OPINION

JURDEN, P.J.

INTRODUCTION

Before the Court are multiple motions for summary judgment filed by Plaintiffs, TIAA-CREF,1 and Defendants, Plaintiff's professional liability insurers. This lawsuit stems from TIAA-CREF's involvement as a defendant in three underlying class action lawsuits, Rink,2 Bauer-Ramazani,3 and Cummings4 (collectively, the "Underlying Actions"), each of which resulted in a settlement.5 As part of the settlement agreements in the Underlying Actions, TIAA-CREF paid out sums of money directly to the class action plaintiffs. TIAA-CREF now seeks coverage from the Defendants for its costs of defending and settling the Underlying Actions.

TIAA-CREF asks the Court to rule as a matter of law that: (1) the Underlying Actions constitute insurable loss under its insurance policies with Defendants; (2) Bauer-Ramazani and Cummings relate back to Rink and the 2007-08 policy period; (3) the settlements in the Underlying Actions are reasonable and not against public policy; (4) TIAA-CREF did not commingle clients' funds with its own; and (5) TIAA-CREF's defense costs in the Underlying Actions are reasonable.

Defendants are Illinois National Insurance Company ("Illinois National"), St. Paul Mercury Insurance Company ("St. Paul Mercury"), St. Paul Fire & Marine Insurance Company ("St. Paul Fire," and collectively with "St. Paul Mercury," "St. Paul"), Ace American Insurance Company ("Ace"), Arch Insurance Company ("Arch"), and Zurich Insurance Company ("Zurich"). All of the Defendants disclaim coverage for various reasons.

All Defendants allege TIAA-CREF's settlements constitute uninsurable disgorgement under their insurance policies with TIAA-CREF. Zurich alleges that TIAA-CREF commingled funds and that TIAA-CREF's defense costs were unreasonable. St. Paul and Arch allege that TIAA-CREF never asked for, nor received, their consent to settle, which they argue is a necessary precondition to enter into a settlement. Finally, St. Paul alleges that Bauer-Ramazani and Cummings do not relate back to Rink and the 2007-08 policy period.

For the reasons discussed below, TIAA-CREF's Motions 1 (Issues 1 and 2) and 3 (Issues 5 and 6) are GRANTED. TIAA-CREF's Motion 2 (Issues 3 and 4) is DENIED. Illinois National's Motion is GRANTED as to the relation back claim, and DENIED as to the remaining issues. Arch's Motion is DENIED. Ace's Motion is GRANTED as to the relation-back claim, and DENIED as to the remaining issues. Zurich's Motion is DENIED. St. Paul's Motions are DENIED.6

BACKGROUND

A. TIAA-CREF

Plaintiff is comprised of a family of companies, including companion companies TIAA and CREF, and additional related entities.7 TIAA-CREF provides retirement accounts, annuities, life and other insurance, and pension plan counseling to employees of non-profit colleges, universities, and other research institutions.8

TIAA is a non-profit organization.9 TIAA offers, inter alia, traditional and variable annuities, including the TIAA Real Estate Account (the "REA").10 TIAA provides investment advisory and management services to the REA on an at-cost basis.11

CREF is a New York non-profit membership corporation.12 CREF operates on an at-cost basis and retains no earnings.13 CREF's only assets are those held in eight investment accounts through which it offers variable annuities (collectively, the "CREF Accounts").14

At all relevant times, TIAA-CREF managed and distributed assets related to the REA and the CREF Accounts (together, the "At-Cost Accounts").15 Those services were provided subject to certain agreements (the "At-Cost Agreements"), the terms of which obligated TIAA-CREF to provide these services to the At-Cost Account holders on an at-cost basis.16

Pursuant to the At-Cost Agreements, TIAA-CREF could charge the At-Cost Accounts only for the expenses actually incurred in providing services. As a result, TIAA-CREF cannot earn profit or incur loss.17 The At-Cost Accounts are required under the At-Cost Agreements to reimburse TIAA-CREF for the cost of its services "through daily payments based on the expense deduction rate agreed upon from time to time by mutual agreement of [the respective signatories] reflecting estimates of the cost of such services with the objective of keeping the payments as close as possible to actual expenses."18 On a quarterly basis, "the amount necessary to correct any differences between the payments and the expenses actually incurred [would] be determined" and that amount "paid or credited [to the service provider], as the case may be, in equal daily installments over the remaining days in the quarter."19

