In an insurance case, a Delaware judge reportedly ruled on March 1, 2018 that Delaware law should apply to an insurance case. The Delaware judge in the insurance case reportedly ruled that "'[a]lthough it may strain public policy to allow a director to collect insurance on a fraud, it does not appear to be explicitly prohibited by Delaware statutory law.'"
Don't strain yourself judge. Another Delaware judge already determined that the fraud involved was "intentional and in bad faith."
The insurance case in Delaware grew out of an earlier fraud case in Delaware. The fraud case involved the same individuals who are apparently claiming Directors and Officers Coverage in the insurance case. Their fraud was actually proven in a trial in the Delaware fraud case. The fraud was that the individuals gave the board of directors of Dole Food Co. false estimates of "how much money the company could save" from accepting a buyout offer from one of the individuals. James Rufus Koren, "A Court Found That an L.A. Billionaire Duped Dole Investors. Now He Wants to Stick Insurers With The Bill" (Los Angeles Times Online, Friday, March 9, 2018).
After the trial of the Delaware fraud case concluded, the Delaware judge presiding wrote that the defendants' "'actions were not innocent or inadvertent, but rather intentional and in bad faith.'" James Rufus Koren, supra, quoting the 2015 opinion of Delaware Chancery Court Chancellor J. Travis Laster.
Stop and reflect with me for a moment. Has an insurance coverage trial lawyer ever been born who would not be really happy with Judge Laster's quoted ruling, if you had to prove intentional and bad faith conduct that barred all coverage for it? Now back to the rest of the story so to speak.
Judge Laster held in the Delaware fraud case that the two individuals who would later claim coverage as directors' and officers' policy "insureds" should accordingly pay $148 million. Apparently before judgment was entered in that amount, the individuals settled -- for that amount together with interest.
The Directors and Officers Carriers Raise the Fraud Ruling as a Defense to Coverage.
The Directors and Officers Carriers filed an action in Delaware to declare that their insurance policies did not cover the "intentional and bad faith" fraud. They argued in particular that their position was a "slam dunk" under California law, but the judge in the Delaware insurance case declined to bar the coverage claim under any State's law. As noted, the Delaware judge in the insurance case reportedly ruled that Delaware law should apply, and anyway, "'[a]lthough it may strain public policy to allow a director to collect insurance on a fraud, it does not appear to be explicitly prohibited by Delaware statutory law.'"
So there you have it. Where are the "fortuity" ideologues when they might do some good? The fortuity ideologues are people who claim, at least when they have a dog in the fight and it is to their advantage, that insurance does not apply unless the covered risk was fortuitous and, moreover, that the party claiming coverage has a burden to prove that the risk involved was fortuitous. There can be no judicial declaration of coverage, the fortuitous ideologues continue, unless the risk is fortuitous.
A trial in the insurance case in Delaware is reportedly currently scheduled for July, 2018.
Stay tuned.
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