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The Delaware Supreme Court on Wednesday upheld a lower court and ruled an Alleghany Corp. unit is obligated to fund the settlement of two directors and officers liability insurance settlements involving Dole Food Co. Inc.
Alleghany unit RSUI Indemnity Co. had sought a declaration it was not obligated to fund the settlement of a breach of fiduciary duty action filed in Delaware Chancery Court and a federal securities action filed in the U.S. District Court in Delaware under its excess coverage, according to the Delaware Supreme Court’s unanimous ruling in RSUI Indemnity Co. v. David H. Murdock and Dole Food Co., Inc.
Westlake Village, California-based Dole holds a $15 million D&O insurance policy issued by Axis Insurance Co. RSUI has the eighth layer of coverage, providing $10 million payable upon the exhaustion of $75 million in coverage from the underlying coverage and payment of a $500,000 retention by Dole. All the other insurers have paid their policy limits or settled with Dole, the ruling said.
In November 2013, Mr. Murdock, Dole director and CEO, took the company private through a merger transaction that was approved by shareholders. However, some Dole stockholders filed a lawsuit in Chancery Court challenging the transaction.
Meanwhile, litigation filed in state court by RSUI, among other insurers, resulted in the court ruling against the insurers. Issues raised on appeal by RSUI included whether California law, rather than Delaware law, applied.
The Supreme Court ruling said, “the Insureds’ legal ties to Delaware are more significant — and therefore should be afforded greater weight — than their physical location in California.
“Nor do we find the other previously discussed California contacts to be legally significant or as laden with policy considerations as Dole’s status as a Delaware corporation and the individual insureds’ status as directors and officers, all operating under the authority and guidance of Delaware law,” the ruling said.
Dole attorney Kirk Pasich, of Pasich LLP in Los Angeles, said in a statement, “We think it’s an important decision that provides guidance on a number of key D&O insurance issues.” An RSUI attorney did not respond to a request for comment.
In September, a Delaware court refused a motion to dismiss D&O litigation filed by insurers including RSUI against an energy company that was being sued in connection with a merger.
The Chancery Court of Delaware has ordered Dole Food Co. Inc. CEO David Murdock and General Counsel C. Michael Carter to pay more than $148 million dollars to investors for fraud, the court said in a decision Thursday.