Item 8.01. Other Events.
As previously reported, on June 29, 2022, AmTrust International Underwriters DAC
("AmTrust"), which was the premerger directors' and officers' insurance policy
underwriter for 180 Life Sciences Corp. (the "Company", "we" and "us"), filed a
declaratory relief action against the Company in the U.S. District Court for the
Northern District of California (the "Declaratory Relief Action") seeking
declaration of AmTrust's obligations under the directors' and officers'
insurance policy. In the Declaratory Relief Action, AmTrust is claiming that as
a result of the merger, the Company is no longer the insured under the subject
insurance policy, notwithstanding the fact that the fees which the Company seeks
to recover from AmTrust relate to matters occurring prior to the merger.
On September 20, 2022, the Company filed its Answer and Counterclaims against
AmTrust for bad faith breach of AmTrust's insurance coverage obligations to the
Company under the subject directors' and officers' insurance policy, and seeking
damages of at least $2 million in compensatory damages, together with applicable
punitive damages. In addition, the Company brought a Third-Party Complaint
against its excess insurance carrier, Freedom Specialty Insurance Company
("Freedom") seeking declaratory relief that Freedom will also be required to
honor its policy coverage as soon as the amount of AmTrust's insurance coverage
obligations to the Company have been exhausted.
On October 25, 2022, AmTrust filed its Answer to the Company's Counterclaims
and, on October 27, 2022, Freedom filed its Answer to the Third-Party Complaint.
On November 22, 2022, the Company filed a Motion for Summary Adjudication
against both AmTrust and Freedom. The Motion was fully briefed, and a hearing
was held on March 9, 2023. The standard to prevail on a Motion for Summary
Adjudication in the Court is high to prevail and requires a judge to find that
there are no disputed issues of fact so that they can rule on the issues as a
matter of law. In this instance the judge found three major issues could be
decided as a matter of law in the Company's favor and that one issue, the Change
in Control exclusion, requires further discovery.
On April 21, 2023, the Court issued an Order Granting in Part and Denying in
Part the Company's Motion for Partial Summary Judgment. Specifically, the Court
granted summary adjudication in favor of the Company on the following issues:
(a) that the Company is, in fact, an insured under both the AmTrust and Freedom
insurance policies; (b) that certain Securities and Exchange Commission (SEC)
subpoena related expenses for defendants Dr. Marlene Krauss, the Company's
former Chief Executive Officer and Director, and George Hornig, the former
Chairman of the Board , are within the basic scope of coverage under both the
AmTrust and Freedom insurance policies; and (c) that the Insured vs. Insured
exclusion relied upon by AmTrust and Freedom is not applicable to bar any such
coverage.
The Court also found that there were issues of disputed facts as to the Change
in Control exclusion contained within the policies, which therefore precluded
the Court from granting the remainder of the Company's requests for summary
adjudication as a matter of law. Accordingly, the Court, at this time, denied
the Company's further requests for summary adjudication and deemed that for the
time being, the Change in Control issue is to be determined at the time of
trial, in order to find that the policies (i) provide coverage for the fees
which the Company has advanced and will advance to Dr. Marlene Krauss and George
Hornig; (ii) that AmTrust has breached the policy; (iii) that AmTrust must pay
such expenses of the Company; and that, once the AmTrust policy has been
exhausted, (iv) Freedom will be obligated to pay such expenses of the Company
pursuant to its policy. The Company intends to continue to vigorously pursue
this final matter in order to establish the Company's entitlement to full
payment by both AmTrust and Freedom of the subject advancement expenses of the
Company.
While the Company continues to believe it has a strong case against both AmTrust
and Freedom, and believes the Court ruling in its favor in regards to the
matters discussed above is a significant positive outcome for the Company, there
can be no assurance that the Company will prevail in this action.
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