Viking Pump, Inc. v. Liberty Mutual Insurance Company, 2007 WL 1039542 (Del. Ch. Apr. 2, 2007), read opinion here. I will briefly highlight only a few key points in the comprehensive and thorough opinion which chronicles the history of a dispute that covers an entire generation. There are many money quotes in this lengthy opinion, which was based on New York substantive law. I will focus only on my personal favorites. Procedurally, the Court was presented with cross motions for summary judgment pursuant to Rule 56(h). Noteworthy are the cases cited at footnote 76, where the Court treated the cross motions for summary judgment as a submission for a judgment on the merits. The Court applied New York law which considers subsequent course of conduct by the parties as the most persuasive evidence of the agreed upon intention of the parties especially when the contract is ambiguous. (See footnote 88.)
Moreover, the Court discussed the principles involved with an insurance company’s notice of a "reservation of rights" and the outer time limit on the effectiveness of a general reservation of rights and the requirement of an insurance company to “inform its insurers of claims decisions and to do so in a reasonably prompt and informative manner that allows insureds to protect their rights by pursuing other courses of action. When an insurer fails to provide a timely disclaimer of liability it cannot later deny that liability. If an insurance company defends a claim on the condition that it reserves the right to disclaim liability at a later date, it must inform the insured as soon as practicable after it has ascertained facts upon which it bases its reservation. Here the Court concluded that after Liberty obtained all the information it needed, it failed to disclaim liability based on those answers and therefore its reservation of rights letter became ineffective.
UPDATE: See here for blog post about updated opinion and clarifying letter from the court.