Chubb prevails over Beazley in Facebook IPO litigation

A federal appeals court has upheld a lower court ruling holding that a Chubb Ltd. unit is not obligated to indemnify Nasdaq under the professional services exclusion in its directors and officers liability policy in connection with Facebook’s botched 2012 initial public offering. The unanimous ruling by a three-judge panel of the 2nd U.S. Circuit Court of Appeals in New York in Beazley Insurance Co. Inc. v. ACE American Insurance Co., Illinois National Insurance Co. agrees with a 2016 ruling by the U.S. District Court in New York that Nasdaq retail investors were “customers” and therefore excluded under the D&O policy’s professional services exclusion. In 2015, in a first for a U.S. stock exchange, Nasdaq agreed to pay $26.5 million to settle a class action lawsuit in its bungling of Facebook's $16 billion IPO.According to court papers, during the relevant time period, Nasdaq maintained both errors and omissions and D&O liability policies. American International Group Inc. unit Chartis Specialty Insurance Co., which is not a party to the litigation, was Nasdaq's primary E&O liability insurer at the relevant time, with a $15 million limit of liability, while Beazley was Nasdaq's first-layer excess E&O insurer, with a $15 million limit of liability.