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Six years. That’s how long SPAC directors and officers remain exposed to securities lawsuits after a merger closes — and the exclusion many insurers assumed would wall off that exposure just failed to hold up in court.
What Happened
According to Insurance Business America, on June 12, 2026, the Delaware Supreme Court declined to accept StarStone Specialty Insurance Company’s request for an interlocutory appeal — a mid-case judicial review filed before trial concludes — in a liability coverage dispute involving View Inc. The refusal is not a final verdict, but it leaves a consequential lower-court ruling firmly in place.
The backstory begins in March 2021, when CF Finance Acquisition Corp. II completed a de-SPAC merger (a transaction in which a publicly traded blank-check shell company acquires a private business and takes it public, bypassing the traditional underwritten IPO process) with View Operating Corporation. The combined entity took the name View, Inc. Multiple lawsuits followed: a securities class action, a shareholder derivative proceeding, and an SEC civil action — all centered on alleged misrepresentations and governance failures during the merger process.
StarStone had issued a $5 million management and professional liability follow-form excess policy (meaning it mirrors the terms of the primary policy directly beneath it) sitting above $20 million in underlying limits written by Ironshore Specialty Insurance Company. StarStone moved to have coverage barred under its “public offering exclusion.” On March 30, 2026, the Delaware Superior Court rejected that argument outright, granting Legacy View partial summary judgment and holding the exclusion did not apply to the de-SPAC transaction. StarStone then sought immediate appellate review. Delaware courts said no — consistent with their longstanding view that “piecemeal appeals in sprawling, multi-year coverage disputes are generally disfavored because they inject inefficiency, disrupt the trial court’s management, and raise costs.”
Why the Exclusion Failed — and What That Means for Policy Coverage
The “public offering exclusion” has been standard boilerplate in management liability policies for decades. It was designed to carve out claims arising from a company’s stock offering — the IPO-related litigation that underwriters historically treated as a separately priced, excludable risk. The clause made sense when “going public” meant an underwritten share sale. It was written well before the SPAC boom of 2020–2021 rewrote how private companies reached public markets.
The Delaware Superior Court found that generic “public offering” exclusion language in legacy policy forms may be “inadequate and potentially vulnerable to challenge when applied to de-SPAC transactions.” In plain English: the exclusion was drafted for one type of transaction, and courts are not going to stretch it to cover a structurally different one. That is a meaningful signal for any D&O buyer holding a policy that predates 2020.
Chart: The two-layer D&O policy tower in StarStone v. View ($20M Ironshore underlying, $5M StarStone excess) compared with the $28M D&O coverage the Delaware Supreme Court affirmed for Harman International on January 27, 2026. Scale: $1M ≈ 11px.
StarStone’s case is not an isolated data point. On January 27, 2026, the Delaware Supreme Court affirmed $28 million in D&O coverage for Harman International in a federal securities class action settlement, rejecting a “bump-up exclusion” (a clause designed to limit coverage when merger consideration is later found inadequate). On February 16, 2026, the same court refused a managed care errors-and-omissions insurer’s request for an interlocutory appeal in a separate coverage fight over an underlying false claims lawsuit. In August 2025, the court ruled 3–2 in Aearo Technologies that defense cost payments made by non-insured parent 3M did not satisfy subsidiary Aearo’s self-insured retention (the out-of-pocket threshold the insured must clear before coverage activates) — yet another case where courts declined to extend policy language beyond what it plainly said.
As of June 20, 2026, SPAC-related securities class actions accounted for roughly 2% of all securities class action filings in 2025, with approximately 45% dismissed at an early stage. The percentage sounds modest, but surviving cases are expensive and slow. Multi-year run-off D&O coverage — sometimes called “tail coverage” — typically protects for 3 to 6 years after a de-SPAC transaction for claims arising from pre-merger activity, and SPAC directors and officers can remain litigation targets for up to six years after the acquisition closes. That is a long exposure window for policies carrying exclusion language courts are now reading narrowly.
The broader D&O market is not in crisis. As of June 20, 2026, most 2026 D&O renewals are trending toward flat pricing in what analysts describe as a buyer’s market with readily available capacity. Flat pricing feels comfortable. But “flat” does not mean “covered” — it means the cost of legacy exclusion uncertainty may not yet be baked into the rate.
AI Is Fast. Coverage Disputes Are Not.
Cases like StarStone v. View clarify exactly where AI is — and is not — transforming claims management. As of June 20, 2026, Ping An Insurance Group has automated nearly 60% of accident and health claims, with some settled in as little as 51 seconds. For high-volume, structured personal lines claims, that speed is a genuine operational gain.
