St. Paul Mercury Insurance v. Miller
968 F. Supp. 2d 1236
N.D. Ga.2013Background
- Directors/officers policy dispute: insurer (Plaintiff) seeks declaration it has no duty to defend or indemnify CB&T officers Charles Miller and Trent Fricks in an FDIC suit arising from alleged improper loan approvals and negligent supervision.
- FDIC, as receiver for failed Community Bank & Trust (CB&T), sued Miller and Fricks in the underlying action; insurer provided defense under reservation of rights and sued for declaratory relief.
- Plaintiff moved for summary judgment contending policy bars coverage via (1) a "loss" definition excluding unrecovered loans and (2) an "Insured v. Insured" exclusion. Defendants (FDIC, Miller, Fricks) sought more discovery before adjudication.
- Court considered whether policy language is ambiguous (which would permit parol evidence and justify discovery) and whether summary judgment was appropriate.
- Court held the Insured v. Insured exclusion unambiguous and applicable because the FDIC, as receiver, "stands in the shoes" of CB&T and brought the suit on CB&T's behalf; thus insurer has no duty to defend or indemnify.
- Court denied discovery requests as unnecessary, granted Plaintiff's summary judgment motion, entered judgment for Plaintiff, and denied other pending motions as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether policy language is ambiguous such that parol evidence/discovery is needed | Policy unambiguous; court should decide coverage on its terms | FDIC: further discovery needed into insurer's internal documents/intent | Court: language is materially unambiguous; discovery unnecessary |
| Whether damages alleged (unrecovered loans) fall within "loss" carve-out excluding unrepaid/unrecoverable loans | "Loss" carve-out excludes unrecovered loans; no coverage | FDIC/Miller: suit seeks tort damages caused by officers, not contractual loan recovery; carve-out ambiguous | Court: carve-out ambiguous but resolves against insurer; does not alone bar coverage |
| Whether the Insured v. Insured exclusion bars coverage for FDIC's suit as receiver | Exclusion bars claims brought "by or on behalf of any Insured" — applies where FDIC steps into CB&T's shoes | FDIC: many courts hold such exclusions don't apply to FDIC; exclusion shouldn't bar FDIC receiver suits | Court: exclusion unambiguous and applies because FDIC acts on behalf of CB&T; exclusion bars coverage |
| Whether public policy or precedents favoring FDIC override plain policy language | Insurer: enforce clear contract terms despite policy implications | FDIC: public policy and some case law disfavors applying insured v. insured exclusions to FDIC receiver suits | Court: will not rewrite contract for public policy; follows O’Melveny principle that FDIC "stands in the shoes" and enforces policy text |
Key Cases Cited
- Hays v. Georgia Farm Bureau Mut. Ins. Co., 314 Ga. App. 110 (Ga. Ct. App. 2012) (rules on construction and ambiguity of insurance contracts)
- O’Melveny & Myers v. F.D.I.C., 512 U.S. 79 (U.S. 1994) (FDIC as receiver succeeds to rights of failed institution; defenses against the institution apply to FDIC)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burdens and procedures)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (standard for genuine dispute of material fact at summary judgment)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (U.S. 1986) (requiring reasonable inferences in summary judgment review)