The Delaware Supreme Court affirmed the trial court's finding of coverage under the Directors and Officers policy. RSUI Indemn. Co. v. Murdock, 2021 Del. LEXIS 90 (Del. March 3, 2021).     In November 2013, Murdock, director and CEO of Dole Food Company, Inc., took the company private through a merger transaction in which Murdock acquired all of Dole's stock not already owned by him. The merger was approved by a 50.9% vote of disinterested stockholders. After the merger closed, Dole stockholders filed suit challenging the fairness of the transaction and alleging breach of fiduciary duty against Murdock and others (First Lawsuit). The trial court determined that Murdock and others breached their duty  of loyalty that and drove down Dole's pre-merger stock price. The court found that the merger was not a product of fair dealing. Damages of $148,190,590 were awarded.     Dole gave notice to its insurers of the suit. Dole had a $15,000,000 D&O policy with AXIS. RSUI among other insurers, provided excess D&O coverage in policies that followed form to Dole's policy with AXIS. RSUI was Dole's eighth layer of D&O coverage, providing $10,000,000, payable upon the exhaustion of the underlying $75,000,000 in coverage. Without contribution from its insurers, Dole settled with the stockholders for the full amount of damages awarded by the trial court.      Before the settlement of the First Lawsuit, a second suit (Second Lawsuit) was filed as a class action composed of stockholders who had sold their stock before the merger and were therefore not parties to the First Lawsuit. The Second Lawsuit alleged violations of the Securities Exchange Act. Without consent or confirmation of coverage from the insurers, Dole negotiated a settlement of the Second Lawsuit, agreeing to pay $74,000,000. The layers below RSUI paid $7,000,000 towards the settlement, with Dole paying the remaining $67,000,000.     RSUI and several of Dole's excess insurers filed suit seeking a declaratory judgment that they had no obligation to fund the settlement. The trial court ultimately entered judgment in favor of the insureds and against RSUI in the amount of $10,000,000, policy limits, plus $2,321,095 in prejudgment interest.      RSUI appealed. The first issue was whether the more favorable law to RSUI in California should apply over Delaware law. While Dole's headquarters were in California where its directors and officers lived, Dole was a Delaware corporation and also a citizen of Delaware. The court determined that Delaware had the most significant relationship to the policy and the parties.     RSUI next argued that providing coverage for findings of fraud was against Delaware's public policy. Such a position would defeat the parties' contractual expectations. A blanket prohibition against insuring for losses arising from a director's or officer's wrongful acts (when based on fraud) would leave many injured parties without a means of recovery. Without guidance from the legislature, the court was unwilling to void RSUI's contractual obligations on public-policy grounds.      Next, the court considered wither the policy's Profit/Fraud Exclusion barred coverage. The exclusion provided there was no coverage based upon any profit or financial advantage gained or any willful fraudulent act if established in an adjudication adverse to the insured in an underlying action. Although the decision in the First Lawsuit applied the Profit/Fraud Exclusion, there was no adjudication in the Second Lawsuit because the matter was settled. The settlement in the Second Lawsuit meant the exclusion was not applicable. If RSUI was on the hook for the Second Lawsuit settlement, this alone exhausted its coverage limits, making consideration of the Profit/Fraud Exclusion moot. Dole's $67,000,0000 settlement contribution was more than enough to reach and exhaust RSUI's $10 million limits.     Finally, the court considered Dole's allocation argument that the trial court erred in finding coverage even for non-covered claims. Dole argued for a "relative exposure" analysis, weighing the relative exposures between covered and non-covered losses. The trial court, however, applied the "larger settlement rule," under which a loss was fully recoverable unless the insurer could show that the liability for the non-covered conduct increased the insurer's liability. Since Dole was found to be liable as an aider and abetter to the same extent as Murdock, it appeared that Dole's actions could not have increased the First Lawsuit's settlement. Therefore, the trial court was also affirmed on this point of appeal.      

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