Full Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE ARCLIGHT CAPITAL PARTNERS, ) LLC; ARCLIGHT ENERGY ) PARTNERS FUND VI, L.P.; and ) LIMETREE BAY HOLDINGS, LLC, ) ) Plaintiffs, ) ) and ) ) FREEPOINT COMMODITIES LLC, ) ) Plaintiff-Intervenor, ) v. ) C.A. No. N24C-11-227 PRW ) CCLD LEXINGTON INSURANCE CO., ) ) Defendant. ) Submitted: February 24, 2026 Decided: May 18, 2026 Upon The ArcLight Entities’ Motion for Partial Summary Judgment on Coverage for Pre-Tender Defense Costs, DENIED. Upon Plaintiff-Intervenor Freepoint Commodities LLC’s Motion for Partial Summary Judgment on Issue of Coverage for “Pre-Tender” Defense Costs, DENIED. Upon Defendant Lexington Insurance Company’s Cross-Motion for Partial Summary Judgment Regarding Pre-Tender Defense Costs GRANTED. MEMORANDUM OPINION AND ORDER Jennifer C. Wasson, Esquire, and Ryan D. Kingshill, Esquire, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Robin L. Cohen, Esquire, Alexander M. Sugzda, Esquire, and W. Alex Harris, Esquire, COHEN ZIFFER FRENCHMAN & MCKENNA LLP, New York, New York, Attorneys for Plaintiffs ArcLight Capital Partners, LLC, ArcLight Energy Partners Fund VI, L.P., and Limetree Bay Holdings, LLC. R. Eric Hacker, Esquire, MORRIS JAMES LLP, Wilmington, Delaware; Eric M. Gold, Esquire, and Lauren N. Smith, Esquire, PILLSBURY WINTHROP SHAW PITTMAN LLP, Washington, District of Columbia, Attorneys for Plaintiff- Intervenor Freepoint Commodities LLC. Kurt M. Heyman, Esquire, Aaron M. Nelson, Esquire, Denise S. Kraft, Esquire, and Luke P. Edwards, Esquire, HEYMAN ENERIO GATTUSO & HIRZEL LLP, Wilmington, Delaware; Kendall J. Burr, Esquire, and Jay Patterson, Esquire, MCDOWELL HETHERINGTON LLP, Houston, Texas, Attorneys for Defendant Lexington Insurance Company. WALLACE, J. This case involves an insurance coverage dispute flowing from an oil refinery and storage terminal in the U.S. Virgin Islands (“USVI”).1 The coverage concerns class-action lawsuits relating to pollution from the Refinery. The parties dispute whether the Insurer owes pre-tender defense costs outlaid by the Insureds before the Insurer was notified of the underlying lawsuits covered by the policy. The insurance policy at issue is Contractors Pollution Liability Policy No. CPO 20726893 (“Policy”).2 The parties have competing cross-motions for summary judgment on the issue of pre-tender costs that predate notice to the Insurer. As well, the Insurer moves for summary judgment on the Policy’s coverage of Plaintiff ArcLight Capital Partners, LLC (“ACP”). For the foregoing reasons, the Court GRANTS the Insurer’s Cross-Motion for Partial Summary Judgment on pre-tender costs and ArcLight Capital Partners, LLC’s coverage. As a result, Plaintiffs’ and Intervenor-Plaintiff’s Motions for Partial Summary Judgment are DENIED. 1 See generally The ArcLight Entities’ Br. in Supp. of their Mot. for Partial Summ. J. on Coverage for Pre-Tender Defense Costs at 4 (D.I. 68) [hereinafter “ArcLight Op. Br.”]. For simplicity’s sake, the Court will refer to the facilities as “the Refinery” and “the Terminal.” 2 See Combined Answering Br. in Opp’n to the ArcLight Pls.’ Mot. for Partial Summ. J. and Op. Br. in Supp. of Def. Lexington Insurance Company’s Cross-Motion for Partial Summ. J. Regarding Pre-Tender Defense Costs at 7 (D.I. 72) [hereinafter “Lexington ArcLight Br.”]; Aff. of Beverly McCurry in Supp. of Lexington Insurance Company’s Answer to Pl.- Intervenor Freepoint Commodities, LLC’s Partial Mot. for Summ. J. Regarding Pre-Tender Defense Costs ¶ 7 [hereinafter “McCurry Aff.”] (D.I. 73). -1- I. BACKGROUND3 A. THE PARTIES ACP is a Delaware limited liability company with its principal place of business in Massachusetts.4 Plaintiff ArcLight Energy Partners Fund VI, L.P. (“Fund VI”) is a Delaware limited partnership with its principal place of business in Massachusetts.5 Plaintiff Limetree Bay Holdings, LLC (“LBH”) is a Delaware limited liability company with its principal place of business in Massachusetts.6 Plaintiff-Intervenor Freepoint Commodities LLC (“Freepoint”) is a Delaware limited liability company with its principal place of business in Connecticut.7 Defendant Lexington Insurance Company (“Lexington”) is a Delaware corporation with its principal place of business in Massachusetts.8 B. POLICY BACKGROUND AND UNDERLYING ACTIONS In 2016, LBH—a holding company owned in part by Fund VI—and 3 The Court draws the following facts from the undisputed facts in the pleadings and evidence attached to the parties’ summary judgment affidavits. 