The Delaware Superior Court has held that an underlying shareholder lawsuit and prior litigation alleging certain common facts did not arise out of Interrelated Wrongful Acts, and did not trigger either the Prior Notice or Pending and Prior Litigation Exclusions, concluding that there was no “meaningful linkage” between them. Nat’l Amusements, Inc., v. Endurance Am. Specialty Ins. Co., 2025 WL 720455 (Del. Super. Ct. Feb. 17, 2025).
The insured sought coverage under its 2019 D&O policies (“2019 Policies”) for a shareholder dispute filed in the Delaware Court of Chancery in 2019 (the “2019 Suit”). The 2019 Suit challenged the fairness of shareholder compensation in connection with a merger between Viacom and CBS. The insurers contended that the 2019 Suit and various lawsuits initiated in 2016 (the “2016 Litigation”) arose out of “Interrelated Wrongful Acts,” defined in the 2019 Policies as “Wrongful Acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause or series of related facts, circumstances, situations, events, transactions or causes,” such that 2019 Suit and the 2016 Litigation constituted a single Claim first made prior to the inception of the 2019 Policies. Based upon the purported overlap between the 2019 Suit and the 2016 Litigation, the insurers also asserted that coverage for the 2019 Suit was barred under the 2019 Policies’ “Prior Notice Exclusion,” which precluded coverage for any claim “alleging, based upon, arising out of, or attributable to any Wrongful Act, fact, or circumstance which has been the subject of any written notice given and accepted,” and the 2019 Policies’ “Pending and Prior Litigation Exclusion,” which barred coverage “in connection with any Claim alleging, arising out of, based upon or attributable to . . . any pending or prior litigation.”
In the ensuing coverage litigation, the insured moved for summary judgment, arguing that the 2019 Suit and the 2016 Litigation did not arise out of Interrelated Wrongful Acts, such that the 2019 Suit was a claim “first made” during the policy period of the 2019 Policies, and that neither the Prior Notice nor Pending and Prior Litigation Exclusion precluded coverage.
The Superior Court agreed, granting the insured’s motion. In doing so, the court pointed to the 2019 Policies’ language requiring that the 2019 Suit and the 2016 Litigation “arise out of” “Interrelated Wrongful Acts” in order for the matters to be deemed a single Claim first made in 2016. The Court went on to explain that the Delaware Supreme Court has defined “arising out of” to require “some meaningful linkage.” Accordingly, to be deemed a single claim, the 2019 Lawsuit and the 2016 Litigation must share “some meaningful linkage” to be considered interrelated. To determine whether such a linkage existed, the court considered (1) the nature of the alleged conduct; (2) the identity of the parties; (3) the relevant time periods; (4) the scope of evidence; and (5) the damages claimed.
The court determined that the most significant factor—the nature of the alleged conduct—weighed against interrelatedness. Although both the 2019 Suit and the 2016 Litigation alleged breaches of fiduciary duty by overlapping parties, the court concluded that the 2019 Suit challenged the fairness of the merger price whereas the 2016 Litigation focused on an executive’s mental capacity and various board governance decisions. According to the court, the remaining factors similarly failed to support a finding of relatedness: the parties were not identical, the relevant conduct occurred in different time periods, the relevant evidence addressed distinct issues, and the damages sought differed.
Based upon its application of these factors, the court concluded that the 2016 Litigation and the 2019 Suit did not share any “meaningful linkage.” Moreover, based on the lack of any meaningful linkage, the court held that neither the Prior Notice Exclusion nor the Prior and Pending Litigation Exclusion barred coverage.
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