Judge Carpenter Grants Plaintiffs’ Motion for Entry of Final Judgment and Sets Prejudgment Interest

July 24, 2018

Publication

In Verizon Communications Inc. v. Illinois National Insurance Co., 2018 WL 2317821 (Del. Super. Ct.), Judge Carpenter granted the plaintiffs’ motion for entry of final judgment and prejudgment interest pursuant to Rule 58. This insurance coverage dispute arose from plaintiff Verizon Communications, Inc.’s settlement of two underlying actions (the “U.S. Bank Action” and “Coticchio Action”) related to Verizon’s failed spinoff business. In a prior decision, the Court granted summary judgment in favor of the plaintiffs and found that the plaintiffs were entitled to defense costs for the U.S. Bank Action, which fell under the definition of a “securities claim” in the applicable insurance policies. Thereafter, the plaintiffs filed a motion for entry of final judgment and prejudgment interest seeking the full amount of unreimbursed defense costs for both the U.S. Bank Action and the subsequently filed and related Coticchio Action. In response, defendant Illinois National Insurance Company conceded that final judgment was proper, but opposed the calculation and potential distribution of prejudgment interest. The remaining defendants (the “excess insurers”) argued that final judgment and prejudgment interest were improper because the Court had not yet determined whether the costs were necessary and reasonable.

In considering the motion, Judge Carpenter first analyzed which state’s substantive law applied (Delaware or New York). In addressing this issue, Judge Carpenter noted that “if the Court has already applied a particular state’s substantive law at one stage of the case, it may be required under law of the case doctrine to apply that same state’s substantive law in subsequent stages, therefore eliminating the need for a choice of law analysis.” Id. at *5. Although the doctrine is flexible, Judge Carpenter found no persuasive reason to depart from his prior decisions applying Delaware law.

Having determined that the application of Delaware law was proper, Judge Carpenter also found that entry of final judgment was proper because the defendants denied the plaintiffs’ application for defense costs for the U.S. Bank Action based solely on the fact that it was not a securities claim. In so holding, Judge Carpenter rejected the excess insurers’ effort to challenge the reasonableness of the defense costs:

The Excess Insurers had the ability to raise a fairness and reasonableness issue when [they] initially denied coverage based on the Securities Claim definition as well as during the four-year period [they] had the Plaintiffs’ Defense Cost invoices but did not do so. . . . As a result, the Court believes that the proper and most reasonable decision is to grant final judgment and if the parties desire, let the Supreme Court decide if this Court has properly decided the Securities Claim issue. Otherwise, the Excess Insurers, who have not challenged a single invoice, would stall this litigation for years at great expense to everyone while reviewing thousands of invoices.

Id. at *9.

With respect to prejudgment interest, Judge Carpenter held that prejudgment interest was proper and the accrual date for the prejudgment interest was 90 days from when there was a clear demand for payment, and not when the plaintiffs began sending invoices of costs incurred or when they sought coverage positions. Accordingly, Judge Carpenter applied Delaware substantive law and found that the proper accrual date was when Verizon invoked mediation. Finally, Judge Carpenter held that all defendants were responsible for paying the prejudgment interest because the summary judgment decision was rendered against all of them.

Analysis: This case highlights the Court’s ability to efficiently resolve issues in the final stages of the large insurance coverage disputes that are often handled by the CCLD judges. Because CCLD cases are assigned to a single judge for the life of the case, Judge Carpenter was familiar with the “law of the case” and the reasons why Delaware substantive law would apply in calculating prejudgment interest. Judge Carpenter was also aware of the underlying issues and chose to enter final judgment after determining that the Court should not “condone” the excess insurers’ continual failure to comply with the insurance policies.