## Facts

- National Union issued Owens Corning a directors-and-officers liability policy for March 8, 1991–March 8, 1992, including “Coverage B,” which reimbursed Owens Corning for losses it paid when indemnifying directors and officers.
- A shareholder securities class action alleged that Owens Corning and certain directors and officers misrepresented the company’s financial condition, including asbestos exposure.
- Owens Corning settled the action for approximately $9.975 million and paid defense costs, including amounts reimbursing the individual director/officer defendants.
- Owens Corning sought reimbursement from National Union under Coverage B; National Union denied coverage, disputing both allocation (between insured individuals and the uninsured corporate entity) and whether the indemnification was “pursuant to law.”
- Owens Corning filed a diversity declaratory-judgment action in federal court; Ohio law governed policy interpretation, and Delaware law governed corporate indemnification standards.
- On remand after a prior appeal, the district court ruled that the policy did not require allocation and that the indemnification was lawful under Delaware law; it entered final judgment for Owens Corning and denied National Union leave to amend its pleadings to add new claims and defenses.

## Issues

1. Whether Coverage B required allocation of the settlement and defense costs between insured directors/officers and the uninsured corporate entity as a condition of reimbursement.
2. Whether Owens Corning’s indemnification of directors and officers for the settlement and defense costs was “pursuant to law” under Delaware corporate law and the company’s bylaws.
3. Whether the district court erred in entering final judgment despite National Union’s contention that settlement reasonableness remained unresolved.
4. Whether the district court abused its discretion by denying National Union’s late motion to amend its pleadings.

## Decision

- The Sixth Circuit affirmed the judgment for Owens Corning.
- The policy did not impose an allocation requirement; absent proof that the corporation’s participation made the settlement larger, no allocation-based reduction applied.
- Owens Corning’s indemnification satisfied the policy’s “pursuant to law” condition because it was authorized under Delaware law and the bylaws, and National Union did not rebut the directors’ good-faith showing required for permissive indemnification.
- The district court properly entered final judgment because National Union did not timely preserve a settlement-reasonableness challenge.
- Denial of leave to amend was not an abuse of discretion given the late stage of the case, prior appellate proceedings, and resulting prejudice and delay.

## Legal Principles

- Under Ohio insurance-contract rules, ambiguous terms are construed in favor of the insured; an insurer that wants allocation must draft an express allocation provision.
- For D&O Coverage B claims, allocation between insured individuals and an uninsured corporate entity is not required absent policy language or proof that the uninsured party increased the settlement or defense costs (a “larger settlement” approach).
- When reimbursement is conditioned on corporate indemnification “pursuant to law,” Delaware General Corporation Law § 145 and the corporation’s bylaws govern whether indemnification is permissible or required, including good-faith and best-interests predicates for permissive indemnification.
- Settlement-reasonableness and similar defenses may be forfeited if not timely raised and litigated; courts may enter final judgment when remaining objections are untimely.
- Post-remand, late amendments adding new theories may be denied where they would cause delay and prejudice; appellate review is for abuse of discretion.

## Conclusion

The Sixth Circuit held that the D&O insurer had to reimburse Owens Corning for amounts it paid to indemnify and defend its directors and officers because the policy did not require allocation absent proof the uninsured corporation increased the settlement, the indemnification complied with Delaware law and the bylaws, and the insurer’s late procedural efforts did not justify reopening the case.


Owens Corning v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 257 F.3d 484 (6th Cir. 2001)