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In First Solar, Inc. v. Nat’l Union First Ins. Co., 2022 Del. LEXIS 93 (Mar. 16, 2022), the Delaware Supreme Court affirmed the decision of the Delaware Superior Court holding that a securities class action and a later follow-on action were substantially related such that the later action was excluded from insurance coverage under an exclusion for “Related Claims.” The Supreme Court clarified that the standard for a Related Claim is individually determined by the language of the specific policy at issue, rather than a blanket “fundamentally identical” standard that had been followed by previous Superior Court decisions. Nonetheless, the Supreme Court agreed that the two actions in this case were substantially related under the broad policy language at issue, which defined a Related Claim as a “Claim alleging, arising out of, based upon or attributable to any facts or Wrongful Acts that are the same as or related to those that were ... alleged in a Claim made against an Insured.”


The appellant in this case was First Solar, Inc., which manufactures solar panels and sells photovoltaic power plants. In March 2012, First Solar stockholders filed a class action alleging violations of federal securities laws due to false and misleading public disclosures (the “Smilovits Action”). The plaintiffs in the original securities class action alleged that First Solar (i) made various misrepresentations, including regarding the quality and costs of its manufacturing; (ii) perpetuated these misrepresentations by concealing and misrepresenting major design defects in its solar modules; (iii) misrepresented its financials; (iv) artificially inflated its stock prices; (v) permitted insider trading; (vi) manipulated cost-per-watt metrics; and (vii) understated its expenses in violation of GAAP. The Smilovits plaintiffs alleged that these actions took place from April 30, 2008 to February 28, 2012. National Union Fire Insurance Company of Pittsburgh, PA provided insurance coverage for the Smilovits Action under a 2011-2012 $10 million “claims made” directors and officers insurance policy. First Solar also had excess 2011-2012 coverage from Chubb, a fact that would become important later.

On June 23, 2015, while the original Smilovits Action was still pending, certain First Solar stockholders who had opted out of the class action filed a separate action (the “Maverick Action”). The second action alleged violations of the same federal securities laws, as well as violations of Arizona statutes and claims for fraud and negligent misrepresentation. The second action alleged similar, but not identical, misconduct in the period between May 2011 and December 2011.

When the second set of plaintiffs filed the Maverick Action in 2015, First Solar had a 2014-2015 $10 million “claims made” policy with National Union, plus a $10 million layer of excess coverage with a different insurer, XL Specialty Insurance Company. The 2014-2015 National Union policy excluded coverage for “Related Claims.” The policy defined a “Related Claim” as “a Claim alleging, arising out of, based upon or attributable to any facts or Wrongful Acts that are the same as or related to those that were … alleged in a Claim made against an Insured.” The policy specified that a Related Claim is deemed to relate back in time and that this “shall be deemed to have been first made at the time that such previously reported Claim was first made.” Claims deemed to have been made prior to the inception date of the 2014-2015 policy would not be covered by the policy. Hence, the question of whether National Union would need to provide insurance coverage for the second Maverick Action turned on whether or not the claims were “Related Claims.”

At first, First Solar actually obtained coverage for the second Maverick Action under its 2011-2012 policies. First, National Union paid under the 2011-2012 primary insurance policy. When that coverage was exhausted, the 2011-2012 excess insurer, Chubb, accepted coverage on the grounds that “the new Maverick litigation is based on the same facts and circumstances of the previously noticed Smilovits class action complaint,” and hence, “[Chubb] treats this matter as a related claim.” Chubb provided coverage for the Maverick Action as the litigation progressed. Meanwhile, in the original Smilovits Action, First Solar filed a motion to transfer in order to litigate both actions before the same judge, arguing “substantial overlap in legal and factual issues and the substantial overlap in parties.” The court granted First Solar’s motion.

On January 5, 2020, First Solar settled the original Smilovits Action. The $80 million settlement exhausted all of the 2011-2012 coverage from both the primary and secondary insurers. First Solar then began to arbitrate the Maverick Action and sought coverage under the 2014-2015 primary National Union policy and the XL Specialty excess policy. First Solar eventually settled the Maverick Action for $19 million without a coverage commitment from either National Union or XL Specialty. National Union and XL Specialty subsequently denied coverage, and First Solar filed the insurance coverage action in Delaware Superior Court. First Solar alleged breach of contract and sought declaratory relief that the insurers were obligated to provide coverage.