325 F. Supp. 3d 212
D.D.C.2018Background
- Plaintiff insured (F-Squared context) sought coverage for matters arising from an SEC action; insurer defendants (Zurich and XL) moved for summary judgment denying coverage.
- Policy contains a "deemed-made" clause excluding coverage for claims that were "deemed made" by an earlier order of investigation, subpoena, Wells Notice, or target letter that indicates proceedings "may be brought."
- On September 23, 2012 the SEC issued a "Formal Order" directing a private investigation based on information suggesting F-Squared violated federal law.
- Plaintiff argues the deemed-made clause does not apply because the SEC Formal Order does not identify anyone as a target of potential civil, criminal, administrative, or regulatory proceedings.
- Defendants argue the Formal Order plainly triggers the deemed-made clause because it indicates proceedings "may be brought," placing the matter outside the policies' coverage period.
- Court concludes the policy language is unambiguous, the SEC Order satisfied the clause's low threshold, and grants defendants' summary judgment motions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the SEC Formal Order triggers the policy's "deemed-made" clause | Formal Order does not identify anyone as a possible subject of proceedings, so clause doesn't apply | Order signaled that proceedings "may be brought" against F-Squared and thus triggers the clause | Clause triggered; Formal Order met the low threshold and excluded coverage |
| Whether the Formal Order qualifies as an "order of investigation" under the clause | "Order Directing Private Investigation" is not the same as listed examples (target letter, Wells Notice) | The contractual list is broad; the Formal Order falls squarely within "order of investigation" | Formal Order is an "order of investigation" and falls within clause |
| Whether ambiguity exists in the policy such that contra proferentem applies | Plaintiff contends at least a rational alternative reading exists, requiring denial of summary judgment | Policy language is plain and unambiguous; no need to construe against drafter | No ambiguity; court applies plain meaning and enforces the clause |
| Effect of deemed-made trigger on coverage period and pending counterclaims | Plaintiff implies coverage should apply despite the Order | Defendants argue the investigation preceded the coverage period, mooting coverage and related counterclaims | Court holds investigation occurred outside coverage period; grants summary judgment for defendants and directs parties to resolve remaining counterclaims and submit proposed judgment |
Key Cases Cited
- Metropolitan Prop. & Cas. Ins. Co. v. Morrison, 460 Mass. 352, 951 N.E.2d 662 (Mass. 2011) (ambiguity construed against drafter)
- GRE Ins. Grp. v. Metro. Boston Hous. P'ship, Inc., 61 F.3d 79 (1st Cir. 1995) (plain policy language given its ordinary meaning)
- Hyfer v. Metropolitan Life Ins. Co., 318 Mass. 175, 61 N.E.2d 3 (Mass. 1945) (insurance policy provisions plainly expressed must be enforced according to their terms)