Ninth Circuit Overturns $20 Million D&O Coverage Denial

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In a win for policyholders, the Ninth Circuit Court of Appeals has reversed a Nevada district court's ruling in favor of a D&O liability insurer that had refused to cover over $20 million in defense and settlement costs for a lawsuit against a casino and resort company. The appeals court found the insurer's denial based on a contractual liability exclusion was too broad, and ordered the lower court to take a closer look at the individual claims, including for quantum meruit and fraud, which may not have been subject to the exclusion.

Why it matters

The Ninth Circuit's decision is a timely reminder for policyholders to carefully scrutinize coverage denials, especially overbroad readings of contract exclusions, and to consider pursuing insurers who wrongfully deny coverage. The ruling reinforces that courts will construe exclusions narrowly against insurers and in favor of coverage where possible.

The details

The casino and resort company, Las Vegas Sands, sought coverage from its D&O liability insurer for over $20 million in costs related to a lawsuit alleging breach of contract, fraud, and quantum meruit. The insurer, National Union Fire Insurance, denied coverage based on a contractual liability exclusion in the policy. A Nevada district court initially ruled in favor of the insurer, but the Ninth Circuit has now reversed that decision.

• The underlying lawsuit was filed in Nevada state court.
• The district court ruled in favor of the insurer in September 2024.
• The Ninth Circuit issued its reversal decision on December 29, 2025.

What’s next

On remand, the district court will be required to undertake a 'separate analysis' of each cause of action in the underlying lawsuit to determine if the contractual liability exclusion applies.