Opinion
C. A. N22C-05-130 SKR CCLD
10-09-2024
HERTZ GLOBAL HOLDINGS, INC., and THE HERTZ CORPORATION, Plaintiffs, v. ACE AMERICAN INSURANCE CO., et al. Defendants
Jennifer C. Wasson, Esq., Carla M. Jones, Esq., POTTER ANDERSON & CORROON LLP, Wilmington, Delaware, Robin L. Cohen, Esq., Kenneth H. Frenchman, Esq., Cynthia M. Jordano, Esq., Jason D. Meyers, Esq., Samantha E. Smith, Esq. COHEN ZIFFER FRENCHMAN & MCKENNA LLP, New York, New York, Allan B. Moore, Esq., Jarrett Williams, Esq., Jad H. Khazem, Esq., COVINGTON & BURLING LLP, Washington, DC. Attorneys for Plaintiffs Hertz Global Holding, Inc. and The Hertz Corporation. Robert J. Katzenstein, Esq., Julie M. O'Dell, Esq., SMITH, KATZENSTEIN AND JENKINS, LLP, Wilmington, Delaware, Leah Godesky, Esq., Joseph O'Connor, Esq., Jessica Snyder, Esq., O'MELVENY & MYERS LLP, Los Angeles, California. Attorneys for Defendants ACE American Insurance Company and ACE Property & Casualty Insurance Company. Thaddeus J. Weaver, Esq., DILWORTH PAXSON LLP, Wilmington, Delaware, Michael F. Perlis, Esq., KAUFMAN BORGEEST & RYAN LLP, Woodland Hills, California, Matthew I. Schiffhauer, Esq., KAUFMAN BORGEEST & RYAN LLP, Garden City, New York. Attorneys for Defendant Alterra American Insurance Company. Bruce W. McCullough, Esq., BODELL BOVE, LLC, Wilmington, Delaware, Christopher P. Ferragamo, Esq., Spencer A. Adams, Esq., JACKSON & CAMPBELL, P.C., Washington, D.C. Attorneys for Defendant Everest National Insurance Company. Marc S. Casarino, Esq., KENNEDYS CMK LLP, Wilmington, Delaware. Attorney for Defendant Great American Insurance Company of New York and Great American Spirit Insurance Company. David A. Bilson, Esq., PHILLIPS, MCCLAUGHLIN & HALL, Wilmington, Delaware, Andrew L. Margulis, Esq., Jung H. Park, Esq., ROPERS MAJESKI PC, New York, New York. Attorneys for Defendant National Fire & Marine Insurance Company. Kurt M. Heyman, Esq., Aaron M. Nelson, Esq., HEYMAN ENERIO GATTUSO & HIRZEL LLP, Wilmington, Delaware, Alexander S. Lorenzo, Esq., ALSTON & BIRD LLP, New York, New York. Attorneys for Defendant National Union Fire Insurance Company. Carmella P. Keener, Esq., COOCH AND TAYLOR, P.A., Wilmington, Delaware, Adam H. Fleischer, Esq., Craig M. Leff, Esq., Matthew P. Fortin, Esq., BATESCAREY LLP, Chicago, Illinois. Attorneys for Defendants North American Elite Insurance Company and North American Specialty Insurance Company. William R. Adams, Esq., DICKIE MCCAMEY & CHILCOTE, P.C., Wilmington, Delaware, Jeffrey L. Kingsley, Esq., Colleen E. Hayes, Esq., GOLDBERG SEGALLA LLP, Philadelphia, Pennsylvania. Attorneys for Defendant QBE Insurance Corporation. Timothy S. Martin, Esq., Daryll Hawthorne-Searight, Esq., WHITE AND WILLIAMS LLP, Wilmington, Delaware, Gabriel E. Darwick, Esq., WHITE AND WILLIAMS LLP, Newark, New Jersey. Attorneys for Defendant Steadfast Insurance Company. John C. Phillips, Esq. PHILLIPS, MCCLAUGHLIN & HALL, P.A, Wilmington, Delaware, Joseph A. Bailey, III, Esq., WERNER AHARI MANGEL LLP, Washington, D.C. Attorneys for Defendant U.S. Specialty Insurance Company. Carmella P. Keener, Esq. COOCH AND TAYLOR, P.A., Wilmington, Delaware, Ronald P Schiller, Esq., Michael R. Carlson, Esq., Anthony J. Palmer, Esq. HANGLEY ARONCHICK SEGAL PUDLIN & SCHILLER, Philadelphia, Pennsylvania. Attorneys for Defendant Navigators Specialty Insurance Company.
Submitted: July 10, 2024
Upon Hertz's Motion for Partial Summary Judgment: DENIED.
Upon Swiss Re Corporate Solutions Elite Insurance Corporation's Motions for Partial Summary Judgment: GRANTED.
Upon Navigators Specialty Insurance Company's Motion for Summary Judgment: GRANTED.
Jennifer C. Wasson, Esq., Carla M. Jones, Esq., POTTER ANDERSON & CORROON LLP, Wilmington, Delaware, Robin L. Cohen, Esq., Kenneth H. Frenchman, Esq., Cynthia M. Jordano, Esq., Jason D. Meyers, Esq., Samantha E. Smith, Esq. COHEN ZIFFER FRENCHMAN & MCKENNA LLP, New York, New York, Allan B. Moore, Esq., Jarrett Williams, Esq., Jad H. Khazem, Esq., COVINGTON & BURLING LLP, Washington, DC. Attorneys for Plaintiffs Hertz Global Holding, Inc. and The Hertz Corporation.
