Mattel, Inc. v. XL Insurance America, Inc.

SUPERIOR COURT
OF THE
STATE OF DELAWARE

MEGHAN A. ADAMS LEONARD L. WILLIAMS JUSTICE CENTER
JUDGE 500 NORTH KING STREET, SUITE 10400
WILMINGTON, DELAWARE 19801
(302) 255-0634

June 2, 2025

TO: COUNSEL OF RECORD

RE: Mattel, Inc. v. XL Insurance America, Inc., et al.
C.A. No.: N23C-01-042 MAA CCLD
Dear Counsel, 1

In its previous Memorandum Opinion (the “Prior Opinion”) regarding the

Parties’ cross-motions for summary judgment, the Court designated certain issues as

reserved for later decision.2 The Parties have met and conferred regarding the Prior

Opinion.3 The Court now resolves the reserved issues.

A. The Corridor Retention Endorsements

The Corridor Retention Endorsements were discussed in the Facts section of

the Prior Opinion.4 Under the terms of the Umbrella Policies’ Corridor Retention

Endorsements, Mattel must pay $2,000,000 per occurrence before an individual

1
The Court incorporates by reference the entirety of the Prior Opinion, including the defined terms
and short-form citations contained therein. Mattel, Inc. v. XL Ins. Am., Inc., 2025 WL 948008 (Del.
Super. Mar. 28, 2025) (D.I. 714) [“Prior Opinion”].
2
Id. at *12.
3
Letter to The Honorable Meghan A. Adams from Jennifer C. Wasson Regarding Unresolved
Issues, at 1 (D.I. 728).
4
Prior Opinion at *2.
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Umbrella Policy will respond.5 In the Prior Opinion, the Court held that all of the

RNPS Claims constitute a single occurrence under the terms of the Policies.6

Because a Corridor Retention applies per occurrence, 7 Mattel is responsible for one

single Corridor Retention amount ($2,000,000) that applies to every Policy.

The Chubb Umbrella Policies are silent on whether defense costs may erode

a Corridor Retention amount. Some evidence indicates the Parties intended to

exclude defense costs from eroding a Corridor Retention.8 This Court makes no

determination on whether defense costs may erode the Chubb Umbrella Policies’

Corridor Retention Endorsements on summary judgment, instead leaving the issue

for factual resolution at trial.9

B. The National Union OAE and PCOH Endorsement

National Union argues its 2011 Umbrella Policy follows form to the

underlying Primary Policy, adopting the Deemer Clause in the 2011 LBC.10 National

Union directs the Court to the 2011 Umbrella Policy’s PCOH Endorsement, which

5
Id. (emphasis added).
6
Id. at *8.
7
See, e.g., JPA Ex. 19 at ACE-RNP00000886 (D.I. 537).
8
Chubb’s Omnibus Answering Br. in Opp’n. to Mattel’s and Great American’s Mots. for Partial
Summ. J. [“Chubb Answering”] Ex. PPP at MARSH-MAT-0001112 (D.I. 620).
9
See, e.g., Capano v. Lockwood, 2013 WL 2724634, at *2 (Del. Super. May 31, 2013) (“Therefore,
summary judgment will not be granted if it appears that there is a material fact in dispute or that
further inquiry into the facts would be appropriate.” (citation omitted)).
10
National Union MSJ at 25, 35.
2
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N23C-01-042 MAA CCLD
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provides that coverage for liability arising out of the PCOH applies only if the

underlying 2011 Primary Policy covers PCOH claims, and that:

Coverage under this policy for such liability will follow the terms,
definitions, conditions and exclusions of Scheduled Underlying
Insurance, subject to the Policy Period, Limits of Insurance, premium
and all other terms, definitions, conditions and exclusions of this policy.
Provided, however, that coverage provided by this policy will be no
broader than the coverage provided by Scheduled Underlying
Insurance.11

National Union contends its 2011 Umbrella Policy adopts the LBC, including the

Deemer Clause, pursuant to this PCOH Endorsement.12 National Union’s 2011

Umbrella Policy also contains an OAE, which lacks a Deemer Clause, just like the

OAE in the Chubb Policies.13

Mattel argues the presence of the OAE in National Union’s Policy defeats

National Union’s argument. Mattel contends reading the PCOH Endorsement as

adopting the LBC renders the OAE meaningless.14 Because the PCOH Endorsement

provides that PCOH coverage is “subject to the…terms…of [the 2011 National

Union Umbrella Policy],” Mattel argues the OAE supplants any adopted LBC

11
JPA Ex. 17 at NATIONALUNION_0001915.
12
National Union MSJ at 35.
13
JPA Ex 17 at NATIONALUNION_0001921
14
Mattel’s Opp. to National Union’s Mot. for Summ. J. [“Mattel Resp. to National Union”] at 16
(D.I. 617).
3
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language.15 Great American contends that there is at least a genuine issue of material

fact on whether National Union’s 2011 Umbrella Policy adopts the LBC.16

National Union counters that the PCOH Endorsement adopts the LBC without

rendering the OAE superfluous.17 National Union first argues the OAE and PCOH

Endorsement are consistent, and that the OAE batches claims into a single

“occurrence” while the PCOH Endorsement deems them to a particular year.18 The

Court is not persuaded. If the PCOH Endorsement adopts the LBC in full, then the

adopted LBC serves as both a batching clause and a Deemer Clause, and the OAE

is unnecessary.

