Delaware Court Rejects “Public Offering” Exclusion in De-SPAC Coverage Dispute

Key Takeaways

• Delaware court held “public offering” exclusion doesn’t cover SPAC parent shares
• Insurer must pay when liability arises, not after defense costs
• Ruling forces underwriters to rewrite D&O exclusions for de‑SPAC structures
• Bad‑faith claim allowed, signaling potential extra‑contractual insurer liability
• Decision reinforces narrow, text‑based interpretation of insurance policies in Delaware

Pulse Analysis

The Delaware Superior Court’s March 30 decision in the View de‑SPAC dispute marks a pivotal moment for directors‑and‑officers (D&O) coverage in the wake of the recent resurgence of SPAC activity. By interpreting the “public offering” exclusion narrowly—limiting it to offerings of the insured’s own equity—the court rejected the insurer’s argument that the merger of View with CF Finance Acquisition Corp. II constituted a public offering. The ruling underscores Delaware’s longstanding preference for plain‑language construction and signals that insurers must meet a high evidentiary burden to invoke exclusions in complex, multi‑entity transactions.

The judgment sends a clear message to underwriters: legacy D&O forms with generic public‑offering language are increasingly vulnerable when applied to de‑SPAC structures. To protect against coverage gaps, insurers will likely need to draft tailored exclusions that explicitly reference SPAC mergers, reverse recapitalizations, or other hybrid transactions. Such precision not only reduces litigation risk but also aligns policy language with the legal realities of how these deals are structured, rather than how they are economically described. Insurers that fail to update their wording may face heightened exposure to both coverage disputes and bad‑faith claims.

Beyond policy wording, the court’s interpretation of the “pay on behalf of” clause reshapes claim‑handling expectations. By obligating the insurer to advance defense costs as soon as liability attaches, the decision accelerates cash‑flow demands on carriers and alters loss‑reserve calculations for de‑SPAC litigation. Moreover, the allowance of a bad‑faith suit against the insurer highlights the potential for extra‑contractual penalties when coverage positions lack clear contractual support. As the pipeline of post‑de‑SPAC lawsuits continues to grow, market participants—issuers, counsel, and insurers—must reassess both underwriting standards and claims strategies to mitigate emerging risks.