foreign regulatory risk.
This ruling clarifies that, under Delaware law, D&O coverage should extend to SEC disgorgement unless specifically excluded, shaping coverage negotiations and claims going forward.
By the numbers:
- $16.4M — Clear Channel’s SEC disgorgement payment deemed insurable by the court.
- $3.8M — Prejudgment interest included in the covered loss.
- April 28, 2026 — Date of the Delaware Superior Court’s ruling.