Justia Delaware Supreme Court Opinion Summaries

Guaranteed Rate, Inc., a mortgage lender, purchased two types of insurance policies from ACE American Insurance Company: management liability and professional liability. Guaranteed Rate sought coverage under the policies for an investigation and eventual settlement of claims brought by the federal government under the False Claims Act. ACE denied coverage under both policies. According to ACE, the Professional Liability Policy expressly excluded False Claims Act charges. ACE also contended that the False Claims Act charges arose from Guaranteed Rate’s professional services, which were excluded under the Management Liability Policy. Only the Management Liability Policy was at issue in this appeal. In Guaranteed Rate’s suit against ACE, a Delaware superior court held that the False Claims Act investigation and settlement did not arise out of Guaranteed Rate’s professional services. Instead, it arose out of false certifications made to the government. Thus, the Management Liability Policy covered the loss. To this, the Delaware Supreme Court agreed with the superior court. View "ACE American Insurance Company v. Guaranteed Rate, Inc." on Justia Law

In a previous action between these parties, the Delaware Supreme Court addressed whether the exclusive-remedies provision in the workers’ compensation act precluded an injured employee from pursuing recovery from an uninsured motorist policy. After the Court held that the exclusive-remedies provision did not apply, the employer and its workers’ compensation carrier sought a declaratory judgment that they were permitted to assert a lien against any recovery the employee might obtain for injuries already compensated under the workers’ compensation act. The employee and the uninsured motorist insurer contended that any such lien was barred by statute, relying on the Court’s decision in Simendinger v. National Union Fire Insurance Co., 74 A.3d 609 (Del. 2013). The superior court followed that binding precedent as it was required to do and dismissed the declaratory judgment claim. After review however, the Delaware Supreme Court concluded Simendinger was decided in error. The Court therefore reversed the superior court’s decision and held that the workers’ compensation act expressly allowed the employer and its workers’ compensation carrier to assert a subrogation lien against benefits paid to the employee under the employer’s uninsured motorist policy. View "Horizon Services, Inc. v. Henry" on Justia Law

Sathiyaselvam Thangavel and Sasikala Muthusamy were tenants who leased an apartment from Seaford Apartment Ventures, LLC. The complaint filed by Seaford Apartment’s insurer, Donegal Mutual Insurance Company, alleged that the tenants hit a sprinkler head while they flew a drone inside the apartment. Water sprayed from the damaged sprinkler head and caused damage to the apartment building. Seaford Apartment filed an insurance claim with Donegal, who paid $77,704.06 to repair the water damage. Donegal then brought this action against the tenants through subrogation and alleged that the tenants were negligent and breached the property’s rules and regulations. Donegal sought to recover the repair costs from the tenants. Under the "Sutton" rule, landlords and tenants are co-insureds under the landlord’s fire insurance policy unless a tenant’s lease clearly expresses an intent to the contrary. If the Sutton rule applies, the landlord’s insurer cannot pursue the tenant for the landlord’s damages by way of subrogation. In this case, a Delaware superior court ruled in the tenants’ favor at summary judgment that the Sutton rule applied because the lease did not clearly express an intent to hold the tenants liable for the landlord’s damages. To this the Delaware Supreme Court agreed and affirmed. View "Donegal Mutual Insurance Company v. Thangavel" on Justia Law

Wilmington Trust National Association, acting as securities intermediary for Viva Capital Trust, was the downstream purchaser of two high- value life insurance policies issued by Sun Life Assurance Company of Canada. After the insureds died, Sun Life, believing that the policies were “stranger originated life insurance” ("STOLI") policies that lacked an insurable interest, filed suit in the Superior Court, seeking declaratory judgments that the policies were void ab initio. Sun Life sought to avoid paying the death benefits and to retain the premiums that had been paid on the policies. Wilmington Trust asserted affirmative defenses and counterclaims, alleging that Sun Life had flagged the policies as potential STOLI years before Wilmington Trust acquired them. Wilmington Trust sought to obtain the death benefits or, in the alternative, a refund of all the premiums that it and former owners of the policies had paid on the policies. Sun Life countered that allowing Wilmington Trust to recover the death benefits would constitute enforcing an illegal STOLI policy and that Wilmington Trust could not recover the premiums because, among other arguments, Wilmington Trust knew that it was buying and paying premiums on illegal STOLI policies. The trial court denied Wilmington Trust’s bid to secure the death benefits, but ordered Sun Life to reimburse, without prejudgment interest, all premiums “to the party that paid them.” The Delaware Supreme Court agreed with the trial court’s disallowance of Wilmington Trust’s death-benefit claim, accomplished in part by an earlier dismissal of Wilmington Trust’s promissory- estoppel counterclaim and the striking of certain of its equitable defenses, finding it was consistent with STOLI precedents. But its application of an “automatic premium return” rule—that is, ordering all premiums to be returned without conducting the fault-based analysis we adopted in Geronta Funding v. Brighthouse Life Ins. Co., 284 A.3d 47 (Del. 2022)—was not. Nor was the trial court’s denial of prejudgment interest. Therefore, the Supreme Court affirmed in part, reversed in part, and remanded to the superior court for reconsideration of its ruling on Wilmington Trust’s premium-return claim, including its claim for prejudgment interest. View "Wilmington Trust National Association v. Sun Life Assurance Company of Canada" on Justia Law

