The Supreme Court of Delaware, applying Delaware law, has held that certain allegations in an underlying complaint did not constitute a separate “Claim” against an insured under the D&O policies at issue. Origis USA LLC v. Great Am. Ins. Co., 2025 WL 2055767 (Del. July 23, 2025). The court also concluded that even if they did, the policies’ “Prior Acts” exclusion precluded coverage in its entirety.
Former investors of the insured company filed suit against the company and its former CEO for allegedly perpetrating a scheme to acquire the investors’ majority interest for below market value, before selling the company for millions in profit. The company sought coverage for the suit from its D&O tower, which asserted that the policies’ “Prior Acts” exclusion precluded coverage. This exclusion barred coverage for any “Claim” that “alleges, arises out of, [or] is based upon . . . any actual or alleged Wrongful Act which first occurred before November 18, 2021.”
In the ensuing coverage action, the company pointed to three paragraphs in the underlying complaint and argued that they alleged “Wrongful Acts” that occurred after November 18, 2021. The insurers’ argument was twofold. First, they argued that the referenced paragraphs did not comprise a separate “Claim” implicating coverage. Second, they argued that even if those allegations constituted a separate “Claim,” the “Prior Acts” exclusion precluded coverage for the complaint because it alleged conduct exclusively before November 18, 2021, and that to the extent it referenced any conduct after that date, such conduct necessarily arose from the pre-November 18, 2021 conduct. The lower court sided with the insurers on both issues, which were raised on appeal.
The appellate court first rejected the company’s argument that the three paragraphs constituted a standalone “Claim” separate and apart from the other paragraphs of the underlying complaint, holding that while the allegations might assert a “Wrongful Act,” no “Claim” (defined in part as a “written demand for monetary . . . relief” or a “civil proceeding”) followed. It determined that “those allegations are little more than an aside in a lengthy complaint that assert a number of Claims—but only claims for pre-November 2021 Wrongful Acts.” The appellate court also held that, even if the allegations constituted a separate “Claim,” the “Prior Acts” exclusion precluded coverage in its entirety. In affirming the lower court’s ruling, the court held that the exclusion applied because the alleged “failure to comply with the . . . investigation [i.e., the post-November 18, 2021 conduct] ‘arose from’ the conduct that necessitated the investigation.”
[View source.]
