The D&O insurance implications of M&A litigation often extend beyond claims against the company and its directors and officers. When financial advisers are drawn into transaction-related litigation, companies that have agreed to indemnify them may be required to reimburse defense costs and settlement payments, raising questions about the extent to which those amounts could be covered under a public company D&O insurance program.
A pending coverage dispute arising out of Cornerstone Building Brands’ 2022 take-private transaction highlights those issues. At the center of the dispute is whether amounts a company pays to indemnify its financial adviser for defense costs and settlement payments constitute covered Loss under a public-company D&O policy. Below is a discussion of Cornerstone’s coverage complaint, the parties’ competing summary judgment arguments, and potential D&O underwriting implications.
Cornerstone Coverage Litigation
On August 25, 2025, Cornerstone filed its complaint in the Eastern District of North Carolina seeking indemnification from certain excess insurers. The complaint alleges that in October 2021, Cornerstone’s special committee retained Centerview Partners (Centerview) as its financial adviser in connection with a proposed take-private transaction involving the company’s controlling shareholder. Under the engagement agreement, Cornerstone allegedly agreed not only to pay Centerview’s advisory fees but also to broadly indemnify Centerview for losses, claims, liabilities, settlements, and litigation expenses arising from the take-private transaction.
After Cornerstone’s take-private deal was completed, various shareholder actions relating to the transaction were filed against Cornerstone and other participants in the transaction, including Cornerstone’s directors and officers. Centerview was subpoenaed during several of the proceedings and was eventually named as a defendant in aiding-and-abetting claims brought in the Delaware stockholder litigation. According to Cornerstone’s complaint, Centerview ultimately incurred $9.8 million in defense costs and settlement payments, which Cornerstone reimbursed pursuant to the indemnification agreement.
In its separate complaint in the coverage litigation, Cornerstone alleges that it sought reimbursement for Centerview’s defense costs under its D&O insurance program, but its insurers denied coverage for the amounts paid on Centerview’s behalf. Cornerstone argues that payments made on behalf of Centerview constitute covered “Loss” because they were amounts the company became legally obligated to pay on account of a “Securities Claim.” Cornerstone also emphasizes that the applicable policies did not contain a contractual liability exclusion.
Cornerstone filed its motion for partial summary judgment on June 5, 2026. It contends that the underlying Delaware stockholder litigation filed against Cornerstone, and which named Centerview, constituted a covered “Securities Claim” arising out of the take-private transaction and that the amounts paid to Centerview qualify as covered Loss because they were amounts the company became legally obligated to pay. Cornerstone further argues that the Delaware litigation and related federal securities actions constitute a single Securities Claim under the policies’ related-claims provisions, that Centerview’s costs were incurred “on account of” that claim because they would not have arisen absent the underlying shareholder litigation, and that the absence of a contractual liability exclusion confirms coverage.
Cornerstone’s excess insurers filed their opposition to Cornerstone’s motion for summary on July 10, 2026. The insurers contend that the Delaware stockholder litigation was not a “Securities Claim” made against Cornerstone because the company itself was not named as a defendant, and that claims asserted against directors and officers do not automatically become claims against the corporate entity. The insurers further argue that Centerview is neither the Company nor an Insured Person under the policies and that prior payments by the D&O program related to Cornerstone’s indemnification of insured directors and officers do not establish coverage for payments made on behalf of a non-insured third party.
In addition, Cornerstone’s excess insurers contend that Cornerstone’s payment obligation arose from a separate contractual undertaking contained in the Centerview engagement agreement rather than from a covered “Securities Claim.” According to the insurers, the reimbursement therefore represents an uninsured contractual obligation or business debt, and the absence of a contractual liability exclusion is irrelevant because coverage must first exist under the policies’ affirmative grant of Side C coverage before any exclusion analysis is reached.
On July 23, 2026, Cornerstone and one of the defendant insurers filed a notice of settlement. The coverage action remains pending as to the other excess insurer defendants.
Discussion
The Cornerstone dispute combines several recurring D&O coverage issues, including the scope of Side C entity coverage, the definition of a Securities Claim, and the impact of contractual indemnification obligations. As The D&O Diary has previously discussed, these disputes often turn on whether the underlying claim falls within the policy’s grant of coverage and whether the payment at issue is properly characterized as covered Loss.
In the Cornerstone coverage litigation, the central issue is whether a company’s payment of its financial adviser’s defense costs and settlement pursuant to an indemnification agreement constitutes covered Loss because it arises from a Securities Claim or is instead uncovered because it stems from a separate contractual obligation.
Cornerstone argues that a Texas court previously found coverage in a similar dispute involving its predecessor, NCI Building Systems. According to Cornerstone, the court held that amounts NCI was obligated to pay on behalf of third-party consultants in connection with shareholder litigation constituted covered Loss under materially similar D&O policy language. The insurers, by contrast, contend that the unpublished NCI order is distinguishable and provides little guidance.
Whatever weight the court gives the NCI decision, the dispute highlights the potential consequences of treating adviser indemnification payments as covered Loss. If Cornerstone prevails, D&O insurers may seek to clarify whether Loss includes amounts paid on behalf of non-insured third parties and to more expressly address contractual indemnification obligations through revised policy wording, exclusions, or related Side C provisions.
Conversely, a ruling for the insurers could reinforce the view that Side C coverage applies only to Loss arising from a Securities Claim against the company and not to liabilities assumed through separate contractual obligations. Such a result would preserve the distinction between covered Securities Claim exposure and obligations arising from indemnification agreements with financial advisers and other transaction participants.
Ultimately, the Cornerstone coverage litigation provides a useful example of the tension between broad Side C coverage grants and liabilities assumed through commercial contracts. If the court ultimately issues a substantive ruling, the decision could become an important reference point for future disputes involving financial-adviser indemnification obligations and the scope of Side C coverage in transaction-related litigation.