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Xerox Seeks $15 Million for Losses Incurred from Five Lawsuits.
Insurer Says Xerox’s Policy Doesn’t Cover the Losses.
Xerox Corp. is in a legal battle with one of its insurers over a $15 million claim related to its failed merger with Fujifilm Holdings Corp. in 2018.
The company, which makes printers and copiers, sued Travelers Casualty and Surety Co. of America in 2020, alleging that the insurer breached its contract by denying coverage for the losses that Xerox suffered in five shareholder lawsuits.
The lawsuits accused Xerox of misleading investors about the value and prospects of the merger, which was eventually abandoned after a proxy fight led by activist investors Carl Icahn and Darwin Deason.
Xerox settled the lawsuits for a total of $32 million in 2019 and sought reimbursement from its insurers under its directors and officers liability policy, which had a limit of $100 million.
However, Travelers refused to pay its share of $15 million, arguing that the policy excluded claims arising from “bodily injury, property damage, or personal and advertising injury.”
Travelers also contended that the policy did not cover the settlement payments because they were not “losses” as defined by the policy, but rather “disgorgement” of ill-gotten gains.
Xerox disputed Travelers’ interpretation of the policy and asked the court to order the insurer to pay the $15 million, plus interest and costs.
Xerox also claimed that Travelers’ denial of coverage triggered a “follow form” clause in the policies of two of its excess insurers, AXIS Insurance Co. and Arch Insurance Co., which prevented them from paying their respective shares of $10 million and $7 million.
Xerox’s lawyer, Tony Tatum, told the appellate court on Thursday that Travelers’ position was “absurd” and “untenable,” and that the insurer was trying to “rewrite” the policy to avoid its obligations.
Tatum said that the shareholder lawsuits did not involve any bodily injury, property damage, or personal and advertising injury, but rather alleged breaches of fiduciary duty, fraud, and misrepresentation by Xerox and its directors and officers.
He also said that the settlement payments were not disgorgement, but rather a compromise to resolve the litigation and avoid further expenses and risks.
Tatum urged the court to reverse the lower court’s decision, which had denied Xerox’s motion for summary judgment and granted Travelers’ motion to dismiss the case.
Travelers’ lawyer, John Nonna, defended the insurer’s decision and said that the policy clearly excluded the claims that Xerox faced in the shareholder lawsuits.
Nonna said that the policy defined “personal and advertising injury” to include “oral or written publication, in any manner, of material that … disparages a person’s or organization’s goods, products or services.”
He said that the shareholder lawsuits alleged that Xerox and its directors and officers made false and misleading statements about the merger, which disparaged Fujifilm’s products and services.
Nonna also said that the policy defined “loss” to exclude “any amount for which the insured is not financially liable or which is without legal recourse to the insured.”
He said that the settlement payments were not losses, but rather disgorgement, because Xerox and its directors and officers were not financially liable for them, and because they were made to return the benefits that they received from the merger.
Nonna asked the court to affirm the lower court’s decision and dismiss the case. The appellate court did not indicate when it would issue a ruling on the case.
AuthorJanuary 26, 2024 at 1:22 AM
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