MEMORANDUM OPINION & ORDER
In this action removed from Alabama state court, Plaintiffs Worthington Federal Bank (the “Bank”) and Worthington Financial Holdings, Inc. (‘WFH”) (collectively “Plaintiffs” or the “Companies”) bring claims under Alabama law for breach of contract, the tort of bad faith, and for a declaratory judgment against Everest Na--tional Insurance Company (“Everest”) and Security National Insurance Company (“Security National”) (collectively “Defendants”). (See Doc.
I.BACKGROUND
For purposes of the instant summary judgment motions only, the parties have stipulated to the following facts (see Doc. 32 at 2-4):
1. Everest issued Directors & Officers Liability Policy Number 8100000269-121 for the policy period of December 14, 2012 to December 14, 2013 (the “Everest Policy”).
2. Security National issued Directors & Officers Liability Policy Number SD01108069 for the policy period of December 14, 2013 to December 14, 2014 (the “Security National Policy”).
3. The terms of the Everest Policy and the Security National Policy and no other insurance agreement govern the dispute among the Parties.
4. Plaintiffs are insureds under the Everest Policy and the Security National Policy.
6. On April 4, 2014, Stephen Brewer and others filed suit against Plaintiffs and certain of their employees, officers and/or directors in the Circuit Court of Madison County, Alabama (the “Brewer Lawsuit”). Plaintiffs provided Security National with notice of the Brewer Lawsuit on April 9, 2014, and Everest with notice of the Brewer Lawsuit on April 16, 2014. Solely for purposes of the Preliminary Summary Judgment Motions, neither Everest nor Security National will argue that notice of the Brewer Lawsuit was untimely.
7. Plaintiffs, contend that they have met every condition precedent to coverage under the Security National Policy and the Everest Policy. Plaintiffs assert that one or both Policies should provide defense costs and coverage for the Brewer Lawsuit.
8. Everest asserts that the Brewer Lawsuit is deemed to be a claim first made during the Security National Policy period and is not related to the Worthington Lawsuit.
9. Security National asserts that the claims and allegations in the Brewer Lawsuit are Interrelated Wrongful Acts (as defined under the Security National Policy) with the claims and allegations in the Worthington Lawsuit and is deemed to have been made during the Everest Policy period.
10. Everest asserts that the Brewer Lawsuit is not covered under the Everest Policy because, inter alia, the claim was not made during the Policy Period.
11. Security National asserts that the allegations in the Brewer Lawsuit are related to claims first made during the Everest Policy period. Security National also asserts that the Brewer Lawsuit is not covered under the Security National Policy because, inter alia, (a) it is an Interrelated Wrongful Act (as defined under the Security National Policy), (b) it is deemed to have been first made no later than the date when the Worthington Lawsuit was filed pursuant to Section III.B. of the Security National Policy, and (c) Exclusion A.1 of the Security National Policy excludes coverage for the Brewer Lawsuit.
The parties have further stipulated that it is appropriate for the court to consider the following documents in ascertaining whether summary judgment is due to be granted (see Doc. 32 at 4-5):
1. The Everest Policy (Doc. 38-1);
2. The Security National Policy (Doc. 36-1, Doc. 38-2);
3. Plaintiffs’ Application for the Security National Policy dated December 11, 2013 (Doc. 36-7);
4. The pleadings (including the Complaint) in the Worthington Lawsuit (Doc. 36-2, Doc. 38-3 (“Worthington Complaint” or “Worthington Compl.”));
5. The pleadings (including the Complaint) in the Brewer Lawsuit (Doc. 36-3, Doc. 38-4 (“Brewer Complaint” or “Brewer Compl.”)).