4 Compl. in Intervention and Demand for a Jury Trial ¶ 8 (D.I. 28) [hereinafter “Freepoint Compl.”]; Def. Lexington Insurance Company’s Answer and Affirmative Defenses to Compl. in Intervention ¶ 8 (D.I. 42) [hereinafter “Freepoint Answer”]. 5 Freepoint Compl., ¶ 9; Freepoint Answer ¶ 9. 6 Freepoint Compl., ¶ 10; Freepoint Answer ¶ 10. 7 Freepoint Compl., ¶ 7; Freepoint Answer ¶ 7. 8 Freepoint Compl., ¶ 11; Freepoint Answer ¶ 11. -2- another indirect equity investor purchased the terminal storage assets in Limetree Bay and the then-dormant Refinery out of bankruptcy.9 After some time owning and operating the Terminal, the indirect equity owners established the entity Limetree Bay Refining, LLC (“LBR”), which worked to restart the Refinery’s operations.10 Beginning in 2021, several classes of plaintiffs sued over pollution arising from the Refinery’s restart.11 Initially, ACP was the only ArcLight Entity named in the suits.12 And ACP paid around $1.6 million in fees and expenses between May 2021 and December 2022.13 Later, Fund VI and LBH became defendants to separate suits in January 2023 and February 2023, respectively.14 Eventually, the lawsuits were consolidated in March 2024 into the Consolidated Class Action.15 The class plaintiffs named Fund VI, LBH, and ACP (hereinafter the 9 Affidavit of Jeanna T. Simeone in Supp. of the ArcLight Entities’ Mot. for Partial Summ. J. on Coverage for Pre-Tender Defense Costs ¶¶ 4–6 (D.I. 68) [hereinafter “Simeone Aff.”]. 10 Simeone Aff., ¶ 8. 11 See Aff. of Alexander M. Sugzda in Supp. of the ArcLight Entities’ Mot. for Partial Summ. J. on Coverage for Pre-Tender Defense Costs ¶¶ 7–12 (D.I. 68) [hereinafter “Sugzda Aff.”]; McCurry Aff., ¶ 3. 12 Aff. of Kendall J. Burr in Supp. of Lexington Insurance Company’s Answer to Pl.- Intervenor Freepoint Commodities, LLC’s Mot. for Summ. J. and Cross-Mot. for Partial Summ. J. Regarding Pre-Tender Defense Costs ¶ 10 (D.I. 73) [hereinafter “Burr Aff.”]. 13 Burr Aff., ¶ 15. 14 Sugzda Aff., Ex. B. and Ex. C. 15 Sugzda Aff., ¶ 8. -3- “ArcLight Entities”) as defendants, and alleged that they “haphazardly restarted” refining operations without implementing “critically necessary improvements and repairs” or exercising “proper management or safe operations” of the facility.16 The class plaintiffs also named Freepoint—an indirect investor in the project—as a defendant.17 Freepoint retained the international law firm of Hogan Lovells to defend the lawsuits and billed roughly $772,488.88 in fees and expenses between May 2021 and December 2023.18 After incurring $2.5 million in defense costs, the ArcLight Entities learned of the Policy through counsel.19 C. NOTICE TO LEXINGTON On January 11, 2022, LBR’s counsel, Baker & Hostetler LLP, sent a letter concerning the underlying lawsuits to Lexington.20 That letter identified LBR as the Insured and attached the complaints to each of the underlying lawsuits, which named Freepoint as a defendant[.]”21 Lexington acknowledged LBR’s notice on 16 Sugzda Aff., Ex. D ¶¶ 4, 6, 8, 96–99 (D.I. 68) [hereinafter “Consol. Compl.”]. 17 See Consol. Compl. at 1. 18 Burr Aff., ¶ 18. 19 Simeone Aff., ¶ 11. 20 Aff. of Lauren N. Smith in Supp. of Pl.-Intervenor Freepoint Commodities LLC’s Mot. for Partial Summ. J. on Issue of Coverage for “Pre-Tender” Defense Costs [hereinafter “Smith Aff.”] Ex. B (D.I. 69) [hereinafter “Notice of Claim”]. 21 Notice of Claim. -4- January 28, 2022.22 On May 6, 2022, Lexington responded with a Reservation of Rights letter that detailed each of the underlying suits and named the Policy’s Insureds.23 After agreeing to defend the underlying lawsuits, Lexington noted that it “first received notice of the potential claims against Terminals by email and letter dated January 11, 2022.24 And on February 24, 2023, counsel for Limetree Bay Terminals, LLC, (“LBT”), sent a letter to Lexington requesting to know its position on coverage and attached the amended complaints listing LBH and Fund VI as defendants.25 On January 8, 2024, Freepoint sent a letter to Lexington via its counsel Hogan Lovells US LLP and Moore, Dodson, Russell & Wilhite, P.C. to confirm coverage.26 Upon learning of the Policy and Lexington’s defense of LBT, Fund VI sent a letter to Lexington on January 25, 2024, to confirm that Lexington would defend it as well.27 D. POLICY COVERAGE Lexington issued the Policy to LBR, effective September 25, 2018.28 LBR, 22 Smith Aff., Ex. C. 23 Smith Aff., Ex. D. 24 Id., Ex. F at 16. 25 Sugzda Aff., Exs. B, C, and G (D.I. 68). 