At-Cost Account holders may request a transfer of all or part of their funds to another account or investment option, or request a direct payment of all or part of their funds via withdrawal. Value is calculated by determining the value of the units (or shares) for the account in question,20 and then dividing that amount by the total number of outstanding units in that account.21

In a given transaction, this calculation is determined as of the "Good Order Date," which is either the day that all documents needed to process the request have been received in good order, or an agreed-upon future business day.22 The value of the redeemed unit(s) as of the Good Order Date is the amount that the account holder ultimately receives at the time of payment.23 As a result of daily market fluctuations, the value of the units on the date the transaction is actually processed and paid (the "Processing Date") may differ from the value on the Good Order Date.24 Any difference—positive or negative—in the value of the units on the Processing Date and the amount paid to the account holder (the value as of the Good Order Date) is referred to as the "Transactional Fund Expense," or "TFE."25 If the units increase in value between the Good Order Date and the Processing Date, there is a TFE gain, whereas any decrease in value results in a TFE loss.26 All TFE gains and losses are recorded on TIAA's general ledger.27

TFE gains and losses are netted with other operational expenses and allocated based on relative net asset value to the At-Cost Accounts.28 The TFE allocation is factored into the total expenses charged to each serviced At-Cost Account and investment option.29 With respect to the At-Cost Accounts, any and all allocated TFE, including any TFE gains, are passed through to current participants as a component of those Accounts' total expenses.30 TFE is, however, a relatively minor component of each investment option's overall expenses and is "de minimis" with respect to each investment option's net asset value.31

B. TIAA-CREF's Insurance Programs and Policies

In the 2007-08 and 2009-10 policy years, TIAA-CREF purchased professional liability insurance from Defendants. Illinois National issued both of the primary Professional Liability Polices (collectively, the "Primary Policies"). Each Primary Policy has liability limits of $15 million in excess of a $5 million deductible for the year of coverage. The remaining Defendants issued excess policies for each policy period:32

All of the excess policies "follow form" to the Primary Policies, meaning that they adopt the terms of the Primary Policies as their own, except where the excess policies contain their own superseding or conflicting terms.33

C. Relevant Policy Language

Because all of the Defendants' policies follow form to the Illinois National Primary Policies, the Primary Policies define the major terms at issue. The Primary Policies provide:

"Loss" is defined as "judgments and settlements and any Defense Costs," while expressly excluding "matters which may be deemed uninsurable under the law pursuant to which this policy shall be construed[.]"35 Under the Primary Policies, Illinois National agreed to "pay the Loss of the Insured . . . for any actual or alleged Wrongful Act of any Insured" in the rendering of, or failure to render, Professional Services.36

"Claim" is defined as: "(a) a written demand for monetary or non-monetary relief; (b) a civil or arbitration proceeding for monetary or non-monetary relief . . .; or (c) an administrative or regulatory proceeding commenced by the filing of a notice of charges or investigative order or similar document."37

"Wrongful Act" is defined as "any breach of duty, neglect, error, misstatement, misleading statement, omission or other act committed, attempted or allegedly committed or attempted in the rendering or failing to render Professional Services."38

The Primary Policies provide that, under limited circumstances, Claims submitted after the policy period may be deemed as having been "first made" during the policy period. The Primary Policies state:

The Primary Policies also contain a Commingling Exclusion, which provides that the Insurer shall not be liable to make any payment for Loss in connection with any Claim made against an Insured "arising out of, alleging, or any way involving, directly or indirectly, the commingling of funds or accounts."40

The Primary Policies also contain a Defense Participation Clause providing that the "Insurer shall have the right to effectively associate with the Insureds in the defense and settlement of any Claim."41

The Zurich Policy contains a slightly different Defense Participation clause providing that Zurich may "elect to participate in the investigation, settlement or defense of any claim against any of the `Insured(s)' for matter [sic] covered by this Policy."42

The Primary Policies also contain a Consent to Settle Provision which states that "[t]he Insured shall not admit or assume any liability, settle any Claim or incur any Defense Costs in connection with such Claim without the written consent of the Insurer, but such consent shall not be unreasonably withheld. . . ."43

