ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
This matter came regularly before the Court on 17 April 1991 for hearing on the parties’ 25 March 1991 cross motions for summary judgment. Having reviewed the pleadings on file and the arguments of counsel, and being fully advised in the premises, the Court FINDS and ORDERS as follows.
FACTS
On 9 December 1983, MGIC Indemnity Corporation, predecessor-in-interest to the defendant herein, issued a Directors and Officers Liability Insurance Policy to Platte Valley Bancorporation, Inc., the holding company of the Saratoga State Bank. The policy period was extended through 2 January 1985 by the amendment of endorsement no. 12 on 9 December 1984. The policy was a “claims made” policy under which American Casualty Company [American Casualty or ACCO], agreed to pay losses which the directoi's and *1023 officers of the bank became legally obligated to pay as a result of their negligence or breach of fiduciary duty.
The policy issued to the bank included several riders and endorsements, two of which are subjects of this litigation. Endorsement No. 1 [the “regulatory” endorsement] is an exclusion for “claim[s] made against the Directors or Officers based upon or attributable to ... any action brought by or on behalf of the Federal Deposition Insurance Corporation.” Endorsement No. 2 [the “insured v. insured” endorsement] excludes coverage when losses arise from any suit maintained against a director or officer by any other director, officer or the bank. Further, payment under the policy was subject to a $10,000 deductible per loss. “Loss” is defined in the policy.
The bank became insolvent and was voluntarily closed on 11 October 1985, and the Wyoming State Examiner appointed the FDIC receiver at that time. The FDIC, in its corporate capacity, thereafter accepted assignment of certain of the.bank’s assets, including all claims that the bank and its shareholders had against its directors and officers. On 11 October 1988, the FDIC filed suit against George W. Mcllvaine [Mcll-vaine], the bank’s president, alleging that he had breached his statutory and fiduciary duties to the bank. Mcllvaine was an insured- under the policy here at issue. FDIC and Mcllvaine ultimately entered into a settlement agreement which provided that Mcll-vaine was legally obligated to pay the FDIC $925,000. Under the agreement, Mcllvaine paid $20,000 to the FDIC, must pay any salary or commissions which are earned by him during 1989, 1990 and 1991 to the extent that such exceed $100,000, and assigned to the FDIC all of his rights under the ACCO policy. To date, Mcllvaine has made no additional payments under the agreement.
The immediate action was filed by the FDIC on 9 October 1990, seeking declaratory judgment regarding the coverage of the policy and contending that ACCO acted in bad faith in failing to admit liability under the policy, delaying and withholding payment under the policy and refusing to settle the underlying suit within policy limits. In its reply to the response of American Casualty to their motion for partial summary judgment, FDIC has also asserted that American Casualty is bound by the broader policy coverage of the initial policy issued to the bank, because the renewal contract was issued without calling attention to the more limited coverage. This “constructive nonrenewal” theory was not addressed by these motions.
American Casualty has moved for summary judgment, contending initially that endorsements 1 and 2 to the policy unambiguously exclude coverage for the D & O lawsuit. Alternatively, ACCO claims that Mcll-vaine’s “loss” is limited to the amount of money which he will actually be required to pay. Finally, ACCO contends that FDIC cannot establish a prima facie claim for breach of the implied covenant of good faith.
FDIC has moved for partial summary judgment on American Casualty’s affirmative defenses, arguing that, as a matter of law, the regulatory and insured v. insured exclusions cannot be interpreted or enforced as ACCO contends.
DISCUSSION
When the coverage of an insurance policy is at issue, the court applies established rules of interpretation and construction to examine the policy language.
St. Paul Fire and Marine Insurance Co. v. Albany County School Dist. No. 1,
*1024 1. The Regulator Endorsement.
