Chubb seeks court clarification in Nortel settlement

Chubb Insurance Company of Canada has filed a declaratory action in the Ontario Superior Court of Justice in Toronto related to its insurance policies for Nortel Networks Corporation.
The action seeks a determination by the court regarding the insurance coverage available for certain securities class-action lawsuits filed against Nortel in the United States.
The action asks a Canadian court to confirm that the directors and officers’ liability insurance policy that Chubb issued to Nortel which covers the policy period of Nov. 1, 2003, to Nov. 1, 2004 is the policy that responds to this securities litigation.
Declaratory actions are typically filed to provide clarity and direction on complex, disputed matters that affect multiple parties.
In the action, Chubb acknowledged its obligation to provide coverage for the securities litigation under the terms and conditions of its policy except for certain former officers of Nortel whom Nortel has terminated for cause. Similarly, Nortel has never disputed the fact that any coverage Chubb provides for the securities litigation is provided solely under this 2003-04 policy.
However, in connection with the proposed settlement of this securities litigation recently announced by Nortel, an issue has arisen as to whether this litigation is covered under different policies that Chubb issued to Nortel for an earlier policy period. The earlier Chubb policies and its 2003-04 policy differ in several respects including limits of coverage.
As the lead insurer in these periods, Chubb has brought its declaratory action to confirm that the 2003-04 policy responds to this securities litigation. In a statement, Chubb said it “looks forward to working cooperatively with [Nortel] to quickly resolve this issue.”