# LANDMAN v. RSUI INDEMNITY COMPANY

> District Court, E.D. Pennsylvania · January 27, 2020

URL: https://www.frixlaw.com/law-library/cases/10398295

## Case

- **Court:** District Court, E.D. Pennsylvania
- **Decided:** January 27, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ROBERT VITO and : CIVIL ACTION
UNEQUAL TECHNOLOGIES COMPANY :
:
v. :
:
RSUI INDEMNITY COMPANY : NO. 19-1941

WILLIAM LANDMAN : CIVIL ACTION
:
v. :
:
RSUI INDEMNITY COMPANY : NO. 19-2468

MEMORANDUM OPINION

Savage, J. January 27, 2020

In these declaratory judgment actions, we must determine whether RSUI
Indemnity Company has a duty to defend and indemnify Unequal Technologies Company
(“UTC”), its CEO and director Robert Vito, and director William Landman (“the insureds”)
in a shareholder derivative action brought by Joseph D’Ascenzo in the Pennsylvania
Court of Common Pleas for Chester County (the “D’Ascenzo Action”). RSUI contends the
“related acts” provision and the “prior acts” exclusion in its directors and officers insurance
policy bar coverage for the D’Ascenzo Action.
We conclude that among the multiple claims asserted in the D’Ascenzo Action are
several that are covered by the policy and are not excluded. Therefore, we shall deny
RSUI’s motions for judgment on the pleadings and declare that RSUI has a duty to defend
the insureds in the D’Ascenzo Action.
Factual Background

At the center of the dispute are UTC and its directors. Formed in April 2008, UTC
holds licenses to patented shock suppression and force dispersion technology used in
athletic equipment, law enforcement and military equipment, and consumer and industrial
products.1 Robert Vito is the president, CEO, Chairman of the Board, and controlling
shareholder of UTC.2 He was the sole director until November 7, 2013 when William
Landman became a director.3 Landman is the co-founding member, principal, and CEO
of MainLine Investment Partners, LLC, an investment firm.4 In 2013, MainLine Investment
Partners purchased eight million shares of UTC stock for $12 million through its vehicle
MainLine Special Op UT, LLC (“MainLine”).5 MainLine designated Landman a director of
UTC as provided under its Investor’s Rights Agreement.6
In April 2017, Joseph D’Ascenzo, a minority shareholder in UTC,7 sent UTC a
demand to inspect its records.8 In response, UTC provided documentation in October

1 Def.’s Mot. for J. on Plead. Exh. A-4 at ¶ 12 (Dkt. No. 19-1941, ECF No. 21) (“Derivative
Complaint”).

2 Pl. UTC/Vito’s Compl. at ¶ 2 (Dkt. No. 19-1941, ECF No. 1); Derivative Complaint at ¶ 2.

3 Pl. Landman’s Compl. at ¶¶ 87, 99 (Dkt. No. 19-2468, ECF No. 1).

4 Derivative Complaint at ¶ 15.

5 Id. at ¶ 19.

6 Id. at ¶ 26.

7 Id. at ¶ 23.

8 Id. at ¶ 26.
2017.9 In June 2018, D’Ascenzo filed suit against UTC, Vito, Landman, and several other
affiliated entities.10
D’Ascenzo’s Third Amended Complaint focuses on his claim that he was deprived
of an elected seat on the board. He alleges that the board consists of three seats, one for

Vito or his designee (Vito), one for MainLine’s designee (Landman), and a third nominated
by Vito and approved by Landman.11 He alleges that the Articles of Incorporation provide
that if Vito and Landman fail to appoint an independent director, shareholders may elect
one.12 He claims that he launched a proxy bid to fill the third open seat to provide
independent oversight of Vito and Landman.13 According to D’Ascenzo, at a
shareholders’ meeting in December 2017, he received over eight million votes in support
of his proxy bid, representing almost 10% of the shareholders and placing him third in the
board elections after Vito and Landman.14 He claims that UTC, Vito, and Landman
attempted to prevent the election from taking place, and have refused to acknowledge
the results and allow him to participate in board decisions.15 In January 2019, at UTC’s

annual meeting, Vito, Landman, and Anthony Tomasello were elected to the board.16

