Over the past several years—starting with the landmark Murdock decision in 2021 supporting insurability of alleged fraud^[1]—Delaware courts have issued a string of significant, pro-policyholder decisions on important insurance issues under directors’ and officers’ (“D&O”) liability policies. Recent rulings involving noncash settlements, government investigations, bump-up exclusions, and related claims reinforce Delaware’s increasingly influential role in shaping national coverage law.

Two themes stand out. First, Delaware is producing a growing body of notable, policyholder-friendly guidance, including from an active Delaware Supreme Court. And second, many outcomes are tied to Delaware law—often uniquely so—such that policyholders may not have achieved the same results before other courts or under other state laws.

What follows is a brief summary of some of the latest developments in Delaware D&O insurance coverage jurisprudence and what they mean for Delaware corporations, boards, and executives in placing and renewing policies, pursuing claims, and navigating insurance coverage disputes in and out of litigation.

I. Delaware Courts Are Driving Meaningful Policyholder Wins Across Key Coverage Issues

A. Alleged Fraud Is Insurable in Delaware, and Delaware Law Governs D&O Policies Protecting Delaware Insureds

In RSUI Indemnity Co. v. Murdock, a go-private transaction led to stockholder suits alleging fiduciary violations against the company and its directors and officers. At trial, the individual defendants were found to have fraudulently manipulated the stock price prior to the merger and to be liable for more than $148 million in damages. Before judgment was entered, the parties entered into a settlement, which the company’s D&O insurer refused to fund.

The Delaware Supreme Court held that Delaware public policy does not prohibit the insurability of fraud under D&O policies, particularly for sophisticated corporate parties. Delaware law strongly favors freedom of contract and expressly authorizes corporations to purchase D&O insurance covering directors and officers even where indemnification is unavailable, including for claims alleging fraudulent conduct.

Notwithstanding the policy’s “relative exposure” language, the court rejected the insurer’s attempt to apply the “relative exposure” test and instead followed the more policyholder-friendly “larger settlement” rule.^[2] Under that rule, the entire settlement is covered unless the insurer proves that uncovered conduct increased the amount of the settlement. Because the policy promised coverage for “all monetary amounts” the insureds became legally obligated to pay, and the allocation provision did not specify a method for resolving disputes, the insurer’s preferred pro rata allocation method was inconsistent with the policy as a whole. The insurer failed to show that noncovered conduct drove a larger settlement, so the full settlement was recoverable.

Applying the “most significant relationship” test, the court also held that Delaware law governs D&O policies for a Delaware corporation, even though a company may be headquartered in another state or the policy may have been issued elsewhere. Where the insured risk is the directors’ and officers’ fidelity to the corporation, the state of incorporation has the predominant interest. The court emphasized that Delaware is the “center of gravity” for D&O policies because the First State’s corporate law framework affirmatively supports broad indemnification and insurance rights.^[3] As a result, directors and officers of Delaware corporations should receive the benefit of Delaware law in D&O coverage disputes.

Why it matters: The court departed from the often-followed “relative exposure” allocation application and endorsed the idea that Delaware law should govern interpretation of D&O policies issued to Delaware corporations, spurring discussion about Delaware choice of law. The court also held that fraud is insurable in Delaware if merely alleged but not proven. Murdock has been cited repeatedly by courts in and out of Delaware to affirm this idea.^[4] Delaware policyholders can take advantage of more favorable coverage for settlements in various forms that may not be available in other states with less developed shareholder jurisprudence.

B. Exclusions Construed Narrowly and in Favor of Coverage

In Pangea Equity Partners v. Great American, a Chicago-based real estate management company’s directors and officers faced a whistleblower lawsuit accusing them of submitting false certifications about rent rates for Section 8 housing in violation of the False Claims Act (“FCA”). When the company’s D&O insurers denied coverage under a contractual liability exclusion, the Delaware Superior Court refused to accept the insurers’ “overbroad application” of the exclusion where the underlying qui tam complaint alleged violations of federal law and was not for breach of contract.^[5] In finding that the insurers had a duty to defend, the court said that the contract exclusion was inapplicable because the underlying lawsuit involved alleged regulatory violations and there was only a “tenuous connection” between the whistleblower allegations and the underlying government contracts.^[6]

