AT&T Option Coverage Suit Rightly Tossed: Court

By Julie Zeveloff

Law360, New York (August 07, 2009) -- A New Jersey appeals court has affirmed motions to dismiss in AT&T
Corp.'s coverage suit against two separate fiduciary insurance programs
over litigation stemming from adjustments to a stock option plan issued
to former MediaOne Group Inc. executives following the
AT&T-MediaOne merger.

The opinion, handed down Monday by the
New Jersey Superior Court Appellate Division, says a state court
properly dismissed the telecommunications company's claims against
primary insurers Certain Underwriters at Lloyd's London and National
Union Fire Insurance Co. of Pittsburgh, as well as several excess
insurers.

AT&T sought coverage for five actions, including a
suit in the Delaware Chancery Court filed by former executives and
directors of MediaOne who sought access to stock options. That suit,
known as the Lillis action, recently resulted in an $11.3 million
damages award against the company.

The other four actions, also
brought by former MediaOne employees and filed in various courts,
either are in arbitration or have been settled.

In affirming the
dismissals, the appeals court considered the varied arguments of
AT&T and the separate insurance programs and found that neither
tower was liable to AT&T for damages and defense costs.

AT&T
first contended that it was covered under the Lloyd's tower of coverage
because the Lillis action was based on negligent conduct and the trial
court improperly failed to look beyond breach-of-contract labels in the
complaint, according to Monday's opinion.

The telecommunications
company also argued that the trial court erred in finding that the
plaintiffs in the Lillis action did not make allegations that involved
plan “administration,” because that term

MORE:  http://securities.law360.com/articles/115590