II. SUBJECT MATTER JURISDICTION
Before considering the merits of the summary judgment motions, it is necessary to address subject matter jurisdiction despite that no party questions its existence. Federal courts have limited jurisdiction and are authorized to hear only those types of cases prescribed by Congress. See Baggett v. First Nat. Bank of Gainesville,
Plaintiffs originally filed this action in the Circuit Court of Madison County, Alabama, seeking to recover under state law pursuant to various contract and tort theories against Everest and another defendant, ABA Insurance Services, Inc. (“ABAIS”). (Doc. 1-1). Everest and ABAIS removed the action pursuant to 28 U.S.C. §§ 1441, 1446. (Doc. 1). As the parties invoking federal jurisdiction, Everest and ABAIS bore the burden of establishing jurisdiction. Underwriters at Lloyd’s, London v. Osting-Schwinn,
The allegations of the notice of removal are sufficient to show that the amount-in-controversy requirement is not in doubt. (See Doc. 1, ¶¶ 12-22). However, Everest and ABAIS also had to establish the citizenship of all parties and that no defendant shares citizenship with any plaintiff. See Stillwell v. Allstate Ins. Co.,
For diversity purposes, a corporation is deemed a citizen of both the State under whose law it was incorporated and the State where it has its principal place of business. 28 U.S.C. § 1332(c)(1). As such, a pleading must allege sufficient material as to both of those prongs to make a prima facie showing of citizenship. American Motorists,
The record sufficiently demonstrates the citizenship of all parties alleged to be corporations, namely, both removing defendants, Everest and ABAIS; the later-added defendant, Security National; and Plaintiff WFH. Specifically, the notice of removal alleges that Everest was incorporated in Delaware and has its principal place of business in New Jersey and that ABAIS was both incorporated and has its principal place of business in Ohio. (Doc. 1, ¶¶ 9, 10). Security National, added as a defendant by an amendment to the complaint, has pled that it is a Delaware corporation with its principal place of business in Texas. (Doc. 24, ¶4). And finally, Plaintiff WFH has pled that it is an Alabama corporation that has its headquarters in Madison County, Alabama. (Doc. 1-1 at 1-2, ¶¶ 2, 5). ABAIS has been dismissed from the suit (Doc. 13), but, in any event, Plaintiff WFH, as a citizen of only Alabama, is diverse from all defendants, present and former.
However, the citizenship of the other plaintiff, the Bank, is another matter. In the notice of removal, it is alleged only that, “on information and belief, Plaintiffs are citizens of Alabama.” Such a conclusory allegation is insufficient to establish the citizenship of a corporation or other business organization. See Thomas v. Board of Trustees of Ohio State Univ.,
The court has reason to believe, however, that the Bank is a Federal savings association chartered pursuant 12 U.S.C. § 1464 and is now known as American Bank of Huntsville. (Worthington Compl. ¶¶ 9, 17 (alleging that Worthington Federal Bank is a “federally-chartered savings” bank with its headquarters in Huntsville); Brewer Compl. ¶¶ 25, 32 (same); https://www.facebook.com/ americanbankofhuntsville (“Just wanted to remind our clients that as of August 31, 2014, Worthington Federal Bank is now known as American Bank of Huntsville.”) (visited May 15, 2015); http://www.occ.gov/
III. SUMMARY JUDGMENT STANDARDS
Pursuant to Rule 56 of the Federal Rules of Civil ProoeduRE, party is authorized to move for summary judgment on all or part of a claim or defense asserted either by or against the movant. Under that rule, the “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. ProC. 56(a); see also Celotex Corp. v. Catrett,
The fact that multiple parties have filed a motion for summary judgment does not alter the Rule 56 standards applicable to each one. “Cross-motions for summary judgment will not, in themselves, warrant the court in granting summary judgment unless one of the parties is entitled to judgment as a matter of law on facts that are not genuinely disputed.” United States v. Oakley,
IV. DISCUSSION
A. Rules Governing Interpretation of Insurance Contracts
Sitting in diversity, this court is bound to apply Alabama substantive law, while applying federal procedural law. See Erie R. Co. v. Tompkins,
“[gjeneral rules of contract law govern an insurance contract. The court must enforce the insurance policy as written if the terms are unambiguous.” Lambert v. Coregis Ins. Co., Inc.,950 So.2d 1156 , 1161 (Ala.2006) (quoting Safeway Ins. Co. of Ala. v. Herrera,912 So.2d 1140 , 1143 (Ala.2005)) (internal citations and quotations omitted). Further,
the mere fact that a word or a phrase used in a provision in an insurance policy is not defined in the policy does not mean that the word or phrase is inherently ambiguous. If a word or phrase is not defined in the policy, then the court should construe the word or phrase according to the meaning a person of ordinary intelligence would reasonably give it. The court should not define words it is construing based on technical or legal terms.
Id. at 1161-62 (quoting Safeway,912 So.2d at 1143 ) (internal quotations and citations omitted).
