Langdale Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh

• Decision Date: 03 June 2014
• Docket Number: Civil Action No. 1:12–CV–02422–SCJ.
• Citation: Langdale Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 110 F.Supp.3d 1285 (N.D. Ga. 2014)
• Parties: The LANGDALE COMPANY, Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendant.
• Court: U.S. District Court — Northern District of Georgia

110 F.Supp.3d 1285

The LANGDALE COMPANY, Plaintiff,

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendant.

Civil Action No. 1:12–CV–02422–SCJ.

United States District Court, N.D. Georgia, Atlanta Division.

Signed June 3, 2014.

Filed June 4, 2014.

Charles Neal Pope, David Cowan Rayfield, George W. Walker, III, Shaun P. O'Hara, Wade H. Tomlinson, III, Paul V. Kilpatrick, Jr., Pope McGlamry Kilpatrick, Morrison & Norwood, Columbus, GA, for Plaintiff.

Catherine Salinas Acree, Christopher B. Freeman, Walter Holloway Bush, Jr., Carlton Fields Jorden Burt, PA, Atlanta, GA, for Defendant.

ORDER

STEVE C. JONES, District Judge.

This matter appears before the Court on Plaintiff's Motion for Partial Summary Judgment [Doc. No. 50] and Defendant's Motion for Summary Judgment [Doc. No. 69].

I. Factual Background

On July 12, 2012, Plaintiff, The Langdale Company ("Plaintiff," "Langdale", or "TLC") filed a Complaint against National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("Defendant" or "National Union"). Doc. No. 1. Langdale's Complaint was amended and recast on August 21, 2012. Doc. No. 7. In its Complaint, Langdale asserts claims for breach of contract (count one); bad faith refusal to advance defense costs (count two); and declaratory judgment (count three).

A review of the record shows the following facts.¹

Langdale is a Georgia Corporation.

For the calendar year April 1, 2009 to April 1, 2010, Langdale purchased a "claims made" insurance policy issued by National Union, to wit: Policy No.: 01–754–82–11, with an effective date of April 1, 2009, (the "Policy"). A true and accurate copy of the Policy that was issued by National Union is found in the record at Doc. No. 52–1. The Policy was the first policy issued by National Union to Langdale. The Policy issued to Langdale replaced an expiring insurance policy that was issued by Chubb Group of Insurance Companies (Federal Insurance Company).

National Union issued a temporary binder for Directors and Officers coverage to Langdale on March 31, 2009.² On April 30, 2009, another temporary binder was issued to Langdale.³ On May 30, 2009, National Union issued a Temporary and Conditional Binder to Langdale.⁴ The effective date of the Policy remained April 1, 2009 with every continuation of the temporary binder. On July 2, 2009, National Union mailed the Policy to Langdale; however, the Policy erroneously included an Endorsement 15. Endorsement 15 never was referenced on any of the binders issued by National Union and was not intended to be a part of the coverage bound. On July 7, 2009, National Union mailed a correct Policy to Langdale as originally bound with an effective date of April 1, 2009. The Policy mailed on July 7, 2009 had a completed Endorsement 8 and removed Endorsement 15.⁵

The Policy included a Directors and Officers (D & O) coverage section with a limit of liability of $10 million and a $100,000.00 deductible. National Union is required under the Policy to advance Defense Costs prior to the final disposition of a Claim (when the Claim is covered). The Policy does not include an allocation provision for Defense Costs.

On May 21, 2009, The Virginia Langdale Miller family filed a lawsuit against Johnny W. Langdale, Jr., Harley Langdale, Jr., and Johnny W. Langdale, Jr., as Executor of the Estate of John W. Langdale, Sr. styled Langdale Miller Nalley, et al. v. John W. Langdale, Jr.; Harley Langdale Jr.; and John W. Langdale Jr., as Executor of the Estate of John W. Langdale, Sr., Civil Action, 2009–CV–1343, Superior Court of Lowndes County, Georgia (hereinafter the "Miller Lawsuit" or "1343 Suit"). A true and correct copy of the Miller Lawsuit is found in the record at Doc. No. 52–4.

The Miller Lawsuit is against two of The Langdale Company's shareholders, Harley Langdale ("Harley") and Johnny Langdale, Jr. ("Johnny"). The Miller Lawsuit included a Count titled "Count Three Breach of Fiduciary Duty as Director" and was expressly brought against Johnny Langdale in his capacity as a Director of The Langdale Company.

On June 22, 2009, following service of the Miller Lawsuit, Johnny Langdale, Jr. sent a letter seeking indemnification from Langdale. The record testimony indicates that Langdale has fully paid the lawyers for Johnny Langdale.

