Client Alert

This is a two-part series on directors and officers (“D&O”) insurance coverage.  Part I discusses the application of Delaware law to coverage disputes involving Delaware corporate insureds.  Part II discusses its relevance.

In Stillwater Mining Co. v. National Union Fire Insurance Co. of Pittsburgh, 289 A.3d 1274 (Del. 2023), the Delaware Supreme Court recently affirmed that—in the absence of a choice of law provision—Delaware law most likely applies to D&O insurance coverage disputes involving Delaware corporate insureds.

The Delaware Supreme Court had previously so held in RSUI Indemnity Co. v. Murdock, 248 A.3d 887 (Del. 2020).  In that case, the court observed that the insured’s state of incorporation is the “center of gravity of the typical D&O policy.”  248 A.3d 887, 901. 

But the Murdock court then noted, however, that the insured’s state of incorporation “does not end [its] analysis” because it must consider whether other factors “tip the balance”  in the other direction.  Id.  The court then rejected the insurers’ argument that the insured being headquartered in a different state could override the insured’s state of incorporation.  Id. 

So, the question becomes, what factors, if any, could “tip the balance”  away from the state of incorporation.  In Stillwater, the insured argued that the state of incorporation should not apply because—unlike the insured in Murdock—it asserted D&O insurance handling claims and not D&O insurance coverage claims.  289 A.3d at 1286. 

But the Delaware Supreme Court quickly shot down such argument reasoning that its precedent recognizes the “importance of applying a single body of law” to D&O insurance policies.  Id.

As a result, in the wake of Stillwater, it is unclear what factors, if any, could “tip the balance” away from the law of the state of incorporation. 

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