American Casualty contends that the “regulatory endorsement” included in the insurance policy at issue excludes from coverage suits brought by the FDIC or other regulatory agencies. Endorsement # 1 of the insurance policy issued to the Saratoga State Bank reads in part:
It is understood and agreed that the Insurer shall not be liable to make any payment for Loss in connection with any claim made against the Directors or Officers based upon or attributable to
any action or proceeding brought by or on behalf of the Federal Deposit Insurance Corporation....
The FDIC posits three arguments concerning this exclusion: (1) the exclusion applies only to “secondary suits”; (2) the exclusion is, at best, ambiguous; and (3) enforcement of the exclusion as ACCO interprets it would violate public policy. The Court finds none of these arguments compelling.
It is reasonable to interpret the exclusion to preclude claims which may arise from secondary suits. However, the natural and unstrained reading of this endorsement, while it does indeed preclude secondary suit claims, also on its face precludes recovery for any claims brought by the FDIC or other specified regulatory agencies. The only reasonable construction of that phrase is the one which the FDIC initially suggests, that the endorsement be limited solely to secondary suits. The FDIC has succeeded in its action against Mcllvaine, and now seeks to assert a claim against the insurance policy based upon that action. Admittedly, the use of the phrases “based upon or attributable to” in conjunction with “any action or proceeding brought by or on behalf of’ the FDIC may be cumbersome, but it does not change the Court’s perception that:
[rjeading the endorsement as a whole, without placing undue emphasis on the words “based upon or attributable to,” it is clear that the insured’s intent was to exclude coverage for any loss resulting from any action brought by or on behalf of the FDIC in any capacity against a bank director or officer.
Gary v. American Cas. Co. of Reading, Pa.,
The majority of the courts who have addressed this question have agreed.
1
See, Am. Cas. Co. of Reading Pa. v. Baker,
In interpreting the meaning of policy language, the Court should not interpret it so as to make any language superfluous. Nor should the Court overemphasize any one phrase to reach a strained interpretation. If the endorsement is read to exclude coverage for any suits brought by regulatory agencies or any suits attributable to suits brought by the same, none of its terms are superfluous. The Court will not, by emphasizing the phrase “based upon or attributable to,” so narrowly construe the endorsement as to contort its obvious intent.
FDIC’s public policy argument is discussed below.
2. The Insured v. Insured Endorsement.
American Casualty next contends that the “insured v. insured” endorsement included in the insurance contract excludes from coverage suits brought by the FDIC when it is acting “in the shoes” of the bank, one of the insured parties. Endorsement # 2 of the insurance policy at issue provides:
It is understood and agreed that the Insurer shall not be liable to make any payment for Loss, ... which is based upon or attributable to any claim made against any Director or Officer by any other Director or Officer or by the Institution defined in Clause 1(a) of the Policy.
The FDIC argues that this exclusion is not enforceable against them for three reasons: (1) the endorsement, on its face, does not apply to claims made by an entity other than directors, officers or the Institution; (2) if the Court were to conclude that the policy language was ambiguous, it should be construed in favor of coverage; and (3) enforcement of the exclusion would violate public policy.
American Casualty contends that the claims brought by the FDIC in this action are claims belonging to the Bank, and that the FDIC may therefore only assert these claims to the extent that it “stands in the shoes” of the Bank. Because those claims belong to the Bank and are asserted against another insured, American Casualty argues, the insured v. insured endorsement excludes coverage for them by its terms.
The Court finds that the exclusion does not, by its terms, exclude coverage in this action, that the exclusion is ambiguous, and that it should therefore be construed in favor of coverage. The endorsement lists distinctly those persons and entities to whom it applies. This Court, like the district court in
Baker,
Further, it is clear that the policy reasons for attaching such an endorsement do not apply in cases like the present. The potentiality which prompted the drafting of this exclusion, the directors and officers of the bank acting collusively and suing either themselves or the bank, does not exist once the FDIC has been appointed receiver. There is no dispute that the FDIC, as receiver, is a genuinely adverse party in this action.