National Union also notes slight language differences between the LBC

batching provision, which requires claims to be “substantially the same,” and the

OAE batching provision, which requires claims to be “the same.”19 National Union

further explains that, if the language of the two batching clauses is held to conflict,

the OAE will trump the LBC with respect to batching, but the LBC’s Deemer Clause

will still be adopted by the PCOH Endorsement.20

15
Id. at 17.
16
Great American’s Br. in Opp. to National Union’s Mot. for Summ. J. [“Great American Resp. to
National Union”] at 4 (D.I. 623).
17
National Union’s Omnibus Reply Br. in Supp. of Mot. for Summ. J. [“National Union Reply”]
at 15 (D.I. 641).
18
Id. at 15-16.
19
Id. at 16, fn. 4.
20
Id. at 16.
4
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The OAE batches together claims arising out of “two (2) or more discrete

units of the same or substantially similar [product]” where the claims arise out of

“the same” issue with the product.21 The LBC batches together claims arising out

of one “lot” of products – meaning “(2) or more discrete units of the same or

substantially similar good or product” – where the claims arise out of “substantially

the same” issue with the product.22 These batching provisions contain functionally

identical language.

National Union points to contracts caselaw confirming California courts can

consider contexts outside of the instant case in determining whether a provision is

superfluous.23 National Union first argues that, because the OAE contains a separate

paragraph unrelated to batching, it is not superfluous.24 The existence of a separate,

unique paragraph in the OAE has no bearing on whether the OAE’s batching clause

is superfluous.

National Union next argues that the OAE is not superfluous, even if the LBC

is incorporated into the National Union 2011 Umbrella Policy, because the Primary

21
JPA Ex. 17 at NATIONALUNION_0001921.
22
JPA Ex. 3 at ACE-RNP00015240.
23
See Aerojet-Gen. Corp. v. Com. Union Ins. Co., 155 Cal. App. 4th 132, 145 (2007) (considering
a hypothetical scenario in determining whether an insurance policy provision was superfluous);
Meraz v. Farmers Ins. Exch., 92 Cal. App. 4th 321, 327 (2001) (same).
24
National Union Reply at 17.
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Policy containing the LBC could be terminated mid-term.25 In that event, according

to National Union, the LBC would no longer be adopted by the National Union

Umbrella Policy, and the OAE would take effect.26 National Union thus argues the

OAE is “a belt-and-suspenders” provision.27

The PCOH Endorsement “follow[s] the terms, definitions, conditions, and

exclusions of the Scheduled Underlying Insurance.”28 “Scheduled Underlying

Insurance” is a defined term and refers to specific insurance policies in effect at the

time the 2011 National Union Umbrella Policy was executed. 29 In the event the

Scheduled Underlying Insurance was cancelled mid-term, this Court is not

convinced the PCOH Endorsement would be affected. The PCOH Endorsement

would already have adopted the terms of those now cancelled policies.

Under California law, “contracts—even insurance contracts—are construed to

avoid rendering terms surplusage.”30 To read the PCOH Endorsement as adopting

the LBC would render the OAE superfluous. On the other hand, the OAE contains

no language explicitly superseding or nullifying the follow-form language of the

25
Id. at 18.
26
Id.
27
Id. at 19.
28
JPA Ex. 17 at NATIONALUNION_0001915.
29
Id. at NATIONALUNION_0001873-74.
30
ACL Techs., Inc. v. Northbrook Prop. & Cas. Ins. Co., 17 Cal. App. 4th 1773, 1785 (1993), as
modified (Sept. 21, 1993).
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PCOH Endorsement. A genuine issue of material fact exists: was the PCOH

Endorsement intended to incorporate the language of the LBC in full, including the

Deemer Clause? The Court cannot make this determination on a motion for

summary judgment.31

C. The Trailing Retention Endorsement

The parties dispute whether the Trailing Retention Endorsement is implicated

in this case, and, if so, how the Trailing Retention Endorsement impacts coverage.

