This decision holds that insurance in the form of an indemnity bond or a D&O policy may cover losses suffered as a result of the Madoff fraud. The application of a bond to such claims may surprise some as Madoff was not an employee whose dishonesty was the cause of the loss. However, as the Court notes, the bond at issue was written very broadly and may well cover dishonesty of such third persons.
In this decision, the Superior Court ruled sua sponte that it lacked subject matter jurisdiction over an action seeking declaratory relief and requesting the appointment of an arbitrator. The court held that under 10 Del. C. § 5704 the Court of Chancery has exclusive jurisdiction to appoint an arbitrator when the parties’ agreed upon method of appointment fails for any reason.
Kempski v. Toll Bros., Inc., 2008 WL 4642633 (D. Del. Oct. 21, 2008)
In this opinion, the District Court reinforced Delaware’s law that indemnity provisions that require one party to indemnify another party for the second party’s own negligence are void as against Delaware’s public policy. Here the Defendant, Toll Brothers, Inc., contracted with Delaware Heating and Air Conditioning Services, Inc. (“DHAC”), to perform HVAC work on Defendant’s housing developments. One of DHAC’s employees was injured while performing the work, and sued Defendant. Defendant sought indemnification from DHAC pursuant to their contract. Both Defendant and DHAC sought summary judgment on the indemnification claim. The Court found that under Delaware law, the contractual indemnification provision that Defendant sought to invoke was against Delaware public policy, and granted summary judgment for DHAC.
Continue Reading...When one company acquires several other companies, which carry their own D&O liability coverage, the resulting entity then holds multiple towers of coverage.
Here, the company held multiple towers of coverage and sought reimbursement for the defense costs it was advancing to certain of its officers and directors who were prosecuted in a criminal case. The issue that arose on summary judgment was whether the court had to allocate the defense costs across the multiple towers, while the criminal case was ongoing.
Since none of the contracts required such an allocation, the court held that the insured company could elect to collect payments in advance from any tower and that the court would not mandate allocation at this stage. The court left open the possibility that allocation could be required at a future time, presumably upon final disposition of the case.
Federal Ins. Co. v. Hilco Capital, LP, 2008 WL 3021109 (Del. Super. Ct. Aug. 5, 2008).
This coverage dispute arises out of the settlement of an underlying breach of fiduciary duty action. The plaintiffs and defendants (insureds) in that underlying action, along with the first-layer D&O carrier, reached a settlement agreement without the consent of the excess liability carrier, despite the settlement implicating that policy.
The excess liability carrier objected to the settlement arrangement and refused to consent. The plaintiffs informed the insureds that it would not seek to recover any part of the judgment from them if they agreed to the settlement, despite the excess liability carrier’s lack of consent.
Continue Reading...AT&T v. Clarendon America Ins. Co., C.A. No. 04C-11-167-JRJ (Del. Super. Ct. June 25, 2008).
This decision will be of interest to any parties drafting or negotiating D&O policy exclusions.
This coverage dispute arose out of stockholder litigation brought against certain AT&T directors, alleging false and misleading statements. That action settled during trial, with AT&T agreeing to pay $100 million to the plaintiffs. National Union, AT&T’s excess D&O carrier, denied coverage.
The issue before the Superior Court here, on AT&T’s motion for partial summary judgment, was whether National Union could deny coverage based on the policy’s fraud exclusion. AT&T argued that the fraud exclusion requires an adjudication and does not apply to settlements.
Continue Reading...This case is an insurance coverage dispute between Tyson Foods, Inc., and certain of its underwriters over damages caused by Hurricane Katrina. The underwriters filed two declaratory judgment actions in Delaware seeking denial of coverage. Two weeks later Tyson filed an action in Mississippi. Tyson then moved to dismiss or stay the Delaware action.
The Superior Court found that the underwriters’ Delaware action was first filed. The court then applied the Cryo-Maid factors to determine if the Delaware action should nonetheless be dismissed or stayed on forum non conveniens grounds. The court considered (1) whether Delaware law governs the case; (2) the relative ease of access to proof; (3) the availability of compulsory process for witnesses; (4) the possibility of a view of the premises; (5) the pendency or nonpendency of a similar action or actions in another jurisdiction; and (6) all other practical considerations that would affect the trial.
