IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
ZURICH AMERICAN INSURANCE ) COMPANY, AMERICAN ) GUARANTEE and LIABILITY ) INSURANCE COMPANY ) ) Plaintiffs, ) ) C.A. No. N19C-05-108 MMJ CCLD v. ) ) SYNGENTA CROP PROTECTION ) LLC, ) ) Defendant. )
Submitted: January 27, 2023 Decided: March 28, 2023
POST-TRIAL OPINION
John D. Balaguer, Esq., Timothy S. Martin, Esq., White and Williams LLP, Wilmington, DE, Michael M. Marick, Esq. (pro hac vice), Karen M. Dixon, Esq. (pro hac vice), Skarzynski Marick & Black LLP, Chicago, IL, Alexis J. Rogoski, Esq. (pro hac vice), Andrew Gerow, Esq. (pro hac vice), Skarzynski Marick & Black LLP, New York, NY, Attorneys for Plaintiffs
Stephen E. Jenkins, Esq., Catherine A. Gaul, Esq., Ashby & Geddes P.A., Wilmington, DE, Dorothea W. Regal, Esq. (pro hac vice), Joshua L. Blosveren, Esq. (pro hac vice), John P. Curley, Esq. (pro hac vice), Miriam J. Manber, Esq., (pro hac vice), Wendy Tsang, Esq. (pro hac vice), Hoguet Newman Regal & Kenney, LLP, New York, NY, Attorneys for Defendant
JOHNSTON, J. PROCEDURAL POSTURE This is an insurance coverage action between Plaintiffs Zurich American
Insurance Company, American Guarantee and Liability Insurance Company
(collectively, “Plaintiff Insurers”), and Syngenta Crop Protection, LLC.
Syngenta’s Swiss parent company is Syngenta Crop Protections AG (“SCPAG”).
Syngenta Crop Protection, LLC and SCPAG will be referred to collectively as
“Syngenta.” Zurich Insurance Company, Ltd. (“ZIC”) is Plaintiff Insurers’ Swiss
affiliate. ZIC is the entity that was involved in the insurance underwriting for the
policies at issue in this case.
The underlying litigation for which Syngenta sought insurance coverage
concerns multiple actions alleging bodily injuries, sickness, or disease resulting
from exposure to Paraquat (the “Paraquat Actions”).
Plaintiff Insurers requested: (1) declaratory judgment that there is no
insurance coverage for the underlying Paraquat-related claims (Count I); (2)
declaratory judgment that the alleged misrepresentations, omissions, concealment
of facts, and incorrect statements in Syngenta’s insurance applications prevent
recovery for the Paraquat-related claims (Count II); (3) recoupment of the defense
costs advanced by Plaintiff Insurers for the Paraquat-related claims (Count III); and
(4) restitution (Count IV).1
1 See generally, Am. Compl. 2 Syngenta filed counterclaims seeking: (1) damages for breach of contract
(Counterclaim I); (2) declaratory relief regarding the duty to defend (Counterclaim
II); (3) declaratory relief regarding the duty to indemnify (Counterclaim III); and
(4) damages associated with an alleged breach of the implied obligations of good
faith and fair dealing (Counterclaim IV).2
After Summary Judgment, Counts II, III, and IV of Plaintiff Insurers’
Amended Complaint remain. Count II requests declaratory judgment that the
alleged misrepresentations, omissions, concealment of facts, and incorrect
statements in Syngenta’s insurance applications prevent recovery for the Paraquat-
related claims.3 Counts III and IV seek reimbursement for all defense costs paid to
Syngenta under the Zurich Policies for the Paraquat Actions.
This Court held a bench trial on October 3, 4, 5, 6, 7, and 18, 2022. Post-
trial briefs were filed. Under 18 Del. C. § 2711, Plaintiff Insurers “must show a
false representation by the insured, the materiality of that representation to the
insured risk, and . . . reliance on the representation made.”4
2 See generally, Am. Counterclaims. 3 Zurich Am. Ins. Co. v. Syngenta Crop Prot. LLC, 2022 WL 4091260, at *8–9 (Del. Super.). 4 Old Republic Ins. Co. v. Rexene Corp., 1990 WL 176791, at *6 (Del. Ch.). 3 FINDINGS OF FACT AND CONCLUSIONS OF LAW
The Tillery Letter
On January 18, 2016, Stephen Tillery (“Tillery”) sent a letter to Syngenta
(the “Tillery Letter”) alleging his firm had “been retained by numerous victims of
Parkinson’s disease.” The Tillery Letter alleged a connection between Paraquat—
an herbicide manufactured and sold by Syngenta—and Parkinson’s disease. The
Tillery Letter mentioned various studies allegedly supporting such a connection.
