Certain Underwriters at Lloyds, London v. Chemtura Cororporation
160 A.3d 457
| Del. | 2017Background
- Chemtura (successor to Uniroyal) purchased a decades-spanning, multi-jurisdictional insurance program (primary Home Ins. plus London market/Lloyd’s excess) covering worldwide operations beginning in the 1950s.
- Policies were procured through a New York broker, listed New York addresses (including service agent), and Uniroyal had its principal place of business in New York at the start of the program.
- Environmental liabilities arose at many sites; after prior settlements, two remaining sites (Arkansas and Ohio) gave rise to disputes over allocation of coverage for cleanup and defense costs.
- Core contractual question: which state’s law governs interpretation of the insurance program and allocation methodology ("all sums" v. "pro rata")?
- Superior Court applied the Restatement (Second) §193 site-of-the-risk presumption and held that each site’s local law governs (Arkansas law for Arkansas site; Ohio law for Ohio site), producing an "all sums" result for the remaining claims.
- Delaware Supreme Court reversed, holding New York law governs the contract as a whole based on the most significant relationship at formation and policy-wide contacts.
Issues
| Issue | Plaintiff's Argument (Chemtura) | Defendant's Argument (Lloyd's) | Held |
|---|---|---|---|
| Choice of law for interpreting multi-jurisdictional insurance program | Apply law of each site where underlying liability arose (site-of-risk); Arkansas law for Arkansas site and Ohio law for Ohio site | Apply single consistent law (New York) to interpret the integrated insurance program | Held for Lloyd’s: New York law governs the contract as a whole |
| Applicability of Restatement (Second) §193 presumption | §193 supports applying site-of-risk law for each claim | §193 does not mandate a rotating, claim-by-claim rule; presumption looks to principal location of risk when contracts were formed (here, New York) | §193 does not require site-by-site choice; historical contacts point to New York |
| Use of §188 factors and timing of contacts | Weight present contacts and site interests (forum of contamination) | Weight contacts at time of contracting and the contract’s subject matter (enterprise-wide coverage) | Use §188 with focus on formation-time contacts and whole-contract subject matter; points to New York |
| Weight of Arkansas and Ohio governmental interests | States have vested interest in their environmental remediation laws being applied | Those interests are limited here because dispute is purely contractual between private parties allocating who pays; no risk that states would be left responsible for cleanup | Held that Arkansas and Ohio interests are insufficient to overcome New York contacts |
Key Cases Cited
- Oliver B. Cannon & Son, Inc. v. Dorr-Oliver, Inc., 394 A.2d 1160 (Del. 1978) (Delaware’s early adoption of Restatement (Second) approach to contract choice of law)
- Deuley v. DynCorp Intern., Inc., 8 A.3d 1156 (Del. 2010) (recognizing Delaware follows the Restatement (Second) most-significant-relationship test)
- Shook & Fletcher Asbestos Settlement Trust v. Safety Nat. Cas. Corp., 909 A.2d 125 (Del. 2006) (treating multi-jurisdictional insurance/coverage questions under Delaware conflicts principles)
- Viking Pump, Inc. v. Century Indemnity Co., 2 A.3d 76 (Del. Ch. 2009) (discussing need for uniform interpretation across integrated insurance schemes)
- E. Gerli & Co. v. Cunard S.S. Co., 48 F.2d 115 (2d Cir. 1931) (historical perspective on pre-Restatement skepticism toward party-selected choice-of-law)