Robert J. Katzenstein, Esq., Julie M. O'Dell, Esq., SMITH, KATZENSTEIN AND JENKINS, LLP, Wilmington, Delaware, Leah Godesky, Esq., Joseph O'Connor, Esq., Jessica Snyder, Esq., O'MELVENY & MYERS LLP, Los Angeles, California. Attorneys for Defendants ACE American Insurance Company and ACE Property & Casualty Insurance Company.
Thaddeus J. Weaver, Esq., DILWORTH PAXSON LLP, Wilmington, Delaware, Michael F. Perlis, Esq., KAUFMAN BORGEEST & RYAN LLP, Woodland Hills, California, Matthew I. Schiffhauer, Esq., KAUFMAN BORGEEST & RYAN LLP, Garden City, New York. Attorneys for Defendant Alterra American Insurance Company.
Bruce W. McCullough, Esq., BODELL BOVE, LLC, Wilmington, Delaware, Christopher P. Ferragamo, Esq., Spencer A. Adams, Esq., JACKSON & CAMPBELL, P.C., Washington, D.C. Attorneys for Defendant Everest National Insurance Company.
Marc S. Casarino, Esq., KENNEDYS CMK LLP, Wilmington, Delaware. Attorney for Defendant Great American Insurance Company of New York and Great American Spirit Insurance Company.
David A. Bilson, Esq., PHILLIPS, MCCLAUGHLIN & HALL, Wilmington, Delaware, Andrew L. Margulis, Esq., Jung H. Park, Esq., ROPERS MAJESKI PC, New York, New York. Attorneys for Defendant National Fire & Marine Insurance Company.
Kurt M. Heyman, Esq., Aaron M. Nelson, Esq., HEYMAN ENERIO GATTUSO & HIRZEL LLP, Wilmington, Delaware, Alexander S. Lorenzo, Esq., ALSTON & BIRD LLP, New York, New York. Attorneys for Defendant National Union Fire Insurance Company.
Carmella P. Keener, Esq., COOCH AND TAYLOR, P.A., Wilmington, Delaware, Adam H. Fleischer, Esq., Craig M. Leff, Esq., Matthew P. Fortin, Esq., BATESCAREY LLP, Chicago, Illinois. Attorneys for Defendants North American Elite Insurance Company and North American Specialty Insurance Company.
William R. Adams, Esq., DICKIE MCCAMEY & CHILCOTE, P.C., Wilmington, Delaware, Jeffrey L. Kingsley, Esq., Colleen E. Hayes, Esq., GOLDBERG SEGALLA LLP, Philadelphia, Pennsylvania. Attorneys for Defendant QBE Insurance Corporation.
Timothy S. Martin, Esq., Daryll Hawthorne-Searight, Esq., WHITE AND WILLIAMS LLP, Wilmington, Delaware, Gabriel E. Darwick, Esq., WHITE AND WILLIAMS LLP, Newark, New Jersey. Attorneys for Defendant Steadfast Insurance Company.
John C. Phillips, Esq. PHILLIPS, MCCLAUGHLIN & HALL, P.A, Wilmington, Delaware, Joseph A. Bailey, III, Esq., WERNER AHARI MANGEL LLP, Washington, D.C. Attorneys for Defendant U.S. Specialty Insurance Company.
Carmella P. Keener, Esq. COOCH AND TAYLOR, P.A., Wilmington, Delaware, Ronald P Schiller, Esq., Michael R. Carlson, Esq., Anthony J. Palmer, Esq. HANGLEY ARONCHICK SEGAL PUDLIN & SCHILLER, Philadelphia, Pennsylvania. Attorneys for Defendant Navigators Specialty Insurance Company.
MEMORANDUM OPINION AND ORDER
SHELDON K. RENNIE, JUDGE
I. INTRODUCTION
This breach of contract case is assigned to the Complex Commercial Litigation Division of this Court. Plaintiffs Hertz Global Holdings, Inc. and The Hertz Corporation ("Hertz") filed a declaratory judgment against several insurance companies that sold primary, umbrella, and excess liability policies to Hertz. Defendants include general liability insurers (the "GL Insurers") and directors and officers liability insurers (the "D&O Insurers"). In its complaint, Hertz seeks declarations that the GL Insurers and D& O Insurers are obligated to pay for defense and settlement costs in connection with underlying personal injury claims.
The GL Insurers are ACE American Insurance Co., Swiss Re Corporate Solutions Elite Insurance Corporation (named as North American Elite Insurance Company in complaint), Swiss Re Corporate Solutions America Insurance Corporation (named as North American Specialty Insurance Company in complaint), ACE Property & Casualty Insurance Company, National Fire & Marine Insurance Company, Steadfast Insurance Company, QBE Insurance Corporation, Navigators Specialty Insurance Company, American Guarantee & Liability Insurance Co., Great American Insurance Co. of New York, Endurance Assurance Corporation, Great American Spirit Insurance Company, Lexington Insurance Company, Everest National Insurance Company, and National Union Fire Insurance Company of Pittsburgh, PA. ACE American Insurance and ACE Property & Casualty Insurance Company were dismissed from the action. D.I. 216.
National Union Insurance Company of Pittsburgh, P.A, Continental Casualty Company, U.S. Specialty Insurance Company, and Alterra American Insurance Company n/k/a Pinnacle National Insurance Company.
