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Solera Holdings, Inc. v. Xl Specialty Insurance Co.

Superior Court of Delaware

July 31, 2019

SOLERA HOLDINGS, INC., Plaintiff,
v.
XL SPECIALTY INSURANCE COMPANY, Ace American Insurance Company, Illinois National Insurance Company, Arguonaut Insurance Company, Hudson Insurance Company, Endurance American Insurance Company, Zurich American Insurance Company, Liberty Insurance Underwriters Inc., Federal Insurance Company, Defendants.

         Submitted: April 16, 2019

Page 1250

         Upon Defendants ACE American Insurance Company and Federal Insurance Company’s Motion for Summary Judgment: Denied

         David J. Baldwin, Esquire, Carla M. Jones, Esquire of POTTER ANDERSON & CORROON LLP, Wilmington, Delaware, and Peter M. Gillon, Esquire, Alexander D. Hardiman, Esquire, Tamara D. Bruno, Esquire of PILLSBURY WINTHROP SHAW PITTMAN LLP, Washington, D.C., Attorneys for Plaintiff.

         Gregory F. Fischer, Esquire of COZEN O’CONNOR, Wilmington, Delaware, and Angelo G. Savino, Esquire of COZEN O’CONNOR, New York, NY, Attorneys for Defendants ACE American Insurance Company and Federal Insurance Company.

         Carmella P. Keener, Esquire of ROSENTHAL, MONHAIT & GODDESS, P.A, Wilmington, Delaware, Attorney for Defendants Endurance American Insurance Company and Liberty Insurance Underwriters Inc.

         Ronald P. Schiller, Esquire, Michael R. Carlson, Esquire, Matthew N. Klebanoff, Esquire of HANGLEY ARONCHICK SEGAL PUDLIN & SCHILLER, Philadelphia, Pennsylvania, Attorneys for Defendant Endurance American Insurance Company.

         Scott A. Schechter, Esquire, Matthew E. Mawby, Esquire of KAUFMAN BORGEEST & RYAN LLP, Valhalla, New York, Attorneys for Defendant Liberty Insurance Underwriters Inc.

         Bruce W. McCullough, Esquire, of BODELL BOVÉ, LLC, Wilmington, Delaware, Attorney for Defendant Zurich American Insurance Company.

         Bruce E. Jameson, Esquire, John G. Day, Esquire of PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware, and Tammy Yuen, Esquire, Kenneth M. McBrady, III, Esquire of SKARZYNSKI BLACK LLC, New York, New York Attorneys for Defendant XL Specialty Insurance Company.

         Kurt M. Heyman, Esquire, Aaron M. Nelson, Esquire of HEYMAN ENERIO GATTUSO & HIRZEL LLP, Wilmington, Delaware, and Scott B. Schreiber, Esquire, James W. Thomas, Jr., Esquire of ARNOLD & PORTER KAYE SCHOLER LLP, Washington, D.C., Attorneys for Defendant Illinois National Insurance Company.

         Stephen F. Dryden, Esquire of WEBER GALLAGHER SIMPSON STAPLETON FIRES & NEWBY, LLP, New Castle, Delaware, Attorney for Defendant Hudson Insurance Company.

         John C. Phillips, Jr., Esquire, David A. Bilson, Esquire, of PHILLIPS, GOLDMAN, MCLAUGHLIN & HALL, P.A., Wilmington, DE, and Geoffrey W. Heineman, Esquire, Jung H. Park, Esquire of ROPERS, MAJESKI KOHN & BENTLEY, New York, New York, Attorneys for Defendant Argonaut Insurance Company.

          OPINION

         LeGrow, J.

Page 1251

          This case involves the interpretation of a directors’ and officers’ insurance policy, specifically whether that policy covers attorneys’ fees and pre-judgment interest the insured company incurred defending an appraisal action. Plaintiff purchased primary and excess directors’ and officers’ liability insurance policies from Defendants. After Plaintiff was acquired by a private company in March 2016, several of Plaintiff’s shareholders filed an appraisal action in the Delaware Court of Chancery. Plaintiff first notified Defendants of the appraisal action in January 2018, after a substantial portion of the litigation was complete. This dispute arose when Defendants denied Plaintiff coverage for expenses incurred defending the appraisal action. In response, Plaintiff initiated this breach of contract and declaratory judgment action against Defendants seeking coverage for pre-judgment interest and defense expenses incurred in the appraisal action. Defendants moved for summary judgment on all claims.

          The pending motion presents three questions: (1) whether a "Securities Claim" under the insurance policies is limited to a claim alleging wrongdoing, (2) whether the policies cover pre-judgment interest on a non-covered loss, and (3) whether Plaintiff’s acknowledged breach of the policies’ consent-to-defense clause bars recovery of Plaintiff’s defense expenses. Based on the policies’ plain language, I conclude the appraisal action qualifies as a covered "Securities Claim" because that term’s definition is not limited to claims of wrongdoing. Additionally, because there is no limiting language in the policies’ definition of "Loss," coverage for pre-judgment interest is not limited to covered losses. As to the defense expenses, Delaware law implies a prejudice requirement in insurance contract consent clauses, and Plaintiff’s breach of the consent clause therefore does not bar coverage for defense expenses absent a showing of prejudice. Defendants’ motion for summary judgment therefore is denied.

          FACTS AND PROCEDURAL BACKGROUND

          Unless otherwise noted, the following facts are drawn from the complaint and the record provided by the parties.

          The D & O Policies

         Plaintiff Solera Holdings, Inc. ("Solera") is a software company incorporated in Delaware. Defendants issued Solera’s primary and excess directors’ and officers’ liability insurance policies. Defendants provided Solera’s tower of insurance coverage for securities claims made between June 10, 2015 and June 10, 2016. Defendant XL Specialty Insurance Company ("XL") issued the primary policy (the "Policy") and the remaining defendants issued excess policies, which follow-form ...


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