(Article from Insurance Law Alert, January 2026)
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Holding
A policyholder is not bound, for insurance coverage purposes, by the damages valuation it pursued or recovered in the underlying litigation. Hartree Nat. Gas Storage, LLC v. AIG Specialty Ins. Co., No. N22C-05-081, 2025 Del. Super. LEXIS 1291 (Del. Super. Ct. Dec. 9, 2025).
Background
Hartree Natural Gas Storage acquired an energy center from PAA Natural Gas Storage and purchased representations and warranties insurance to cover seller breaches, including a second-layer excess policy from AIG that attached above approximately $56 million in losses. After closing, Hartree discovered that gas was missing and that it had overpaid for the transaction. Hartree notified its insurers that it was seeking coverage for (1) the costs of replacing the missing gas and (2) overpayment damages based on discounted cash flow analysis of the entire transaction. Coverage was denied.
In the underlying litigation against PAA, Hartree initially advanced two damages theories—one for the cost of replacing the missing gas valued at about $55 million, and the other for a “loss-of-sale-value” theory estimated at $90 million. At trial, Hartree abandoned the loss-of-sale-value theory and proceeded only on the missing-gas claim, ultimately recovering about $30 million.
Hartree then sued AIG for coverage under the excess policy. AIG moved for summary judgment, arguing that the excess layer was not triggered because Hartree recovered only $30 million in the underlying case and could not now claim damages exceeding $90 million.
Decision
The court denied AIG’s motion, rejecting each of the doctrines AIG relied on to bar Hartree’s higher damages claim. Collateral estoppel did not apply because the loss-of-sale-value theory was never litigated or decided. Judicial and quasi-judicial estoppel failed because the underlying court did not adopt, rely on, or make findings about Hartree’s withdrawal of that theory. Waiver and law-of-the-case theories were inapplicable because they operate only within the same litigation.
The court also held that unresolved factual issues precluded summary judgment, including whether Hartree complied with the policies’ subrogation and mitigation provisions.
Comments
This ruling underscores that excess insurers cannot assume they are off the risk simply because underlying litigation resolves below attachment points. A policyholder may pursue a narrower or lower-risk damages theory against a counterparty and later seek coverage on a higher valuation under its insurance program.