Why it matters: In addition to reinforcing Delaware courts’ commitment to narrowly construing exclusions, the Pangea Equity Partners decision follows a broader trend showing that FCA litigation is often covered by D&O insurance despite being subject to recurring disputes about insurability of FCA remedies, various exclusions, and coverage for government investigations.^[7]

C. Government CIDs Can Qualify as “Claims”

In Cigna Group v. XL, a healthcare company sought coverage under a management liability policy for costs incurred in responding to a civil investigative demand (“CID”) issued by the Department of Justice (“DOJ”) in connection with an investigation into suspected FCA violations.^[8] The insurers argued that the CID was not covered because it did not intend to hold the company responsible for any wrongful acts. The Delaware Superior Court disagreed, concluding that—even though the policy provided separate coverage for “Governmental Investigations” that expressly referenced CIDs—the DOJ’s CID was nevertheless covered as a “Claim” because it investigated specific alleged wrongdoing by the recipient and demonstrated an intent to hold the receiver accountable for that conduct.^[9]

In Delaware, the court explained, references to “investigation” of potential wrongdoing were not materially different from an accusation that the recipient violated the FCA. Covering the CID as a “Claim” also did not render the standalone investigation coverage superfluous because that coverage could still apply to CIDs that do not become claims.

Why it matters: The Cigna ruling builds upon prior rulings addressing coverage for costs associated with subpoenas and CIDs,^[10] further cementing Delaware’s broad government investigation coverage. That view contrasts with courts in other jurisdictions that have taken narrower positions on government investigation coverage, construing similar policy language more restrictively and treating subpoenas, CIDs, and similar governmental demands as mere investigatory tools that do not rise to the level of a claim that can trigger coverage. Similar to the Pangea Equity Partners decision above, Cigna also supports defense coverage for FCA matters, even during the investigation phase before regulators file formal charges or commence litigation.

D. Delaware’s “Meaningful Linkage” Standard for Related Claims

In Forte Biosciences v. Wesco, a pharmaceutical company and several D&O insurers disagreed over what policies covered an investor’s 2023 shareholder lawsuit.^[11] The insurers, which issued policies for the 2022 policy period, argued the 2023 suit wasn’t covered because it was unrelated to a 2022 books and records demand that they had accepted as a “notice of circumstances” that could lead to a future claim. The Delaware Superior Court disagreed, ruling earlier this year that the claims related back to the 2022 demand.^[12] Applying the Delaware Supreme Court’s “meaningful linkage” standard for determining if different D&O claims are related, the court rejected the insurer’s narrower interpretation because it would run counter to the Delaware Supreme Court’s direction to interpret meaningful linkage “broadly” to “find coverage.”^[13]

Why it matters: While “related” claim disputes are inherently unpredictable and very policy- and fact-specific, Delaware’s meaningful linkage test for relatedness is different because Delaware courts assess relatedness in favor of the policyholder to find coverage. This differs from other jurisdictions that may apply a more neutral approach favoring neither the policyholder nor the insurer.^[14]

E. Noncash Settlements Can Constitute Covered “Loss”

In Midvale Indemnity v. AMC Entertainment Holdings, the Delaware Supreme Court affirmed that a settlement paid in stock—not cash—can qualify as a covered “Loss” under a D&O policy.^[15] The Superior Court had emphasized that, under Delaware law, stock is a form of currency usable for a variety of corporate transactions, including settling debts. This Delaware precedent undermined the insurers’ attempts to confine “Loss” to monetary payments only.^[16]

The Superior Court then relied on the term “paid” in the policy’s bump-up exclusion. Again citing Delaware law, the court said “paid” has been interpreted to apply to stock transfers, implying that stock can be “paid” to create a covered loss. Finally, the court concluded that the parties’ disputes about whether the company sought consent on a phone call was a factual issue to be presented to a jury, as Delaware law allows policyholders to preserve coverage after failing to obtain consent by rebutting a presumption that the insurer was prejudiced. The Delaware Supreme Court upheld the lower court’s ruling in full.

Why it matters: AMC Entertainment highlights Delaware’s favorable view on yet another important issue, consent to settle, preserving potential coverage as long as the policyholder rebuts a presumption that the insurer was prejudiced and that the settlement was reasonable. The decision also shows how Delaware’s leading role in shaping corporate governance and shareholder litigation jurisprudence bleeds over into insurance disputes, supporting broader coverage for nontraditional payments like stock. Other states may not recognize stock as “currency” or may enforce stricter consent requirements that limit or eliminate coverage.

