Delaware Court Enforces D&O Coverage For SEC Disgorgement Settlement

Delaware remains one of the most important jurisdictions for corporate America, so pro-policyholder D&O decisions from Delaware courts are worth watching closely.

In Clear Channel Outdoor Holdings, Inc. v. Illinois National Insurance Co., C.A. No. N24C-02-208 PAW CCLD (Del. Super. Ct. Apr. 28, 2026), the Delaware Superior Court held that AIG was required to indemnify Clear Channel for the disgorgement and prejudgment-interest components of an SEC settlement, rejecting the insurer’s arguments that those amounts were uncovered penalties or uninsurable as a matter of Delaware public policy.

The coverage dispute arose after Clear Channel settled an SEC investigation concerning internal accounting controls and alleged improper payments by a subsidiary. The SEC settlement required Clear Channel to pay $16.35 million in “disgorgement,” $3.76 million in prejudgment interest and a separate $6 million “civil monetary penalty.”

The key issue was whether the disgorgement and prejudgment interest qualified as covered Loss under the D&O policy, or whether, as AIG argued, those amounts were really penalties in substance or otherwise uninsurable under Delaware law.

The court rejected AIG’s position, holding that “[t]he Policy separately addresses ‘civil . . . penalties’ and disgorgement, the two monetary remedies the SEC can impose.” Reading the policy in context, the court concluded that the Civil Penalties Exclusion “unambiguously excludes SEC civil monetary penalties but not SEC disgorgement or prejudgment interest paid in settlement.” The court also rejected AIG’s public-policy argument, explaining that Delaware courts will not lightly override what the parties agreed to and that “[n]o public policy sufficient to overcome the parties’ contract exists here.” Although the court dismissed Clear Channel’s bad-faith claim, it granted Clear Channel’s motion for partial summary judgment on indemnity and held that AIG must indemnify Clear Channel for the SEC settlement up to the policy limit.

The decision reinforces two important points for policyholders: Delaware courts may hold insurers to the distinction between penalties and disgorgement in the policies they wrote and they are reluctant to let insurers use public policy as an escape for losses that otherwise fall within the coverage they agreed to provide.

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