Stillwater Mining Company filed suit against its directors’ and officers’ liability insurers to recover the expenses it incurred defending a Delaware stockholder appraisal action. The superior court granted the insurers’ motions to dismiss after it found that Delaware law applied to the dispute and the Delaware Supreme Court’s decision in In re Solera Ins. Coverage Appeals (“Solera II”) precluded coverage for losses incurred in a stockholder appraisal action under a similar D&O policy. The primary issue on appeal was whether Delaware or Montana law applied to the claims in Stillwater’s amended complaint. Stillwater argued that the superior court should have applied Montana law because Montana had the most significant relationship to the dispute and the parties. If Montana law applied, according to Stillwater, it could recover its defense costs because Montana recognized coverage by estoppel, meaning the insurers were estopped to deny coverage when they failed to defend Stillwater in the appraisal action. Before the Delaware Supreme Court issued Solera II, the Solera I court held that D&O insureds could recover losses incurred in a stockholder appraisal action. Taking advantage of that favorable ruling, Stillwater argued in its complaint that Delaware law applied to the interpretation of the policies. Then when Solera II was issued, Stillwater reversed position and claimed that Montana law applied to the policies. Its amended complaint dropped all indemnity claims for covered losses in favor of three contractual claims for the duty to advance defense costs and a statutory claim under Montana law. In the Supreme Court's view, Stillwater’s amended claims raised the same Delaware interests that Stillwater identified in its original complaint – applying one consistent body of law to insurance policies that cover comprehensively the insured’s directors’, officers’, and corporate liability across many jurisdictions. It then held the superior court did not abuse its discretion when it denied Stillwater's motions. View "Stillwater Mining Company v. National Union Fire Insurance Company of Pittsburgh, PA" on Justia Law

The issue this appeal presented for the Delaware Supreme Court’s review asked for a determination of whether premiums paid on insurance policies declared void ab initio for lack of an insurable interest should be returned. Geronta Funding argued Delaware law required the automatic return of all premiums paid on the void policy. Brighthouse Life Insurance Company argued a party must prove entitlement to restitution. The trial court agreed with Brighthouse and relied on the Restatement (Second) of Contracts to determine whether Geronta was entitled to restitution. Specifically, the court held that Geronta could obtain restitution if it could prove excusable ignorance or that it was not equally at fault. Applying this test, the court ruled that Geronta was only entitled to the return of the premiums it paid after alerting Brighthouse to the void nature of the policy at issue. Geronta appealed this ruling, arguing that the court erred when it adopted the Restatement instead of automatically returning the premiums, erred in its actual application of the Restatement, even assuming that is the proper test, and erred by precluding certain testimony from Geronta witnesses. Because this was a matter of first impression, the Supreme Court adopted restitution under a fault-based analysis as framed by the Restatement as the test to determine whether premiums should be returned when a party presents a viable legal theory, such as unjust enrichment, and seeks the return of paid premiums as a remedy. The Court held, however, that despite applying the Restatement, the Superior Court’s application of the Restatement failed to account for the relevant questions encompassed by that approach. The Supreme Court reversed the trial court’s holdings regarding entitlement to premiums and remanded for further consideration, but found no fault in the Superior Court preclusion of certain testimony from Geronta’s witnesses. View "Geronta Funding v. Brighthouse Life Insurance Company" on Justia Law

