In a somewhat unusual case, Vice Chancellor Morgan T. Zurn addressed the question whether in pari delicto is an equitable or a legal defense, in In the Matter of the Liquidation of Indemnity Insurance, C.A. No. 8601-VCZ, order preserving affirmative defense (Del. Ch. Oct. 4, 2019). In an earlier decision in the case, Zurn held that the claimant had brought a purely legal claim and that equitable defenses were unavailable to bar the claim even when that legal claim was brought in a court of equity. Whether the defense of in pari delicto was a legal or equitable defense would determine whether it could be asserted in the case before her.

In order to understand the posture of the case, it is necessary to review the vice chancellor’s earlier opinion in In the Matter of the Liquidation of Indemnity Insurance, (Del. Ch. May 15, 2019). Delaware’s insurance commissioner had seized Indemnity Insurance Corp. (IIC) under the Delaware Uniform Insurance Liquidation Act. Eventually, IIC was placed in liquidation, and the insurance commissioner administered IIC’s liquidation as its receiver.