**Delaware Supreme Court Rules Stock-Based Settlements Qualify as Insurable "Loss" Under D&O Policies**
The Delaware Supreme Court has affirmed a lower court’s decision that stock-based settlements constitute a covered "loss" under directors and officers (D&O) insurance policies, rejecting insurers’ arguments that coverage applies only to cash payments.
The ruling stems from a dispute between AMC Entertainment Holdings, Inc. (AMC) and its insurers after shareholders sued the company over its issuance of AMC Preferred Equity Units (APEs). Unable to secure shareholder approval to increase its authorized common stock, AMC created the APEs as an alternative security. The lawsuit was settled in 2022 when AMC agreed to issue 6,897,018 shares of common stock and cover plaintiffs’ attorney’s fees in exchange for a release of claims.
AMC sought coverage from its 17 D&O insurers, including primary carrier XL Specialty Insurance Co. and excess insurer Midvale Indemnity Co., which denied the claim, arguing that stock does not qualify as a "loss" under the policy’s definition. The dispute centered on whether the term "loss" was limited to monetary payments or could include non-cash compensation.
In February 2024, the Delaware Superior Court sided with AMC, ruling that the policy’s definition of "loss" did not explicitly restrict coverage to cash payments. The court emphasized that insurance policies should be interpreted broadly and noted that stock functions similarly to cash, serving as a form of currency for corporate transactions. The Delaware Supreme Court upheld the decision on December 9, 2024, without additional commentary.
The case sets a precedent for policyholders, particularly those facing liquidity constraints, by confirming that non-cash settlements—such as stock—may trigger D&O coverage. AMC was represented by Cohen Ziffer Frenchman & McKenna LLP, which described the ruling as a "vital precedent" for companies using alternative compensation in settlements.
Source: https://www.insurancejournal.com/news/east/2025/12/15/851083.htm
AMC Theatres cybersecurity rating report: https://www.rankiteo.com/company/amc-theatres
"id": "AMC1765822129",
"linkid": "amc-theatres",
"type": "Breach",
"date": "12/2025",
"severity": "50",
"impact": "2",
"explanation": "Attack limited on finance or reputation"{'affected_entities': [{'industry': 'Entertainment (Movie Theaters)',
'location': 'United States',
'name': 'AMC Entertainment Holdings, Inc.',
'type': 'Corporation'}],
'date_resolved': '2023-12-09',
'description': 'AMC Entertainment Holdings sought coverage for losses '
'incurred in a settled lawsuit brought by shareholders, where '
'the settlement was paid in shares of stock rather than cash. '
'The Delaware Supreme Court affirmed that such settlements are '
"covered under the definition of 'loss' in D&O insurance "
'policies.',
'impact': {'legal_liabilities': 'Settlement of shareholder lawsuit'},
'investigation_status': 'Resolved',
'lessons_learned': "The definition of 'loss' in D&O insurance policies is not "
'restricted to cash payments and can include settlements '
'paid in stock or other non-cash forms.',
'post_incident_analysis': {'corrective_actions': 'Court rulings clarified '
"that 'loss' includes "
'non-cash settlements, '
'setting a precedent for '
'future insurance coverage '
'disputes.',
'root_causes': 'Dispute over the interpretation of '
"'loss' in D&O insurance policies, "
'specifically whether non-cash '
'settlements (e.g., stock) are '
'covered.'},
'recommendations': 'Policyholders should ensure their insurance policies '
'explicitly cover non-cash settlements to avoid disputes '
'with insurers.',
'references': [{'source': 'Delaware Supreme Court Ruling'},
{'source': 'Cohen Ziffer Frenchman & McKenna LLP Statement'}],
'regulatory_compliance': {'legal_actions': 'Shareholder lawsuit and insurance '
'coverage dispute'},
'response': {'third_party_assistance': 'Legal representation by Cohen Ziffer '
'Frenchman & McKenna LLP'},
'title': 'AMC Entertainment Holdings D&O Insurance Coverage Dispute',
'type': 'Legal and Insurance Dispute'}