Editors
The Honorable Meghan A. Adams Superior Court, State of Delaware | Jennifer C. Wasson, Esquire Potter Anderson & Corroon LLP |
Mari Boyle, Esquire Richards Layton & Finger |
§ 1.1. Introduction
This chapter summarizes the significant case law developments from state and federal courts across the country in 2021–22 concerning directors’ and officers’ liability insurance coverage claims. Noteworthy decisions included the following:
- First Solar, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 274 A.3d 1006 (Del. 2022). The Delaware Supreme Court held that the insurance policy language dictates whether a claim relates back to an earlier claim under a claims-made liability policy, not the “fundamentally identical” standard.
- Verizon Communications Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2022 WL 14437414 (Del. Super. Oct. 18, 2022). The Superior Court of Delaware’s Complex Commercial Litigation Division held that a settlement in a fraudulent transfer suit brought by a bankruptcy trustee for FairPoint Communications against Verizon Communications Inc. was covered under Verizon’s directors and officers liability policy.
- CUMIS Specialty Ins. Co., Inc. v. Kaufman, 2022 WL 10640903 (S.D.N.Y 2022). The United States District Court for the Southern District of New York denied the former Melrose Credit Union CEO’s motion to reconsider its ruling that CUMIS Specialty Insurance Company was not obligated to cover Kaufman’s legal costs in appealing his bribery conviction. The court held further that CUMIS was entitled further to recoup Kaufman’s post-sentencing expenses that the insurance company already paid.
§ 1.2. Claim
First Solar, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 274 A.3d 1006 (Del. 2022). The Delaware Supreme Court held that the insurance policy language dictates whether a claim relates back to an earlier claim under a claims-made liability policy, not the “fundamentally identical” standard.
In March 2014, First Solar Inc.’s (“First Solar”) stockholders filed a class action lawsuit against the company, alleging that it violated federal securities laws by making false or misleading public disclosures (“Smilovits Action”). First Solar’s primary insurer, National Union Fire Insurance Company of Pittsburgh, PA (“National Union”), provided coverage for the Smilovits Action under a 2011–2012 $10 million “claims made” directors and officers insurance policy (“D&O policy”). While the Smilovits Action was pending, on June 23, 2015, First Solar stockholders who opted out of the Smilovits Action filed a class action lawsuit, referred to as the Maverick Action, alleging violations of the same federal securities laws as the Smilovits Action, in addition to violations of Arizona statutes and claims for fraud and negligent misrepresentation.
When the Maverick Action was filed, First Solar had a $10 million “claims made” policy with National Union for 2014–2015 (the “Primary Policy”) and a $10 million layer of excess coverage with XL Specialty Insurance Company (the “Excess Policy”). After First Solar sought insurance coverage under the Primary Policy and Excess Policy for the Maverick Action, the insurers denied coverage under a “Related Claims” exclusion, which provided that a Related Claim is “a Claim alleging, arising out of, based upon or attributable …