26 Smith Aff., ¶ 10 and Ex. G. 27 Simeone Aff., ¶ 14. 28 Sugzda Aff., Ex. A § VI. Definitions, Policy Period, as amended by Endorsement No. 7 -5- LBH, Freepoint, and Fund VI are insured under the Policy.29 The Policy provides coverage for Loss: The Company will pay on behalf of the Insured all sums that the Insured shall become legally obligated to pay as Loss as a result of Claims for Bodily Injury, Property Damage or Environmental Damage resulting from Pollution Conditions caused by Covered Operations. The Pollution Conditions must be unexpected and unintended from the standpoint of the Insured. The Bodily Injury, Property Damage, or Environmental Damage must occur during the Policy Period.30 The Policy also states that “[w]hen a Claim is made against the Insured” to which the Policy applies, Lexington “has the right to defend, including, but not limited to, the right to appoint counsel and the duty to defend such Claim.”31 Included in the Loss definition are Claim Expenses.32 And Claim Expenses are “[f]ees charged by any lawyer designated by [Lexington]” and “[a]ll other fees, costs and expenses resulting from the investigation, adjustment, defense and appeal of a Claim, if authorized by [Lexington].”33 Section III identifies the Insured’s duties when there is a Claim and says (D.I. 68) [hereinafter “Policy”]. 29 Policy § VI. Definitions and Policy Endorsement. No. 3; McCurry Aff., ¶ 4. 30 Policy § I. 1; McCurry Aff., ¶ 5. 31 Id. § I. 2. – “Defense,” as amended by End. 8; McCurry Aff., ¶ 7. 32 Id. § VI. T; McCurry Aff., ¶ 6. 33 Id. § VI. D. -6- that, as a “condition precedent” to the right of coverage provided by the Policy, the Insured must: 1) “give notice as soon as practicable to [Lexington]”; 2) “forward the following to [Lexington] as soon as practicable after receipt” various materials including court pleadings, “technical reports, laboratory data, field notes,” “expert reports, investigations, and data collected by experts,” and “[a]ny other information developed or discovered by the Insured concerning the Claim”; and 3) cooperate with Lexington to “the fullest extent possible by providing assistance necessary to adjust, investigate, and defend the claim.” 34 Also, the Insured cannot “except at such Insured’s own cost, voluntarily make any payment, assume any obligation, or incur any expense . . . without [Lexington’s] prior written consent.”35 E. THE COURT HOLDS THAT LEXINGTON HAS A DUTY TO DEFEND FUND VI, LBH, AND FREEPOINT. Earlier in this litigation, ACP, Fund VI, LBH, and Freepoint moved for partial summary judgment on the issue of Lexington’s duty to defend.36 The Court held a hearing on the motions and granted the motions as to Fund VI, LBH, and Freepoint.37 The Court denied the motion as to ACP because ACP had not 34 Id. § III. A. 35 Id. § V. Q. 36 Plaintiffs’ Motion for Partial Summary Judgment on AIG’s Duty to Defend (D.I. 7); Plaintiff-Intervenor Freepoint Commodities LLC’s Motion for Partial Summary Judgment on AIG’s Duty to Defend (D.I. 29). 37 D.I. 46. -7- “demonstrated at this stage that it is insured under the Policy.”38 II. PARTIES’ CONTENTIONS The ArcLight Entities and Freepoint move for partial summary judgment on the issue of Lexington’s duty to pay pre-tender defense costs.39 They argue that Lexington must show prejudice to avoid paying these costs pursuant to Solera Holdings, Inc. v. XL Spec. Ins. Co.,40 which they posit is clear precedent that Delaware requires a prejudice showing in this scenario.41 Further, they argue that Lexington cannot show prejudice.42 Lexington responds in virtually the same manner to ArcLight and Freepoint; Lexington contends ACP isn’t insured under the Policy.43 In short, Lexington insists that pre-tender costs aren’t reimbursable under Delaware law and there’s no prejudice element in this analysis.44 To Lexington, Solera is an outlier, and Home Insurance Company v. American Insurance 38 Order on Plaintiffs and Plaintiff-Intervenor’s Motions for Partial Summary Judgment (D.I. 48). 39 See generally ArcLight Op. Br. at 15–23; Freepoint Op. Br. at 13–25. 40 213 A.3d 1249 (Del. Super. Ct. 2019), reversed on other grounds, 240 A.3d 1121 (Del. 2020). 41 Arclight Op. Br. at 17; Freepoint Op. Br. at 14–15. 42 ArcLight Op. Br. at 17–22; Freepoint Op. Br. at 19–25. 43 Lexington ArcLight Br. at 20–22. 