Stillwater Mining Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

Decision Date12 January 2023
Docket Number24,2022
PartiesSTILLWATER MINING COMPANY, Plaintiff Below, Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, ACE AMERICAN INSURANCE COMPANY, and QBE INSURANCE CORPORATION, Defendants Below, Appellees.
CourtUnited States State Supreme Court of Delaware

Submitted: October 26, 2022

Court Below: Superior Court of the State of Delaware C. A. No N20C-04-190

Upon appeal from the Superior Court. AFFIRMED.

David J. Baldwin, Esquire, Peter C. McGivney, Esquire, BERGER HARRIS LLP, Wilmington, Delaware, Martha Sheehy, Esquire (argued), SHEEY LAW FIRM, Billings, Montana, and Kyle A Gray, Esquire, HOLLAND &HART LLP, Billings, Montana, for Plaintiff Below, Appellant Stillwater Mining Company.

Kurt M. Heyman, Esquire (argued), Aaron M. Nelson, Esquire, HEYMAN ENERIO GATTUSO &HIRZEL, LLP, Wilmington, Delaware, Scott B. Schreiber, Esquire, William C. Perdue, Esquire, Andrew T Tutt, Esquire, and Samuel I. Ferenc, Esquire, ARNOLD &PORTER KAYE SCHOLER LLP, Washington, D.C., for Defendant Below, Appellee National Union Fire Insurance Company of Pittsburg, Pa. John C. Phillips Jr., Esquire, David A. Bilson, Esquire, PHILLIPS, MCLAUGHLIN & HALL, P.A., Wilmington, Delaware, Geoffrey W. Heineman, Esquire, Jung H. Park, Esquire, and John J. Iacobucci Jr., Esquire, ROPERS MAJESKI, PC, New York, New York, for Defendant Below, Appellee QBE Insurance Corporation.

John L. Reed, Esquire (argued), DLA PIPER LLP, Wilmington, Delaware, Gregory F. Fischer, Esquire, COZEN O'CONNOR, Wilmington, Delaware, Angelo G. Savino, Esquire, COZEN O'CONNOR, New York, New York, for Defendant Below, Appellee ACE American Insurance Company.

Before SEITZ, Chief Justice; VAUGHN and TRAYNOR, Justices.

SEITZ CHIEF JUSTICE:

Stillwater Mining Company filed suit against its directors' and officers' liability insurers to recover the expenses it incurred defending a Delaware stockholder appraisal action. The Superior Court granted the insurers' motions to dismiss after it found that Delaware law applied to the dispute and our Court's decision in In re Solera Ins. Coverage Appeals ("Solera II") precluded coverage for losses incurred in a stockholder appraisal action under a similar D&O policy.

The main issue on appeal is whether Delaware or Montana law applies to the claims in Stillwater's amended complaint. Stillwater argues that the Superior Court should have applied Montana law because Montana has the most significant relationship to the dispute and the parties. If Montana law applies, according to Stillwater, it can recover its defense costs - not because the policies cover the loss - but because Montana recognizes coverage by estoppel, meaning the insurers are estopped to deny coverage when they failed to defend Stillwater in the appraisal action.

We affirm the Superior Court's judgment. Before this Court issued its Solera II decision, the Superior Court in Solera I held that D&O insureds could recover losses incurred in a stockholder appraisal action. Taking advantage of the trial court's favorable ruling, Stillwater argued that Delaware law applied to the interpretation of the policies. As it argued in its original complaint, "Delaware law applies to the principles of contract interpretation at issue in this proceeding" and "Delaware has a strong interest in the application of its principles of corporate law and governance in construing the directors' and officers' liability insurance policies at issue in this matter."[1]

After Solera II, however, Stillwater reversed position and claimed that Montana law applies to the policies. Its amended complaint dropped all indemnity claims for covered losses in favor of three contractual claims for the duty to advance defense costs and a statutory claim under Montana law. In our view, Stillwater's amended claims raise the same Delaware interests that Stillwater identified in its original complaint - applying one consistent body of law to insurance policies that cover comprehensively the insured's directors', officers', and corporate liability across many jurisdictions. Stillwater also challenges the Superior Court's denials of its motion for voluntary dismissal without prejudice and its motion to stay pending resolution of the action Stillwater filed in Montana. The Superior Court did not exceed its discretion when it denied both motions.

