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Del. Solar Ruling Warns Insureds Against Overconfidence


The Delaware Supreme Court's recent decision finding no coverage for First Solar Inc. is leading policyholders and insurers to rethink the state's friendliness to insured companies in director and officer insurance disputes.

Yet some attorneys who represent policyholders said the state high court's willingness to take up the issue and decide whether the underlying claims were related and whether there is a possibility for coverage shows that Delaware is not an unfriendly place for insureds.

Justin Lavella, an insurance recovery partner at Blank Rome LLP, said the First Solar decision is not as negative for policyholders as some may think. The ruling can set a positive precedent for policyholders if they need to show that two underlying claims are related to get coverage under different circumstances and policy language that may not have a related-claims exclusion.

Related claims disputes are "incredibly factual specific and dependent," Lavella said. The First Solar opinion is not necessarily maximizing or minimizing coverage but is limited to its own facts, he said.

The solar panel maker proposed a very high standard: that two underlying claims must be absolutely identical in order to be excluded by the policy's related claims provision, and the court rejected that, Lavella explained.

But the high court cited previous pro-policyholder opinions favorably, he pointed out. "It just found that the First Solar case went one step too far beyond the line into relatedness. But in doing so it didn't create a new standard or erase the good case laws," he said.

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"Del. Solar Ruling Warns Insureds Against Overconfidence," by Daphne Zhang was published in Law360 on April 1, 2022.