A Delaware court has refused to let AIG Specialty escape a representations and warranties insurance (RWI) coverage fight with Hartree Natural Gas Storage over a gas storage deal.
In a memorandum opinion and order dated December 9, 2025, Judge Paul R. Wallace of the Delaware Superior Court’s Complex Commercial Litigation Division denied AIG’s motion for summary judgment, keeping the excess carrier in the case.
The dispute stems from Hartree’s June 2021 purchase of the Pine Prairie Energy Center from PAA Natural Gas Storage, L.P., under a Membership Interest Purchase Agreement (MIPA). Hartree bought a stack of buyer-side representations and warranties insurance for the deal: a primary policy from Euclid with US$25 million of cover above a US$6.375 million retention, a US$25 million first excess layer from Liberty, and a US$13.75 million second excess layer from AIG Specialty. AIG’s layer responds only if Hartree’s covered loss exceeds US$56.375 million in total.
After taking over the facility, Hartree said it discovered serious issues, including missing base gas. It told its insurers that it believed it had overpaid for Pine Prairie and that its loss would include both the cost of replacing the missing gas and any overpayment above that. The insurers disagreed, and AIG maintained that Hartree’s loss did not reach its excess layer.
Hartree sued the insurers in Delaware. The case against AIG now centers on two claims: one for a declaration on coverage and one for breach of contract. That action was stayed while Hartree pursued a separate fraud lawsuit against PAA over the same transaction.
In the fraud case, Hartree initially advanced two damages figures. One was about US$55 million, based on what it said it would cost to replace the missing gas. The other was US$90 million, based on what it claimed was an overall overpayment for the entire deal using a discounted cash flow analysis. During trial, Hartree dropped the US$90 million theory and went forward only on the missing-gas calculation.
In a January 15, 2025 decision in Hartree v. PAA, the court awarded Hartree US$30,247,277.60 for the missing gas and related costs. Hartree and PAA later signed a settlement agreement stating that the verdict, decision and settlement could not be used as an admission of liability or wrongdoing in future proceedings.
Back in the coverage case, AIG argued that the roughly US$30 million award ended the matter as far as it was concerned. Because that number is far below AIG’s US$56.375 million attachment point, AIG said its policy could never be triggered. It also argued that Hartree should not be allowed to revive the US$90 million “overpayment” theory against its insurers after abandoning it at trial.
AIG relied on a mix of legal doctrines and policy provisions. The Euclid primary policy defines “Loss” broadly to include almost any cost or liability from a breach of the MIPA’s representations and warranties, plus defense and prosecution costs, and it is calculated without giving effect to certain limitation or materiality provisions in the deal. Loss is reduced by “Recovered Amounts” Hartree actually receives. The policy also has a mitigation clause requiring Hartree, once it knows of a problem that could reasonably lead to loss, to use commercially reasonable efforts to limit that loss, and a subrogation clause that restricts Hartree from knowingly and intentionally waiving the insurers’ rights in fraud cases in a way that would be expected to prejudice those rights.
Hartree argued that the insurers agreed to cover its “Loss” from breaches of the MIPA, and that this definition is not tied to the specific damages theory it chose to pursue in the PAA trial. The policies also state Hartree is not required to sue the seller, except in relation to subrogation.
Judge Wallace held that the US$90 million overpayment theory was never actually litigated or decided in Hartree v. PAA, because Hartree withdrew it during trial and the earlier opinion addressed only the missing-gas theory. He ruled that the PAA decision does not block Hartree from advancing the US$90 million theory in the coverage case, and he rejected AIG’s reliance on judicial estoppel, quasi-estoppel, waiver and law-of-the-case arguments for the same basic reason: those doctrines did not fit a theory that was never decided in the earlier case.
On the policy side, the judge found real factual disputes about whether AIG’s subrogation rights were actually harmed and whether Hartree met its mitigation obligations, particularly with respect to the alleged overpayment for the facility as a whole. Questions about Hartree’s intent, AIG’s communications, and what loss could have been avoided will have to be tested at trial, he said, and cannot be resolved on summary judgment.
In practical terms, the decision signals that in RWI disputes, an underlying judgment against a seller based on one damages theory does not automatically cap the insured’s recoverable “Loss” where another theory was raised but never decided; that Delaware courts are cautious about using procedural doctrines to stop an insured from pursuing that alternative theory against insurers; that how subrogation and mitigation clauses play out will often turn on detailed facts about intent, communication and “commercially reasonable” steps; and that excess insurers cannot assume a damages award below their attachment point will, by itself, secure an early exit from coverage litigation.
