The Relative Exposure Clause (“REC”) found in several Directors & Officers Insurance Policies (“D&O”) imposes a duty on the Insureds and Insurer to arrive at a fair and proper allocation of defense and indemnity costs (“ Loss”) between covered and uncovered claims that are alleged in a third party lawsuit or demand for money( “Suit”).
By “uncovered claims,” I refer to all defenses set out in the Insurer’s response to the notice of tender of the Suit and on which the Insurer may rely to limit or deny the Insureds’ rights to indemnity for a tendered Loss.
A. Bracketed Negotiations
The Mediator must consider the problems created when Disputants engage in bracketed negotiations of the Loss before they agree to participate in Mediation. Typically, after the Insureds have sent the Insurer notice of the Suit, the Insured will demand the Insurer’s agreement to fund 100% of the Loss reached by settlement or judgment, subject to applicable policy limits and retentions. The Insured will explain why the tendered Suit is a covered claim under the terms of the D&O and why 100% of the Loss, less the retention, will not be available to the Insureds to resolve the Suit.
Typically, the Insurer will respond to the tender by setting forth in great detail policy provisions it believes govern its duties and the Loss. The Insurer’s response will discuss the policy limits of coverage, relevant exclusions, applicable retentions and governing endorsement. The Insurer will also explain why under the law it believes governs the Suit, the claims alleged in the Suit are not covered, why some allocation must be made regarding covered and uncovered claims and why it has denied coverage for the some claims alleged in the Suit based on general public policy grounds under the governing law.
The letter will also explain the duty of the Insureds to exhaust their policy limits -$150,000/Inusred -before the Insureds have any claim on D&O limits of $5million.
In the wake of the Sarbanes-Oxley certification claims, restatement of earnings, backdating of options, and a very recent study showing that excessive compensation may have caused accounting irregularities, the Insurer may also demand documents on which it may base a rescission of the D&O. The declination letter will reserve all options regarding coverage and the threat of rescission of the coverage.
The declination letter will remind the Insureds that they must hire defense counsel and that they must pay the first $150,000 of such Loss. The Insurer will point out that the D&O, unlike the other forms of insurance, does not contain a duty to defend the Insureds; it is the Insured’s duty to hire and pay for defense counsel.
The Insurer will clearly explain that based on the current information it has been supplied, any extrinsic facts brought to it attention, the allegations set out in the Suit, the governing exclusions, endorsements and the public policy of the forum it claims governs the coverage issues, that the Suit is not a covered Loss or may be partially Loss and it may also propose a percentage allocation of the covered Loss for the Insureds consideration. The Insurer will usually request more information if it determines there is a potential for coverage of the Loss, correspondence among all parties discussing the Loss, the identity of all other Insurance carriers that may have issued other forms of insurance coverage for the Loss and notices of claims to any prior D&O carriers. The Insurer’s reply will usually request the Insureds’ coverage counsel to reply to its response with any disagreements the Insureds’ have with any statements set out in the declination letter, the authorities relied on and any matter on which it can later rely to demonstrate that it gave each Insured every opportunity to present facts and law regarding the coverage matters in dispute. Lastly, the Insurer will invite the Insureds any new developments that the Insureds believe will be material and require the Insurer to change its declination decision and in California it will advise that the Insureds may have the California Department of Insurance review the matter. The Mediator should understand the purpose of the declination letter-it is to preserve all grounds that may exist or later be urged to defeat the Insureds’ claim for Indemnity of the Loss. Like a general denial filed in response to a lawsuit, the declination letter is the starting point of negotiations that will take place in the Mediation.
The Insureds will respond to Insurer’s demand for more information and provide whatever it has available, make arguments to counter the Insurer’s declination of coverage, ask for any internal guidelines the Insurer used to make any allocation of the Loss it has proposed among covered and uncovered claims, named defendants and unnamed defendants and other responsible parties and cite to the legal authority regarding the Insurer’s duty to advance defense funds and costs pending a resolution of the coverage matters.
The Insureds will specifically inform the Insurer that a failure to advance defense funds and costs may jeopardize the Insureds’ rights, defenses and the ability to retain experts to defeat the Suit.