On March 1, 2024, the parties filed seven opening briefs in support of their respective motions for summary judgment. On May 10, the GL Insurers filed their answering briefs in opposition to Hertz's motion, and Hertz filed its omnibus answering brief in opposition to the GL Insurers motions for summary judgment. On June 14, the parties filed their replies in further support of their motions for summary judgment. On July 10, 2024, the Court heard oral argument on the motions. For the reasons stated below, Hertz's motion is denied, and the GL Insurers' motions are granted.
Plaintiffs' Opening Brief in Support of Their Renewed Motion for Partial Summary Judgment on the "Occurrence" and Trigger of Coverage ("Hertz Motion") (D.I. 344); Opening Brief in Support of Defendant Everest National Insurance Company Motion for Partial Summary Judgment on Number of Occurrences (D.I. 322); Opening Brief in Support of Defendant Everest National Insurance Company's Motion for Partial Summary Judgment on Certain 2020 Policy Year Trigger Issues (D.I. 323); Swiss Re Corporate Solutions Elite Insurance Corporation's Brief in Support of Its Motion for Partial Summary Judgment That the Henry, Holmes and Arvary Personal Injury Claims Are Separate Occurrences Within the 2016 Period ("SRCS Motion on Occurrences") (D.I. 338); Swiss Re Corporate Solutions Elite Insurance Corporation's Brief in Support of Motion for Partial Summary Judgment That Losses Paid for Three Alleged Injuries Outside of the 2015 Policy Period Do Not Erode the 2015 Policy's Retained Limit ("SRCS Motion on Trigger") (D.I 340); Navigators Specialty Insurance Company's Opening Brief in Support of Motion for Summary Judgment ("Navigators Motion") (D.I. 339); Opening Brief in Support of Defendants National Union Fire Insurance Company of Pittsburgh, PA. and Lexington Insurance Company's Motion for Summary Judgment with Regard to Their Excess Liability Policies (D.I. 394).
The parties informed the Court prior to oral argument that Hertz reached a settlement in principle with Everest National Insurance Company and National Union Fire Insurance Company of Pittsburgh, PA and Lexington Insurance Company. D.I. 500, 501. The Court considers those insurers' respective motions withdrawn until a settlement is finalized.
II. FACTUAL AND PROCEDURAL BACKGROUND
Unless otherwise noted, the factual background is drawn from the undisputed facts in the parties' pleadings and documentary exhibits submitted by the parties.
A. The Parties
Hertz Global Holdings, Inc. and The Hertz Corporation are incorporated in Delaware with principal places of business in Florida. From 2014 to 2020, Hertz purchased $210 million in general liability coverage. For those years, ACE American Insurance Company ("ACE") issued primary general liability policies to Hertz with deductibles of $5 million and policy limits of $5 million. Hertz purchased umbrella policies from Swiss Re Corporate Solutions Elite Insurance Corporation (the "SRCS Elite Policies") for the 2014 to 2016 coverage years, and ACE (the "ACE Umbrella Policies," and together with the SRCS Elite Policies, the "Policies") for the 2017 to 2020 coverage years. The Policies provide up to $50 million of coverage for each policy period, subject to a $10 million self-insured retention. Additionally, for each year from 2014 to 2020, Hertz purchased follow form excess umbrella insurance.
Compl. ¶¶ 7-8. Hertz's principal place of business before 2015 was New Jersey. See Navigators Motion at 12 (D.I. 339).
Compl. ¶ 30.
Id. ¶ 30.
Id. ¶ 34.
Id. ¶ 35.
Id. ¶ 47.
B. The Policies: Relevant Provisions
The SRCS Elite Policies provide coverage for personal and advertising injury. Specifically:
See, e.g., Affidavit of Cynthia Jordano in Support of Plaintiffs' Opening Brief in Support of Their Renewed Motion for Partial Summary Judgment on the "Occurrence" and Trigger of Coverage ("Jordano Aff."), Ex. 1 ("SRCS Elite 2014 Policy") (D.I. 341).
We will pay on behalf of the "insured" those sums in excess of the
"retained limit" that the "insured" becomes legally obligated to pay as damages by reason of liability imposed by law because of "bodily injury," "property damage," or "personal and advertising injury" to which this insurance applies.
SRCS Elite 2014 Policy at 1 of 21 (§ 1.A).
"Personal and advertising injury" means "injury, including consequential 'bodily injury,' arising out of one more of the following offenses: 1. false arrest, detention or imprisonment; [or] 2. malicious prosecution."
Id. at 19 of 21 (§ VII.R).
The SRCS Elite Policies are "occurrence" based policies. The Limits of Insurance applies to "Each Occurrence;" the self-insured retention applies on an "each 'occurrence'" basis; and the "'occurrence' [must be] committed during the
See Appalachian Ins. Co. v. Liberty Mut. Ins. Co., 676 F.2d 56, 59 (3d Cir. 1982) (explaining that under an "occurrence" policy, the insured is indemnified for occurrences taking place within the policy period while under a "claims made" policy the insured is indemnified for claims made during the policy period regardless of when the acts giving rise to those claims occurred); Michael Murray, The Law of Describing Accidents: A New Proposal for Determining the Number of Occurrences in Insurance, 118 Yale L.J. 1484, 1493 (2009) ("Per-claim insurance provides recovery up to the policy limit for every claim filed against the insured. Per-occurrence coverage, on the other hand, provides recovery up to the policy limit for every occurrence, regardless of the number of claims filed against the insured.").
