Fed. Deposit Ins. Corp. v. Bancinsure, Inc.

• Decision Date: 16 June 2014
• Docket Number: Case No. CV 12–09882 DMG MRWx.
• Court: U.S. District Court — Central District of California
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. BANCINSURE, INC., Defendant.

99 F.Supp.3d 1084

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff

v.BANCINSURE, INC., Defendant.

Case No. CV 12–09882 DMG MRWx.

United States District Court, C.D. California.

Signed June 16, 2014.

Larry Mark Golub, Barger & Wolen LLP, Sandra I. Weishart, Hinshaw & Culbertson LLP, Los Angeles, CA, for Plaintiff.

Carleton Ray Burch, David T. Dibiase, Mark J. Krone, Anderson McPharlin and Conners LLP, Los Angeles, CA, Richard P. Tricker, Winget Spadafora Schwartzberg LLP, Los Angeles, CA, Andrew B. Downs, Bullivant Houser Bailey PC, San Francisco, CA, Loren D. Podwill, Bullivant Houser Bailey PC, Portland, OR, for Defendant.

ORDER RE CROSS–MOTIONS FOR SUMMARY JUDGMENT [DOC. 27, 28]

DOLLY M. GEE, District Judge.

This matter is before the Court on the parties' cross-motions for summary judgment. The hearing took place on June 13, 2014. [Doc. 27, 28]. The Court has duly considered the arguments and evidence presented in support of and in opposition to the Motions, including arguments made at the hearing. For the reasons discussed below, Plaintiff FDIC's Motion is GRANTED and Defendant BancInsure's Motion is DENIED.

I.FACTUAL BACKGROUND

A. Evidentiary Objections

The parties raise voluminous evidentiary objections to exhibits filed by the opposing party. [Doc. 43–2, 42–2, 48–1, 49–1, 49–2, 49–3, 50, 51.] The Court addresses the objections as necessary below. The Court does not address objections pertaining to facts it deems immaterial to the resolution of the Motions.

B. Material Undisputed Facts

In January 2007, BancInsure issued a Directors' and Officers' Liability Insurance Policy Including Company Reimbursement, No. 04DO00378–2 (the “Policy”) to Security Pacific Bank, under which the Bank's Directors and Officers (“D & Os”) qualified as “Insured Persons.” (Plaintiff's Statement of Uncontroverted Facts (“PSUF”) ¶ 1 [Doc. # 27–2].) The Policy period was from January 2007 to January 2010. (Id. ¶ 3.) On November 7, 2008, the California Department of Financial Institutions (“DFI”) closed Security Pacific Bank, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. (PSUF ¶ 19.) Under the terms of the Policy, when the Bank ceased operations on November 7, 2008, the Policy coverage also ceased. (Id. ¶ 12.)

1. Relevant Policy Provisions

The Policy is a “Claims–Made Policy” containing a “Notice of Claim” provision as follows:

A. The Insured Persons and the Company shall, as a condition precedent to their rights under this Policy, give the Insurer notice, in writing, as soon as practicable of any Claim and shall give the Insurer such information and cooperation as it may reasonably require.

B. If, during the Policy Period, any Insured Person or the Company (1) receives written or oral notice from any party that it is the intention of such party to hold any Insured Person responsible for a specific alleged Wrongful Act, or (2) becomes aware of any circumstances that may give rise to a Claim against any Insured Person for a specific alleged Wrongful Act; and, as soon as practicable gives written notice of the potential Claim to the Insurer as referenced in subsections (1) and (2) above, which notice is in any event received by the Insurer no later than thirty (30) days following the end of the Policy Period, and such notice includes (1) the reasons for anticipating such a Claim, (2) the nature and date of the alleged Wrongful Acts, (3) the alleged injury, (4) the names of the potential claimants and any Insured Person involved in the alleged Wrongful Acts, and (5) the manner in which any Insured Person or the Company first became aware of the potential Claim, then any Claim, the potential of which was specifically identified as required above, shall, for the purpose of this Policy, be treated as a Claim made during the Policy Period.”

(Sandra I. Weishart Decl. ¶ 4, Exh. 2 at 10 (Policy at Section IX) [Doc. # 27–3].)

In addition, the Policy's “Insured v. Insured Exclusion” provides, in relevant part:

Section V. Exclusions.

The Insurer shall not be liable to make any payment for Loss in connection with any Claim made against the Insured Persons based upon, arising out of, relating to, in consequence of, or in any way involving:

* * *

11. a Claim by, or on behalf, or at the behest of, any other Insured Person, the Company, or any successor, trustee, assignee or receiver of the Company except for:

(a) a shareholder's derivative action brought on behalf of the Company by one or more shareholders who are not Insured Persons and make a Claim without the cooperation or solicitation of any Insured Person or the Company....