The Insureds’ will retain defense counsel with experience in defending the issues raised in the Suit. The Insureds will have to fund their defense pending the Insurer’s decision on the proper allocation formula that it agrees to apply to the Loss. In many cases, the burden placed on Insureds to advance defense costs will result in a substantial decline in the company’s quarterly earnings. Many reporting companies have disclosed to their shareholders that burden on earnings by the escalating litigation expenses will affect the profitability of the enterprise until the litigation is resolved. In some of these cases the ultimate stability of the enterprise may depend on the resolution of Loss as quickly as possible. It is not unusual for the cost of defense of the Suit to consume quarterly earnings for many quarters. Accordingly, the Insurer’s delay in funding a proper defense places tremendous pressure on defense counsel, coverage counsel, Officers and Directors and all employees involved in the defense of the Suit.
B. REQUEST TO PARTICIPATE IN MEDIATION
While the Suit proceeds through the early stages of litigation, motions to dismiss, other law and motion hearings, written and deposition discovery, disputes over the discovery of material documents, preparations of motions for summary judgment and ultimately trial, Plaintiff’s Counsel, the Court, Defense Counsel or the Insurer may suggest that the stakeholders participate in a Mediation to see if the Suit can be resolved.
Thereafter, the each stakeholder will meet privately with its counsel to see if they have sufficient information to conduct a meaningful analysis of the claims. Once a determination has been made that each stakeholder has sufficient information available, the stakeholders will outline the parameters of the Mediation and the conditions applicable to any exchange of information and documents. Written agreements should carefully document the restrictions on any future reference to materials and information exchanged prior to and during the Mediation.
The stakeholders will privately review and discuss among themselves prior to attending the Mediation, acceptable settlement ranges. These internal guideposts will not be shared with opposing parties. The Insureds may make protective written demands for payment of policy limits which all understand to be their duty as counsel for the Insureds. The plaintiff may have indicated that he believes that a negotiated settlement will require the Insurer to pay its policy limits, additional payments from each Insured out of their personal funds and by uncovered defendants in the Suit. In some cases the Insureds and Insurer to may have come to a tentative agreement, subject to applicable policy limits and retentions, for the Insurer to be prepared to seriously consider a contribution of some fixed per cent of the Loss within certain dollar limits. Such tentative agreements of an allocation may occur before the Mediation session starts or develop after private caucuses with the Mediator and Insurer.
Undoubtedly the Insurer will in written transmittal reserve all rights and again disclaim coverage for some claims and refuse to fund any proposed settlement in any sum until it believes it has all current information about the Loss. The Insurer will agree to participate in the Mediation without prejudice to all its rights, if and when it has all relevant information delivered to it in advance of the Mediation showing the status of all negotiations, exchange of demands and offers and the Insureds provide it with a detailed letter explaining how any allocation of the Loss is to be made among the Corporate Insured, Directors and Officers, uninsured defendants, covered and uncovered claims and all defense costs.
When there is a dispute about the legal fees and costs of defense, the Insurer may also request that each Insured supply it will billing statements, payment records and some original documents which will permit the Insurer to verify data it is requested to accept regarding the Loss.
C. COSTS OF DEFENSE
At the time of the Mediation the Officers & Directors have paid $1,000, 000 to defend the Suit. The Corporation employing the Officers and Directors has advanced the funds to pay defense counsel. Defense counsel has submitted billing for each Insured. The Corporation had hired its own counsel and paid it $ 800,000. The Suit alleges that the Corporation and the Insured Officers and Directors are jointly and severally liable for all Losses under the statutory claims and some of the common law claims.
The defendant Officers made demand for defense and indemnity from the Corporation under its Corporate Charter, Corporate by- laws, existing employment contracts and California Labor Code Section 2802.
The Directors have based their claim for defense and indemnity on the same documents and legal grounds.
The Insureds demand that the Insurer offer policy limits to resolve The Suit. The Insurer reviews the settlement documents, billings and communication proposing the settlement terms and offers 20% of the settlement and 20% of the legal fees less the retentions applicable to each Insured.
The Insurer claims 80% of the liability is based on the Corporation’s actions, an uninsured party to the litigation. It refuses to pay any amount of the corporation’s legal bills or costs. It points out that at any rate the Corporation’s retention is $250,000 and amount is greater than any Loss payable even a claim was covered.