9 Id. at ¶ 27.

10 Id. at ¶ 36.

11 Id. at ¶¶ 88-96, 111.

12 Id. at ¶ 132.

13 Id. at ¶ 180.

14 Id. at ¶¶ 188, 194, 209, 213, 215.

15 Id. at ¶ 5.

16 Pl. UTC/Vito’s Compl. at ¶ 47 (Dkt. No. 19-1941, ECF No. 1).
Counts I through V of D’Ascenzo’s Third Amended Complaint revolve around the
December 2017 board election. These counts seek various declaratory judgments related
to the election and the third seat on the board.17 Count VI seeks a declaration that UTC,
Vito, and Landman may not pursue shareholders for indemnification for legal fees under

UTC’s bylaws because the indemnification provisions are unenforceable and
unconscionable.18 Count VII seeks a declaration that D’Ascenzo is excused from making
a formal demand on the board before bringing suit as required under 15 Pa. C.S.A. §
1781 because demand would be futile.19
Count VIII seeks a declaration that Vito’s fraudulent acts and disregard for
corporate formalities since 2008 require his removal from the board.20 It alleges Vito failed
to hold annual meetings of shareholders, elect directors by shareholder vote, obtain
approval from disinterested directors for self-dealing transactions, deliver financial
statements on time, and allow shareholders to inspect books and records.21 The allegedly
fraudulent acts include engaging in self-dealing transactions and usurpation of corporate

opportunities, receiving warrants and stock options at prices substantially below market
value, adopting bylaws that contravene Pennsylvania law as a tool to oppress
shareholders, and making material misrepresentations about UTC’s technology in
investor pitches.22

17 D’Ascenzo TAC at ¶¶ 153-218, 219-239, 240-256, 257-265, 266-286.

18 Id. at ¶¶ 287-299.

19 Id. at ¶¶ 300-316.

20 Id. at ¶¶ 317-343.

21 Id. at ¶¶ 18, 22.

22 Id. at ¶ 323.
Counts IX through XI seek a declaration that the board election held in January
2019 is null and void.23 These counts request an order for a new election.24
At the time D’Ascenzo filed his action, RSUI insured UTC, Vito, and Landman
under Directors and Officers Liability Policy, #NP674556, for the period November 2017
to November 2018.25 RSUI first issued the policy in November 2013 and renewed it

annually.26
UTC, Vito, and Landman asked RSUI to defend them in the D’Ascenzo Action.27
RSUI refused, asserting that the claims are not covered under the policy.28 The insureds
then brought these actions seeking a declaration that RSUI has a duty to defend and
indemnify them.29 They also demand reimbursement for their legal expenses in defending
the D’Ascenzo Action thus far.30
RSUI invokes the policy’s related acts provision and the prior acts exclusion. It
contends another shareholder’s earlier demand letter in 2015 and derivative action in
2016, and the D’Ascenzo Action constitute one interrelated claim that is deemed to have

23 Id. at ¶¶ 345-448.

24 Id.

25 Pl. UTC/Vito’s Compl. at ¶ 7.

26 Id. at ¶¶ 7-8.

27 Pl. UTC/Vito’s Compl. at 1-2 (Dkt. No. 19-1941, ECF No. 1); Pl. Landman’s Compl. at ¶ 9 (Dkt.
No. 19-2468, ECF No. 1).

28 Pl. UTC/Vito’s Compl. at ¶ 61 (Dkt. No. 19-1941, ECF No. 1); Pl. Landman’s Compl. at ¶ 45 (Dkt.
No. 19-2468, ECF No. 1).

29 Pl. UTC/Vito’s Compl. at ¶¶ 56-63 (Dkt No. 19-1941, ECF No. 1); Pl. Landman’s Compl. at ¶¶
39-52 (Dkt. No. 19-2468, ECF No. 1).

