Anderson Kill secured a significant victory on behalf of Hemisphere Media Group, Inc. (“Hemisphere”) in a directors and officers (“D&O”) insurance coverage action against Fair American Select Insurance Company (“FASIC”) in the Superior Court of Delaware’s Complex Commercial Litigation Division.  See Hemisphere Media Grp., Inc. v. Fair Am. Select Ins. Co., No. N24C-06-116 PAW CCLD, 2026 WL 1970729 (Del. Super. Ct. June 18, 2026).

The Superior Court granted Hemisphere’s motion for summary judgment, ruling that Delaware’s “Larger Settlement Rule” governs the coverage allocation of a $15 million settlement of an underlying stockholder class action against Hemisphere directors and other entities.  When an insurance policy does not direct the parties to apply a specific allocation method, Delaware law provides that the appropriate allocation method is the Larger Settlement Rule.  The Larger Settlement Rule holds that settlements and defense costs that involve both covered and uncovered parties or claims are fully covered by insurance unless the insurance company proves that alleged uncovered conduct increased the insurance company’s liability.  The decision is significant because it reaffirms Delaware’s protection of the economic expectations of policyholders when they purchase D&O insurance coverage and that the Larger Settlement Rule best serves that expectation and purpose of D&O insurance.

Raymond A. Mascia Jr. argued the motion on behalf of Hemisphere, as part of the Anderson Kill insurance recovery team also consisting of William G. Passannante and Regan E. Samson.

In 2024, Hemisphere settled an underlying stockholder class action against directors of Hemisphere and other entities for $15 million.  The stockholder action alleged that the defendants breached their fiduciary duties in connection with a take-private transaction of Hemisphere.  The Hemisphere directors are “Insured Persons” under Hemisphere’s D&O insurance; the other defendants are not.  To address insurance for such situations, Delaware employs the Larger Settlement Rule, which holds that “a loss is fully recoverable unless the insurer can show that the liability for non-covered conduct increased the insurer’s liability.”  RSUI Indem. Co. v. Murdock, 248 A.3d 887, 908 (Del. 2021).

Seeking to avoid its coverage obligations under Delaware law, FASIC argued that the policy’s allocation clause required the parties to allocate any settlement between covered and uncovered claims based on “relative legal and financial exposures” and “benefits obtained.”

The Superior Court rejected FASIC’s argument and sided with Anderson Kill.  The Superior Court carefully parsed the policy’s allocation provision, which included a “best efforts” clause, and observed that it did not direct the parties to use any specific allocation method.  Rather, it merely stated that the parties “use their best efforts” to reach an allocation agreement and, in those negotiations, consider “relative legal and financial exposures” and “benefits obtained.”  Hemisphere, 2026 WL 1970729, at *10.

FASIC relied heavily on the policy’s so-called “disagreement clause,” which stated, that if the parties did not agree on an allocation, FASIC would “advance that portion of Loss which the Insured and the Insurer agree is not in dispute until a final amount is agreed upon or determined pursuant to the provisions of this Policy and applicable law.”  Id.  FASIC argued that this so-called “disagreement clause” mandated an allocation using the  “relative legal and financial exposures” and “benefits obtained” language referenced in the “best efforts” clause.

The Superior Court rejected that argument, holding “that is not what the disagreement clause says,” but instead that it “contemplates that a final amount will be determined pursuant to ‘the provisions of this Policy’ – that is, the whole Policy – and ‘applicable law.’”  Id.  Applying that correct interpretation, the Superior Court held that “none of the ‘provisions of this Policy,’” including the “best efforts” cause, mandated an allocation using the  “relative legal and financial exposures” and “benefits obtained” language referenced in the “best efforts” clause.  Id.

Critically, the Superior Court instead recognized that “[w]hat the ‘provisions of this Policy’ do mandate is that the ‘Insurer shall pay on behalf of the Company Loss resulting from a Claim,’ defining Loss to include ‘settlements … that any Insured is legally obligated to pay.’”  Id.  Therefore, the Superior Court held that the policy as a whole “mandates broad coverage for ‘settlements . . . that any Insured is legally obligated to pay’” and  “does not exclude coverage where a settlement also relates to conduct by an uninsured person, nor does it mandate a particular allocation method.”  Id.  The Superior Court concluded that because the policy promises broad coverage for any settlement that any insured is legally obligated to pay and because the policy lacks any specific allocation method, Delaware law “directs that the Larger Settlement Rule applies.”  Id.

“This decision recognizes that an agreement to agree to allocate is not a substitute for clear policy language mandating an allocation method,” Mascia said.  “D&O insurance companies promise to pay for all losses that a policyholder is legally obligated to pay, including settlements.  Given this promise of broad coverage, the Superior Court ruled that FASIC could not later attempt to limit that promise with an allocation method that it never wrote into the policy.”

About Anderson Kill

Anderson Kill is a full-service law firm best known for its work in insurance recovery for policyholders.  Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, trusts, committees and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Washington, DC, Philadelphia, PA, Shelton, CT, Newark, NJ, Boston, MA, and Los Angeles, CA.

William G. Passannante is co-chair of Anderson Kill’s insurance recovery group. Raymond A. Mascia Jr. is a shareholder and Regan E. Samson is an associate in that group.  All three are based in the firm’s New York City headquarters.