Owens Corning v. National Union Fire Insurance Co.
United States Court of Appeals for the Sixth Circuit
257 F.3d 484 (2001)
Owens Corning's (plaintiff) D&O insurance policy with National Union (defendant) required reimbursement for lawful indemnification payments to its officers and directors, and its bylaws permitted indemnification to the maximum extent allowed by Delaware law; after shareholders sued Owens Corning and six officers/directors in 1991 alleging financial misrepresentation, the company settled for roughly $10 million in 1995 and reimbursed the officers' and directors' defense costs, then sought reimbursement from National Union, which refused, prompting Owens Corning's declaratory judgment suit. The trial court ruled for Owens Corning, finding the indemnification mandatory under Delaware law's provision requiring reimbursement when directors are "successful on the merits or otherwise," and National Union appealed, arguing the indemnification was unlawful.
Whether a corporation's bylaws granting maximum indemnification flexibility create a rebuttable presumption that its officers and directors acted in good faith, shifting the burden to a challenging insurer to make specific allegations of bad faith.