Continue Reading...MBIA Ins. Corp. v. Royal Indem. Co., 2007 WL 3125319 (D.Del. Oct. 25, 2007)
In this opinion the District Court resolved cross-motions for summary judgment on the defendant’s counterclaim for breach of contract. The relationship between the plaintiffs and the defendant arose out of the underwriting of student loans. Student Finance Corporation (“SFC”) underwrote loans to students using funds from banks, then allegedly fraudulently issued “forbearance payments” in order to hide delinquent and defaulting loans. SFC transferred the loans to several trusts, which then issued fixed income notes, called Certificates, to investors. Plaintiff #1 was the trustee of trusts holding the securitized student loans. Defendant insured the loans that backed the Certificates with insurance policies that unconditionally guaranteed the students’ repayment of principal plus 90 days interest. Plaintiff #2 guaranteed payment of the Certificates in the event that the Defendant failed to honor its policies on the loans. Plaintiffs sued Defendant seeking to enforce its unconditional guarantee to repay the loans. Defendant counterclaimed against Plaintiff #1 for breach of contract, arguing that Plaintiff #1 did not adequately fulfill its oversight responsibilities under applicable Pool Servicing Agreements (“PSAs”) with respect to the servicing of the loans, and thus did not discover the allegedly fraudulent forebearance payments, resulting in Defendant engaging in continual transactions with SFC. Plaintiffs’ claim for enforcement of Defendant’s guarantee obligation was settled, leaving the Court only Defendant’s counterclaim to resolve.
Continue Reading...Alcoa Inc. v. Alcan Inc., 2007 WL 2083813 (D.Del. July 17, 2007)
In this action for declaratory judgment, Plaintiff sought a ruling that it was not liable to various Defendants for the clean-up costs associated with environmental contamination on a property Plaintiff formerly owned. Plaintiff sold the contaminated property to Defendant 1 pursuant to an acquisition agreement that provided for a 12 year indemnification for certain environmental liabilities. Defendant 1 then sold the property to Defendant 2 with a separate indemnification agreement. Defendant 3 later acquired Defendant 2 and its subsidiary. When Defendant 3 sought to sell the contaminated property to the city in which the property was located, the city first required, both as part of the purchase agreement and through a letter to Plaintiff, that the contamination be sufficiently remedied. Defendant 3 sought indemnification from Defendant 1, which then sought indemnification from Plaintiff. Plaintiff responded to the city’s letter that Defendant 3 was responsible for the clean up, and rejected Defendant 1’s indemnification demand under the argument that it was outside the scope of the acquisition agreement. Plaintiff sought declaratory judgment that it was not liable to any of the Defendants. Defendant 1 moved to dismiss under F.R.C.P. Rule 12(b)(7) for failure to join an indispensable party, arguing that Plaintiff should have joined the city.
Continue Reading...Alcoa Inc. v. Alcan Inc., C.A. No. 06-451-SLR (D.Del. July 17, 2007)
In this action for declaratory judgment, Plaintiff sought a ruling that it was not liable to various Defendants for the clean-up costs associated with environmental contamination on a property Plaintiff formerly owned. Plaintiff sold the contaminated property to Defendant 1 pursuant to an acquisition agreement that provided for a 12 year indemnification for certain environmental liabilities. Defendant 1 then sold the property to Defendant 2 with a separate indemnification agreement. Defendant 3 later acquired Defendant 2 and its subsidiary. When Defendant 3 sought to sell the contaminated property, the contamination was detected. Defendant 3 sought indemnification from Defendant 1, which then sought indemnification from Plaintiff. Plaintiff rejected the indemnification demand under the argument that it was outside the scope of the acquisition agreement, and sought declaratory judgment that it was not liable to any of the Defendants. Defendant 3, a Canadian corporation, moved to dismiss for lack of personal jurisdiction.
Continue Reading...This insurance coverage action is an offshoot of the highly publicized, allegedly fraudulent scheme devised by Lord Conrad Black and other inside directors of Plaintiff Sun-Times Media Group (formerly “Hollinger International”) to deceive the corporation and misappropriate hundreds of millions of dollars.
