P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

____________ N o. 09- 3336

____________ AM ERI CAN LEGACY F OUN DATI ON, RP

A ppel l ant

v . NAT I ONAL UNI ON F I RE I NS UR ANC E CO M P ANY OF PI TTSBURG H, PA; TRA VELERS I ND EM NI TY

COM P ANY OF AM ERI CA

____________ A p p ea l from the U n it ed S tat es D istri ct C o u rt fo r th e D istri ct of

D elaw are ( D

. C

. C i v. N o. 1- 07- C V

- 00248) D i s t r i ctJ udge: H onor abl e Sue L. R obi ns on

____________ A r gued J ul y15, 2010 B efore: F U E N T E S , V A N A S K IE an d W E IS, C i rcui tJudg es.

( Fi l ed: O ct ober12, 2010) Ri c h a r d D. S h o r e , E s q u i r e ( AR GUE D) M ark A

. P ac k m an , E sq u ir e2 K am i E

. Q u inn , E sq u ir e Jo h n D

. N il es, E sq u ir e GI LBERT LLP 1100 N ew Y or k A ve. , N W , Sui t e 700 W as hi ngt on, D

. C

. 20005
L au ra D av is Jon es, E sq u ir e T im o thyP

. C airns, E sq u ir e PACH ULSK I , STAN G, ZI EHL, & J ON ES LL P 919 N

. M arketSt r eet , 17th Fl oor W i l m i ngt on, D E 19899 A t t or ney s forA ppel l ant Ba rb a r a I

. M i c h a e l i d e s , E s q u i r e ( AR GUE D) M at t hew J

. Fi nk A gel o L

. R eppas BA TES & CA REY LLP 191 N or t h W acke rD r i ve, Sui t e 2400 C hi cago, I L 60606 A t t or ney s forA ppel l ees

____________ OP I NI ON

____________3 W E I S, C i r cui tJ udge.
I n t hi s appea l , a pol i cyhol der s eeks t o r ecove rexpens es i ncurr ed i n defe ndi ng agai ns tcl ai m s forw hi ch the i ns ur ance companydeni ed cove r age. W endi ng t hr ough a t h icke t of i ncl us i ons and excl us i ons l eads t o the conc l us i on t hatt he D i s t r i ctC our tpr oper l yent er ed sum m aryj udgm enti n favorof t h e i n s u r e r . Ac c o r d i n g l y , we wi l l a f f i r m. A . A ll eg ed L iab il it y o f T h e F o u n d a ti o n to L o r ill a r d : T h e U n d e r ly in g S u it A m e ric a n L e g a c yF o u n d a tio n , a D e law a re n o n -p ro f it corpor at i on, w as form ed bythe t erm s of the 1998 M as t er S e t t l e m e n tA g r e e m e n t ( “ M S A ” ) b e t w e e n 4 6 s t a t e s ’ a t t o r n e ys ge n e r a l a n d t h e c o u n tr y ’ s l a r g e s t t o b a c c o c o mpa n i e s . A m ong t hes e w as L or i l l ar d T obacc o C om pany , w hos e di s put e w i t h the Fo undat i on i s att he r ootof the ca s e now befor e us . T he Foundat i on’ s m i s s i on, as ini t i al l ys etfor t h i n t he M SA and in c o rp o ra ted in to its o w n b y law s, w a s to e d u c a te th e p u b lic a b o u t th e d a n g e rs o f

to b a c c o p ro d u c ts in o rd e r to re d u c e th e ir us e among A m er i ca’ s y out h.
T h e M S A p ro v id e d th a t th e to b a c c o c o m p a n ies w o u ld fund adve r t i s i ng campai gns , devel oped by t he F oundat i on, t hat demonstr at ed the n egat i ve i m pactof t obacc o pr oductus age. T he ad s w ere t o b e con cerned o nlyw i t h the “add i ct i ven ess, heal th eff

ect s , and s oci al cos t s r el at ed t o t he us e of t obacc o pr oduct s . ” A ds t hatamount ed t o a “pe r s onal at t ack o n , or v il ifi ca ti o n o f,” to b ac co co m p an ies o r th eir em p loy ee s w ere pr ohi bi t ed.I n addi t i on, t he Foundat i on m ai nt ai ned a w eb si t e that 1 p e rm itt e d v isito rs to c o m p lete a n d se n d a p re -f o rm a tted e m a il t o t ob acco c om pan yem ploy ees byi nse rtin g ad verbs, adject i ves, verbs a n d no un s. T he w ebsi t e i nst ruct ed u ser s not t o u se p rof an e o r ha rassing lang u ag e in th eir m essa g es, bu t L o ri ll ard e m p lo y e e s re c e iv e d m a n ya b u siv e a n d p ro f a n ity -l a c e d e m a ils t hr ough t hi s pr ogr am. E ventual l y , L or i l l ar d i ns t al l ed a f i l t ert hat b lo c k e d th e se m e ss a g e s, a n d th e F o u n d a tio n re m o v e d th e e m a il fea tur e fr om i t s w ebs i t e. 4 T h e F o u n d a tio n c re a ted a se r ie s o f tele v isio n a n d ra d io a d s b ra n d e d “ th e tru th (TM ).” T h e s e a d s w e re b ra s h , e d g y, i m per t i nent , and di s r es pect ful , t o appea l t o thos e t eens and y oung adul t s w ho w er e bel i eved t o be more l i kel yt o us e t obacc o p r o d u c t s . Th e a d s p o r t r a y e d Lo r i l l a r d a n d o t h e rt o b a c c o f i r ms in a m o c k in g a n d u n f

a v o ra b le lig h t. 1
I n 2001, L or i l l ar d s enta ce as e- and- desi stl et t ert o t he F o u n d ati o n , threa tenin g to fi le su it o v er on e of tho se a d s . A d raftcom plai nt i ncluded w i t h the l et t er al l eged vari ou s t ort s, i ncl udi ng s l anderper s e and per quod, l i bel pers e and pe rquod, second aryl i bel, a nd un fai r ordecep t i ve acts or pract i ces. L or i l l ar d’ s l et t eral s o s ugges t ed t hat i t m i ghtal s o pur s ue br eac h of co ntr actcl ai m s. In a lette r of

Ja n u a ry1 8 , 2 0 0 2 , L o rillard f o llo w e d u p w ith a “N ot i ce of I nt ent t o I ni t i at e E nfor cement Pr ocee d ing U nder M SA

. ” Ther e, L or i l l ar d as s ert ed that the Foundat i on had im p ro p e rly u se d th e f

u n d in g d e sig n a ted b y th e M S A f o r p u b lic5 educa t i on and fa i l ed t o m eet i t s obl i gat i ons undert hat a g re e m e n t. T h e F o u n d ati o n p ere m p tori lyfil ed a d ec laratory jud g m en t acti o n ag ains t L o ri ll ard in D elaw are C h an ce ryC o u rt o n F e b ru a ry1 3 , 2 0 0 2 . S ix d a y s la ter , L o rillard b ro u g h t su it agai ns tt he Foundat i on i n N o r t h C ar ol i na s t at e court

