The 2nd U.S. Circuit Court of Appeals said Monday that a Liberty Mutual Holding Co. Inc. unit correctly denied directors and officers coverage for a lawsuit accusing a board member of twice violating shareholder agreements.
A panel of the New York-based appellate court agreed with a trial judge that an exclusion in a propane fuel and equipment company’s policy barred coverage for any claim arising out of contractual liability or contractual obligations. The case is Paraco Gas Corp. et al. v. Ironshore Indemnity Inc.
Shareholders sued Rye Brook, New York-based Paraco and board members Joseph Armentano and Christina Armentano, claiming that Joseph Armentano, the company’s CEO, transferred shares in violation of two shareholder agreements. Paraco and the board members sought coverage from Ironshore, which refused, court records show.
Paraco and the board members sued Ironshore in federal court in New York, asserting claims for breach of contract and seeking a court order requiring coverage from Ironshore. The insurer moved to dismiss the lawsuit, arguing the underlying claims clearly fell within the exclusion.
The trial judge granted the motion, ruling that the alleged violations of the shareholder agreements were claims that arose out of a breach of a contractual obligation.
Representatives for the parties did not respond to requests for comment.
