Court Opinion

ID: 4570285
Source: CourtListenerOpinion
Date Created: 2020-09-28 16:03:42.716467+00
Date Added: 2024-06-11T09:27:59.564529
License: Public Domain

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.

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                                 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

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