Delaware justices stress jurisdiction consistency in D&O insurance disputes
The opinion links two other recent Supreme Court decisions that have set precedent in resolving disputes over D&O insurance coverage, all clarifying the role Delaware laws play in those contracts.
Delaware law applies when determining whether insurers need to provide directors and officers liability coverage, the state Supreme Court has ruled affirming a Superior Court’s decision in insurers’ favor.
The opinion links two other recent Supreme Court decisions that have set precedent in resolving disputes over D&O insurance coverage, all clarifying the role Delaware laws play in D&O coverage contracts. The decision was handed down on Jan. 12.
“What comes through in the opinion is a strong interest in consistency,” said Carolyn Rosenberg, a partner in Reed Smith’s insurance recovery group. “Delaware law is going to have broad applicability with respect to coverage disputes that are brought in Delaware.”
The appellant, Montana-based Delaware corporation Stillwater Mining Co. held D&O insurance policies with National Union Fire Insurance Co., with ACE American Insurance and QBE Insurance Corp as excess insurers. Stillwater shareholders filed the appraisal action underlying the insurance dispute in the Court of Chancery after the company was acquired and taken private in 2017, claiming Stillwater’s management had supported an unfair sale process—a claim the court ultimately found wasn’t proven.
National Union subsequently said it wouldn’t be paying for the defense costs and interest incurred during the appraisal case, and Stillwater filed its complaint against the insurers in Superior Court.
As the case progressed, Stillwater switched its stance on which state’s law should be applied, arguing for Delaware law before reversing course and arguing Montana had a greater interest.
That switch coincided with the Supreme Court reversing the Superior Court’s separate decision in litigation over D&O coverage for Solera Holdings Inc., which involved policies both sides in the Stillwater case said were similar to Stillwater’s D&O coverage.
Stillwater filed its case in Montana state court after the Supreme Court’s reversal of the Solera decision. Both Delaware courts found that while they weren’t entirely comfortable with the switch, Stillwater’s revised claims were comparable enough to decide either way that Delaware law applied.
The Superior Court granted the insurers’ motion to dismiss the case, applying the Supreme Court’s 2021 decision in RSUI Indemnity Co. v. Murdock to determine Delaware law should apply because Delaware had the most significant connection to the D&O policies, then decided based on the Supreme Court’s 2020 reversal of a case brought by Solera Holdings Co. that Stillwater’s D&O coverage didn’t apply to appraisal proceedings.
With that in mind, the court turned back to the precedent set in Murdock, finding applying multiple states’ laws to the same contractual issue over-complicated and slowed down getting coverage claims resolved.
“From a choice of law perspective, it’s reaffirming prior Delaware court decisions about Delaware’s strong interest in applying its law to D&O insurance coverage disputes,” Rosenberg said.
Attorneys who represented the parties in the Supreme Court case either did not respond or declined to comment on the decision.
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