30 Id.
been first made before the policy period.31 Alternatively, RSUI argues that the D’Ascenzo
Action is based in part on wrongful acts that occurred before the policy was first issued
on November 19, 2013.32
Standard of Review
The interpretation of an insurance contract is a question of law. Am. Auto. Ins. Co.
v. Murray, 658 F.3d 311, 320 (3d Cir. 2011). Whether a claim is covered or is barred by

an exclusion may be determined on a motion for judgment on the pleadings. Allstate Fire
& Cas. Ins. Co. v. Hymes, 29 A.3d 1169, 1171 (Pa. Super. 2011).
In deciding a motion for judgment on the pleadings made pursuant to Federal Rule
of Civil Procedure 12(c), the court considers the facts alleged in the pleadings and
documents attached as exhibits or incorporated by reference in the pleadings. See FED.
R. CIV. P. 10(c); Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 335 (6th
Cir. 2007). All well-pleaded factual assertions in the nonmovant’s pleadings are accepted
as true and all contrary allegations in the movant’s pleadings are assumed to be false.
5C CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FED. PRAC. & PROC. CIV. § 1368 (3d ed.
2016) (citing Allah v. Al–Hafeez, 226 F.3d 247, 249–50 (3d Cir. 2000)).

The movant must establish that no material issue of fact remains to be resolved
and it is entitled to judgment as a matter of law. Jablonski v. Pan Am. World Airways, Inc.,
863 F.2d 289, 290–91 (3d Cir. 1988); Shelly v. Johns–Manville Corp., 798 F.2d 93, 97
n.4 (3d Cir. 1986). The motion can be granted only if the nonmovant cannot prevail under

31 Def.’s Mot. for J. on Plead. at 15-16 (Dkt. No. 19-1941, ECF No. 21); Def.’s Mot. for J. on
Plead. at 15-16 (Dkt. No. 19-2468, ECF No. 26).

32 Def.’s Mot. for J. on Plead. at 19 (Dkt. No. 19-1941, ECF No. 21); Def.’s Mot. for J. on Plead. at
19 (Dkt. No. 19-2468, ECF No. 26).
any set of facts. Green v. Fund Asset Mgmt., L.P., 245 F.3d 214, 220 (3d Cir.
2001); Turbe v. Gov't of V.I., 938 F.2d 427, 428 (3d Cir. 1991).
Analysis
Scope of Coverage Under the Policy
The policy is a “claims-made” policy limiting coverage to defined claims first made
during the policy period that arise from or relate to conduct occurring after the policy was
issued. RSUI contends that a February 2, 2015 letter demanding documents (“Demand
Letter”) and a June 2016 shareholder derivative lawsuit (“Derivative Action”) are prior

related acts that preclude coverage of the D’Ascenzo Action. Accordingly, it argues that
D’Ascenzo’s claims are not covered because they were first made in 2015, before the
policy period.
In February 2015, MainLine and Landman, through their attorney, sent the
Demand Letter to Vito expressing concerns over UTC’s business plan and Vito’s conduct
in running the business.33 MainLine and Landman contended in the Demand Letter that
UTC’s course had eroded shareholder value and expended over $11 million of MainLine’s
investment with no resulting value.34 They accused Vito of not having provided Landman
with the necessary information he had requested to serve as a director and not having
afforded Landman the opportunity to work on a functioning board.35 They also accused

Vito of ignoring corporate formalities and contractual commitments.36 They demanded
that Vito (1) discontinue self-dealing transactions without proper approval; (2) permit them

33 Def.’s Mot. for J. on Plead. Exh. 3 at 1 (Dkt. No. 19-1941, ECF No. 21).

34 Id.

35 Id.

36 Id. at ¶¶ 1-2.
to examine the share registrar and other books and records; (3) respect all corporate
formalities; and (4) investigate and confirm compliance with various anti-fraud, securities,
wage, and tax laws.37
In June 2016, MainLine and Landman filed the Derivative Action against Vito and

UTC in the Pennsylvania Court of Common Pleas for Montgomery County.38 The
complaint alleged that Vito was actively soliciting new investors with materials that
misrepresented UTC’s finances and concealed UTC’s poor performance.39 It also alleged
that Vito refused to cease his fundraising efforts and to allow the board to review and
approve the fundraising materials.40 They sought damages, an injunction against
fraudulent fundraising efforts, and a declaration that certain UTC securities offers had
expired and were invalid.41 The parties settled the Derivative Action a month later.42
RSUI contends the February 2, 2015 Demand Letter complaining of how Vito was
operating the business, and demanding that Vito produce certain documents and comply
with proper corporate governance formalities constitutes a claim under the policy. RSUI

argues that the D’Ascenzo Action is the same claim that MainLine and Landman made in
the Demand Letter. It also characterizes it as a claim arising out of related prior acts.
Although RSUI acknowledges that the Demand Letter, the Derivative Action, and
the D’Ascenzo Action each satisfy the policy’s definition of a “claim,” it maintains that the