I.
A.

Stillwater Mining Company is a Delaware corporation with its principal place of business in Stillwater County, Montana.[2] Stillwater has directors', officers', and corporate liability insurance policies (the "D&O policies") from National Union Fire Insurance Company ("NUFI"), as primary policy issuer, and ACE American Insurance Company and QBE Insurance Corporation, as excess insurers.[3] We refer to the three defendants together as the "Insurers."

The D&O policies provide that the Insurers "shall pay the Loss . . . arising from any Securities Claim made against [Stillwater] for any Wrongful Act."[4] The policies define "Loss" to include defense costs.[5] The policies define a "Securities Claim" as "a Claim . . . alleging a violation of any law, rule or regulation, whether statutory or common law."[6] Under the policies, "Wrongful Act" means "any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act by [Stillwater], but solely in regard to a Securities Claim."[7] The D&O policies do not require the Insurers to provide a defense in litigation but the Insurers "shall advance . . . covered Defense Costs" once they "received written notice of a Claim."[8]

The D&O policies do not have a choice-of-law provision, but Stillwater emphasizes that they contain Montana amendatory endorsements, one of which provides for conformity with Montana law.[9] Another Montana amendatory endorsement governing alternative dispute resolution states that "[t]he mediator or arbitrators shall give due consideration to the general principles of the law of the state where [Stillwater] is incorporated in the construction or interpretation of the provisions of this policy."[10] The policies afford coverage "anywhere in the world."[11]

The D&O policies formed a tower of insurance that provided directors', officers', and corporate liability coverage for claims made during the policy period from May 1, 2016, to August 1, 2017.

B.

Stillwater was publicly traded until 2017 when Sibanye Gold Limited, a South African mining company, acquired Stillwater in a merger and took it private. Following the merger, some Stillwater stockholders filed an appraisal action in the Court of Chancery under 8 Del. C. § 262, seeking the fair value of their stock.[12] In the appraisal proceeding, the petitioners claimed that Stillwater's board and CEO conducted a flawed and biased sale process and breached their fiduciary duty to obtain fair value for Stillwater stock.

In April 2017, Stillwater notified the Insurers of the appraisal demands and requested approval to incur defense costs.[13] NUFI advised Stillwater in June 2017 that it would be issuing a disclaimer letter in response to the notice of appraisal demands, but it did not do so.[14] Neither ACE nor QBE accepted coverage for the demands.[15]

On July 31, 2019, the Superior Court held in Solera I that a D&O policy covered a Delaware stockholder appraisal action because it alleged a violation of law and thus was a covered "securities claim" under the policy's definition.[16] Both Stillwater and the Insurers agree that the D&O policies in the current case are substantially similar to the relevant portion of the policy in Solera I.[17] Stillwater contends that Solera I was the first time any court in the country addressed insurance coverage of a Delaware appraisal action under a D&O policy. Thus, according to Stillwater, both before and after Solera I, the appraisal action "at least potentially implicated the D&O policies' coverage for Securities Claims" and triggered the Insurers' duty to defend.[18]

In August 2019, the Court of Chancery found after trial that the fair value of Stillwater stock on the valuation date was the transaction price of $18 per share.[19] The court also found that the petitioners failed to show a flawed and biased sale process. As required by statute, the court awarded interest to the petitioners. The petitioners appealed, and this Court affirmed the Court of Chancery's judgment.[20]

Stillwater notified the Insurers of the Court of Chancery's decision and demanded reimbursement of defense costs and statutory interest payments.[21] Shortly after, Stillwater received NUFI's notice denying coverage for the appraisal action. NUFI explained that "[t]he Appraisal Action is not a Claim alleging a violation of any law, rule or regulation and as such does not assert a Securities Claim .... Moreover, the Appraisal Action did not allege a Wrongful Act."[22]

After unsuccessful mediation efforts, on April 13, 2020, NUFI filed a declaratory judgment action against Stillwater in the Superior Court and sought a declaration that the D&O policy did not cover losses from the appraisal action. In response, Stillwater filed its own action in the Superior Court against NUFI, ACE, QBE, and other excess insurers seeking coverage for defense costs and statutory interest payments from the appraisal action.[23]

C.

Against the backdrop of Solera I, Stillwater alleged in its original complaint that "Delaware law applies to the principles of contract interpretation at issue in this proceeding" and "Delaware has a strong interest in the application of its principles of corporate law and governance in construing the directors' and officers' liability insurance policies at issue in this matter."[24] The complaint was limited to indemnity claims. In other words, Stillwater sought to...

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