. T hat compl ai nti ncl uded no t or tcl ai m s bu tal l eged br eac h of the M SA and of the cove nantof good fa i t h and fa i rdeal i ng. L ori l l ar d count er cl ai m ed aga i ns tthe Foundat i on i n the D el aw ar e C hance r yC our ti n Sept ember2002, as s ert i ng br eac h of the M SA ; br eac h of t he dut yand cove nantof good fa i t h and fa ird ea li n g im p li ed in the M S A ; v iolati o n s o f the F o u n d ati o n ’s by l aw s and ce r t i fi cat e of i ncorpor at i on; a dec l ar at oryj udgm ent t hat t he F oundat i on w as notel i gi bl e forpubl i c fundi ng undert he M SA ; and tr es pas s t o chatt el. T he N or t h C ar ol i na s ui tw as s t ay ed and r emai ned pendi ng w hi l e the part i es l i t i gat ed the D elaw are m att er. In Ja n u a ry2 0 0 3 , th e D e la w a re C o u rt o f C h a n c e ryh e ld th a t th e F o u n d a tio n , tho u g h n o t a s ig n a to ryto th e M S A , co u ld be hel d l i abl e forvi ol at i ons of thatagreement

. G r ant i ng su m m aryjud g m en t t o L o ri ll ard o n this i ssu e, th e C h an ce ry C o u rt f o u n d th a t th e F o u n d a tio n h a d a d o p ted th e M S A , b o th e x p re ss lya n d “ im p licitlyb ya c c e p tin g its b e n e f its w ith k n o w led g e o f it s term s. ” A m . L eg ac yF o u n d

. v . L o ri ll ard T obacc o C o. , 831 A

. 2d 335, 348- 50 ( D el

. C h. 2003)

. T her efor e, t he C our tconcl uded thatthe Foundat i on w as bound bythe M SA ’ s pr ovi s i ons . I d. at351.T he C hance r y C our t ’ s deni al of i nj unct i ve r el i ef on t he 2 e- m ai l m es s ages w as affi r m ed bec aus e the w ebs i t e had be en rem ov ed an d d am ages, i f any , w ere de m i nim us. A l t ho ug h those comm uni cat i ons w er e per s onal at t acks , thatcl ai m h ad bee n di s m i s s ed byt he V ice C h an cel l orforfai l ur e t o pr os ecut e, and L or i l l ar d di d notappea l thatdi s m i s s al

. L or i ll ard T obacc o C o. 6 A ft er l engthy di s covery and mot i ons pr act i ce, i ncl udi ng cr os s - m ot ion s fo r sum m aryjud g m en t, the C h an ce ryC ourtfound t h a t th e a d s i n q u e s t i o n d i d n o t b r e a c h t h e M S A

. S p e c i f i c a l l y, t he ads di d notvi ol at e the ant i

- vi l i fi cat i on cl aus e bec aus e they d id n o t in c o rp o ra te “ sc u rrilo u s [ o r] v itriolic a ttac k s[ ,]” n o r d id t heyamount t o “cruel s l ander

. . . . publ i c r i di cul e, tr aduct i on, or cal um ny . ” A m . L egac yF o und. v. L or i l l ar d T obacc o C o. , 886 A

. 2d 1, 32- 33 ( D el

. C h. 2005)

. I n addi t i on, the ads di d not c o n tain p e rso n a l atta c k s b e c a u se “ n o n e o f th e a d s s p e c if

ic a lly i dent i f[i ed] a t ar getof an a l l eged a t t ack. ” I d. at43. A ccor di ngl y , s um m aryj udgm entw as gr ant ed i n favorof the Foundat i on i n A ugus t2005. I d. at46. O n appea l , t he D elaw are Supr eme C our taff i r m ed the hol ding s o f t he C hance r yC our ton bot h the s t andi ng and lia b ility is s u e s . L o r i l l a r d T o b a c c o C o . v . A m . L e g a c yF o u n d ., 903 A

. 2d 728 ( D el

. 2006)

. H avi ng car eful l ys crut i ni zed f ourof t he ads t hatL or i l l ar d had as s ert ed w er e contr aryt o the M SA , t he cou rtfou nd t hat “[t]he adv ert i sem ents are noti nv i dious, d isp a ra g in g , o f

f e n siv e , b e lli g e re n t, no r f ier c e lyo r se v e re ly cr i t i cal

. N orar e theydenounce m ent s t hatar e both unfounded and abus i ve or s l ander ous . . . . [They ] do notqual i fyas per s onal at t acks orvi l i fi cat i ons . ” I d. at742. 2v . A m . L eg ac yF o u n d

. , 9 0 3 A

. 2 d 7 2 8 , 7 4 3 -44 (D el. 2 0 0 6 ). 7 M o re o v e r, b e c a u se D e la w a re law p ro v id e d th a t a c o rp o ra tio n w a s b o u n d b y its p re in c o rp o ra tio n a g re e m e n t “if [ it] expr es s l yadopt s t h[at ]

. . . agr eementori m pl i ci t l y adopt s i tby acc ept i ng i t s benef

i t s w i t h know l edge of i t s t erm s , ” the D el aw ar e Supr eme C our tfound the Foundat i on’ s cr os s - appea l t o be “w i t houtm er i t

. ” I d. at745.
B. The Founda t i on v. N at i ona l U ni on: The C urrent L i t i gat i on D ur i ng t he t i m e i tw as publ i s hi ng the ads at i s s ue i n t he L or i l l ar d s ui t s , t he F o u n d at i on had i n eff ecta numberand var i etyof i ns ur ance pol i ci es . O f the fourcom p reh ens i ve gener al l i abi l i ty ( “C G L ”) pol i ci es , thr ee ha d been w r i t t en by T r av e l e r s I n d e mni t yComp a n yo f Am e r i c a a n d a n o t h e rby Scot t s dal e I ns ur ance C om pany . I n addi t i on, N at i onal U ni on Fi r e I ns ur anc e C o m panyof Pi t t s bur gh, Pa. , had i s s ued an In d iv id u a l an d O rg a n iza tio n (“ I& O ” ) P o licy a s w e ll a s u m b re lla i ns ur ance t o t he Foundat i on. A ft err ece i vi ng L or i l l ar d’ s N ovember13, 2001, cea s ea n d

- d e s i s tl e t t e r , o u t s i d e l e g a l c o u n s e l f o rth e Fo u n d at i on i ns t ruct ed i t s b rok er t o “i m m edi at el yputon not i ce – a nd d e m a n d d e f

e n s e a n d i n d e m n i t y f

r o m – a l l i n s u r e r s ( p r i m a r y, um br el l a and exce s s ; gener al l i abi l i t y , D & O , et c. ) t hat i s s ued pot ent i al l yappl ic abl e pol i ci es . ” The br okerr es ponded by s endi ng a not ice o f o ccurr ence form t o N at i onal U ni on and T r avel er s on D ece m ber4, 2001.8 In A p ril 2 0 0 2 , T ra v e ler s d e n ied c o v e ra g e f o r th e N o rth C ar ol i na cl ai m but di d notaddr es s the D el aw ar e l i t i gat i on. I n a lette r o f D e c e m b e r 6 , 2 0 0 2 , tw o m o n th s a f ter L o rillard f

iled its c o u n t e r c l a i ms , Na t i o n a l Un i o n s i mi l a r l ya d v i s e d t h a tt h e c l a i ms pr es ent ed i n t he N or t h C ar ol i na s ui t w er e not i ns ur ed undert he I& O P o li cyb ec au se suits ari sing o u t of b rea ch o f c o n tr ac t w ere excl uded. I n addi t i on, th at in su r er– evi dent l yunaw ar e of L or i l l ar d’ s count er cl ai m s , fi l ed t w o m onths ear l i er – w r ot e that no cost s fr om t he D el aw are act i on w ou l d b e cov e re d b ecause “af fi r ma t i v e p r o s e c u t i o n o f a l a ws u i t i s n o t a Cl a i m u n d e rt he P o lic y .” N ear l yt hr ee mont hs l at er , on February26, 2003, t he Foundat i on advi s ed i t s b rok er thatt he D el aw ar e s ui tw as m ovi ng forw ar d on L or i l l ar d’ s count er cl ai m s and r eques t ed that t he br oker “i m m edi at el y cont act al l i ns ur er s . . . and demand any d e f e n s e a n d in d e m n ity a s m a yb e o w e d .”
In A p ril 2 0 0 3 , N a tio n a l U n io n to ld th e F o u n d a tio n that its u m b re lla p o licie s w o u ld n o t in su re liab ili tyf ro m th e law su its un der ei t her of the tw o c o v erage op t i on s, A or B

