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finding that even though review would not "completely terminate the litigation" it would "significantly affect the subsequent phase of litigation" where "all parties moved for summary judgment or joined with other parties moving for summary judgment pursuant to Superior Court Rule 56(h) and represented that all issues raised in all motions for summary judgment were ripe for final adjudication on the merits."
Summary of this case from Krane v. Cade (In re Port of Wilmington Gantry Crane Litig.)Opinion
C.A. No. 07C-09-102 RRC.
Submitted: September 20, 2009.
Decided: September 30, 2009.
Upon National Union Fire Insurance Company of Pittsburgh, PA.'s Motion for Clarification.
DENIED.Order Granting HLTH Corp. et al. Leave to Appeal the "Prior Notice" Opinion of August 31, 2009.
ORDER
This 30th day of September, 2009, upon consideration of defendant, National Union Fire Insurance Company of Pittsburgh, PA.'s Motion for Clarification of the Court's "Prior Acts" Opinion dated August 31, 2009, it appears to the Court that:
1. On August 31, 2009, the Court issued an opinion denying defendant insurers' Motion for Summary Judgment, which argued that a "Prior Acts" Exclusion contained within a Directors and Officers ("D O") insurance policy should bar advancement of defense costs for directors and officers charged with criminal offenses in South Carolina. The opinion, which the parties refer to as the "Prior Acts Order" (because on August 31, 2009 the Court issued a related opinion referred to as the "Prior Notice Order"), held that the Prior Acts Exclusion did not bar advancement of defense costs because defendant insurers "failed to meet [their] burden of establishing that the Prior Acts Exclusion acts as a "clear and unambiguous" bar to [Plaintiffs'] claims for coverage because, bearing the burden, [defendant insurers have] failed to satisfactorily reconcile the conflicting terms of the Prior Acts Exclusion and Endorsement 13."
Dkt 267.
Dkt 268.
HLTH Corp. v. Clarendon Nat'l Ins. Co., 2009 WL 2849777, at *23 (Del. Super. Aug. 31, 2009).
2. Defendant, National Union Fire Insurance Company of Pittsburgh, PA., filed the instant "Motion for Clarification" on September 10, 2009. Defendant argues that the motion should be granted because "[the] Court's Prior Acts Order deemed the National Union policy ambiguous." Defendant argues that, as a result of this holding, further discovery is needed to "explore the grounds for Plaintiffs' allegations of unlimited coverage." Defendant alleges that the parties have never had the opportunity to pursue discovery and that discovery is needed to determine whether the insurance policy at issue is "ambiguous."
Def. Mot. for Clarification, Docket Item ("D.I.") 272, at 2.
Id. at 3.
Id. at 4.
3. In response, Plaintiffs HLTH Corporation ("HLTH") and Emdeon Practice Services, Inc. (collectively, "Plaintiffs") argue that the motion is untimely and that further discovery is not needed because National Union never previously asserted the need for more discovery, agreed that the Court should decide the case "entirely based upon the existing record of uncontested material facts[,]" and "entered into a stipulation of facts with Plaintiffs[.]" Alternatively, Plaintiffs argue that the Court did not rely on any ambiguity in holding that the "Prior Acts" exclusion did not bar advancement of defense costs to the directors and officers and only held that Defendants failed to carry their burden of proof in showing that the exclusion applied. Finally, Plaintiffs assert that Defendant's motion "is an attempt to rewrite the long established rule that when a policy is `ambiguous or unclear,' `the issue of coverage must be resolved in favor of the insured[.]'"
Pls. Opp'n to Mot. for Clarification, D.I. 283, at 1.
Id. at 2-3.
Id. at 3 (citing HLTH Corp., 2009 WL 2849777, at *23).
4. In denying Defendant's Motion, the Court need not reach the merits of the motion because the Court holds that the Motion for Clarification is a Motion for Reargument pursuant to Superior Court Rule 59(e). Pursuant to Superior Court Rule 59(e), "[a] motion for reargument shall be served and filed within 5 days after the filing of the Court's opinion or decision." In the present case, Defendant's Motion was filed on September 10, 2009, which is a date beyond the time frame prescribed by Rule 59(e).
See Energy Partners, Ltd. v. Stone Energy Corp., 2006 WL 2947483, at *5 (Del. Ch. Oct. 11, 2006) (holding a motion for clarification amounts to a motion for reargument); Cede Co. v. Technicolor, Inc., 1994 WL 1753202, at *1 (Del. Ch. Dec. 6, 1994) (stating a motion for clarification is a motion for reargument and must follow the same time frame for filing).
