Delaware Business Litigation Report

Superior Court Grants Summary Judgment to Insurers, Finding that Certain of AT & T's D & O Policies Do Not Cover Claims in Underlying Litigation

AT&T Corp. v. Clarendon America Ins. Co., C.A. No. 04C-11-167 (JRJ), 2006 WL 1382268 (Del. Super. Ct. April 25, 2006). This was an insurance coverage case involving Directors and Officers and Company ("D & O") liability policies purchased by plaintiff AT & T Corp. ("AT & T") and At Home Corp. ("At Home") from various primary and excess insurers. AT & T sought coverage, including indemnity, payment of defense fees, costs, and settlements or judgments, relating to several underlying shareholders suits brought against AT & T and certain officers and directors of AT & T and At Home. The defendants brought motions for partial summary judgment, alleging that AT & T's clams fell outside the scope of coverage under the D & O policies. Ultimately, the court granted the defendants' motions.

Turning to the court's analysis, the court avoided deciding a preliminary choice of law issue. The parties disagreed as to whether New York, New Jersey, or California law applied. Essentially finding no true conflict of law at this stage of the case, the court determined it did not have to rule on which law governed because all three of the states interpret insurance policies by giving the policy language its plain and ordinary meaning. Furthermore, the court found that all three states utilize similar standards to determine if there is an ambiguity in the contract language. Turning to the disputed contract language, AT & T argued that each misrepresentation or omission in the underlying cases amounted to a separate "claim" against the directors under the terms of the relevant policies. The defendant insurance companies argued that such an argument ignored the separate definitions of "claim" and "wrongful act" in the relevant policies. Finding for the defendants, the court determined that each act or omission was a "wrongful act," not a "claim." The court also found that the claims fell outside the scope of coverage period based on when those claims were first made.

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