In its recent decision in Intel Corp. v. American Guarantee & Liability Insurance Co., 2012 Del. LEXIS 480 (Del. Sept. 7, 2012), the Supreme Court of Delaware, in a case involving application of California law, had occasion to consider whether an insured’s out-of-pocket payment of defense costs count toward exhaustion of policy limits for the purpose of triggering an excess policy.
The Intel decision is yet the latest decision in a complicated coverage case that has proceeded in both Delaware state court and California federal court. The coverage litigation arises out of several class action antitrust lawsuits filed against Intel. In the relevant policy year, Intel had a primary general liability policy issued by Old Republic with limits of liability of $5 million, and an excess policy issued by XL Insurance Company with limits of liability of $50 million. Immediately excess to the XL policy was a follow form excess liability policy issued by American Guarantee & Liability Insurance Co. (“AGLI”). As a result of coverage litigation between XL and Intel, XL paid to Intel $27.5 million of its $50 million policy limits. Intel continued to pay defense costs out-of-pocket following this settlement. Intel claimed that AGLI’s policy was triggered as a result of its payment of sufficient defense costs. AGLI, however, contended that the XL policy could only be exhausted as a result of payments made by XL.
Complicating the court’s analysis was the fact that the AGLI policy contained two provisions concerning when AGLI’s coverage obligations were triggered. After determining which provision controlled, the court...