See, Zandstra,
The Court also finds that the endorsement is ambiguous. The endorsement is subject to at least the two meanings ascribed to it by the parties. In
American Cas. Co. of Reading, Pa. v. FSLIC,
the “Institution” or “Association” which the Insured v. Insured endorsement purports to exclude is susceptible to more than one reasonable interpretation. American’s position is logical and does not require a strained reading of the policy. Yet, the stated purpose of the policy is to insure the officers and directors against loss from claims made for breach of duty. This purpose would be entirely defeated or very severely restricted if suits brought by the FSLIC were not covered. Therefore it would not be unreasonable for such a broad exclusion, if intended, to be stated expressly. Obviously, American was aware of the FSLIC’s role because the FSLIC was referred to by name in [another endorsement].
Id.
If contract language is reasonably susceptible to a double meaning, the contract is ambiguous as a matter of law.
Farr v. Link, 746
P.2d 431 (Wyo.1987). Language in a contract will be construed most strongly against the drafter if there is an ambiguity, and most strongly in favor of coverage.
Worthington v. State,
Finally, the Court is not convinced that the FDIC, acting as receiver, is in the same position as the institution. In
FDIC v. National Union Fire Ins.,
Cases like D’Oench [ Duhme & Co. v. FDIC,315 U.S. 447 ,62 S.Ct. 676 ,86 L.Ed. 956 (1942) ], [FDIC v. J Gulf Life [Insurance Co.,737 F.2d 1513 (11th Cir.1984) ] and Re Charter [Executive Center Ltd.,34 B.R. 131 (Bankr.M.D.Fla.1983) ] indicate that it is improper to conclude that the FDIC is like any other assignee bank subject to all defenses against its predecessor bank. The fact that the FDIC has been viewed traditionally in a different light than ordinary assignees, in more than the limited context of D’Oench and § 1823(e), alone makes it unclear whether endorsement to the insurance policy barring the predecessor bank’s recovery on certain claims similarly bars the FDIC’s recovery.
Moreover, the FDIC is clearly suing in a different capacity than would its predecessor bank. As the court recognized in FDIC v. American Bank & Trust Shares, Inc.,460 F.Supp. 549 , 561 (D.S.C.1978), unlike a bank suing its officers and directors, the FDIC represents not only the failed bank’s shareholders, but also itself as a creditor, as well as its predecessor’s other creditors. Therefore, insofar as the FDIC is suing to recoup its own losses, it is arguably like any other third party *1027 bringing action against the insurer and the insured, ...
National Union,
The FDIC’s role in acting as receiver is much more expansive than that of either director, officer or bank. The Court agrees that any policy provision which plainly includes it can provide a defense to liability. “When a policy provision is not clearly applicable to the FDIC, however, the agency should not be subject to the defense it allegedly provides.” Id. at 1156.
Again, the weight of authority supports the Court’s conclusion that this endorsement should not be read to exclude coverage in this type of action.
4
See, Am. Cas. Co. of Reading, Pa. v. Baker,
S. Public Policy.
The FDIC next asserts that, whether the above exclusions are ambiguous or not, this Court should not enforce them. To do so, FDIC claims, would be against the clear mandate of public policy as directed by the Congress. Its argument is that, with the passage of the Financial Institutions, Reform, Recovery, and Enforcement Act of 1989 [FIRREA], the Congress gave to the FDIC “all rights, titles, powers, and privileges” of the shareholders and depositors of failed institutions, with respect to the assets of those institutions. Among those rights is the assertion of derivative claims. FDIC argues that since these types of actions are not excluded from coverage by the policy, enforcement of the regulatory or insured v. insured exclusions which would exclude coverage of the same actions when brought by the FDIC, would “directly contravene the statutory provision” discussed above.
FDIC directs the Court to
United Paper-workers Int’l Union v. Misco, Inc.,
[i]f [a] contract ... violates some explicit public policy, we are obliged to refrain from enforcing it. Such a public policy, however, must be well defined and dominant, and is to be ascertained “by reference to the laws and legal precedents and not from general considerations of supposed public interest.”
