Delaware Business Litigation Report

Superior Court Rejects Insurers’ Motions to Dismiss Coverage Dispute Based upon Ripeness and Lack of Personal Jurisdiction

Energy Transfer Equity, L.P. v. Twin City Fire Insurance Co., et al., C.A. No. N19C-11-009 EMD CCLD (Del. Super. Ct. Sept. 25, 2020)

Energy Transfer Equity, L.P. v. Twin City Fire Insurance Co., et al., C.A. No. N19C-11-009 EMD CCLD (Del. Super. Ct. Sept. 28, 2020) 

Plaintiffs-Insureds sought declaratory relief and damages for Defendants-Insurers anticipatory breach of directors’ and officers’ insurance policies. Defendant Twin City Fire Insurance Co. issued the primary policy, and the remaining Defendants issued excess coverage policies. Plaintiffs specifically sought insurance coverage related to litigation in the Court of Chancery (“Dieckman Action”), in which trial had occurred but no decision had been issued.

In related decisions, the Superior Court denied a motion to dismiss under Superior Court Civil Rule 12(b)(1) filed by one group of defendants (“12(b)(1) Movants”) and a separate motion to dismiss under Rule 12(b)(1) filed by under another group of defendants (“12(b)(2) Movants”).

The 12(b)(1) Movants urged dismissal because they contended there was not yet a live controversy, which the Delaware Constitution (like the United States Constitution) requires. Relying on XL Specialty Insurance Company v. WMI Liquidating Trust, 93 A.3d 1208 (Del. 2014), the 12(b)(1) Movants asserted that there could not be a live controversy until the Court of Chancery’s final judgment on liability in the Dieckman Action. But the Superior Court disagreed and distinguished XL Specialty. In that case, suit implicating potential liability had not been filed, whereas in this one, the Dieckman Action was past trial already. Moreover, the Court noted that the other relevant factors weighed against dismissal: this action would be re-filed as soon as Dieckman Action was decided; this action would continue because not all Defendants sought dismissal; and the Dieckman Action would be decided before the Court reached the merits of this case. All of these factors indicated to the Court that the case “ha[d] matured to the point where judicial action is appropriate.”

Likewise, the Court refused to dismiss the 12(b)(2) Movants. First, the Court found that Delaware’s long-arm statute applied because 10 Del. C. § 3104(c)(6) expressly provides for jurisdiction over any person that contracts to insure persons or entities, such as Plaintiffs, within the State of Delaware. 

Second, the Court concluded that its exercise personal jurisdiction would not offend due process.   Initially, the Court noted that this case involves specific jurisdiction, not general personal jurisdiction (which has been restrained in recent years). By insuring Delaware entities, the 12(b)(2) Movants should have foreseen the possibility that they could be haled into Delaware for matters related to those insurance contracts. The Court noted that this conclusion was not new given that the Superior Court had reached the same conclusion on similar facts in a prior case, Hoechst Celanese Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 1991 WL 190313 (Del. Super. Ct. Sept. 10, 1991).

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