44 Id. at 22–30. -8- Group45 is the correct case on this issue.46 Alternatively, Lexington says that if the Court determines that a prejudice requirement exists under Delaware law, there is a conflict of laws, and the Court should apply USVI law to this issue.47 Finally, Lexington submits that summary judgment is inappropriate if there is a prejudice requirement since that is a factually-intensive matter for trial.48 In reply, Freepoint reiterates that: (1) Lexington has to show prejudice to avoid paying pre-tender defense costs; (2) there is no conflict of law between Delaware and USVI law; and (3) in any event, Lexington cannot show prejudice.49 As well, the ArcLight Entities maintain that: (1) Lexington cannot show any prejudice to lack of notice or consent; (2) Lexington cannot move for summary judgment against ACP since this goes beyond the scope of the ArcLight Entities’ motion for partial summary judgment; and (3) Lexington has waived any argument to avoid paying for pre-tender costs because this was not raised in its initial resistance to coverage.50 45 2003 WL 22683008, at *4–5 (Del. Super. Ct. Oct. 30, 2003). 46 Lexington ArcLight Br. at 23–30. 47 Id. at 30–35. 48 Id. at 35–39. 49 See generally Plaintiff-Intervenor Freepoint Commodities LLC’s Answering Brief in Opposition to Defendant Lexington Insurance Company’s Cross-Motion for Partial Summary Judgment Regarding Pre-Tender Defense Costs at 2–27 (D.I. 79). 50 See generally The ArcLight Entities’ Opposition to Defendant Lexington Insurance Company’s Cross-Motion for Partial Summary Judgment Regarding Pre-Tender Defense Costs at 11–31 (D.I. 80). -9- Lexington continues to submit that: (1) USVI law would apply if there was a conflict, and USVI law would conflict if the Court finds that Delaware law requires a prejudice showing; and (2) even if the Court decides to require a prejudice analysis, summary judgment should be denied as this is an issue for trial.51 Too, Lexington attests that Fund VI and LBH cannot recover defense costs incurred before they were sued by non-insured ACP and it has not waived any right to rely on policy terms.52 Lastly, the ArcLight Entities hold fast to the arguments made in their prior briefing.53 And Freepoint says that it complied with all the conditions precedent under the Policy, and Lexington didn’t suffer any prejudice.54 III. STANDARDS OF REVIEW A. SUMMARY JUDGMENT This Court can grant a moving party’s motion for summary judgment 51 See generally Defendant Lexington Insurance Company’s Reply Brief in Support of Cross- Motion Against Plaintiff-Intervenor Freepoint Commodities LLC for Partial Summary Judgment Regarding Pre-Tender Defense Costs at 4–23 (D.I. 89). 52 Defendant Lexington Insurance Company’s Reply Brief in Support of Cross-Motion Against ArcLight Entity Plaintiffs for Partial Summary Judgment Regarding Pre-Tender Defense Costs at 4–7, 21–22 (D.I. 91). 53 See generally The ArcLight Entities’ Reply in Support of their Motion for Partial Summary Judgment on Coverage for Pre-Tender Defense Costs at 1–5 (D.I. 90) [hereinafter “ArcLight Reply”]. 54 See generally Plaintiff-Intervenor Freepoint Commodities LLC’s Reply Brief in Support of its Motion for Partial Summary Judgment on Issue of Coverage for “Pre-Tender” Defense Costs at 1–12 (D.I. 92). - 10 - under Delaware Superior Court Rule 56 only when no genuine issue of material fact exists, and the party is entitled to judgment as a matter of law. 55 Summary judgment “will not be granted if there is a material fact in dispute” 56 or if “it seems desirable to inquire thoroughly into [the facts] to clarify the application of the law to the circumstances.”57 The moving party has the burden of demonstrating “its claim is supported by undisputed facts.”58 If the moving party meets its burden, the burden shifts to the non-moving party to show there is a “genuine issue for trial.”59 In determining whether such a genuine issue exists, “the Court must view the facts in the light most favorable to that non-moving party.”60 “Lastly, the Court accepts as true the parties’ factual stipulations.”61 “While the Court may not be able to grant summary judgment ‘if the 55 Del. Super. Ct. Civ. R. 56; Options Clearing Corp. v. U.S. Specialty Ins. Co., 2021 WL 5577251, at *7 (Del. Super. Ct. Nov. 30, 2021); Motors Liquid. Co. DIP Lenders Tr. v. Allianz Ins. Co., 2017 WL 2495417, at *5 (Del. Super. Ct. June 19, 2017). 56 Radulski v. Liberty Mut. Fire Ins. Co., 2020 WL 8676027, at *3 (Del. Super. Ct. Oct. 28, 2020); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”). 57 Ebersole v. Lowengrub, 180 A.2d 467, 468–69 (Del. 1962). 58 Radulski, 2020 WL 8676027, at *3 (citing Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979)). 