Delaware Superior Court Explains How To Assert Fraud Exclusion

Posted In Coverage

Gallup v. Greenwich Insurance, C.A. N14C-02-136 FWW (January 30, 2017)

This is an important insurance coverage decision. It upholds the claim of an insurer to bring a coverage suit to determine that a fraud exclusion applies to bar coverage on an underlying litigation that asserted a claim for fraud. This is important because fraud exclusions often depend on a finding in a final judgment of fraud by the insured in the underlying litigation. An insured may try to avoid such a judgment by settling and then asking the insurer to pay the settlement.  See e.g. the decision in Arch Insurance Company v. Murdock, Del. Super. C.A. N16C-01-104 EMD (December 21, 2016), denying the use of a fraud exclusion when the underlying case was settled.

Patricia A. Winston and James J. Gallagher, II Elected As Partners

Morris James LLP is pleased to announce that Patricia A. Winston and James J. Gallagher, II have been elected partners effective January 1, 2017.  More ›

Delaware Superior Court Limits Fraud Exclusion

Arch Insurance Company v. Murdock, C.A. N16C-01-104 EMD CCLD (December 21, 2016)

This is an important decision because it limits the use of the typical fraud exclusion in a D&O policy to avoid liability to the insured.  The insured David Murdoch was found to have breached his fiduciary duty to Dole Foods resulting in a damage opinion awarding over $148,000,000. He soon settled the case by paying the damages and the suit was dismissed prior to the entry of a final judgment. He then sought to be reimbursed by the Dole D&O carriers. The insurers defended on the basis that the policy excluded coverage for litigation over a director’s personal gains obtained by fraud. However, the policy also required that the adjudication of wrongful conduct be reflected in a final judgment. The court held that even though there was a Court of Chancery opinion finding Murdock liable there was no final judgment and thus the exclusion for fraud did not apply. Further, the Court held that the insurers could not be subrogated in a suit against Murdock. While the case is not yet over, this result is probably upsetting to most insurers who do not expect to have to cover their insured’s frauds. But as the Superior Court correctly pointed out, there is precedent for this result. Hence, it can be said the insurers were on notice this might occur.  Of course, the answer to this problem is to change the policy wording to not require a final adjudication when a case is settled.

Superior Court of Delaware Finds that Settlement Amounts not Uninsurable Disgorgement

The Superior Court’s Complex Commercial Litigation Division held in TIAA-CREF Individual & Institutional Services, LLC v. Illinois National Insurance Company, C.A. No. N14C-05-178 (JRJ) (CCLD) that amounts TIAA-CREF paid in settlement of three underlying class action lawsuits did not represent uninsurable disgorgement.  The underlying lawsuits alleged that TIAA-CREF improperly failed to credit the accounts of customers with investment gains that accrued while transfer or withdrawal requests were being processed.  The underlying lawsuits were eventually settled with payouts to the class members.  Pursuant to the settlement agreements, TIAA-CREF specifically stated that it was resolving disputed claims, denied any wrongdoing, and did not admit liability.  TIAA-CREF subsequently sought coverage for the settlement amounts, but the insurance carriers denied coverage on various grounds, including that the amounts TIAA-CREF agreed to pay represented uninsurable disgorgement. More ›

Supreme Court of Delaware Decides Long-Standing Dispute in Viking Pump Action

Posted In Decision

The Supreme Court of Delaware issued its decision in the long-standing dispute in In re Viking Pump, Inc. and Warren Pumps, LLC.  The appeal arose out of several rulings in the Court of Chancery and after a jury trial in the Complex Commercial Litigation Division of the Superior Court of Delaware. 

The litigation began in 2005 in the Court of Chancery, when Viking brought suit claiming it was the successor to certain insurance policies that Liberty Mutual Insurance Company had issued to Houdaille Industries, Inc., or, in the alternative, seeking partition of the Liberty policy limits.  That dispute settled.  Viking and Warren then filed new complaints in the Court of Chancery against more than twenty excess insurers that had issued excess policies to Houdaille.  The issue was whether to allocate using either the “pro rata” or “all sums” approach.  The Court of Chancery held that, under New York law, the language of the policy unambiguously provided for “all sums” allocation.  The case was then transferred to the Superior Court. More ›

Superior Court of Delaware Finds that Late Notice Does Not Defeat Coverage Under D&O Policy

Posted In policies

The Superior Court’s Complex Commercial Litigation Division held in Medical Depot, Inc. v. RSUI Indemnity Company that late notice did not preclude coverage in a D&O policy absent prejudice to the insurer.  By way of brief background, in June 2013, Tony Messadri sent Medical Depot a letter (the “Demand Letter”) in which Mezzadri threatened to file a class action lawsuit if the company did not bring itself into compliance with California law.  In March 2014, Messadri filed his initial complaint.  Messadri did not serve the initial complaint on Medical Depot, but Medical Depot’s HR director received a copy of the complaint from outside counsel.  On September 2, 2014, Messadri served an amended complaint on Medical Depot; Medical Depot notified its D&O insurer of the amended complaint on September 9, 2014.   More ›

Superior Court of Delaware Grants Motion for Summary Judgment Regarding Duty to Defend Under Wisconsin Law

The Complex Commercial Litigation Division of the Superior Court of Delaware recently held that Travelers Indemnity Company (“Travelers”) breached its duty to defend and indemnify plaintiff CNH Industrial America LLC (“CNH”) in underlying asbestos-related lawsuits. More ›

