Seattle-based Cutter & Buck Inc. announced that the Company has received notice that its primary directors’ and officers’ liability insurance carrier is attempting to rescind the Company’s directors’ and officers’ liability insurance coverage.
In a letter the Company, Genesis Insurance Company, the Company’s primary D&O insurance carrier, alleged that Washington law permits the carrier to rescind the policy as a result of the circumstances underlying the Company’s recent decision to restate its historical financial results. The Company disagrees with the rationale given by the insurer for its action and does not believe that the insurer is entitled to rescind the policies it issued to the Company. The Company has initiated contact with the insurer to discuss this matter. Should those discussions fail to result in a satisfactory outcome, the Company will consider formally disputing the insurer’s decision to rescind the coverage.
As previously announced, the Company and certain of its current and former officers are currently defendants in three class action securities lawsuits, and one shareholder derivative suit. While suits of this type may be costly, these suits are still in preliminary stages and the Company is not in a position to quantify the range of potential costs related to this litigation. The Company has submitted claims to its D&O insurers with respect to each of these suits. If the Company’s primary D&O insurer is permitted to rescind its coverage, then the Company would likely be responsible to bear the full consequences of the pending litigation.
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