SEC Tolling Request Not a Securities Claim Against Insured Company Under D&O Policy

A Delaware Superior Court, applying Delaware law, has held that the United States Securities and Exchange Commission’s (“SEC”) request to toll the statute of limitations did not constitute a “Securities Claim” under a D&O policy because the tolling request was made in connection with an investigation into the company. Clear Channel Outdoor Holdings Inc. v. Illinois Nat’l Ins. Co., 2025 WL 1796542 (Del. Super. Ct. June 30, 2025). The court also held that the tolling request did not constitute a “Securities Claim” because the request did not allege any violation of securities law and did not allege Wrongful Acts by the insured company.

An advertising company sought coverage under its D&O policy for legal costs incurred in responding to an SEC investigation into the company after the SEC requested that the company enter into a tolling agreement. The D&O policy only provided entity coverage to the insured company for Securities Claims. The D&O insurer denied coverage on the basis that (1) the policy’s definition of “Securities Claim” did not include any investigation of the insured company, and the tolling request was part of an SEC investigation of the company; (2) the policy limited the definition of a “Securities Claim” to only those claims “alleging a violation of any securities law, regulation or rule . . . alleging, arising out of, based upon or attributable to the purchase or sale or offer or solicitation of an offer to purchase or sell any securities of an [insured company],” and the tolling request did not allege such a violation; and (3) the relevant insuring agreement required any Securities Claim be made against an insured company for any “Wrongful Act” of that insured company, and the tolling request was not for any articulated Wrongful Act.

In the ensuing coverage litigation, the court denied the insured’s motion for summary judgment. The court agreed with the insurer, holding that the SEC’s request to toll the statute of limitations was not a “Securities Claim” because the definition of “Securities Claim” did not include an investigation of the insured company, and the tolling request was made in connection with the SEC’s investigation of the company. The court rejected the insured’s argument that this conclusion contradicted the policy’s definition of “Claim,” which included “any written request to toll or waive an applicable statute of limitations.” The policy afforded coverage for “Claims” against insured individuals, but entity coverage was limited to “Securities Claims.” The court further reasoned that the tolling request also did not constitute a “Securities Claim” because the request did not allege any violation of securities laws. Finally, the court held that the tolling request did not allege a Wrongful Act or seek redress and therefore did not trigger coverage under the applicable insuring agreement.