SRCS Elite 2014 Policy at 5 of 21 (§ IV.D) ("Subject to Paragraphs B. and C. above, the Each Occurrence Limit stated in the Declarations is the most we will pay for the sum of all damages because of . . . 'personal and advertising injury' arising out of any one 'occurrence.'"). The "Each Occurrence Limit" is $50 million. Id. at 1 of 1 (Dec. Item 4).
Id. at 20 of 21 (§ VII.V) ("'Retained limit' means . . . [t]he amount shown in the Declarations as the Self-Insured Retention applicable to each 'occurrence' that results in damages not covered by 'scheduled underlying insurance' or 'other insurance.'").
'policy period.'" Further, "with respect to 'personal and advertising injury,'" an "occurrence" means:
Id. at 1 of 21 (§ I.B) ("This insurance applies to . . . 'personal and advertising injury,' but only if . . . the 'personal and advertising injury' is caused by an 'occurrence' that takes places in the 'coverage territory' arising out of your business, but only if the 'occurrence' was committed during the 'policy period.'").
a covered offense. All damages that arise from the same act, publication or general conditions are considered to arise out of the same "occurrence," regardless of the frequency or repetition thereof, the number or kind of media used or the number of claimants.
Id. at 19 of 21 (§ VII.O.2).
Similarly, under the ACE Umbrella Policies, "the offense causing the 'personal and advertising injury'" [must] take[] place . . . during the 'policy period.'"
Jordano Aff., Ex. 2 ("ACE 2017 Policy") at 1 of 19 (§ I.A.2).
C. The Underlying Claims
On May 21, 2020, former rental car customers filed a lawsuit in this Court against Hertz as well as various Hertz-affiliated individuals (the "Ayoub Complaint"). The Ayoub Complaint asserts that Hertz filed false theft reports for apparently overdue or missing vehicle rentals, resulting in the arrests and prosecutions of its customers. The Ayoub Complaint describes these alleged practices as "systemic" and "nationwide."
Id., Ex. 22 (Hannah Ayoub, et al. v. Hertz Global Holdings, Inc. et al., N20C-05-0189 (Del. Super. Ct. 2020)) ("Ayoub Compl.").
See Ayoub Compl. ¶¶ 8, 20, 28.
Id. ¶¶ 28, 29, 30, 55, 134.
These theft reports allegedly failed to accurately reflect whether a customer paid for a rental or received a rental extension. The Ayoub Complaint alleges that personnel failed to investigate the accuracy of the theft reports in accordance with Hertz policies. For example, the Ayoub Complaint alleges that Hertz submitted theft packages to police prior to charging customers the final bill. Hertz finalized paper theft packages based on whether the authorization hold of a customer's credit was denied or not, rather than on a final billing charge. Hertz then submitted the theft report to police before verifying whether the customer paid the full balance of the rental.
Id. ¶ 30(a), (b), and (d).
Id. ¶¶ 30(c), 84-91.
Id. ¶¶ 40-50.
Id. ¶¶ 47-49.
Id. ¶¶ 48-49.
Hertz also allegedly erased any record of customer extensions to vehicle rentals without giving notice of the erasures to the customer. Extensions for car rentals appeared on Hertz's records upon approval of an authorization hold on a customer's credit card. But if the authorization hold was denied, Hertz's computer systems erased the extension, backdated the due date of the rental, and reported the vehicle as stolen to the police without providing the call or extension history. The customer did not receive notice of the voided extension, and could later face arrest and criminal charges. The Ayoub Complaint also alleges that Hertz destroyed records, renter information, and data.
Id. ¶ 65.
Id. ¶ 66.
Id. ¶¶ 67, 71.
Id. ¶ 67.
Id. ¶¶ 98-105.
The underlying plaintiffs asserted a variety of claims, including claims of malicious prosecution, abuse of process, false arrest/imprisonment, intentional/negligent infliction of emotional distress, negligence/gross negligence, negligent supervision and management, and unfair trade practices.
One day after the filing of the Ayoub Complaint, the Hertz Corporation and its affiliates filed for Chapter 11 bankruptcy proceedings. During the pendency of the bankruptcy, counsel to the Ayoub plaintiffs submitted more than 200 proofs of claims. Additional lawsuits were filed in Delaware, Pennsylvania, and Florida.
Compl. ¶ 65.
Id. ¶ 67.
Jordano Aff., Exs. 23-28.
In August 2020, Hertz provided notice of the Ayoub Complaint to its primary and umbrella insurance carriers, and it provided notice to its excess umbrella carriers in April 2022. It provided notice of the Ayoub Complaint to its D&O carriers in June 2020.
Compl. ¶¶ 68-69.
Id. ¶ 75.
On May 27, 2022, Hertz initiated this action by filing a complaint seeking indemnification for defense costs in connection with the underlying claims asserted against Hertz.
On December 1, 2022, Hertz reached a settlement with 364 of the 367 claimants for approximately $168 million.. (Redacted) .
Jordano Aff., Ex. 42.
Id. ¶ 48.
III. STANDARD OF REVIEW
The Court may grant summary judgment only when "the record demonstrates that 'there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" At the summary judgment stage the Court determines whether genuine issues of material fact exist, but the Court does "not decide such issues." To achieve summary judgment, the movant must carry its burden to demonstrate its motion is supported by undisputed material facts. If the movant is successful, then the burden shifts to the non-movant to demonstrate a "genuine issue for trial" still exists. The Court views the facts and draws all reasonable inferences in the light most favorable to the non-movant.