(Id. at 7.) The Policy also contains a “Regulatory Endorsement,” which deletes the regulatory coverage exclusion.¹ (Id. at 23.)

2. BancInsure's Notice of Potential Claims

On November 5, 2008, Amy B. Briggs, counsel for Security Pacific, sent a letter to BancInsure.² (Weishart Decl. ¶ 17, Exh. 15.) The letter stated that it was providing notice of a claim pursuant to Section IX of the Policy. (Id. ) It further stated that the FDIC had issued a cease and desist order to Security Pacific Bank in April 2008, but the Bank was in violation of the order. (Id. ) As a result, it warned that the FDIC “may liquidate and take possession of the Bank, as a result of which the FDIC and the DFI may bring enforcement actions against the individual D & Os of the Bank. Should you need a list of the current D & Os, please let me know and we will provide it for you.” (Id. )

On November 6, 2008, BancInsure responded to Briggs' letter, acknowledging “receipt of your notice of a potential claim,” and assigning Donald R. Pratt, Jr. to the investigation of the claim. (Weishart Decl. ¶ 18, Exh. 16.)

On November 6, 2008, Briggs wrote a second letter to BancInsure, to “ensure compliance with Section IX. of the Policy,” stating:

In addition to any enforcement action, the FDIC, as receiver for the Bank, may bring a civil action against the individual D & Os seeking to recover money damages as a result of their alleged conduct. See 12 U.S.C. § 1821(k). Any such civil lawsuit would likely be based on allegations related to the following “Wrongful Acts” as set forth in the Cease and Desist Order referenced previously ... [enumerating acts].

(Weishart Decl. ¶ 19, Exh. 17.)

On November 7, 2008, Claims Adjuster Ted Equals sent a letter to Briggs, requesting that Briggs provide him a list of current D & Os of the Bank, along with a copy of the FDIC's April 2008 cease and desist letter. (Weishart Decl. ¶ 21, Exh. 19.) That same day, Briggs emailed Equals the requested information. (Defendant's Statement of Genuine Dispute of Material Fact (“DSGDMF”) ¶ 32.)

On November 13, 2008, Briggs sent a letter to Equals and Claims Manager William Van Butler, notifying them that the FDIC had been made receiver of the Bank and the D & Os could face regulatory action or civil suits. (Weishart Decl. ¶ 27, Exh. 25.)

On November 18, 2008, Briggs sent another letter to Van Butler and Equals, notifying them of, among other things, the names and titles of 14 D & Os of the Bank. (Weishart Decl. ¶ 28, Exh. 26.)

On October 11, 2011, counsel for the FDIC notified BancInsure of the FDIC's impending lawsuit against the D & Os. (DSGDMF ¶¶ 76–77.) Shortly thereafter, the FDIC also provided BancInsure a copy of a complaint the FDIC was prepared to file, which set forth specific claims and money damages to be pursued by the FDIC. (Id. at 78.)

3. Coverage Determination and Settlement Agreement

On November 30, 2011, BancInsure issued its coverage determination as to the FDIC's claims. (Weishart Decl. ¶ 57, Exh. 56.) First, it found that the Insured v. Insured Exclusion precluded coverage because the FDIC was acting as a receiver of the Bank. (Id. at pg. 5) Second, the letter specified that the notice requirements of Section IX.B of the Policy were not satisfied within thirty days of expiration of the Policy. (Id. at pg. 7.)

Subsequently, the FDIC, the D & Os, and BancInsure entered into a settlement agreement, effective August 8, 2012, whereby: (1) the D & Os assigned their rights under the Policy to the FDIC; (2) the parties agreed that the merits of the FDIC's claims against the D & Os would not be litigated and that instead the FDIC would file suit against BancInsure to determine whether the Policy provided coverage; and (3) that if coverage was found to exist, BancInsure would pay the Policy's $6,000,000 coverage limit to the FDIC. (DSGDMF ¶ 80).

Accordingly, on November 19, 2012, the FDIC filed a complaint in this Court for declaratory relief and breach of contract. [Doc. # 1.] The complaint asserts that BancInsure wrongfully denied coverage for the FDIC's claims against Security Pacific Bank's former D & Os. Both parties have moved for summary judgment as to the two coverage defenses asserted by BancInsure. [Doc. 27, 28.]

II.LEGAL STANDARD

Summary judgment should be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a) ; accord Wash. Mut. Inc. v. United States, 636 F.3d 1207, 1216 (9th Cir.2011). Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its initial burden, Rule 56(c) requires the nonmoving party to “go beyond the pleadings and by her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.’ ” Id. at 324, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 56(c), (e) (1986)); see also Norse v. City of Santa Cruz, 629 F.3d 966, 973 (9th...