37 Id. at ¶¶ 3-7.

38 Def.’s Mot. for J. on Plead. Exh. 4 (Dkt. No. 19-1941, ECF No. 21).

39 Id. at ¶¶ 44-45.

40 Id. at ¶¶ 42, 62-65, 97-98.

41 Id. at ¶¶ 103-112.

42 D’Ascenzo TAC at ¶ 73.
three must be treated as one claim. RSUI contends that the allegations in the Demand
Letter and the Derivative Action substantially overlap with the allegations in the
D’Ascenzo Action such that they are one interrelated claim under the policy. Under
RSUI’s view, this interrelated claim was “first made” upon service of the Demand Letter

in February 2015, outside the policy period. RSUI also argues that at least several counts
in the D’Ascenzo Action are based on allegations of wrongful conduct occurring before
the policy inception date of November 19, 2013. So, RSUI argues, the D’Ascenzo Action
is barred because it is based on pre-November 19, 2013 conduct.
There are similarities between the Derivative Action and the D’Ascenzo Action.
But, there are significant differences. The parties are different. The relief sought is
different. D’Ascenzo was not a party to the Derivative Action. He did not seek a seat on
the board of directors until after the Derivative Action was terminated.
The Demand Letter too was significantly different. D’Ascenzo was not making a
claim in that letter. MainLine and Landman were. Landman is now a defendant in the

D’Ascenzo Action. This is the first time a claim is made against him.
D’Ascenzo’s claim, although sounding much like MainLine and Landman’s, is not
the same. His claim goes beyond complaining of Vito’s failure to comport with corporate
formalities and self-dealing. It alleges irregularities in the December 2017 annual meeting
and the refusal to seat D’Ascenzo as a director. It seeks to place him on the board. The
factual bases for this claim did not exist before the inception of the policy.
Even if the Demand Letter were a claim, the insureds are not seeking a defense
or indemnity for it. Nor are they doing so for the Derivative Action. They demand that
RSUI provide a defense and indemnity for the D’Ascenzo Action only. RSUI must defend
them if the D’Ascenzo Action is not related to the Demand Letter or Derivative Action and
not based on wrongful conduct occurring before November 19, 2013.
Duty to Defend
An insurance carrier’s duty to defend is distinct from its duty to indemnify. It is
interpreted more broadly than the duty to indemnify. QBE Ins. Corp. v. Walters, 148 A.3d
785, 788 (Pa. Super. 2016) (quoting Kvaerner Metals Div. of Kvaerner U.S., Inc. v.

Commercial Union Ins. Co., 908 A.2d 888, 896 n.7 (2006)). An insurer may have a duty
to defend even though it may have no duty to indemnify. Id. (quoting Selective Way Ins.
Co. v. Hosp. Grp. Servs., Inc., 119 A.3d 1035, 1046 (Pa. Super. 2015) (en banc)). A duty
to indemnify does not arise until the insured is found liable for a covered claim. Id.
The duty to defend is determined solely from the allegations in the complaint in the
underlying action. Pac. Indem. Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985). Because
the duty to defend is broader than the duty to indemnify, the complaint in the underlying
action must be construed liberally. Id. (citing Frog, Switch & Mfg. Co. Inc. v. Travelers Ins.
Co., 193 F.3d 742, 746 (3d Cir. 1999)). The factual allegations are accepted as true, and
all doubts as to coverage are resolved in favor of the insured. QBE Ins. Corp., 148 A.3d

at 788 (citing Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 290 (2007)). To
prevent artful pleading designed to avoid policy exclusions, it is necessary to examine the
factual allegations in the complaint, not how the plaintiff in the underlying action frames
the request for relief. QBE Ins. Corp., 148 A.3d at 788 (citing Donegal, 938 A.2d at 291).
In other words, the focus of the coverage inquiry is on the substance, not the form, of the
allegations.
Whenever the complaint sets forth facts raising claims that could possibly come
within the policy’s coverage, the insurer’s duty to defend is triggered. Id.; Pac. Indem. Co.,
766 F.2d at 760. Any doubt whether the facts give rise to a duty to defend must be
resolved in the insured’s favor. Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d
526, 540-541 (Pa. 2010). Consequently, an insurer is obligated to defend the insured
against any suit arising under the policy even if the suit is “groundless, false, or fraudulent”

