Case Background

Alpha GRP, Inc., a Delaware-based motorsports company, and its officer, Colin Dyne, filed a lawsuit against their long-time insurance broker, Woodruff-Sawyer & Co., over advice given during the company’s wind-down process. Alpha GRP had been organising and promoting automotive races, but later opted to shut down operations through an “assignment for the benefit of creditors.” In doing so, they relied on Woodruff-Sawyer’s advice to purchase tail insurance policies intended to protect against lawsuits during the shutdown. The core of the dispute revolved around whether those policies would cover lawsuits filed by unpaid creditors.

The cause that led to the dispute

Plaintiffs alleged that Woodruff-Sawyer had negligently advised them to buy extended “tail” coverage on existing director and officer (D&O) policies that specifically excluded coverage for claims made by creditors. Plaintiffs argued that Woodruff-Sawyer, while presenting itself as a specialist in risk management and insurance for businesses winding down, had failed to inform them of this critical exclusion. They claimed this omission rendered the policies effectively worthless for the circumstances they were in.

Injuries suffered

After relying on the broker’s advice and purchasing the tail policies, paying more than $261,000 in premiums, Alpha GRP and Dyne were sued in several creditor-related lawsuits. When they tried to invoke coverage, the insurer denied it based on the creditor exclusion in the policy. As a result, Alpha and Dyne had to fund their legal defenses out of poc