Intel Corp. v. American Guarantee & Liability Insurance
2012 Del. LEXIS 480
| Del. | 2012Background
- Intel appeals a Superior Court grant of partial summary judgment for AGLI on whether AGLI must reimburse Intel for defense costs under an excess insurance policy.
- The AGLI Policy is a Following Form Excess policy that follows the XL Policy and requires exhaustion of the underlying XL limits before coverage applies.
- The XL Policy provides $50 million for ultimate net loss; Intel paid substantial defense costs beyond XL limits.
- Endorsement #1 modifies the Following Form Policy by deleting inconsistent terms and adding a duty to defend only to the extent consistent with XL, but not before exhaustion.
- Condition H of the Following Form Policy states exhaustion by payments of judgments or settlements before coverage applies, and this is not satisfied by Intel’s out-of-pocket defense costs.
- California law governs contract interpretation and exhaustion language; the court must reconcile the policy language across the Endorsement, the Following Form Policy, and the XL Policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the XL policy exhaustion language is triggered by judgments/settlements or by insured defenses | AGLI: exhaustion requires payments of judgments/settlements, not defense costs | Intel: exhaustion includes insured payments toward defense costs via settlement credits | Exhaustion requires judgments or settlements; defense costs do not exhaust under Paragraph C of Endorsement |
| Whether Endorsement Paragraphs A–B create a duty to defend, and whether Paragraph C limits that duty until exhaustion | AGLI: Endorsement creates duty to defend but limited by exhaustion language | Intel: Endorsement deletes the exclusion and implements XL’s duty to defend; Paragraph C conflicts | Endorsement creates a limited duty to defend, constrained by Paragraph C’s exhaustion requirement |
| How Condition H interacts with Paragraph C and the Endorsement to govern coverage | AGLI: Condition H is indemnity-focused and not applicable to triggering defense; Paragraph C controls | Intel: Condition H broadens coverage to include defense when underlying limits exhausted | Condition H cannot override Paragraph C; defense trigger is governed by exhaustion by judgments or settlements |
| Whether extrinsic evidence is needed to interpret the policy | AGLI: no extrinsic evidence necessary given clear language | Intel: latent ambiguity may require parol evidence | No remand for extrinsic evidence; record shows no latent ambiguity warranting remand |
| Whether the question merits California Supreme Court certification | Qualcomm-level questions are controller; no need for certification | Certification unnecessary given controlling precedents | Certification not appropriate; controlling California contract-interpretation principles apply |
Key Cases Cited
- Qualcomm, Inc. v. Certain Underwriters At Lloyd's, London, 161 Cal.App.4th 184 (Cal. Ct. App. 2008) (informs exhaustion interpretation via policy language)
- ConAgra Foods, Inc. v. Lexington Ins. Co., 21 A.3d 62 (Del.2011) (applies contract interpretation and exhaustion principles)
- MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635 (Cal. 2003) (interpretation of insurance contracts under California law)
- Powerine Oil Co. v. Superior Court, 37 Cal.4th 377 (Cal. 2005) (general contract-interpretation framework for insurance)
- County of San Diego v. Ace Property & Cas. Ins. Co., 37 Cal.4th 406 (Cal. 2005) (interpretation and exhaustion concepts in California insurance law)
- Farmers Ins. Exch. v. Hurley, 76 Cal.App.4th 797 (Cal. Ct. App. 1999) (exhaustion and credits in insurance contexts)