Best Lawyers® 2017 Recognizes 20 Morris James Attorneys

Twenty Morris James attorneys in twenty-six practice areas were selected by their peers for inclusion in The Best Lawyers in America 2017 edition. Morris James also has been recognized in four new practice areas, Personal Injury Litigation – Defendants, Arbitration, Corporate Governance Law and Mediation.  The Best Lawyers® list is based on an extensive survey involving detailed evaluations of leading lawyers by their peers. More ›

Superior Court of Delaware Confirms D&O Policy Provides Coverage for Investigation Costs Associated with Shareholder Derivative Demands

In a series of decisions regarding a matter of first impression under Delaware law, the Superior Court of Delaware held that the “Investigation Costs” for two related shareholder derivative demands made by Robert Ammerman (“Ammerman”) were covered under Defendant and Counterclaim Plaintiff XL Specialty Insurance Company’s (“XL”) Management Liability and Company Reimbursement Insurance Policy (the “XL Policy”) that XL issued to Ameritrans Capital Corporation (“Ameritrans”).  See Ameritrans Capital Corp. v. XL Specialty Ins. Co., C.A. No. N14C-10-019 (EMD) (Nov. 30, 2015) (granting Ameritrans’ Motion for Judgment on the Pleadings); (June 15, 2016) (granting XL’s Motion for Reargument but upholding November 30, 2015 decision).   More ›

Court denies summary judgment after claim construction

Cronos Technologies, LLC v. Expedia, Inc., et al., C.A. Nos. 13-1538-LPS; 13-1541-LPS; 13-1544-LPS, July 22, 2016.

Stark, C. J. Claim construction opinion issues regarding three terms from one patent. Defendants’ motion for summary judgment is deferred pending the filing of a status report.

The disputed technology relates to website remote ordering systems. The following terms were considered:

  1. “Item Code”/ “identifying code”
  2. “data entry device for providing said terminal with said ... item codes"
  3. “user inputting said identifying code"

Plaintiff contends that hyperlinks implemented in defendants’ websites are infringing item codes, The court concludes that defendants have met their burden of showing no genuine issue of material fact that their websites do not infringe. However, the court acknowledges that actual claim constructions are only being provided with this opinion and concludes that plaintiff should be permitted to consider new infringement theories even if it is unlikely it court persuade the court to allow them with the pretrial conference just a week away. The parties are directed to meet and confer and to provide their positions on whether summary judgment of non-infringement should be entered.

Chambers USA Recognizes 14 Morris James Attorneys and 5 Practice Areas Among the Nation’s Best

Posted In News

Morris James is pleased to announce that fourteen of its partners and five practice areas have been recognized by Chambers USA 2016.  More ›

Morris James Attorneys Participate in Delaware Mock Trial

Posted In News

Morris James attorneys and staff continued the firm’s longstanding support for the Delaware High School Mock Trial Competition with twelve attorneys serving as judges or coaches at the annual competition held at the New Castle County Courthouse on February 26-27, 2016.  Jason C. Jowers, a partner in the firm’s Corporate and Commercial Litigation Group, completed his seventh year as Chair of the competition and received the Pete Jones Award, named after Morris James partner Pete Jones, given to an individual who has demonstrated sustained commitment to the goals and values of the mock trial program. Eric Hacker, an associate in the firm’s Georgetown office, coached Sussex Central, the first team from Sussex County to advance to the finals of the competition. In addition to Jowers and Hacker, the Morris James attorneys who participated as coaches or judges included partners Kevin Healy, Pete Jones,  Lewis Lazarus, Dennis Schrader, Joe Slights, and David Soldo, and associates Megan Adams, Nick Krawitz,  Beth Powers,  and Laura Readinger. Also, Morris James administrative assistant Margie Touchton served as the Judge Volunteer Coordinator.

Delaware Supreme Court Justice Collins J. Seitz, Jr.,  the presiding judge of the championship round, commented that the future of the practice of law in Delaware is bright based on the skill demonstrated by the finalists.  David Williams, the firm’s managing partner, expressed his gratitude to the attorneys and staff who gave so generously of their time to aid the next generation of Delaware lawyers, noting that “this type of dedication exemplifies the type of community service for which the firm is proud.”

U.S. News - Best Lawyers Ranks Eighteen Morris James Practice Areas among 2016 “Best Law Firms” in Delaware

Posted In News

Eighteen Morris James practice areas were recognized in the 2016 “Best Law Firms” rankings by U.S. News – Best Lawyers®. These rankings complement the twenty-one Morris James attorneys who were selected by their peers for inclusion in the “The Best Lawyers in America” 2016 edition.

The practice areas recognized include: More ›

Morris James Receives Christopher W. White 2015 Distinguished Access to Justice Leadership Award

Posted In News

Morris James LLP was presented the Leadership Award at the Delaware State Bar Association’s Christopher W. White 2015 Distinguished Access to Justice Awards Breakfast on October 29th, 2015. The Leadership Award is given to the firm who has demonstrated outstanding leadership in the field of pro bono service to the impoverished in Delaware, and who fosters a culture which recognizes the value of Access to Justice service.  More ›

Sixteen Morris James Lawyers Recognized in Delaware Today's "Top Lawyers 2015"

Posted In News

Morris James LLP is pleased to congratulate the lawyers listed below, who were most recommended by their professional peers in a survey of Delaware attorneys conducted by Delaware Today magazine. Sixteen Morris James attorneys were distinguished in their respective practice areas, with seven named as “top vote-getters,” listed below in bold. More ›