59 Del. Super. Ct. Civ. R. 56(e); CNH Indus. Am. LLC v. Am. Casualty Co. of Reading, 2015 WL 3863225, at *1 (Del. Super. Ct. June 8, 2015) (“If the motion is properly supported, then the burden shifts to the non-moving party to demonstrate that there are material issues of fact for resolution by the ultimate fact-finder.”). 60 Radulski, 2020 WL 8676027, at *3 (citing Judah v. Del. Tr. Co., 378 A.2d 624, 632 (Del. 1977)). 61 Id. - 11 - factual record has not been developed thoroughly enough to allow the Court to apply the law to the factual record,’”62 “a matter should be disposed of by summary judgment whenever an issue of law is involved and a trial is unnecessary.”63 “[W]hen an ultimate fact to be determined is one of motive, intention or other subjective matter, summary judgment is ordinarily inappropriate.”64 Without doubt, summary judgment is encouraged, but there is no “right” to summary judgment.65 B. CONFLICT OF LAWS Delaware follows a three-part test to determine the choice of law.66 Under this test, courts: (1) determine whether the parties made an effective choice of law through their contract; (2) if not, determine whether there is an actual conflict between the laws of the states each party urges should apply; and (3) if so, analyze which state has the most significant relationship to the claims. 67 For the most 62 Id. at *4 (quoting CNH Indus. Am., 2015 WL 3863225, at *1). 63 Jeffries v. Kent Cty. Vocational Tech. Sch. Dist. Bd. of Educ., 743 A.2d 675, 677 (Del. Super. Ct. 1999); Brooke v. Elihu-Evans, 1996 WL 659491, at *2 (Del. Aug. 23, 1996). 64 Humanigen, Inc. v. Savant Neglected Diseases, LLC, 2021 WL 4344172, at *21 (Del. Super. Ct. Sept. 23, 2021) (quoting LVI Gp. Invs., LLC v. NCM Gp. Hldgs., LLC, 2019 WL 7369198, at *22 (Del. Ch. Dec. 31, 2019)). 65 US Dominion, Inc. v. Fox News Network, LLC, 293 A.3d 1002, 1034 (Del. Super. Ct. 2023) (quoting Telxon Corp. v. Meyerson, 802 A.2d 257, 262 (Del. 2002) (internal quotation marks and citation omitted)). 66 Stillwater Mining Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa, 289 A.3d 1274, 1283 (Del. 2023). 67 Id. - 12 - significant relationship aspect of this test, Delaware looks to the Restatement (Second) of Conflict of Laws.68 The factors considered under the Restatement are: (a) the place of contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation, and place of business of the parties.69 And the Restatement presumes that the law of the state which the parties understood was to be the principal location of the insured risk applies to insurance policies.70 IV. DISCUSSION The Court first addresses whether Lexington waived its right to argue that it isn’t liable for pre-tender costs by not raising the issue in the previous motions for partial summary judgment concerning Lexington’s duty to defend. The Court finds that Lexington didn’t waive this argument because the first motions didn’t encompass this issue. Turning to the merits of the motions, the Court addresses whether the Policy covers pre-tender costs incurred before Lexington was notified. Since the 68 Certain Underwriters at Lloyds, London v. Chemtura Corp., 160 A.3d 457, 465 (Del. 2017). 69 RESTATEMENT (SECOND) OF CONFLICT OF LAWS [hereinafter “Restatement”] § 188 (A.L.I. 1971). 70 Chemtura, 160 A.3d at 465. - 13 - Policy doesn’t have a choice-of-law provision, the Court must compare the laws of Delaware and the USVI to determine whether there is a conflict between the jurisdictions. Under Delaware law, Lexington must demonstrate that the lack of notice and lack of consent prejudiced Lexington to excuse Lexington from paying pre-tender costs. But there is a conflict between USVI law and Delaware law because no caselaw suggests that USVI courts would adopt that minority view requiring such showing of prejudice. If anything, there is caselaw suggesting that USVI courts would adopt the majority view that insurers aren’t liable for pre- tender costs. And, no doubt, USVI has a more significant relationship since that is the location of the insured risk. Thus, since USVI law applies to this issue, Lexington isn’t liable for pre-tender costs and need not show prejudice. While it could not definitively do so earlier, the Court now confirms that the Policy doesn’t cover ACP. The reason is that the Policy doesn’t list ACP as an insured, and ACP has failed to demonstrate that it can prove it is covered. So, ACP isn’t entitled to any pre-tender costs. Lastly, the Court determines