Arch's Policies have their own Consent to Settle Provision, which is slightly narrower that in the Primary Policies. Arch's Policies state:

D. Underlying Actions

The instant case stems from the three Underlying Actions. In each Underlying Action, TIAA-CREF customers alleged that TIAA-CREF failed to pay them TFE gains that had accrued in their accounts between the Good Order Date and the Processing Date. In total, TIAA-CREF paid approximately [REDACTED\] to defend and settle the Underlying Actions.45

1. The Rink Action and Settlement

On October 29, 2007, during the 2007-08 policy period, CREF was sued in the Rink action.46 The Rink plaintiffs alleged that CREF failed to: (1) process participants' transfer or withdrawal requests within the seven days required by the CREF accounts prospectuses; and (2) pay such participants any TFE gains between the Good Order Date and the Processing Date.47 The Rink plaintiffs sought, among other relief, actual damages, in addition to attorneys' fees.48

TIAA-CREF notified its insurers of the Rink lawsuit on November 29, 2007.49 On January 14, 2008, Illinois National responded, reserving all of its rights and defenses under the policy.50 On January 29, 2008, Arch determined the case was unlikely to hit its limits and closed its file.51 Arch stated that its closure was subject to reopening if the circumstances so warranted.52 On February 27, 2008, St. Paul Mercury responded, but made no coverage determination.53 Instead, St. Paul Mercury requested to remain informed.54 On May 23, 2008, TIAA-CREF submitted Illinois National's coverage letter to the excess insurers.55 On January 10, 2010, Zurich, like Arch, closed its file because it believed that the Rink case would not trigger its obligations.56 Zurich also reserved its right to reopen and investigate the matter at a later time.57 TIAA-CREF continued to update Defendants on the progress in the Rink action.58

In May 2012, CREF entered into a class action settlement agreement with the Rink class (the "Rink Settlement").59 As to each class member who filed an approved claim, CREF agreed to pay an individual amount calculated according to a formula set forth in the Rink settlement.60 On June 8, 2012, TIAA-CREF notified Defendants that it had executed a settlement agreement with the Rink class.61 TIAA-CREF also provided Defendants with an estimate of its costs, as well as its reasons for entering into settlement.62

At that time, St. Paul did not inform TIAA-CREF that it believed the settlement was unreasonable.63 Arch did not communicate with TIAA-CREF after receiving notice of the Rink Settlement.64 And Zurich, according to the deposition of its claims handler, believed its consent was probably not needed because the settlement was not going to trigger Zurich's obligations; thus, at the time Rink settled, he considered the matter closed.65

The Rink Settlement provided that CREF expressly denied any allegations of wrongdoing in the pleadings, and did not admit or concede any fault, wrongdoing, or liability alleged in Rink.66 The Rink Settlement Agreement contains a "DENIAL OF LIABILITY" section expressly providing:

CREF ultimately paid over [REDACTED\] to the Rink Settlement class members, and paid approximately $7.8 million in class counsel fees.68

2. The Bauer-Ramazani Action and Settlement

On August 17, 2009, during the 2009-10 policy period, a second class action suit was filed against TIAA-CREF. The Bauer-Ramazani plaintiffs alleged that TIAA-CREF failed to pay any TFE gains between the Good Order Date and the Processing Date to all participants who had requested transfers or withdrawals from their variable annuity accounts.69 As in Rink, the plaintiffs in Bauer-Ramazani sought both compensatory damages and attorneys' fees and costs, among other relief.70

TIAA-CREF notified Defendants of the Bauer-Ramazani lawsuit on or about January 3, 2010.71 On January 5, 2010, Arch reserved its rights to decide coverage at a later date; on February 2, 2010, St. Paul Fire reserved its rights; and on April 14, 2010, Illinois National reserved its rights.72

TIAA-CREF continued to update Defendants regarding the progress of the lawsuit until it was ultimately settled.73 On April 23, 2013, Illinois National denied coverage, as did Arch on June 9, 2013.74 St. Paul never provided its position, and there is no evidence on the record indicating whether it denied or accepted coverage for Bauer-Ramazani.75