“It is well established ... that when doubt exists as to whether coverage is provided under an insurance policy, the language used by the insurer must be construed for the benefit of the insured.” St. Paul Mercury Ins. Co. v. Chilton-Shelby Mental Health Ctr.,595 So.2d 1375 , 1377 (Ala.1992). Further, “when ambiguity exists in the language of an exclusion, the exclusion will be construed so as to limit the exclusion to the narrowest application reasonable under the wording.” Id. (citation omitted). “However, it is equally well settled that in the absence of statutory provisions to the contrary, insurers have the right to limit .their liability by writing policies with narrow coverage.” Id. Indeed, “[i]f there is no ambiguity, courts must enforce insurance contracts as written and cannot defeat express provisions in a policy, including exclusions from coverage, by making a new contract for the parties.” Id. (citation omitted).
Further, “[insurance contracts, like other contracts, are construed to give effect to the intention of the parties and, to determine this intent, the court must examine more than an isolated sentence or term; it must read each phrase in the context of all other provisions.” Royal Ins. Co. of Am. v. Thomas,879 So.2d 1144 , 1153-54 (Ala.2008) (quoting Hall v. Am. Indem. Group,648 So.2d 556 , 559 (Ala.1994)) (citation omitted).
HR Acquisition I Corp. v. Twin City Fire Ins. Co.,
Liability insurance coverage typically includes two separate duties: (1) the duty to defend, and (2) the duty to indemnify. Tanner v. State Farm Fire & Cas. Co.,
“It is well settled ‘that [an] insurer’s duty to defend is more extensive than its duty to [indemnify].” United States Fid. & Guar. Co. v. Armstrong,479 So.2d 1164 , 1168 (Ala.1985) (citations omitted). Whether an insurance company owes its insured a duty to provide a defense in proceedings instituted against the insured is determined primarily by the allegations contained in the complaint. Id. at 1168. If the allegations of the injured party’s complaint show an accident or an occurrence within the coverage of the policy, then the insurer is obligated to defend, regardless of the ultimate liability of the insured. Ladner & Co. v. Southern Guar. Ins. Co.,347 So.2d 100 , 102 (Ala.1977) (citing Goldberg v. Lumber Mut. Cas. Ins. Co.,297 N.Y. 148 ,77 N.E.2d 131 (1948)). However, ‘[t]his Court ... has rejected the argument that the insurer’s obligation to defend must be determined solely from the facts alleged in the complaint in the action against the insured.’ Ladner,347 So.2d at 103 . In Pacific Indemnity Co. v. Run-A-Ford Co.,276 Ala. 311 ,161 So.2d 789 (1964), this Court explained:
“ “We are of opinion that in deciding whether a complaint alleges such injury, the court is not limited to the bare allegations of the complaint in the action against insured but may also look to facts which 'may be proved by admissible evidence.... ’
“276 Ala. at 318 ,161 So.2d at 795 ; see Ladner,347 So.2d at 103 (quoting this language). ‘[I]f there is any uncertainty as to whether the complaint alleges facts that would invoke the duty to defend, the insurer must investigate the facts surrounding the incident that gave rise to the complaint in order to determine whether it has a duty to defend the insured.’ Blockburn v. Fidelity & Deposit Co. of Maryland,667 So.2d 661 , 668 (Ala.1995) (citing United States Fid. & Guar. Co. v. Armstrong,479 So.2d 1164 (Ala.1985)) (other citations omitted). When a complaint alleges both acts covered under the policy and acts not covered, the insurer is under a duty to at least defend the allegations covered by the policy. Blackburn,667 So.2d at 670 (citing Tapscott v. Allstate Ins. Co.,526 So.2d 570 , 574 (Ala.1988)).”
