Delaware Courts Issue Series of Pro-Policyholder D&O Insurance Decisions: Dole Litigation Results in Important Decisions Favoring Policyholders in D&O Coverage Litigation, Including Delaware Supreme Court Decision on Choice of Law, Insurability and AllocationSullivan & Cromwell LLP - April 1, 2021
On March 3, 2021, the Delaware Supreme Court in RSUI Indemnity Co. v. Murdock issued an important decision ending years of litigation over Dole Food Co.’s 2013 going-private transaction and related insurance coverage issues. Among other things, the Court held that Delaware law governed the D&O policy because Dole is incorporated in Delaware, that fraud is not uninsurable as a matter of Delaware public policy, and that the insurer could not reduce coverage by allocating loss to uninsured actors and actions. The Delaware Supreme Court’s decision followed a series of lower court decisions interpreting several common D&O provisions, including the fraud exclusion, the cooperation requirement, and the insurer’s right to pre-approve settlement.
In light of the large number of corporations incorporated in Delaware and the numerous lawsuits that allege fraud against such corporations and their officers and directors, these decisions have significant implications both for insureds and insurers. These rulings impact not only the scope of coverage, but also the extent to which insureds must cooperate with insurers, and the reasonableness of an insurer’s refusal to consent to a settlement. Insurers may seek to engage in forum battles to attempt to avoid the applicability of Delaware law, and may also seek to amend their standard D&O policy language to avoid these pro-policyholder rulings.
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