In May 2013, the court certified a class of participants whose transfer or withdrawal requests for their ERISA-governed variable annuity accounts had not been processed within seven days of the Good Order Date, and who had not been paid any alleged appreciation in value between the Good Order Date and Processing Date.76 On May 31, 2013, TIAA-CREF notified Defendants that the Court ordered mediation for June 12, 2013, stating, "[a]s with any mediation we will need to decide on settlement authority for the purpose of negotiating."77 However, no Defendant responded.78

In mid-December 2013, possibly due to escalating settlement discussions, TIAA-CREF requested that ACE and Illinois National waive their consent to defense clauses.79 Both insurers agreed.80

On January 31, 2014, TIAA-CREF entered into a class action settlement agreement with the Bauer-Ramazani class (the "Bauer-Ramazani Settlement").81 Under the Bauer-Ramazani Settlement, TIAA-CREF stated that it:

Similar to Rink, the Bauer-Ramazani Settlement also contains a section entitled "No Admission of Liability," which provides:

Pursuant to the Bauer-Ramazani Settlement, TIAA-CREF agreed to pay the Bauer-Ramazani class members $19.5 million on a pro rata basis and $3.3 million for class counsel fees and costs.84 On February 25, 2014, TIAA-CREF forwarded its estimated total loss for Bauer-Ramazani to Defendants.85

3. The Cummings Action and Settlement

The third Underlying Action, Cummings, was filed on May 10, 2012. The Cummings plaintiffs alleged that TIAA-CREF delayed processing for fund withdrawal requests from certain At-Cost Accounts and failed to pay class members the fully-appreciated value/positive TFE between the Good Order Date and the Processing Date in their accounts.86 TIAA-CREF notified the Defendants of the Cummings action on November 14, 2014.87

Cummings went to mediation in November 2015, after TIAA-CREF filed its Amended Complaint in this Court, and the parties "agreed in principle" to the mediator's settlement proposal.88 Pursuant to the proposal, TIAA-CREF agreed to pay $2.9 million in settlements and incurred [REDACTED\] in defense costs. TIAA-CREF notified Defendants of these amounts on December 2, 2015.89

PARTIES' CONTENTIONS

TIAA-CREF asks the Court to find as a matter of law that: (1) disgorgement is not an uninsurable loss under Delaware and New York law; (2) Bauer-Ramazani and Cummings relate back to Rink and the 2007-08 policy period; (3) the policies' commingling exclusion does not apply; and (4) the insurers lost their right to require consent or to challenge the reasonableness of defense costs in the Underlying Actions.

All Defendants allege that TIAA-CREF's settlements of the Underlying Actions constitute disgorgement of funds and that such payments are uninsurable loss under New York law. There are four additional arguments advanced by various insurers: (1) St. Paul argues that Bauer-Ramazani and Cummings do not relate back to Rink and the 2007-08 policy period;90 (2) Zurich, Illinois National, and ACE allege that TIAA-CREF commingled clients' funds with its own; (3) Arch and St. Paul each argue TIAA-CREF failed to obtain their consent to settle the Underlying Claims, thereby obviating their duty to pay, and (4) Zurich argues that TIAA-CREF's defense costs for the Underlying Actions are unreasonable.

STANDARD OF REVIEW

Summary judgment should be granted where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.91 The United States Supreme Court has defined the summary judgment standard as follows:

The moving party bears the initial burden of showing there are no genuine issues of material fact in dispute. This burden may be satisfied by demonstrating that no evidence exists to support the non-moving party's claim.93 Once the moving party has met its evidentiary burden, the burden shifts to the non-moving party to proffer specific evidence showing that a genuine issue of material fact still exists.94

If there are no genuine issues of material fact, then the moving party is entitled to judgment as a matter of law.95 If, however, material facts remain in dispute or the factual record has not been developed thoroughly enough to allow the Court to apply the law to the factual record, then summary judgment will not be granted.96