so long as there is a possibility of coverage. Selective Way Ins. Co., 119 A.3d at 1046
(citation omitted).
RSUI contends that it is excused from its duty to defend the insureds because
some allegations in the D’Ascenzo complaint overlap with those in the Demand Letter or
the Derivative Action. It seems to argue that because it may not have a duty to defend
some claims in the D’Ascenzo Action, it does not have a duty to defend any, no matter
when they arose. On the contrary, under Pennsylvania law, if a single claim in a multi-
claim complaint is potentially covered, the duty to defend attaches until the underlying
plaintiff can no longer recover on that covered claim. Nationwide Mut. Ins. Co. v. CPB
Int’l, Inc., 562 F.3d 591, 596 (3d Cir. 2009) (citing Frog, Switch & Mfg. Co. Inc., 193 F.3d

at 746). Thus, unless the related acts provision or the prior acts exclusion applies, RSUI
is obligated to defend the insureds in the D’Ascenzo Action as long as at least one claim
is potentially covered. Frog, Switch & Mfg. Co. Inc., 193 F.3d at 746.
Where the insurer relies on a policy exclusion as the basis for denying coverage,
the insurer has the burden of proving that the exclusion applies. Gen. Refractories Co. v.
First State Ins. Co., 855 F.3d 152, 158 (3d Cir. 2017) (citing Madison Constr. Co. v.
Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999)); Tuscarora Wayne Ins. Co. v.
Hebron, Inc., 197 A.3d 267, 272 (Pa. Super. 2018) (quoting Swarner v. Mut. Ben. Grp.,
72 A.3d 641, 645 (Pa. Super. 2013)). Policy exclusions are strictly construed against the
insurer. Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206-7 (3d Cir. 2001);
Tuscarora Wayne, 197 A.3d at 272 (quoting Swarner, 72 A.3d at 645).
Related Acts Provision
The policy’s “related acts” provision provides that:
All Claims based on, arising out of, directly or indirectly resulting from,
in consequence of, or in any way involving the same or related facts,
circumstances, situations, transactions or events, or the same or related
series of facts, circumstances, situations, transactions or events, shall
be deemed to be a single Claim for all purposes under this policy . . .
and shall be deemed first made when the earliest of such Claims is first
made, regardless of whether such date is before or during the Policy
Period.43

RSUI argues that the D’Ascenzo Action arises out of the same facts as the
Demand Letter and the Derivative Action. It highlights multiple overlapping allegations,
including: (1) the UTC board consisted of three seats; (2) Vito failed to nominate a third
director for Landman’s approval; (3) Vito and UTC failed to hold regular board meetings;
(4) an audit or special committee of independent directors is needed to conduct an internal
investigation into Vito’s and UTC’s conduct; (5) Vito and UTC did not provide adequate
information to shareholders and Landman when requested; (6) Vito and UTC have
ignored many corporate formalities; (7) Vito engaged in self-dealing transactions without
proper approval; and (8) Vito misrepresented UTC’s financial information to solicit new
investors.44 RSUI points out overlapping allegations concerning the various stock
purchase agreements and investor rights agreements between UTC, Vito, Landman, and

43 Def.’s Mot. for J. on Plead. at 11 (Dkt. No. 19-1941, ECF No. 21); Def.’s Mot. for J. on Plead. at
11-12 (Dkt. No. 19-2468, ECF No. 26).

