August 20, 2021
D&O Insurance: Carriers Get a “W” in Appraisal Case
As I’ve previously blogged, Delaware is not regarded as the most hospitable of jurisdictions by D&O insurance carriers, but this recent guest post by Frank Reynolds over on Frances Pileggi’s blog says that the carriers recently won one over in Delaware Superior Court. Here’s an excerpt, which highlights the significant role that the Delaware Supreme Court’s 2020 Solera decision played in the decision:
The Delaware Superior Court recently dismissed Jarden LLC’s bid for D&O insurance coverage for an appraisal suit that was not “for” redress of a “wrongful act” – and even if it was, the act couldn’t have occurred before the sale to Jewel Rubbermaid Inc. closed, ending the coverage period, in Jarden LLC v. Ace American Insurance Co., et al., No. N20C-03-112 AML CCLD opinion issued (Del. Super. July 30, 2021).
In her July 30 opinion, Judge Abigail LeGrow, guided by a recent milestone Delaware Supreme Court opinion, said the underlying shareholder challenge to the price Jarden investors received in 2016 was by nature, a “statutory proceeding”, even if the deal negotiation was “flawed” and the appraisal petitioners won a $177.4 million judgment.
Judge LeGrow wrote that in keeping with the high court’s ruling in a coverage action for an appraisal suit in In Re Solera Insur. Coverage Appeals, 240 A.3d 1121, 1135-36 (Del. 2020), “the only issue before the appraising court is the value of the dissenting stockholder’s shares on the date of the merger,” and no claims of wrongdoing are considered.
Judge LeGrow’s opinion may be of interest to corporate and insurance specialists–-at least for the reason that it was a win of sorts for corporate insurers in what they have complained has been a long, dry season for them in Delaware D&O insurance coverage litigation.
The Judge acknowledged that while evidence of potential flaws in the negotiation process may be considered in an appraisal action, that evidence is relevant only in determining the weight to be given to the deal price. So, if any act forms the basis for an appraisal claim, it isn’t the wrongful conduct associated with the merger process, but the execution of the merger itself.
– John Jenkins