DISCUSSION

A. Conflict of Laws

The policies at issue do not contain choice of law provisions, but all parties agree that either Delaware or New York law applies. At oral argument, the parties further agreed that the application of Delaware and New York law would result in the same outcome as to all of the issues in contention except for the issue of insurability of disgorgement; therefore, the parties agree there is a "false conflict" as to all but one of the issues.97 Where there is a false conflict, "the Court should avoid a choice-of-law analysis altogether" and apply the law of the forum.98 Because the forum is Delaware, Delaware law will apply to the extent there is a false conflict.99 Furthermore, "absent any conflict, the Court may apply general principles that are consistent with the law of either jurisdiction."100

The parties disagree as to whether New York law and Delaware law conflict on the issue of insurability of disgorgement. Both parties agree that Delaware law is silent on this issue, but disagree as to the outcome under New York law. Defendants contend that New York law would render TIAA-CREF's loss in the Underlying Settlements uninsurable, whereas TIAA-CREF argues that New York law would not render its loss uninsurable under these facts.

The Court can find no case, and the parties have not identified one, in which a Delaware court has articulated Delaware public policy regarding the insurability of disgorgement. However, the parties agree that, in the event of a true conflict, New York law applies.101 Because—as discussed below—the Court does not find that the settlement agreements in the Underlying Actions constitute uninsurable disgorgement under New York's public policy, it is unnecessary to determine whether Delaware law conflicts with New York law on this issue.

B. Disgorgement

The Primary Policies provide that "[t]he Insurer shall pay the Loss of the Insured arising from a Claim."102 Loss is defined as "judgments and settlements and any Defense Costs," which does not include "matters which may be deemed uninsurable under the law pursuant to which this policy shall be construed[.]"103 The Defendants contend that the settlements paid by TIAA-CREF in the Underlying Actions constitute disgorgement, and that disgorgement is an uninsurable loss.104

Disgorgement is defined as "the act of giving up something (such as profits illegally obtained) on demand or by legal compulsion."105 New York courts elaborate that the purpose of disgorgement is "to deprive a party of ill-gotten gains and to deter improper conduct."106

Defendants maintain that New York disfavors insuring disgorgement, and cite a number of cases in support of this argument. However, as discussed below, those cases are not on all fours with this case.

In Vigilant Insurance Co. v. Credit Suisse First Boston Corp.,107 the Securities and Exchange Commission ("SEC") and NASD Regulation, Inc. ("NADSR") investigated allocations of IPO shares of Credit Suisse First Boston Corp. ("Credit Suisse").108 The SEC commenced a civil action on January 22, 2012, and Credit Suisse entered into a consent judgment one week later.109 The Final Judgment explicitly stated that Credit Suisse "shall pay $70.0 million, representing disgorgement of monies obtained improperly. . . ."110

Credit Suisse then sought coverage from its insurer, Vigilant Insurance Co. ("Vigilant"), which denied the claim.111 Vigilant moved for summary judgment, arguing that its policy did not cover the $70 million loss.112 The Court ruled in Vigilant's favor, holding, "Credit Suisse cannot recoup $70.0 million disgorgement because it would defeat the purpose of the disgorgement provision in the final judgment."113 Further, the Court held, "The final judgment specifically links the disgorgement payment to the improper activity that the SEC complaint alleged. This is not merely a case in which a party settled an action without admitting liability."114

Millennium Partners, L.P. v. Select Insurance Co. similarly involved the insurability of settlement-related costs resulting from an SEC order.115 In that case, the SEC and the New York Attorney General's Office conducted an investigation into the trading practices of a hedge fund, Millennium Partnership ("Millennium"), and Millennium settled with both agencies. The SEC entered an "SEC Order" asserting that Millennium had wrongfully made millions of dollars in profit.116 Further, the SEC Order concluded that Millennium's conduct violated the Securities Act and the Exchange Act.117 Without admitting or denying the SEC findings, Millennium consented to the relief and agreed to pay $148.0 million.118

Millennium then sought coverage from its insurer, Select, for defense costs it incurred during the SEC investigation. When Select denied coverage, Millennium brought suit.119 The Supreme Court held that Millennium's defense costs were uninsurable.120 Like Credit Suisse, the Millennium Court found that the SEC Order established a conclusive link between disgorgement and the improperly acquired funds.121 Even though Millennium Partnership settled and did not admit to the SEC's findings, the Court found no other reasonable interpretation of, or rationale for, the settlement.122

