The United States Court of Appeals for the Third Circuit, applying Delaware law, has held that a D&O policy’s Major Shareholder Exclusion, barring claims brought against the insured entity by a company owning five percent or more of the entity, was ambiguous as applied to a company acquiring one hundred percent of the insured’s stock after the policy period.  EMSI Acquisition, Inc. v. RSUI Indem. Co., 2019 WL 4511948 (3d Cir. Sept. 19, 2019).  The court also rejected the insurer’s argument that the insured’s settlement with the acquiring company did not constitute “Loss” under the policy.

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Applying Delaware law, a Delaware state trial court has held that insurers did not act in bad faith by denying coverage for underlying settlements when they had reasonable grounds for their position and promptly sought a declaratory judgment as to their indemnification responsibilities.  Arch Ins. Co. v.  Murdock., 2019 WL 1932536 (Del. Super. Ct. May 1, 2019).

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Ruling on summary judgment, the Delaware Chancery Court has held that forum selection clauses in three separate companies’ corporate charters requiring that any claims under the Securities Act of 1933 be brought in federal court are “ineffective and invalid.”  Sciabacucchi, et al. v. Salzberg, et al., C.A. No. 2017-0931-JTL (Del. Ch. Dec. 19, 2018).  In doing so, the court noted that the source of the 1933 Act claims was federal law, distinct from any right created under Delaware law, and thus beyond the power of the companies to control through their bylaws in this manner.

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The Supreme Court of Delaware has held that under Delaware law, the three-year statute of limitations period applicable to a statutory bad faith action governed by Louisiana law commences when the insured could plead a prima facie case and was therefore barred.  Homeland Ins. Co. of New York v. Corvel Corp., 2018 WL 6061261 (Del. Nov. 20, 2018).

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Applying Delaware law, a Delaware state court has held that a policy’s “capacity” exclusion precluded coverage for two directors because the claims filed against those directors would not have been established “but for” the directors’ alleged misconduct related to third-party investment entities the directors formed to control the insured company.   Goggin v. National Union Fire Ins. Co. of Pittsburgh, 2018 WL 62661195 (Del. Sup. Ct. Nov. 30, 2018).

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In a case that was briefed and argued by Wiley Rein in the trial court and on appeal, along with Fox Rothschild LLP as Delaware local counsel, the Delaware Supreme Court held that Texas law applies to a comprehensive insurance program issued to a Texas corporation and its subsidiaries nationwide.  The Travelers Indemnity Company v. CNH Industrial America, LLC, No. 420, 2017 (Del. July 16, 2018).  The Court reversed a decision of the Superior Court holding that Wisconsin law applied and, as a result, that the anti-assignment provisions of the policies at issue were unenforceable.  Noting that it was undisputed that the anti-assignment provisions are enforceable under Texas law, the Court reversed the nearly $14 million judgment in favor of the purported assignee of rights under the policies and directed entry of judgment for the insurer.

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In a win for Wiley Rein’s client, the United States District Court for the Central District of California has held that a prior acts exclusion in a management liability policy bars coverage for a securities lawsuit brought by shareholders alleging misrepresentations before the prior acts date and continuing after the prior acts date.  Jayhawk Private Equity Fund II LP v. Liberty Ins. Underwriters, Inc., No. 17-cv-5523 (C.D. Cal. June 7, 2018).

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The Superior Court of the State of Delaware, applying Delaware and Kansas law, has held that an insurer owed a duty to pay defense costs under a directors and officers liability policy for a lawsuit primarily alleging the misappropriation of trade secrets, despite a misappropriation exclusion, on the basis that the underlying complaint asserted a claim alleging computer fraud not excluded by the policy.  WoodSpring Hotels LLC v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, Case No. N17C-09-274 (Del. Super. Ct., May 2, 2018).

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The Delaware Chancery Court has dismissed an action brought by three plaintiffs’ law firms seeking legal fees in connection with merger litigation that was initially successful, but which ultimately failed on appeal when the transaction closed and the objector lost standing.  Bragar Eagel & Squire, PC, et al. v. Kinder Morgan Energy Partners, LP, et al., C.A. No. 2017-0841-JTL (Del. Ch. Apr. 9, 2018).  The court determined that principles of res judicata required that it reject the firms’ subsequent action to recover fees and that, even if that were not the case, the firms’ prior efforts had not produced a “cognizable benefit” for the objecting plaintiff sufficient to justify a fee award.

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