It is time for corporate insureds to reevaluate whether they need to add entity coverage to their D&O insurance programs for SEC and other administrative investigations.

The U.S. Court of Appeals for the Tenth Circuit recently affirmed summary judgment in favor of a D&O carrier, finding no coverage under Colorado law for legal fees and expenses associated with a pre-Wells Notice SEC investigation of the insured organization.

In MusclePharm Corp. v. Liberty Ins. Underwriters, Inc., Case No. 16-1462 (10th Cir. Oct. 17, 2017), the court issued an unpublished decision in which it decided the SEC’s investigation leading up to its issuance of a “Wells Notice” to the plaintiff did not fall under the policy definition of “claim” because it did not allege a “wrongful act” during the policy period.