Similarly, in J.P. Morgan Securities Inc. v. Vigilant Insurance Co., an SEC investigation triggered a settlement.123 In 2003, the SEC began investigating Bear Stearns for allegedly facilitating late trading and deceptive market timing.124 Bear Stearns eventually settled with the SEC, and the SEC Order directed Bear Stearns to disgorge $160 million.125 When Bear Stearns subsequently sought indemnity from its insurers, the insurers declined, citing New York's public policy against insuring disgorgement as a deterrence mechanism.126

In the litigation that followed, the New York Supreme Court denied the insurers' Motion to Dismiss. However, the appellate court reversed the Supreme Court's holding, stating:

The facts here differ from those in Credit Suisse, Millennium, and J.P. Morgan. After lengthy litigation TIAA-CREF settled, expressly denying any liability.128 Moreover, neither the SEC nor any other governmental entity was involved in the Underlying Actions. Defendants focus on Credit Suisse's language about "being ordered to return funds." But, the Credit Suisse court noted, an order to return funds is different than a settlement, and "[a] different outcome [in which disgorgement payments are deemed insurable] might result when parties settle under different circumstances."129

Credit Suisse, Millennium, and J.P. Morgan all involve conclusive links between the insured's misconduct and the payment of monies. Not so here. TIAA-CREF settled and expressly denied any liability. The Court finds no conclusive link between the settlements in the Underlying Actions and wrongdoing by TIAA-CREF that would render the settlement agreements uninsurable disgorgement.

TIAA-CREF's Motion for Summary Judgment that the settlements do not constitute uninsurable disgorgement under the insurance policies (Motion 3, Issue 5) is GRANTED. TIAA-CREF's Motion for Summary Judgment against Defendants that TIAA-CREF's loss is not relieved by a public policy against insuring disgorgement (Motion 3, Issue 6) is GRANTED. Defendants' Motions for Summary Judgment that the settlement payments constitute uninsurable loss are DENIED.

C. Relation Back

TIAA-CREF, Illinois National, and ACE argue that Bauer-Ramazani and Cummings relate back to 2007-08.130 St. Paul is the only insurer to argue that Bauer-Ramazani and Cummings actions, both filed after the 2007-08 policy year, do not relate back to Rink, which was filed in the 2007-08 policy year.131

Delaware and New York courts use a plain reading approach to examine unambiguous policy language.132 The Notice/Claim Reporting Provision in the Primary Policies states:

Given this language, whether a claim relates back to an initial claim turns on the similarity and relatedness of the facts between the initial case and each subsequent case. The greater the similarities and relatedness between cases, the more likely subsequent claims are to relate back to an initial claim.

In support of its argument that Bauer-Ramazani and Cummings do not relate back to 2007-08, St. Paul avers that the three Underlying Actions are dissimilar and unrelated because they involve different time frames, jurisdictions, entities, and laws (e.g., non-ERISA vs. ERISA claims).

In this case, the plain language of Primary Policies is clear; if the subsequent claims allege, arise out of, and are based upon or attributable to the facts alleged in the initial claim, then the subsequent claims should relate back. Although TIAA-CREF was sued in different jurisdictions by different plaintiffs, and in cases encompassing both ERISA and non-ERISA claims, the allegations in the Underlying Actions arise out of, and are attributable to, the same type of conduct— TIAA-CREF's business practice that resulted in failure to pay customers their gains during delays in processing.134

Given the plain language in the Primary Policies and the allegations in each Underlying Action, there is no genuine issue of material fact in dispute. The Court finds that the claims in all of the Underlying Actions arise out of the same conduct on the part of TIAA-CREF. Thus, Bauer-Ramazani and Cummings relate back to Rink and the 2007-08 policy period.135

Consequently, TIAA-CREF's Motion for Summary Judgment that the Underlying Actions relate back to the 2007-08 policy period (Motion 1, Issue 1) is GRANTED. Illinois National's Motion for Summary Judgment as to relation back is GRANTED. St. Paul's Motion for Summary Judgment as to relation back is DENIED.

