Reversing the trial court, the Delaware Supreme Court has held that an appraisal proceeding does not constitute a “Securities Claim” under a D&O policy.  In re Solera Insurance Coverage Appeals, Nos. 413,2019 and 418,2019 (Del. Oct. 23, 2020).

Continue Reading Delaware Supreme Court Holds that Appraisal Proceeding is not a “Securities Claim”

A Texas court of appeals found no coverage under two excess directors and officers liability policies for an appraisal action brought by dissenting shareholders to a merger pursuant to Section 262 of the Delaware General Corporation Law.  Zale Corp. v. Berkley Ins. Co., 2020 WL 4361942 (Tex. Ct. App. July 30, 2020).  The court held that the litigation right created by the appraisal statute turns on the act of executing the merger and not on any “wrongful act” preceding the merger.  Thus, because the merger was consummated after the policy period, there was no “wrongful act” during the policy period sufficient to trigger coverage for the appraisal suits.

Continue Reading Texas Court Holds “Instrumental Act” in Appraisal Litigation is Execution of Merger

The United States District Court for the District of New Jersey, applying Delaware law, has held that an exclusion precluding coverage for misappropriation of trade secrets in a directors and officers liability policy barred coverage for a claim brought against the insured by a competitor alleging the negligent failure to supervise an employee.  Sprout Health, LLC v. RSUI Indem. Co., 2020 WL 2507776 (D.N.J. May 15, 2020).  The court determined that the negligence count was “directly contingent” on a showing that the insured’s employee misappropriated the competitor’s trade secrets.

Continue Reading Negligent Failure to Supervise Claim Barred by Misappropriation of Trade Secrets Exclusion

The Delaware Supreme Court today handed securities defendants a major victory, concluding that forum selection provisions in Delaware companies’ registration statements that required that certain securities litigation be brought solely in federal district court were facially valid.  Salzberg, et al. v. Sciabacucchi, Case No. 314 2019 (Del. Mar. 18, 2020).  In doing so, it overturned the Delaware Chancery Court’s previous conclusion that such provisions were unenforceable to the extent that they required any claim under the Securities Act of 1933 (the 1933 Act) to be filed exclusively in federal court.

Continue Reading Delaware Supreme Court Reverses Chancery Court; Concludes Federal Forum Selection Provisions Enforceable For 1933 Act Claims

In a matter of first impression, the Delaware Superior Court has adopted the “larger settlement rule” to govern allocation of settlement amounts where (i) a settlement resolves, at least in part, insured claims; (ii) the parties cannot agree as to the allocation of amounts attributable to covered versus non-covered claims; and (iii) the policy’s allocation provision does not prescribe a specific allocation method.  Arch Ins. Co. v. Murdock, No. N16C-01-104 (Del. Super. Ct. Jan. 17, 2020).

Continue Reading Delaware Adopts Larger Settlement Rule

The Delaware Supreme Court has held that D&O policies do not afford coverage for an underlying lawsuit asserting causes of action for breach of fiduciary
Continue Reading Delaware Supreme Court Holds Trustee Action Alleging Breach of Fiduciary Duty, Unlawful Dividend, and Fraudulent Transfer Is Not a “Securities Claim”

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.

Continue Reading Third Circuit Finds Major Shareholder Exclusion Ambiguous as Applied to Company Acquiring All of Insured’s Stock after Policy Period

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).

Continue Reading Dole Insurers Did Not Act in Bad Faith

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.

Continue Reading Delaware Chancery Court Rules Federal Forum Selection Clause in Corporate Charter Unenforceable

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).

Continue Reading Statute of Limitations Period Begins When Insured Can Plead Prima Facie Elements of Bad Faith Case