I’m not sure we’ve ever had the opportunity to describe a Business Court opinion as "epic" before, but here we are. On Friday, in State v. Custard, the Court delivered a 70-page, 4-appendix opinion that’s the corporate governance equivalent of The Ten Commandments or Ben-Hur. In addition to a thorough discussion of directors’ duties under North Carolina and Delaware law, the opinion answers four previously unanswered questions posed in the Robinson on North Carolina Corporation Law treatise that occupies a prominent shelf in every North Carolina business lawyer’s library.
Custard was a breach of fiduciary duty case brought by the Commissioner of Insurance as the liquidator of Commercial Casualty Insurance Company of North Carolina ("CCIC") against three directors of CCIC. To make a long story short, CCIC focused on "artisan" liability insurance policies for small contractors and tradesmen in California. For a period of time, it also offered non-standard auto policies in North Carolina and redomesticated itself from Georgia to North Carolina in 2001, thus becoming subject to NCDOI regulation. In hindsight, CCIC set its premiums too low and wrote too many policies. As the Court tactfully phrased it, "CCIC’s growth outperformed the Company’s ability to generate policyholder surplus." It became insolvent in 2004.
Key points from Judge Tennille’s opinion include:
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