the dates of tender relating to costs. Only Freepoint and Fund VI properly requested coverage and cannot recover costs spent before those dates. LBH never requested coverage and isn’t entitled to any costs. - 14 - A. LEXINGTON DID NOT WAIVE ITS RIGHT TO ASSERT THAT IT IS NOT LIABLE FOR PRE-TENDER COSTS. If a party seeks summary judgment on all issues relating to a claim, the opposing party is on notice that it should raise any issue relating to the claim.71 Failure to raise these issues can lead to a finding of waiver.72 Earlier in this suit, the ArcLight Entities and Freepoint moved for partial summary judgment on the issue of Lexington’s duty to defend.73 Lexington opposed the motions but didn’t cross-move for partial summary judgment.74 The pre-tender costs issue did not come within the scope of the earlier motion practice. The prior motions concerned the underlying complaints and whether they triggered the duty to defend. Lexington wasn’t required to argue that, in the alternative, even if it has a duty to defend, it isn’t liable for pre-tender costs. Accordingly, Lexington didn’t waive its right to assert that pre-tender costs aren’t recoverable. B. DELAWARE REQUIRES INSURERS TO SHOW PREJUDICE TO ESCHEW COVERAGE BASED ON AN INSURED BREACHING A CONDITION PRECEDENT TO COVERAGE. To begin its substantive analysis here, the Court looks at Delaware’s 71 N. Am. Leasing, Inc. v. NASDI Holdings, LLC, 276 A.3d 463, 471 (Del. 2022). 72 Id. 73 D.I. 7, 29. 74 D.I. 31, 32. - 15 - history of considering prejudice to insurers when an insured breached a condition to coverage in an insurance policy. When laying this history alongside Delaware’s abhorrence of forfeiture relating to insurance and conditions precedent in contracts, one must conclude that Delaware law requires an insurer to show prejudice before that insurer can avoid paying pre-tender costs. 1. The Implied-Prejudice Rule. In 1974, our Supreme Court confronted an issue of first impression: is an insurance carrier freed of liability on its policy in the absence of some showing that the insured’s breach caused the insurer’s interest to be prejudiced?75 The Court recognized a jurisdictional split on the issue.76 The Court also observed that, no doubt, the purpose of a notice provision is to protect an insurance company from any resulting prejudice.77 But an insurance contract should be read to accord with the reasonable expectations of the purchaser so far as its language will permit.78 While expressing concern with the result of forfeiture, the Court determined that “when an insured fails in his burden of proving compliance with the notice condition, before any forfeiture can result, the insurer 75 State Farm Mut. Auto. Ins. Co. v. Johnson, 320 A.2d 345, 346 (Del. 1974). 76 Id. 77 Id. at 347. 78 Id. - 16 - has the burden of showing that it has thereby been prejudiced.”79 A decade later, this Court addressed a similar issue involving a policy’s consent-to-settlement provision in Hall v. Allstate Insurance.80 After noting the Supreme Court’s Johnson decision, this Court decided that “prejudice to the insurer should also be considered in cases of violation of the consent-to- settlement provision of an insurance policy.”81 In doing so, the Court expanded the reach of the Johnson prejudice analysis to include notice provisions and consent-to-settlement provisions as well. The Hall decision has been cited by this Court as precedent that the implied-prejudice rule applies to consent-to- settlement provisions in insurance agreements.82 Forty years after Hall, in Home Insurance Co. v. American Insurance Group, this Court addressed the type of notice required to trigger the duty to defend.83 The Court acknowledged that the Delaware Supreme Court hadn’t yet spoken on that issue and that other jurisdictions were divided on it.84 The Court 79 Id. 80 See Hall v. Allstate Ins. Co., 1985 WL 1137299, at *7 (Del. Super. Ct. Jan. 11, 1985). 81 Id. at *8–9. 82 Allstate Ins. Co. v. Fie, 2006 WL 1520088, at *4 n.20–21 (Del. Super. Ct. Mar. 9, 2006); Solera Holdings, Inc. v. XL Specialty Ins. Co., 213 A.3d 1249, 1258–59 (Del. Super. Ct. 2019), opinion clarified, 2019 WL 4120688 (Del. Super. Ct. Aug. 29, 2019), and rev’d on other grounds sub nom. In re Solera Ins. Coverage Appeals, 240 A.3d 1121 (Del. 2020). 83 Home Ins. Co. v. Am. Ins. Grp., 2003 WL 22683008, at *4 (Del. Super. Ct. Oct. 30, 2003). 