Clariant Corp v. The Harford Mutual Insurance Company arose out of a negligence suit brought by an employee, Rocky Stayton, against the building owner, Mill-Pond Properties, Inc. ("Mill-Pond"). As part of the lease, Mr. Stayton's employer and Mill-Pond's tenant, Clariant Corp. ("Clariant"), agreed to indemnify Mill-Pond for personal injury suits brought by Clariant employees. Therefore, Mill-Pond filed a declaratory judgment action against Clariant, seeking indemnification and defense in the Stayton case.

Mill-Pond and Clariant settled the declaratory judgment action. As part of the settlement agreement, Clariant agreed to pay Mill-Pond $6,500 and Mill-Pond released all claims against Clariant arising out of the underlying action.

Despite this agreement, Clariant undertook the defense of Mill-Pond's case against Mr. Stayton. During the litigation, Mr. Stayton amended his Complaint to allege a defect in the construction of the building that caused his injury. When Mr. Stayton amended his Complaint, Clariant wrote Mill-Pond stating that it was no longer obligated to defend the case, as the case was now outside of the indemnification clause of the lease. Mill-Pond brought a second declaratory judgment action, again seeking indemnification and defense in the Stayton case. The trial court held that Mill-Pond was entitled to a defense and Clariant appealed.

The Supreme Court of Delaware first examined the settlement agreement. The settlement agreement unambiguously stated that Mill-Pond released all claims against Clariant. Therefore, under the terms of the agreement, Mill-Pond could not file declaratory judgment actions against Clariant seeking indemnification and a defense. In fact, under the agreement, Clariant did not even have to defend the underlying action at all.

However, the Supreme Court found that neither party understood the agreement they were signing. Mill-Pond filed an affidavit stating that it did not understand the settlement agreement and Clariant clearly did not understand the agreement, because it voluntarily undertook the defense of the underlying action after signing the agreement. Therefore, the Supreme Court held that, as evidenced by the conduct of the parties, the intent of the settlement agreement was for Clariant to defend the underlying action. As such, Clariant had to continue defending the action, despite the Amended Complaint.