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Superior Court Addresses Allocation Of Defense Costs Across Multiple Towers

HLTH Corp. v. Agricultural Excess and Surplus Ins. Co., 2008 WL 3413327 (Del. Super. Ct. July 31, 2008).

When one company acquires several other companies, which carry their own D&O liability coverage, the resulting entity then holds multiple towers of coverage.   

 

Here, the company held multiple towers of coverage and sought reimbursement for the defense costs it was advancing to certain of its officers and directors who were prosecuted in a criminal case. The issue that arose on summary judgment was whether the court had to allocate the defense costs across the multiple towers, while the criminal case was ongoing.  

 

Since none of the contracts required such an allocation, the court held that the insured company could elect to collect payments in advance from any tower and that the court would not mandate allocation at this stage. The court left open the possibility that allocation could be required at a future time, presumably upon final disposition of the case.