Parexel Int'l (IRL) Ltd. v. Xynomic Pharms., Inc., 2020 WL 5202083, at *4 (Del. Super. Ct. Sept. 1, 2020) (quoting Del. Super. Ct. Civ. R. 56(c)).
Merrill v. Crothall-American Inc., 606 A.2d 96, 99 (Del. 1992) (citation omitted); see also Oliver B. Cannon & Sons, Inc. v. Dorr-Oliver Inc., 312 A.2d 322, 325 (Del. Super. Ct. 1973).
Envolve Pharmacy Sols., Inc. v. Rite Aid Headquarters Corp., 2023 WL 2547994, at *7 (citing Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979)).
Del. Super. Ct. Civ. R. 56(e).
Judah v. Del. Tr. Co., 378 A.2d 624, 632 (Del. 1977) (citations omitted).
If cross-motions have been filed "and neither party argues the existence of a genuine issue of material fact, 'the Court shall deem the motions to be the equivalent of a stipulation for decision on the merits based on the record submitted with the motions.'" But if genuine issues of material fact persist despite the cross-motions, "summary judgment is not appropriate."
Zenith Energy Terminals Joliet Hldgs. LLC v. CenterPoint Props. Tr., 2023 WL 615997, at *8 (Del. Super. Ct. Jan. 23, 2023) (citation omitted).
Id.
IV. DISCUSSION
The parties filed several motions for summary judgment. The Court addresses Hertz's motion first, followed by the GL Insurers' Motions. The Court's analysis regarding Hertz's motion guides the Court's analysis in the other motions filed.
A. Delaware Law Applies
In the absence of a choice of law provision and conflict between Delaware law and the law of another state, the Court applies Delaware law. No actual conflict with Delaware law exists, because the parties' dispute may be resolved on the plain language of the Policies alone, and no party has identified any conflict with regard to Delaware's principles of contract interpretation.
See Arch Ins. Co. v. Murdock, 2018 WL 1129110, at *8 (Del. Super. Ct. Mar. 1, 2018); Northrop Grumman Innovation Sys., Inc. v. Zurich Am. Ins. Co., 2021 WL 347015, at *8 (Del. Super. Ct. Feb. 2, 2021) ("If the conflict a party advances is 'merely a false ... conflict,' then there is no choice-of-law analysis to undertake and Delaware law applies.").
Under Delaware law, "the interpretation of contractual language, including that of insurance policies, is a question of law." The Court is to interpret the insurance policy as a whole, "and not on any single passage in isolation." In doing so, the Court endeavors "to give each provision and term effect" and not render any terms "meaningless or illusory." A meaning inferred from a particular part of the contract does not control if it "runs counter" to a contract's "overall scheme or plan."
Id., 2021 WL 347015, at *9.
O'Brien v. Progressive Northern Ins., 785 A.2d 281, 287 (Del. 2001). See also Chicago Bridge & Iron Co. N. U, v. Westinghouse Elec. Co., 166 A.3d 912, 912 (Del. 2017).
Weinberg v. Waystar, Inc., 294 A.3d 1039, 1044 (Del. 2023) (citation omitted).
E.I. du Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985).
If the contract language is "clear and unambiguous, the parties' intent is ascertained by giving the language its ordinary and usual meaning." A contract is ambiguous only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings. The test to determine if ambiguity exists is not what the parties intended it to mean, but "what a reasonable person in the position of the parties would have thought it meant." "Courts will not torture contractual terms to impart ambiguity where ordinary meaning leaves no room for uncertainty." Where the language is ambiguous, the contract is to "be construed most strongly against the insurance company that drafted it."
RSUI Indem. Co. v. Murdock, 248 A.3d 887, 905 (Del. 2021).
Rhone-Poulenc Basic Chemicals Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992).
Id.
Id.
RSUI Indem. Co., 248 A.3d at 887 (invoking the doctrine of contra proferentum).
B. Hertz's Motion
Hertz argues that the underlying claims arise out of a single covered "occurrence," and in its motion, seeks coverage under the 2014-2016 SRCS Elite Policies. Hertz argues that the allegedly systemic issues with regard to Hertz's theft-prevention policies and other policies and practices constitute a single occurrence from which all the underlying offenses arose, thereby subjecting Hertz to a single self-insured retention limit, as opposed to applying a self-insured retention limit for each false arrest and/or malicious prosecution. And, as Hertz contends, while these policies were in effect, this single occurrence serves as an "ongoing," continuous trigger.
Because the personal injury claims settled for amounts that mostly fell below the self-insured retention limit, Hertz cannot obtain coverage unless the claims are aggregated. See Michael Murray, The Law of Describing Accidents: A New Proposal for Determining the Number of Occurrences in Insurance, 118 Yale L.J. at 1493 ("It follows from this analysis that the finding of one or multiple occurrences is neither universally pro-insured nor pro-insurer. The interests of the parties depend on the interaction of a number of variables, including the deductible amount, the value of each claim, the per-occurrence limit, and the value of the sum of the claims. Some generalizations, however, can be made. For example, insurers prefer a finding of multiple occurrences when there are multiple claims each of which is less than the deductible, while insured individuals prefer a finding of one occurrence in the same situation. When each claim is greater than the deductible, the preferences will vary depending on the difference between the claims and deductibles, the sum of the losses, and the occurrence limit . . . In practice, insurers and insured parties often take inconsistent positions in different cases because of the change in their interest in the pending litigation.")