The plaintiffs claim to have incurred over $20 million in defense costs—and allege that they will incur nearly $20 million more—to defend themselves and their agents in multiple lawsuits resulting from this conduct, including a securities class action filed in Illinois (“Illinois Class Action”). Specifically, Plaintiff Sun-Times Media brought this action, seeking a declaration of coverage under its excess D&O insurance policies issued by the defendants. The plaintiffs argued that the defendants were obligated to pay those defense costs and had wrongfully refused to do so.
To this end, early in the litigation, Plaintiff Sun-Times Media moved for partial summary judgment, seeking a declaratory judgment that certain insurer defendants had a duty under applicable policies to pay past and future defense costs incurred in the Illinois Class Action. The defendants countered by moving to dismiss or stay the plaintiffs’ entire complaint, citing McWane and forum non conveniens. The court ruled on both motions, issuing separate opinions.
Continue Reading...The parties filed cross-motions for summary judgment on counterclaims in an ongoing declaratory judgment action. The plaintiff, TIG Insurance Company ("TIG"), sought a declaration that it was only liable to pay an allocated share of a global settlement that its insured, Six Flags, Inc. ("Six Flags") negotiated in a class action civil rights lawsuit that alleged that Six Flags had engaged in discriminatory practices at one of its amusement parks. TIG also sought a declaration that it was not responsible for covering the attorneys' fees that Six Flags incurred in defending the class action and negotiating the settlement.
Continue Reading...This case is part of a larger insurance coverage dispute involving Directors and Officers and Company Liability ("D&O") coverage purchased from certain of the defendants by plaintiff AT&T Corp. ("AT&T") and the company of which AT&T was the majority stockholder, the now-bankrupt At Home Corporation ("At Home"). AT&T sought D&O coverage in connection with several underlying shareholder suits brought against it and certain directors and officers of AT & T and At Home. The court previously decided the potential coverage liability under the AT&T D&O policies but not the At Home policies. See AT & T Corp. v. Clarendon America Ins. Co., C.A. No. 04C-11-167 (JRJ), 2006 WL 1382268 (Del. Super. Ct. Apr. 13, 2006, amended Apr. 25, 2006). At issue in this case are the D&O policies issued by the five defendant insurers to At Home, including the primary insurer and the four excess insurers (collectively, the "At Home Insurers"). The At Home Insurers moved to dismiss AT&T's complaint.
Continue Reading...DuPont sued its excess insurance carriers for declaratory relief and damages in connection with a number of class-action lawsuits over the past 20 relating to polybutylene ("PB") piping. DuPont claimed that the defendant carriers were obligated under the terms of their respective policies to indemnify DuPont for liabilities arising from the sale of a product produced by DuPont and used by several other companies to make acetal fittings for polybutylene piping. As of this opinion, those liabilities totaled more than $235 million. Following discovery, the court granted DuPont's motion for summary judgment on several issues.
Continue Reading...On April 25, 2006, the Superior Court granted summary judgment in favor of multiple defendants. The plaintiff, AT&T, moved to certify an appeal pursuant to Rule 42, and the Superior Court granted AT&T leave to file and interlocutory appeal. On May 31, 2006, the Delaware Supreme Court accepted the interlocutory appeal as well.
Continue Reading...I.U. North America, Inc. v. A.I.U. Ins. Co., 896 A.2d 880 (Del. Super. Ct. 2006).
This case involved claims for breach of contract and for declaratory judgment and ancillary relief to determine the responsibility for payment of liabilities incurred as a result of numerous claims and actions seeking to recover damages allegedly due to exposure to asbestos resulting from the conduct of the plaintiffs. The plaintiffs, the insureds, argued that a settlement agreement to resolve coverage issues arising out of asbestos claims required insurer to indemnify insureds for payments on behalf of defaulting parties to settlements. The plaintiffs moved for summary judgment, and the Superior Court found that the settlement agreement did not require insurer to reimburse insureds for payments on behalf of defaulting parties.
Continue Reading...This was an insurance coverage case involving Directors and Officers and Company ("D & O") liability policies purchased by plaintiff AT & T Corp. ("AT & T") and At Home Corp. ("At Home") from various primary and excess insurers. AT & T sought coverage, including indemnity, payment of defense fees, costs, and settlements or judgments, relating to several underlying shareholders suits brought against AT & T and certain officers and directors of AT & T and At Home. The defendants brought motions for partial summary judgment, alleging that AT & T's clams fell outside the scope of coverage under the D & O policies. Ultimately, the court granted the defendants' motions.