44 Def.’s Mot. for J. on Plead. at 12 (Dkt. No. 19-1941, ECF No. 21); Def.’s Mot. for J. on Plead. at
12 (Dkt. No. 19-2468, ECF No. 26).
MainLine.45 RSUI also argues that D’Ascenzo’s own demand in April 2017 to inspect
UTC’s books and records “mirrored” the Demand Letter.46
The insureds assert that to exclude coverage under the related acts provision,
RSUI must show a “substantial overlap” between the facts alleged in the D’Ascenzo

Action and the facts alleged in the Demand Letter and the Derivative Action. They assert
that RSUI glosses over obvious distinctions between the D’Ascenzo Action and the
Demand Letter and the Derivative Action. They contend that the factual allegations
surrounding the December 2017 and January 2019 shareholder meetings and elections
comprise the core of the D’Ascenzo Action. The insureds concede that some allegations
in the D’Ascenzo Action overlap with the Demand Letter and the Derivative Action, but
they maintain these overlapping allegations do not form the basis for the relief D’Ascenzo
seeks in his Third Amended Complaint.
Some of the allegations in the D’Ascenzo Action are based on the same wrongful
acts alleged in the Demand Letter and the Derivative Action. In particular, Count VIII of

D’Ascenzo’s complaint calling for Vito’s removal from UTC’s board is predicated on Vito’s
allegedly fraudulent conduct in soliciting investment, engaging in self-dealing
transactions, and ignoring corporate formalities. These same allegations formed the basis
of the Demand Letter and the Derivative Action. D’Ascenzo includes allegations
concerning Vito’s allegedly fraudulent conduct and disregard for corporate formalities
throughout his complaint, without specifically tying the allegations to a particular count.

45 Def.’s Mot. for J. on Plead. at 12-13 (Dkt. No. 19-1941, ECF No. 21); Def.’s Mot. for J. on Plead.
at 12-13 (Dkt. No. 19-2468, ECF No. 26).

46 Def.’s Mot. for J. on Plead. at 13 (Dkt. No. 19-1941, ECF No. 21); Def.’s Mot. for J. on Plead. at
13 (Dkt. No. 19-2468, ECF No. 26).
Although Count VIII may be predicated on facts related to the Demand Letter and
the Derivative Action, the other ten counts are not. Construing the allegations in favor of
the insureds, we agree with them that the gravamina of Counts I through VII and Counts
IX through XI are the December 2017 and January 2019 shareholder meetings and

elections. D’Ascenzo alleges fraudulent conduct or disregard of corporate formalities in
some counts, but the request for relief does not rely on any of the allegations central to
the relief sought in the 2015 Demand Letter and the 2016 Derivative Action.
The earliest the conduct at the heart of these counts began was sometime in 2017,
when D’Ascenzo learned from UTC’s bylaws that the annual meeting of shareholders was
fixed for the third Monday in December.47 This event marked the beginning of
D’Ascenzo’s quest to launch a proxy bid for director and to compel UTC and Vito to hold
a shareholders meeting in December 2017. These events occurring in late 2017, 2018,
and early 2019 form the bases for the requests for relief in Counts I through VII and IX
through XI.48

At its core, the D’Ascenzo Action complains of the actions taken by the insureds
to deprive D’Ascenzo of a seat on the board of directors. The Third Amended Complaint
recounts events leading up to and during the annual meeting at which D’Ascenzo claims
he was elected to the board. These events occurred after the acts cited in the Demand
Letter and the Derivative Action. They are discrete acts and claims that did not exist prior

47 D’Ascenzo TAC at ¶ 174.

48 D’Ascenzo’s April 2017 demand to inspect UTC’s books and records similarly does not serve as
the point at which the claims in the D’Ascenzo Action were “first made.” The April 2017 demand letter
allegations are not related to the allegations forming the basis of the D’Ascenzo Action. The D’Ascenzo
Action is almost entirely predicated on allegations surrounding the December 2017 shareholder meeting
and election. D’Ascenzo’s demand and UTC’s response were part of the events leading up to this meeting
and election, not the basis of the relief sought in the complaint.
to the relevant policy periods. Therefore, the related claims provision in the policy does
not bar the majority of D’Ascenzo’s claims.
Prior Acts Exclusion
Coverage under the policy only applies to claims first made and reported during
the 2017-2018 policy period that do not arise from wrongful acts occurring prior to
November 19, 2013.49

The policy’s “prior acts” exclusion provides that:

The Insurer shall not be liable to make any payment for Loss in
connection with any Claim made against any Insured that alleges, arises
out of, is based upon or attributable to, directly or indirectly, in whole or
in part, any actual or alleged Wrongful Acts which first occurred prior to
November 19, 2013.50

