RSUI Indemnity Co. v. Murdock

Dole Food Company (Dole) (defendant) was incorporated in Delaware and headquartered in California. Dole had directors-and-officers-liability insurance from multiple insurers, including RSUI Indemnity Co. (RSUI) (plaintiff), to cover directors’ and officers’ litigation costs and other expenses incurred in legal challenges to actions taken in their official capacities. In 2013, Dole’s CEO and controlling shareholder, David Murdock (defendant), took the company private. Two lawsuits arose from that process, a Delaware state-court action for fraudulent manipulation of Dole’s stock price and a federal securities action. RSUI denied coverage to Murdock under the directors-and-officers insurance, claiming that California law governed and California public policy barred coverage in circumstances involving fraudulent conduct. RSUI filed suit in a Delaware trial court, seeking a declaratory judgment specifying each party’s rights and obligations. In support of its position that California law governed, RSUI emphasized that (1) the policies were not limited to claims arising under Delaware law, (2) the policies were negotiated and delivered in California, and (3) Dole’s directors and officers lived and worked in California. Dole and Murdock argued that Delaware law, not California law, governed and that it did not preclude coverage in the given circumstances. They argued that Delaware had a superior interest in having its own law applied to interpret directors-and-officers policies held by Delaware corporations. The Delaware trial court agreed and held in Dole’s and Murdock’s favor. RSUI appealed.