Insurance
30 Keybridge held a D&O liability insurance policy (referred to in correspondence as the Lockton insurance policy) in respect of Mr Johnson's directorship of Keybridge. Mr Johnson apparently made a claim under the Keybridge D&O policy, but it was rejected on the basis the policy did not respond to the claim. In a paper prepared by Mr William Ho, Bentley's company secretary, for the purpose of the second resolution dated 6 February 2020, Mr Ho refers to the fact that both Mr Johnson and Mr Patton made claims on the Keybridge D&O policy (page 114, affidavit filed 31 May 2022). The claim by Mr Johnson and its rejection are cited in the Chubb letter dated 7 November 2023 referred to below. I infer that the same policy extended to Mr Patton as a fellow director at the relevant time. I also infer that Mr Patton's claim was rejected: I infer this on the basis that, having regard to the Constitution and clause 4.1 of the Keybridge Deed, it is highly unlikely that Keybridge would have paid Mr Patton (see [10], [20] and [21] above) if the insurer under the Keybridge D&O policy had accepted his claim.
31 Bentley held a D&O liability insurance policy with Chubb, which extended to cover, on certain terms and conditions, a person acting at the request of Bentley as a director of an 'outside entity', such as Keybridge.
32 On 23 November 2019 Bentley notified Chubb of a claim under the policy in relation to Mr Johnson's liability for costs as a director of an 'outside entity' (Keybridge), but Chubb has not accepted that the policy responds to the claim.
33 Communications between Bentley's insurance broker and Chubb were in evidence. The communications included extracts from the policy, although the policy as a whole was not in evidence. No objection was taken to the admissibility of the communications.
34 Relevantly, by email dated 26 February 2020 an officer of Chubb wrote to Bentley's insurance broker indicating that on the information currently before Chubb, it did not consider there to be 'a triggered claim under the policy'. Chubb sought further information to clarify certain matters.
35 There were (apparently) further communications on 14 September 2023 and 18 October 2023 on behalf of Bentley to Chubb responding to requests for information.
36 By letter dated 7 November 2023 Chubb wrote to Mr Ho setting out background facts to the claim and concluding with the following 'preliminary coverage determination' ('Insuring Agreement B' being the relevant part of the policy):
Preliminary views on coverage
Insuring Agreement B
Relevantly, Insuring Agreement B of the Policy provides that:
'The Insurer will pay to, or, on behalf of the Company, all Loss resulting from a Claim first made during the Policy Period against an Insured Person where the Company has indemnified or agreed to indemnify such Loss'
The definition of Claim includes 'a civil…proceeding…against an Insured Person, for a Wrongful Act'. In turn, the definition of Wrongful Act includes 'with respect to any Insured Person: (a) any actual, alleged or proposed breach of trust, act, error, omission, misstatement, misleading statement, misrepresentation, defamatory statement, libel, slander, neglect or breach of duty or any other matter claimed against an Insured Person by reason of their acting in the capacity of an Insured Person'.
Mr Johnson is a director of Bentley, being the Company. However, consistent with the views set out in our email of 26 February 2020, the Proceeding does not constitute a Claim against Mr Johnson, as the Proceeding was prosecuted by himself and Bentley. As such, Insuring Agreement B of the Policy is not triggered insofar as the Proceeding is being prosecuted by Mr Johnson.
This leaves the Mr Patton's Counterclaim against Mr Johnson. In our view, the Counterclaim simply seeks relief and various declarations regarding the validity or invalidity of the First and Second Meetings and the resolutions passed at those meetings, as well as the costs of the Proceeding. It follows that there is no Wrongful Act alleged by the Counterclaim and therefore no Claim which triggers Insuring Agreement B.
We invite Mr Johnson to make submissions on Insuring Agreement B before we make a final determination on coverage.
(original emphasis)
37 Further, the letter from Chubb explained that the policy was an excess-only policy, which, on Chubb's view, would only cover costs that were not otherwise covered. According to counsel for Mr Johnson, Chubb's position was that Chubb would not agree to cover Mr Johnson's costs until it was informed of the outcome of this proceeding, at which point it would ascertain whether any cover would be provided.
38 So much appears to be supported by the 7 November 2023 letter:
Extension 2.6 Outside Directorship
Notwithstanding our preliminary view that Insuring Agreement B is not triggered, and for completeness, we consider the potential application of Extension 2.6 of the Policy, which provides that:
'(i) This Policy shall extend to include an Insured Person who at the specific request, or knowledge and consent, of the Company is a director, officer, trustee, governor, board advisor, board observer or equivalent of any Outside Entity in their capacity as such.
(ii) Cover under this Extension shall be excess of any indemnification provided by the Outside Entity and any valid and collectible directors and officers liability insurance, including any policies listed in the Proposal or any endorsement for an Outside Entity, where such payment is made in respect of the Outside Entity.
…
(iv) If the Outside Entity's directors and officers liability insurance is provided by the Insurer or any member of Chubb, then the total aggregate amount of available cover for Loss under this Extension shall be reduced by the amount paid to the Outside Entity or any Insured Person under such insurance.'
Keybridge is an Outside Entity because it is not a Subsidiary of Bentley and has no securities traded on any exchange in the USA.
Mr Johnson is a Director or Officer because he is a director of Bentley, being the Company, and therefore he is an Insured Person. Mr Johnson is also a director of Keybridge, being an Outside Entity, at the specific request or knowledge and consent of Bentley. Accordingly, by sub-paragraph (i) of Extension 2.6, cover under the Policy would extend to Mr Johnson in his capacity as a director of Keybridge, if Insuring Agreement B of the Policy is triggered (which is not presently the case). However, any cover afforded under Extension 2.6 would be in excess of any indemnification provided by Keybridge and any valid and collectible directors and officers liability insurance, where such payment is made in respect of Keybridge. To that end:
• any indemnification by Keybridge in respect of Mr Johnson's costs is subject to the outcome of the further costs hearing scheduled for 7 December 2023; and
• as discussed above, Keybridge's insurer denied indemnity in respect of Mr Johnson's claim for his costs.
Accordingly, the outcome of the further costs hearing is also relevant before we can make a final assessment on the application (if any) of Extension 2.6 of the Policy. In the meantime, we reserve our rights under the Policy and at law to assess the availability of any cover under Extension 2.6.
Please let us know the outcome of the further costs hearing and whether Mr Johnson has or intends to challenge the indemnity decision of Keybridge's D&O insurer.
(original emphasis)
39 By the time of the hearing before me, Bentley had not responded further to Chubb. According to counsel for Mr Johnson, there was no expectation that Chubb would change its view.