Executive Summary Blog

Executive Summary Blog

Legal developments affecting professional liability insurers

Tag Archives: Delaware

Delaware Supreme Court Holds Trustee Action Alleging Breach of Fiduciary Duty, Unlawful Dividend, and Fraudulent Transfer Is Not a “Securities Claim”

Posted in “Claim”
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 duty, unlawful dividend, and fraudulent transfer because the lawsuit is not a “Securities Claim” under the policies.  In re Verizon Insurance Coverage Appeals, C.A. No. 558, 2018 (Del. Oct. 31,… Continue Reading

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

Posted in Insured v. Insured Exclusion, Loss
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… Continue Reading

Dole Insurers Did Not Act in Bad Faith

Posted in Bad faith/duty to settle
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… Continue Reading

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

Posted in Corporate Considerations
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… Continue Reading

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

Posted in Bad faith/duty to settle, Notice of Claim
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.… Continue Reading

“Capacity” Exclusion Bars Coverage for Two Directors for Claims of Wrongdoing and Fiduciary Breaches Outside Their Insured Capacity

Posted in Uncategorized
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… Continue Reading

Delaware Supreme Court Holds Texas Law Applies to Comprehensive Insurance Program Issued to a Texas Corporation and Its Subsidiaries

Posted in Uncategorized
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.… Continue Reading

Court Holds Prior Acts Exclusion Bars Coverage for Securities Lawsuit

Posted in Prior Knowledge/Warranty Exclusion
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… Continue Reading

Computer Fraud Claim Triggers Insurer’s Duty to Pay Defense Costs Despite “Gravamen” of Litigation Involving Excluded Misappropriation Claims

Posted in Allocation
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… Continue Reading

No Legal Fees for M&A Objector Where Transaction Resulted in Loss of Standing to Object

Posted in Corporate Considerations
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… Continue Reading

No Second Bite for Derivative Plaintiffs: Delaware Supreme Court Rebuffs Invitation to Undermine Preclusive Effect of Prior Unsuccessful Derivative Action

Posted in Corporate Considerations
The Delaware Supreme Court, once again addressing questions of issue preclusion in the context of shareholder derivative litigation, has rejected suggestions by the Chancery Court that giving preclusive effect to initial, unsuccessful efforts to litigate demand futility violates the Due Process rights of shareholders attempting to bring a subsequent action elsewhere. California State Teachers’ Retirement… Continue Reading

No Coverage for $3.5 Million in Pre-Notice Defense Expenses Where Notice Was a Year Late

Posted in Consent to settle/incur defense costs, Defense Costs, Notice of Claim
Applying Delaware law, a federal court in New York has held that where an insured waited more than a year to report a lawsuit to its insurer and during that period incurred more $3.5 million in legal fees, the insurer had no obligation to pay pre-tender defense costs, without regard to whether the insurer could… Continue Reading

Inviting a Second Bite at the Apple: Delaware Chancery Court Suggests New Approach to Evaluating Preclusive Effect of Prior Unsuccessful Derivative Litigation

Posted in Corporate Considerations
In response to the Delaware Supreme Court’s question in connection with remand, the Delaware Chancery Court has suggested reevaluation of its prior willingness to dismiss subsequent derivative litigation where an earlier derivative action has been dismissed due to demand futility.  In re Wal-Mart Stores, Inc. Delaware Derivative Litigation, C.A. No. 7455-CB (consol.), supp. op. (Del.… Continue Reading

Specific Litigation Exclusion Bars Coverage When Claim Arises “At Least in Part” From Excluded Litigation

Posted in Related Claims and associated exclusions
An Illinois district court, applying Delaware law, has held that a specific litigation exclusion in a company’s directors and officers insurance policy bars coverage for a claim arising “at least in part” from the litigation referenced in the exclusion.  RSUI Indem. Co. v. Worldwide Wagering, Inc, 2017 WL 3023748 (N.D. Ill. Jul. 17, 2017).… Continue Reading

No “Final Adjudication” Where Parties Settled After Court Issued Opinion But Prior to Judgment

Posted in Dishonesty Exclusion
The Delaware Superior Court, purporting to apply Delaware and California law, has held that there was no “final adjudication” for purposes of triggering a conduct exclusion where the parties to the underlying action settled after the court issued an interlocutory memorandum opinion containing findings of fraud.  Arch Ins. Co. v. Murdock, 2016 WL 7414218 (Del.… Continue Reading

Settlement of Class Actions for Allegedly Withheld Profits Not Disgorgement

Posted in Defense Costs, Loss, Public Policy prohibition on insurance
Applying New York and Delaware law, the Superior Court of Delaware has held that a retirement benefits provider’s settlement of three class actions seeking payment of alleged profits did not constitute disgorgement and was insurable under the provider’s professional liability policies.  TIAA-CREF Individual & Institutional Servs. LLC v. Illinois Nat’l Ins. Co., 2016 WL 6534271… Continue Reading

Absent Prejudice, Untimely Notice Does Not Preclude Coverage if Notice Provided During Renewal Policy Period

Posted in “Claim”, Notice of Claim
The Delaware Superior Court, applying Delaware law, has held that an insured’s failure to provide timely notice of a claim during the applicable claims-made policy period does not preclude coverage when the insured renewed the policy and provided notice of the claim during the renewal policy period, unless the insurer can prove prejudice as a… Continue Reading

Insured v. Insured Exclusion, Allocation Do Not Apply to Related Claims

Posted in Allocation, Collusion, Insured v. Insured Exclusion
A Delaware trial court has affirmed its ruling that an Insured v. Insured exclusion does not apply to a shareholder derivative demand brought by a director of the company because the demand constitutes a single Claim with an earlier demand made by the same individual before he became a director. Ameritrans Capital Corp. v. XL… Continue Reading