Plaintiffs' Omnibus Reply Memorandum of Law in Further Support of Its Motion for Partial Summary Judgment on "Occurrence" and Trigger of Coverage at 1 ("The GL Policies state that '[a]ll damages that arise from the same act .. or general conditions are considered to arise out of the same 'occurrence,' regardless of the frequency or repetition thereof . . . or the number of claimants,' and that all Policies in effect while this singular "occurrence" was ongoing are triggered.") (D.I. 487).
In opposition to Hertz's motion and in support of their individual motions for summary judgment, the GL Insurers argue that each underlying offense constitutes its own occurrence, and accordingly, to receive coverage, (1) Hertz must exceed the retention amount for each offense underlying the claim and (2) such offense must occur during the policy period for which Hertz seeks insurance coverage.
1. The Underlying Claims Allege Damages Because of "Personal and Advertising Injury"
The SRCS Elite Policies provide that coverage will extend for "those sums in excess of the 'retained limit' that the 'insured' becomes legally obligated to pay as damages by reason of liability imposed by law because of . . . 'personal and advertising injury.'" The "personal and advertising injury" must be "caused by an 'occurrence' . . . committed during the 'policy period.'" Similarly, the ACE Umbrella Policies require that "the offense causing the 'personal and advertising injury' take[] place . . . during the "policy period."
SRCS Elite 2014 Policy at 1 of 21 (§ 1.A).
Id. at 1 of 21 (§ I.B).
ACE 2017 Policy at 1 of 19 (§ I.A.2). Though Hertz did not move for summary judgment with respect to the ACE Umbrella Policies, the Court references those Policies' language because they are the subject of the GL Insurers' Motions and the outcome of the Court's analysis of the two types of policies is the same.
The underlying claims allege damages because of "personal and advertising" injury. "Personal and advertising injury" means "injury . . . arising out of one or more of the following offenses: 1. False arrest, detention or imprisonment; [or] 2. malicious prosecution." The Ayoub Complaint (which the proofs of claim resemble) alleges that the claimants were falsely arrested and/or maliciously prosecuted. Thus, any injury they suffered as a result of those incidents is a "personal and advertising injury."
Where the parties diverge is on the provision defining "occurrence." Hertz argues that the allegedly faulty policies and practices at Hertz constitute the single occurrence from which each offense arose. The GL Insurers, on the other hand, treat each offense as its own occurrence.
2. An Occurrence is a Covered Offense.
"With respect to 'personal and advertising injury,'" an "occurrence" means:
a covered offense. All damages that arise from the same act, publication or general conditions are considered to arise out of the same "occurrence," regardless of the frequency or repetition thereof, the number or kind of media used or the number of claimants.
SRCS Elite 2014 Policy at 19 of 21 (§ VII.O.2). In contrast, "with respect to 'bodily injury' or 'property damage,' an occurrence means: 'an accident, including continuous or repeated exposure to substantially the same general harmful conditions. All such exposure to substantially the same general conditions shall be considered as arising out of the same 'occurrence,' regardless of the frequency or repetition thereof, or the number of claimants.'" Id. at 19 of 21 (§ VII.O.1).
Under an "occurrence" based policy, an insurer is liable for the as-defined occurrence during the policy period, and claims arising out of that occurrence. Here, the Policies are "occurrence" based, and specifically define that "occurrence," in the first clause above, to be a "covered offense" with respect to "personal and advertising injury." The Policies then define "personal and advertising injury" as certain enumerated covered offenses that include false arrest, malicious prosecution and publication of defamatory material. By defining an occurrence as a "covered offense," the scope of coverage is limited to the covered offense, and any damages arising therefrom.
SRCS Elite 2014 Policy at 19 of 21 (§ VII.R).
As a corollary, because an occurrence must be committed during the policy period to trigger coverage under the SRCS Elite Policies, the covered offense must occur during the policy period to obtain coverage for the underlying claim. The same applies for the ACE Umbrella Policies, which provides that "the offense causing the 'personal and advertising injury' take[] place during the 'policy period.'" Conversely, covered offenses that occur outside a policy period do not trigger coverage for underlying claims for that period.
Id. at 1 of 21 (§ I.B).
ACE 2017 Policy at 1 of 19 (§ I.A.2).
This leaves the Court with the question of how to interpret the second clause following the definition of "occurrence" with respect to "personal and advertising injury." The second clause states that "all damages that arise from the same act, publication or general conditions shall be considered as arising out of the same 'occurrence.'"
SRCS Elite 2014 Policy at 19 of 21 (§ VII.O.2); ACE 2017 Policy at 17 of 19 (§ VII.O.2).
Hertz calls the second clause a "deemer" clause. A "deemer" clause is a "mechanism to determine which single policy responds where an occurrence potentially triggers more than one policy . . . the intent of these clauses is to limit the insurer's liability where loss spreads over more than one policy period." Hertz contends that the so-called occurrence that triggers multiple policies is Hertz's corporate malfeasance. To get there, however, Hertz performs contractual gymnastics.
Stonewall Ins. Co. v. E.I. du Pont de Nemours & Co., 996 A.2d 1254, 1259 (Del. 2010) (citing 3 Alan S. Rutkin et al., New Appleman Insurance Law Practice Guide 39.15(4) (2009)); see also Allocation of Losses in Complex Insurance Coverage Claims § 3:4 (Westlaw) ("In addressing progressive injuries and/or damages, some insurance contracts contain provisions that 'deem' a particular date in the progression of the injury and/or damage as the relevant triggering date for when an injury or damage takes place for purposes of the insurance contract.").