Id.
at 766,
Initially, the Court notes that no form of D & O insurance is required by statute or regulation. In
FDIC v. Aetna Cas. and Sur. Co.,
to take on a risk for which it did not bargain. Insurance policies which have sections limiting coverage are not contrary to public policy where such policies are not required by statute where the form of coverage has not been mandated.
Id.
at 1078, citing
Allen,
This Court also finds the lack of any statutory or regulatory insurance requirements significant. As the district court reasoned in Gary:
[I]f exclusions such as the regulatory exclusion herein “would so seriously hamper ... [the federal agency] in carrying out its duties that public policy prevents” enforcement, ... then a bank’s failure to obtain directors’ and officers’ liability insurance would also violate public policy to the same extent because in that instance the FDIC would also have to look solely to the assets of the directors and officers to collect any judgment against them for breach of their statutory and common law duties. Yet there is no statutory or regulatory requirement that a bank such as Security Bank obtain or maintain officers’ and directors’ liability insurance_ When directors’ and officers’ liability insurance is not required by statute, such that complete failure to obtain such insurance cannot be contrary to public policy, and there is no mandated form of coverage if coverage is obtained, certainly directors’ and officers’ liability insurance policies providing only limited coverage such as those herein are not contrary to public policy.
Further, the limitation in the insurance policy purchased by the bank does not affect .the rights assumed by the FDIC. The FDIC still assumes all rights of the shareholders and creditors of the bank. The FDIC may maintain an action against the bank, its directors and officers, and, if successful in the action may obtain a judgment for the entire amount to which the shareholders or creditors may be entitled. None of those rights are hampered by the endorsements in the policy. That the endorsement would limit the amount of recovery in this situation only emphasizes the point that the insurance policy purchased by the bank is an asset of the bank. The endorsements in the insurance policy are limitations on the assets of the institution, directors and officers, and not on the rights or privileges of persons bringing suit against them. The Court is in no position, absent a clear Congressional edict, to require that the assets of a financial institution be of a certain amount or type.
At hearing, the FDIC stated that the lack of direction by the Congress remaining neutral is a very different from not stating an affirmative public policy. On the contrary, the Court finds that they are precisely the same. The direction by Congress that the courts decide the enforceability of D & O liability policies must not be taken as a directive to determine public policy. That is not the function of this Court. Rather, the Court need only decide whether the exclusions in the insurance policies are unambiguous and effective as drafted.
While the FDIC contends that the majority of courts addressing the exclusions have refused to enforce them, this analysis is misleading. In fact, a slight majority of courts who have discussed this issue have held that public policy considerations should not act to avoid enforcement of unambiguous exclu
*1029
sions.
5
See, FDIC v. Aetna Cas. and Sur. Co.,
I. Is the Recovery in this Action “Loss”?
American Casualty contends that it is only liable for “loss” as defined in the policy, and that recovery against it for any amount which Mcllvaine would not actually be required to pay is not included in that definition.
“Loss” is defined in the first section of the policy, and means:
any amount which the Directors or Officers are legally obligated to pay ... for a claim or claims made against the Directors and Officers for Wrongful Acts and shall include but not be limited to damages, judgments, settlements, costs (exclusive of salaries of officers or employees), and defense of legal actions, claims or proceedings and appeals therefrom, and costs of attachment or similar bonds,
Pursuant to the settlement agreement negotiated between Mcllvaine and the FDIC, Mcllvaine was “legally obligated” to pay $925,000 to the FDIC. The agreement provides that Mcllvaine pay $20,000 to the FDIC, pay any salary or commissions which are earned by him during 1989, 1990, and 1991 to the extent that such exceed $100,000, and assign to the FDIC all of his rights under the ACCO policy, American Casualty contends that, because Mcllvaine has not earned over $100,000 in either 1989 or 1990, and is unlikely to in 1991, the total of his obligation to the FDIC is $20,000. The term “loss,” ACCO claims, is unambiguously defined in the policy and includes only in fact legal obligations. ACCO argues that, to the extent that the payments from Mcllvaine to FDIC are contingent upon other, non-related events, they are not contemplated by the clear definition in the policy.
