Energy Transfer Equity, L.P. v. Twin City Fire Insurance Co. ( 2020 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
ENERGY TRANSFER EQUITY, L.P., et al., )
)
Plaintiffs, )
) C.A. No. N19C-11-009 EMD CCLD
v. )
)
TWIN CITY FIRE INSURANCE CO., et al., )
)
Defendants. )
)
Submitted: June 24, 2020
Decided: September 28, 2020
Upon Moving Defendants’ Motion to Dismiss Pursuant to Civil Rule 12(b)(1)
DENIED
Jennifer C. Wasson, Esquire, Carla M. Jones, Esquire, Potter Anderson & Corroon LLP,
Wilmington, Delaware, Robin L. Cohen, Esquire, Adam Ziffer, Esquire, David Dehoney,
Esquire, McKool Smith, P.C., New York, New York. Attorneys for Plaintiffs Energy Transfer
Equity L.P., Regency GP LP, and Regency GP LLC.
Robert J. Katzenstein, Esquire, Robert K. Beste, Esquire, Smith, Katzenstein & Jenkins LLP,
Wilmington, Delaware, David Newmann, Esquire, Jason M. Russell, Esquire, Hogan Lovells US
LLP, Philadelphia, Pennsylvania. Attorneys for Defendant ACE Insurance Company.
Robert J. Katzenstein, Esquire, Robert K. Beste, Esquire, Smith, Katzenstein & Jenkins LLP,
Wilmington, Delaware, Thomas J. Judge, Esquire, Dykema Gossett PLLC, Washington, D.C.
Attorneys for Defendant Travelers Casualty and Surety Company of America.
Robert J. Katzenstein, Esquire, Robert K. Beste, Esquire, Smith, Katzenstein & Jenkins LLP,
Wilmington, Delaware, Michael R. Goodstein, Esquire, Bailey Cavalieri LLC, Columbus, Ohio.
Attorneys for Defendant Old Republic Insurance Company.
Marc S. Casarino, Esquire, White & Williams LLP, Wilmington, Delaware, Erica J. Kerstein,
Esquire, Phyllis A. Ingram, Esquire, White & Williams, New York, New York. Attorneys for
Defendants Arch Insurance Company and Alterra America Insurance Company n/k/a Pinnacle
National Insurance Company.
Thaddeus J. Weaver, Esquire, Dilworth Paxson LLP, Wilmington, Delaware. Attorney for
Defendant RSUI Indemnity Company.
Thomas G. Macauley, Esquire, Macauley LLC, Wilmington, Delaware. Attorney for Defendant
Beazley Insurance Company, Inc.
DAVIS, J.
I. INTRODUCTION
This insurance coverage dispute is assigned to the Complex Commercial Litigation
Division of the Court. On November 1, 2019, Plaintiffs Energy Transfer Equity, L.P. (“Energy
Transfer”), Regency GP LP, and Regency GP LLC (collectively, the “Insureds”) filed a
Complaint asserting claims against Defendants Twin City Fire Insurance Co. (“Twin City”),
Zurich American Insurance Company (“Zurich”), Associated Electric & Gas Insurance Services
Limited(“Associated Electric”), U.S. Specialty Insurance Company (“U.S. Specialty”), Illinois
National Insurance Company (“Illinois National”), RSUI Indemnity Company (“RSUI”), Axis
Insurance Company (“Axis”), Old Republic Insurance Company (“Old Republic”), Allied World
National Assurance Company (“Allied World”), Navigators Insurance Company (“Navigators”),
Arch Insurance Company (“Arch”), ACE American Insurance Company (“ACE”), XL Specialty
Insurance Company (XL Specialty”), Alterra America Insurance Company (“Alterra”), Berkley
Insurance Company (“Berkley”), Beazley Insurance Company, Inc. (“Beazley”), and Travelers
Casualty and Surety Company of America (“Travelers”) (collectively, “Insurance Defendants”).1
Through the Complaint, the Insureds seek: (i) declaratory relief concerning a duty to indemnify
(Count II);2 and (ii) damages for anticipatory breach of contract arising out of the Insurance
Defendants purported repudiation under the directors’ and officers’ insurance policies issued by
the Insurance Defendants to the Insureds (Count I).3
1
D.I. No. 1.
