Fairfax Unit Owes D&O Coverage to Ex-Hospital CEO, Judge Says

A Fairfax Financial Holdings Ltd. insurer must pay for the defense costs of a former hospital CEO being sued by the hospital’s bankruptcy estate, a federal bankruptcy judge said.

Although the directors and officers liability policy excluded coverage for litigation between insured parties, the exclusion explicitly didn’t apply to bankruptcy cases, Judge Marvin Isgur of the US Bankruptcy Court for the Southern District of Texas said in a Thursday ruling.

Walker County Hospital Corp. sued Shannon Brown for alleged unlawful actions he took as CEO after sending two demand letters for payment of damages. Brown then brought a cross-claim, asking ...