In a victory for insurers, a unanimous Supreme Court in Delaware overturned a lower court ruling on Friday, finding that costs associated with a share appraisal sought by shareholders in connection with a merger were not insurable under the coverage of the board and executives.
Westlake, Texas-based Solera Holdings Inc., formed in Delaware, had purchased $ 55 million in D&O coverage, including $ 10 million in primary coverage from XL Specialty Insurance Co., a unit of Axa XL, and $ 45 million in surplus from nine insurers, including units from Chubb Ltd. and American International Group Inc., according to the judgment of the Supreme Court of Delaware in I on: Solera Insurance Protection Appeals.
After Solera was acquired by a private company, Austin, Texas-based Vista Equity Partners, several of its shareholders filed an evaluation action in March 201
C ourt ordered Solera to pay the petitioners the value of their shares, which was less than the concentration price, plus $ 38.4 million in advance interest, according to the decision. Solera also incurred more than $ 13 million in lawyers and other fees to defend the disputes.
After the insurers refused to provide coverage, Solera filed a lawsuit in the State Court in 2018 and demanded compensation for interest and defense costs.
XL settled with Solera for an undisclosed amount, while most of the remaining surplus insurance companies, which had insurance policies that followed the form of the primary coverage, continued the case according to the decision.
The insurers claimed that they were not obliged to cover the costs. , argues an appraisal measure did not meet the primary policy definition of a securities claim, as it does not require an allegation of evidence of error under Delaware law. Solera claimed that allegations of wrongdoing were not required.
Delaware's superior court ruled in Solera's favor, claiming that a securities claim under the coverage is not limited to alleged errors, and that insurers were required to pay advance interest and defense costs.
The Supreme Court of the State agreed with the insurers. The definition of the security claim on the policy "requires that a claim relates to a violation of a law that regulates securities", the decision states.
It said, "this conclusion is forced by the simple meaning of the word 'transgression,' which involves a certain element of error, even if it is done with an innocent state of mind."
It is also compelled to reach this conclusion by the "historical background of the Delaware Act, its text and by a long line of unbroken cases" on this issue, the decision said, in the face of the lower court.
The court said that since it ruled in favor of insurers in this matter, the remaining prejudice interests and defense cost issues were difficult.
Lawyers in the case had no comment or could not be reached. Catalog