Business insurance

Delaware Supreme Court rules for AIG and Axa in D&O case

On Wednesday, the Delaware Supreme Court unanimously upheld a lower court ruling and ruled that units of American International Group Inc. and Axa SA were not obligated to indemnify a company for solar power in connection with litigation with directors and officers in connection with their coverage of claims.

Shareholders of Tempe, Ariz.-based First Solar Inc. filed a class action lawsuit in Arizona in 2012, accusing the company of misrepresenting its manufacturing cost cuts, among other allegations, according to court documents in First Solar Inc. v. National Union Fire Insurance Co. of Pittsburgh, Pennsylvania and XL Specialty Insurance Co.

In March 2014, a number of shareholders withdrew from this litigation and filed a second lawsuit alleging various faults and cover-ups on the part of the company. Solar agreed to pay $19 million to settle the case.

National Union and the XL XL Specialty Unit denied coverage on the grounds that the second lawsuit was substantially identical to the lawsuit filed in 2012, and because the lawsuit was filed in 2013, there was no coverage in under their indemnity policies.

First Solar filed suit against the insurers in October 2020, alleging breach of contract. Both insurers filed motions to dismiss the case, and the Delaware Superior Court ruled in their favor in June.

The Delaware Supreme Court en banc also ruled in favor of the insurers, although on different grounds. “The Superior Court found that the follow-on action was ‘substantially identical’ to the first action filed and therefore excluded them from coverage under subsequently issued policies,” its ruling said.

The Supreme Court ruling said neither the Delaware Supreme Court nor any other court had adopted the “fundamentally identical” standard and that a “tie standard” should have been used to try the case instead. .

However, in upholding the lower court, the Supreme Court said that under either standard, “later issued insurance policies did not cover the follow-on action.”

Lawyers in the case did not comment or respond to a request for comment.