Delaware Litigation Lawyer & Attorney : Francis G. X. Pileggi : Corporate, Business, Commercial, Delaware Chancery Court

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In Premier Parks, Inc. v. TIG Insurance Co., read opinion here, the Delaware Superior Court addressed cross-motions for summary judgment on counterclaims.  The initial claim was a declaratory judgment action by the insurance company to seek a ruling that it was only liable to pay an allocated share of a global settlement entered into by Six Flags Inc. (formerly known as Premier Parks Inc.) in connection with a class action civil rights lawsuit.  Based on a choice of law provision, the court applied the substantive law of Oklahoma, but the procedural law of Delaware. 

 The court found based on Oklahoma law that it was the duty of the insurer to notify its insured regarding the importance of apportioning a settlement.  In this case, the court observed that the insurance company was aware of the negotiations leading to the settlement and was kept updated so that the detrimental reliance of the insured on the silence of the insurer warranted the shifting of the burden from the insured to the insurer to prove an allocation of responsibility for purposes of determining the liability among several parties of a settlement amount. Several key factors were highlighted by the Court:  (1) TIG was aware of the very serious potential damages that could have been suffered by Six Flags if the class action went to trial but despite this, TIG only approved a firm that had little or no experience in class action work and was not even reliable in terms of serving as local counsel. (2) Although TIG was kept informed of the ongoing negotiations and the choice of more experienced counsel, they were either not responsive to requests for their involvement or to the extent that they did respond, they were simply not helpful and did not provide Six Flags with the type of legal defense that it needed to address the serious nature of the pending lawsuit against it. 

Based on Oklahoma law, the Court determined that TIG was equitably estopped from denying Six Flags recovery simply because the settlement failed to apportion between covered and noncovered claims.

In sum, the court found that TIG was estopped from denying Six Flags coverage for the full amount of the settlement and because TIG could not meet their burden of allocating the settlement between covered and noncovered claims, they would be responsible for the total amount of the negotiated settlement.  Six Flags had asked TIG for approval of a settlement amount but the response from TIG was in essence, unreasonable.

The court also required TIG to pay all of the attorneys’ fees incurred by Six Flags and that they would be estopped from asserting any defenses under their “reservation of rights letter” because of the “course of dealing” that had been engaged in for many years between Six Flags and the claims administrator for TIG which regardless of the terms of the policy gave much leeway to Six Flags in choosing counsel especially in large, high value, high exposure cases.  The Court relied on Oklahoma cases that allowed estoppel to prevent enforcement of contractual provisions where there had been a contrary course of dealing (citation omitted).

Despite that “historical” course of dealing which always resulted in consent to Six Flags’ prior choice of counsel and prompt response to inquiries, it was not until more than eight months after the request in this case that TIG responded to the efforts of Six Flags to seek approval for the choice of a large law firm in this matter, and then after that period of eight months they belated said that they would not cover the bills for that law firm.