American Cas. Co. of Reading, Pennsylvania v. Baker, s. 92-56048
| Decision Date | 02 May 1994 |
| Docket Number | 93-56190,93-56191 and 93-56193-93-56197,93-55828,93-56168,Nos. 92-56048,s. 92-56048 |
| Parties | AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, Plaintiff-Appellant, and Continental Casualty Company; CNA Financial Corporation; CNA Insurance Companies, Counterclaim-defendants-Appellants, v. Joe G. BAKER; Verne F. Potter; William E. Leonard; James C. Roberts; Frank Purcell, Jr.; Joe Sax; H. Cedric Roberts; Ernest W. Baker; Harold Harris; John E. Egdahl; Walter L. Huckabay; Joe D. McCarthy; Franklin D. Hatridge; James D. Stroffe; Bruce Kehrli; Peter T. Fletcher; Bernard Baker, Defendants-Appellees, Resolution Trust Corporation, Defendant-Intervenor. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, Plaintiff-Appellee, v. Joe G. BAKER; Ernest W. Baker, Defendants, and Peter T. Fletcher, Defendant-Appellant, Resolution Trust Corporation, Defendant-Intervenor. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, Plaintiff-Appellee, v. Joe G. BAKER; Verne F. Potter; William E. Leonard; James C. Roberts; Frank Purcell, Jr.; Joe Sax; H. Cedric Roberts; Ernest W. Baker; Harold Harris; John E. Egdahl; Walter L. Huckabay; Joe D. McCarthy; James D. Stroffe; Bruce Kehrli; Peter T. Fletcher; Bernard Baker, Defendants, and Franklin D. HATRIDGE; Defendant-counter-claimant-Appellant, v. CONTINENTAL CASUALTY COMPANY; CNA Financial Corp.; CNA Insurance Co., Counter-defendants-Appellees, and Resolution Trust Corporation, Defendant-Intervenor. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, Plaintiff-Appellee, v. Joe G. BAKER; Verne F. Potter; William E. Leonard; James C. Roberts; Frank Purcell, Jr.; Joe Sax; H. Cedric Roberts; Ernest W. Baker; Harold Harris; John E. Egdahl; Walter L. Huckabay; Joe D. McCarthy; Franklin D. Hatridge; James D. Stroffe; Bruce Kehrli; Peter T. Fletcher, Defendants, Bernard Baker, Defendant-Appellant, Continental Casualty Company; CNA Financial Corp.; CNA Insurance Co., Counter-defendants, Resolution Trust Corporation, Defendant-intervenor. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, Plaintiff-Appellee, v. Joe G. BAKER; Verne F. Potter; |
| Court | U.S. Court of Appeals — Ninth Circuit |
Peter K. Rosen, Rosen & Winston, Los Angeles, CA; Bruce E. Peotter, McDermott, Will & Emery, Robert A. Peterson, Friedman, Peterson, Walling & Lau, Newport Beach, CA, Mark L. Weisman, Weisman, Butler & Watson, Beverly Hills, CA; Mark R. Beckington, Drummy, King & White, Costa Mesa, CA; Robert B. Clark, Luce, Forward, Hamilton & Scripps, San Diego, CA; Bill J. Thompson, Thompson, White, King & French, Valencia, CA, Robin D. Weiner, Tuttle & Taylor, Los Angeles, CA, for defendant-intervenor-appellant.
Before: GOODWIN and HALL, Circuit Judges, and TANNER, District Judge. *
The Resolution Trust Corporation and the former directors and officers of the insolvent Pacific Savings Bank appeal the district court's summary judgment that no insurance coverage is available under policies issued by American Casualty Company and its predecessors. American Casualty appeals the district court's order requiring it to advance defense costs incurred by the directors and officers in a lawsuit with the RTC until a final determination of coverage under the policies. We affirm the district court's conclusion that no coverage exists under the policies and dismiss as moot the insurer's appeal of the advancement order.
In February 1989, federal regulators declared Pacific Savings Bank insolvent. The Federal Deposit Insurance Corporation, seeking to recover investment losses of more than $70 million by the bank, filed suit in district court against Pacific's directors and officers (the "Directors/Officers"), alleging negligence, breach of fiduciary duty, and breach of contract. 1 American Casualty Company of Reading, Pennsylvania, the issuer of Pacific's several directors' and officers' insurance policies ("D & O policies"), subsequently sought a declaratory judgment that the D & O policies did not cover regulatory claims against the Directors/Officers. The Resolution Trust Corporation, which had replaced the FDIC as plaintiff in the underlying litigation, intervened and, with the Directors/Officers, counterclaimed against American Casualty and related entities Continental Casualty Company, CNA Financial Corporation, and CNA Insurance Companies (together "CNA") for a declaration that the policies did in fact encompass the RTC claims.
The coverage litigation implicated five D & O policies, each of which contained two identical provisions. First, the "Discovery Clause" gave Pacific the right to purchase "discovery coverage" in the event that CNA chose not to renew the policy. This coverage provided for additional time to report losses based on acts occurring prior to the policy's expiration date. Second, the "Notice Clause" required CNA to inform Pacific at least thirty days before expiration of a policy that it would not renew coverage. Relevant provisions of the other policies, and circumstances surrounding their adoption, are as follows:
1. The 1980-83 Policy
In September 1980, MGIC Indemnity Corporation sold Pacific a three-year, $10 million D & O policy. After the policy expired, CNA purchased MGIC's D & O business and, through an "Assumption Agreement," assumed liability for "those expired and cancelled [MGIC] policies ... where a claim can be reported after the policy expiration date." CNA and WMBIC, MGIC's successor in interest, later executed a "Rescission Agreement" purporting to eliminate CNA's liability for "claims in existence" under the assumed MGIC policies.
2. The 1983-85 Policy
Prior to expiration of the 1980-83 Policy, MGIC sent Pacific's Broker, Pacifica Insurance Services ("PIS"), a Commitment for Insurance ("1983 Commitment") setting forth proposed terms of a successor policy. The 1983 Commitment stated that "[t]he proposed terms and conditions under this Commitment for Insurance differ from the expiring Policy's terms and conditions." Specifically, MGIC had added a "Regulatory Exclusion," which, as explained below, exempted from coverage the claims of certain government agencies. Although MGIC had also increased the premium and reduced the coverage limits, Pacific purchased the policy.
CNA later executed the Assumption Agreement and took over the policy. After researching the market for policies with more favorable terms and finding none, Pacific and PIS subsequently contacted CNA and renegotiated the policy terms,...
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