Jumping over the first clause, Hertz ignores the language that an occurrence means a "covered offense." It then lands on the second clause and argues that if damages arise from the same "act, publication, or general conditions," such an act, publication or general conditions constitutes an occurrence. With that contractual overlay, Hertz identifies its corporate malfeasance as the single-occurrence from which the underlying claims arise.
Hertz's interpretation is unreasonably broad and tortured. The Policies expressly confine the range of potentially triggering events-with respect to personal and advertising injury-to the commission of covered offenses. Yet Hertz so dilutes the meaning of an "occurrence" to mean any but-for wrongful act. Adopting its interpretation would render meaningless the first clause, and runs counter to the Policies' overall "scheme or plan" as an offense-based occurrence policy with respect to personal and advertising injury. Had the parties wanted to bargain for broader language, they could have done so, as seen in accident-based occurrence policies that are typically found in product-liability cases.
SRCS Elite 2014 Policy at 19 of 21 (§ VII.O.1) (defining "occurrence" with respect to "bodily injury or property damage" to be an "an accident, including continuous or repeated exposure to substantially the same general harmful conditions"); Valley Forge Ins. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 2012 WL 1432524, at *9 (Del. Super. Ct. Mar. 15, 2012) (defining "occurrence" as an "accident, including continuous or repeated exposure to substantially the same harmful conditions."); Stonewall Ins. Co. v. E.I. du Pont de Nemours & Co., 996 A.2d 1254, 1257 (Del. 2010) ("'Occurrence' . . . shall mean an accident or a happening or event or a continuous or repeated exposure to conditions . . . All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.").
Adopting Hertz's interpretation also raises additional interpretative issues, highlighting its unworkability. If an allegedly deficient corporate policy or practice constitutes an "occurrence" that gives rise to several covered offenses, when did the "occurrence" first arise for purposes of triggering coverage? Hertz argues that a policy's coverage applies if the allegedly defective policies were in effect at any point during the policy's coverage period. Yet, in Appalachian Ins. Co. v. Liberty Mut. Ins. Co., the Third Circuit found that coverage is based on when injury is first manifested, not on a continuous trigger theory.
676 F.2d at 56. In Appalachian Ins. Co., a company was seeking indemnification from its insurers for the settlement of sex discrimination claims. Id. The sex discrimination claims were filed between 1971 and 1974 and arose from the company's 1965 employment policies. Id. at 58. The applicable policy periods for which the company was insured was between 1971 and 1974. Id. at 59. In determining whether the sex discrimination claims arose from a single occurrence or multiple occurrences, the Court looked to whether the claims arose from a common cause. Id. at 61. In determining when the occurrence occurred, the Court's analysis shifted to the timing of the injury, specifically, "when the injuries first manifest themselves." Id. at 61-62. The Court found that injury from the company's discriminatory policies first manifested itself in 1965, because the policies had an "immediate" impact on its employees. Id. at 63. Thus, because the occurrence preceded the effective date of the policy periods, the company was not entitled to coverage. The Court reached this holding despite the fact that the injury continued into the 1971 through 1974 policy periods. The Court explained that indemnifying the company for sex discrimination claims that arose after the year in which the discriminatory employment policies were adopted "contravened the rule that an insured cannot insure against something which has already begun." Id. at 63. Upon adoption of the employment policies, the risks were no longer unknown, because of their "immediate" impact. Id. The Court, however, does not find Appalachian Ins. Co. applicable to this action because the policy in Appalachian Ins. Co. defined an occurrence to be any "accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury." Id. at 58, n.8. Here, it is a covered offense.
Further, the Court would need to determine which allegedly deficient company policy or practice at Hertz constitutes the "act, publication or general conditions" that allegedly resulted in the several hundred personal injury claims for which Hertz seeks coverage. Hertz does not advance its position by broadly identifying an amalgam of practices and policies at Hertz and making generalized conclusions that each of the personal injury claims arose as a result of those practices and policies.
In sum, Hertz's reading of the Policies' language defining an occurrence "with respect to personal and advertising injury" is unreasonable.
3. The Second Clause Allows for Aggregating Common Damages
Rather than expand the definition of what constitutes an "occurrence," the GL Insurers argue that the second clause is a mechanism to aggregate damages that arise from the same covered offense. This is a reasonable interpretation.
To aggregate damages as part of the same personal injury offense, the "same act, publication, or general conditions" must either be the covered offense or comprise the covered offense. For example, a mother is arrested in front of her two children, and the three file claims against Hertz; the damages the three claimants suffered constitute a single occurrence because the injuries arose from the false arrest of the mother. Or, a spouse suffers emotional distress from witnessing the false arrest of her husband; her damages arise from the same act that gave rise to the arrest of the husband-law enforcement arresting her husband. In these instances, the second clause limits the application of multiple per-occurrence caps "regardless of the frequency or repetition [of the same act, publication, or general conditions]. . ., the number or kind of media used or the number of claimants." This interpretation does not alter the definition of "occurrence," but preserves the parties' intent that liability attach to the as-defined occurrence and any damages flowing therefrom.
Transmittal Affidavit of Aaron M. Nelson in Support of Opposition to Plaintiffs' Renewed Motion for Partial Summary Judgment, Exs. A-C (D.I. 461).
See, e.g., Swiss Re Corporate Solutions Elite Insurance Corporation's Combined Reply in Support of Motions For Partial Summary Judgment That (1) Losses Paid for Three Alleged Injuries Outside of the 2015 Policy Period do not Erode The 2015 Policy's Retained Limit and (2) The Henry, Holmes and Arvary Personal Injury Claims are Separate Occurrences Within The 2016 Period at 20-21 (D.I. 479).
