Delaware’s Supreme Court has affirmed a lower-court decision holding that AMC’s D&O settlement paid in stock can qualify as a covered “loss.”
The case matters for D&O claims and coverage teams because the dispute turned on what AMC used to settle. AMC Entertainment Holdings, Inc. sought coverage for losses incurred in a settled shareholder lawsuit, and the insurers denied coverage on the ground that the settlement payment method – shares of AMC stock – was not covered by the policies.
The background, as described by the Delaware Superior Court, begins with AMC’s financial challenges during the COVID-19 pandemic and its emergence as a “meme” stock. AMC increased liquidity by issuing more Class A common stock until it approached the authorized limit in its certificate of incorporation, then created AMC Preferred Equity Units, or APEs, which the court described as representing a fractional interest in preferred stock and carrying the same voting rights as common stock. AMC later pursued a shareholder proposal to increase authorized common stock and effect a 1-for-10 reverse stock split.
Shareholders sued in the Delaware Court of Chancery to prevent the proposal. The Chancery Court allowed AMC to hold a shareholder meeting but barred amendments to the certificate of incorporation pending a ruling. Shareholders approved the proposal on March 14, 2023, but AMC could not implement it under that order.
AMC ultimately settled the shareholder litigation on April 27, 2023. Under the settlement, AMC agreed to provide 6,897,018 shares of common stock to the plaintiffs and to pay the plaintiffs’ attorneys’ fees. In exchange, the plaintiffs agreed to release claims and dismiss the action, which would lift the Chancery Court order. The Court of Chancery initially rejected the settlement because it included a proposed release of claims by APE holders who were not among the plaintiffs, but it approved a revised settlement on Aug. 11, 2023.
AMC’s accounting treatment became part of the record in the coverage fight. Beginning with its first quarter 2023 financial statements, AMC recorded the settlement payment as a contingent liability and an expense and valued it based on the estimated fair value of the shares, recording it as a $99.3 million expense on its books.
That settlement structure led to the insurance coverage lawsuit. AMC sued 17 insurance companies over coverage under its directors and officers insurance program. By the time the Superior Court decided the cross-motions for summary judgment, only Midvale Indemnity Company remained.
The Superior Court’s Feb. 28, 2025 memorandum opinion centered on the policy wording. The policies defined “Loss” as: “damages, judgments, settlements, pre-judgment and post-judgment interest or other amounts (including punitive, exemplary or multiplied damages, where insurable by law) that any Insured is legally obligated to pay and Defense Expenses, including that portion of any settlement which represents the claimant’s attorneys’ fees.” Midvale argued that stock is not money and therefore cannot be “paid,” so the settlement did not constitute a covered “Loss.” The court disagreed, concluding that the definition did not restrict coverage to cash payments and declining to insert such a limitation.
Midvale also argued that because the policies require insurers to “pay [Loss] on behalf of” AMC, coverage should not apply where only AMC can issue AMC stock. The Superior Court rejected that argument as well, reasoning that the insurers’ obligation was to indemnify AMC for covered “Loss,” and that their inability to deliver stock directly to the underlying plaintiffs did not defeat coverage.
In interpreting the wording, the court pointed to the policies’ “Bump-Up” exclusion, which provides that “Loss” does not include “any amount which represents or is substantially equivalent to an increase in the consideration paid, or proposed to be paid, by the Company in connection with its purchase of any securities or assets of any person, group of persons, or entity.” The court said the exclusion was not applicable to the issue presented, but treated its use of “paid” as relevant to the meaning of the same word elsewhere in the policies.
Still, the Superior Court did not end the dispute. The policies included a consent-to-settle clause stating that “[n]o Insured may…make any settlement offer with respect to, or settle any Claim without the Insurer’s consent, such consent not to be unreasonably delayed or withheld.” On that issue, the court found genuine disputes of material fact, including what occurred during a March 29, 2023 conference call and whether the March 28, 2023 mediation involved substantive settlement discussions. Those questions, the court held, would have to be decided by a jury.
Midvale appealed. In its Dec. 9, 2025 order, the Delaware Supreme Court affirmed the Superior Court’s judgment, stating it should be affirmed “on the basis of and for the reasons stated” in the Feb. 28, 2025 memorandum opinion.
For insurers and brokers, the decisions highlight two issues addressed in the coverage dispute: whether a settlement paid in AMC stock constitutes covered “Loss” under the policies, and whether coverage may be affected by the policies’ consent-to-settle requirement, which the Superior Court held presents factual questions for a jury.