2
Compl. ¶¶ 59-63.
3
Id. ¶¶ 64-70.
2
On January 31, 2020, Defendants ACE, Travelers Casualty, Old Republic, Arch, Alterra,
RSUI, and Beazley (collectively, the “Moving Insurers”) filed a Motion to Dismiss under
Superior Court Civil Rule 12(b)(1) (the “Motion”).4 The Insureds filed a Plaintiffs’ Opposition
to the Moving Insurers’ Rule 12(b)(1) Motion to Dismiss (the “Opposition”) on March 16,
2020.5 The Moving Insurers, on April 14, 2020, filed a Reply Brief Supporting Moving
Defendants’ Motion to Dismiss Pursuant to Civil Rule 12(b)(1) (the “Reply”).6 The Court held a
hearing on the Motion, the Opposition and the Reply on June 24, 2020. 7 At the end of the
hearing, the Court took the Motion under advisement.
For the reasons stated below, the Motion is DENIED.
II. FACTS8
A. GENERAL BACKGROUND
Energy Transfer is one of the largest midstream energy companies in the United States.9
Energy Transfer and Regency GP LP are limited partnerships organized and existing under the
laws of Delaware.10 Regency GP LLC is a limited liability company organized and existing
under the laws of the State of Delaware. 11 Regency GP LP is the general partner of Regency
Energy Partners LP (“Regency”). 12 Regency GP LLC is the general partner of Regency GP
LP.13
4
D.I. No. 72.
5
D.I. No. 77.
6
D.I. No. 79.
7
D.I. No. 98.
8
Unless otherwise state, the facts are derived from the Complaint.
9
Compl. ¶ 5.
10
Id. ¶¶ 5-6.
11
Id. ¶ 7.
12
Id. ¶ 2,
13
Id.
3
Twin City is an Indiana corporation with its principal place of business in Connecticut.14
Zurich is a New York corporation with its principal place of business in Illinois. 15 Aegis is a
Bermuda corporation with its principal place of business in New Jersey. 16 U.S. Specialty is a
Texas corporation with its principal place of business in Texas. 17 Illinois National is an Illinois
corporation with its principal place of business in Illinois. 18 RSUI is a New Hampshire
corporation with its principal place of business in Georgia.19 AXIS is an Illinois corporation
with its principal place of business in Georgia. 20 Old Republic is a Pennsylvania corporation
with its principal place of business in Illinois. 21 Allied World is a New Hampshire corporation
with its principal place of business in New York.22 Navigators is a New York corporation with
its principal place of business in Connecticut.23 Arch is a Missouri corporation with its principal
place of business in Pennsylvania.24 ACE is a Pennsylvania corporation with its principal place
of business in Pennsylvania. 25 XL Specialty is a Delaware corporation with its principal place of
business in Connecticut.26 Alterra is a Delaware corporation with its principal place of business
in Virginia.27 Berkley is a Delaware corporation with its principal place of business in
Connecticut.28 Travelers is a Connecticut corporation with its principal place of business in
14
Id. ¶ 8.
15
Id. ¶ 9.
16
Id. ¶ 10.
17
Id. ¶ 11.
18
Id. ¶ 12.
19
Id. ¶ 13.
20
Id. ¶ 14.
21
Id. ¶ 15.
22
The Complaint alleged that Allied World is also a Delaware corporation. Compl. at ¶ 16. Allied World contends
it is no longer a Delaware corporation.
23
Compl. ¶ 17.
24
Id. ¶ 18.
25
Id. ¶ 19.
26
Id. ¶ 20.
27
Id. ¶ 21.
28
Id. ¶ 22.
