Medical Mut. Ins. Co. of Maine v. Indian Harbor

• Citation: 583 F.3d 57
• Decision Date: 08 October 2009
• Docket Number: No. 08-2525.,08-2525.
• Parties: MEDICAL MUTUAL INSURANCE COMPANY OF MAINE, Plaintiff, Appellant, v. INDIAN HARBOR INSURANCE COMPANY, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

583 F.3d 57

MEDICAL MUTUAL INSURANCE COMPANY OF MAINE, Plaintiff, Appellant, v. INDIAN HARBOR INSURANCE COMPANY, Defendant, Appellee.

No. 08-2525.

United States Court of Appeals, First Circuit.

Heard September 16, 2009.

Decided October 8, 2009.

Jeffrey T. Edwards, with whom Preti, Flaherty, Beliveau & Pachios, LLP was on brief, for appellant.

Leslie S. Ahari, with whom Troutman Sanders LLP, Louis K. Thomas, and Pierce Atwood LLP were on brief, for appellee.

Before HOWARD, RIPPLE,^* and SELYA, Circuit Judges.

SELYA, Circuit Judge.

This appeal presents the question of whether a corporation can recover under a director and officer (D & O) liability insurance policy for losses stemming from judicial and administrative complaints filed against the company but which alleged wrongful conduct on the part of its directors and officers. In typical fashion, the policy language limits coverage to losses resulting from claims made against the directors and officers themselves.

D & O policies exist to fund indemnification covenants that protect corporate directors and officers from personal liability, not to protect the corporation by which they are employed. The position advanced by the company in this case—extending coverage to situations in which the directors and officers are not themselves the actual targets of the claims made—would if accepted transmogrify D & O policies into comprehensive corporate liability policies. Because such a transmogrification is contrary to both the letter and the spirit of the D&O policy at issue here, we affirm the district court's entry of summary judgment in favor of the insurer.

I. BACKGROUND

This case had its genesis in a dispute between Medical Mutual Insurance Company of Maine (MMIC) and Patrick A. Dowling, who suffered a stroke in April of 2005. MMIC did not wait very long before ousting Dowling from his position as its chief executive officer.

Dowling retained counsel who, in October of 2005, wrote a demand letter to MMIC, seeking compensation for alleged disability discrimination. When the demand letter failed to produce the desired response, Dowling filed an administrative complaint against MMIC with the Maine Human Rights Commission and the federal Equal Employment Opportunity Commission. The statement of charge named MMIC as the lone respondent, but alleged discriminatory conduct on the part of MMIC, its directors, and its officers.

After the agencies issued right-to-sue letters, Dowling filed a civil complaint against MMIC in the United States District Court for the District of Maine. Dowling did not name any director or officer as a defendant, but the complaint contained allegations of wrongful conduct attributable to MMIC's directors and officers. The complaint sought damages against MMIC and, among a series of other prayers for relief, also requested that the court "[e]njoin MMIC, its agents, employees, and successors, from continuing to violate" Dowling's rights.

The named parties eventually settled the case. MMIC paid $325,000 out of its own coffers in exchange for Dowling's execution of a release of all claims against MMIC and its "officers, agents, employees, attorneys, [and] members of the Board of Directors."

MMIC subsequently sought reimbursement from Indian Harbor Insurance Company, which had issued a D & O policy (styled in this instance as a management liability policy) to MMIC. That policy provided reimbursement for any loss(es) to MMIC arising out of claims made against its directors and officers. Indian Harbor refused to pay the piper, concluding that Dowling's claims had been made only against the company (MMIC) and not against its directors or officers.

Undaunted by this rebuff, MMIC filed the instant action against Indian Harbor in the district court, seeking to compel payment under the Indian Harbor policy. On cross-motions for summary judgment, the court concluded that the policy did not cover losses resulting from either of the complaints (administrative or judicial) filed by Dowling against MMIC. Consequently, it granted summary judgment in Indian Harbor's favor. This timely appeal ensued.

II. ANALYSIS

We operate under a familiar legal framework. This is a diversity case, 28 U.S.C. § 1332(c), in which Maine law supplies the substantive rules of decision. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The district court, applying Maine law, made its dispositive ruling at the summary judgment stage, and that ruling engenders de novo review. Houlton Citizens' Coal. v. Town of Houlton, 175 F.3d 178, 184 (1st Cir.1999).

