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Delaware Supreme Court Finds Fraud Insurable

In a recent decision, the Delaware Supreme Court ruled that insuring against fraud does not per se violate Delaware public policy and held that the insured’s D&O policy covered claims alleging securities fraud. RSUI Indemnity Company v. Murdock, No. 154, 2020, 2021 WL 803867 (Del. Mar. 3, 2021). In so doing, the Court diverged from other states with general public policy exceptions to fraud and reinforced the proposition that contracts should be enforced as written. In other words, if an insurer intends its policy to
exclude certain types of claims, the policy should expressly say so as opposed to after-the-fact appeals to “public policy” as grounds for denying coverage.

Brief Case Synopsis
The Murdock case involved a directors and officers (“D&O”) excess policy insuring Dole Food Company, Inc. (“Dole”), which was triggered, along with another eight layers of D&O insurance, when CEO and Director David Murdock took Dole private through a merger transaction.  That merger resulted in several lawsuits asserting claims for  securities fraud against him and COO and General Counsel C. Michael Carter. The allegations contained claims that Murdock and Carter “breached their duty of loyalty through a series of intentional, unfair, and fraudulent actions that, among other things, drove down Dole’s pre-merger stock price.” Read more…