TIG Ins. Co. of Michigan v. Homestore, Inc.

Homestore, Inc., and several of its officers and directors, Barbara Alexander, Michael A. Buckman, M. Jeffrey Chamey, L. John Doerr, Joseph E. Hanauer, William E. Kelvie, Kenneth M. Klein, Terrence M. McDermott, Allan P. Merrill, Evelyn Yalung and Stuart H. Wolff (Appellant Insureds), appeal from the judgment entered after an order granting summary judgment for TIG Insurance Company of Michigan (TIG) in an action seeking rescission of Homestore’s directors and officers (D&O) liability insurance policy. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Securities Claims and Criminal Investigation

Homestore, a publicly traded company, is an Internet-based provider of residential real estate listings and related content. Homestore appeared to be performing well during fiscal year 2000 and the first quarter of 2001. However, in December 2001 Homestore announced the audit committee of its board of directors had begun an inquiry into the company’s accounting methods and it would restate certain of its financial statements.

Soon after Homestore’s announcement shareholders began filing federal securities class action and derivative liability lawsuits against Homestore and…