Under Maine law, the general rule is that ambiguous language in an insurance policy must be construed against the insurer. Seaco Ins. Co. v. Davis-Irish, 300 F.3d 84, 86 (1st Cir.2002); Union Mut. Fire Ins. Co. v. Comm'l Union Ins. Co., 521 A.2d 308, 310 (Me.1987). The very articulation of this rule indicates its limitations: unambiguous language does not fall within the rule but, rather, must be given its plain and ordinary meaning. Alternative Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 35 (1st Cir. 2001); Lidstone v. Green, 469 A.2d 843, 846 (Me.1983). When a term is expressly defined within the four corners of an insurance policy, an inquiring court must defer to that definition and thereby give effect to the intent of the parties. See John Hancock Life Ins. Co. v. Abbott Labs., 478 F.3d 1, 7-8 (1st Cir.2006); see also In re Blinds to Go Share Purchase Litig., 443 F.3d 1, 7 (1st Cir.2006) ("Where the parties to a contract take pains to define a key term specifically, their dealings under the contract are governed by that definition.").

In the case at hand, the parties' dispute centers on Section I(B) of the policy's insuring agreements.² Section I(B) provides The Insurer shall pay on behalf of the Company Loss which the Company is required or permitted to pay as indemnification to any of the Insured Persons resulting from a Claim first made against the Insured Persons during the Policy Period or, if applicable, the Optional Extension Period, for a Wrongful Act or Employment Practices Wrongful Act.

The policy defines "Insured Person" as "any past, present or future director or officer, or member of the Board of Managers, of the Company." The policy further defines the word "claim" to include any one of the following four iterations:

(1) a written demand for monetary or non-monetary relief;

(2) any civil proceeding in a court of law or equity, or arbitration;

(3) any criminal proceeding which is commenced by the return of an indictment; and

(4) a formal civil, criminal, administrative regulatory proceeding or formal investigation of an Insured Person or the Company (but with respect to the Company only for a Company Wrongful Act) which is commenced by the filing or issuance of a notice of charges, formal investigative order or similar document identifying in writing such Insured Person or the Company as a person or entity against whom a proceeding as described in (C)(2) [civil proceeding] or (3) [criminal proceeding] above may be commenced, including any proceeding before the Equal Employment Opportunity Commission or any similar federal, state or local governmental body....

We bring these policy provisions to bear here. To establish coverage under Section I(B), MMIC had to show both that Dowling made a "claim" as defined in the policy and that Dowling's claim was made against MMIC's directors and officers. In the district court, MMIC pointed to two separate "claims" that it deemed sufficient to satisfy this two-part test: the administrative complaint and the judicial complaint. In its reply brief in this court, MMIC for the first time enlarged this list, contending that a demand letter from Dowling's counsel to MMIC, dated October 13, 2005, constitutes a third such "claim."

We take the newest contention first, and reject it out of hand. For one thing, MMIC did not advance this contention in the district court and, therefore, it is procedurally defaulted. See United States v. Slade, 980 F.2d 27, 30 (1st Cir. 1992) ("It is a bedrock rule that when a party has not presented an argument to the district court, she may not unveil it in the court of appeals."). For another thing, MMIC waived the contention by failing to allude to it in its opening brief in this court. See DeCaro v. Hasbro, Inc., 580 F.3d 55, 63 (1st Cir.2009) ("It is common ground that contentions not advanced in an appellant's opening brief are deemed waived."); Sandstrom v. ChemLawn Corp., 904 F.2d 83, 86 (1st Cir.1990) (similar).

This leaves the administrative complaint and the judicial complaint. We address them in chronological order, beginning with the administrative complaint.

The administrative complaint fails to satisfy the policy's definition of a "claim." In order for an administrative complaint to constitute a claim under that definition, the filing must "identif[y] in writing [an] Insured Person ... as a person ... against whom a proceeding ... may be commenced."³ Dowling's notice of charge names MMIC as the sole respondent and does not identify any particular directors or officers. The accompanying statement of charge makes a few categorical references to MMIC's agents, representatives, and board members, but it does not name any specific director or officer. Reading the policy as it is written, the administrative complaint simply does not comprise a "claim" for purposes of coverage under Section I(B).

We turn next to Dowling's judicial complaint. That pleading satisfies the definition of "claim" because it marks the commencement of a "civil proceeding in a court of law." The larger question is whether the claim is one "made against" an insured person.

It cannot be gainsaid that the directors and officers composed the entire roster of "Insured Persons" for purposes of the coverage in question. MMIC itself is not included. It is equally clear that Dowling brought his action only...