Two questions of law were certified to the Delaware Supreme Court by the United States Court of Appeals for the Eleventh Circuit: (1) when faced with an action brought by an estate under 18 Del. C. 2704(b), an innocent downstream investor in a stranger-originated life insurance (“STOLI”) policy, or its securities intermediary, could assert certain defenses under the Delaware Uniform Commercial Code; and (2) whether downstream investors in a STOLI policy could sue to recover any premiums they paid. The Court answered question one in the negative: in the sui generis context of STOLI schemes, these defenses are not available. The Court answered question two in the affirmative: yes, if the party being sued can prove its entitlement to those premiums under a viable legal theory. View "Wells Fargo Bank v. Estate of Phyllis M. Malkin" on Justia Law

This appeal involved a challenge to how Geico General Insurance Company (“GEICO”) processed insurance claims under 21 Del. C. 2118. Section 2118 provided that certain motor vehicle owners had to obtain personal injury protection (“PIP”) insurance. Plaintiffs, all of whose claims for medical expense reimbursement under a PIP policy were denied in whole or in part, were either GEICO PIP policyholders who were injured in automobile accidents or their treatment providers. Plaintiffs alleged GEICO used two automated processing rules that arbitrarily denied or reduced payments without consideration of the reasonableness or necessity of submitted claims and without any human involvement. Plaintiffs argued GEICO’s use of the automated rules to deny or reduce payments: (1) breached the applicable insurance contract; (2) amounted to bad faith breach of contract; and (3) violated Section 2118. Having reviewed the parties’ briefs and the record on appeal, and after oral argument, the Delaware Supreme Court affirmed the Superior Court’s ruling that the judiciary had the authority to issue a declaratory judgment that GEICO’s use of the automated rules violated Section 2118. The Supreme Court also affirmed the Superior Court’s judgment as to the breach of contract and bad faith breach of contract claims. The Court concluded, however, that the issuance of the declaratory judgment was improper. View "GEICO General Insurance Company v. Green" on Justia Law

In March 2012, First Solar, Inc. stockholders filed a class action lawsuit against the company alleging that it violated federal securities laws by making false or misleading public disclosures ("Smilovits Action"). National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) provided insurance coverage for the Smilovits Action under a 2011–12 $10 million “claims made” directors and officers insurance policy. While the Smilovits Action was pending, First Solar stockholders who opted out of the Smilovits Action filed what has been referred to as the Maverick Action. The Maverick Action alleged violations of the same federal securities laws as the Smilovits Action, as well as violations of Arizona statutes and claims for fraud and negligent misrepresentation. In this appeal the issue presented for the Delaware Supreme Court's review was whether the Smilovits securities class action, and a later Maverick follow-on action were related actions, such that the follow-on action was excluded from insurance coverage under later-issued policies. The Superior Court found that the follow-on action was “fundamentally identical” to the first-filed action and therefore excluded from coverage under the later-issued policies. The Supreme Court found that even though the court applied an incorrect standard to assess the relatedness of the two actions, judgment was affirmed nonetheless because under either the erroneous “fundamentally identical” standard or the correct relatedness standard defined by the policies, the later-issued insurance policies did not cover the follow-on action. View "First Solar, Inc. v. National Union First Insurance Company of Pittsburgh, PA" on Justia Law

Appellees, Rite Aid Corporation, Rite Aid Hdqtrs. Corp., and Rite Aid of Maryland, Inc. (collectively, “Rite Aid”), held a general liability insurance policy underwritten by defendany Chubb, Limited ("Chubb"). Rite Aid and others were defendants in multi-district litigation before the United States District Court for the Northern District of Ohio (the “MDL Opioid Lawsuits”). Plaintiffs in that suit filed over a thousand suits in the MDL Opioid Lawsuits against companies in the pharmaceutical supply chain for their roles in the national opioid crisis. Certain suits were bellwether suits - including the complaints of Summit and Cuyahoga Counties in Ohio (“the Counties”) which were at issue here. The question this case presented for the Delaware Supreme Court was whether insurance policies covering lawsuits “for” or “because of” personal injury required insurers to defend their insureds when the plaintiffs in the underlying suits expressly disavowed claims for personal injury and sought only their own economic damages. The Superior Court decided that Rite Aid’s insurance carriers were required to defend it against lawsuits filed by two Ohio counties to recover opioid-epidemic-related economic damages. As the court held, the lawsuits sought damages “for” or “because of” personal injury because there was arguably a causal connection between the counties’ economic damages and the injuries to their citizens from the opioid epidemic. The Supreme Court reversed, finding the plaintiffs, governmental entities, sought to recover only their own economic damages, specifically disclaiming recovery for personal injury or any specific treatment damages. Thus, the carriers did not have a duty to defend Rite Aid under the governing insurance policy. View "ACE American Insurance Company v. Rite Aid Corporation" on Justia Law