. O n A ug ust 13, 2003, t hati ns ur erfur t heradvi s ed thatit d id notbel i eve c o v e r a g e w a s a p p l i c a b l e u n d e r t h e I & O P o l i c y. N o tw i t hs t andi ng i t s deni al s of cove r age, N at i onal U ni on r eques t ed, and the Found ati o n pr ovi ded, s i x l i t i gat i on s t atus r epor t s betw een D ece m ber2003 and M ar ch 2006.
I n February2007, Scot t s dal e I ns ur ance C om pany re v iew e d th e “ S u it P a p e rs” f ro m th e L o rillard law su its, w h ich it a p p a re n tlyh a d n o t re c e iv e d u n ti l th a t ti m e . In its acknow l edgment , Sco tt s d a l e i n f o rme dth e Foundat i on t hati thad9 no know l edge of

L or i l l ar d’ s count er cl ai m s unt i l one y earaft er th e yh a d b e e n a d

ju d ica ted a n d , b e c a u se o f late n o tic e , w o u ld pr ovi de no i ns ur ance . In M a y20 07 , aft er al l of the po t enti al l yapp l i cable in su re rs h a d d e n ied c o v e ra g e , the F o u n d a tio n f iled th is a c tio n in th e U n ited S tate s D istric t C o u rt f o r th e D istric t o f

D e law a re , to r ecove rt he appr oxi m at el y$17 m i l l i on i tcl aim s to ha ve s pent defe ndi ng agai ns tL or i l l ar d’ s s ui t

. A ft er an ext ens i ve r evi ew of t h e v a r i o u s p o l i c i e s ’ p r o v i s i o n s , t h e Cou r t c o n c l u d e d t hat no i ns ur ance w as appl i cab le and ent er ed j udgm enti n favorof N at i onal U ni on. T hi s appea l fol l ow ed.
I. T h e D istric t C o u rt h a d ju risd ictio n o v e r th is d iv e rsity act i on under28 U

. S. C

. § 1332. A ppel l at e re vi ew i s author i zed b y2 8 U

. S

. C

. § 1 2 9 1

. W e re v iew d e n o v o the gra n t o f su m m ary j udgm ent

. T he D ist ri ct C our t ’ s i nt erpr et at i on of the i ns ur ance p o licie s a t issu e is lik e w ise a d e ter m in a tio n o f law su b jec t to pl enaryr evi ew . See A l exande rv. N at ’ l F ir e I ns . of H art for d, 4 5 4 F

. 3 d 2 1 4 , 2 1 9 n . 4 (3d C ir. 2 0 0 6 ); U n iversa l U n d erw ri ters I ns . C o. v. T r avel er s I ns . C o. , 669 A

. 2d 45, 47 ( D el

. 1995)

. T he part i es agree that no co nflic t o f l aw s i ssue i s pres ent because contr ol l i ng law in the D i s t r i ctof C ol um bi a, w her e the Foundat i on has i toffi ces , and D el aw are , t he s t at e i n w hi ch N ati o n al U n ion is i n co rpo rated , are sim il ar.10 II. A s w i t h al l contr act s, i ns ur ance pol i ci es ar e i nt erpr et ed t o gi ve ef

fec tt o t hei rpl ai n l anguage : “C l earand unambi guous l anguage i n an i n s u r ance pol i cys houl d b e gi ven i t s or di naryand us ual m eani ng. . . . [W ] hen the l anguage of an i ns ur ance contr act i s cl ear and unequi vocal , a par t yw i l l be bound byi t s pl ai n m eani ng . . . . T o t he ext entthat am b igu ityd o es e x ist , the d o ctri n e o f c o n tr a pr ofer entum r equi r es t hatt he language of an in su ra n c e c o n tra c t b e c o n stru e d m o st s tro n g ly a g a in s t th e in s u ra n c e c o m p a n yth a t d ra f te d it.”
R h o n e -P o u le n c B a s ic C h e m s . C o . v . A m . M o to ri s ts In s . C o ., 616 A

. 2d 1192, 1195- 96 ( D el

. 1992) ( ci t at i ons om i t t ed) ( s econd alt era ti o n in o ri g inal).
I n addi t i on, “[t ] he dutyt o defe nd m ay. . . be br oadert han the du tyto u lt im atelyind em n ify

. ” A m . Ins. G rp. v. R isk E n ter. M g m t. , L t d. , 761 A

. 2d 826, 830 ( D el

. 2000)

. T o det erm i ne w h e th e r a n o b lig a tio n to d e f e n d e x ists u n d e r th e u su a l li a b ili ty pol i cy , t he “c our tt ypi cal l yl ooks t o t he al lega ti ons of the compl ai ntt o deci de w hether t he t hi r d par t y ’ s act i on agai ns tt he i ns ur e d s t a t e s a c l a i m cov e r e d b y t he pol i c y . ” I d. a t82 9. So lo n g a s o n e c o u n t o r c laim is c o v e re d u n d e r th e p o licy , the d u ty t o defe nd i s t r i gger ed. A ny doubtorambi gui t yas t o t he pl eadi ngs or t he pol i cy t erm s s houl d be r es ol ved i n favor of the i ns ur ed. See C ont ’ l C as . C o. v. A l exi s I

. duPontSch. D i s t

. , 317 A

. 2 d 1 0 1 , 1 0 5 (D el. 1 9 7 4 ).I tm ayhave be en a s t r at egi c move on t he p art o f the 3 Foundat i on t o excl ude i ndepende nti ns ur ance couns el fr om contr ol l i ng l i t i gat i on t hatcoul d have r es ul t ed i n num er ous 11 III . I n t he i nt er es t s of cl ar i t y , w e w il l d i s cus s the pert i nent pr ovi s i ons of ea ch i ns ur ance agr eementati s s ue, and ana l y ze the c o v e r a g e a v a i l a b l e u n d e ri t , s e p a r a t e l y. A . T he I & O P oli cy In its I& O P o licy , N a tio n a l U n io n a g re e d to “payon behal f o f t he [Foundat i on] L os s ar i s i ng fr om a C l ai m . . . agai ns tt he [Foundat i on]

. . . for a n ya c tu a l o r a lleg e d W ro n g f u l A c t [ d e f

in e d in re lev a n t p a rt a s] “ a n yb re a c h o f d u ty , n e g lec t, e rro r, m is s ta te m e n t, m is le a d in g s ta te m e n t, om i s s i on or act by or on behal f of t he [Foundat i on as w el l as ] l i bel , s l ander , defa m at i on or publ i cat i on orut t er ance in v iol at i on of an in d iv id u a l’ s ri g h t o f

p ri v a c y .” U nl i ke typi cal l i abi l i t yi ns ur ance , t he I & O Pol i cy e x p licitlysta ted th a t N a tio n a l U n io n “ d [ id ] n o t a ss u m e a n yd u ty t o defe nd” unl es s defe ns e of the ca s e w as t ender ed i n w r i t i ng by t he pol i cyhol der