Syngenta was familiar with all studies that were cited.5 The Tillery Letter
suggested pursuing a few “bellwether” cases instead of incurring the expense of
pursuing cases in numerous jurisdictions. The Tillery Letter also stated that Tillery
believed his clients and Syngenta could execute a tolling agreement while waiting
for a few “bellwether cases” to be litigated.
By Opinion dated August 3, 2020, this Court held that the Tillery Letter did
not constitute a “Claim for Damages.”6
The Court finds that the January 18, 2016 Tillery Letter constituted a threat of future litigation. The Tillery Letter's mere reference to personal injury is insufficient to constitute a claim. Taken as a whole, the Tillery Letter is reasonably interpreted at most as requesting damages, and proposing a future method by which to resolve any future claims. The Tillery Letter's lack of specificity regarding
5 Oct. 3 Tr. [Breutel] 107:14–108:6. 6 Zurich American Ins. Co. v. Syngenta Crop Protection, LLC, 2020 WL 5237318, at *9–11 (Del. Super.); see also Zurich Am. Ins. Co., 2022 WL 4091260, at *2. 4 potential claimants or plaintiffs prevents this Court from finding that the Tillery Letter is a “Claim for Damages.”7
Kirkland Fees
After receiving the Tillery Letter, Syngenta engaged Kirkland & Ellis LLP
(“Kirkland”) to investigate the substance of the Tillery Letter and to follow up with
Tillery. On February 10, 2016, Kirkland met with Tillery. The purpose of the
meeting was: (1) to respond to Tillery’s request for a conversation regarding the
contents of the proposal from the Tillery Letter; and (2) to get more information
from Tillery about his clients or other matters that could be useful for evaluation.
In the meeting, Tillery did not disclose specific information concerning the
identity of his clients, nor did he provide the information Kirkland requested to
substantiate his claims. After the meeting, Kirkland continued: to conduct an
analysis of the scientific literature related to the allegation that Paraquat might be
connected to Parkinson’s disease; and to provide a litigation risk assessment.
Kirkland billed Syngenta approximately $2 million for its work regarding Tillery
and the related Paraquat research (the “Kirkland Fees”).
After the meeting, Tillery did not provide to Kirkland any of the requested
information to substantiate his claims. The last communication between Tillery
and Kirkland before the filing of the Hoffmann Action—the first of the Paraquat
7 Id. at *9. 5 Actions—was on April 25, 2016. The April 25, 2016 communication was an email
where a litigation partner from Kirkland continued to ask for medical records for
the six unidentified “bellwether plaintiffs.” This email also asked for copies of
documents allegedly confirming Syngenta knew of a potential connection between
Paraquat and Parkinson’s Disease. Tillery filed the Hoffmann Action more than a
year later, in October 2017.
Renewal Application for 2017 Coverage
The case centers around Syngenta’s responses to Questions 19, 20, and 21 of
the 2016 renewal application for 2017 to 2018 insurance coverage (the “Renewal
Application”).
Question 19 asked Syngenta to “[a]ttach a summary of ground up aggregate
losses, insured and uninsured, including all defense costs for the past 5 years . . . .”
Question 20 asked whether there were “any individual occurrences or claims
during the past 10 years . . . which have cost or are reasonably expected to cost
(including both indemnity and defense costs) more than $2 million . . . .”
Question 21 asked whether there were “any integrated or batch occurrences
or claims, whether or not reported to an insurance carrier as an integrated or batch
occurrence, during the past 10 years . . . which have cost or are reasonably
expected to cost more than $2 million . . . .”
6 Beginning with the 2017 to 2018 year (the “2017 Policies”), the policies
changed from occurrence-reported policies to claims-made policies.8 The Renewal
Application—a Bermuda Form Application—did not contain definitions for
“defense costs,” “claim,” or “occurrence.” Syngenta did not provide information
about the Kirkland Fees related to Tillery, or the Tillery Letter, in response to
Questions 19, 20, or 21.
