This story is reprinted with permission from the Insurance Coverage Law Center, the industry's only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.

A trial court in Delaware has certified its decision on two issues of first impression under Delaware insurance coverage law to the Supreme Court of Delaware.

The Case

After Solera Holdings, Inc., sued excess insurers ACE Insurance Company and Federal Insurance Company, the insurers moved for summary judgment, seeking confirmation that they had no obligation to pay defense expenses or indemnify Solera in connection with an appraisal action.

The insurers argued that their excess insurance policies, which followed form and incorporated the provisions of the primary directors' and officers' insurance policy issued to Solera by XL Specialty Insurance Company, only provided coverage for losses resulting solely from a "securities claim" and that an appraisal action under 8 Del. C. § 262 was not a securities claim within the meaning of the primary insurance policy.

The Delaware trial court denied the insurers' motion for summary judgment, holding that an appraisal action under 8 Del. C. § 262 was a securities claim within the meaning of the primary insurance policy because the definition of securities claim was not limited to claims of wrongdoing.

The trial court also ruled as a matter of Delaware law that the primary policy's clause requiring the insurer's prior consent to defense expenses impliedly contained a prejudice requirement.

The insurers asked the trial court to certify its opinion for interlocutory appeal to the Supreme Court of Delaware Supreme; Solera responded that it did not oppose interlocutory review.

The Court's Decision

The court granted the motion.

In its decision, the court ruled that its prior opinion decided two issues of first impression in Delaware: (1) the meaning of "securities claim" within a directors' and officers' liability insurance policy and whether an appraisal action was such a claim, and (2) whether a consent clause relating to defense expenses contained an implied prejudice requirement under Delaware law.

The court pointed out that, as to the definition of a securities claim, its interpretation of the policy was a question of law and that no prior Delaware decision had defined that term or had considered whether the term encompassed an appraisal action under Section 262.

As to the consent clause, the court noted that it held that settled Delaware law implied a prejudice requirement in insurance policy consent-to-settle clauses, and that the prejudice requirement also should be implied in consent-to-defense-expenses clauses. The court added that its extension of the implied prejudice requirement to a consent-to-defense clause was an issue of first impression in Delaware and, therefore, was appropriate for interlocutory review.

The court decided that interlocutory review would support an efficient and just resolution of the case, and that the benefits of such review outweighed its probable costs.

Accordingly, it certified an interlocutory appeal to the Delaware Supreme Court of its opinion denying the insurers' motion for summary judgment.

The case is Solera Holdings, Inc. v. XL Specialty Ins. Co., No. N18C-08-315 AML CCLD (Del. Super. Ct. Sept. 26, 2019).

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Meyerowitz is the director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. He can be contacted at [email protected].