31 F.3d 285 (5th Cir. 1994), 93-3730, Resolution Trust Corp. v. Ayo

Docket Nº:93-3730, 93-3732.
Citation:31 F.3d 285
Party Name:RESOLUTION TRUST CORPORATION, in its Capacity as Receiver of Peoples Federal Savings and Loan Association, Plaintiff-Appellant Cross Appellee, v. Donald J. AYO, Donovan J. Barker, George H. Diedrick, Jr., Ambrose H. Landry, Succession of John F. Pugh, Sr., and Troy W. Thompson, Jr., Defendants. Fidelity and Deposit Company of Maryland, Defendant-Ap
Case Date:September 09, 1994
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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31 F.3d 285 (5th Cir. 1994)

RESOLUTION TRUST CORPORATION, in its Capacity as Receiver of

Peoples Federal Savings and Loan Association,

Plaintiff-Appellant Cross Appellee,


Donald J. AYO, Donovan J. Barker, George H. Diedrick, Jr.,

Ambrose H. Landry, Succession of John F. Pugh,

Sr., and Troy W. Thompson, Jr., Defendants.

Fidelity and Deposit Company of Maryland, Defendant-Appellee

Cross Appellant.



Louis A. MIRAMON, Jr., et al. Defendants,

Louis A. Miramon, Jr., et al., Defendants-Appellants,

Fidelity & Deposit Company of Maryland, Defendant-Appellee.

Nos. 93-3730, 93-3732.

United States Court of Appeals, Fifth Circuit

September 9, 1994

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[Copyrighted Material Omitted]

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Kyle M. Keegan, Victor L. Roy, Susannah M. DeNicola, Roy, Kiesel & Tucker, Baton Rouge, LA, for appellant No. 93-3730.

John L. Lanier, Pugh, Lanier and Riviere, Thibodaux, LA, for amicus-Ayo, et al.

Eugene R. Preaus, Diane L. Matthews, Preaus, Roddy & Krebs, New Orleans, LA, for appellee in No. 93-3730.

George D. Fagan, Leake & Andersson, New Orleans, LA, for Cook, Fritchie, Lowry, Qulliber & Wunder.

Harold B. Carter, Jr., Stephen L. Williamson, Montgomery, Barnett, Brown, Reed, Hammond & Mintz, New Orleans, LA, for Miramon, Englande, Wascom.

Anita M. Warner, Matthew K. Brown, New Orleans, LA, Robert E. Arceneaux, Pinkie C. Wilkerson, Barham & Arceneaux, Grambling, LA, for RTC.

Richard T. Simmons, Jr., Kurt D. Engelhardt, Hailey, McNamara, Hall, Larmann & Papale, Metairie, LA, for Bossier.

James T. Flanagan, Mollere & Flanagan, Metairie, LA, for Fitzpatrick & Thomas.

C. Allen Hennesy, John M. Girault, Monroe & Lemann, New Orleans, LA, for Becker.

Eugene R. Preaus, Diane Lloyd Matthews, Preaus, Roddy & Krebs, New Orleans, LA, for appellee in No. 93-3732.

Appeals from the United States District Courts for the Eastern District of Louisiana.

Before REYNALDO G. GARZA, SMITH, and PARKER, Circuit Judges.

REYNALDO G. GARZA, Circuit Judge:

The above consolidated cases were brought by the RTC against former officers and directors of banks who carried Director & Officer Liability Policies ("D & O") with Fidelity & Deposit Co. of Maryland ("F & D"). In both cases, the district judges found that no genuine issue of material fact existed, and granted summary judgment in favor of F & D on the grounds that the insureds failed to comply with the notice requirements of the F & D policy. The relevant portions of the policies for each case are identical. The issues of law presented for appeal are also substantially the same for both cases. For the following reasons, we affirm the district courts decisions.



The individual defendants in this case are former directors and officers of the federally insured thrift South Savings and Loan Association ("South Savings"). In 1982, F & D issued an insurance policy on behalf of South Savings and its officers and directors providing coverage for director and officer liability. This policy was effective between May 3, 1982 and May 31, 1985. In 1985, F & D issued a second director and officer liability policy in favor of South Savings which became effective on May 31, 1985. South Savings' insurance coverage with F & D terminated on May 31, 1986. 1

On August 7, 1992, the Resolution Trust Corporation ("RTC"), as receiver of South Savings, instituted this litigation against the director defendants. The RTC alleged that the directors were liable under theories of gross negligence and breach of fiduciary duty resulting from the directors' alleged misdealing in eight different transactions. 2 Additionally, RTC filed a third party action against F & D under Louisiana's direct action statute, La.R.S. 22:655. In this action, the RTC contends F & D is liable for the losses sustained as a result of the directors' alleged misconduct by virtue of the 1982 and

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1985 insurance policies. The directors filed cross-claims against F & D in which they assert that, under the director and officer liability policy, F & D has a duty to defend, including a duty to advance defense costs, and a duty to provide liability coverage.