Bermuda Form Application
Plaintiff Insurers argue the Bermuda Form Application shares a symbiotic
relationship with a Bermuda Form Policy. Plaintiff Insurers argue the 2016–17
Liability Master Policy (the “2016 ZIC Excess Policy”) is a Bermuda Form Policy.
Thus, Plaintiff Insurers argue the 2016 ZIC Excess Policy definitions should apply
when interpreting the Renewal Application.
Syngenta argues Syngenta’s responses to Questions 19, 20, and 21 were
accurate and consistent with the course of dealing of the parties. Syngenta also
argues any ambiguities should be interpreted in its favor.
The Court finds the 2016 ZIC Excess Policy definitions are inapplicable to
the Renewal Application. The Bermuda Form Application contains no definitions
and makes no reference to any other document containing definitions.
8 An occurrence-reported policy’s coverage is triggered when notice of an incident is given to the insurer, whereas a claims-made policy’s coverage is triggered when a claim is made against the insured. 7 Additionally, the 2017 Policies being applied for were not Bermuda Form Policies
because they were claims-made policies.9 While the previous year’s 2016 ZIC
Excess Policy was an occurrence-reported policy—like a Bermuda Form Policy—
the 2016 ZIC Excess Policy contained various differences when compared to a
traditional Bermuda Form Policy. Principal of these differences was that the 2016
ZIC Excess Policy’s applicable law was Swiss law, rather than the standard
Bermuda Form Policy’s amended version applying New York law or English
law.10 Therefore, the 2016 ZIC Excess Policy definitions are not incorporated into
the Renewal Application.
Contract Interpretation
The definitions of the terms in the Renewal Application are subject to
insurance contract interpretation principles.11 In Ferrellgas Partners L.P. v. Zurich
American Insurance Company,12 this Court outlined the principles of insurance
contract interpretation:
Interpretation of contracts is a question of law. The Court must give effect to the parties’ mutual intent at the time of contracting. The Court should interpret contract language as it “would be understood by any objective, reasonable third party.” Absent ambiguity, contract terms should be
9 Oct. 10 Tr. [Scorey] 85:2–23 (stating that a claims-made policy is not a Bermuda Form Policy). 10 Oct. 10 Tr. [Scorey] 76:15–78:6. 11 See Novellino v. Life Ins. Co. of N. Am., 216 A.2d 420, 422 (Del. 1966) (noting that an offer is contained in an application for insurance); Mut. of Omaha Ins. Co. v. Driskell, 293 So. 3d 261, 264 (Miss. 2020) (“[A]n application for insurance is not a contract but rather an offer to contract.”). 12 2020 WL 363677 (Del. Super.), appeal denied, 2020 WL 764155 (Del. Super.). 8 accorded their plain, ordinary meaning. Ambiguity exists when the disputed term “is fairly or reasonably susceptible to more than one meaning.”
Insurance policies are also adhesion contracts, not generally the result of arms-length negotiation. Thus, the rules of construction “differ from those applied to most other contracts.” Where policy language is ambiguous, the doctrine of contra proferentem requires the Court to interpret the policy in favor of the insured because the insurer drafted the policy. The Court, pursuant to this doctrine, looks to “the reasonable expectations of the insured at the time when he entered the contract[.]” The Court will only apply this doctrine where the policy is ambiguous. When the policy language is “clear and unambiguous[,] a Delaware court will not destroy or twist the words under the guise of construing them” and each party “will be bound by its plain meaning.”13
If contract language is ambiguous, then the Court may consider extrinsic
evidence.14 The most persuasive form of extrinsic evidence is the course of
dealing between the parties.15
The Court finds the doctrine of contra preferentem is inapplicable in the
instant case because the Plaintiff Insurers did not draft the Renewal Application.
13 Id. at *4 (internal citations omitted). 14 GMG Cap. Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 783 (Del. 2012) (“[W]here reasonable minds could differ as to the contract’s meaning, a factual dispute results and the fact-finder must consider admissible extrinsic evidence.”). 15 In re Mobilactive Media, LLC, 2013 WL 297950, at *16 (Del. Ch.) (“[C]ourts should consider the parties’ course of performance as the ‘most persuasive evidence of the [meaning of the] parties’ agreement.’” (quoting Pers. Decisions, Inc. v. Bus. Plan. Sys., Inc., 2008 WL 1932404, at *5 (Del. Ch.), aff’d, 970 A.2d 256 (Del. 2009))); see also Restatement of Contracts (Second) § 202 cmt. g (2008).
