In a dispute described by a Delaware court as litigation that has “exploded” beyond “any reasonable common sense,” an investment management firm has prevailed in litigation coverage with insurers and its co-insured over whether it is entitled to entity defense costs in connection with lawsuits and U.S. Securities and Exchange Commission investigations.

The complex litigation stems from 2011 agreements between New York investment firm AR Capital LLC and Phoenix-based Vereit Inc., a real estate operating company, according to Wednesday’s ruling by the Delaware Superior Court in Wilmington in AR Capital LLC v. XL Specialty Insurance Co., et al.; Vereit Inc. v. AR Capital LLC. The agreements were terminated in 2013 and 2014.

In 2014, Vereit’s board of directors audit committee began investigating certain reporting irregularities, and an SEC investigation followed, according to the ruling. The SEC issued a subpoena to AR Capital, demanding documents relating to its business with Vereit.

Both firms were named as defendants in subsequent lawsuits filed by shareholders, which led to one consolidated class action and at least seven opt-out actions, according to the ruling.

In November 2014, AR Capital and its officers and directors hired two law firms to defend itself, which led to $14.5 million in defense costs.

Vereit had purchased primary and excess insurance coverage for February 2014 to February 2015, with XL Insurance Co., its primary insurer, providing $10 million in coverage, and seven excess insurers providing a tower of another $70 million in coverage, according to the ruling. The excess policies generally “follow form” to the primary policy’s terms and conditions.

AR Capital was added as a covered entity under the definition of company, while its directors are included in the primary policy’s definition of “insured persons.”

XL acknowledged AR Capital’s defense costs and began providing coverage on behalf of six of its officers and directors but denied coverage to the corporate entity.

AR Capital demanded coverage from all insurers, and also requested indemnification from Vereit. The situation led to AR Capital filing suit against the insurers and Vereit filing a complaint against AR Capital, seeking a determination AR Capital must first seek coverage under its own liability insurance program.

AR Capital subsequently settled with XL and Beazley Insurance Co., which insured the first excess layer.

All parties agree AR Capital may be entitled to Side B coverage for its D&O policy, but disagree over whether AR Capital is entitled to Side C entity coverage, the ruling said.

The court held it was entitled to this coverage based on policy language. AR Capital “is to be paid for their claims up to the same amount Vereit has already been paid by the excess insurers. Thereafter, AR Capital and Vereit shall be paid its defense costs as they are incurred and submitted (first in, first out),” said the ruling.