5. Therefore, because Defendant has failed to comply with the requirements of Superior Court Rule 59(e), Defendant's Motion for Clarification is DENIED. IT IS SO ORDERED.
This 30th day of September, 2009, plaintiffs HLTH Corporation ("HLTH") and Emdeon Practice Services, Inc. (collectively, "Plaintiffs") having made application pursuant to Rule 42 of the Supreme Court for an Order certifying an appeal from the Memorandum Opinion ("Opinion") granting summary judgment to multiple defendants, dated August 31, 2009, the Court makes the following findings:
1. The Opinion, which the parties and the Court now refer to as the "Prior Notice Order" (because on August 31, 2009 the Court issued a related opinion referred to as the "Prior Acts Order"), determines a substantial issue and establishes a legal right in that it determines the rights of multiple defendant insurers to deny coverage for the advancement of ongoing, substantial defense costs under the Directors and Officers ("D O") insurance policies, and the right of the directors and officers to coverage under those same policies. The Opinion held that a Prior Notice Exclusion contained within the D O policies barred advancement of defense costs because:
Dkt 268
Dkt 267
See, e.g., State Farm Mut. Auto. Ins. Co. v. Abramowicz, 386 A.2d 670, 671 (Del. 1978) (holding pursuant to Supreme Court Rule 42 that a summary judgment decision that had determined the validity of a contract provision essential to the position of parties a "substantial issue" and the legal right of the insured to recover damages pursuant to the policy); AT T Corp. v. Clarendon Am. Ins. Co., 2006 WL 1360934, at *1 (Del. Super. May 18, 2006) (stating pursuant to Supreme Court Rule 42 that a denial of coverage under D O policies establishes both a substantial issue and a legal right meriting an interlocutory appeal under Supreme Court Rule 42); Monsanto Co. v. Aetna Cas. Sur. Co., Del. Super., C.A. No. 88-JA-118, slip op. at ¶ 1 (Feb. 10, 1994) (finding under Supreme Court Rule 42 that where the issue "bears directly upon the existence of insurance coverage as a matter of law" it therefore determines "a substantial issue").
[1] the notice of claims Plaintiffs gave to the 2005-2006 Emdeon Tower insurers arose out of the same facts as the notice of claims Plaintiffs gave to the MMC Tower insurers, and the Emdeon 2005-2006 Tower succeeded the MMC Tower in time and did not provide concurrent coverage; 2) when reading the Emdeon 2005-2006 Tower as a whole, the application of the Prior Notice Exclusion does not render any terms unclear or ambiguous, and Endorsement 13 does not contradict the Prior Notice Exclusion; and 3) Defendants were not aware that notice was given to the MMC Tower insurers when they entered the Emdeon 2005-2006 Tower so they have not waived, or are not estopped, from applying the Prior Notice Exclusion.
HLTH Corp. v. Clarendon Nat'l Ins. Co., 2009 WL 2849779, at *23 (Del. Super. Aug. 31, 2009).
2. Pursuant to Supreme Court Rule 42(b)(v), considerations of justice would be served by interlocutory review because of the following:
(a) The D O insurance policy at issue involves large sums of money that will serve to fund litigation associated with a criminal matter pending in South Carolina, and any ability of Plaintiffs to fund the litigation without the insurance coverage is immaterial as to whether defendant insurers must advance defense costs.
AT T Corp., 2006 WL 1360934, at *1 (stating that the amount of money at issue is a factor in determining whether to certify an interlocutory appeal in the interests of justice).
Although Fireman's Fund's Response to Certification of Interlocutory Appeal states that Plaintiffs must first exhaust the underlying policies and can then "dip into [their] ample cash reserves[,]" the money available to Plaintiffs to fund a defense is immaterial to certification of this appeal, which involves the duty of defendant insurers to advance costs and not Plaintiffs' potential ability to fund the litigation.
(b) The ability of the directors and officers charged with criminal offenses in South Carolina to access the funds provided by the D O insurance policy at issue could have an impact on the legal strategies employed and the ability of the directors and officers to set forth potentially meritorious defenses to the Underlying Action.
