Jarden, LLC v. ACE Am. Ins. Co., C.A. No. N20C-03-112 AML CCLD (Del. Super. July 30, 2021)

Director and corporate liability insurance coverage is determined by the specific language of the insurance policies. Last year, the Delaware Supreme Court held that an appraisal claim under 8 Del. C. § 262 was not a “securities claim” because it was not a claim for a “violation of law[,]” as required under that policy’s definition. See In re Solera Ins. Coverage Appeals, 240 A.3d 1121 (Del. 2020). This case addressed similar issues under somewhat different policy language. 

After an appraisal proceeding in the Court of Chancery, the insured corporation brought suit in the Superior Court’s Complex Commercial Litigation Division against its insurers, seeking coverage for defense costs and a pre-judgment interest award. Addressing the insurers’ motions to dismiss, the Court determined that, although the Chancery appraisal proceeding was a “Securities Claim” as defined in the insurance policies, it did not trigger coverage due to two other provisions. First, by its nature as a creature of statute, the appraisal proceeding did not involve seeking redress for conduct; consequently, though a Securities Claim, it was not one that met the policies’ additional requirement that, for any claim to be covered, it must be a claim “for” a “Wrongful Act.” Second, even if an appraisal claim was one for a Wrongful Act, the right to bring that claim did not exist until the consummation of the merger, regardless of stockholders having submitted appraisal demands prior to the merger date. Because the merger date was beyond the insurance policies’ cutoff date for acts that would trigger coverage, the appraisal proceeding was not covered. Accordingly, the Court granted the insurance companies’ motions to dismiss.