AT&T wants insurers to pay settlement

John O'Brien Feb. 8, 2007, 2:12pm


DOVER, Del. - For AT&T, the fate of $400 million may rest on the definition of the word "claim."

The company received a little good news Monday when the Delaware Supreme Court overturned a lower court's ruling that meant insurance companies did not have to pay a $400 million settlement AT&T entered into concerning the 2000 transaction of At Home Corp.

The dispute between AT&T and seven of its insurers stems from what exactly constitutes a claim as it pertains to certain directors and officers and company liability policies.

AT&T was charged in 2002 with breaching its fiduciary duty and misappropriating trade secrets when it purchased 25 percent of the outstanding stock of At Home, as well as 74 percent of its voting power.

Four suits came out of the transaction. One of which (Williamson v. AT&T) resulted in a $400 million settlement. Another (Leykin v. AT&T) was dismissed.

As AT&T and its insurers argued the definition of "claim," the Delaware Superior Court determined that, under its meaning of the word, only one of the four disputed "claims made" policies covered anything.

Insurers said the two lawsuits were based on "wrongful acts" that were the subject of two prior actions filed in 1999 and 2000.

"The trial court held that under the policy language, a 'claim' means a 'civil proceeding,' and that therefore the Williamson and Leykin actions each constituted one 'claim,'" Justice Carolyn Berger wrote.

The Supreme Court decided that "claim" may refer to causes of action within the lawsuits.

"We say 'may' because, as AT&T concedes, several of the causes of action arise out of the same underlying wrongful conduct and, as a result, are deemed to be a single 'claim,'" Berger wrote.

"Since neither the parties nor the trial court have addressed this point, we decline to decide, in the first instance, how many separate 'claims' are asserted in the two actions. Only after the 'claims' have been properly identified will it be possible to determine whether there is coverage under the relevant policies."

AT&T, during proceedings at the trial court, argued that each alleged misrepresentation, omission, act or breach of fiduciary duty constituted a separate claim because each act would support a demand for damages or other relief, and that there were at least 15 claims in the Leykin suit and "numerous" claims in Williamson.

The company modified its argument for the appeal.

"AT&T now contends that the number of 'claims' within a complaint equals the aggregated number of causes of action that arise from the same alleged underlying wrongful conduct," Berger wrote.

Now, AT&T alleges that 11 causes of action in Williamson boil down to four separate claims: A zone of insolvency claim; a misappropriation of technology claim; a financing and financial condition claim; and the "March 2000 challenge" claim.

"The decision of the Superior Court is reversed, in part, and this matter is remanded for further action in accordance with this decision," the opinion says.

More News