D&O coverage disputes are a different problem entirely. As industry observers note, “the insurance policy itself remains the bottleneck to achieving deeper efficiencies through AI” — automated systems still struggle with the nuanced contract interpretation questions at the core of cases like this one. Whether a “public offering exclusion” applies to a de-SPAC merger is not a pattern-matching exercise. It requires reading the specific policy form, the specific transaction structure, and a still-developing body of Delaware case law. No model resolves that in 51 seconds.
As of June 20, 2026, generative AI-related lawsuits in the U.S. have grown 978% between 2021 and 2025 — a data point that underscores how quickly new litigation categories can outrun the policy language drafted to address them. The AI Systems Evaluation Tool, expected ready for nationwide use by November 2026, will require insurers to disclose data fed into their AI risk assessment systems, which may eventually shape how coverage disputes are constructed and litigated. For now, the specific words in your policy form — not an algorithm — are what hold up in a Delaware courtroom.
Three Things to Check Before Your Next D&O Renewal
The StarStone ruling carries a practical message for any organization with management liability coverage. These are worth raising directly with a licensed insurance professional before your next renewal:
Ask for the policy form and read the exclusion yourself, or have counsel read it. If the form predates 2020, it almost certainly uses language written before de-SPAC structures existed as a meaningful transaction category. Ask your broker specifically: how does this carrier interpret this clause relative to SPAC and de-SPAC transactions? Get that answer documented.
If your company went public through a SPAC merger in 2020 or 2021, you may still be within the exposure window. Multi-year run-off D&O coverage typically protects for 3 to 6 years post-merger for pre-close claims — but the trigger conditions vary by form. Verify that your tail coverage explicitly addresses claims arising from de-SPAC merger activity, not just post-close governance events.
Some insurers have updated their management liability forms to include explicit SPAC and de-SPAC language. In a flat-pricing buyer’s market, comparing forms across competing carriers costs nothing at renewal and can surface real policy coverage differences. The premium may land in the same range; the language — and what a court will enforce — may not.
Frequently Asked Questions
What is a public offering exclusion in a D&O policy, and when does it actually apply to SPAC transactions?
A public offering exclusion bars D&O coverage for claims arising from a company’s stock offering — traditionally, an underwritten IPO. It was designed to carve out securities offering litigation, which carriers historically priced separately. Whether it applies to a de-SPAC transaction — where the shell company, not the operating business, conducts the offering — is precisely what courts are now deciding. As the StarStone case illustrates, carriers relying on legacy form language may find courts unwilling to extend the exclusion to transaction structures that postdate the drafting. Consult a licensed insurance agent to understand how your specific form applies to your organization’s situation.
How does a de-SPAC merger affect D&O insurance coverage for directors and officers going forward?
A de-SPAC transaction creates layered litigation exposure across multiple parties: the SPAC’s own directors and officers, the target company’s legacy leadership, and the combined entity’s post-merger board can all face claims tied to alleged misrepresentations or governance failures during the process. Coverage depends on which entities are named insureds, how the policy defines a covered “claim,” and whether exclusions carve out offering-related conduct. Because SPAC directors and officers can remain litigation targets for up to six years after the acquisition closes, confirming adequate run-off coverage is not optional. A licensed insurance professional familiar with management liability can help map exposure for your specific structure.
Why do Delaware courts keep refusing insurance companies’ interlocutory appeals in coverage disputes?
Delaware courts reserve interlocutory appeals — mid-case appeals before trial concludes — for extraordinary circumstances, and contract interpretation generally does not qualify. As Delaware courts have stated, “contract interpretation, no matter the stakes, generally is not the kind of undertaking worthy of midstream intervention by our high court.” In complex, multi-year coverage disputes, courts view these mid-case appeal bids as procedurally disruptive and cost-generating without advancing resolution. The consistent pattern seen in the StarStone, managed care E&O, and Harman cases reflects that policy: let the trial court finish its work first.
Bottom Line
In my analysis, StarStone’s outcome here is less a litigation defeat than a product design problem. The carrier sold a policy with exclusion language calibrated for a transaction world that no longer exists, and a Delaware court enforced that policy the way a reasonable buyer would have read it. That is the correct result. The real risk for D&O buyers is not that insurers are losing in court — it is that neither party scrutinized the form language carefully before the SPAC deal closed. The time to understand what your policy actually covers is before regulators send the first letter, not after the securities class action is certified.
Always consult a licensed insurance agent or broker before making coverage decisions for your organization.
Disclaimer: This article is for informational purposes only and does not constitute insurance advice. Always consult a licensed insurance agent for personalized guidance. Research based on publicly available sources current as of June 20, 2026.