The Supreme Court of Delaware has held that each cause of action pleaded against an insured in a single complaint may constitute a separate "claim" under a D&O policy. AT&T Corp. v. Faraday Capital Ltd., 2007 WL 329218 (Del. Feb. 5, 2007).
The insured company sought coverage under four programs of primary and excess D&O coverage for defense costs and expenses incurred in defending against two suits. The coverage dispute turned on whether the claims in the underlying lawsuits arose before the later policy programs took effect and, if not, whether the lawsuits were based on "wrongful acts" that were the subject of prior actions and thus only covered by the earliest policy year at issue.
The policies at issue contained substantially similar provisions and provided coverage for "Losses resulting from any Claim first made against the Directors and Officers during the Policy Period for a Wrongful Act." The policies defined "claim" to include:
- Any written or oral demand for damages or other relief against any of the Assureds, [or]
- Any civil, criminal, administrative or regulatory proceeding initiated against any of the Assureds.
The company argued that each complaint contained multiple "claims." Although the company's position on the actual number of "claims" in each lawsuit evolved over the course of the proceedings, at oral argument the insureds contended that there were six separate claims in the two complaints insured the underlying litigation. The carriers, on the other hand, argued that "when a demand is made in the form of a lawsuit, one lawsuit equals one 'Claim.'"
The court held that the company's definition of Claim more faithfully reflected "the intended meaning of 'Claim' in the policies." Agreeing with the analysis of Home Insurance Co. of Illinois v. Spectrum Information Technologies, Inc., 930 F. Supp. 825 (E.D.N.Y. 1996), the court determined that "there may be a Claim that is not a civil proceeding... and a civil proceeding that is not a 'Claim'.... The term 'Claim' means a demand for money damages or other relief, regardless of the form in which that demand is presented." The court therefore concluded that each cause of action in the underlying lawsuits could constitute a separate claim within the meaning of the policies. However, the court did not find that every cause of action is necessarily a separate claim. Rather, the court explained, multiple causes of action would constitute a single claim if they arose from the same wrongful conduct.
The Delaware Supreme Court declined to decide how many separate claims were asserted in the underlying lawsuits. Rather, the Supreme Court remanded the matter to the trial court because the parties and the trial court had not fully addressed the issue as it was reframed by the Supreme Court.