A Texas appeals court ruled Tuesday, September 15th, that the former CFO of Superior Offshore International Inc. can proceed with his claim that XL Specialty Insurance Co. wrongly refused to defend or indemnify him in underlying bankruptcy litigation, holding there are still questions regarding the possibility of coverage.
In a 20-page opinion, a panel of the Houston appellate court said that a trial court improperly granted summary judgment to XL on Roger D. Burks’ breach-of-contract claim. Burks is seeking about $2 million in damages for compensation he lost when he settled with now-defunct Superior Offshore’s bankruptcy estate, which had filed a complaint to recover property that the company transferred to Burks and to avoid future obligations owed to him.
Factual issues still remain as to whether the bankruptcy plan agent’s claims against Burks are interrelated with those asserted in prior shareholder derivative suits filed against Superior Offshore and whether XL, the company’s directors and officers insurer, has a duty to front defense costs to and indemnify Burks, the panel found.
“This case will matter to C-suite executives of beleaguered companies and the lawyers who defend them,” said Chris Johns, an Austin-based partner in Johns Marrs Ellis and Hodge LLP, which represents Burks. “The court’s opinion makes it much harder for insurance companies in Texas to just deny coverage for defense costs when a bankruptcy trustee tries to force directors and officers to forfeit compensation, severance packages and stock.”
The case is Roger D. Burks v. XL Specialty Insurance Co., case number 14-14-00740, in the Fourteenth Court of Appeals of the State of Texas.
To read more on this matter, please see Law360’s article on the case here.