On October 20, 2009, Langdale filed a Declaratory Judgment action styled The Langdale Company v. Harley Langdale, Jr. et al., Civil Action No. 2009–cv–2747, Superior Court of Lowndes County, State of Georgia ("hereinafter "Declaratory Judgment action" or "2747 Suit" "). On November 13, 2009, the Virginia Langdale Miller family filed a Counterclaim in the Declaratory Judgment action against Langdale. The Counterclaim alleged that Langdale aided and abetted the alleged Trustees of the purported Trust, made misrepresentations together with the alleged Trustees, and schemed with the alleged Trustees. The Counterclaim filed in the Declaratory Judgment action included a Count V "Respondeat Superior Liability of [Langdale] for its Officers' Misconduct."

The Miller Lawsuit, the Declaratory Judgment action, and the Counterclaim were all consolidated into one action, i.e., the Underlying Litigation. These consolidated cases, according to the Georgia Court of Appeals, concern a trust created in 1959 by Judge Harley Langdale, Sr. ("Judge Langdale") for the benefit of his daughter, Virginia Miller. The plaintiffs, who are beneficiaries under the trust or their legal representatives, filed suit in the Superior Court of Lowndes County, claiming, inter alia, that the trustees breached their fiduciary duties in administering the trust and in distributing the trust corpus, which was comprised of stock held in The Langdale Company.

At all times pertinent, Johnny Langdale, Jr. was an Executive/Employee of Langdale.

At all times pertinent, The Langdale Company was an insured under the Policy, as was Johnny Langdale, Jr., to the extent that he qualifies as an "Individual Insured," as that term is defined in the Policy.

On August 4, 2009, Langdale provided written notice to National Union of the claims made against Johnny Langdale in the Miller Lawsuit. Included with the August 4, 2009 notice to National Union was a copy of the demand for indemnification and advancement of Defense Costs Langdale received from Johnny Langdale. Also included with the August 4, 2009 notice to National Union was a copy of the Miller Lawsuit. National Union's Claims Analyst, Douglas Croland, was assigned to the Claim submitted by Langdale to National Union.⁶

After receiving notice of the Miller Lawsuit, National Union denied coverage under the Policy by letter dated November 12, 2009. In its letter, National Union stated that it had "carefully reviewed the insurance policy ... as well as the allegations asserted." The two grounds for denying coverage provided by National Union on November 12, 2009 (based on the lawsuit, not the counterclaim) were Endorsement No. 15 and exclusion 4(g). National Union's November 12, 2009 denial included a reservation of rights which read as follows:

National Union's coverage position is based on the information presently available to us. This letter is not, and should not be construed as a waiver of any terms, conditions, exclusions or other provisions of the Policy, or any other policies of insurance issued by National Union or any of its affiliates. National Union expressly reserves all of its rights under the Policy, including the right to assert additional defenses to any claims for coverage, if subsequent information indicates that such action is warranted.

Endorsement No. 15 is not an Endorsement in the Policy.

On November 25, 2009, Langdale responded to National Union's coverage denial (by letter from Attorney Thomas S. Richey ("Richey")) and notified National Union that Endorsement No. 15 was not part of the Policy. Langdale also requested that National Union withdraw its denial of coverage for the Miller Lawsuit. In that letter, Langdale's counsel stated, "That Endorsement was not in the coverage as offered and bound and is not a part of the Policy now. If you examine the March 19, 2009 quote and the March 31, 2009 binder for the Policy (attached), there was no mention of such an exclusion."

Also on November 25, 2009, Langdale tendered notice of a Counterclaim in the Declaratory Judgment action that was filed directly against Langdale and for which Langdale sought coverage under the Policy. On November 25, 2009, Langdale advised National Union that Johnny Langdale resigned as trustee before the purchase of stock from the Trust, so that [Johnny Langdale] could act on [Langdale's] behalf in consummating the transaction.

National Union responded to Langdale's November 25, 2009 letters through its coverage counsel, John Jordak of Alston & Bird.

On March 26, 2010, National Union, via Alston & Bird, sent a letter to Langdale that abandoned Endorsement 15 and relied upon Exclusion 4(g) and the Policy's definition of Wrongful Act to again deny coverage. National Union, through its counsel did not rely upon Endorsement 8 ("Specific Investigation/Claim/Event or Act Exclusion") in its March 26, 2010 letter, although National Union was in possession of a 2008 State Suit and 2008 Federal Suit at the time.⁷

On June 25, 2010, Langdale sent another letter to Alston & Bird challenging National Union's denial.

On July 9, 2010, Alston & Bird sent a letter to Langdale requesting certain documents.

On October 13, 2010, National Union, by letter, agreed to advance reasonable Defense Costs (as defined in the Policy) for the defense of Johnny Langdale, Jr, against the allegations in Count III of the Miller Lawsuit. National Union's October 13, 2010 letter stated, "based upon National Union's review, and pursuant to the Policy, National Union agrees to advance reasonable Defense Costs (as defined in the Policy) for the defense of Johnny Langdale, Jr. against the allegations in Count III (and only Count III) of the Complaint in Langdale Miller...