Tanner,
B. Duty to Indemnify
At the outset, Plaintiffs argue that to the extent that Everest or Security National’s motions for summary judgment seek a ruling from this court that would absolve either insurer of liability to indemnify Plaintiffs for any loss they might later suffer in a judgment in the Brewer Law
C. Duty to Advance Defense Costs
The court notes that neither the Everest Policy nor the Security National Policy technically obligates the insurer to “assume” or “provide” a “defense” for the insured, even as to covered claims. {See Doc. 38-1 at 15, § VII(A)(1); Doc. 38-2 at 5, 16, § VIII(A)). Rather, the Everest Policy only requires the insurer to indemnify for a covered “Loss,” which not only “any amount which the Insured is legally obligated to pay resulting from a Claim, including damages, judgments, [and] settlements,” but also “Defense Costs,” defined as “reasonable and necessary legal fees and expenses incurred in defending or investigating” a covered claim. (Doc. 38-1 at 7-8 (emphasis omitted)
The assumption of the defense itself and the advancement of costs of the defense “are discrete concepts.” American Legacy Found., RP v. National Union Fire Ins. Co. of Pittsburgh, Pa.,
1. Everest’s Motion
Because the Everest Policy was issued first and has the earlier coverage period, the court will address Defendant Everest’s motion for partial summary judgment first. Everest’s primary argument is straightforward: Everest contends that it is entitled to summary judgment as to claims based on its obligations to Plaintiffs vis-á-vis the Brewer Lawsuit because it was not filed until after the coverage period of the Everest Policy had lapsed. In support, Everest observes that its policy is a “claims-made policy,” under which Everest will pay for “Loss resulting from Claims first made during the Policy Period or the Discovery Period against the Insured Persons .... ” (Doc. 38-1 at 5; see also id. at 1). In discussing the nature of “claims made” policies generally, the Alabama Supreme Court has stated:
[Under a] “claims made” policy ... a carrier agrees to assume liability for any errors, including those made before the inception of the policy, as long as the claim is made during the policy period. On the other hand, an “occurrence” policy provides coverage for any acts or omissions that arise during the policy period, even though the claim is made after the policy has expired. Homestead Ins. Co. v. American Empire Surplus Lines Ins. Co.,44 Cal.App.4th 1297 ,52 Cal.Rptr.2d 268 (1996).
In order to reduce exposure to'an unpredictable and perhaps lengthy “tail” of lawsuits brought long after an “occurrence” policy period has ended, insurance carriers developed “claims made” policies. Such policies limit an insurer’s risk by restricting coverage to the policy in effect when a claim is asserted against the insured, without regard to the timing of the damage or injury.This restriction allows the carrier to establish reserves despite inflation, upward-spiraling jury awards, or enlarged tort liability occurring after the policy period. “Claims made” policies permit insurers to predict more accurately both the limits of their exposure and the premium needed to accommodate the risk undertaken. Homestead, supra.
The hallmark of a “claims made” policy is that exposure for claims terminates with the expiration or termination of the policy, thereby providing certainty ingauging potential liability; this certainty in turn leads to more accurate calculation of reserves and premiums. “Claims made” policies benefit insureds by making coverage cheaper and more widely available. Homestead, supra.
Thus, a “claims made” policy limits coverage to claims made against the insured during the policy period. Coverage does not depend on when the “actual or alleged negligent act, error or omission” occurs. Instead, coverage depends on when the claim is made against the insured. Under a “claims made” policy, the insurer generally is responsible for loss resulting from claims made during the policy period, no matter when the liability-generating event took place. An “occurrence” policy may be triggered in one of several ways. The event that triggers a “claims made” policy, by contrast, is transmission of notice of the claim. Homestead, supra.
Attorneys Ins. Mut. of Ala., Inc. v. Smith, Blocker & Lowther, PC,
Everest emphasizes that the Brewer Lawsuit was not filed until April 2014, about four months after the coverage period of the Everest Policy expired in December 2013. Everest argues, therefore, that it is not bound under its “claims-made” policy to advance defense costs in the Brewer Lawsuit. Everest further maintains that Plaintiffs had the option under the Everest Policy to purchase an extended reporting period or “tail,” which would have provided coverage for claims made after the Policy ends which are based on “wrongful acts” that occurred during the Policy Period but resulted in a claim made during an extended “discovery period.” In this vein, the Everest Policy provides:
SECTION III — DISCOVERY PERIOD
A.[T]he Insured shall have the right to purchase an optional extended reporting period (herein called the Discovery Period) [of 180 days].
B. The Discovery Period is not an extension of coverage, but rather an extended reporting period for Claims first made during the Discovery Period resulting from Wrongful Acts that occurred prior to the effective date of cancellation, nonrenewal or conversion and otherwise covered under this Policy. Notice of facts and circumstances that may give rise to a Claim, pursuant to Section X(B), must be given-during the Policy Period and shall not be effective if given during the Discovery Period.
(Doc. 38-1 at 6; id. at 1, “Item 4”). Everest emphasizes that Plaintiffs did not exercise their option to purchase this “discovery period” “tail,” but Plaintiffs are now attempting, Everest says, to obtain coverage for the Brewer Lawsuit as if they had done so.