Continue Reading...Prior to death, decedent Logan sought worker's compensation benefits arising from injury caused by occupational exposure to asbestos while employed by H. C. Moore. When the employer's worker's compensation carrier could not be identified, the Delaware Industrial Accident Board (the "Board") ordered Delaware Insurance Guaranty Association ("DIGA") to appear and defend Logan's claim. DIGA moved for Summary Judgment. The Court entered judgment in favor of DIGA on the grounds that 18 Del. C. § 4204 authorized only the payment of valid covered claims existing prior to (or shortly after) an order of liquidation of an insolvent insurer.
Authored by:
Jason C. Jowers
302-888-6860
jjowers@morrisjames.com
Levy v. Hayes Lemmerz International Inc., C.A. No. 1395-N, 2006 WL 985361 (Del. Ch. Apr. 5, 2006).
The plaintiffs in this case sought indemnification for a settlement of claims against them for $27.5 million, paying $7.2 million out of their own pockets. The plaintiffs were former outside directors of a public company engaged in the automobile supply trade who were sued by both stockholders and bondholders of that company for various statutory violations and breaches of fiduciary duty when the company was forced to reveal that some of its financial statements contained materially misleading information. The corporation that the plaintiffs served ("Old Hayes") entered Chapter 11 bankruptcy and emerged as the operating subsidiary of a new entity ("New Hayes"). When the plaintiffs sought indemnification for the settlement under the old corporation's bylaws, their individual indemnification plans, and the bankruptcy reorganization plan, both Old Hayes and New Hayes refused. The Court of Chancery dismissed the plaintiffs' claims as to New Hayes, which the court found as a matter of law had no obligation to indemnify its predecessors' former directors and officers; however, the court denied the motion to dismiss as to the old company because the directors had a right to proceed with their claim for indemnification against Old Hayes.
Continue Reading...Plaintiff filed a complaint seeking a declaratory judgment of its right to indemnification in asbestos litigation under the terms of a stock purchase agreement executed by its predecessor-in-interest, which had acquired a subsidiary of Borg-Warner Corp. ("BWC"). Defendant Burns International Services Corp. ("Burns"), which had purchased BWC's insurance assets at a liquidation sale, filed a counterclaim alleging that its indemnification obligations to plaintiff only arose out of a later letter agreement, and that once BWC's insurance was exhausted, plaintiff had to pay the costs of defending and resolving the asbestos claims. During the pendency of the instant case, plaintiff informed Burns that (i) it had terminated the counsel chosen by Burns to defend the asbestos claims; (ii) it was choosing its own counsel; and (iii) it was directing its new counsel to file third-party complaints against defendants and to pursue global settlements in the underlying asbestos cases (together, the "threatened actions"). Burns then sought a temporary restraining order and preliminary injunction to enjoin plaintiffs from taking the threatened actions.
Continue Reading...In 2002 AT & T Wireless Services, Inc. ("AWS") merged with TeleCorp PSC, Inc. Following the merger the TeleCorp shareholders filed a derivative action alleging that the TeleCorp directors had breached their fiduciary duties. The Court of Chancery approved a settlement of $47.5 million. AWS filed an action in Superior Court seeking reimbursement from TeleCorp's insurance carries and its own primary insurer, Faraday Capital Limited ("Faraday"), and its excess insurer, National Union Fire Insurance Company ("National Union"). AWS voluntarily dismissed Faraday. Subsequently, pursuant to Rule 12(b)(6), the insurers moved to dismiss, and the court granted their motions to dismiss the claims relating to reimbursement for the settlement. However, the court denied TeleCorp's primary insurer's motion to dismiss the claim for defense costs.
