Superior Court Declines to Dismiss Counterclaims Based on “Interrelated Wrongful Act” Clause in D&O Coverage Dispute Arising Out of Viacom-CBS Merger
National Amusements Inc. v. Endurance American Specialty Insurance Co. (Del. Super. April 28, 2023)
In this D&O insurance coverage dispute, the plaintiffs moved to dismiss the defendant insurers' counterclaims, which contended that the "Interrelated Wrongful Acts" clause barred coverage under the present D&O policies for certain merger-related litigation initiated in 2019. That clause deemed interrelated acts a single claim and deemed them to be made in the earliest policy period in which the earliest interrelated claim was made. Defendants' theory was that the merger litigation initiated in 2019 arose from interrelated prior wrongful acts starting in 2016 when the plaintiffs were involved in a battle for corporate control, which were the subject.
The Delaware Superior Court held that the plaintiffs' motion to dismiss was premature. While questioning their theory, the Court reasoned that the defendants did not yet have access to the unredacted complaints in the underlying merger litigation that they, in fairness, should first receive in discovery. Further, the Court explained that when there is doubt as to "relatedness" of actions under an Interrelated Wrongful Acts clause in a D&O insurance policy, the Delaware Supreme Court permits a court to look beyond the pleadings and consider statements an insured made that are inconsistent with its current coverage position. Here, the Court found that plaintiffs' indemnification claims for the merger litigation under the settlement agreements arising from the 2016 suits may advance a position on the issue of "relatedness" that is inconsistent with plaintiffs' current coverage position, requiring discovery.Share