4
Connecticut.29 Upon information and belief, the Insureds allege that all Insurance Defendants
are authorized to sell or write insurance in Delaware and, at all material times, have conducted
and continue to conduct substantial insurance business in Delaware.30
Energy Transfer has one of the largest portfolios of energy assets in the United States,
with assets covering 38 states.31 Energy Transfer’s core operations include transportation and
storage of natural gas, crude oil, and other energy products.32 Energy Transfer owns and
operates one of the largest pipeline systems in the United States, transmitting natural gas and
other energy products across thousands of miles of pipeline connecting various production areas
to markets across the United States and Canada. 33 At the time of the merger transaction,
Regency was a master limited partnership, providing midstream services in high natural gas
producing areas of the country.34 These services included the gathering and processing,
compression, treatment, and transportation of natural gas in a number of states. 35
B. INSURANCE POLICIES
As part of its risk management programs, Energy Transfer annually purchased insurance,
including director & officer (“D&O”) insurance.36 Energy Transfer obtains insurance to protect
Energy Transfer and its subsidiaries against third-party claims alleging wrongful conduct on the
part of Energy Transfer and its subsidiaries. 37 Energy Transfer’s D&O insurance coverage tower
in effect from February 28, 2014 to February 28, 2015 provides $170 million in Side C (entity)
29
Id. ¶ 24.
30
Id. ¶¶ 8-24.
31
Id. ¶ 28.
32
Id.
33
Id.
34
Id. ¶ 29.
35
Id.
36
Id. ¶ 30.
37
Id.
5
coverage in 17 layers of insurance, all in excess of a $3.5 million self-insured retention.38 Except
as otherwise specified, all excess policies within the coverage tower “follow form” to Policy No.
00-DA-0228176-14 sold by the primary carrier, Twin City (the “Twin City Policy”).39 As
alleged in the Complaint, “[f]ollow form” means that, aside from attachment points and limits of
liability, the excess policies incorporate and adopt the terms, conditions, definitions, and
exclusions of the Twin City Policy. 40
The Insurance Defendants have disputed their obligation to pay any damages in
connection with the Dieckman Action (discussed below) under the following Policies: 41
 The Twin City Policy, issued by Twin City, with a $10 million limit; 42
 second-layer excess Policy No. DOC 5964643 06, issued by Zurich American
with limits of $10 million in excess of $10 million; 43
 third-layer excess Policy No. DX1001114P, issued by Aegis with limits of $10
million in excess of $20 million;44
 fourth-layer excess Policy No. 14-MGU-14-A31330, issued by U.S. Specialty
with limits of $10 million in excess of $30 million; 45
 fifth-layer excess Policy No. 02-381-01-85, issued by Illinois National with
limits of $10 million in excess of $40 million;46
 sixth-layer excess Policy No. HS656241, issued by RSUI with limits of $10
million in excess of $50 million;47
 seventh-layer excess Policy No. MCN730719/01/2014, issued by AXIS with
limits of $10 million in excess of $60 million;48
38
Id. ¶ 31.
39
See id. ¶ 32; Compl. Ex. A.
40
Id. ¶ 32.
41
Id. ¶ 33.
42
Id. ¶ 33(a).
43
See Compl. Ex. B.
44
See Compl. Ex. C.
45
See Compl. Ex. D.
46
See Compl. Ex. E.
47
See Compl. Ex. F.
48
See Compl. Ex. G.
6
 eighth-layer excess Policy No. CUG 36509, issued by Old Republic with limits
of $10 million in excess of $70 million;49
 ninth-layer excess Policy No. 0305-2630, issued by Allied World with limits of
$10 million in excess of $80 million;50
 tenth-layer excess Policy No. CH14DOL313510IV, issued by Navigators with
limits of $10 million in excess of $90 million;51
 eleventh-layer excess Policy No. DOX 9300155-00, issued by Arch with limits
of $10 million in excess of $100 million;52
 twelfth-layer excess Policy No. DOX G25592724 004, issued by ACE with
limits of $10 million in excess of $110 million;53
 thirteenth-layer excess Policy No. ELU133333-14, issued by XL with limits of
$10 million in excess of $120 million;54
 fourteenth-layer excess Policy No. MAXA6EL0001635, issued by Alterra with
limits of $10 million in excess of $130 million;55
 fifteenth-layer primary Policy No. 18009514, issued by Berkley with limits of
$10 million in excess of $140 million;56
 sixteenth-layer excess Policy No. V15QYP140701, issued by Beazley with
limits of $10 million in excess of $150 million;57 and
 seventeenth-layer excess Policy No. 106066639, issued by Travelers with limits
of $10 million in excess of $160 million. 58
The Twin City Policy contains an exclusion provision that the Insurance Defendants have
raised in their dispute with the Insureds.59 In particular, Section V(D)(3) of the Twin City Policy
provides:
49
See Compl. Ex. H.