. T he Foundat i on does notcont end t hat N at i onal U ni on w as as ked orr equi r ed t o as s um e the def ens e of t he Lori l l ar d l i t i gat i on. 3cl ai m s i n m ul t i pl e s t at es , w i th ei ther the purpos e oreff ectof evadi ng orunr avel i ng the M S A

. W e not e thatami cus cur i ae br i efs w er e fi l ed i n t he C hance r yC our ton behal f of 34 s t at es and 20 otheror gani zat i ons conce r ned w i t h t obacc o- r el at ed heal t h i s s ues . T hus , t her e mayw el l have be en s ubt l e, under l y i ng conce r ns m or e i m por t antt o t he Foundat i on atthatt i m e t han the costof d efen ding L ori l l ard’ s coun t ercl ai m s. 12 R ath er, the Foundat i on’ s cover age c l ai m i s bas ed on anotherpr ovi s i on of the I & O Pol i cy , w hi ch obl i gat ed N at i onal U n io n to “adva nce . . . att he w ri tt en r eques tof the [Foundat i on] , D efe ns e C os t s pr i ort o the fi nal d isp o sitio n o f a C laim

. S u c h a d v a n c e d p a ym e n ts by [N at i onal U ni on] s hal l be r epai d t o [N at i onal U n io n ] b y[ th e F o u n d a tio n ] . . . in th e e v e n t an d to t he ext entt hat[the Foundat i on] s hal l n o tbe e n tit led u n d e r th e ter m s an d c o n d iti o n s o f th is p o lic yto p a ym e n t o f

s u c h L o s s .” N at i onal U ni on’ s under t aki ng t o advance cos t s w as notopenended, h ow ever . T he pol i cyfur t hers t i pul at ed thatthe Foundat i on “s hal l not

. . . i ncur any D efe ns e C os t s w i t houtt he p rio r w ritten c o n se n t o f [ N a tio n a l U n io n ]. O n ly t hos e . . . D efe ns e C os t s w h ich have been cons ent ed t o by[N at i onal U ni on] shal l be13 re c o v e ra b le a s L o ss u n d e r th e ter m s o f th is p o lic y .” A n o ther li m it ati o n w as d etail ed in the I& O P o li cy ’s Ex c l u s i o n ( k ) , wh i c h d e n i e d c o v e r a g e f o rc l a i ms “al l egi ng, ar i s i ng outof, bas ed u p on or at t r i but abl e t o anyactu al oral l eged c ontr actual l i abil i t yof [ t he F o u n d at i on ] under anyexp res s c o n tr a c t o r a g re e m e n t.” N evert hel es s , t hi s excl usion w oul d notappl y , and cove r age w oul d be p r ovi ded, i f “l i abi l i t y. . . w oul d have a t t ache d i n t he a b s e n c e o f

s u c h e x p re s s c o n tr a c t.”

1

. T h e D istri ct C o u rt co n cu rred w ith the C h an ce ryC o u rt ’s c o n c lu sio n th a t th e F o u n d a tio n “ h a d a n e x p licit re latio n sh ip to t he M SA

. ” A m L egac yFound. v. N at ’ l U nion F ir e Ins

. of P ittsbu rgh , P a., 6 4 0 F

. S u p p . 2 d 5 2 4 , 5 3 8 (D

. D e l. 2 0 0 9 ). Al t e r n a t i v e l y , t h e Di s t r i c tCou r to b s e r v e d , “ t h e M SA c a n be hel d t o be an i m pl i ed i n fac tcontr actas i tr el ate[ d] t o [the Foundat i on] , ” w hi ch “i m pl i ed i n fac tcontr actha[d] t he l egal equi val encyof an e xpr es s contr act

. ” I d. n. 33. Fi ndi ng t hat L or i l l ar d’ s cl ai m s i n t he under l y i ng s ui t w er e bas ed upon br eac h of that ex p r es s contr act , the D i s t r i ctC our thel d t hatE xcl us i on ( k) of the I & O Pol i cypr ecl uded cove r age. I d. at537- 38.
F urtherm ore, t he D i stri ctC o u rtdecided thatbecau se L ori l l ard had no tal l eged l i bel orsl and er i n the und erl y i ng cases,A l t hough t heyar e di s t i nctent i t l ement s, t he D i s t r i ct 4 C o u rt a s w e ll as th e p a r ti e s so m e tim e s u se d th e ter m s “ d u tyto d e f e n d ” a n d “ d u t y t o a d v a n c e d e f e n s e c o s t s ” i n t e r c h a n g e a b l y. 14 E xclusi on (k) ’s “escape c lau se, ” res t ori ng i nsurance fo r tho se contr actual cl ai m s t hat w oul d have “att ache d i n t he abs ence of [ a n ] e x p re ss c o n tra c t,” d id n o t ap p ly . Id . at 5 3 8 -3 9 . N o b a sis th e re f o re e x is te d to in v o k e N a tio n a l U n io n ’s “ d u ty to d e f e n d .” 4 I d. at539. 2

. T he Foundat i on’ s r eques tforr el i ef i n t he cas e bef or e us i s not ba s e d o n a r e f

u s a l t o a s s u me th e d e f

e n s e b u t r a t h e rt he f a ilu re to a d v a n c e th e c o sts o f th e d e f e n se . T h e se a re d isc re te c o n c e p ts. W h e n a n in su ra n c e c o m p a n ya ss u m e s a d e f e n se , it r et ai ns a n d r e mun e r at es couns el ; or di nar i l yno r ei m bur s ementof l egal fee s i s r equi r ed, even i f the under l y i ng cl ai m pr oves fal s e, f ra u d u len t, oru n f

o u n d e d . In c o n tra st, if a n in su re r a g re e s to adv ance the co st s of a d efen se, as st at ed earl i er, t he insur ed m ust requesti n w ri t i ng t he i nsurer ’s con sent befo re i ncu rr i ng defe nse cos t s and maybe req u ir ed t o r epaythe i ns ur erforadvanc ed pay m ents

. T he s t ar t i ng poi ntof the cover age anal y s i s i s w hethert he dut yt o advanc e cost s w as act i vat ed, and i f so, w hen. N at i onal U n ion ’s po li cyd o es n o t st ate w h en the ad v an ce p ay m en ts w ere due oth er than “pr i ort o t he fi nal di s pos i t i on of a Cl ai m . ” The r ecor d r evea l s no expl i ci t r eques t s for N at i onal U ni on’ s p ri or appro val of part i cul ar , des i gnat ed def ens e expe ns es , noranyM os t cour t s t hathave c onfr ont ed thi s i s s ue “ha ve rul ed 5 that d ef en se c o sts sho u ld b e p aid co n tem p o ran eo u sly as th eyare i ncurr ed. ” B arr yR