9 Rather, the parties used a Bermuda Form Application, which is a broker-driven
application form. Thus, neither party is entitled to benefit, as a matter of law, from
any ambiguity in the Renewal Application. Where terms are ambiguous, the Court
will analyze any applicable extrinsic evidence.
Question 19
Question 19 on the Renewal Application states: “Attach a summary of
ground up aggregate losses, insured and uninsured, including all defense costs for
the past 5 years . . . .”
Without a definition of “defense costs” in the application, the Court finds the
term “defense costs” is ambiguous. The core dispute is whether research costs are
defense costs. Without a definition to consult, the Court finds the definition of
“defense costs” is ambiguous in the context of Question 19 of the Renewal
Application.
The Court finds the course of dealing between ZIC and Syngenta is the most
pertinent evidence controlling whether Syngenta was required to submit the
Kirkland Fees in response to Question 19.16 Since at least 2009, Syngenta has
responded to Question 19 in annual renewal applications by submitting a loss run,
16 In re Mobilactive Media, LLC, 2013 WL 297950, at *16 (Del. Ch.) (“[C]ourts should consider the parties’ course of performance as the ‘most persuasive evidence of the [meaning of the] parties’ agreement.’” (quoting Pers. Decisions, Inc. v. Bus. Plan. Sys., Inc., 2008 WL 1932404, at *5 (Del. Ch.), aff’d, 970 A.2d 256 (Del. 2009))); see also Restatement of Contracts (Second) § 202 cmt. g (2008). 10 and stating: “Please refer to claims information.”17 The attached loss run only
included data on claims and occurrences of which Syngenta’s insurers had been
formally notified.18 Each cost on the loss run was associated with a specific
notified claim or occurrence. Any costs incurred that were not associated with a
notified matter were not on the loss run.19 ZIC’s underwriter was aware of and
understood that Syngenta’s loss run only contained notified claims and
occurrences.20 Therefore, Syngenta’s response to Question 19 made it clear that
Syngenta was only submitting notified matters.
The Court finds the course of dealing since 2009 between the parties
demonstrates that it was acceptable for Syngenta to submit a loss run in response to
Question 19. Because the parties’ course of dealing established a pattern whereby
it was acceptable for Syngenta to submit a loss run only detailing costs associated
with a notified claim or occurrence, it was not a false representation for Syngenta
to do the same in the Renewal Application. Therefore, the fact that Syngenta did
not disclose the Kirkland Fees in its Renewal Application was neither an omission
nor misrepresentation for purposes of 18 Del. C. § 2711.
17 Oct. 3 Tr. [Breutel] 129:10–19, 135:3–136:12; Oct. 6 Tr. [Terp] 20:9–18. 18 See Oct. 6 Tr. [Terp] 14:20–15:20 (explaining the contents of the columns in the loss run); TX032; TX162; TX188. 19 See Oct. 6 Tr. [Terp] 18:17–19:7 (“The system will only capture information once there is a notified insurance claim.”); Oct. 4 Tr. [Oram] 198:8–199:8 (confirming the loss run only included matters that had been notified to Syngenta insurers). 20 Oct. 4 Tr. [Oram] 198:2–199:8. 11 Plaintiff Insurers have admitted that “submitting loss runs is a standard and
potentially acceptable means of responding” to Question 19.21 The parties
submitted evidence regarding insurance industry customs and practices on this
issue. Having ruled on the basis of the parties’ course of dealing, the Court need
not address industry customs and practices.
Questions 20 and 21
Question 20 asked whether there were “any individual occurrences or claims
during the past 10 years . . . which have cost or are reasonably expected to cost
(including both indemnity and defense costs) more than $2 million . . . .” Question
21 asked whether there were “any integrated or batch occurrences or claims,
whether or not reported to an insurance carrier as an integrated or batch
occurrence, during the past 10 years . . . which have cost or are reasonably
The question is whether the Tillery Letter constitutes an occurrence,
integrated occurrence, or claim for purposes of Questions 20 and 21. The Court
previously has held that the Tillery Letter did not constitute a “Claim for
Damages.”22 Therefore, the only remaining issue is whether the Tillery Letter
constitutes an “occurrence” or “integrated occurrence” that Syngenta was required
21 Plaintiff Insurers’ Reply Br. at 5–6. 22 Zurich American Ins. Co. v. Syngenta Crop Protection, LLC, 2020 WL 5237318, at *9–11 (Del. Super.); see also Zurich Am. Ins. Co., 2022 WL 4091260, at *2. 12 to provide in response to Questions 20 and 21. An “integrated occurrence” is a
subset of “occurrence.” In other words, to have an “integrated occurrence,” one
must first have an “occurrence.” Therefore, the Court will focus on the definition
of “occurrence,” and only address “integrated occurrence” if necessary.
