A Delaware judge has ruled that Verizon Communications Inc.is owed $48 million from insurers from having defended ashareholder suit seeking $14 billion over thetelecommunication giant's spin off of its print and electronicdirectories business in 2006.

Years-long fight for insurance reimbursement

The ruling from Delaware Superior Court JudgeWilliam C. Carpenter Jr. granted final judgment to Verizon in itsyears-long fight for advancement of defense costs, and shut down aneffort by the company's excess insurers to investigate thereasonableness of the costs Verizon had claimed.

Rather, it would be up to the state's high court toultimately decide the central issue of whether the insurers were infact responsible for advancing Verizon its costs, Carpentersaid.

“It is the court's opinion that it is simply time to stop thislitigation Ferris wheel. In spite of the assertions by thedefendants to the contrary, the litigation will end only wheneither the parties accept this court's prior decision or it isaffirmed or reversed by the Delaware Supreme Court,” he wrote in a32-page opinion. “Granting final judgment will allow this path tooccur.”

Original lawsuit dismissed

The decision came more than one year after Carpenter ruled thata unit of AIG Inc. and several excess insurers were obligated topay Verizon more than $48 million related to litigation in a Texasfederal court over the company's spin off of its directoriesbusiness, which later went bankrupt.

The case, which sought $14 billion in damages against Verizonand executive John Diercksen, was dismissed by the U.S.District Court for the Northern District of Texas, in adecision that was later upheld by the U.S. Court of Appeals for theFifth Circuit.

Qualified as securities claims under primary insurancepolicy

Key to Carpenter's earlier ruling was the judge's finding thatthe claims for fraudulent transfer and breach of fiduciary dutiesin the Texas litigation pertained to laws regulating securities andthus qualified as securities claims under Verizon's primaryinsurance policy.

Illinois National Insurance Co., the primary insurer andAIG affiliate, later conceded that Verizon was entitled torecovery under the policy; however, excess insurers XL Specialty Insurance Co., Zurich AmericanInsurance Co. and Twin City Fire Insurance Co. held out againstVerizon's motion for final judgment, contending that they did notowe anything because the primary insurer had not yet paid Verizonunder its policy.

Judge rejected insurers' argument for additional discovery

Instead, the insurers argued that another round of discovery wasneeded to determine whether the amount was reasonable, and theychallenged Verizon's position that it was entitled to prejudgmentinterest on the costs.

Last week, Carpenter rejected the argument as an attempt to“prolong” the litigation, saying that the excess insurers had nevercontested a single invoice it had received from Verizon over thecourse of four years.

“The defendants' position on coverage lived and died on theissue of 'securities claim' and to continue the litigation is notonly unreasonable but would condone the excess insurers continualfailure to comply with the insurance policies,” Carpenter said.

'Proper & most reasonable decision'

“As a result, the court believes that the proper and mostreasonable decision is to grant final judgment and if theparties desire, let the Supreme Court decide if this court hasproperly decided the securities claim issue. Otherwise, the excessinsurers, who have not challenged a single invoice, would stallthis litigation for years at great expense to everyone whilereviewing thousands of invoices.”

An attorney for Verizon on Wednesday declined to comment on thedecision.

According to Carpenter's ruling, Verizon is entitled to fullreimbursement of $48 million, plus prejudgment interest of 5.75%from January 2014 to March 24, 2017.

Tom McParland of DelawareLaw Weekly can be contacted at 215-557-2485 or at [email protected].Follow him on Twitter @TMcParlandTLI.