Viacom Inc. v. United States Specialty Ins. Co.

Viacom Inc. v. United States Specialty Ins. Co.

Opinion

This short letter opinion addresses the following motions: (1) Certain Defendants' Motion to Dismiss or Stay in Viacom v. U.S. Specialty, et al., N22C-06-016 AML CCLD (the "Viacom Coverage Case"); (2) the Unique 2016 Insurers' Motion to Dismiss in the Viacom Coverage Case; and (3) Certain Defendants' Motion to Dismiss or Stay in Redstone v. ACE American Insurance Co., et al., N22C-06-020 AML CCLD (the "Redstone Coverage Case").¹ The law in this area is settled, and an extensive analysis of that precedent in the context of the pending motions would not meaningfully add to the law's development. In other words, the motions are straightforward and can be resolved with a concise explanation of the Court's reasoning.

Factual and Procedural Background

Only a brief factual background is warranted. There are three related insurance coverage disputes pending before the Court regarding coverage for two actions pending in the Court of Chancery (collectively, the "Chancery Cases"). The Chancery Cases arise from the 2019 merger between Viacom Inc. and CBS Corporation and [*2]  assert Viacom's and CBS's directors, officers, and controlling shareholders breached their fiduciary duties in connection with the merger. Litigation in the Chancery Cases has involved exhaustive pretrial discovery and motion practice, and trial in the first action is scheduled to proceed this summer. The damages sought in the Chancery Cases far exceed the various towers of insurance implicated and at issue in the coverage cases pending before this Court.

In the three related coverage disputes, Viacom, National Amusements, Inc., and Shari Redstone seek insurance coverage for damages they ultimately may be ordered to pay as a result of a settlement or judgment in the Chancery Cases. The Viacom Coverage Case and the Redstone Coverage Case seek coverage under Viacom's tower of directors and officers ("D&O") liability insurance policies.² Although Viacom's insurers have paid the defense costs incurred by some of their insureds in the Chancery Cases,³ they have denied any coverage obligation for a judgment or settlement. Among the reasons the insurers articulate for denying coverage is: (i) a dispute as to which policy period is implicated by the Chancery Cases; and (ii) whether the so-called [*3]  "Bump Up Exclusion" in Viacom's policies bars coverage for any damages that might be awarded in the Chancery Cases. There are other potential disputes between the parties with respect to coverage, including "conduct exclusions" that could be implicated if a judgment is entered, and allocation of coverage in the event there are both covered and uncovered losses. Although the parties mediated the coverage disputes, the insurers steadfastly maintain there is no coverage and therefore have refused to offer any money toward possible settlement of the underlying Chancery Cases.

In June 2022, the plaintiffs filed their complaints asserting declaratory judgment and anticipatory breach of contract claims relating to the insurers' refusal to acknowledge a coverage obligation. The complaints in the Viacom Coverage Case named as defendants the insurers for both Viacom's 2019 insurance tower and its 2016 insurance tower because some of the 2019 insurers have taken the position that the 2016 tower, rather than the 2019 tower, is implicated by the claims in the Chancery Cases. Some [*4]  of the defendant insurers answered the complaints, while others (collectively, the "Moving Defendants") moved to dismiss on the basis that the plaintiffs' claims are not ripe and will not be ripe unless and until the Chancery Cases resolve through settlement or by entry of a judgment against the insureds. The Moving Defendants additionally argue the claims are not ripe because the plaintiffs failed to comply with an alternative dispute resolution clause in the insurance policies. Finally, the insurers who issued policies in the 2016 tower, but did not issue policies in the 2019 tower (the "Unique 2016 Insurers") argue the complaint fails to state a claim against them because the plaintiffs only are seeking coverage under the 2019 tower.

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