On January 27, 2026, in an opinion authored by Justice Valihura, the Supreme Court of Delaware affirmed a decision by the Delaware Superior Court granting a plaintiff company’s motion for summary judgment against its insurers in a directors and officers (“D&O”) insurance denial case.
Illinois Nat'l Ins. Co. v. Harman Int'l Indus., Inc., No. 47, 2025 (Del. Jan. 27, 2026). The Court held that the underlying settlement of a securities class action alleging inadequate disclosures in connection with the acquisition of the insured company did not increase the deal consideration, and thus the bump-up exclusion in the D&O policies did not excuse coverage.
As discussed in our prior post, Judge Paul R. Wallace of the Superior Court granted summary judgment to the insured, holding that the company was entitled to coverage for its $28 million settlement of a securities class action asserting claims against the company’s board under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) based on allegedly inadequate disclosures in connection with the company’s acquisition. Construing the policy terms, Judge Wallace held that under the “bump-up” exclusion applied only if: (1) the underlying claims sought a remedy for allegedly inadequate deal consideration, and (2) the settlement represented an effective increase in the deal consideration. Judge Wallace held that neither exclusion condition was satisfied, because, as to the former, a revised deal price was not an available remedy for Section 14(a) violations, and, as to the latter, the record reflected a settlement to avoid future litigation costs, not to effectively increase the deal price.
On appeal, the Delaware Supreme Court agreed that the record did not support any inference that the settlement effectively represented an increase in the transaction consideration. The Court observed that the settlement class included individuals who were not stockholders at the time of the transaction (and thus did not receive deal consideration), no expert evidence opined on the “true value” of the shares, and the settlement appeared intended to avoid the costs of further litigation. Because the relevant D&O policies permitted exclusion only upon the satisfaction of both exclusion conditions, the Court held that the insurers failed to demonstrate an effective increase in transaction consideration.
Although it did not alter the result, the Supreme Court disagreed with the Superior Court’s construction of the first exclusion condition. Because the bump-up provisions in the D&O policies at issue referred to claims “alleging that the price . . . paid for the acquisition . . . is inadequate,” the Court held that it was error to impose an additional requirement that there be a viable remedy connected to such allegations. Because allegations of inadequate consideration were “intrinsic” to the underlying Section 14(a) and 20(a) claims, the Court held that the first exclusion condition was satisfied.
