82 F.3d 670 (5th Cir. 1996), 94-30707, F.D.I.C. v. Booth
|Citation:||82 F.3d 670|
|Party Name:||FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. Burnice E. BOOTH, et al., Defendants, Burnice E. BOOTH, et al., Defendants, Cross Claimants, Plaintiffs-Appellants, and Burnice E. Booth, et al., Defendants, Cross Claimants, Plaintiffs-Appellants, Cross-Appellees, v. The ST. PAUL INSURANCE COMPANY, Defendant, Cross Defe|
|Case Date:||May 14, 1996|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Todd A. Rossi, Mathile W. Abramson, Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, Baton Rouge, LA, for Booth, Price, Parker & Varnado.
L. Jerome Stanley, Baton Rouge, LA, for M.W. Brignac.
John Ashley Moore, Taylor, Porter, Brooks & Phillips, Baton Rouge, LA, for Holland & Coxe.
Thomas E. Balhoff, Mathews, Atkinson, Guglielmo, Marks & Day, Baton Rouge, LA, for Walker, Simoneaux & Peek.
Marvin E. Owen, Baton Rouge, LA, for Scott.
Larry M. Roedel, David Wooldridge, Roedel, Parson, Forrester, Hill & Koch, Baton Rouge, LA, for Smith.
William H. Patrick, III, Schwab & Walter, Baton Rouge, LA, for Hughes.
Kyle M. Keegan, Victor L. Roy, III, Roy, Kiesel & Tucker, Baton Rouge, LA, J. Scott Watson, Christopher J. Bellotto, Washington, DC, for FDIC.
M. Grace Ratnesar, Gary J. Rouse, Koch & Rouse, New Orleans, LA, for St. Paul Ins. Co.
Appeals from the United States District Court for the Middle District of Louisiana.
Before DeMOSS and DENNIS, Circuit Judges, and DUPLANTIER, District Judge [*].
DUPLANTIER, District Judge:
The Federal Deposit Insurance Corporation ("The FDIC") and the directors of a failed bank appeal the district court's judgment dismissing their suit against St. Paul Insurance Co. The district court concluded that the defendant insurer's directors and officers liability insurance policy did not provide coverage for the activities of the directors for which the FDIC seeks recompense. We find no error in the district court's ruling and AFFIRM.
A directors and officers liability insurance policy issued by St. Paul Insurance Co. to the Livingston Bank in Denham Springs, Louisiana, covered the liability of the bank as an entity and that of its directors and officers individually ("Directors"). The policy was effective from January 2, 1983, with an initial three year term ending January 2, 1986. St. Paul canceled coverage effective May 29, 1985. 1 Pursuant to a policy endorsement, the Bank then exercised its right to purchase an extended twelve month discovery period providing coverage for acts or omissions prior to the date of termination discovered during the ensuing twelve months.
On March 13, 1994, the FDIC instituted this action against the Directors, charging that they breached their duties in the management of various loans made during the policy period. The FDIC additionally named St. Paul as a defendant under the Louisiana Direct Action Statute. 2 Because St. Paul
denied coverage of the Directors' actions, a number of the Directors also filed a cross-claim against St. Paul.
St. Paul moved for summary judgment on the ground that no event had occurred during the period in which the policy was in effect which would result in coverage under the terms of the policy. The district court initially denied this motion without assigning reasons.
Thereafter, the Directors moved for partial summary judgment, seeking a declaration that the policy required St. Paul to provide the Directors a defense. In response, the district court held that the policy did not impose a duty to defend, but that it did require a contemporaneous reimbursement of defense costs. 3 The district court certified that ruling for appeal, but this court denied jurisdiction.
St. Paul later reurged its motion for summary judgment on coverage, citing new precedent from this circuit. The district court reversed itself and granted St. Paul's motion. In its oral reasons, the district court additionally found that, should this court reverse the ruling on coverage, the policy would still require contemporaneous reimbursement of defense costs. The district court entered judgment dismissing all claims against St. Paul.
The FDIC and Directors appeal on the coverage issues, and St. Paul cross-appeals on the district court's order that it contemporaneously reimburse defense costs in the event that we conclude that there is coverage. Because we find that the district court correctly determined that the policy does not cover the Directors' activities, we do not address the issue of contemporaneous reimbursement of defense fees.
We review the district court's summary judgment decisions de novo, applying the same standards applicable to the district court. 4 We review the record independently and make any factual inferences in favor of the non-moving party. 5
St. Paul's policy contains the following relevant provisions concerning coverage:
III. POLICY PERIOD: This Policy applies to any negligent act, any error, any omission, or any breach of duty which occurs:
(1) During the policy period and then only if claim is made or suit is brought during the policy period. If, during this policy period, the Insured shall have knowledge or become aware of any negligent act, any error, any omission or any breach of duty and shall, during the policy period, give written notice thereof to the company, then such notice shall be considered a claim hereunder;
* * * * * *
If the company shall cancel or refuse to renew this Policy, the Named Insured shall have the right upon payment of an additional premium of 10% of the three year premium hereunder, to ninety (90) days after the date of such termination in which to discover claims resulting from any negligent act, any error, any omission or any breach of duty alleged to have been committed prior to the date of termination....
ENDORSEMENT NO. 2
EXTENSION OF DISCOVERY PERIOD
It is hereby agreed that the discovery period of III POLICY PERIOD shall be amended to read:
"... If the company shall cancel or refuse to renew this policy the named insured shall have the right upon payment of an additional premium of 20% of the three year premium hereunder, to twelve months after the date of such termination in which to discover claims resulting from any negligent act, any error, any omission or any breach of duty alleged to have been committed prior to the date of termination. Such right hereunder must, however, be exercised by the named insured by written notice not later than ten (10) days after
such termination date. If written notice is not given within the afore mentioned ten day period, the insured shall not at a later date be able to exercise such right." (Emphasis added.)
The Directors argue that under these provisions there are three distinct situations which result in coverage for events occurring during the policy period: 1) if a claim is made or a suit is brought during the policy period; 2) if, during the policy period, the insured has knowledge or becomes aware of any negligent act, error, omission, or breach of duty and, during the policy period, gives written notice thereof to St. Paul, or 3) if, during the one year "discovery period" after the cancellation of the policy by St. Paul, the insured "discovers" claims resulting from any negligent act, error, omission, or breach of duty. The Directors contend that there is no "notice" requirement for this third situation; mere "discovery" by an insured during the twelve month extended period is sufficient for coverage.
In contrast, St. Paul contends that there is coverage in only two situations: 1) if a claim is made or suit is brought during the policy period; or 2) if during the policy period or (in the event of cancellation by St. Paul within twelve months after cancellation if the insured takes advantage of the extension of the discovery period) the insured gains knowledge, becomes aware of, or "discovers" an activity committed prior to the date of termination with claim potential and provides the company with written notice thereof during the policy period or the twelve month extended "discovery period." According to St. Paul, Endorsement No. 2 "Extension of Discovery Period" simply extends the period of time in which one of these two situations must occur for coverage to attach. We agree with St. Paul.
Under Louisiana law, an insurance contract must be interpreted as a whole. 6 The Directors' argument focuses only on specific provisions of the policy. They argue that because of the absence of a specific requirement of notice in the extended discovery period endorsement, no notice is required if the discovery occurs after termination. The Directors contend that in this respect the policy is ambiguous and must be interpreted in their favor. 7
The Directors' argument ignores the fact that the "extension of discovery period" endorsement accomplishes nothing...
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