D. PRE MEDIATION CONFERENCE
During a pre Mediation Conference with counsel the Mediator generally discusses nature of the claim, defense, initial demands, offers, pending court motions and court hearing deadlines, pending dispositive motions, proposed motions, needed discovery and issues relating to insurance coverage. The parties will agree on the parameters of the Mediation confidentiality privilege, a briefing schedule and how many days of the Mediators time they think they will need to explore a resolution of the dispute.
E. THE MEDIATON
Unless the parties demand it in unusual cases, it is best to separates the parties into private rooms to explore the underlying interests of each. In the privacy of each caucus, the Mediator discusses the facts, law and the allocation procedures undertaken by the Disputants. The Mediator explores any new developments that have occurred that bear on today’s Mediation.
The Mediator encourages all participants to avoid unproductive and wasteful tactics that may result a breakdown of the settlement process.
All Insured parties and the Insurer are reminded of the need to honor the duty of good faith and fair dealing each owes to the other. The Mediator encourages all stakeholders to be patient and open to the Mediation process until all agree it is not longer productive.
The Mediator will want to demonstrate to each stakeholder that he has carefully reviewed the legal briefs, summaries on the key facts, points of law, the key policy terms, and the methodology used by the Insured, Insurer and Disputants to arrive at their claims, defenses and the allocation of the Loss.
F. LEGAL BREIFS
The legal briefs may discuss the following issues and law applicable to many Mediations of D&O coverage Disputes:
G. Careless Policy Drafting and Underwriting
Judge Shadur in National Union Fire Ins. Co. of Pittsburgh, Pa. v. Continental Illinois Corp., 673 F. Supp. 300, 301 (N.D. Ill. 1987) pointed out that the case had generated twenty-eight written opinions. Judge Shadur complained about the poor policy drafting and underwriting practices of the Insurers. Judge Shadur quoted from Heller v. Equitable Life Assurance Society of the United States, 833 F.2d 1253, 1260 (7th Cir. 1987):
“Insurance companies, members of a service industry, must recognize that they, like their insureds, have corresponding duties and obligations under the policy and must conduct themselves accordingly instead of attempting to rely on the courts to correct their own deficiencies in underwriting and/or careless policy drafting.”
H. Loss of Attorney-Client Privilege
Disputes over insurance coverage and payment of The Loss result in a wavier of the attorney-client privilege.
In Safeway Stores, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa, 1992 WL 486801, p. 3 (N.D. Cal.), Judge Jensen discussed the cases in California holding that when an insured seeks to recover the costs of the underlying litigation, the insured waives the attorney-client privilege regarding information relevant to the underlying litigation.
“By filing its claim for the $2 million against the defendant, Safeway has waived the attorney-client privilege concerning the settlement. Safeway cannot deny discovery related to the information which must be relied upon by the Court in calculating the appropriate allocation. National Union is entitled access to the communications relating to the settlement of the shareholder actions which bear upon the allocation issue.”
I. Policy Demands
When the Insured demands coverage for 100% of the Loss (less the retention) and the Insurer offers a small payment above the retention amount set out in the policy, and thereafter they sue each other, they may not be focusing on the Loss, the duty to resolve it and the costs to defend it. Is it in the Insurer’s and Insureds’ economic interest to spend the insurance resources wisely and to use those funds to resolve the Loss? Can the Suit be settled within policy limits? Has sufficient time been devoted to determine whether the costs of dispute resolution among the Insured and Insurer can be put to better use resolving the Loss? Are the interests of counsel getting in the way of efficient claims resolution?
J. Information Imbalance
Insurer and Insureds are most likely to engage in bracketed negotiations when they are ignorant of the facts, law and status of negotiations with the third party claimants. In addition to failing to act in good faith, each may be missing the opportunity to resolve the claim at the lowest figure. Will more damaging information be discovered by delays that will increase the settlement demand? Are the litigants on a litigation track that may exhausts insurance money that could have been used to resolve the Loss?
K. Transaction Costs
All too often, the Insurer and Insured fail to take account of all transaction, opportunity and other out of pocket costs and expenses when they rush to litigate a coverage dispute. This is particularly true when litigation starts immediately after notice of the Suit and the parties refuse to disclose all relevant information necessary to arrive at a fair allocation of the Loss.
The hourly billing practices of the lawyers involved in the defense of the Suit and the costs of insurance coverage work must be carefully coordinated to avoid spending the Insureds’ scarce resources on coverage and defense costs that could otherwise have been dedicated to resolve the Loss.