D. Commingling

Zurich, joined by Illinois National and Ace, contends that TIAA-CREF's claims are excluded by the policies' Commingling Exclusions, which state: "the policy will not apply to any claim made against the insured arising out of, alleging, or any way involving, directly or indirectly, the commingling of funds or accounts."136 The policies at issue do not define commingling. Commingling is defined in Black's Law Dictionary as "[a] mixing together; esp[ecially], a fiduciary's mixing of personal funds with those of a beneficiary or client."137

Zurich argues that TIAA-CREF commingled funds because: (1) TIAA-CREF took gains and losses from clients' accounts and either paid administrative expenses or allocated those funds to other accounts,138 and (2) TIAA-CREF mixed its clients' funds with its own.139

Zurich cites to a number of cases in support of its position, each of which is distinguishable from this case. For example, in K. Bell & Associates v. Lloyd's Underwriters, an insurance broker placed premiums received from an insured and reinsurers' payments to the insured into the same account.140 K. Bell could not account for the insured's funds because it could not distinguish between the insured's funds and the reinsurers' premiums.141 Consequently, the insured obtained a judgment against K. Bell.142 K. Bell sought coverage from its insurer, which contended the underlying claim fell under the policy's commingling exclusion.143 The exclusion stated there was no indemnity for claims "arising out of the commingling of monies or accounts, or loss of monies received by the insured or credited to the insured's account."144 The Court held this exclusion precluded coverage for K. Bell because K. Bell was unable to discern its clients' funds from its own.145

In Jiaxing Globallion Import & Export Co., Ltd. v. Argington, Inc., a case cited by both TIAA-CREF and Zurich that involves Missouri law, the Court found the defendants commingled funds where the defendants mixed the corporation's funds with their own, and used those mixed funds to pay personal debts, make personal purchases, and take out cash advances.146

The conduct at issue in K. Bell and Jiaxing is clearly commingling: a mixing of personal and business funds, without a clear identity as to whose funds belonged where, and using the mixed funds for personal expenses. That is simply not the case here. First, TIAA-CREF's At-Cost Account Agreements state that any TFE will be allocated among other accounts.147 Second, the TIAA-CREF clients could readily calculate the value of their gain.148 And third, TIAA-CREF did not mix clients' funds with its own funds, the hallmark of commingling, and nor did it use those funds for its own private benefit.149 TIAA-CREF did not make purchases, repay debts, or take out cash advances with the TFE gains.150 The Court finds no genuine issues of material fact that preclude summary judgment on this issue. The undisputed facts establish that the Commingling Exclusion does not apply here.

TIAA-CREF's motion for Summary Judgment that coverage is not precluded by the Commingling Exclusion (Motion 1, Issue 2) is GRANTED. Zurich's Motion for Summary Judgment as to commingling is DENIED.

E. Consent to Settle Provisions

Arch and St. Paul argue that consent to a settlement is a condition precedent to coverage. As such, they contend TIAA-CREF was required to obtain their consent to settle the Underlying Actions in order to trigger Arch and St. Paul's coverage obligations, but failed to do so.151

TIAA-CREF argues that it kept Defendants informed of the developments and settlement discussions in the Underlying Actions, and that Defendants' behavior (or lack thereof) obviated TIAA-CREF's obligation to obtain Defendants' consent before entering into settlement agreements in the Underlying Actions.152

Arch admits it denied coverage for Bauer-Ramazani, but at the time it denied coverage, the parties were operating under a presumption that Bauer-Ramazani fell within the 2009-10 policy period.153 Arch contends that its denial of coverage was therefore only relevant to its right to consent to settlement under 2009-10 policy. Now that TIAA-CREF, Illinois National, and ACE seek to relate back Bauer-Ramazani and Cummings to Rink and the 2007-08 policy period,154 Arch maintains that its denial of coverage under the 2009-10 policy is not tantamount to a denial of coverage under the 2007-08 policy.155 Thus, Arch argues, it did not waive its right to consent to settlement by denying coverage under its 2007-08 policy.

It is unclear from the record exactly when TIAA-CREF and Illinois National agreed they would seek relation back of Bauer-Ramazani and Cummings to Rink and the 2007-08 policy period, and when the other Defendants received notice of any such agreement.156

Whether Arch and St. Paul gave, or could have given, consent to settle (or whether they waived the consent to settle provision) depends on when and if they received notice that TIAA-CREF and Illinois National sought to relate Bauer-Ramazani and Cummings back to Rink and the 2007-08 policy period. These are genuine issues of material fact which must be determined by the finder of fact and are therefore inappropriate for disposition on summary judgment.