50
See Compl. Ex. I.
51
See Compl. Ex. J.
52
See Compl. Ex. K.
53
See Compl. Ex. L.
54
See Compl. Ex. M.
55
See Compl. Ex. N.
56
See Compl. Ex. O.
57
See Compl. Ex. P.
58
See Compl. Ex. Q.
59
Id. ¶ 45.
7
Pursuant to Section VII., ALLOCATION OF DAMAGES, the Insurer shall not pay
Damages:
....
(3) under Insuring Agreement (B) or (C) that represent the amount by which the
purchase price or consideration is effectively increased in connection with a Claim
alleging that the price or consideration paid or proposed to be paid in a transaction
involving all or substantially all of the ownership interests in or assets of an entity
is inadequate, or plaintiff counsel fees and costs arising out of such Claim. 60
C. THE DIECKMAN ACTION
On or about June 10, 2015, a class of unitholders in Regency filed a class action lawsuit,
Dieckman v. Regency GP LP, et al., Case No: 11130-CB, D (the “Dieckman Action”), against,
among others, Regency GP LP and Regency GP LLC, alleging breach of the Regency limited
partnership agreement.61 According to the Amended Complaint in the Dieckman Action, 62
Energy Transfer Partner’s acquisition by merger of Regency violated the Regency limited
partnership agreement because of undisclosed conflicts of interest in the merger approval
process, inadequate negotiations, inadequate consideration of Regency’s standalone prospects,
and an improper dilution of Regency’s profits after the acquisition. 63 The defendants in the
Dieckman Action dispute the Dieckman plaintiff’s claim for relief. 64 The underlying plaintiff
alleged four causes of action, one of which survived a motion to dismiss: breach of contract by
Regency GP LP and Regency GP LLC for breach of the Regency limited partnership
agreement.65 The Dieckman plaintiff is seeking approximately $2 billion in damages, interest,
and fees. 66 Energy Transfer has defended the Dieckman Action for more than four years and
trial took place in December of 2019.67 Argument for post-trial briefing took place on May 6,
60
Id. ¶ 46.
61
Id. ¶ 47.
62
See Compl. Ex. R.
63
Id. ¶ 48.
64
Id.
65
Id.
66
Id. ¶ 49.
67
Id.
8
2020.68 The Court of Chancery requested additional briefing on August 25, 2020.69 The parties
submitted the additional briefing on September 15, 2020.70
Energy Transfer timely notified all of its 2014-2015 coverage tower insurers of the
Dieckman Action. 71 Twin City, the primary insurer, agreed to pay defense costs in excess of the
retention amount, but has disputed its obligation to pay for damages that the Insureds may incur
in connection with any settlement of or judgment in the Dieckman Action. 72 The other Insurance
Defendants have adopted Twin City’s coverage position and on that basis denied any obligation
to pay damages that the Insureds may incur in connection with any settlement of or judgment in
the Dieckman Action.73
The Insureds allege that the Dieckman Action constitutes a “Securities Claim” within the
meaning of the Policies because the underlying claims are brought by unitholders of Regency, a
defined Entity under the Twin City Policy. 74 The Insureds contend that the Dieckman Action
plaintiff asserts a “Wrongful Act” in the form of alleged misstatements, omissions, and breaches
of duties.75 The Insureds then allege that any obligation to pay the underlying plaintiff or class
as a result of a settlement or judgment would be “Damages,” constituting a “Loss” under the
Twin City Policy. 76 The Insureds, therefore, assert that the Insurance Defendants’ coverage
obligations are triggered under Insuring Agreement I(C).77
68
See Dieckman v. Regency GP LP, et al., Case No: 11130-CB, D.I. No. 317 (“Dieckman D.I. No.__”).
69
Dieckman D.I. No. 319.
70
Dieckman D.I. Nos. 320 and 321.
71
Id. ¶ 50.
72
Id. ¶ 51.
73
Id. ¶ 52.
74
Id. ¶ 53.