Continue Reading...The Delaware Insurance Guaranty Association ("DIGA") sought reimbursement from Christiana Care Health Services ("CCHS") pursuant to one of the Delaware Insurance Guaranty Association Act's provisions for claims paid on behalf of an insolvent insurer. In this case the insolvent insurer had insured a corporation that merged into CCHS. The Superior Court granted CCHS's motion for summary judgment, finding that CCHS was not an "insured" under the insurance policy. Reversing the lower court, the Delaware Supreme Court found that a court must consider the purpose and intent of 18 Del. C. § 4211 when determining if a company is an "insured." A court may not rely on terms in an insurance policy that are inconsistent with the purpose and intent of Section 4211. The Supreme Court found that CCHS became an insured after the named insured merged into the defendant, and CCHS is obligated to reimburse DIGA pursuant to Section 4211.
Continue Reading...Plaintiff Shook & Fletcher Asbestos Settlement Trust, as Successor to Certain Assets and Liabilities of Shook & Fletcher Insulation Company ("Shook & Fletcher"), brought an action to establish coverage for asbestos bodily injury claims under three excess liability policies issued by Safety National Casualty Company, successor to Safety Mutual Casualty Corporation ("Safety"), for policy years 1983 through 1985. The parties moved for summary judgment on various issues, including the choice of law and what act "triggered" the insurance coverage. The court found that Alabama law governed the insurance policies. The Court also determined that a conflict between Delaware and Alabama law exists because Delaware has adopted the "continuous trigger" standard. Because the choice of law analysis favored Alabama, that state's "exposure trigger" standard governed.
Continue Reading...AT&T Wireless Services, Inc. v. Federal Ins. Co., 2005 WL 2155695 (Del. Super. Ct. Aug. 18, 2005).
The Plaintiff filed a notice of partial dismissal in an attempt to dismiss certain defendants. The defendants who were purportedly dismissed moved to quash the notice of dismissal. The court found that one defendant insurer could be dismissed because the entire action was being voluntarily dismissed. However, the court granted the motion to quash as to the other defendant because the dismissal only eliminated certain claims as opposed to the entire action. Plaintiff also sought leave of the court to dismiss a second group of defendants pursuant to Rule 41(a)(2). The court denied this motion.
Continue Reading...Royal Indemnity Company ("Royal") sought a declaratory judgment to determine whether it had an obligation to General Motors ("GM") in relation to insurance purchased by GM over the course of several decades from Royal. GM filed a motion to dismiss on forum non conveniens grounds, and the Court denied the motion to dismiss.
Continue Reading...Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611 (Del. Ch. 2005).
Wal-Mart brought suit against all the parties involved in its purchase of corporate-owned life insurance ("COLI") policies. Its complaint alleged a broad range of legal and equitable claims against the insurance brokers and providers, all seeking to recover from them the losses it incurred in connection with this risky tax avoidance scheme. On consolidated motions to dismiss brought by the insurers and brokers, the court concluded that the retailer failed to state a claim upon which relief could be granted. The court, therefore, granted the defendants' motions to dismiss.
Continue Reading...Scottsdale Indem. Co. v. Lloyd, 04C-04-024 THG, 2005 WL 516852 (Del. Super. Ct. Mar. 4, 2005).
A corporation's commercial liablility insurer petitioned the court for a determination as to whether the policies automobile exclusion prevented coverage for damages arising from an accident involving one of the corporation's officers. The insurer moved for summary judgment, and the Superior Court found that the automobile exclusion did apply.
Continue Reading...This case involved whether TIG Ins. Co. ("TIG") met its contractual obligations to provide adequate counsel to defend Premier Parks, Inc. ("Six Flags") in an employment discrimination case. After intially granting plaintiff's motion to compel discovery, the court limited its ruling on reargument after it became clear that complying with the court's order would require manual searches of files rather than simple electronic searches.
Continue Reading...This is an insurance contract related action brought by plaintiff, who also sought an injunction demanding notice under certain insurance policies. Plaintiff also sought a declaratory judgment that the insurance settlement agreement did not impair their rights and a permanent injunction.
Continue Reading...Certainteed Corp. v. Celotex Corp., et al., C.A. No. 471, 2005 WL 217032 (Del. Ch. Jan. 24, 2005).
Plaintiff brought a breach of contract action against defendant sellers under their asset purchase agreement for indemnification of losses and other related claims.
Continue Reading...Enter keywords:
Add this blog to your feeds or put your e-mail in the box below and hit GO to subscribe by e-mail.
For more information concerning any of these cases, contact Edward M. McNally at emcnally@morrisjames.com or 302.888.6880