TIAA-CREF's Motion for Summary Judgment that defendants' may not avoid coverage based on lack of consent to settlement (Motion 2, Issue 3) is DENIED. Arch's Motion for Summary Judgment that its consent to settle was a condition precedent to coverage is DENIED. St. Paul's Motion for Summary Judgment that its consent to settle was a condition precedent to coverage is DENIED.

F. Defense Costs

TIAA-CREF contends that because it paid all defense costs for the Underlying Actions out-of-pocket, those costs are per se reasonable. Consequently, it asks the Court to rule as a matter of law that the defense costs are reasonable.

In Delaware, the finder of fact employs a multi-factor test to determine the reasonableness of defense costs:

These factors are well-established in Delaware.158 New York courts consider an almost identical set of factors when determining the reasonableness of defense costs.159

TIAA-CREF bases its argument on Taco Bell Corp. v. Continental Casualty Co., in which the Seventh Circuit held: "Because of the resulting uncertainty about reimbursement, [the insured] had an incentive to minimize its legal expenses (for it might not be able to shift them); and where there are market incentives to economize, there is no occasion for a painstaking judicial review."160 Accordingly, TIAA-CREF suggests that the Court should dispense with the multi-factor analysis entirely because its out-of-pocket payment of defense costs renders those costs per se reasonable.

The Court has not found, nor have the parties identified, any Delaware case that addresses Taco Bell, and only one New York has cited it—Danaher Corp. v. Travelers Indemnity Co., a United States Magistrate's Report and Recommendation later adopted in full by the United States District Court.161 In discussing the various considerations courts should take into account when determining a "reasonable hourly rate," the Magistrate's Report mentions Taco Bell in passing, noting that defendants who pay out-of-pocket attorneys' fees have an incentive to minimize defense costs.162

TIAA-CREF argues that because the Federal Magistrate's Report in Danaher ultimately awarded all of the defense costs to the insured who had paid out-of-pocket, it followed the Taco Bell holding. This argument misses an important point. The Magistrate in Danaher first conducted a multi-factor analysis before awarding costs.163 The Magistrate did not, as TIAA-CREF implies, rely solely on the Taco Bell rationale, but rather accepted the Taco Bell rationale as one of many factors to be considered when determining the reasonableness of defense costs—nothing more.164

Given that neither Delaware nor New York has relied on Taco Bell to dispense with the well-established multi-factor approach to determining reasonableness of defense costs, this Court will not do so. In particular, it will not do so because, if anything, recent Delaware case law has consistently applied the multi-factor analysis in determining the reasonableness of defense costs.165

While it is true that TIAA-CREF had an incentive to minimize its defense costs because it was paying them out-of-pocket, the finder of fact must consider the Cox factors. It cannot do so on the record before it.

Consequently, TIAA-CREF's Motion for Summary Judgment as to the reasonableness of its defense costs (Motion 2, Issue 4) is DENIED.

CONCLUSION

For the foregoing reasons, the Court finds that: (1) Bauer-Ramazani and Cummings relate back to Rink and the 2007-08 policy year; (2) TIAA-CREF's losses do not constitute uninsurable disgorgement; (3) coverage is not precluded by the Commingling Exclusion; (4) it is for the finder of fact to determine whether notice of relation back was given to St. Paul and Arch, such that their consent to settle was required in order to trigger their coverage obligations; and (5) it is for the finder of fact to determine whether TIAA-CREF's defense costs were reasonable.

Consequently, TIAA-CREF's Motions 1 (Issues 1 and 2) and 3 (Issues 5 and 6) are GRANTED. TIAA-CREF's Motion 2 (Issues 3 and 4) is DENIED. Illinois National's Motion is GRANTED as to the relation back claim, and DENIED as to the remaining issues. Arch's Motion is DENIED. Ace's Motion is GRANTED as to the relation back claim, and DENIED as to the remaining issues. Zurich's Motion is DENIED. St. Paul's Motions are DENIED.

IT IS SO ORDERED.

APPENDIX A