Two expert witnesses opined as to two different definitions of “occurrence”
that could be applicable. One expert claimed “occurrence” meant “an allegation of
fact that somebody in the real world has been injured . . . .”23 The other expert
narrowed the definition, claiming an “occurrence” meant there had to be an
individual claimant who was identifiable.24
The course of dealing between Syngenta and ZIC demonstrates that
Questions 20 and 21 were satisfied by Syngenta’s identification of the subsets of
the notified claims and occurrences on the loss run. Syngenta did not include the
Tillery Letter in the response to Questions 20 and 21 because it was not in the loss
run as a notified claim or occurrence. The Tillery Letter and subsequent meetings
with Tillery did not yield specifics regarding alleged claimants until more than one
year after uploading its Renewal Application—when the Hoffmann Action was
filed.
23 Oct. 10 Tr. [Scorey] 50:4–23. 24 Oct. 7 Tr. [Baker] 44:19–45:1. 13 The Tillery Letter and subsequent information from Tillery provided only
generalized and speculative information about the dollar value of potential future
litigation. Any cost estimates were of necessity amorphous and uncertain.
Nevertheless, Tillery previously had litigated against Syngenta in the
Atrazine Community Water Actions and the Atrazine Doe Action.25 The Atrazine
Community Water Actions led to a $105 million settlement and $80 million in
defense costs.26 In 2016, the Atrazine Doe Action was still pending.27 By May
2015, the Atrazine Doe Action had incurred over $9 million in defense costs.28
If “occurrence” is defined as a circumstance reasonably expected to give rise
to a claim, costs may include funds paid to investigate and assess the risks of
anticipated litigation. Based on Syngenta’s prior knowledge of and experience
with litigation initiated by Tillery, it would have been reasonable to anticipate that
indemnity and defense costs could exceed $2 million for future Paraquat actions.
Additionally, Syngenta could not reasonably pass off any possibility of future
litigation involving Tillery as a purely frivolous threat.
In 2019, the conduct of Plaintiff Insurers and ZIC demonstrates how they
interpreted the definition of “occurrence.” Syngenta attempted to give notice of
25 Oct. 18 Tr. [Nadel] 17:9–18:19. 26 Id. at 17:9–18:6, 56:16–57:16. 27 Id. at 18:20–22. 28 TX016-0004 (“The Captive has reimbursed the insured for its defense costs incurred till May 2015 in the amount of USD 9,241,148 less USD 1,000,000 deductible.”). 14 circumstance regarding Glyphosate losses against Monsanto in 2018. Syngenta
also sold products containing Glyphosate. Plaintiff Insurers rejected the notice in
2019 because Syngenta did not identify the names and addresses of any injured
persons. Plaintiff Insurers claim they were less concerned about the Glyphosate
losses because they were tied to Monsanto, not Syngenta. In response to
Syngenta’s notice, ZIC’s underwriter asked Syngenta “to explain in detail which
concrete facts make it appear likely that a specific, determinable claim by an
individualized claimant will be brought against Syngenta and when and how the
risk management department of the policyholder first became aware of these
facts.”29 A letter from Plaintiff Insurers to Syngenta, dated February 7, 2019, again
states that for an occurrence to have taken place, Syngenta must “provide, at a
minimum, . . . (1) How, when and where the “occurrence” or offense took place;
(2) The names and addresses of any injured persons and witnesses; and (3) The
nature and location of any injury or damage arising out of the ‘occurrence’ or
offense.”30
While these events took place in a policy year after the Renewal
Application, the Court finds Plaintiff Insurers’ interpretation of “occurrence”
persuasive as to how Plaintiff Insurers likely interpreted the meaning of
29 TX094-0001. 30 TX128-0004. 15 “occurrence” on the Renewal Application. Syngenta’s expert provided a definition
of “occurrence” that also aligns with Plaintiff Insurers’ description of the meaning
of “occurrence” in their correspondence with Syngenta. Therefore, for a matter to
constitute an “occurrence,” or “integrated occurrence,” an identifiable claimant
must exist. The Tillery Letter alleged that claimants existed, but Tillery declined
upon request to share any identifiable information about his alleged clients with
Syngenta before Syngenta submitted the Renewal Application. Thus, no
identifiable claimant existed at the time of the Renewal Application.
