SS M&A Litigation Outlook - Flipbook - Page 33
ln re. Solera lns. Coverage Appeals,
No. 413, 2019 (Del. Oct. 23, 2020)
Why it is important
On appeal, the Delaware Supreme Court rejected a
company’s attempt to obtain reimbursement from
its D&O insurers for the costs of an appraisal action.
The court found the appraisal action to be a neutral
inquiry into fair value, which was not covered by the
language in the D&O policy. This decision provides
guidance for insurers and insureds going forward
on how the plain language of D&O policies may
be interpreted.
Summary
Solera Holdings, Inc. (Solera), a software company,
carried excess D&O insurance policies, with coverage
up to US$55 million, from three different insurers.
The Delaware Superior Court previously found that
the D&O insurance policies covered costs stemming
from an appraisal action against Solera following
Solera’s acquisition by an affiliate of Vista Equity in
2016 for US$55.85 a share. After a full hearing, the
trial court determined that fair value was US$53.95,
less than what Solera’s shareholders received in the
acquisition. But Solera was ordered to pay US$38
million in pre-judgment interest, and incurred
US$13 million in fees in connection with those
proceedings. Solera sought to recover those amounts
under its D&O policies. The D&O policy language at
issue related to losses resulting from “any Securities
Claim,” a term specifically defined in the policy as
“any actual or alleged violation” of a securities law.
The court’s analysis centered on whether an
appraisal action could reasonably be described
as stemming from a “violation” of a law or rule
regulating securities and whether allegations of
wrongdoing were required for a matter to be a
“Securities Claim” under the D&O Policy. The trial
court held that a “violation” did not require an
allegation of wrongdoing, and thus a demand for
appraisal – which “is an allegation that the company
contravened” the right of shareholders to receive fair
value – was a “Securities Claim” under the policy.
value, which could suggest that wrongdoing was an
important consideration, but held that this inquiry
only went to the weight of the corporation’s evidence
of fair value, but was not otherwise relevant to an
appraisal action.
Reversing that decision, the Delaware Supreme
Court held that the plain meaning of “violation”
indicates an element of wrongdoing and that the
wrongdoing is largely irrelevant to an appraisal
action. The statutory appraisal action, the court
held, was designed to remedy a specific problem of
individual shareholders withholding consent and
blocking mergers by providing a method for such
shareholders to obtain a neutral, “independent”
assessment of fair value. The court acknowledged
that there are cases in which courts look at indicators
of unfairness in the sales process in ascertaining fair
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