The FDIC contends that this issue is controlled by
Lopez v. Arryo,
The Court agrees that Arryo controls the disposition of this issue. The facts of the present case weigh even more heavily toward the plaintiff. No covenant not to execute against Mcllvaine was ever entered into as part of the settlement. The settlement agreement states specifically that he is legally obligated to the FDIC for '$925,000, and “loss” is that amount which the insured is legally obligated to pay, whether he ultimate *1030 ly pays it or not. As in Arryo, there is no prejudice to American Casualty in this action, except that they may be required to pay on a demand on an insurance contract for the very eventuality for which Mcllvaine was insured.
5. Bad Faith.
American Casualty lastly contends that the plaintiff has not presented facts which could support a cause of action for bad faith in their denial of coverage. A breach of the implied covenant of good faith and fair dealing may be actionable in Wyoming in the administering of an insurance policy if the plaintiff can demonstrate that the validity of the claim for which coverage is denied is not fairly debatable.
McCullough v. Golden Rule Inc. Co.,
The plaintiffs complaint is not limited, however, to a wrongful denial of a claim made by Mcllvaine. The acts which constitute bad faith, FDIC contends, consisted of ACCO’s failing to admit liability under the policy, delaying and withholding payment under the policy and refusing to settle the underlying suit within policy limits. Thus, FDIC urges the Court to find that ACCO also acted in bad faith prior to either admitting or denying the claim. The Court finds that an insurance company’s actions in administering a claim in Wyoming are only material to a bad faith action if the claim is ultimately denied although its validity was not fairly debatable.
The question of the proper standard to apply in a case whether the alleged actions in bad faith go beyond denial of a claim, however, has apparently been left open. Presumably, if a claim ultimately proves not to be fairly debatable, a complete absence of investigation by an insurer, or an intentional delay in either settlement or denial of a claim would be relevant to the cause of action in Wyoming.
In
Pace v. Insurance Co. of North America,
while the subjective element can be inferred from an investigation that recklessly disregards the facts, the objective element must also be shown. This requires establishing that a reasonable insurer, proceeding under the facts and circumstances that a proper investigation would have revealed would not have denied payment of the claim.
Id. at 584.
This reasoning is consistent with the rule established in
McCullough.
There, as did the court in
Pace,
6
the Wyoming court found that “this objective standard of whether appropriateness of the denial of the claim is fairly debatable will form the focus of this tort.”
McCullough,
An improper investigation standing alone, however, does not establish bad faith if in fact the insurer had an objectively reasonable basis to deny the claim. In other words, if the insured is not able to satisfy the objective test under the Wisconsin standard, the inquiry as to whether the insurer committed bad faith ends.
Smith, First Party Bad Faith in Wyoming, 26 Land & Water L.Rev. 225, 255 (1991) (footnotes omitted).
The court agrees that Wyoming has thus far limited the scope of the bad faith tort to those denials of coverage which are done without a de facto objectively reasonable basis. Some jurisdictions recognizing this tort have likewise held that the actions of an insurer in adequately investigating a claim, and presumably then in failing to admit or deny a claim or refusing to pay on a claim,
*1031
are only relevant to a bad faith action when the claim is denied without an objectively reasonable basis.
See, Aetna Cas. & Sur. Co. v. Superior Court,
The FDIC correctly states the standard to apply on summary judgment in this tort action. Pursuant to Fed.R.Civ.P. 56(c), summary judgment is appropriate “if the pleadings, deposition, answers to interrogatories, and admissions on file, together with the affidavits on file, if any, show that there is not genuine issue as to any material fact, and that the moving party is entitled to summary judgment as a matter of law.” The moving party has the burden of showing the absence of a genuine issue concerning any material fact.
