VOLUNTARY HOSP. OF AMERICA v. NAT. UN. FIRE INS., Civ. A. No. 3:91-CV-2577-X.

• Decision Date: 27 July 1993
• Docket Number: Civ. A. No. 3:91-CV-2577-X.
• Citation: 859 F. Supp. 260
• Parties: VOLUNTARY HOSPITALS OF AMERICA, INC., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

859 F. Supp. 260

VOLUNTARY HOSPITALS OF AMERICA, INC., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., et al., Defendants.

Civ. A. No. 3:91-CV-2577-X.

United States District Court, N.D. Texas, Dallas Division.

July 27, 1993.

Terence Michael Murphy, Katie Jean Colopy, Jennifer Ruth Brandeis, Jones Day Reavis & Pogue, David Henry Pace, Affiliated Computer Services, Dallas, TX, for Voluntary Hospitals of America, Inc.

Judith A. Schening, Jonathan B Skidmore, Fulbright & Jaworski, Dallas, TX, Frank Friddith Jones, Fulbright & Jaworski, Houston, TX, for Nat. Union Fire Ins. Co. of Pittsburgh, Pa.

William Beale Dean, Brown Herman Scott Dean & Miles, Fort Worth, TX, for Home Ins. Co. of Illinois.

Richard Hunt Gateley, McLean & Sanders, Fort Worth, TX, Dennis Randall Yeager, Yeager & Lang, New York City, Geoffrey W. Heineman, Andrew L. Margulis, Michael D. Brown, Ohrenstein & Brown, New York City, for H.S. Weavers (Underwriting) Agencies, Ltd.

Richard Hunt Gateley, McLean & Sanders, Fort Worth, TX, Geoffrey W. Heineman, Andrew L. Margulis, Michael D. Brown, Ohrenstein & Brown, New York City, for Anglo American Ins. Co., Ltd., Commercial Union Assur. Co., Ltd., Assicurazioni Generali S.P.A., Ocean Marine Ins. Co., Ltd., London & Hull Ins. Co., Ltd., Sphere Drake Ins. Co., PLC, Dai-Tokyo Ins. Co. (U.K.), Ltd., Aegon Ins. Co. (U.K.), Ltd., Sovereign Ins. Co. (U.K.), Ltd., Syndicate No. 1127, Syndicate No. 122, Syndicate No. 15, Syndicate No. 190, Syndicate No. 620, Syndicate No. 205.

Sid Stahl, pro se.

MEMORANDUM OPINION AND ORDER

KENDALL, District Judge.

NOW before the Court are Defendant, National Union Fire Insurance Company of Pittsburgh, Pa.'s Motion for Summary Judgment, filed on March 15, 1993, Plaintiff's response to this motion and National Union's reply to the response. Having considered these filed materials, the summary judgment evidence and the applicable law, the Court determines that National Union's motion should be, and hereby is, GRANTED.

This case is a dispute over insurance coverage between, on the one hand, insurers that issued directors and officers liability insurance policies and, on the other, the insured. Plaintiff VHA and one of its subsidiaries, VHA Enterprises, along with certain individual officers and directors, were sued by a class of shareholders in a derivative action, hereinafter the "Ryan action," which ultimately settled. Ryan's suit was prosecuted with the active assistance of Thomas Reed, a former officer and director of VHA Enterprises. VHA reimbursed its officers and directors for claims against them in the Ryan action and also paid their legal fees. VHA now seeks reimbursement for the amounts it expended relating to that lawsuit. The total amount sought exceeds $8,000,000.

National Union moves the Court to grant summary judgment in its favor based on the "insured v. insured" exclusion in the policy. This provision states as follows:

The Insurer shall not be liable to make any payment for Loss in connection with any claim or claims made against the Directors or Officers ... which are brought by any Insured or the Company; or which are brought by any security holder of the Company whether directly or derivatively, unless such claim(s) is instigated and continued totally independent of, and totally without the solicitation of, or assistance of, or active participation of, or intervention of, any Insured or the Company; provided, however, this exclusion shall not apply to wrongful termination of employment claims brought by a former employee other than a former employee who is or was a Director of the Company....

