Hunton Insurance Recovery Blog

Drug-maker Pfizer and one of its excess insurers, North River, are in the middle of a contentious dispute regarding the proper forum for their coverage dispute over directors and officers liability insurance following both parties’ race to the courthouse to file competing lawsuits in 2015. Pfizer argues that its own preferred forum of Delaware (where Pfizer is incorporated) is correct, while North River counters that New York (where Pfizer’s headquarters and its broker are located) is the proper forum. The dispute, which involves competing motions in Delaware and New York courts, highlights the importance of both the timing and location of forum selection in litigating insurance coverage disputes.

The current dispute relates to insurance coverage for a securities class action filed in New York in 2010. Pfizer settled the securities lawsuit in 2015 and sought coverage from sixteen insurers, fourteen of which paid their limits towards the settlement. Other than one excess insurer that was subject to an arbitration provision, North River was the only insurer that refused to contribute.

Following a failed mediation attempt and mandatory waiting period set forth in the primary policy’s ADR provision, Pfizer sued in Delaware Superior Court, site of many complex coverage disputes over the past decades, shortly after midnight the day the waiting period expired. North River sued Pfizer hours later in its chosen venue, New York federal court. North River later removed Pfizer’s state-court action in Delaware to federal court. North River also moved in the Delaware coverage lawsuit to transfer venue to New York, citing Pfizer’s principal place of business in New York, North River’s principal place of business in neighboring New Jersey, and negotiation of the North River excess policy and underlying policy in New York by a New York insurance broker.

Pfizer countered by moving: (1) to remand the Delaware lawsuit to state court, or in the alternative, to enjoin North River’s prosecution of its “duplicative, anticipatory and second-filed” New York action; and (2) to dismiss or stay the New York action in favor of Pfizer’s Delaware action, citing the court’s discretionary jurisdiction under the Declaratory Judgment Act, the Colorado River abstention doctrine, and the first-filed rule.

Last week, the parties filed various briefs in support of their respective motions in the Delaware and New York lawsuits. Critical to the motions will be the courts’ interpretation of the “first-filed” rule, state court abstention, and what weight should be placed on state of incorporation, headquarters, broker location, and policy negotiation and placement in determining the most “convenient” forum. Of particular note is North River’s assertion that Pfizer’s Delaware action—filed at 12:01 a.m. on January 31, 2018—was “a premature race to the courthouse” based on a technical argument that the 120-day standstill period (running from conclusion of the mediation on October 3, 2017) did not end until 5:07 p.m. that day, which North River calculated using the precise time that Pfizer “declared the mediation concluded.” Litigants often weigh the benefits of being first to file a lawsuit, and it is important for policyholders to consider that strategy when evaluating when to file. While being “first to file” does not always rule the day, it is an important factor and can weigh heavily in the decision over forum in a particular case.

Regardless of the outcome of these motions, this forum battle underscores the high stakes involved in coverage actions like this. It also highlights the numerous factors policyholders must consider when evaluating venue provisions in insurance policies and, in the absence of controlling provisions, determining when and where to file a coverage lawsuit. We will continue to monitor this dispute for further developments.