84 Id. - 17 - then concluded that the insurer was only liable for defense costs that arose after being notified of the underlying lawsuit the plaintiffs sought coverage for, without completing a prejudice analysis.85 Later, the Southern District of New York cited Home Insurance when concluding that, under Delaware law, an insurer is not liable for the pre-tender defense costs incurred by the insured, irrespective of the existence of prejudice.86 Then, in Solera Holdings, Inc. v. XL Specialty Insurance Company,87 this Court found that there was no reason the implied-prejudice requirement that Delaware courts apply to consent-to-settle clauses would not also apply to consent-to-defense provisions and applied the implied-prejudice rule to pre- tender costs.88 Lexington argues that Solera wrongly applied the implied- prejudice rule to a consent-to-defense provision and cites back to Home Insurance.89 85 Id. at *4–5. 86 Abrams v. RSUI Idemnity Co., 272 F. Supp. 3d 636, 641–42 (S.D.N.Y. 2017). 87 213 A.3d 1249 (Del. Super. Ct. 2019) rev’d on other grounds sub nom. In re Solera Ins. Coverage Appeals, 240 A.3d 1121 (Del. 2020). 88 Id. at 1258–59. 89 Lexington ArcLight Br. at 24–30. One would rightly consider Home Insurance an outlier as: 1) it appears only one Delaware court has ever cited it—and did not cite it relating to pre- tender costs; 2) it did not mention forfeiture; and 3) it did not mention prejudice. See Juliano v. State, 254 A.3d 369, 383 (Del. 2020) (finding that a Superior Court decision was an outlier as it had not been followed in any other Superior Court decisions). What’s more, the Court is persuaded that—were it to speak on the matter—the Delaware Supreme Court would likely require a showing of prejudice; this is fleshed out further below. - 18 - Harmonizing this caselaw, the Court finds that Delaware courts have consistently been concerned with the harsh outcome of forfeiture in insurance disputes when the policy would otherwise provide coverage. And, thus, they apply the implied- prejudice rule regularly.90 Indeed, most other courts have held that a showing of prejudice is required before forfeiture in insurance contracts when the insured fails to comply with a condition precedent and the policy expressly provides coverage.91 That said, courts are split on whether the implied-prejudice rule applies to pre-tender costs, and the majority rule is that an insurer isn’t liable for 90 Johnson, 320 A.2d at 347 (“Therefore, we hold that when an insured fails in his burden of proving compliance with the notice condition, before any forfeiture can result, the insurer has the burden of showing that it has thereby been prejudiced.”); Wilhelm v. Nationwide Gen. Ins. Co., 2011 WL 4448061, at *3–4 (Del. Super. Ct. May 11, 2011), aff’d, 29 A.3d 246 (Del. 2011) (recognizing the Johnson decision and the Court’s concern of forfeiture when a claim is covered by the policy); see also Med. Depot, Inc. v. RSUI Indem. Co., 2016 WL 5539879, at *11 (Del. Super. Ct. Sept. 29, 2016), abrogated on other grounds by First Solar, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 274 A.3d 1006 (Del. 2022) (“Delaware law abhors forfeiture where to do so would deny the insured the very thing paid for.”). 91 See Hernandez v. Gulf Grp. Lloyds, 875 S.W.2d 691, 692 (Tex. 1994) (“We hold that an insurer may escape liability on the basis of a settlement-without-consent exclusion only when the insurer is actually prejudiced by the insured’s settlement with the tortfeasor.”); Lauric v. USAA Cas. Ins. Co., 209 P.3d 190, 193 (Colo. App. 2009) (“We conclude that the notice- prejudice rule applies to an insured’s failure to notify the insurer and obtain its consent to a settlement in violation of notice and consent-to-settle clauses in a UIM case.”); State Farm Mut. Auto. Ins. Co. v. Fennema, 110 P.3d 491, 492 (N.M. 2005) (“[W]e hold that for an insurer to justify foreclosing an insured’s right to underinsured motorist benefits, the insurer must demonstrate it was substantially prejudiced by the insured’s breach of the consent-to-settle provision.”); Nationwide Ins. Co. v. Schneider, 906 A.2d 586, 591 (Pa. Super. Ct. 2006), aff’d, 960 A.2d 442 (Pa. 2008) (“Even if the primary UIM insurer is a “liable party” under the UIM provisions of the policy, when an insured settles in contravention of a policy’s consent-to-settle clause, an insurer must show that its interests are prejudiced.”); Dominion Energy, Inc. v. Zurich Am. Ins. Co., 2016 WL 1032771, at *6–7 (D. Conn. Mar. 15, 2016) (applying Massachusetts law and determining that insurer had to pay pre-tender costs since there was no