With this language in mind, National Union points out the following definitions in the policy: "`Insured(s)', or `Director(s) or Officer(s)', means any past, present or future duly elected or appointed Directors or Officers of the Company...." The policy defines "company" as the "Named Corporation VHA ... and any Subsidiary thereof." National Union argues that because Reed, a former officer and director of a VHA subsidiary, assisted Ryan, a security holder of the company, in the Ryan action, the insured v. insured exclusion exonerates it from payment and therefore entitles it to summary judgment. VHA argues that the definition of "insured" in the policy is ambiguous and therefore susceptible of the introduction of extraneous evidence to explain its meaning. If true, this assertion would mandate the denial of National Union's motion.

The Court predicates its subject matter jurisdiction on diversity of citizenship, 28 U.S.C. § 1332, and therefore looks to state law as the rule of decision for substantive matters. 28 U.S.C. § 1652; Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Where no state court has decided a particular question at issue, the federal court must make an educated guess as to how the state's supreme court would rule. Nobs Chemical, U.S.A., Inc. v. Koppers Co., 616 F.2d 212, 214 (5th Cir.1980). The applicability of Texas law is undisputed.

The movant in a summary judgment context must show the absence of any genuine issue of material fact and entitlement to judgment as a matter of law. Slaughter v. Southern Talc Co., 949 F.2d 167, 170 (5th Cir.1991). The existence of a genuine issue of material fact is determined based on whether a fair-minded jury could return a verdict for the plaintiff based on the evidence presented. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 252, 106 S.Ct. 2505, 2510, 2512, 91 L.Ed.2d 202 (1986). The rules allocating the burden of proof guide a court in a summary judgment analysis, Fields v. City of S. Houston, 922 F.2d 1183, 1187 (5th Cir.1991), and such allocation depends on the burden of proof that would obtain at trial. See Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 150 (5th Cir.1991). The nonmovant is not required to respond to the motion until the movant properly supports his motion with competent evidence. Russ v. International Paper Co., 943 F.2d 589, 591 (5th Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 1675, 118 L.Ed.2d 393 (1992). However, once the movant has carried his burden of proof, the nonmovant may not sit idly by and wait for trial. Page v. DeLaune, 837 F.2d 233, 239 (5th Cir.1988). When a movant carries his initial burden, the burden then shifts to the nonmovant to show that the entry of summary judgment is inappropriate. Duckett v. City of Cedar Park, 950 F.2d 272, 276 (5th Cir.1992). Although the nonmovant may satisfy this burden by tendering depositions, affidavits and other competent evidence,¹ "mere conclusory allegations are not competent summary judgment evidence, and they are therefore insufficient to defeat or support a motion for summary judgment." Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.1992), cert. denied, ___ U.S. ___, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992). In short, "the adverse party's response ... must set forth specific facts showing that there is a genuine issue for trial." FED. R.CIV.P. 56(e). However, merely colorable evidence or evidence not significantly probative will not defeat a properly supported summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2510-11 (1986). The existence of a mere scintilla of evidence will not suffice. Id. at 252, 106 S.Ct. at 2512. When the nonmoving party fails to make the requisite showing and the moving party has met his summary judgment burden, the movant is entitled to summary judgment. FED.R.CIV.P. 56(c); Campbell v. Sonat Offshore Drilling, 979 F.2d 1115, 1119 (5th Cir.1992).

Whether the policy's definition of "insured" is ambiguous is a question of law. Watkins v. Petro-Search, Inc., 689 F.2d 537 (5th Cir.1982). An insurance policy is ambiguous only when the provision to be construed is reasonably susceptible of more than one meaning. Continental Cas. Co. v. Allen, 710 F.Supp. 1088 (N.D.Tex.1989). The Court concludes that the exclusion's plain meaning leads to National Union's conclusion. However, VHA asserts that the definition of "insured" means different things in different contexts in the policy. The proper meaning regarding the pertinent exclusion is therefore allegedly lost through ambiguity and...