The Court cannot yet interpret this Endorsement. By its plain language, the

Trailing Retention Endorsement is only triggered if the aggregate limits of liability

under any “underlying insurance” are reduced or exhausted by the payment of

“loss.”32 “Loss” “means those sums paid in the settlement a claim or ‘suit’ or

satisfaction of a judgment which the ‘insured’ is legally liable to pay as damages

because of ‘bodily injury’, ‘property damage’, or ‘personal and advertising injury’,

after making proper deduction for all recoveries and salvages.”33

This trigger language means the converse is also true: under the plain language

of the Trailing Retention Endorsement, if Mattel has not yet reduced or exhausted

31
See, e.g., Capano, 2013 WL 2724634, at *2 (“Therefore, summary judgment will not be granted
if it appears that there is a material fact in dispute or that further inquiry into the facts would be
appropriate.” (citation omitted)).
32
See, e.g., JPA Ex. 19 at ACE-RNP00000873.
33
Id. at ACE-RNP00000842.
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the limits of any “underlying insurance” by the payment of “loss,” the Trailing

Retention Endorsement has not been triggered.

Such a clarification means a great deal in the context of the duty to defend.

Based on the language of the Trailing Retention Endorsement, if Mattel has paid

“loss” which eroded or exhausted the limits of the policies underlying Chubb’s

Umbrella Policies, then the Trailing Retention Endorsement is triggered, removing

Chubb’s duty to defend.34 If the “underlying policies” are untapped, and the Trailing

Retention Endorsement is not triggered, then Chubb maintains the duty to defend,

as the Trailing Retention Endorsement’s duty-to-defend disclaimer has not and

cannot take effect without the Trailing Retention Endorsement first having been

triggered. Such an outcome is curious: if the “underlying policies” are untapped,

Chubb has a duty to defend, but if Mattel has already ever paid any “loss” under the

“underlying policies” Chubb has no duty to defend. The Court is not convinced this

outcome reflects the parties’ intent.

Counsel for Starr explained, at oral argument, that it believes the Trailing

Retention Endorsement, at most, impacts the RNPS Claims allocated to 2013, as

2013’s Primary Policy is the only first-layer policy implicated.35 The Court is not

so certain, as the language of the Trailing Retention Endorsement indicates a Trailing

34
Id. at ACE-RNP00000873.
35
Tr. 165:6-15.
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Retention is implicated where any of the “underlying insurance” policies have been

reduced or exhausted by “loss.”36 The Umbrella Policies sit above various first-layer

policies, including the Primary Policies and other policies which are not relevant to

this action.37 Under the plain language of the Trailing Retention Endorsement, if

any of the aggregate limits of these “underlying policies” are reduced or exhausted

by “loss” paid in unrelated cases, the Trailing Retention Endorsement may be

triggered in this case, potentially eliminating Chubb’s duty to defend.

Additionally, the Trailing Retention Endorsement, unlike the Corridor

Retention Endorsements, does not clarify whether it applies per claim or per

occurrence. The Trailing Retention Endorsement defines a “Trailing Retention” as

an amount Mattel will pay “in the settlement of any claim or ‘suit’ to which this

policy applies.”38 This language appears to indicate that a Trailing Retention is only

due in cases Mattel settles, as opposed to cases where a judgment is entered against

Mattel – a result which seems unintended. This language concerning “any claim or

suit” potentially – but inconclusively – indicates the parties to Chubb’s Umbrella

Policies intended for the Trailing Retention Endorsement to apply on a per claim

basis.

36
See, e.g., JPA Ex. 19 at ACE-RNP00000873.
37
Id. at ACE-RNP00000823-826 (outlining the various policies included as “underlying
insurance” for the 2013 Umbrella Policy).
38
Id. at ACE-RNP00000873.
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If the Trailing Retention applies on a per claim basis, Chubb’s duty to defend

would be further reduced. Mattel would be required to pay a Trailing Retention for

every RNPS Claim allocated to a policy year in which the Trailing Retention

Endorsement has been invoked (potentially every relevant policy year, as explained

above), thereby preventing Mattel from seeking defense in any RNPS Claim.

The Court remains uncertain that any of the explanations for the Trailing

Retention Endorsement provided by the Parties clearly evidences the parties’ intent

given the strangeness of the provision. This genuine issue of material fact precludes

a summary judgment ruling on the workings of the Trailing Retention

Endorsement.39

The Motions for Summary Judgment are resolved in accordance with this

letter and the Prior Opinion.

IT IS SO ORDERED.

39
See, e.g., Capano, 2013 WL 2724634, at *2 (“Therefore, summary judgment will not be granted
if it appears that there is a material fact in dispute or that further inquiry into the facts would be
appropriate.” (citation omitted)). There is no right to summary judgment. Cross v. Hair, 258 A.2d
277, 278 (Del. 1969).
10