Adickes v. S.H. Kress & Co.,
It is enough to assert facts which, if proven, could lead a reasonable trier of fact to the conclusion that American Casualty denied coverage in this instance although the validity of the claim was not fairly debatable. Given the above findings, that the language of the policy unambiguously, as a matter of law, excludes coverage for loss from this type of suit, the Court cannot also conclude that the insurer did not have an objectively reasonable basis to deny coverage. The focus of the Court’s inquiry is not the conduct of the insurer in denying the claim nor the information, or lack thereof, on which it denied the claim, but an objective determination of the validity of the claim. Findings that the claim here is plainly excluded, yet that ACCO’s denial of coverage was not even fairly debatable, would create a logical incongruity which the Court cannot tolerate. The bad faith claim must be dismissed.
CONCLUSION
Finding that endorsement # 1 in the insurance policy issued to the Saratoga State Bank unambiguously excludes from coverage the losses in connection with this suit, and that enforcing the exclusion as written will not violate well defined or dominant public policy, IT IS ORDERED that the defendant American Casualty Company’s Motion for Summary judgment on that issue should be, and is, GRANTED;
Finding that endorsement # 2 in the insurance policy issued to the Saratoga State Bank is ambiguous, and that the ambiguity should be construed in favor of coverage, IT IS FURTHER ORDERED that the plaintiff FDIC’s Motion for Partial Summary Judgment on that issue should be, and is, GRANTED;
IT IS FURTHER ORDERED that the defendant’s motion for summary judgment as it regards exclusion of the claim as outside the definition of “loss” in the insurance policy should be, and is, DENIED; and
IT IS FURTHER ORDERED that the defendant’s motion for summary judgment as it regards a breach of the implied covenant of good faith and fair dealing should be, and is, GRANTED.
Notes
. Contrary to the representation made to the Court by the FDIC, the courts who have addressed this precise issue have more often than not concluded that the language in identical or very similar exclusions is unambiguous. After reviewing all of the cases presented by each side on the issue, the Court finds that six have found the exclusion unambiguous, two have concluded that it is ambiguous, and the remaining ten did not address the issue, or discussed an endorsement which was materially different than that at issue here.
In
American Cas. Co. of Reading, Pa. v. F.D.I.C.,
In finding ambiguity in the same exclusion, the court in
FSLIC v. Mmahat,
Civil Action No. 86-5160,
Finally, of the courts which did not address the issue, at least one, the United States District Court for the District of Washington in
Branning v. CNA Ins. Companies,
. In
Baker,
. The policy at issue here does not expressly except shareholder derivative suits from the endorsement, as do some of the policy endorsements considered in other decisions. The Court finds this of little significance, however. Just as in the policies discussed in the cited cases, a suit by shareholders, other than an Insured, clearly does not fall within the parameters of this endorsement.
. At the end of two exclusions, the score is: Ambiguous 9, Unambiguous 4. Five of the decisions did not address these exclusions.
. There are a number of courts which have decided not to enforce one or both of these exclusions based on the public policy rationale.
See, International Insurance Co. v. McMullan,
Civil No. J84-0760(W),
A close examination of these cases reveals that the court in Mmahat blindly relied upon the court’s decision in Oldenburg and applied it even though the policy at issue there contained an "insured v. insured” exclusion. However, in Oldenburg, the court relied more on the absence of an "insured v. insured” clause, a clause which excludes coverage for claims brought against any insured by another insured. The court in Oldenburg reasoned that since the directors would have been covered had the bank brought an action, it would be against public policy to exclude coverage simply because the bank's right of action had been assigned to FSLIC.
McMullan, Civil No. J84-0760(W), at 53.
. The circuit court was discussing the holding of the Rhode Island Supreme Court in
Bibeault v. Hanover Insurance Co.,
. The court in
Aetna,