Delaware Supreme Court Affirms Delaware Choice-of-Law Ruling In Dismissal of D&O Liability Insurance Coverage Dispute
Stillwater Mining Company v. National Union Fire Insurance Company of Pittsburgh, PA et al., No. 24, 2022 (Del. Jan. 12, 2023)
This decision from Delaware Supreme Court addresses choice-of-law questions for D&O insurance contract disputes and cautions litigants to remain consistent in the positions they take before the trial court. The appellant here, an insured under a tower of directors and officers’ liability insurance policies, asserted that Delaware law applied to the claims in its original complaint for coverage of its defense costs in an appraisal action. Following a decision from the Delaware Supreme Court in another matter (In re Solera Ins. Coverage Appeals), which held that an insurer is not obligated to provide coverage for appraisal actions under a similar insurance policy, the insured amended its complaint and, in so doing, argued that Montana rather than Delaware law controlled.
In response, the insurers moved to dismiss, arguing that Delaware law applied and under the Delaware Supreme Court’s relevant authority, they were not required to provide coverage for the defense of the appraisal action. The Superior Court granted the insurers’ motion, agreeing that Delaware law applied and under controlling precedent, the insured was not entitled to coverage. The insured appealed the ruling on the grounds that the Superior Court incorrectly decided that Montana law applied.
On appeal, the Supreme Court affirmed the Superior Court’s choice of Delaware law and its dismissal. The Supreme Court engaged in a review on the merits and, considering factors under the Restatement (Second) on Conflicts of Laws, relied on its previous precedent that Delaware has a strong interest in ensuring that its law is applied uniformly to insurance policies affecting Delaware corporations across multiple jurisdictions. The Supreme Court also noted its “concern” with the appellant’s opportunistic change of position regarding which state’s law controlled.