A Delaware court ruled Wednesday that American International Group Inc. and Axa SA units were not obligated to indemnify a solar energy company in directors and officers litigation under their claims-made coverage.
Shareholders of Tempe, Arizona-based First Solar Inc. filed a class-action lawsuit in Arizona in 2012, charging the company had misrepresented the reduction of its manufacturing costs, among other allegations, according to the ruling by the Delaware Supreme Court in First Solar Inc. v. National Union Fire Insurance co. of Pittsburgh, PA and XL Specialty Insurance Co.
AIG unit National Union provided coverage for the suit and exhausted its policy, the ruling said.
Then in March 2014, a number of shareholders opted out of that litigation and filed a second suit alleging various defects and concealments by the company. Solar agreed to pay $19 million to settle the case.
National Union and XL unit XL Specialty denied coverage on the basis that the second suit was essentially identical to the suit filed in 2012, and because the litigation was filed in 2013, there was no coverage under their claims-made policies.
First Solar filed suit against the insurers in October, charging breach of contract. Both insurers filed motions to dismiss the case, which the court granted in its ruling.
Both lawsuits “have substantial similarities,” including that they sued identical defendants, and the periods cited in the lawsuits “clearly overlap and cover the same 10 months in 2011,” the ruling said.
They also “involve the same fraudulent scheme – artificially raising stock prices by misrepresenting First Solar’s ability to produce solar electricity at costs comparable to the costs of conventional energy production,” the ruling said.
“The unambiguous terms” of the policies “preclude coverage for claims that predate the inception of the policies,” the court said, in granting the insurers’ motions to dismiss the litigation.
An AIG attorney had no comment, while XL and First Solar’s attorneys did not respond to requests for comment.