See Tafeen v. Homestore, Inc., 2005 Del. Ch. LEXIS 77, at *8 (Del. Ch. May 26, 2005) (stating that the failure to advance defense costs affects litigation strategy because the director will choose an affordable strategy over a potential alternative). Additionally, even though Fireman's Fund's Response to Certification of Interlocutory Appeal states that Plaintiffs must first exhaust the underlying policies before its duty to advance costs arises, this argument is immaterial because Plaintiffs have a right to know how much money is available under the collective policies, so they can assess potential litigation strategies.
(c) While interlocutory review at this point may not completely terminate the litigation, all parties moved for summary judgment or joined with other parties moving for summary judgment pursuant to Superior Court Rule 56(h) and represented that all issues raised in all motions for summary judgment were ripe for final adjudication on the merits. Therefore, a final resolution by the Supreme Court of whether the D O policy at issue was a "renewal, replacement or successor in time" to a previous insurance policy and whether the Prior Notice Exclusion is applicable to bar advancement of defense costs will significantly affect the subsequent phases of litigation, the scope of discovery, the length and complexity of a potential trial, and it will conserve judicial resources by providing a framework for potential settlement discussions.
In a similar case involving a D O insurance policy, the Court considered remarkably similar factors to the ones discussed in this opinion and interlocutory review was ultimately granted by the Delaware Supreme Court. See AT T Corp., 2006 WL 1360934, at *1, cert. granted, AT T Corp. v. Faraday Capital Ltd., 918 A.2d 1104 (Del. 2007).
(d) Finally, and although not directly related to the interests of justice exception under Supreme Court Rule 42(b)(v), Delaware courts recognize a public policy in favor of promptly resolving issues relating to advancement of defense costs.
See, e.g., Sun-Times Media Group, Inc. v. Royal SunAlliance Ins. Co. of Canada, 2007 WL 1811265, at *10 (Del. Super. Jun. 20, 2007) (resolving on summary judgment an issue involving advancement of defense costs). The advancement of defense costs under a D O insurance policy appears analogous to advancement of defense costs under 8 Del. C. § 145, which also recognizes the necessity of prompt and efficient adjudication of the duty to advance defense costs. See Tafeen, 2005 Del. Ch. LEXIS 77, at *8 (discussing that necessity of resolving advancement of defense costs quickly); see also Lipson v. Supercuts, Inc., 1996 Del. Ch. LEXIS 108 (Del. Ch. Sept. 10, 1996) (same).
For the foregoing reasons, IT IS ORDERED that the Court's Prior Notice Order of August 31, 2009 (Dkt 268) is hereby certified to the Supreme Court of the State of Delaware for disposition in accordance with Rule 42 of that Court.
In a companion decision issued on September 30, 2009, the Court has also certified the Prior Acts Order for review by the Supreme Court of Delaware
This 30th day of September, 2009, defendants National Union et al. having made application pursuant to Rule 42 of the Supreme Court for an Order certifying an appeal from the Memorandum Opinion ("Opinion") denying summary judgment to multiple defendants, dated August 31, 2009, the Court makes the following findings:
1. The Opinion, which the parties and the Court now refer to as the "Prior Acts Order" (because on August 31, 2009 the Court issued a related opinion referred to as the "Prior Notice Order"), determines a substantial issue and establishes a legal right in that it determines the rights of multiple defendant insurers to deny coverage for the advancement of ongoing, substantial defense costs under the Directors and Officers ("D O") insurance policies, and the right of the directors and officers to coverage under those same policies. The Opinion held that a Prior Acts Exclusion contained within the D O policies did not bar advancement of defense costs because defendant insurers have "failed to meet [their] burden of establishing that the Prior Acts Exclusion acts as a "clear and unambiguous" bar to [Plaintiffs'] claims for coverage because, bearing the burden, [defendant insurers have] failed to satisfactorily reconcile the conflicting terms of the Prior Acts Exclusion and Endorsement 13."
Dkt 267
Dkt 268
See, e.g., State Farm Mut. Auto. Ins. Co. v. Abramowicz, 386 A.2d 670, 671 (Del. 1978) (holding pursuant to Supreme Court Rule 42 that a summary judgment decision that had determined the validity of a contract provision essential to the position of parties a "substantial issue" and the legal right of the insured to recover damages pursuant to the policy); AT T Corp. v. Clarendon Am. Ins. Co., 2006 WL 1360934, at *1 (Del. Super. May 18, 2006) (stating pursuant to Supreme Court Rule 42 that a denial of coverage under D O policies establishes both a substantial issue and a legal right meriting an interlocutory appeal under Supreme Court Rule 42); Monsanto Co. v. Aetna Cas. Sur. Co., Del. Super., C.A. No. 88-JA-118, slip op. at ¶ 1 (Feb. 10, 1994) (finding under Supreme Court Rule 42 that where the issue "bears directly upon the existence of insurance coverage as a matter of law" it therefore determines "a substantial issue").