prejudice). - 19 - these costs.92 2. Were one using Delaware law, the Policy would be viewed as creating conditions precedent to coverage—not exclusions—and Lexington would have to show prejudice to avoid covering pre- tender costs. Insurance policies are contracts.93 So long as an insurance contract doesn’t exclude coverage required by law, doesn’t violate any statute, and doesn’t violate any public policy, the insurance agreement determines the extent of the insurer’s liability.94 In Delaware, contract interpretation is a determination of law.95 The Court will construe the contract “as a whole, giving effect to all provisions therein.”96 Clear and unambiguous language will be given its ordinary and usual meaning.97 And in the end, an insurer shoulders the burden of proving that a loss or claim is excluded under the policy.98 First, for Lexington to be liable for these pre-tender costs, the Policy must 92 See Am. Mut. Liab. Ins. Co. v. Beatrice Companies, Inc., 924 F. Supp. 861, 873–74 (N.D. Ill. 1996), as amended (Apr. 25, 1996) (discussing the two differing approaches to pre-tender costs without notice). 93 IDT Corp. v. U.S. Specialty Ins. Co., 2019 WL 413692, at *7 (Del. Super. Ct. Jan. 31, 2019). 94 16 Williston on Contracts § 49:1 (4th ed. 2025). 95 CNH Am., LLC v. Am. Cas. Co. of Reading, Pennsylvania, 2014 WL 626030, at *4 (Del. Super. Ct. Jan. 6, 2014). 96 Id. 97 Id. 98 See Natl. Union Fire Ins. Co. Pittsburgh, P.A. v. Rhone-Poulenc Basic Chemicals Co., 1992 WL 22690 (Del. Super. Ct. Jan. 16, 1992), aff’d sub nom, Rhone-Poulenc Basic Chemicals Co. v. Am. Motorists Ins. Co., 616 A.2d 1192 (Del. 1992). - 20 - provide for coverage. Here, the pre-tender costs and fees fall under Claim Expenses in the Policy. And the Policy provides that Claim Expenses are “[f]ees charged by any lawyer designated by [Lexington]” and “[a]ll other fees, costs and expenses resulting from the investigation, adjustment, defense and appeal of a Claim, if authorized by [Lexington].”99 The natural read of this language is that Lexington must give authorization as a condition to coverage of fees and costs relating to the defense of a Claim. So, the Policy covers these pre-tender costs, provided that the Insureds obtained Lexington’s authorization.100 In other words, the authorization requirement is a consent provision. In addition, there are other express conditions precedent in the Policy. The non-occurrence of a condition precedent can lead to a forfeiture.101 “A condition precedent is an act or event, other than a lapse of time, that must exist or occur before a duty to perform something promised arises.”102 And “‘[a] forfeiture is generally understood as a deprivation of rights or property as a result 99 Policy § VI. D. (emphasis added). 100 Because of the conditional language, the Court views the authorization requirement as a condition precedent to coverage, not as an exclusion to coverage. See 17 Williston on Contracts § 49:111 (4th ed. 2025) (“Exclusions from or exceptions to coverage are different from . . . conditions set forth in policies, although the two are often confused. An exception or exclusion in a policy of insurance is a limitation of liability or a carving out of certain types of loss to which the coverage or protection of the policy does not apply.”). 101 Thompson St. Capital Partners IV, L.P. v. Sonova United States Hearing Instruments, LLC, 340 A.3d 1151, 1168 (Del. 2025) (citation omitted). 102 Id. at 1167 (emphasis in original) (cleaned up). - 21 - of the nonperformance of some obligation or condition.’”103 Here, the Policy provides that Lexington is on the hook for fees and costs related to a Claim if they are authorized by Lexington.104 The use of terms like “if,” “provided that,” “on condition that,” or some other phraseology that conditions performance usually connotates an intent for a condition rather than a promise.105 The “if” in the Policy shows an intent to create a condition precedent, and Lexington’s authorization is an act that had to exist to trigger coverage for Claim Expenses. Therefore, Lexington’s authorization is a condition precedent to coverage, not an exclusion of coverage for any fees that Lexington didn’t authorize. The express conditions in the Policy are much easier to identify as conditions. The parties expressly call them conditions to coverage.106 Under the express conditions, and relevant to these motions, the Insured had to give notice to Lexington to obtain coverage.107 “‘For a condition to effect a forfei