The Court finds the definition of “occurrence” is ambiguous in the context
of Questions 20 and 21 of the Renewal Application. The Court finds the course of
dealing between the parties controls whether Syngenta was required to disclose the
Tillery Letter in response to Questions 20 and 21.31 The course of dealing between
the parties demonstrated that for a matter to warrant disclosure as an “occurrence,”
or “integrated occurrence” in response to Questions 20 and 21, an identifiable
claimant must exist. The Tillery Letter did not contain identifiable claimants, nor
was Syngenta able to obtain identification in its follow up with Tillery.32 Thus, for
31 In re Mobilactive Media, LLC, 2013 WL 297950, at *16 (Del. Ch.) (“[C]ourts should consider the parties’ course of performance as the ‘most persuasive evidence of the [meaning of the] parties’ agreement.’” (quoting Pers. Decisions, Inc. v. Bus. Plan. Sys., Inc., 2008 WL 1932404, at *5 (Del. Ch.), aff’d, 970 A.2d 256 (Del. 2009))); see also Restatement of Contracts (Second) § 202 cmt. g (2008). 32 The Court considered testimony that Syngenta would have been incentivized to disclose the Tillery Letter under its 2016 insurance policies because the 2016 insurance policies were 16 the Renewal Application, an “occurrence” required more than non-specific
circumstances reasonably expected to give rise to a claim.
Therefore, the Tillery Letter did not constitute an “occurrence” or
“integrated occurrence” for purposes of Questions 20 and 21. The Court finds that
Syngenta’s failure to disclose the Tillery Letter in its response to Questions 20 and
21 of the Renewal Application was neither an omission nor misrepresentation for
purposes of 18 Del. C. § 2711.
Materiality
Applicable Standard
To prevent recovery under 18 Del. C. § 2711, an omission or
misrepresentation must be:
(1) Fraudulent; or (2) Material either to the acceptance of the risk or to the hazard assumed by the insurer; or (3) The insurer in good faith would either not have issued the policy or contract, or would not have issued it at the same premium rate or would not have issued a policy or contract in as large an amount or would not have provided coverage with respect to the hazard resulting in the loss if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.
occurrence-reported policies. Reporting the Tillery Letter at that time would have preserved coverage under the 2016 insurance policies. While relevant, this testimony is not dispositive.
17 Plaintiff Insurers contend that subpart 2 contains an objective standard. This
would mean an omission is material if it “would be likely to induce a reasonable
person to manifest assent, or if the maker knows that it would be likely to induce
the recipient to do so.”33 Syngenta contends that if subpart 2 is an objective
standard, then an omission is material if it “would be likely to induce a [reasonable
insurer in this insurer’s position] to manifest assent, or if the maker knows that it
would be likely to induce the recipient to do so.”34 While Smith v. Keyston,35
Windsor-Mount Joy Mutual Insurance Company v. Jones,36 and United Westlabs,
Inc. v. Greenwich Insurance Company37 all reference the “reasonable person”
objective standard of materiality articulated in the Restatement (Second) of
Contracts, the Court has yet to make a definitive ruling on the objective standard’s
applicability to 18 Del. C. § 2711(2).