HLTH Corp. v. Clarendon Nat'l Ins. Co., 2009 WL 2849777, at *23 (Del. Super. Aug. 31, 2009).
2. Pursuant to Supreme Court Rule 42(b)(v), considerations of justice would be served by interlocutory review because of the following:
Although defendant insurers' "interests of justice" arguments for certification to this Court of the Prior Acts Order are somewhat less compelling than the arguments of plaintiffs HLTH Corp. and Emdeon Practice Services, Inc. for Certification of Interlocutory Appeal of the Prior Notice Order, the Court notes that Plaintiffs do not affirmatively oppose certification of defendant insurers' interlocutory appeal, stating in the first paragraph of their response to Certification of Interlocutory Appeal that "Plaintiffs have no objection to the Court granting Defendants' Prior Acts Application if the Court also grants Plaintiffs' Application for Certification of an Interlocutory Appeal. . . ." See Plaintiffs Response To Cert. of Interlocutory Appeal.
(a) All movants moved for summary judgment pursuant to Superior Court Rule 56(h) and represented that all issues raised in the Motion for Summary Judgment were ripe for final adjudication. Therefore, resolution by the Supreme Court of whether the Prior Acts Exclusion acts as a "clear and unambiguous" bar to coverage will significantly affect the subsequent phases of litigation and has potential to terminate further litigation completely because a resolution in favor of defendant insurers would bar coverage for Plaintiffs' claims.
The Court notes that defendant insurers advance relatively few arguments on behalf of certifying this interlocutory appeal. Not all the criteria for certification discussed in the Court's accompanying certification of the Prior Notice Order apply to defendant insurers because defendant insurers do not need access to the funds to present a meritorious defense and pursuant to the D O policies at issue, defendant insurers may recover the funds advanced to Plaintiffs if it is later found that the directors and officers charged with criminal offenses in South Carolina were not entitled to the funds. See HLTH Corp. v. Clarendon Nat'l Ins. Co., 2009 WL 2849779, at *9 (Del. Super. Aug. 31, 2009) ("Such advance payments by the Insurer shall be repaid to the Insurer by each and every Insured or Organization, severally according to their respective interests, in the event and to the extent that any such Insured or Organization shall not be entitled under this policy to payment of such Loss."); see also Sun-Times Media Group, Inc. v. Royal Sunalliance Ins. Co. of Canada, 2007 WL 1811265, at *12 (Del. Super. Jun. 20, 2007) (stating that even if exclusions were shown to apply at a later date, the future finding does not prevent present advancement of defense costs).
(b) If the Delaware Supreme Court grants interlocutory review of the Prior Notice Order, review also by the Supreme Court of the Prior Acts Order will resolve two disputes involving related coverage issues.
(b) Finally, and although not directly related to the interests of justice exception under Supreme Court Rule 42(b)(v), Delaware courts recognize a public policy in favor of promptly resolving issues relating to advancement of defense costs.
See, e.g., Sun-Times, 2007 WL 1811265, at *10 (resolving on summary judgment an issue involving advancement of defense costs). The advancement of defense costs under a D O insurance policy appears analogous to advancement of defense costs under 8 Del. C. § 145, which also recognizes the necessity of prompt and efficient adjudication of the duty to advance defense costs. See Tafeen v. Homestore, Inc., 2005 Del. Ch. LEXIS 77, at *8 (Del. Ch. May 26, 2005) (discussing that necessity of resolving advancement of defense costs quickly); see also Lipson v. Supercuts, Inc., 1996 Del. Ch. LEXIS 108 (Del. Ch. Sept. 10, 1996) (same).
For the foregoing reasons, IT IS ORDERED that the Court's Prior Acts Order of August 31, 2009 (Dkt 267) is hereby certified to the Supreme Court of the State of Delaware for disposition in accordance with Rule 42 of that Court.
In a companion decision issued on September 30, 2009, the Court has also certified the Prior Notice Order for review by the Supreme Court of Delaware.