The district judge concluded that both the RTC and the directors failed to point to any evidence which suggested that South Savings or the directors complied with the notice requirements of the policy, or that they even attempted to put F & D on notice for the claims and alleged misconduct asserted in this case. "To the contrary, the undisputed evidence, including South Savings' and the defendant directors' repeated denials that they had knowledge of any conduct that might lead to the filing of a claim in renewal application forms, establishes that no notice was provided to F & D as a matter of law." The judge noted that since the underlying facts in the case were undisputed, and these facts were insufficient to satisfy the notice requirements of the policy, summary judgment was proper.


This suit was brought by the RTC, as receiver for Peoples Federal Savings & Loan Association, Thibodaux, Louisiana ("Peoples"), against certain directors and officers of Peoples and against its directors and officers liability insurance carrier, F & D, pursuant to the Louisiana Direct Action Statute, La.R.S. 22:655.

The RTC sought to recover losses in excess of $2.2 million sustained by Peoples as a result of the alleged acts and omissions of the individual directors. The claims arose from a number of different deficiencies relating to loan underwriting, collection, and management practices on approximately fifty (50) loan transactions. RTC alleges that claims covered under the policies issued to the directors were made against the directors by federal banking regulators during the policy period and/or that F & D received actual or constructive notice of such claims or potential claims during the policy period. The D & O policies at issue were in effect from June 25, 1983 through June 25, 1985, and from June 25, 1985 through June 25, 1986. 3 Similarly, the district court entered summary judgment in favor of F & D.

The Insurance Policies

The F & D policies are entitled "Directors and Officers Liability Insurance Policy Including Association Reimbursement." The policies in question are "claims made" policies, as opposed to the customary "occurrence" policy. Under claims made policies, the mere fact that an "act, error, or omission" occurs during the policy period is not sufficient to trigger insurance coverage. FDIC v. Mijalis, 15 F.3d 1314, 1330 (5th Cir.1994). In order to trigger coverage, such policies usually require that a claim be made against the insured during the policy period. The F & D policies also provide coverage for potential claims provided F & D receives, within the policy period, notice of the occurrence of a specified wrongful act. The controversy in the case before us stems primarily from the notice provisions which dictate that for potential future claims to be treated as a "claim" made during the policy year, the insured must notify F & D, within the policy period, of any occurrences that may subsequently result in a claim. The policy provides in pertinent part:


(a) If during the policy period, or during the extended discovery period if the right is exercised by the Association or the Directors and Officers in accordance with Clause 2, the Association or the Directors and Officers shall:

(1) receive written or oral notice from any party that it is the intention of such party to hold the Directors and Officers, or any of them, responsible for a specified Wrongful Act; or

(2) become aware of any act, error or omission which may subsequently give rise to a claim being made against the Directors and Officers, or any of them, for a specified Wrongful Act;

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and shall during such period give written notice thereof to the Company as soon as practicable and prior to the date of termination of the policy, then any claim which may subsequently be made against the Directors and Officers arising out of such Wrongful Act shall, for the purpose of this policy, be treated as a claim made during the Policy Year or the extended discovery period in which such notice was first given.

(b) The Association or the Directors and Officers shall, as a condition precedent to their rights under this policy, give to the Company notice in writing as soon as practicable of any claims made and shall give the Company such information and cooperation as it may reasonably require.

The notice requirements in claims made policies allow the insurer to "close its books" on a policy at its expiration and therefore "attain a level of predictability unattainable under standard occurrence policies." Mijalis, 15 F.3d at 1330. Insurance companies may limit their liability through clear and unambiguous notice provisions, and impose any reasonable conditions they wish upon the insureds under the contract. Livingston Parish School Bd. v. Fireman's Fund Am. Ins. Co., 282 So.2d 478, 481 (La.1973). See also, FDIC v. Barham, 995 F.2d 600, 604 n. 9 (5th Cir.1993). The purpose of the reporting requirement is to define the scope of coverage by providing a certain date after which an insurer knows it is no longer liable under the policy, and for this reason such reporting requirements are strictly construed.

Despite the enormous volume of briefs involved in this consolidated case, and the myriad of parties involved, the crux of both the cases lies in two specific issues:

1. Did the insureds provide F & D with sufficient notice of "acts, errors, or omissions which may subsequently give rise to a claim such that the claims eventually made should be treated as claims made during the policy year?"

2. If not, is the failure of the insured to provide the requisite notice serve as a defense against the RTC's claim...

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