On March 5, 2026, the Delaware Supreme Court unanimously affirmed two Superior Court rulings and a final judgment in favor of Genworth and its life insurance subsidiaries. The case, originally filed on May 9, 2022, involved eight professional liability insurers across an approximately $80 million coverage tower with a $25 million self-insured retention. Four of the original defendants - Freedom Specialty, Continental Casualty, Atlantic Specialty, and Argonaut - settled with Genworth before the case reached the Supreme Court.
The dispute stemmed from three class action lawsuits brought by long-term care policyholders who accused Genworth of failing to disclose planned premium rate increases - some internally projected closer to 300%. The Skochin Action alone cost Genworth over $213 million in settlement payments and approximately $26.5 million in class counsel fees.
The remaining four insurers — AIG Specialty, AXIS, U.S. Specialty, and ACE American - denied coverage based on three policy exclusions.
In its September 2023 ruling, the Superior Court rejected two of those defenses outright. The Claim Reserves Exclusion, which denied coverage for losses tied to "the inadequacy of any claim reserves of the Company," failed because the court found the class actions targeted Genworth's disclosure failures - not the adequacy of its reserves. Under Virginia law, the court noted, exclusionary language must be "construed most strongly against the insurer." The Underwriting Exclusion likewise failed because its built-in carve-back exempted claims "arising out of the sale and marketing of insurance or investment products" - precisely what the class actions alleged.
The third exclusion - the Premiums Exclusion, which barred coverage when losses constitute "premiums, return premiums or commissions" - required a second round of discovery and briefing. In its February 2025 ruling, the court drew a line through the settlement payments. Flat-dollar payments made to policyholders who had already stopped paying premiums - the "NFS Option" - were not a return of premiums. They compensated for Genworth's alleged non-disclosure, not inflated rates. Payments under the "PBO" and "RBO" options, which were calculated based on premiums policyholders had actually paid, were treated differently - but the distinction did not alter the outcome.
The court found that the NFS payments alone were large enough to exhaust the remaining retention and the insurers' full policy limits. Genworth was entitled to recover up to the insurers' policy limits regardless of how the remaining settlement categories were classified.
The Delaware Supreme Court affirmed all rulings in full (Genworth Financial, Inc. v. AIG Specialty Insurance Company, C.A. No. N22C-05-057 EMD CCLD (Del. Super.), aff'd, No. 325, 2025 (Del. Mar. 5, 2026)).
For insurers and claims professionals, the case is a reminder that exclusion arguments do not always carry the day — especially when a single category of covered loss is large enough to exhaust the tower on its own.
