Opinion ID: 3011726
Heading Depth: 2
Heading Rank: 1

Heading: Delaware Insurance Law

Text: This is the second time that we have reviewed allegedly ambiguous language in Definition 10(c) of the CGL policy. See New Castle County, 174 F.3d at 344-51. The previous panel's discussion of Delaware law pertaining to insurance policy interpretation is a good starting point for our analysis: Before an insurer is obligated to defend or indemnify a policyholder, the insured must demonstrate that coverage is available under the policy. An insur er's duty to defend is broader than its duty to indemnify, but `is limited to suits which assert claims for which it has assumed liability under the policy.' `[W]here there exists some doubt as to whether the complaint against the insured alleges a risk insured against, that doubt should be resolved in favor of the insur ed.' Most importantly therefore, an insurer is`required to defend any action which potentially states a claim which is covered under the policy.' Thus, in this case, if the Acierno actions potentially state a claim that is covered under definition 10(c), National is requir ed to defend the county in those actions. Whether the Acierno actions potentially state a claim for which National has assumed liability depends upon how we interpret definition 10(c). As a basic matter, Delaware law requires us to interpr et insurance contracts `in a common sense manner.' W e must also 7 examine the disputed language in the context of the entire policy. `Absent some ambiguity, Delaware courts will not destroy or twist policy language under the guise of construing it,' because `creating an ambiguity where none exists could, in effect, create a new contract with rights, liabilities and duties to which the parties ha[ve] not assented.' When policy language is ambiguous, however, under Delaware law this Court must apply the doctrine of contra proferentem . That is, ambiguous language must be construed against the drafter and in conformance with the reasonable expectations of the insured. The premise underlying the principle of contra proferentem is that an insurance contract is one of adhesion. As the Delaware Supreme Court r ecently explained, [T]he insurer . . . is the entity in control of the process of articulating the terms [of an insurance contract]. The other party . . . usually has very little to say about those terms except to take them or leave them or to select from limited options of fered by the insurer. . . . Therefor e, it is incumbent upon the dominant party to make the terms clear . Convoluted or confusing terms are the pr oblem of the insurer . . . not the insured. . . . As noted earlier, due to the insurer's dominant position, when an ambiguity is found in insurance policy language, we must construe the language against the insurer as a matter of Delawar e law. And therefore, unlike with other types of contracts, we need not inquire into the parties' actual intent. Because ambiguous language is construed against the insurer as a matter of law, we take special note of Delaware law for determining whether language is ambiguous. `The settled test for ambiguity is whether the provisions in controversy are r easonably or fairly susceptible of different interpretations or may have two or more different meanings.' An insurance policy is not ambiguous, however, `merely because two conflicting 8 interpretations may be suggested. Rather , both interpretations must reflect a r easonable reading of the contractual language.' Thus, we must examine, not only whether the county's reading of definition 10(c) is possible, but also whether it is reasonable. New Castle County, 174 F.3d at 342-44 (citations omitted). Thus, in order to assess National Union's obligations, Delaware law requires us to ask whether the Acierno suits potentially state a claim under Definition 10(c) of the CGL policy. See id. at 343. We must answer in the affirmative if the language of the policy is ambiguous as to its coverage of the specific claims. An insurance policy is ambiguous if there is more than one reasonable interpretation of its terms. The Delaware Supreme Court has not addressed whether an invasion of the right of private occupancy is ambiguous, and both parties agree that lower court opinions in the state provide no clear answer . As a result, we must look outside of Delaware, to other state court decisions and relevant public policy, to r each a decision.3