Finci v. American Cas. Co. of Reading, Pa.

• Decision Date: 02 May 1990
• Docket Number: No. 840,840
• Parties: , 58 USLW 2690 Michael FINCI v. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, et al. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA v. STATE of MARYLAND DEPOSIT INSURANCE FUND CORPORATION, et al. Sept. Term 1989.
• Court: Court of Special Appeals of Maryland

Page 471

82 Md.App. 471

572 A.2d 1092, 58 USLW 2690

Michael FINCI v. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, et al.

AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA v. STATE of MARYLAND DEPOSIT INSURANCE FUND CORPORATION, et al.

No. 840 Sept. Term 1989.

Court of Special Appeals of Maryland.

May 2, 1990.

Richard A. Finci, Pickett, Houlon & Berman, on the brief, Hyattsville, for appellant, Michael Finci.

H. Emslie Parks, Parks, Hansen & Ditch, on the brief, Towson, for American Cas. Co.

Timothy C. Russell, Thomas C. Schaufelberger, Douglas C. McAllister and Drinker, Biddle & Reath, Washington, D.C., for appellant.

Neil J. Dilloff, Jonathan D. Smith and Piper & Marbury, J. Joseph Curran, Jr., Atty. Gen., Dennis M. Sweeney, Deputy Atty. Gen., on the brief, Baltimore, for M.D.I.F.

Argued before ROBERT M. BELL, WENNER and CATHELL, JJ.

WENNER, Judge.

This is yet another appeal arising from the 1985 savings and loan crisis in Maryland. The matter now before us was spawned by two lawsuits which were later consolidated, each of which sought amounts alleged to be owed under a directors' and officers' liability policy (the D & O Policy) issued by appellant, American Casualty Company of Reading, Pennsylvania (American Casualty), to First Maryland Savings & Loan, Inc. (First Maryland). In November of 1985, it was determined that First Maryland was in serious financial condition. As a result, the Circuit Court for Montgomery County appointed the State of Maryland Deposit Insurance Fund (MDIF) as conservator for First Maryland, ¹ and subsequently as First Maryland's receiver. ²

Both of the underlying lawsuits arose from a prior action filed by First Maryland and MDIF against several defendants (the Seidel Action), including appellant, Michael Finci, a former director of First Maryland. ³ Prior to trial in the Seidel Action, Finci settled with First Maryland and MDIF for $330,000. ⁴ First Maryland and MDIF later obtained a multi-million-dollar judgment against the remaining defendants. ⁵

Following the entry of judgment in the Seidel Action, First Maryland and MDIF, and Michael Finci, each filed lawsuits against American Casualty. Finci, as a former director of First Maryland, sought to recover under the D & O Policy for his $330,000 settlement plus attorney's fees. First Maryland and MDIF sought to recover the full amount of coverage available under the D & O Policy. ⁶ Those two lawsuits were consolidated by the circuit court.

This appeal is from an order of the Circuit Court for Baltimore City which granted First Maryland and MDIF's motion for partial summary judgment on the issue of priority to the proceeds from the D & O Policy. In addition, the circuit court granted judgment in favor of MDIF and against American Casualty in the amount of $2.995 million. ⁷

Upon appeal, American Casualty asserts that:

I. All claims based on the Seidel Action are excluded by both the "Insured vs. Insured" and "Regulatory" exclusions contained in the D & O Policy.

II. Maryland public policy does not render the exclusions unenforceable.

III. In the absence of a factual record, the grant of summary judgment was improper as to the remaining defenses. ⁸

In addition, Finci asserts that:

IV. The circuit court erred in granting appellees' motion for partial summary judgment as to priority of the policy proceeds.

V. The circuit court erred in denying as moot Finci's second motion for summary judgment.

We have carefully reviewed the record before us as well as the statutes involved and their legislative history. From all of this, we conclude that the "Insured vs. Insured" and "Regulatory" exclusions in the D & O policy are contrary to the public policy of the State of Maryland and, thus, are void and unenforceable. Moreover, from our examination of the various statutes involved and their legislative history, we conclude that the legislature intended to give judgments obtained by the State, and by MDIF as its agent, priority over all other judgments. Md.Fin.Inst.Code Ann. § 10-120(b) (1986 Repl.Vol. & Supp.1989). Consequently, the order of the circuit court granting judgment in favor of MDIF and granting partial summary judgment to First Maryland and MDIF on the issue of priority to the proceeds of the D & O Policy was properly granted.

Standing

We shall begin our discussion with American Casualty's assertion that MDIF does not have standing to sue under the D & O Policy. We see it somewhat differently.

MDIF is an agent of the State. State v. Hogg, 311 Md. 446, 467, 535 A.2d 923 (1988). In its capacity as conservator and receiver of First Maryland, MDIF becomes the "real party in interest" in an action brought in the name of MDIF. See Id.