. O s t r ager& T hom as R

. N ew m an, H andbook o n In s . C o v e ra g e D is p u te s , § 2 0 .0 2 [ i] , a t 1 5 2 5 -2 6 (1 5 th e d .) (c iti n g c a se s). “ O th e r c o u rts, h o w e v e r, h a v e ru led th a t ab se n t a s peci fi c pr ovi s i on addr es s i ng t he t i m i ng of r ei m bur s ementof defe ns e cos t s , i ns ur er s m us tr ei m bur s e def ens e cos t s onl yupon a d e te rm in a tio n th a t th e lo s s e s a re c o v e re d u n d e r t h e p o lic y .” Id. at 15 2 6 (cit ing ca ses). 15 dem and s byt he F ou nd at i on for pay m ent of a c c rued defe nse c o sts , at a n ytim e b e f

o re f in a l r e s o lu tio n o f

th e L o rillard su it. N ordi d t he Foundat i on chal l enge N at i onal U nion’ s deni al of c o v e ra g e , b a s e d o n E x c lu sio n (k ), u n til th e f ili n g o f th is s u it. B o th p a rties , in s h o r t, se e m e d c o n ten t to a w a it th e u lti m a te di s pos i ti o n of the Lori l l ar d cl ai m s befor e turni ng t o t he i nsurance co verage is sues. P o licy h o ld e rs in o th e r c a se s w e re m o re f o rc e f u l in a s s e rt ing their po sit ion s. In L ittl e v . M G IC Ind em n ityC o rp ., 836 F. 2d 789 ( 3d C i r . 1987) ( appl y i ng Penns y l vani a l aw ) , i tw as “undi s put ed t hat[the pol i cyhol der ] ha[d] obt ai ned fr om [the in su re r] w h a tev e r c o n se n t” w a s re q u ire d a s to th e d e f e n se c o sts i ncurr ed. I d. at795. T he di s put e t h ere i nvol ved w hen the advanc e paym ent s w er e t o be made. I n a dec l ar at oryj udgm ent ac tio n fil ed b ef

o re reso luti o n o f th e u n d erly ing su it , this C o u rt h e l d t h a t t h e i n s u r e rh a d t h e d u t yt o a d v a n c e c o s t s a s t h e yc a me due r athert han w ai t for t erm i nat i on of t he under l y i ng cl ai m . I d. at793- 95. 5T hi s t es tappea r s t o b e m or e fl exi bl e than s t r i ct 6 adher ence t o t he t extof t he under l y i ng compl ai ntas i s the pract i ce w i t h d utyt o d efen d p rovi si on s. 16 B r ow n v. A m er i can I nt ernat i onal G r oup, 339 F. Supp. 2d 336 ( D. M a s s . 2 0 0 4 ) , was l i k e wi s e a d e c l a r a t o r yj u d g me nt a c tio n . T h e re , th e c o u rt c o n c lu d e d th a t th e d u tyto a d v a n c e c o sts w as i n eff

ects o l ong as t he under l y i ng compl ai nts ugges t ed a rea so n ab le po tential fo r co v era g e. Id

. a t 3 4 6 -47

. T h e c o u rt 6 a lso h e ld th a t an e x c lu sio n c ite d b y the in su ra n c e c o m p a n yto d e n ya ll co v e ra g e d id n o t co n tr o l. A c c o rd in g ly , the d u tyto advanc e cos t s r emai ned vi abl e. I d. L i ke L i t t l e, B r ow n w as fi l ed aft ert he under l y i ng l i t i gat i on began butb efor e any d e term i nati on on l i abil i t y had been m ade there. A nd , as w ith L i t t l e, B r ow n di d notr es ul ti n a monet aryj udgm ent

. I d. at347.
T he Foundat i on ar gues thatthe duty t o advanc e paym ent of def ense c os t s w as t r i gger ed byL or i l l ar d’ s al l egat i ons i n t he coun tercl ai m s , t he s ame cr i t er i on fordet erm i ni ng w hen the obl i gat i on t o defe nd ar i s es i n m os t l i abi l i t ypol i ci es . A l t hough t hatar gum entm ay have some w ei ghtw hen an I & O pol i cyhol der s eeks an i nt er i m det erm i nat i on of cover age, i t does notw i n the d ayh ere . A t no p o int be fo re su itw as f il ed in th e D istri ct C o u rt di d t he Foundat i on s eek a decl ar at oryj udgm entcont es t i ng t he appl i cat i on of Ex clus ion ( k) , nordi d i tdemand paym entof expens es as t heycame due. A fr ee- fl oat i ng obl i gat i on m us tbe tie d to s o m e th in g o f

s u b s ta n c e to b e e n f

o rc e a b le , in th is c a s e , a demand fors peci fi c s um s of def ens e cos t s . N orw as a w r i t t en r eques tforN at i onal U ni on’ s cons ent s ought byt he Foundat i on a t an ytim e b e f

o re it b ro u g h t th is s u it.T h e F o u n d a tio n h e re h a s b r o a d ly al le g e d th a t “ a ll . . . 7 con dit i on s and p rereq u isi t es t o co verage u nd er the [v ari ou s] Pol i ci es have be en s at i s fi ed or w ai ved. ” C om pl

. ¶¶ 34, 40, 46. H ow ever , i t s compl ai ntdoes notexpl i ci t l yas s ertcompl i ance w i t h t he I & O Pol i cy ’ s r equi r ement of pr i orappr oval byN at i onal U ni on of def

ens e cos t s , and nothi ng i n t he r ecor d s ugges t s t hat t he F ou nd at i on soug ht anyi nsurer ’s w ri t t en ap proval of def ense cos t s pr i ort o i ncurr i ng t hem. I n t hat r es pect , t hi s cas e i s unl i ke L ittl e a n d fa ll s w ith in the co m m en t i n R h o n e-P o u lenc , that “[ i] n or derforan i ns ur ed t o es t abl i s h t he contr actual lia bi l i t yof an i nsurerfor breach o f an insurance con t ract , t he insu red m ust s how t hathe has compl i ed w i t h al l condi t i ons pr ece dentt o t he i ns ur er ’ s per form ance . ” 616 A

. 2d at1198. 17 Instea d , the F o u n d ati o n ’s c o m p lai n t i n the D istri ct C o u rt so u g h t a m o n e ta ryju d g m e n t o f a t lea st $ 1 6 ,8 2 8 ,9 4 6 .4 1

. T h is 7 l e g a l a c t i o n d i d n o tc o mme n c e u n t i l a f t e r t h e De l a wa r e S u p r e me Cou r t h a d r e s o l v e d t h e u n d e r l y i n g d i s p u t e , h o l d i n g t h a t t he F ou nd at i on had no tcom m i t t ed an yw rongf ul acta g a i nst L or i l l ar d. A t t hat poi nt , fi nal det erm i nat i on of the i s s ues ar i s i ng undert he I & O Pol i cyas t o the Lori l l ar d cl ai m had bee n r eac hed. Specul at i on atan ea r l i ers t age i n the D el aw ar e s ui tas t o w hat m i ghthave be en the out come of t hatl i t i gat i on s ho u ld notnow b e th e b a sis f

o r a m o n e tar yju d g m e n t. T he ca s e befor e us i s aki n t o A m er i can I ns ur ance G r oup v. R i s k E nt erpr i s e M anage m entL t d. , s upr a, 761 A

. 2d 826. T her e, a per s onal i nj ury pr ocee di ng had s ett l ed af ter m any m ont hs of di s covery . A tt hatpoi nt , t he i ns ur erdeni ed a put at i ve addi t i onal i ns ur ed’ s r eques tfor r ei m bur s ementof the cos tof18 d e f e n d in g th e to rt a c tio n a lo n g w ith th e a m o u n ts p a id in se ttl e m e n t. Id . at 8 2 7 . T h e D e la w a r e S u p re m e C o u rt, comm ent i ng on t he purpor t ed i ns ur ed’ s del ayi n demandi ng a d e f e n se , o b se rv e d th a t th e “ d e ter m in a tio n o f w h e th e r a d u tyto defe nd exi s t ed i s bei ng m ade aft er t he under l y i ng l i t i gat i on has al r eady been se t t l ed. For t h[i s ] r eas on[ ], the ur gencythatoft en exi s t s at th e out s etof l i t i gat i on i s notpr es ent