F. Delaware Narrows the “Bump-Up” Exclusion

In Illinois National Insurance Company v. Harman International, a policyholder paid $28 million to settle a securities class action challenging an M&A transaction on the grounds that the target’s proxy statement contained false and misleading statements in violation of the Securities Exchange Act of 1934.^[17] The Delaware Supreme Court refused to enforce a D&O policy “bump-up” exclusion to bar coverage for the settlement, affirming a lower court ruling that the insurers failed to show that any portion of the settlement represented an “effective increase” in deal consideration.^[18] The insurers could not deny under the exclusion—which in Delaware is enforced only if “specific, clear, plain, conspicuous, and not contrary to public policy”—because they failed to demonstrate that the “real result” of the settlement was that the payment increased the amount of deal consideration the shareholders received in the transaction.

Why it matters: Harman highlights how Delaware frequently holds insurers to high burdens in enforcing exclusions, including on bump-up exclusions that have favored insurers in other jurisdictions.^[19] As the Delaware Supreme Court recognized, however, “not all bump-up provisions contain the same claim and loss requirements,” so results may vary based on different governing law, policy language, or facts.^[20]

II. Takeaways

These decisions provide important takeaways for Delaware corporations and their in-house counsel, risk managers, board members, and executives to consider in purchasing and recovering under D&O and other management liability policies.

Understand and leverage governing law: Variances in state law can be outcome determinative in coverage disputes. In Murdock, the Delaware Supreme Court endorsed the idea of consistently applying Delaware law to claims involving Delaware companies and their directors and officers. In many cases that followed, Delaware policyholders have benefited from that approach, supporting the perception that Delaware is increasingly policyholder friendly.

That perception may result in updated policy language, like choice-of-law and forum‑selection provisions, that could steer claims away from Delaware and materially impact D&O coverage outcomes. Companies incorporated in Delaware—or able to litigate there—will benefit from paying careful attention to governing law and how policies may impact the default rules.

Policy wording matters: Regular policy audits should scrutinize key terms, especially as hot-button issues like government investigations coverage, bump-up exclusions, and related claims result in new forms, endorsements, and policy updates that alter the status quo under standard forms.

Force insurers to clearly demonstrate exclusions: Insurance policy interpretation is subject to many policyholder-friendly principles that can be leveraged in favor of coverage, especially when insurers rely on exclusions (like the insurers in Harman and Pangea Equity Partners). The Delaware Supreme Court, like courts of virtually all states, demands clear and specific language to enforce exclusions that policyholders can use to their advantage.

Be proactive, not reactive: Virtually all D&O policy terms change year over year, even with the same insurers. Even static language can take on new meaning as courts interpret and rule on a particular issue, like in the decisions discussed above. The time to assess a problematic exclusion, new endorsement, updated form, or potential gap is during the placement or renewal process, not after a claim is made.

Of course, recent rulings do not uniformly favor policyholders,^[21] but even cases ruling against coverage show that Delaware courts, particularly the Delaware Supreme Court, do not shy away from tackling nuanced, complex D&O coverage issues that can provide important guidance to corporate policyholders facing similar insurance claims in the future.

III. Conclusion

Delaware courts continue to support the view that Delaware is an increasingly policyholder-friendly jurisdiction on D&O coverage. Delaware policyholders should keep pace with this growing body of law by taking into consideration governing law and forum when navigating claim denials and potential coverage litigation.

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1. RSUI Indem. Co. v. Murdock, 248 A.3d 887 (Del. 2021). ↑

2. See Nordstrom, Inc. v. Chubb & Son, Inc., 54 F.3d 1424 (9th Cir. 1995). ↑

3. RSUI Indem. Co., 248 A.3d at 901. ↑

4. See, e.g., Movora LLC v. Gendreau, 345 A.3d 997, 1026 n.257 (Del. Super. Ct. 2025); Maffei v. Palkon, 339 A.3d 705, 744 at n.186 (Del. 2025); Astellas US Holding, Inc. v. Fed. Ins. Co., 66 F.4th 1055 (7th Cir. 2023). ↑

5. Pangea Equity Partners, LP v. Great Am. Ins. Grp., No. N23C-12-060 MAA CCLD, 2025 WL 786050, at *6 (Del. Super. Ct. Mar. 12, 2025). ↑

