In re TIAA-CREF Insurance Appeals

Summary

The Delaware Supreme Court affirmed the Superior Court’s judgment in consolidated insurance coverage appeals involving TIAA-CREF’s settlements and defense costs arising from investor class actions. The Court held that the settlements were not uninsurable disgorgement under New York public policy, upheld the award of defense costs, rejected challenges concerning Arch’s consent-to-settle defense and limits-reduction provision, and declined to award prejudgment interest against excess insurers whose obligations had not yet attached. The Court also upheld the verdict for Zurich on notice and consent-to-settle defenses.

Holdings

1. The settlements were not uninsurable disgorgement under New York public policy because they were not conclusively linked to ill-gotten gains obtained by TIAA.
2. TIAA met its burden to prove that the Bauer-Ramazani defense costs were reasonable and necessary, and the Superior Court properly denied the insurers' renewed motions for judgment as a matter of law.
3. Sufficient evidence supported the jury's finding that Arch waived its consent-to-settle condition, and any error concerning the futility issue was harmless.
4. The percentage savings was properly calculated using the underlying insurer's policy limit and settlement amount, resulting in a 14 percent reduction, rather than using the total claim including prejudgment interest.
5. Ace and Arch were not liable for prejudgment interest because their performance obligations had not been triggered and remained uncertain under the attachment and shavings provisions.
6. The Superior Court properly treated waiver of Zurich's defenses as a matter of Delaware procedural law and did not err in allowing the issue to go to the jury; any alleged jury-instruction error was harmless.

Questions Presented

1. Whether the settlements of the investor class actions constituted uninsurable disgorgement under the policies and New York public policy.
2. Whether TIAA proved that its Bauer-Ramazani defense costs were reasonable and necessary.
3. Whether Arch waived its consent-to-settle defense or was excused from obtaining consent because requesting it would have been futile.
4. Whether Arch's limits reduction under its shavings provision should be calculated using the underlying policy limit or the total claim including prejudgment interest.
5. Whether Ace and Arch owed prejudgment interest before the underlying insurance layers had paid out and their performance obligations had been triggered.
6. Whether Zurich waived its notice and consent-to-settle defenses and whether the jury received a proper instruction concerning waiver.

Disposition

affirmed