Opinion ID: 177020
Heading Depth: 2
Heading Rank: 2

Heading: The Foundation v. National Union: The Current Litigation

Text: During the time it was publishing the ads at issue in the Lorillard suits, the Foundation had in effect a number and variety of insurance policies. Of the four comprehensive general liability (CGL) policies, three had been written by Travelers Indemnity Company of America and another by Scottsdale Insurance Company. In addition, National Union Fire Insurance Company of Pittsburgh, Pa., had issued an Individual and Organization (I & O) Policy as well as umbrella insurance to the Foundation. After receiving Lorillard's November 13, 2001, cease-and-desist letter, outside legal counsel for the Foundation instructed its broker to immediately put on noticeand demand defense and indemnity fromall insurers (primary, umbrella and excess; general liability, D & O, etc.) that issued potentially applicable policies. The broker responded by sending a notice of occurrence form to National Union and Travelers on December 4, 2001. In April 2002, Travelers denied coverage for the North Carolina claim but did not address the Delaware litigation. In a letter of December 6, 2002, two months after Lorillard filed its counterclaims, National Union similarly advised that the claims presented in the North Carolina suit were not insured under the I & O Policy because suits arising out of breach of contract were excluded. In addition, that insurerevidently unaware of Lorillard's counterclaims, filed two months earlier wrote that no costs from the Delaware action would be covered because affirmative prosecution of a lawsuit is not a Claim under the Policy. Nearly three months later, on February 26, 2003, the Foundation advised its broker that the Delaware suit was moving forward on Lorillard's counterclaims and requested that the broker immediately contact all insurers ... and demand any defense and indemnity as may be owed. In April 2003, National Union told the Foundation that its umbrella policies would not insure liability from the lawsuits under either of the two coverage options, A or B. On August 13, 2003, that insurer further advised that it did not believe coverage was applicable under the I & O Policy. Notwithstanding its denials of coverage, National Union requested, and the Foundation provided, six litigation status reports between December 2003 and March 2006. In February 2007, Scottsdale Insurance Company reviewed the Suit Papers from the Lorillard lawsuits, which it apparently had not received until that time. In its acknowledgment, Scottsdale informed the Foundation that it had no knowledge of Lorillard's counterclaims until one year after they had been adjudicated and, because of late notice, would provide no insurance. In May 2007, after all of the potentially applicable insurers had denied coverage, the Foundation filed this action in the United States District Court for the District of Delaware, to recover the approximately $17 million it claims to have spent defending against Lorillard's suit. After an extensive review of the various policies' provisions, the Court concluded that no insurance was applicable and entered judgment in favor of National Union. This appeal followed.
The District Court had jurisdiction over this diversity action under 28 U.S.C. § 1332. Appellate review is authorized by 28 U.S.C. § 1291. We review de novo the grant of summary judgment. The District Court's interpretation of the insurance policies at issue is likewise a determination of law subject to plenary review. See Alexander v. Nat'l Fire Ins. of Hartford, 454 F.3d 214, 219 n. 4 (3d Cir.2006); Universal Underwriters Ins. Co. v. Travelers Ins. Co., 669 A.2d 45, 47 (Del. 1995). The parties agree that no conflict of laws issue is present because controlling law in the District of Columbia, where the Foundation has it offices, and Delaware, the state in which National Union is incorporated, are similar.
As with all contracts, insurance policies are interpreted to give effect to their plain language: Clear and unambiguous language in an insurance policy should be given its ordinary and usual meaning.... [W]hen the language of an insurance contract is clear and unequivocal, a party will be bound by its plain meaning.... To the extent that ambiguity does exist, the doctrine of contra proferentum requires that the language of an insurance contract be construed most strongly against the insurance company that drafted it. Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195-96 (Del.1992) (citations omitted) (second alteration in original). In addition, [t]he duty to defend may ... be broader than the duty to ultimately indemnify. Am. Ins. Grp. v. Risk Enter. Mgmt., Ltd., 761 A.2d 826, 830 (Del. 2000). To determine whether an obligation to defend exists under the usual liability policy, the court typically looks to the allegations of the complaint to decide whether the third party's action against the insured states a claim covered by the policy. Id. at 829. So long as one count or claim is covered under the policy, the duty to defend is triggered. Any doubt or ambiguity as to the pleadings or the policy terms should be resolved in favor of the insured. See Cont'l Cas. Co. v. Alexis I. duPont Sch. Dist., 317 A.2d 101, 105 (Del. 1974).
In the interests of clarity, we will discuss the pertinent provisions of each insurance agreement at issue, and analyze the coverage available under it, separately.