. ” I d. at829. A ccor di ngl y , t he C our trul ed thatdet erm i nat i on of cove r age mus tb e b a s e d o n t h e who l e r e c o r d , i n c l u d i n g t h e evi dence devel oped thr ough di s covery . I d. at829- 30.
T he s ame r at i onal e i s per t i nentunderthe I & O Pol i cy di s put e h ere . T he l egal and fa ctual bas i s forr es ol ut i on of the L or i l l a r d s u i thad bee n fi nal l yadj udi cat ed bef or e the Foundat i on fi l ed thi s act i on t o r ecove rdefe ns e expe ndi tur es . W hat ever m ig h t h a v e b e e n a n o b lig a tio n to a d v a n c e m o n e y s d u rin g e a rly s t a g e s o f t h e L o r i l l a r d l i t i g a t i o n w e n e e d n o td e c i d e . R e a l i t y, notconj ectur e, es t abl i s hes thatthe Fo u n dat i on i s notnow ent i t l ed t o r ecove r yof unadva nced c os t s of def ense u n dert he I & O P o l i c y. 3

. E ven i f thi s w er e notthe ca s e, w e agr ee w i t h the D i s t r i ct C o u rtth a t co v era g e u n d er the I& O P o li cyfo r th e L o ri ll ard cl ai m s w as barr ed byE xcl us i on ( k) , w h ich pr ovi ded that N at i onal U ni on w oul d notbe l i abl e t o m ake “anypaym entfor L os s . . . al l egi ng, ar i s i ng outof, bas ed upon or att r i but abl e t o anyactual oral l eged contr actual l i abi l i t yof an insu r ed underanyFor t he s ame r eas ons , w e concl ude t hat cover age f or 8 d e f e n se a g ai nstL orilla rd ’s c o u n ter c laim f o r “ B re a c h o f

th e D u ty and C ov enan tof G oo d F ai th an d F ai r D eal i ng ” i s l i kew i se 19 expre ss co n tr ac t o ragr eement ; pr ovi ded, h o w e v e r, th a t th is e x c lu sio n sh a ll n o t ap p lyto l i abi l i t yw hi ch w oul d have a t t ache d i n t he abs ence o f su ch ex p ress c o n tr ac t or ag ree m en t[. ]” A ccor di ng t o t he F oundat i on, L or i l l ar d’ s N or t h C ar ol i na compl ai ntand D el aw ar e count er cl ai m s al l eged vi ol at i ons of an i m pl i ed contr actas w el l as an expr ess o n e. The Foundat i on ar gues t hatt he C hance r yC our tfound thati thad adopt ed the M SA “i m pl i ci t l y ” as w el l as expr es s l y and, t her efor e, E xcl us i on ( k) w as notoper at i ve. W e re ject th at arg u m en t. T h e d iscu ssion in the C h an ce ry C our topi ni on upon w hi ch the Foundat ion r el i es i nvol ved the ques t i on of s t andi ng – s peci fi cal l y , w hether t he Foundat i on had “adopt ed” t he M SA and coul d be hel d l i abl e forbr eac h of that ag ree m en t. T h a t cou rth eld, an d the D elaw are S u p rem e C o u rt aff i rm ed, t hatt he Foundat i on had adopt ed the M SA and w as bo un d to i t s t erm s and co nd i t i on s. L or i l l ar d al l eged b r eac hes of the M SA , notof any

“ i mp l i e d ” o b l i g a t i o n t o a d o p to ra d h e r e t o th a t a g r e e me n t

. As t he C han cery C ou rt sum m ari zed t he l i t i gati on , “[B ]oth [p art i es] agr ee thatt he mat t erpr es ent ed i s a s t r ai ght forw ar d contr actual i s s ue t hattur ns on t he l egal i nt erpr et at i on of the w or ds of the [M SA ]

. ” 886 A

. 2d at8. 8p re c lu d e d b yE x c lu sio n (k ) o f th e I& O P o licy . A s th a t cla im expl i ci t l ys t at ed, “I m pl i ed i n the M SA i s a dut yand cove nantof go od fai t h an d fairdeali ng . ” D ef. ’s A nsw er & C ou nter cl

. t o 1 st A m. Com pl

. 40 , ¶6 5 ( e mpha s i s a dd e d)

. I n otherw ords, L or i l l ar d al l eged a br eac h of a duty t hat w as an i nher entpar tof t he M SA – and i ndeed, par tof al l contr act s . T he mer e pr es ence o f t h e wor d “ [ i ] mpl i e d ” i n t h e c o u n t e r c l a i m d o e s n o ti nvoke E x c lu sio n (k )’s e sc a p e c lau se . S e e g e n e ra lly D u n lap v . S tate Far m Fi r e & C as . C o. , 878 A

. 2d 434, 441- 42 (D el. 2005) (im p lied c o v e n a n t o f g o o d f a ith a n d f

a ir d e a lin g a ttac h e s to a ll co n tr ac ts)

. 20 A d d it ion all y , th e F o u n d ati o n asse rt s tha t L o ri ll ard ’s all eg ati o n s – that the F o u n d ati o n ’s a d s b rea ch ing the M S A ’s proscr i pti on s agai nst“vil i fi ca tio n” o f and “personal att acks” agai ns tt he t obacc o compani es – w er e, i n eff ect , t or tcl ai m s and there fo re n o t aff

ec ted b yE x clus ion (k).
W e di s agr ee. T he opi ni ons of the D el aw ar e court s m ake c lea r th a t th e ru lin g s a g a in st L o rillard w e re n o t f o u n d e d o n to rts of l i bel , s l ander , or di s par agement

. See, e. g. , B arr yR

. O s t r ager & T ho m as R

. N ew m an, H and bo ok on Ins. C ov erage D i sputes , § 2 0. 02[h] [3] ( 15t h ed. ) ( w her e s ame ors i m i l arexcl us i on w as p r e s e n t , c o v e r a g e f

o rc l a i ms wa s e x c l u d e d , wh e t h e r s u c h c l a i ms so u n d e d in to r t o r c o n tra c t, so lo n g a s th e yw e re “ u n d e n iab ly li n k ed ” to c o n tr ac tual claim s).
W e ar e per s uaded thatE xcl us i on ( k) r emai ned i n ef fe ct and, fort hi s ad d it i onal r eas on, the I & O Pol i cydi d notpr ovi de i nsurance fo r anypartof the L ori l l ard cl ai m s.21 B . N ati onal U ni on U m br el la P oli cy: Cover age A T h e Na t i o n a l Un i o n Um b r e l l a Po l i c yp r o v i d e d two d i f f e r i n g c o v e r a g e s , A a n d B. C over age A w as “exc es s fol l ow - form ; ” thati s , i tadher ed t o “the t erm s , def

i ni t i ons , condi t i ons and exc l us i ons of Schedul ed U nder l y i ng I ns ur ance . ” Thi s addi t i onal pr ot ect i on w a s i n f o r c e o n l y i f t h e u n d e r l y i n g p o l i c i e s wer e i n e f fec tand t hei rl i m i t s had bee n exhaus t ed. T he D i s t r i ctC our tcons i der ed t he C G L pol i cyw r i t t en byT r avel er s as b eing “Sche dul ed U nder l y i ng I ns ur ance” t o t he N at i onal U ni on U m br el l a. T he Foundati o n i ni t i al l ynamed T r avel er s as a co- defe ndanti n t he s ui tbefor e us , but di s m i s s ed af t era s ett l ementand no l ongerhas a n y c l a i m a g a i n s tt h a tc o m p a n y. A not herpot ent i al l yunder l y i ng pol i cy , though not c h a ra c ter ize d a s s u c h , h a d b e e n iss u e d b yth e S c o ttsd a le I ns ur ance C om pany . T hat i ns ur er di d not r ece i ve anynot i ce of t he Lori l l ar d su i tunt i l February2007, m anyy ear s aft eri tw as fi l ed, and deni ed cove r age f orl ack of not i ce. T he Foundat i on does notas s er tanycl aim thatN at i onal U ni on’ s obl i gat i on “dr opped dow n” t o fi l l t he gap caus ed byScot t s dal e’ s r ej ect i on.T h e D istri ct C o u rtfo u n d that the u n d erly ing T rav elers 9 p o l i c y “ s p e c i f