Many times an Insured overlooks “opportunity costs” by failing to timely resolve coverage claims, such as inability to take a new job( Officer Defendant), delay in closing a deal (Corporate Defendant) and externalities that have significant value to the Corporation and the Insureds.
L. Corporate Officers & Directors Policies
Corporate D&O insurance policies contain an allocation clause imposing a contractual duty on the Insurer and Insured to allocate the Loss (that is contractually defined to include defense costs) between covered and uncovered claims and parties.
M. Allocation Required for Covered and Uncovered Claims
The allocation under a REC is made by applying the allocation clause found in the specific D&O policy to the tendered Suit, claim, proposed settlement or judgment.
The REC language set out in many D&O policies requires an allocation between covered and uncovered claims and Insureds based on an assessment of the legal and economic exposures of each class of defendant in the underlying Suit or claim and the relative benefits obtained by each in connection with the defense and/or settlement of covered and uncovered claims and parties.
N. Fair and Proper Allocation
The allocation must be made in a “fair and proper manner.” These terms are not defined in the D&O policies. The covenant of good faith and fair dealing implied in every insurance policy requires application of the standard of honesty in fact and reasonableness. The Insurer and Insured must act reasonably to permit each to obtain the benefits of the policy. Both Insured and Insurer owe each other honesty in fact and reasonableness in their interactions regarding the tendered claim. As pointed out in PepsiCo, Inc. v. Continental Cas. Co., 640 F.Supp. 656, 662 (S.D. N.Y. 1986):
These allocations are often made, albeit only as approximations, according to some notion of relative fault. See McLean v. Alexander, 449 F.Supp. 1251 (D.Del.1978). rev'd on other grounds, 599 F.2d 1190 (3d Cir.1979).
O. Allocation as a Partial Exclusion
Some courts interpret an allocation clause as a partial exclusion from coverage because the Insurer applies the allocation clause to limit the coverage afforded to its Insured under the policy.
In Owens Corning v. National Union Fire Ins. Co. of Pittsburgh, PA, 257 F.3d 484 at 493 (6th Cir. 2001) the court discussed an allocation clause that was held to be a partial exclusion of the Insurer’s indemnity duty. Thus, under rules governing the construction of exclusions for the benefit of the Insured, the REC must be clear and exact in order to be given effect to reduce policy benefit owed to the Insured.
P. Cases Applying the REC
The REC rule allocates a settlement based on comparing potential exposure of the uninsured and insured defendants and claims had the litigation proceeded to trial and resulted in a judgment against all defendants sued. See Caterpillar, Inc. v. Great Am. Ins. Co., 62 F.3d 955, 961 (7th Cir. 1995). What portion of the Loss is assignable to the Insured? Uncovered Claim? Third parties? How do you arrive at the allocation? See Pan Pacific Retail Properties, Inc. v. Gulf Insurance Company, (9th Cir. 2006), 466 F. 3d 867, at 876[Defense costs reasonably related to covered claims must be reimbursed as determined by the trier of fact].
In Slottow v. American Cas. Co. of Reading, Pennsylvania, 10 F. 3d 1355, 1359 (9th Cir. 1993) a corporation allocated the majority of the settlement to the individual corporate officers who were insured. The Corporate employer was uninsured for the claims. The trial court’s allocation was reversed because it did not apply California law that required an allocation based on a “proportional share of comparative liability for plaintiff’s injuries and their financial ability to satisfy the judgment.” Judge Kozinski’s analysis includes some of the factual and legal issues that are discussed hereafter to arrive at a fair allocation of the Loss. His decision is discusses the conseque3nces of sloppy policy drafting that create ambiguities that must be resolved against the drafter-the Insurer.
In Nodaway Valley Bank v. Continental Cas. Co., 715 F. Supp. 1458 (W.D. Mo. 1989) the court held that the insurer must reimburse the bank for 90% of the settlement and defense, relying on state law that:
“[h]aving purchased this form of ... insurance, the [insured] is entitled to the full benefit of its bargain. So long as an item of service or expense is reasonably related to the defense of a covered claim, it may be apportioned wholly to the covered claim.”
In Nordstrom, Inc. v. Chubb & Son, Inc., 54 F. 3d 1424 (9th Cir. 1994) the court held where corporation’s liability was wholly concurrent with the liability of officers and directors, no allocation was possible, and the insurer was responsible for payment of the entire settlement.
