Mark D. Harris and Margaret A. Dale
On Oct. 31, 2019, the Delaware Supreme Court decided an insurance-coverage dispute arising out of a lawsuit by a bankruptcy trustee against Verizon in connection with Verizon’s divestiture of its “yellow pages” business. In re Verizon Ins. Coverage Appeals, No. 558, 2018, 2019 WL 5616263 (Del. Oct. 31, 2019). The central issue before the court was how to interpret and apply the term “securities claim” in a corporate insurance policy. The ruling serves as a reminder of the importance of carefully reviewing and negotiating the definitions and provisions of policies before they become the subject of litigation.
The case arose out of Verizon’s 2006 tax-free spin-off of its print and electronic directories business into Idearc. In exchange for the directories business, Verizon received some 146 million shares of Idearc stock, $7.1 billion in Idearc debt, and $2.5 billion in cash. Verizon distributed the Idearc shares to its shareholders, and Idearc launched as an independent business with $9.1 billion in debt. Concurrent with the spinoff, Verizon and Idearc purchased primary and excess follow-form D&O insurance policies, which allowed Verizon to recover defense costs “when a Securities Claim was brought against it and covered directors and officers.”
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