SRCS Elite 2014 Policy at 19 of 21 (§ VII.O.2).
Using Hertz's counsel's own words, "contract is everything," and here the plain language of the SRCS Elite Policies expressly provides that an "occurrence" is a covered offense. Hertz has not shown that the allegedly defective policies and practices at Hertz constitute a covered offense, or comprise a part of a covered offense such that damages can be aggregated among the claims. Accordingly, Hertz's motion will be denied.
Hearing Transcript at 31 (D.I. 509).
C. The GL Insurers' Motions on Trigger of Coverage
The GL Insurers seek substantially similar declarations-whether personal injury claims in which underlying offenses occur outside a policy period trigger coverage for that policy. Whether under the language of the SRCS Elite Policies or the ACE Umbrella Policies, for the reasons already described above, the underlying offense must occur during a policy's coverage period to trigger coverage for that policy.
See SRCS Motion on Trigger at 1 ("In this instant motion, SRCS Elite asks the Court to rule that, because the policies are only triggered by a law enforcement 'offense' allegedly committed against a claimant during the policy period, then three exemplar claimants who allege offenses committed against them outside of the exemplar 2015 period cannot trigger coverage under the 2015 policy."); Navigator's Motion ("First, as to trigger, under the plain language of the underlying policies and governing case law, a 'personal and advertising injury' claim can trigger only the policy period in which the personal and advertising injury 'offense'-i.e., a false arrest, false imprisonment, or malicious prosecution-actually took place.").
The G&L Insurers' motions on the issue of trigger will, therefore, be granted.
The Court believes that its rulings as to trigger may moot any dispute as to exhaustion or the prior publication exclusion. To the extent there continues to be a dispute, the GL Insurers' may renew their motions as to any outstanding issues on more narrowed grounds.
D. The GL Insurers' Motions on Number of Occurrences
SRCS' motion seeks declarations that among exemplar claimants, the personal injuries arose out of separate occurrences and that their damages cannot be aggregated. It moved based on the interpretation that an occurrence with respect to personal and advertising injury was a covered offense, and not any but-for wrongful act preceding a covered offense.
SRCS' motion centers on three proofs of claims. Each proof of claim involved arrests of three different individual families, occurring on different months and in different states. It is self-evident that each personal injury offense that occurred against a family-whether it be the false detention or imprisonment-was not the same offense as that against another family in the three proofs of claims at issue. Accordingly, because an occurrence is a covered offense and each of the three proofs of claim arose from a separate covered offense, each of those offenses constitute three separate occurrences.
Affidavit of Matthew P. Fortin in Support of Swiss Re Corporate Solutions Elite Insurance Corporation's Motion for Partial Summary Judgment That the Henry, Holmes and Arvary Personal Injury Claims Are Separate Occurrences Within the 2016 Period, Exs. 5 ("Henry Claim"), 9 ("Holmes Claim"), 14 ("Arvary Claim") (D.I. 338).
In order to aggregate the damages from each of the covered offenses as if it arose from a single occurrence, the damages must arise from the "same act . . . or general conditions" across the covered offenses. Here, there is no genuine issue of material fact that each arrest arose from different interactions with law enforcement. Hertz's characterizations of its allegedly faulty and system-wide reporting issues as the single proximate cause to each of the three proofs of claim ignores the intervening acts and distinct circumstances surrounding each arrest of the individual. For example, the causes to each arrest varied-whether it was the failure of an employee to check an individual's identification, failure to accurately record a valid rental vehicle extension or timely notify a customer of an overdue rental vehicle. Each failure on the part of a Hertz employee represented a distinct "act . . . or general condition[]" that prevents aggregation of the damages across the three proofs of claims at issue. Thus, the damages suffered by the main claimants in each of the three proof of claims cannot be aggregated as if it arose from a single occurrence.
SRCS Elite 2014 Policy at 19 of 21 (§ VII.O.2).
See Arvary Claim.
See Henrys Claim.
See Holmes Claim.
Hertz opposes the motion based on its theory that the allegedly deficient policies and practices constitute the single occurrence triggering coverage for all the personal injury claims. Hertz does not identify any fact dispute, but instead relies on generalized and conclusory allegations in the Ayoub Complaint that the collection of policies and practices at Hertz proximately caused all of the false arrests and malicious prosecutions. Because Hertz's contractual interpretation is unreasonable for the reasons already explained above and is the ground upon which it opposes the motions, the G&L Insurers' motions on the number of occurrences will be granted.
See, e.g., Plaintiffs' Omnibus Memorandum of Law in Opposition to Defendants' Motions for Partial Summary Judgment on "Occurrence" and Trigger of Coverage ("Hertz Omnibus Ans. Br.") at 7 ("The Ayoub Action plaintiffs generally alleged that Hertz and its directors and officers implemented a flawed theft-reporting policy and practice of providing false information to law enforcement that directly and proximately caused the plaintiffs' false arrests, detentions, or imprisonments and/or malicious prosecutions) (citing Ayoub Compl. ¶¶ 2-4, 8, 17, 20, 30, 438-547)) (D.I. 456).
V. CONCLUSION
For the reasons set forth above, Hertz's Motion for Partial Summary Judgment is DENIED. SRCS' Motions for Partial Summary Judgment are GRANTED. Navigators Specialty Insurance Comp any'sMotion for Summary Judgment is GRANTED.
IT IS SO ORDERED.