-
Delaware Superior Court Affirms Insurance Coverage Notwithstanding Prior Unreported Related Claim
09/22/2026On June 30, 2026, Judge Patricia A. Winston of the Delaware Superior Court granted plaintiffs’ motion for partial summary judgment against their liability insurers in an insurance denial case. Big V Capital LLC v. Great American Ins. Co., No. N25C-07-046 PAW CCLD (Del. Super. Ct. June 30, 2026). The Court held that, even though a derivative action filed during a renewed insurance policy period related back to an earlier unreported books and records action for purposes of a retention provision, coverage for the derivative action was not excluded under the policy.
Plaintiffs were several limited liability companies and their manager and sole managing member. A minority member of the plaintiffs filed a books and records action against plaintiffs on January 10, 2024. Plaintiffs did not report the action to the defendant insurer and subsequently renewed the policy with the same carrier for a start date of March 1, 2024. That same minority member then filed a derivative action against plaintiffs on May 13, 2024, which plaintiffs reported and sought coverage for under the renewed policy. The insurer denied coverage for the derivative action.
The insurer’s basis for denial was that the two actions were interrelated and, according to the insurance policy’s retention provision, the two claims were to have been treated as a single claim made on the earliest date of any constituent claim. Thus, according to the insurer, the derivative action was deemed to have been made prior to the renewal policy period. The insurer argued it was therefore excluded from coverage by the policy’s related-claims exclusion provision. Plaintiffs conceded that the claims were related but argued that the policy’s related-claims exclusion only applied when the earlier matter was the subject of a reported claim under a prior policy, which the books and records action was not.
The Court agreed with plaintiffs’ interpretation, holding that the derivative action was “first made” during the renewal period under the plain language of the policy and not subject to the exclusion for interrelated claims. As the court noted, the policy exclusion for interrelated claims provided that “[t]he Insurer shall not be liable” for an “Interrelated” matter, “which has been the subject of any notice or Claim given under any other policy of which this Policy is a renewal or replacement[.]”
The Court acknowledged that defendant had shown there was a “meaningful linkage” between the books and records action and the derivative action, according to the standard articulated in In re Alexion Pharm., Inc., Ins. Appeals, 339 A.3d 694 (Del. 2025). However, the Court explained that was “just the first step” and coverage would only be precluded if that was what was directed by the renewal policy.
The Court held that insureds are entitled to the plain meaning of policy provisions, interpreted broadly to align with their reasonable expectations. The renewal policy’s exclusion provision, which only directed the exclusion of matters from coverage if they were reported under a prior policy period, would therefore be rendered meaningless if it were applied to all prior related claims. The Court further held that while the retention provision provided a timeline for when claims are deemed first made, it was in the context of retentions, not in the context of determining the eligibility of claims coverage. The Court accordingly held that the insurer failed to meet its burden in showing that coverage for the derivative action was specifically excluded.
M&A and Corporate Governance