6. Id. at *4. ↑

7. See, e.g., Guaranteed Rate, Inc. v. ACE Am. Ins. Co., No. N20C-04-268 MMJ CCLD, 2022 WL 4088596 (Del. Super. Ct. Aug. 24, 2022), aff’d, 305 A.3d 339 (Del. 2023); Astellas US Holding, Inc. v. Fed. Ins. Co., 66 F.4th 1055 (7th Cir. 2023); Conduent State Healthcare, LLC v. AIG Specialty Ins. Co., No. N18C-12-074 MMJ CCLD, 2019 WL 2612829 (Del. Super. Ct. June 24, 2019); Affinity Living Grp., LLC v. StarStone Specialty Ins. Co., 959 F.3d 634 (4th Cir. 2020); Call One Inc. v. Berkley Ins. Co., No. 1:21-cv-00466, slip op. (N.D. Ill. Sep. 30, 2025). ↑

8. Cigna Grp. v. XL Specialty Ins. Co., No. N23C-03-009 SKR CCLD, 2025 WL 3884858 (Del. Super. Ct. Dec. 8, 2025), appeal refused, No. 13, 2026, 2026 WL 431438 (Del. Feb. 16, 2026). ↑

9. Id. at *7. ↑

10. See Conduent State Healthcare, LLC v. AIG Specialty Ins. Co., No. N18C-12-074 MMJ CCLD, 2019 WL 2612829 (Del. Super. Ct. June 24, 2019); Guaranteed Rate, Inc. v. Ace Am. Ins. Co., No. N20C-04-268 MMJ CCLD, 2021 WL 3662269 (Del. Super. Ct. Aug. 18, 2021). ↑

11. Forte Biosciences, Inc. v. Wesco Ins. Co., No. N24C-10-015 PAW CCLD, 2026 WL 66768 (Del. Super. Ct., Jan. 8, 2026). ↑

12. Id. at *7. ↑

13. Id. at *8–*9. (citing In re Alexion Pharm., Inc. Ins. Appeals, 339 A.3d 694 (Del. Feb. 4, 2025)). ↑

14. See, e.g., Navigators Ins. Co. v. Under Armour, Inc., 165 F.4th 171 (4th Cir. 2026) (using “common nexus of fact” test to determine relatedness); Navigators Specialty Ins. Co. v. Avertest, LLC, No. 1:24-CV-932 (LMB/WBP), 2025 WL 2025365 (E.D. Va. July 18, 2025) (using “common nexus” test); Boyne USA, Inc. v. Fed. Ins. Co., No. CV 24-70-H-TJC, 2025 WL 2438708 (D. Mont. Aug. 25, 2025) (using “single course of conduct” test). ↑

15. Midvale Indem. Co. v. AMC Ent. Holdings, Inc., No 206, 2025, 2025 WL 3527665 (Del. Dec. 9, 2025). ↑

16. AMC Ent. Holdings, Inc. v. XL Specialty Ins. Co., No. N23C-05-045 MAA CCLD, 2025 WL 655595 (Del. Super. Ct. Feb. 28, 2025), aff’d sub nom. Midvale Indem. Co. v. AMC Ent. Holdings, Inc., No. 206, 2025, 2025 WL 3527665 (Del. Dec. 9, 2025). ↑

17. Ill. Nat’l Ins. Co. v. Harman Int’l Indus., Inc., No. 47, 2025, 2026 WL 204209, at *1 (Del. Jan. 27, 2026). ↑

18. Id. at *8. ↑

19. See Harman Int’l Indus., Inc., 2026 WL 204209, at *9 (distinguishing Towers Watson & Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 138 F.4th 786 (4th Cir. 2025) (finding bump-up exclusion was triggered)). ↑

20. Id. at *8. ↑

21. See, e.g., Origis USA LLC v. Great Am. Ins. Co., No. 461, 2024, 2025 WL 2055767 (Del. July 23, 2025) (holding that allegations referencing post–policy inception conduct did not constitute a separate “Claim” and, in any event, were barred in full by the policies’ Prior Acts exclusion because they arose from pre-exclusion wrongful acts); In re Aearo Techs. LLC, 346 A.3d 584 (Del. 2025) (affirming ruling that a parent company cannot satisfy its subsidiary’s self-insured retention and providing guidance to entities structuring insurance programs). ↑

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