623 F. App'x 628
5th Cir.2015Background
- Underwriters appeal a district court summary judgment ordering reimbursement of Perraud and Raffanello’s attorney’s fees and costs under a D&O policy.
- Perraud and Raffanello worked for Stanford Financial Group Company (SFGC), insured under the Lloyd’s/Arch D&O policy.
- A receivership over Stanford and control of SFGC’s voting rights affected the policy’s coverage features.
- Exclusion J’s applicability and whether a sophisticated-insured exception should apply were central to the dispute.
- The district court found Exclusion J ambiguous and declined to apply a broad sophisticated-insured exception; the Fifth Circuit affirmed.
- The dissent would reject ambiguity and apply Exclusion J unambiguously to bar coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Texas recognizes a sophisticated-insured exception to contra proferentem. | Underwriters assume Texas would recognize the exception. | Appellees argue the exception is not recognized or applicable. | The court limits analysis, declining to apply a broad Texas exception. |
| Whether there was genuine dispute that SFGC negotiated or drafted the exclusion. | Evidence shows some negotiation through SFGC’s broker. | No specific evidence of actual negotiation/drafting by SFGC; testimony insufficient. | No genuine dispute; district court properly declined to apply the exception. |
| Whether the district court’s ambiguity ruling on Exclusion J was erroneous given Texas law. | Ambiguity favored coverage under contra proferentem. | Exclusion J unambiguously bars coverage under receivership facts. | Court affirmed judgment; Exclusion J not needed to address sophisticated-insured issue. |
Key Cases Cited
- Pendergest-Holt v. Certain Underwriters at Lloyd's of London, 600 F.3d 562 (5th Cir. 2010) (discusses the sophisticated-insured exception (contextual reference))
- Pittston Co. Ultramar Am., Ltd. v. Allianz Ins. Co., 124 F.3d 508 (3d Cir. 1997) (exception sparked by insured’s involvement in drafting/negotiating)
- Northbrook Excess & Surplus Ins. Co. v. Procter & Gamble Co., 924 F.2d 633 (7th Cir. 1991) (exception when policy language was customized at insured’s insistence)
- Mut. Life Ins. Co. v. Simpson, 88 Tex. 333 (Tex. 1895) (Texas doctrine on construction of contracts in insurance context)
- In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015) (Texas Supreme Court deferred ruling on sophisticated-insured question when ambiguity absent)