i c a l l y e x c l u d e [ d ] c o v e r a g e f o r‘ a d v e r t i s i n g i n

j u r y’ r es ul t i ng fr om ‘ br eac h o f contr act ’ ” and, ther efor e, N at i onal U ni on’ s C over age A w as not i nvoked. 640 F. Supp. 2d at540. T he C our tal s o hel d t hat , beca us e the pr i m arypol i cyi s s ued by S c o ttsd a le o v e rla p p e d th e N a tio n a l U n io n u m b re lla b yo n ly ei ghtday s , t he Scot t s dal e pol i cyw as nots chedul ed under l y i ng i ns ur ance . I d. I n l i ght of t he Foundat i on’ s abandonmentof any cl ai m underC over age A , w e dec l i ne t o addr es s t hes e fi ndi ngs of th e C o u rt. 22 A tor al ar gum ent , the Foundati o n r ei t er at ed thati tw as m a k in g n o c laim s u n d e r c o v e ra g e A

. W e p ro c e e d th e n to 9 Co v e r a g e B. C . N ati onal U ni on U m br el la P oli cy: Cover age B C o v e ra g e B p ro v id e d u m b re lla in su ra n c e th a t w o u ld “pay on behal f of t he I ns ur ed thos e s um s . . . t hat t he I ns ur ed bec [a] m e[ ] l egal l y obl i gat ed t o payas d a m a g e s b y re a s o n o f lia b ility i m p o s e d b yla w . . . b ec au se o f . .

. P rop erty D am ag e, P erso n al Injury orA dver t i s i ng I nj urynotcover ed bySchedul ed U n d e rl y in g In s u ra n c e .”
T he under l y i ng pol i cyw r i t t en by T r avel er s excl uded personal in

ju rycov erage “ari si ng ou tof [ t he insur ed’s] bus i nes s ” i f s uch bus i nes s w as “adve r t i s i ng, . . . br oadca s t i ng or t el eca s t i ng done byorfor[the i ns ur ed]

. ” Ther efor e, the23 Foundat i on ar gues , beca us e T r avel er s di d notcovers uch p erso n al i n

jury , the um b rell a cam e i n to eff ec t. N ati o n al U n ion ’s u m b re lla p o licyin su re d a g a in st “ p e rso n a l in ju ry ,” d e f

in e d in r el evantpar tas “or al , w r i t t en or el ectr oni c publ i cat i on of m at er i al t hats l ander s orl i bel s a per s on oror gani zat i on, or dis parages a person ’s or organi zat i on ’s go od s, p ro d u c ts o r s e rv ic e s .” W e a g r e e t h a t , i f

t h e a l l e g e d “ P e r s o n a l I n j u r y ” c a me w i t hi n t he s cope of

C over age B and appl i cabi l i tyw as not o th e rw ise e x c lu d e d , N a tio n a l U n io n w o u ld h a v e a d u tyto defe nd. B eca us e the umbre l l a pol i cydi d notcont ai n an o b lig a tio n to a d v a n c e c o sts , b u t p ro v id e d o n lyf o r th e d u tyto defe nd, t he cus t om aryt es t for as s um pt i on of def ens e i s ut i l i zed – t hati s , w e exa m i ne the all eg at i ons i n the compl ai nt , r ather than p roc ee d ing to the u lt im ate resu lto f th e u n d erly ing su it

. In t his res pect, t he u m brel l a differ s fr om t he d ef e n se cost a d v a n c e m e n tp r o v i s i o n s o f th e I & O P o l i c y. Th e Di s t r i c tCo u r th e l d th a t , b e c a u s e Lor i l l a r d ’ s c l a i ms s ounde d i n c o n t r a c tr a t h e rt h a n t o r t , Cov e r a g e B w a s n ot a v a i l a b l e f

o rp r o t e c t i o n a g a i n s ta l l e g a t i o n s o f P e r s o n a l I n

j u r y,T he D i s t r i ctC our tal s o deci ded that“A dver t i s i ng 10 I nj ur y ” w as barr ed byE xcl us i on O

. 640 F. Supp. 2d at541. B eca us e t h e F o undat i on i s notnow pr es s i ng a cl ai m for A dver t i s i ng I nj ur y , w e nee d notr evi ew thatdet erm i nat i on. 24 and , ac co r di ngl y , N at i onal U ni on had had no dutyt o defe nd. 10 640 F. Supp. 2d at541.
T he Foundat i on her e as s ert s that L or i l l ar d char ged that th e a d s a m o u n ted to d isp a ra g e m e n t, lib e l o r sla n d e r a n d so f e ll wi t h i n t h e de fi n i t i o n o f P e r s o n a l I n

j u r yu n d e rCo v e r a g e B. A ccor di ngl y , N at i onal U ni on had a dutyt o defe nd.
T h at ar gum entfai l s . L or i l l ar d’ s compl ai ntand cou nter cl ai m s di d n ot al l ege thatthe ad s w ere s l and erous, l i bel ous , ordi s par agi ng. N o chal l enge t o t he t ruthful nes s of the a d s’ c o n ten ts w a s b e f

o re th e sta te c o u rts. T h e f a c t o f f a lsityis a pr edi cat e for l i bel , s l ander or comm er ci al di s par agement , and i n i t s abs ence n o cause of ac t i on forthes e t or t s w as cl ai m ed, m uch l es s estab li s hed. See, e. g. , N eur otr on I nc. v. M ed. Ser v. A s s ’ n of Pa. , 254 F. 3d 444 ( 3d C i r . 2001) ; s ee a l s o G annettC o. v. K anaga , 750 A

. 2d 1174, 1 1 8 3 ( D el

. 2000) ( pl ai nt i ff i n l i bel cas e “ha d t o demonstr at e ‘ actual i nj ury , ’ abs enta s how i ng of k n o w ledg e o f f

alsi tyo r reck le s s d isr eg ard fo r th e truth” ). T her efor e, t he count er cl ai m s fai l ed t o s etouta t or tcaus e of act i on. M or eover , L or i l l ar d w as s peci fi c i n i t s cl ai m s forr el i ef. N ow her e i n i t s m et i cul ous l y dr aft ed count er cl ai m s , num ber i ng 88 par agr aphs , di d L or i l l ar d s eek da m ages forl i bel , s l anderorL o rillard ’s s o le re q u e st f o r d a m a g e s w a s b a se d u p o n its 11 claim fo r tr esp ass t o ch att el, that is, the F o u n d ati o n ’s “i nt ent i onal [ ] i nt erm eddl [i ng] w i t h L or i l l ar d’ s e- m ail s y s t em a n d c o mp u t e rn e t wo r k

. ” De f ’ s . An s we r& Co u n t e r c l

. t o 1 s tAm. C om pl. 45 ¶ 84

. T hat cl ai m , w h ich soug ht $1, 00 0 fo r the co st of i n s t a l l i n g a n e - ma i l f i l t e r , was a b a n d o n e d d u r i ng t he p ro c e e d in g s in th e C h a n c e ryC o u rt. In a n ye v e n t, th e u m b re lla p o licy ’s E x c lu sio n R , w h ich p re c lu d e s in su ra n c e f o r “ P ro p e rty D amage expec t ed ori nt ended f r om the s t andpoi ntof the In su re d ,” w o u ld b a r a n yc o v e ra g e f o r th e tre sp a ss to c h a tte ls c l a i m. 25 di s par agementof pr oduct