Plaintiffs acknowledge that the complaint in the Brewer Lawsuit does not, on its face, allege a covered claim under the Everest Policy because the Brewer Lawsuit was not filed during the coverage period of the Everest Policy. Nonetheless, Plaintiffs argue that the Brewer Lawsuit is covered under the Everest Policy because that complaint contains allegations of the same or sufficiently similar or related wrongful acts to those underlying the Wor-thington Lawsuit such that the two lawsuits are part of the same single “claim.” In support of their position, Plaintiffs point to the following provision of the Everest Policy:
SECTION VI — LIMIT OF LIABILITY, RETENTION AND INDEMNIFICATION
C. SINGLE CLAIM — Claims based upon or arising out of the same Wrongful Act or Interrelated Wrongful Acts committed by one or more Insureds shall be considered a single Claim, and only one Retention and Limit of Liability shall apply to such single Claim. Each such single Claim shall be deemed to be first made on the date the earliest of such Claims was first made, regardless of whether such date is before or during the Policy Period.
(Doc. 38-1 at 14). Based on this provision, Plaintiffs assert that because they received and reported the Worthington Lawsuit as a “claim” within the Everest Policy period, the Brewer Lawsuit is covered as part of the same “claim” because the Brewer Lawsuit is, they say, based at least in part on alleged wrongdoing that is related to that alleged in the Worthington Lawsuit.
Thus, for the Brewer Lawsuit to be covered under the Everest Policy, two things have to be true. First, the “single claim” provision of the Everest Policy must operate to provide coverage for a “claim” of which notice was given to Everest outside of the policy period on the ground that such claim is the same or sufficiently related to another “claim” made during the policy period. And second, that broader legal principle must apply to the particular facts of this case; that is, the wrongdoing alleged in the Brewer Lawsuit must, for purposes of the Everest Policy, be sufficiently related to the wrongdoing alleged in the Worthington Lawsuit to allow such “relation back” coverage under the “single claim” provision. Everest and Plaintiffs clash over both of those issues. The court addresses each in turn.
As to the first question, the Alabama Supreme Court held in Blackburn v. Fidelity & Dep. Co. of Maryland,
Claims based on or arising out of the same act, interrelated acts or one or more series of similar acts of one or more of the Insured shall be considered a single claim which, for purposes of this policy, shall be deemed to have been made at the time the first of such claims is made against any Insured.
Id. The Alabama Supreme Court agreed with the plaintiff, holding that while the breach-of-fiduciary-duty claims ■ against him were made outside of the policy period, they were deemed to have been made during the policy period under the “single claim” provision because they constituted part of the same claim or claims that had been raised in lawsuits filed in December 1988 and January 1989. Id.
The court concludes that Black-bum is controlling and allows that the “single claim” provision of the Everest Pol
Everest’s argument has a host of flaws. Nothing in Blackburn suggests that the Alabama Supreme Court’s analysis depended upon whether the “single claim” provision expressly stated that it applied “for purposes of this policy.” Also, Everest’s contention that the “single claim” provision is intended only to set the limits of liability for a single claim and retention amounts is based in large part upon the fact that the provision is located within the Everest Policy under the in the section header, “Limit of Liability, Retention, and Indemnification.” The significance of that, however, is undercut by the policy’s stipulation that “the descriptions in the headings and subheadings in this Policy are solely for convenience and form no part of the terms and conditions of coverage.” (Doc. 381 at 21, § XIV (J)); see Nomura Holding Amer., Inc. v. Federal Ins. Co.,
But more fundamentally, Everest is inviting this court to read the “single claim” provision of its policy narrowly in order to defeat coverage when it does not unambiguously provide that its application is limited only to calculating the limits of liability and retention amounts. That approach is inconsistent with Alabama law, pursuant to which ambiguities in policy language are construed in favor of the insured, and any exceptions from coverage are construed narrowly so as to provide maximum coverage: Blackburn,
Everest also emphasizes that the opinion in Blackburn identified the “single claim” provision there as a “ 'relation-back’ clause,”
Everest nonetheless insists that Black-bum might be disregarded on the ground that the opinion does- not clearly “set forth the policy interpretation arguments made by the parties on each of the points,” so “the decision,” Everest posits, “provides no real guidance as to how the parties addressed the specific ‘relation back’ provision, or where the quoted provision appeared and whether it was associated with language clearly providing that a claim made outside of the policy period would be considered timely for purposes of the claims-made coverage.” (Doc. 38 at 18, 19). This argument is a nonstarter. As Everest acknowledges, Blackburn “clearly involved competing arguments as to coverage for claims made after the expiration of the policy.” (Doc. 38 at 18). And the fact is that Blackburn unambiguously and necessarily resolved those arguments against the insurer, holding that, although the policy period ran from May 1988 to May 1989, claims made thereafter in both an original complaint (filed October 1990) and an amended complaint (filed in July 1991), were sufficiently related to claims raised in other pleadings filed within policy period such that the later claims were also deemed, based upon a “single claim” provision, to have been “first filed” within the policy period.