The parties agree that subpart 3 is a subjective standard, meaning an
omission is material if Plaintiff Insurers would “not have issued the policy . . . or
would not have issued it at the same premium rate or would not have issued a
33 Smith v. Keystone, 2005 WL 791387, at *3 (Del. Super.); Windsor-Mount Joy Mut. Ins. Co. v. Jones, 2009 WL 3069695, at *3 (Del. Super.); United Westlabs, Inc. v. Greenwich Ins. Co., 2011 WL 2623932, at *12 (Del. Super.), aff’d, 38 A.3d 1255 (Del. 2012); see also Restatement (Second) of Contracts § 164(2). 34 Restatement (Second) of Contracts § 164(2); Restatement of the Law of Liability Insurance § 8 (2019) (“[T]he materiality analysis focuses on a ‘reasonable insurer in this insurer’s position . . . .’”). 35 2005 WL 791387 (Del. Super.). 36 2009 WL 3069695 (Del. Super.). 37 2011 WL 2623932 (Del. Super.). 18 policy . . . in as large an amount or would not have provided coverage” if Plaintiff
Insurers had known of the omission or misrepresentation.38
The Court finds the applicable materiality standard under 18 Del. C. §
2711(2) is whether a reasonable insurer in Plaintiff Insurers’ position would have
found the failure to disclose the Kirkland Fees and Tillery Letter material.39
Plaintiff Insurers Failed to Demonstrate the Kirkland Fees and Tillery Letter Were Material Under 18 Del. C. § 2711(3)
Plaintiff Insurers and ZIC claim that if they had known about the Kirkland
Fees and Tillery Letter, they either would not have continued to insure Syngenta,
or would have issued a policy with a Paraquat exclusion. This assertion is based
primarily on the retrospective testimony of ZIC’s underwriter.40 In this context of
determining materiality, the Court does not generally give the retrospective
testimony of an underwriter much weight, without other corroborating evidence.41
38 18 Del. C. § 2711(3). 39 Restatement of the Law of Liability Insurance § 8 (2019). 40 See Plaintiff Insurers’ Opening Br. at 46–55. 41 Oglesby v. Penn Mut. Life Ins. Co., 877 F. Supp. 872, 889 (D. Del. 1994) (noting in the context of a disability policy dispute that an underwriter’s statement claiming he would have excluded a risk from the policy can generally “be rightly dismissed as merely post hoc”); Restatement of the Law of Liability Insurance § 9 (2019) (“Standing alone, post-loss testimony by the underwriter about what the underwriter would have done differently has not carried much weight with courts.”); 45 C.J.S. Insurance § 877 (“[T]he trier of facts is not required to believe ‘postmortem’ testimony of the company’s agents that the insurance policy would have been refused if the true facts had been made known.”). 19 Plaintiff Insurers increased the amount of risk in Syngenta’s self-insured
retention layer from 2016 to 2019. The retained risk that Plaintiff Insurers
accepted went from 0% in 2016 to 15% in 2019. Plaintiff Insurers maintained the
15% level of retained risk in Syngenta’s self-insured retention layer until 2022.
Plaintiff Insurers also demonstrated they were willing to continue to insure
against Paraquat-related suits after learning of pending litigation. Plaintiff Insurers
did not exclude Paraquat from Syngenta’s policies immediately after the filing of
the Hoffmann Action in October 2017. Rather, Plaintiff Insurers waited until 2022
to exclude Paraquat from coverage. Plaintiff Insurers contend they did not
materially increase their Paraquat-related risk exposure by continuing to insure
against Paraquat claims because of a claims-series provision that “makes sure . . .
any future claims would be attached to the first one.”42 However, by failing to
exclude Paraquat completely, Plaintiff Insurers were still susceptible to other types
of Paraquat-related claims—such as bodily injury claims resulting from ingesting
Paraquat. This evidences Plaintiff Insurers’ willingness to accept risk related to
Paraquat, even after litigation had been initiated. Plaintiff Insurers could have
completely excluded Paraquat from coverage under the policies after learning of
the Hoffmann Action in October 2017, but they chose not to do so.
42 Oct. 4 Tr. [Oram] 119:13–19. 20 The Court finds that Plaintiff Insurers failed to demonstrate by a
preponderance of the evidence that they would have made a material change to the
renewed policy under 18 Del. C. § 2711(3) if they would have known about the
Kirkland Fees and Tillery Letter.43 Therefore, failure to disclose the Kirkland Fees
and Tillery Letter in the Renewal Application was not material under 18 Del. C. §
2711(3).