75
Id.
76
Id.
77
Id.
9
The Complaint provides that the Insurance Defendants assert that coverage is barred by
Section V(D)(3) of the Twin City Policy. 78 The Insureds allege that the Insurance Defendants
have improperly denied coverage.79 The Insureds allege that the harm alleged by the Dieckman
Action plaintiffs are not limited to a demand for an increase in consideration for the merger
transaction. 80
The Insurance Defendants have also objected to payment or coverage for such damages
on the ground that it would constitute uninsurable disgorgement.81 The Insureds allege that the
Policy has an exclusion that would bar coverage for disgorgement, but only to the extent there is
a final and nonappealable adjudication in the underlying action establishing that the Insureds
wrongly gained personal profit. 82 Moreover, in the absence of such an adjudication, a claim for
disgorgement is covered.83 Accordingly, the Insureds claim that even if these damages did
constitute disgorgement, the Insurance Defendants’ defense would be meritless.84
Seven of the Insurance Defendants have filed answers to the Complaint. 85 Recently, the
Court denied a motion to dismiss for lack of personal jurisdiction filed by Twin City, Allied
World, and Navigators.86
III. PARTIES’ CONTENTIONS
A. THE MOVING INSURERS
The Moving Insurers contend that the Insureds fail to meet their burden to prove there is
a ripe controversy for adjudication that would invoke the duty to indemnify. The Moving
78
Id. ¶ 54.
79
Id. ¶ 55.
80
Id. ¶ 57.
81
Id. ¶ 58.
82
Id.
83
Id.
84
Id.
85
D.I. Nos. 62 through 70.
86
D.I. No. 101.
10
Insurers also argue that the Complaint is based on an uncertain future event pertaining to an entry
of settlement or award of damages in the Dieckman Action.
B. THE INSUREDS
The Insureds oppose the Motion, arguing that the Complaint asserts justiciable claims.
The Insureds claim that the Complaint establishes a sufficient basis to conclude that the relevant
Policies are implicated in the Dieckman Action. In addition, the Insureds contend that the
Complaint satisfies the factors set out in Schick Inc. v. Amalgamated Clothing & Textile Workers
Union87(the “Schick Factors”). The Insureds argue that the non-insurance cases cited by Moving
Insurers do not apply here. Finally, the Insureds claim that the parties’ disputes are interests are
real, adverse and, therefore, litigable.
IV. STANDARD OF REVIEW
Upon a motion to dismiss, the Court (i) accepts all well-pleaded factual allegations as
true, (ii) accepts even vague allegations as well-pleaded if they give the opposing party notice of
the claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) only
dismisses a case where the plaintiff would not be entitled to recover under any reasonably
conceivable set of circumstances.88 However, the court must “ignore conclusory allegations that
lack specific supporting factual allegations.” 89
“Unlike the standards employed in Rule 12(b)(6) analysis, the guidelines for the Court’s
review of [a] Rule 12(b)(1) motion are far more demanding of the non-movant. The burden is on
87
533 A.2d 1235, 1239 (Del. Ch. 1987)
88
See Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531, 536 (Del. 2011); Doe v.
Cedars Academy, No. 09C-09-136, 2010 WL 5825343, at *3 (Del. Super. Oct. 27, 2010).
89
Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998).
11
the Insureds to prove jurisdiction exists. Further, the Court need not accept Insureds factual
allegations as true and is free to consider facts not alleged in the complaint.” 90
V. DISCUSSION
“Delaware courts decline to exercise jurisdiction over a case unless the underlying
controversy is ripe, i.e., has ‘matured to a point where judicial action is appropriate.’”91 A
motion to dismiss based on lack of ripeness is thus “properly considered under Superior Court
Civil Rule 12(b)(1)[.]”92 Jurisdiction to award declaratory relief exists when there is an “actual
controversy” between the parties.93 For an “actual controversy” to exist, the controversy must:
(i) involve the rights or other legal relations of the party seeking declaratory relief; (ii) be one in
which the claim of right or other legal interest is asserted against one who has an interest in
contesting the claim; (iii) be between parties where interests are real and adverse; and (iv) be ripe
for judicial declaration. 94
To determine whether a case ripe for judicial review, the Court must undertake “a
common sense assessment of whether the interests of the party seeking immediate relief
outweigh the concerns of the court in postponing review until the question arises in some more
concrete and final form.”95 The Court’s discretion in making this common sense determination
is guided by the following factors, which are referred to as the Schick Factors:
(1) a practical evaluation of the legitimate interests of the plaintiff in a prompt
resolution of the question presented;
(2) the hardship that further delay may threaten;
90
Appriva S’holder Litig. Co. v. EV3, Inc., 937 A.2d 1275, 1284 n.14 (Del. 2007).