In Gon v. First State Ins. Co., 871 F. 2d 863 (9th Cir. 1989) the court held that the insurance company is obligated to advance defense costs under a D&O Policy, but it may reserve the right to recover costs of defense spent on uncovered claims.
In Douglas v. Los Angeles Herald–Examiner Inc., 50 Cal.App.3d 449, 465 (1975), the court held under California Labor Code Section 2802
“[w]hen an employer refuses to defend an employee in an action which may or may not be unfounded for conduct which may or may not have been within the course and scope of his employment and it is ultimately established that the action was unfounded and the employee acted within the course and scope of his employment, then the employer has an obligation under Labor Code section 2802 to indemnify the employee for his attorney's fees and costs in defending the action.”
Q. Insurance Policy Interpretation
All cases interpreting an allocation clause in the policy start with an examination and interpretation of the words set out in the particular policy and allocation clause before the court.
Allocation opinions all involve the interpretation of the specific language in a D&O policy by the Court as opposed to applying any fixed rule of law. Counsel and Insurers must be directed to cases interpreting the exact language at issue in the Mediation.
The court’s analysis is based on an examination of factual and legal issues alleged in the claim or lawsuit filed by the third party claimant against the Insured.
The court’s analysis of the legal and factual issues in the underlying lawsuit filed against the Insured is undertaken to arrive at a likely outcome of the lawsuit had it proceeded to trial.
The court’s analysis includes a detailed inquiry into what happened in the settlement of the claim or lawsuit and who paid for what relief.
It many instances the stakeholder may ask the Mediator to give his views on these allocation issues as if he were the trier of fact. Unless all parties agree, this is not advisable course for the Mediator to follow because it represents setting a value on the Loss that when not asked for by all parties in the Mediation will likely cause a deadlock.
R. ADR Procedures
Some D&O Policies provide for mediation of disputes to resolve conflicts when the Insurer and its Insured can’t agree on a fair and proper allocation of the Loss and defense costs. Some D&O policies provide for binding arbitration of such disputes.
S. Duty to Allocate the Loss
Directors and Officers must allocate the Loss (and defense costs) wherever the underlying suit or claim seeks relief against uninsured parties and claims. A typical allocation clause provides:
“If both covered by this coverage section and loss not covered by this coverage section are incurred, either because a Claim is against the Insured Persons includes both covered and uncovered matters or because a Claim is made against an Insured Person and others, including the Insured Organization, the Insureds and the Company shall use their best efforts to agree upon a fair and proper allocation of such amount between covered Loss and uncovered loss.”
From Chubb Group of Insurance Companies, Executive Protection Policy, Form 14-02-0943 (Ed.1/92).
T. The REC Language
Many D&O policies include what is really an allocation formula based on the relative exposure of the Insured’s liability to the third party claimant between covered and uncovered claims.
A typical REC provides:
“In determining an allocation, the Insureds and Insurer agree to take into consideration the relative legal and financial exposures, and the relative benefits obtained in connection with the defense and/or settlement of a Claim, between the covered and non-covered parties and/or matters involved in the Claim.”
From Genesis Insurance Co., Form No. GIC-7417 (4/04).
U. Payment of Undisputed Amounts
What amount must the Insurer pay on account of the Loss (and for defense costs) if it does not reach agreement with its Insureds on a fair and proper allocation? Many D&O Policies require the Insurer to pay the undisputed amount either agreed upon by the Insurer and Insureds or as determined by the Insurer.
A typical unilateral payment clause provides:
“If the Insureds and Insurer cannot agree on a fair and proper allocation, then the Insurer shall advance the amounts it believes to constitute covered Loss, including Defense Costs, until a different allocation is negotiated, arbitrated or judicially determined. Any amounts so advanced shall not apply to or create any presumption of a fair and proper allocation of other amounts between coved Loss and non-covered amounts.” From Genesis Insurance Co., Form No. GIC-7417 (4/04). A typical bilateral agreement clause to pay undisputed amounts provides:
“If the Insureds and the Insurer are unable to agree upon an allocation, then until a final allocation is agreed upon or determined pursuant to provisions of this Policy and applicable law, the Insurer will be obligated to make interim payment of that amount or portion of Loss, including defense Costs, which the parties agree is not in dispute.” From Houston Casualty Company, Form HC 991 (03/2004).