. T he r eques t s forr el i ef w er e founde d on al l eged breaches o f c o n tr act

. T he ad dam nu m cl auses, 11 sp ec ifi ca ll yd ir ec ted to ea ch count er cl aim , req u ested d ec laratory j udgm ent s ; entr yof an or der t hat t he Foundat i on had br eac hed t he M SA and di r ect i ng compl i ance w i t h i t ; and i n junc t i ve act i on. B eca us e Lori l l ar d di d notal l ege f ac ts cons t i tut i ng
“ P e rso n a l In

ju ry ” a s d e f

in e d in th e U m b re lla P o licy , a d u tyto defe nd underC over age B w as nott r i gger ed. W e conc l ude that n o n e o f N a tio n a l U n io n ’s p o licie s e n tit le th e F o u n d a tio n to recover expe nses i ncu rr ed in defen ding t he L ori l l ard cl ai m s. T he j udgm entof the D i s t r i ctC our tw i l l be af fi r m ed.1 Fuent es , C i r cui tJ udge, C oncurr i ng: T h is ap p e a l p re se n ts th e q u e stio n o f a n in su re r' s d u tyto a d v a n c e c o s t s , n o tt h e qu e s t i o n o f a n i n s u r e r ' s d u t yt o a s s u me a d e f e n se . I ag re e th a t th e se a re d istin c t c o n c e p ts. O n c e th is d istin c tio n is re c o g n ize d , the m o st im p o rta n t q u e stio n in th is ca se is n o t w h eth er N ati o n al U n ion w as o b li g ated to p ayfo r a defe ns e but w h en and how i tw as obl i gat ed t o do s o. Fr om th is p e rsp e c tiv e , th e q u e stio n is w h e th e r th e F o u n d a tio n is e n tit led to re c o v e r th e c o s ts o f its d e f e n se a t th e e n d o f

its di s put e w i t h L or i l l ar d orw hetheri t shoul d have be en enc o u r aged t o pur s ue i t s contr actual r i ghtt o advanc e paym ent s att he ea r l i es ts tage s of thatdi s put e. W hi l e I agr ee w ith th e m a

jo ri ty' s e x c e lle n t o p in io n a n d its c o n c l u s io n , I w r i t e s epar at el yt o emphasi ze the i m p or t ance of thi s ques t i on o f ti m ing: w hen and how s houl d a r eques tforadvanc e d e f e n s e c o s t s b e p r e s e n t e d ? T ypi cal l y , t hi s ques t i on i s ans w er ed byappl i cat i on of t h e s o - c a l l e d " e i g h tc o r n e r s ru l e , " u n d e rw h i c h a n i n s u r e r 's dut yt o defe nd i s det erm i ned s ol el ybyr efe r ence t o t he c o m p la in t a n d t h e in s u ra n c e p o lic y . See St eve ns v. U ni t ed G en. Ti t l e I

ns . C o. , 801 A

. 2d 61, 6 6 n. 4 ( D

. C

. 2002)

. I f eve n o n e c o u n to rc l a i m o f

th e c o m p l a i n ti s c o v e r e d b y th e p o l i c y, th e d u ty t o a d v a n c e c o s ts is tr ig g e re d

. See C ont 'lC as . C o. v. A lex is d u P o n t S c h . D ist. , 3 1 7 A. 2 d 1 0 1 , 1 0 5 ( De l

. 1 9 7 4 )

. Of cour s e, anydoubt s as t o w hetherthe cl ai m i s cover ed, and any ambi gui t i es i n t he contr act , ar e r es ol ved i n favor o f t he i nsu red

. I d. T he ei ghtcorner s rul e s erves an i m por t ant purpos e, en coura gi ng the s w i ftpr el i m i naryr es ol ut i on of c o v e ra g e d isp u te s . E a rlyre so lu tio n is a d v a n tag e o u s " b o th to2 pr ovi de the i ns ur ed w i t h a def ens e atthe begi nni ng of the lit ig a tio n a n d to p e rm it th e in su re r, as th e d e f ra y in g e n tity , to con t rol the d efen se strat egy . " A m . Ins. G roup v. R isk E nter

. M gm t

. , Ltd. , 7 6 1 A

. 2 d 8 2 6 , 8 3 0 (D el. 2 0 0 0 ). I agr ee w i t h t he maj or i t ythatthi s i s nota typi cal cas e. A s t he ma

jori ty poi nt s out , the r ecor d i s devoi d of evi dence t hatt he F o u ndat i on chal l enged N at i onal U ni on' s deni al of cover age, demanded paym ent foracc rued def ens e cos t s , or r eques t ed N at i onal U ni o n' s appr oval of part i cul arexpens es at a n ytim e b e f

o re th e f in a l re so lu tio n o f

th e L o rillard su it. S lip O p. at17, 19- 20. U n d er thes e ci r cumst ance s , t he Foundat i on' s del ay i n s eeki ng advanc ed cos t el i m i nat ed any ur gencyt hatm i g hthave be en pr es entatthe out s etof the l i t i gat i on and pl ace d thi s cas e w i t hi n the exc ept i on des cr i bed i n A m er i can I

ns ur ance G r oup , 7 6 1 A .2 d a t 8 2 9

. T he exc ept i on announce d i n A m eri can I ns ur ance G r oup a p p lies w h e n e v e r a n in su re d is d ilato ry in p u rsu in g its r i ght s under an i ns ur ance contr act

. I n t hi s s i tuat i on, the ei ght corner s rul e does notappl yand t h e co u rtm ayl ook att he fac tual r ecor d devel oped dur i ng l i t i gat i on. T he exc ept i on, and th e m a jo rityo p in io n ' s c o n c lu sio n th a t th e e x c e p tio n is appl i cabl e in thi s cas e, s houl d notbe r ead a s a s i gn t he ei ght c o rn e rs r u le is e n e rv a ted . R a th e r , th e e x c e p tio n d e sc rib e d in A m er i can I

ns ur ance G r oup adds vi t al i t yt o t he rul e by encour agi ng i ns ur eds t o pur s ue ea r l yr es ol ut i on of cove r age di s put es . A s t hi s cas e i l l us t r at es, fa il u re on the partof an i ns ur ed t o for cef

ul l ypur s ue i t s cl ai m s ear l yi n an i ns ur ance d ispu te ex p o ses th e ins u red to the ri sk that the re co rd d e v e lo p e d d u rin g a law su it w ill b e u n f a v o ra b le to its3 in s u r a n c e c a se . In o rd e r to a v o id th is risk , ins u re d s s h o u ld for cef ul l ypur s ue thei rcl ai m s , a cour s e o f ac t i on t hat ul t i m at el ybenef

i t s t he i ns ur ed, w hi ch m aythen r ece i ve the r es our ces nece s s aryt o m ounta def ens e; the i ns ur er , w hi ch acqui r es t he abi l i t yt o s upervi s e the cos t s of a de fens e; and the c o u rt sy ste m , w h ich c a n m o re e x p e d iti o u slya n d e f f ic ie n tly a d d r e s s c o v e r a g e i s s u e s wh e n th e ya r e p r e s e n t e d i n t h e s a me f o ru m , an d a t th e sa m e tim e , as th e u n d e rly in g law su it.