Moreover, as conservator, MDIF has statutory authority to "exercise the powers, rights, and privileges of the officers, directors, members, and stockholders of the savings and loan association." Md.Fin.Inst.Code Ann. § 9-702(b) (1986 Repl.Vol. & Supp.1989). MDIF is also authorized to exercise these powers in its capacity as receiver. Md.Fin.Inst.Code Ann. § 9-708(c) and (d) (1986 Repl.Vol. & Supp.1989). Accordingly, we hold that MDIF, in its capacity as conservator and receiver of First Maryland, has standing to bring suit under the D & O Policy issued by American Casualty.

Summary Judgment

At the outset, we note that "[a]ny party may file at any time a motion for summary judgment on all or part of an action on the ground that there is no genuine dispute as to any material fact and that the party is entitled to judgment as a matter of law." Md. Rule 2-501(a). The summary judgment proceeding is not a substitute for a trial; rather, it is a proceeding to determine whether a trial is required to resolve a factual controversy. Foy v. Prudential Insurance Co., 316 Md. 418, 422, 559 A.2d 371 (1989). The trial court, in ruling on the motion for summary judgment, must determine whether the pleadings, depositions, answers to interrogatories, admissions, and affidavits on file show that there is no genuine dispute as to any material fact, and whether the movant is entitled to judgment as a matter of law. Md. Rule 2-501(e). See also Syme v. Marks Rentals, Inc., 70 Md.App. 235, 238, 520 A.2d 1110 (1987).

Once the moving party establishes sufficient grounds for summary judgment, the party opposing the motion must show "with some precision" that there exists a genuine dispute as to a material fact. See Foy, supra, 316 Md. at 422, 559 A.2d 371. Maryland courts have defined a "material fact" as "a fact the resolution of which will somehow affect the outcome of the case." King v. Bankerd, 303 Md. 98, 111, 492 A.2d 608 (1985). If the facts are susceptible to more than one inference, all inferences must be resolved against the moving party. Id. See also Syme, supra, 70 Md.App. at 239, 520 A.2d 1110. Moreover, where several inferences may be drawn, summary judgment is not proper, but rather, the dispute must be submitted to the trier of fact. King, supra, 303 Md. at 111, 492 A.2d 608. See also Foy, supra, 316 Md. at 422-423, 559 A.2d 371.

Discussion

Construction of insurance contracts in Maryland is governed by several well settled principles. See Pacific Indemnity v. Interstate Fire & Casualty, 302 Md. 383, 388 488 A.2d 486 (1985). An insurance contract is measured by its terms unless contrary to a statute, a regulation, or public policy. Id. The contractual provisions of an insurance policy are based upon their plain and ordinary meaning. See Globe American Casualty v. Chung, 76 Md.App. 524, 532, 547 A.2d 654 (1988), cert. granted, 314 Md. 508, 551 A.2d 874 (1989). In order to determine the intention of the parties to the insurance contract, the court must consider the contract as a whole. Pacific Indemnity, supra, 302 Md. at 388, 488 A.2d 486. In addition, where the language of the contract is clear and unambiguous, courts may construe the contract as a matter of law. Id. at 389, 488 A.2d 486.

In the case at hand, the D & O Policy, issued by American Casualty to First Maryland, contains several exclusions that purport to limit the liability coverage provided by American Casualty. Endorsement No. 7 (hereinafter the "Regulatory exclusion") of the D & O Policy provides that:

the Insurer shall not be liable to make any payment of Loss in connection with any claim made against the Directors of [sic] Officers based upon or attributable to: any action or proceeding brought by or on behalf of the Federal Deposit Insurance Corporation, the Federal Savings & Loan Insurance Corporation, any other depository insurance organization, the Comptroller of the Currency, the Federal Home Loan Bank Board, or any other national or state regulatory agency (all of said organizations and agencies hereinafter referred to as "Agencies"), including any type of legal action which such agencies have the legal right to bring as receiver, conservator, liquidator or otherwise, whether such action or proceeding is brought in the name of such Agencies or by or on behalf of such Agencies in the name of any other entity or solely in the name of any Third Party.

In addition, Endorsement No. 9 (hereinafter the "Insured vs. Insured exclusion") of the D & O Policy provides that:

the Insurer shall not be liable to make any payment for Loss as defined in Clause 1(d) hereof, which is based upon or attributable to any claim made against any Director or Officer by any other Director or Officer or by the Institution defined in Clause 1(a) of the Policy (hereinafter called "Institution"), except for a shareholders derivative action brought by a shareholder of the Institution other than an Insured.

American Casualty contends that the "Regulatory exclusion" and the "Insured vs. Insured exclusion" preclude coverage of all claims based upon the Seidel Action.

An insurer is entitled to limit the coverage under the insurance policy, provided that the exclusion is made in plain and conspicuous language. See Burns v. International...