V. How to Arrive at a Fair and Proper Allocation
What facts and law must be considered in arriving at the Insured’s relative exposure for the claims, settlement or judgment arising out of the underlying claim or lawsuit?
Case law and a leading treatise identify the following factual and legal issues that must be agreed upon or otherwise determined by a court, arbitrator or in a mediation to arrive at a fair and proper allocation of the loss (including defense costs).
In applying these criteria, it is the goal of the analytical process to allocate the loss based on the potential exposure of the insured and uninsured defendants had the litigation proceeded to judgment. See Xebec Development Partners, Ltd. v. National Union Fire Ins. Co., 12 Cal.App.4th 501 at 558-562 (1993).
One court has described the analytical process as an “elaborate inquiry into what happened in the settlement and who paid for what relief.” See Caterpillar, supra, at 961.
The court in Owens Corning, supra, at 962-963, lists the following issues that should be analyzed and applied to the underlying settlement or judgment to arrive at a fair and proper allocation:
1. the identity, as an individual, an entity, or as a member of a group, of each beneficiary and the likelihood of an adverse judgment against each in the underlying action;
2. the risks and hazard to which each beneficiary of the settlement was exposed;
3. the ability of each beneficiary to respond to an adverse judgment;
4. the burden of litigation on each beneficiary;
5. the deep pocket factor and its potential effect on the liability of each beneficiary;
6. the funding of the defense activity and the burden of such funding;
7. the motivations and intentions of those who negotiated the settlement, as shown by their statements, the settlement documents and any other relevant evidence;
8. the benefits sought to be accomplished and accomplished by the settlement as to each beneficiary, as shown by the statements of the negotiators, the settlement documents and any other relevant evidence;
9. the source of the fund that paid the settlement sum;
10. the extent to which any individual defendants are exempted from liability by state statutes or corporate charter provisions; and,
11. such other and similar matters as are peculiar to the particular litigation and settlement.
As pointed out in Caterpillar, supra, at 961 and in Nordstrom, supra, at 1432, courts deciding allocation disputes do not sit to develop general cannons of allocation for every conflict between D&O Insurers and their Insureds. Rather the court in each case undertakes contract interpretation of the allocation clause in the policy before the court.
Again, as stated in Caterpillar, supra, at 961, the court looks to the language of the contract and applicable law to arrive at a fair and proper allocation:
“In selecting one rule over the other, our role is to interpret the insurance contract between Caterpillar and Great American based on the applicable contract law, in this case that of Illinois. We do not sit to develop general canons of allocation for every conflict between D&O insurers and their insureds; rather we read a particular insurance contract and decide what method of allocation, if any, that contract envisions. See Nordstrom, 54 F. 3d at 1432.”
Nordstrom, supra at 1443 held that the allocation clause before it required the application of the greater settlement rule. The court said:
“We conclude that under this particular D&O policy, the larger settlement rule best effectuates the reasonable expectations of the parties. Accordingly, we will allocate only if there is some amount of corporate liability that is both independent of and not duplicated by liability against the directors and officers. [FN omitted.]”
W. Payment Terms
In AIG’s Policy it agrees to pay defense costs within, “90 days from billing and if Insurer and Insured can’t agree on an allocation, the Insurer shall advance Defense Costs excess of any applicable retention amount which the Insurer states to be fair and proper until a different amount shall be agreed upon or determined pursuant to the provisions of this policy and applicable law.
See AIG D&O Policy No 75011(2/00).
To facilitate the efficient resolution of D&O policy disputes in Mediation and other ADR proceedings among the corporation, officers, directors and their insurers, consideration should be given to implement the following suggestions:
1. Agree that all written submissions and discussions will focus on the enumerated factors governing the allocation of the Loss;
2. Agree on the format of billing statement audits regarding covered and uncovered claims, parties and expenses related to their defense;
3. Agree on the use of graphics to calculate and display questioned items submitted for payment to the Insurer;
4. Agree on the application of the Laffey Matrix or other objective billing hourly rate source to determine the reasonableness of billing rates submitted for payment to the Insurer; and,
5. Agree on the choice of law applicable to Insurance Policy interpretation and indemnity of The Loss.
Knepper & Bailey, Liability of Corporate Officers and Directors, Section 17.06, Supp. at 248-249 (Michie, 4th Ed. 1988 & Supp. 1992)