RSUI argues the D’Ascenzo Action presents a “general scheme” to defraud
shareholders beginning as early as 2008. It highlights D’Ascenzo’s allegations that: (1)
certain provisions of UTC’s bylaws adopted in 2008 are “void and unconscionable” and
“point to a clearly laid out scheme of Vito’s intentions”; (2) Vito and UTC have failed to
adhere to corporate formalities since 2008; and (3) Vito engaged in self-dealing
transactions beginning in 2009. RSUI argues these allegations of pre-November 19, 2013
conduct apply to Landman as well because D’Ascenzo alleges Landman participated in
self-interested transactions and disregarded corporate formalities as soon as he became
a director on November 7, 2013, continuing Vito’s “general scheme” to defraud
shareholders. RSUI also argues that the prior acts exclusion still applies because the

49 Def.’s Mot. for J. on Plead. at 15-16, 19 (Dkt. No. 19-1941, ECF No. 21); Def.’s Mot. for J. on
Plead. at 15-16, 19 (Dkt. No. 19-2468, ECF No. 26).

50 Def.’s Mot. for J. on Plead. at 16 (Dkt. No. 19-1941, ECF No. 21); Def.’s Mot. for J. on Plead. at
16 (Dkt. No. 19-2468, ECF No. 26).
allegations against Landman are based on alleged wrongful acts that occurred before
November 19, 2013.
The insureds reiterate that the core of D’Ascenzo’s complaint is his claim
surrounding the UTC board election. They argue the election-related claims depend

solely on facts occurring in 2017 or later. They concede that Count VIII may be based on
pre-November 19, 2013 conduct. However, they maintain that the “overwhelming focus”
of the D’Ascenzo Action is on the board election and most of the allegations concerning
pre-November 19, 2013 conduct are “extraneous.”
RSUI counters that numerous allegations of pre-November 19, 2013 conduct form
the basis of the election allegations. It argues that the “arising out of” language in the prior
acts exclusion means “but-for” causation. RSUI points out that the various agreements
entered between UTC, Vito, Landman, and MainLine fixed the board membership at three
directors and one had been open since November 2013. RSUI argues these allegations
directly underpin the election counts because they show that the board had an open third

seat and the insureds’ allegedly fraudulent conduct motivated D’Ascenzo to run for the
vacant seat. According to RSUI, “but-for” the insureds’ pre-November 19, 2013 actions,
there would be no election claims in 2017 and 2019.
It does not matter how long a third seat on the board had been vacant. What
matters is when D’Ascenzo was denied that seat. D’Ascenzo claims he was elected in
December 2017 and has been deprived of the seat since then. He filed the underlying
lawsuit in June 2018. Both the election and the filing of the lawsuit occurred during the
policy period. Whether the third seat had existed and had been unfilled for years before
2017 is not relevant. Each seat on the board was available to be filled by election on an
annual basis. Consequently, each seat was a new one each year. No one made a claim
to a third seat until D’Ascenzo did in 2017.
Some counts in the D’Ascenzo Action may be based on conduct occurring before
November 19, 2013. Count VIII is clearly predicated on specific allegations of Vito’s

fraudulent conduct and disregard for corporate formalities beginning before the prior acts
cut-off date and continuing through the December 2017 meeting and election. These
allegations form the basis for the relief sought in Count VIII because D’Ascenzo argues
these actions disqualify Vito from serving on UTC’s board. Count VI arguably involves
pre-November 19, 2013 conduct because it is based on allegedly unconscionable and
void bylaw provisions adopted in 2008.
The remaining nine counts are based entirely on events surrounding the 2017 and
2019 elections. Unlike Counts VI and VIII, the substance of the remaining counts are
actions the insureds took to prevent the December 2017 election and to hinder
D’Ascenzo’s efforts after the election, including holding another election in January 2019.

These actions began in 2017. In other words, the pre-November 19, 2013 conduct was
not a necessary “but-for” cause of the election claims.
Conclusion

We conclude that because the D’Ascenzo Action includes claims based on
allegations that are not related to the Demand Letter or the Derivative Action, or to
conduct occurring before November 19, 2013, RSUI must defend the insureds. If the jury
finds for D’Ascenzo on any of the covered counts in the state court action, RSUI will have
a duty to indemnify them. Therefore, we shall deny RSUI’s motions for judgment on the
pleadings.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10398295. Public record. Not legal advice.