Inconsistent Pleadings and Argument Establish Coverage in One Case and Exclusion in Another

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The Delaware Supreme Court was called upon to determine whether a securities class action and a later follow-on action were related actions, such that the follow-on action was excluded from insurance coverage under later-issued policies. The Superior Court found that the follow-on action was “fundamentally identical” to the first-filed action and therefore excluded from coverage under the later-issued policies.

In First Solar, Inc. v. National Union First Insurance Company Of Pittsburgh, PA and XL Specialty Insurance Company, No. 217, 2021, Supreme Court of Delaware (March 16, 2022) the Supreme Court used the words of the Plaintiff in one case to destroy its claims in the current case.

FACTS

In 2015, First Solar exhausted all coverage under the 2011-12 National Union policy. Chubb, an excess insurer next in line after the 2011-12 National Union policy, accepted coverage of the Maverick Action because “the new Maverick litigation is based on the same facts and circumstances of the previously noticed Smilovits class action complaint,” and as such, “[Chubb] treats this matter as a related claim.”

The Supreme Court concluded that while there might be minor differences – in both cases, plaintiffs allege that First Solar made material misrepresentations regarding its solar power capabilities as part of a fraudulent scheme to increase stock prices.

The Maverick Action Claim was deemed by the Supreme Court to be first made at the time of the Smilovits Action and is excluded from coverage under the Related Claim Exclusion of the Policies. As a result, the judgment of the Superior Court was affirmed.

ZALMA OPINION

It is essential that a litigant seeking insurance coverage must act consistently. In this case First Solar first argued that Smilovits and Maverick were identical and should be tried together which worked well until the available insurance coverage was exhausted and then, to gain more insurance coverage, claimed they were different and it was entitled to coverage for the Maverick Action. The court did not ignore the contradiction and held in favor of the insurer.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

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