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Attorneys fees and prejudgment interest incurred in defending litigation that arose out of a software company’s acquisition are covered under the firm’s directors and officers liability coverage, says a Delaware court in denying Chubb Ltd. units summary judgment in the case.
Westlake Texas-based Solera Holdings Inc., which was incorporated in Delaware, had purchased primary and excess D&O liability insurance policies from a group of insurers including Chubb Ltd. units Ace American Insurance Co. and Federal Insurance Co., according to Wednesday’s ruling by the Delaware Superior Court in Wilmington in Solera Holdings Inc. v. XL Specialty Insurance Co. et al.
After Solera was acquired by a private company, several of its shareholders filed an appraisal action in March 2016 in Delaware Chancery Court to determine whether they had been paid a fair price.
Insurers denied coverage for the more than $13 million in attorneys fees and other costs incurred in defending this litigation, according to the ruling. Solera filed suit, charging breach of contract and seeking a declaratory judgment on the issues of prejudgment interest and defense expenses in the appraisal action.
The Chubb units filed a motion for summary judgment in the case. It and other excess insurers had provided $45 million in excess coverage. XL Specialty, which had issued the primary policy that provided $10 million in coverage, reached a settlement with Solera in the case, according to the ruling.
The court denied Chubb’s motion for summary judgment. An appraisal action is a securities claim within the D&O policy’s meaning, said the court. The policy’s language is unambiguous, it said. “A Securities Claim includes any claim for an alleged violation of law or rule regulating securities.”
The appraisal action “is a Securities claim under the Policy because the appraisal petition necessarily alleges a violation of law or rule.”
The court held that factual issues preclude summary judgment on whether the prejudgment interest award is a loss under the policy, and whether Soleras’ late notice in the case bars coverage for defense expenses.
Peter M. Gillon, a partner with Pillsbury Winthrop Shaw Pittman LLP in Washington, who represented Solera, said the company “is gratified by the court’s thoughtful ruling.”
Chubb’s attorney did not respond to a request for comment.
The Delaware court ruled in July that a prior acts exclusion in an excess policy issued by Chubb Ltd. is not applicable because the differences between the prior case and the current case outweighed their similarities.
A prior acts exclusion in an excess policy issued by Chubb Ltd. is not applicable because the differences between the prior case and the current case outweigh their similarities, says a Delaware court in ruling the insurer is obligated to pay defense or indemnification costs.