Plaintiff Insurers Failed to Demonstrate the Kirkland Fees and Tillery Letter Were Material Under 18 Del. C. § 2711(2)
Little in the record denotes what an insurance carrier other than Plaintiff
Insurers and ZIC would have done with the disclosure of the Kirkland Fees and the
Tillery Letter under similar circumstances. However, at the time of the Renewal
Application in 2016, the insurance market was a “soft market.”44 This meant
insurance carriers held more negotiating power than normal due to market
conditions.45 The ZIC underwriter also considered Syngenta a large account.46 It
is not disputed that Syngenta would not have continued to purchase coverage at the
same premium level if a Paraquat exclusion were added to the policy.47 In its 2015
43 The Court notes that the parties did not contend that the disclosure of the Kirkland Fees and the Tillery Letter would have led to an increased premium. Rather, the parties focused on the potential that disclosure of the Kirkland Fees and Tillery Letter would lead to either a Paraquat exclusion, or lead to not issuing the insurance policies at all. 44 Oct. 5 AM Tr. [Oram] 83:2–4. 45 Id. at 82:10–16. 46 Oct. 4 Tr. [Oram] 128:16–18. 47 Oct. 5 AM Tr. [Oram] 89:22–92:4; TX024-0001. 21 underwriting decision narrative, ZIC admitted it was the “only insurer who
intended to exclude [Paraquat].”48
The Court finds Plaintiff Insurers failed to demonstrate by a preponderance
of the evidence that a reasonable insurer, in Plaintiff Insurers’ position, would have
found the failure to disclose the Kirkland Fees and Tillery Letter material under 18
Del. C. § 2711(2). The combination of market conditions and the lack of evidence
concerning other insurers’ interest in Paraquat requires the Court to reach this
conclusion under the objective standard.
Reliance
To recover under 18 Del. C. §2711, Plaintiff Insurers must demonstrate by a
preponderance of the evidence that they relied upon the alleged material
misrepresentation or omission.49 Syngenta contends that no employee or agent of
Plaintiff Insurers reviewed or relied upon the Renewal application because ZIC,
not Plaintiff Insurers, underwrote the policies at issue. Plaintiff Insurers contend
ZIC was acting as their agent. Plaintiff Insurers argue they relied on the Renewal
Application through their agent.
48 TX075-0008. 49 Old Republic Ins. Co. v. Rexene Corp., 1990 WL 176791, at *6 (Del. Ch.) (“[T]the insurer seeking to void the policy must show a false representation by the insured, the materiality of that representation to the insured risk, and the insurer’s reliance on the representation made.”); see also Dickson-Witmer v. Union Bankers Ins. Co., 1994 WL 164554, at *5 n.4 (Del. Super.) (“The plaintiff urges the Court to read 18 Del.C. § 2711 to require a showing of all three factors (fraud, materiality and reliance) to warrant rescission of an insurance contract.”). 22 The Court has determined that no omission or misrepresentation occurred in
Syngenta’s response to Questions 19, 20, or 21. The Court also has determined
that if Syngenta’s response to Questions 19, 20, or 21 were considered a
misrepresentation or omission, it was not material. Therefore, the Court finds that
the issue of reliance is moot.
CONCLUSION
The Court finds the 2016 ZIC Excess Policy definitions are inapplicable to
The Court finds the doctrine of contra preferentem is inapplicable in the
instant case because Plaintiff Insurers did not draft the Renewal Application.
The Court finds that the course of dealing since 2009 between the parties
demonstrates that it was acceptable for Syngenta to submit a loss run in response to
Question 19. Thus, the fact that Syngenta did not disclose the Kirkland Fees in its
Renewal Application was neither an omission nor misrepresentation pursuant to 18
Del. C. § 2711.
The Court finds the Tillery Letter did not constitute an “occurrence” or
“integrated occurrence” for purposes of Questions 20 and 21. Thus, Syngenta’s
failure to disclose the Tillery Letter in its response to Questions 20 and 21 of the
Renewal Application was neither an omission nor misrepresentation for purposes
of 18 Del. C. § 2711.
23 The Court finds the applicable materiality standard under 18 Del. C. §
2711(2) is whether a reasonable insurer in Plaintiff Insurers’ position would have
found the failure to disclose the Kirkland Fees and Tillery Letter material.50
The Court finds that failure to disclose the Kirkland Fees and Tillery Letter
in the Renewal Application was not material under 18 Del. C. § 2711(2)–(3).
The Court finds that the issue of reliance is moot.
Therefore, on Count II, the Court hereby DENIES Plaintiff Insurers’ request
for declaratory judgment that the alleged misrepresentations or omissions prevent
recovery for the Paraquat-related claims. On Counts III and IV, the Court hereby
DENIES Plaintiff Insurers’ request for recoupment and restitution.
IT IS SO ORDERED.
/s/ Mary M. Johnston Judge Mary M. Johnston
50 Restatement of the Law of Liability Insurance § 8 (2019). 24