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Court of Chancery Examines Post-Merger Insurance Agreement And Denies Injunction Demanding Notice Under Policies

Tenneco Automotive Inc., et al. v. El Paso Corp., et al., C.A. No. 18810-NC (Del. Ch. Jan. 28, 2005). This is an insurance contract related action brought by plaintiff, who also sought an injunction demanding notice under certain insurance policies. Plaintiff also sought a declaratory judgment that the insurance settlement agreement did not impair their rights and a permanent injunction. This action ensued in connection with insurance policies that the plaintiff had acquired to cover against a wide spectrum of risks. Its businesses originally consisted of energy, automotive, packaging and shipbuilding. Following the sale of much of plaintiff's businesses, defendant acquired the balance of the plaintiff's conglomerate in an auction knowing that it would be acquiring its environmental liability exposure. Plaintiff provided the draft of the document that spelled out the rights and liabilities, pursuant to the spin off of its other business lines and merger into defendant. It is that draft document and the insurance agreements that are at the center of this litigation. Defendant later entered into a settlement agreement with the insurers. Plaintiff demanded a copy of that agreement and was denied on the grounds of confidentiality. Thereafter, plaintiff filed this action seeking declaratory judgment that the agreement did not impair their rights under the policies. Applying the law of contracts, the court rejected the doctrine of contra preferentem on these facts and held that the burden of persuasion normally assigned to a plaintiff in a declaratory action may be shifted to a defendant insurer in an action involving insurance coverage. Additionally, the court also discussed the "law of the case" doctrine. Further, the court addressed and denied plaintiffs' claim for permanent injunctive relief regarding defendant's duty to provide notice of its actions to plaintiff under its insurance agreement. Authored by: Raj Srivatsan 302-888 6831 rsrivatsan@morrisjames.com