Claims Arising Out Of Securities Issued By Pre-Acquisition Target Do Not Constitute Securities Claims

A federal district court applying Maryland law held that claims arising out of securities issued by a company to an insured, prior to its acquisition by the insured, were not “Securities Claims” because the company was not a subsidiary of the insured at the time of issuance. Supernus Pharm., Inc. v. Old Repub. Ins. Co., 2026 WL 809555 (D. Md. Mar. 24, 2026).

The insured, a pharmaceutical company, acquired the rights to distribute a prescription medication, Apokyn, though its acquisition of another company. Plaintiffs in the ensuing lawsuit against the insured alleged that the insured’s acquisition of the company, including the distribution rights, violated antitrust laws. The insurer denied coverage for the claim on the grounds that it was not a “Securities Claim,” as that term was defined in the Directors and Officers policy.

The policy defined “Securities Claim,” in relevant part, as any Claim “based upon, arising out of or attributable to the purchase or sale of, or offer to purchase or sell, any securities issued by the Company.” The policy defined “Company” to include the insured and its subsidiaries. Thus, as the court explained, to constitute a “Securities Claim,” a Claim must arise out of a purchase or sale of, or offer to purchase or sell, securities issued either by (a) the insured, or (b) a company that was a subsidiary of the insured at the time it issued securities out of which the claims arose.

According to the court, notwithstanding that the acquisition target had issued the securities in order to effectuate the acquisition, the securities were issued prior to the acquisition, so before the company became a subsidiary of the insured. The court rejected the insured’s argument that because the company was a subsidiary of the insured at the time the insurance claim was made, it should be considered a subsidiary for determining whether coverage was triggered. The court explained that the insured’s argument conflicted with the plain language of the policy, which required the company to be a subsidiary of the insured when it issued securities, and “[u]ndisputedly, it was not.”

Other provisions of the policy supported the court’s determination. First, the policy differentiated between pre-acquisition targets and post-acquisition subsidiaries in several provisions, precluding coverage for claims arising out of conduct by pre-acquisition targets. Second, the insured’s interpretation “would render [an] Endorsement . . . superfluous.” That Endorsement expanded the definition of “Securities Claim” to include coverage for defense costs related to “a Claim . . . in connection with a Company’s actual, proposed or attempted acquisition of an entity which as a result of such acquisition did or would become a Subsidiary” if the Claim was “brought by one or more securities holders of such entity.” In this regard, the court reasoned that if Securities Claims coverage already applied to securities issued by a pre-acquisition target, the Endorsement would be unnecessary because “[s]uch claims would already be covered by the existing coverage for Securities Claims.”

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