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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Showing 4 posts from March 2018.
In Arch Insurance v. Murdock, (Del. Ch. Mar. 1, 2018), a D&O insurance coverage dispute, the state Superior Court’s complex commercial litigation division reasoned broadly to hold that, absent a contrary choice of law clause, Delaware law applies to Delaware corporations’ D&O insurance policies, and that Delaware public policy does not prohibit insuring losses from insureds’ breaching the fiduciary duty of loyalty through fraudulent conduct. More ›
This decision upholds coverage under a D&O policy for a claim alleging fraud by directors. This is not too surprising as the Delaware Corporation Law has long relied on insurance to cover the gap in the DGCL that denies indemnification for some claims based on disloyalty. The business judgment rule, the right to advancement, and indemnification and insurance are the triad of protections for Delaware directors.
To obtain inspection rights from a Delaware corporation to investigate alleged wrongdoing, the petitioner needs some evidence to support his suspicions. As this decision explains, the filing of a suit by someone else is not enough. However, when that other complaint has detailed facts to support it or documents attached that show wrongdoing, that will suffice. This is also a good decision on the scope of inspection rights.
Demand on directors is not required when it is alleged that they have violated a statute or rule. But when the claim is only that they violated the "best practices” suggested by an agency, that is not enough to excuse demand on the board.