Nicholas v. National Union Fire Insurance
2013 Del. LEXIS 632
| Del. | 2013Background
- Plaintiffs are Dr. Henry T. Nicholas III, William J. Ruehle, and Dr. Henry Samueli; insurers are National Union Fire Insurance, Twin City Fire Insurance, XL Specialty Insurance, Arch Insurance, and Federal Insurance.
- Broadcom purchased $210 million in towered insurance covering nineteen policies; primary policy requires payment of loss except where indemnified by Broadcom.
- A 2009 derivative action settlement (Partial Settlement) was approved; Plaintiffs were largely excluded and later objected to final approval.
- The 2011 Settlement resolved appeals in the derivative action; Plaintiffs agreed not to bring claims that would obligate Broadcom to indemnify insurers or void the Insurance Agreement.
- Plaintiffs filed suit in Superior Court alleging bad faith and tortious interference; Superior Court dismissed under Rule 12(b)(6) as barred by the 2011 Settlement.
- This appeal argues the 2011 Settlement is ambiguous and may permit extrinsic-evidence-based interpretation to allow the claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is F.15 of the 2011 Settlement an unambiguous bar? | Nicholas contends ambiguity allows claims to proceed. | Insurers contend second sentence closes the door on collateral attacks. | Ambiguity exists; not unambiguous. |
| May extrinsic evidence interpret the 2011 Settlement? | Extrinsic evidence should resolve intent and permit claims. | Terms should be read only from the contract language. | Extrinsic evidence admissible to determine intent. |
| Should the case be dismissed under Rule 12(b)(6) based on a facial reading? | Plaintiffs plead valid bad-faith/tort claims not barred by language. | Second sentence precludes claims that undermine the Insurance Agreement. | Dismissal reversed; need discovery. |
Key Cases Cited
- Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del.1997) (contract interpretation and ambiguity review)
- Pellaton v. Bank of New York, 592 A.2d 473 (Del.1991) (contract language not ambiguous solely due to party disagreement)
- Rhone-Poulenc Basic Chem. Co. v. American Motorists Ins. Co., 616 A.2d 1192 (Del.1992) (true test of contract meaning is what a reasonable person would think)
- Central Mortgage Co. v. Morgan Stanley Mort. Capital Holdings LLC, 27 A.3d 531 (Del.2011) (contract interpretation and extrinsic evidence considerations)