National Union Fire Insurance Co. v. Verizon Communications
This text of National Union Fire Insurance Co. v. Verizon Communications (National Union Fire Insurance Co. v. Verizon Communications) is published on Counsel Stack Legal Research, covering Supreme Court of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
IN THE SUPREME COURT OF THE STATE OF DELAWARE
NATIONAL UNION FIRE § INSURANCE COMPANY OF § PITTSBURGH, PA, XL § SPECIALTY INSURANCE § COMPANY, NATIONAL § SPECIALTY INSURANCE § No. 96, 2021 COMPANY, U.S. SPECIALTY § INSURANCE COMPANY, AXIS § Court Below–Superior Court INSURANCE COMPANY, and ST. § of the State of Delaware PAUL MERCURY INSURANCE § COMPANY, § C.A. No. N18C-08-086 (CCLD) § Defendants Below, § Appellants, § § v. § § VERIZON COMMUNICATIONS § INC., NYNEX LLC, VERIZON § NEW ENGLAND INC., VERIZON § INFORMATION TECHNOLOGIES § LLC, § § Plaintiffs Below, § Appellees. §
Submitted: March 24, 2021 Decided: April 5, 2021
Before VALIHURA, VAUGHN, and TRAYNOR, Justices.
ORDER
After careful consideration of the notice of interlocutory appeal and its
exhibits, it appears to the Court that: (1) This appeal arises from an insurance-coverage dispute. The appellees,
Verizon Communications Inc., NYNEX LLC, Verizon New England Inc., and
Verizon Information Technologies LLC (together, “Verizon”) filed suit in the
Superior Court against National Union Fire Insurance Company of Pittsburgh, PA
(“National Union”), XL Specialty Insurance Company (“XL”), National Specialty
Insurance Company (“National”), U.S. Specialty Insurance Company (“U.S.
Specialty”), AXIS Insurance Company (“AXIS”), and St. Paul Mercury Insurance
Company (“St. Paul”) (together, “the Insurers”) alleging that the Insurers had
wrongfully denied Verizon coverage for defense and settlement costs incurred in an
underlying fraudulent transfer action (“the FairPoint Action”). The FairPoint
Action arose from a 2008 transaction in which, in exchange for debt notes, Verizon
transferred certain assets to a subsidiary, which was then acquired by FairPoint
Communications, Inc. (“FairPoint”). After FairPoint entered bankruptcy, the
appointed litigation trustee (“the Trustee”) initiated the FairPoint Action.
(2) Verizon sought coverage under two insurance policies: (i) a primary
policy issued by National Union for the policy period from March 31, 2008, to
March 31, 2014, as well as excess policies issued by XL and National that follow
form to and incorporate the terms of National Union’s primary policy (together, “the
FairPoint Policies”), and (ii) a primary policy issued by National Union for the
policy period from October 31, 2009, to October 31, 2010, as well as excess policies
2 issued by U.S. Specialty, AXIS, and St. Paul that follow form to and incorporate the
terms of National Union’s primary policy (together, “the Verizon Policies”). The
FairPoint Policies and the Verizon Policies provide coverage for “securities claims,”
defined in relevant part as claims “brought derivatively on behalf of an Organization
by a security holder of such Organization.” Verizon moved for partial summary
judgment, and the Insurers moved for judgment on the pleadings: Verizon
maintained that the FairPoint Action fit the definition of a securities claim; the
Insurers argued that it did not.
(3) On February 23, 2021, the Superior Court issued an opinion granting
Verizon’s motion for partial summary judgment and denying the Insurers’ motion
for judgment on the pleadings (“the Opinion”).1 The Opinion held that, under its
plain language, the FairPoint Policies covered the FairPoint Action as a securities
claim. The Superior Court also found that Verizon’s defense costs were reasonable
as a matter of law and covered under the FairPoint Policies.
(4) On March 5, 2021, the Insurers asked the Superior Court to certify an
interlocutory appeal from the Opinion under Supreme Court Rule 42. The Insurers
maintained that the Opinion decided several “substantial issues”2 because reversal
of the Opinion could terminate the litigation in whole or in part. The Insurers also
1 Verizon Commc’n Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 2021 WL 710816 (Del. Super. Ct. Feb. 23, 2021). 2 Del. Supr. Ct. R. 42(b)(i). 3 argued that the Opinion conflicts with other trial court decisions3 because the
Superior Court improperly: (i) found that the Trustee’s fraudulent-transfer claims
were derivative by focusing its analysis on the theory of liability, not the nature of
the injury; (ii) equated the estate and the debtor in its reasoning; and (iii) found that
the Insurers had waived their challenge to the reasonableness of defense fees. The
Insurers also averred that interlocutory review could terminate the litigation4 and
would serve the interests of justice.5 Verizon opposed the application.
(5) The Superior Court denied the application for certification.6 As an
initial matter, the Superior Court noted that a decision involving contract
interpretation is not generally the type of undertaking worthy of interlocutory
review. Nevertheless, because the Opinion granted summary judgment in favor of
Verizon on several dispositive issues, the Superior Court considered the Rule
42(b)(iii) factors. The Superior Court concluded that the Opinion does not conflict
with other trial court decisions. Although the Superior Court agreed that Delaware
courts look to the nature of the wrong—and to whom relief should flow—to
determine whether a claim is derivative in the stockholder context, the claim here
was brought by a bankruptcy trustee on behalf of a debtor’s estate. Accordingly, the
3 Del. Supr. Ct. R. 42(b)(iii)(B). 4 Del. Supr. Ct. R. 42(b)(iii)(G). 5 Del. Supr. Ct. R. 42(b)(iii)(H). 6 Verizon Commc’n Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 2021 WL 1016445 (Del. Super. Ct. Mar. 16, 2021). 4 Superior Court concluded that it had properly applied precedent related to claims
brought by bankruptcy trustees to determine that the Trustee’s claim was derivative.
Distinguishing the case law cited by the Insurers, the Superior Court also disagreed
with the Insurers’ claim that the Opinion conflicts with federal bankruptcy decisions.
Finally, the Superior Court disagreed with the Insurers’ argument that the Opinion’s
holding that the Insurers had waived their defense to the reasonableness of fees
conflicted with other trial court decisions.
(6) Next, the Superior Court rejected the notion that interlocutory review
could terminate the litigation, noting that no issue raised by the Insurers would
necessarily terminate the litigation in its entirety: (i) Verizon’s motion concerned
only the FairPoint Policies; (ii) the Insurers’ motion concerned only the Verizon
Policies; and (iii) if the appeal were successful with respect to the reasonableness of
defense costs, it would lead to protracted litigation regarding Verizon’s counsel’s
invoices. The Superior Court also jettisoned the Insurers’ position that the
considerations-of-justice factor weighed in favor of certification: (i) there is no
indication that reversal of any single issue would terminate the litigation; (ii) the
amount in controversy, standing alone, does not satisfy the considerations-of-justice
standard; and (iii) the Insurers will not suffer any irreversible hardship if they must
wait until after trial to appeal the Opinion. As a final matter, the court opined that
certification would not promote the most efficient and fair means to resolve the
5 litigation. We agree with the Superior Court that interlocutory review is not
warranted in this case.
(7) Applications for interlocutory review are addressed to the sound
discretion of the Court.7 In the exercise of its discretion and giving great weight to
Free access — add to your briefcase to read the full text and ask questions with AI
Cite This Page — Counsel Stack
National Union Fire Insurance Co. v. Verizon Communications, Counsel Stack Legal Research, https://law.counselstack.com/opinion/national-union-fire-insurance-co-v-verizon-communications-del-2021.