91
XL Specialty Ins. Co. v. WMI Liquidating Tr., 93 A.3d 1208, 1217 (Del. 2014) (quoting Stroud v. Milliken Enters.,
552 A.2d 476, 480 (Del. 1989)).
92
Homeland Ins. Co. v. Corvel Corp., 2011 WL 7122367, at *3 (Del. Super. Nov. 30, 2011).
93
Id.94
Id. (citations omitted).
95
XL Specialty, 93 A.3d at 1217; see also Hoechst Celanese Corp. v. Nat’l Union Fire Ins. Co., 623 A.2d 1133,
1137 (Del. Super. 1992) (“ripeness . . . is now very much a matter of practical common sense[.]”) (citations
omitted).
12
(3) the prospect of future factual development that might affect the determination
made;
(4) the need to conserve scarce resources; and
(5) a due respect for identifiable policies of law touching upon the subject matter
in dispute.96
In applying the Schick Factors, this Court should “liberally exercise[]” its discretion “so that the
remedial purpose of the [Declaratory Judgment Act] may be well served.” 97 However, even
though “a trial court has discretion in determining whether to entertain a declaratory judgment
action[,] [t]he court may not exercise that discretion . . . unless the action presents an ‘actual
controversy.’”98
Additionally, the Supreme Court summarized Delaware’s ripeness standards in XL
Specialty Insurance Company v. WMI Liquidating Trust:
Generally, a dispute will be deemed ripe if “litigation sooner or later appears to be
unavoidable and where the material facts are static.” Conversely, a dispute will be
deemed not ripe where the claim is based on “uncertain and contingent events” that
may not occur, or where “future events may obviate the need” for judicial
intervention.99
The Supreme Court also stated that, “[i]n this specific insurance coverage context, the plaintiff
must establish a ‘reasonable likelihood’ that coverage under the disputed policies will be
triggered.”100 The Supreme Court further noted that Delaware “courts will decline ‘to enter a
declaratory judgment with respect to indemnity until there is a judgment against the party
seeking it.’”101
96
Hoechst, 623 A.2d at 1137 (citing Schick Inc. v. Amalgamated Clothing & Textile Workers Union, 533 A.2d 1235,
1239 (Del. Ch. 1987)).
97
Schick, 533 A.2d at 1238; see also 10 Del. C. § 6512.
98
XL Specialty, 93 A.3d at 1216 (citing Gannett Co. v. Bd. of Managers of the Del. Criminal Justice Info. Sys., 840
A.2d 1232, 1237 (Del. 2003)).
99
Id. at 1217-18 (citations omitted).
100
Id. at 1218 (quoting Hoechst, 623 A.2d at 1137.
101
Id. (quoting Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611, 632 (Del. Ch. 2005)).
13
In XL Specialty, the Court determined that the coverage dispute before it did not present a
ripe controversy. The plaintiff sought a determination that primary and excess management
liability policies with limits totaling $250 million covered a pending $500 million demand by the
trust against defendant’s former directors and officers arising from a transfer of assets to
defendant’s subsidiary bank.102 The plaintiff’s suit against the insurers for breach of contract and
declaratory relief alleged that the insurers had breached their obligations under the policies “by
denying coverage and failing to pay the D&Os’ defense costs associated with (and by not
attempting to settle)” the claim. 103
The plaintiff was a Delaware statutory trust that was the legal successor to a bankruptcy
debtor.104 The plaintiff contended that it had causes of action against former officers and
directors that would give rise to a claim for indemnification under certain insurance policies. 105
The officers and directors denied liability. 106 The plaintiff never filed suit against the officers
and directors.107 The plaintiff did file a complaint against the insurers in the Bankruptcy Court.
