December 28, 2018 Practice Points

Perils to Named Insured of Ambiguous Additional Insured Provision

A series of lawsuits filed against an insured constitute “related-claims” because the lawsuits involve a “continuing pattern of anticompetitive behavior.

by Gregory Wright

A recently decided case addresses many issues that a policyholder should consider when deciding whether and how to add an additional insured to an insurance policy. In AR Capital, LLC v. XL Specialty Ins. Co., C.A. No.: N16C-04-154 WCC CCLD (Del. Super. Ct. Dec. 12, 2018), the Delaware Superior Court addressed a dispute between a policyholder and an additional insured related to the right of the additional insured to obtain insurance coverage for several underlying claims and, if so, how the insurance limits should be split between the two entities.

Particulars of the Case

Pursuant to contractual agreements, AR Capital, LLC performed management and advisory services for VEREIT, Inc. After VEREIT released restated financials, the Securities and Exchange Commission commenced a formal investigation and numerous shareholders sued VEREIT, AR Capital, and individuals associated with both entities alleging fraud.

VEREIT had purchased a tower of D&O policies (VEREIT insurers). An endorsement to the primary policy amended the definition of “company” to include AR Capital and amended the definition of “insured person” to include AR Capital’s Directors. AR Capital sought coverage from the VEREIT insurers, but certain disputes arose. Further, AR Capital alleged that it had requested indemnification from VEREIT and had been submitting its invoices to VEREIT for transmission to the insurers, but VEREIT had informed the insurers that it spoke on behalf of all insureds and had submitted only VEREIT’s defense costs. One insurer paid its full limits to VEREIT.

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