Genzyme Corp. v. Federal Insurance Co.

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Before Boudin, Dyk, *fn1 and Thompson, Circuit Judges.

Genzyme Corporation (“Genzyme”) appeals from a district court order dismissing Genzyme’s complaint against Federal Insurance Company (“Federal”) for failure to state a claim. Genzyme sought to recover its costs in settling a shareholder class action under a corporate and director and officer liability insurance policy (“the policy”) issued to Genzyme by Federal. Federal denied coverage and Genzyme sued, seeking damages of $10 million plus other relief. The district court held that Genzyme’s loss was not insurable as a matter of Massachusetts public policy. We disagree with this conclusion. In the alternative, the district court held that Genzyme was precluded from recovering under the terms of the policy’s so-called “Bump-Up” clause for any amount paid to settle claims. We agree with the district court that the policy does not cover the amount paid to settle claims against the corporation. However, we hold that the policy does cover any settlement amounts paid pursuant to an indemnification obligation with respect to the directors and officers. Because a portion of the settlement amount may have been paid to settle claims against the directors and officers, we remand to the district court to consider the question of allocation.

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