The Bankruptcy Court dismissed the complaint. 108 Among other rulings, the Bankruptcy Court
held that the declaratory judgment claim against the insurers failed to allege a justiciable actual
controversy.109 The plaintiffs then filed suit in this Court. The Court found the claims to be ripe
and an appeal ensured.110
The Supreme Court held in XL Specialty that the plaintiff’s coverage action was not ripe,
notwithstanding the insurers’ denial of coverage, because it “seeks a judicial determination that,
102
Id. at 1211-12.
103
Id. at 1215.
104
Id. at 1211.
105
Id. at 1212.
106
Id. at 1214.
107
Id. at 1212.
108
Id. at 1215.
109
Id.
110
Id.
14
if made, would necessarily be premised on uncertain and hypothetical facts and that ultimately
may never become necessary.” 111 The Supreme Court explained that the trust had not yet filed
suit against the D & Os and that, if it did, “the D&Os might ultimately prevail,” in which case
the policies at issue “might never be implicated . . . .”112 The Supreme Court also determined
that if the claim eventually resulted in a settlement or judgment against the D&Os, any coverage
under the policies “would depend on” other contingencies, including the obligations imposed by
“any settlement or judgment.”113 A coverage determination prior to that event “would rest on the
court’s predicted outcome of any litigation or settlement of the Asserted Claim—predictions that
could ultimately turn out to be inaccurate.”114 The Supreme Court’s conclusion that the
plaintiff’s claim for declaratory relief was not ripe applied equally to the plaintiff’s breach of
contract claims because those claims “arise out of the same controversy that is the subject of the
declaratory judgment count . . . .”115
The Moving Insurers argue that this action is similar to XL Specialty and the Court should
grant the Motion because the Insurers’ claims are not ripe. The Court would agree except in this
situation the Insurers have been sued, the Dieckman Action, and a determination should be made
soon. The Court has reviewed the docket in the Dieckman Action and notes that final briefing is
complete after trial. The Court of Chancery will be issuing a decision soon. This is substantially
different than a case where an insured is not subject to suit.
The Court must, under the Schick Factors, take into consideration the legitimate interests
of the Insureds in a prompt resolution, the hardship of delay, the prospect of future developments
111
Id. at 1218.
112
Id. at 1219.
113
Id.
114
Id.
115
Id. at 1220.
15
that might affect the determination made, and the need to conserve scarce resources. 116 All of
these factors weigh in favor of the Insureds. The Dieckman Action is close to a decision on
liability. The Insurance Defendants have denied coverage but the Insureds may soon be subject
to liabilities that may be insured under the Policies. The Court is at a loss how scare judicial
economy would be preserved by dismissing this civil action without prejudice as to the Moving
Insurers, have a decision come down in the Dieckman Action in the ninety days or so, and then
have a new complaint filed renaming the Moving Insurers. In addition, this civil action will
proceed. A review of the docket shows that seven Insurance Defendants have filed answers. In
addition, the Court recently ruled on issues relating to personal jurisdiction as to other Insurance
Defendants.
The Court understands this case to be somewhere between the situation presented in XL
Specialty and one where a judgement/settlement has occurred. Delaware courts are to exercise
jurisdiction over a case if the underlying controversy has matured to a point where judicial action
is appropriate. As stated in XL Specialty, the underlying purpose of that principle is to conserve
limited judicial resources and to avoid rendering a legally binding decision that could result in
premature and possibly unsound lawmaking. 117 The Court finds the controversy presented here
to be mature enough where judicial action is appropriate. Moreover, given the status of the
Dieckman Action, the Court finds it highly unlikely that the Court will be entering judgment on
indemnification under the Policies before the Insurers’ rights, if any, to indemnification will have
matured.
116
Hoechst, 623 A.2d at 1137.
117
XL Specialty, 93 A.3d at 1217.
16
VI. CONCLUSION
For the foregoing reasons, the Motion is DENIED.
Dated: September 28, 2020
Wilmington, Delaware
/s/ Eric M. Davis
Eric M. Davis, Judge
cc: File&ServeXpress
17