Hunton Insurance Recovery Blog

In another pro-policyholder ruling in Delaware, a Delaware Superior Court judge has denied a group of insurers’ application for certification of interlocutory appeal in the long-running D&O dispute, Verizon Communications Inc. et al. v. National Union Fire Insurance Co. of Pittsburgh, PA, et al., C.A. No. N18C-08-086 EMD CCLD (Del. Super. March 16, 2021). The court’s most recent decision arises out of a February 23 ruling that Verizon could recover $24 million in legal fees incurred in defense of a fraudulent transfer lawsuit brought by a bankruptcy trustee. When the insurers’ sought to appeal this interlocutory decision, the court refused, concluding that the benefits of an immediate appeal, if any, do not outweigh the probable costs. The decision will permit the orderly resolution of what the court deemed to be “standard contract law principles,” which the insurers had failed to demonstrate negated coverage.

Hunton insurance attorneys Syed Ahmad, Geoffrey Fehling, and Kevin Small commented on a retailer’s insurance dispute related to COVID-19 in the latest edition of the Recall Roundup, posted on the Hunton Retail Law Resource Blog.

In a setback for retail-policyholders hoping to enforce coverage for losses due to COVID-19 in federal court, a Tennessee district court recently knocked out a complaint filed by a sprawling Nashville establishment seeking coverage under a food contamination provision in its property policy. The court’s opinion dismissing Nashville Underground LLC v. AMCO Insurance Co. is noteworthy due to the great lengths taken to define a policy provision—intended to provide broad coverage for disruption of business due to the suspicion of food contamination—in a way that limits coverage contrary to the reasonable expectations of businesses purchasing policies specifically tailored to protect against actual or suspected contamination.

On March 3, 2021, the Delaware Supreme Court issued a landmark decision holding that Delaware law should be applied in disputes over directors and officers liability (“D&O”) insurance policies sold to companies incorporated in Delaware. RSUI Indem. Co. v. Murdock, et al. No. 154, 2020, C.A. No. N16C-01-104 CCLD (Del. Mar. 3, 2021). The court addressed this and other key issues in the long-running dispute over D&O insurance purchased by Dole Food Company, specifically addressing issues raised by Dole’s eighth-layer excess insurer, RSUI, which provided $10 million coverage excess of $75 million.

The court decided multiple important issues, finding that liability for alleged fraud is insurable under Delaware public policy, RSUI’s Profit/Fraud Exclusion did not bar coverage because there had been no “final adjudication” of fraud, and the “larger sums rule” governed allocation issues. However, among these important rulings, the most significant may be the Supreme Court’s ruling that Delaware governs the interpretation of D&O insurance issued to a company incorporated in Delaware.  The court specifically rejected the insurer’s arguments that California law (which might preclude coverage) should apply under a policy that was purchased and issued in California to a Delaware corporation headquartered in California.

One year into the COVID-19 pandemic, courts have issued hundreds of rulings in COVID-19 business interruption lawsuits, many favoring insurers. Yet those pro-insurer rulings are not based on evidence, much less expert opinion evidence. For insurers, ignorance is bliss.