Next, Everest argues that Blackburn does not govern because this court is bound to follow instead the Alabama Supreme Court’s decision in Attorneys Insurance Mutual of Alabama v. Smith, Blocker & Lowther, PC,
The inclusion herein of more than one insured or the making of claims or the bringing of suits by more than one person or organization shall not operate to increase the Company’s limit of liability. Two or more claims arising out of a single act, error, omission or personal injury or a series of related acts, errors, omissions or personal injuries shall be treated as a single claim. All suchclaims, whenever made, shall be considered first made during the policy period or extended reporting endorsement period in which the earliest claim arising out of such act, error, omission or personal injury was first made, and all such claims shall be subject to the same limit of liability.
Id. at 869 (emphasis added in Attorneys Ins. is omitted here). In particular, the insurer argued that, under this provision, the claim made in September 1994 was part of the same claim “first made” in October 1993 because both arose out of the same omission: the partner’s failure to timely file the Subchapter S forms with the IRS. Id. As such, the insurer argued, the insured’s failure to give notice of that omission or any demand until September 1994 did not comply with the policy’s requirement that the insured give prompt notice of the claim. Id. at 868-69.
After the insured filed suit, however, both the trial court and the Alabama Supreme Court rejected the insurer’s position. Id. at 868-70. The Alabama Supreme Court began by recognizing that the policy was a “claims made” policy rather than an “occurrence” policy, meaning that it afforded coverage for a claim made, that is, a money demand received by the insured, during the policy period, rather than based upon the timing of the insured’s allegedly wrongful act or omission. See
Everest argues that Attorneys Insurance “requires” a finding that the “single claim” provision of its policy cannot extend coverage for any claim made after the expiration of the policy period, even if such claim arises from the same or interrelated acts or omissions underlying a covered claim made within the policy period. (Doc. 42 at 3-4). Attorneys Insurance, however, is inapposite. That case did not ask whether a claim made outside the policy period might relate back to a covered claim first filed within the policy period of a “claims made” policy. In fact, the court’s opinion never even identifies the policy period. But this case and Attorneys Insurance are different on an even more fundamental level. Here, the party seeking “single claim” treatment for a later claim (the Brewer Lawsuit) is relying upon its relationship to an earlier, “anchor” claim (the Worthington Lawsuit) for which the insured sought coverage and gave timely notice to the insurer. By contrast, the party seeking “single claim” treatment for the later claim in Attorneys Insurance was relying on its relation to a would-be “anchor” claim that the insured had voluntarily paid itself, as the Court held the policy to have allowed, and the insured did not seek coverage for it at any time. In other words, Attorneys Insurance is about whether a “single claim” provision might allow an insurer to deny coverage for a later claim under a “claims made” policy based on the fact that it did not receive timely notice of a prior demand that was, practically speaking, a mere “phantom” claim that the insured had permissibly paid out of its own pocket. That is simply
Finally, Everest relies heavily on Homestead Ins. Co. v. American Empire Surplus Lines Ins. Co.,
Based on the foregoing, the court concludes that, under the reasoning of Blackburn, Everest is not entitled to summary judgment based on its theory that the “single claim” provision of the Everest Policy cannot authorize coverage for claims made after the policy period even if they are sufficiently related to covered claims first made within the policy period. Thus, the question becomes whether the later claims in the Brewer Lawsuit are sufficiently related to the earlier claims in the Worthington Lawsuit for purposes of the Everest Policy such that they all might
Again, the “single claim” provision of the Everest Policy states in relevant part that “Claims based upon or arising out of the same Wrongful Act or Interrelated Wrongful Acts committed by one or more of the Insureds shall be considered a single claim.” (Doc. 38-1 at 14). In turn, the Everest Policy defines the terms “Wrongful Act” and “Interrelated Wrongful Acts” in relevant part as follows:
Wrongful Act, either in singular or plural, means any actual or alleged error, omission, misstatement, misleading statement, neglect or breach of duty by:
(1) any Insured Person in the discharge of their duties while acting solely in the capacity as such[.]
(Doc. 38-1 at 10).
Interrelated Wrongful Acts means Wrongful Acts which have as a common nexus any fact, circumstance, situation, event, transaction or series of related facts, circumstances, situations, events or transactions.
(Id. at 8).
In determining whether two or more claims are sufficiently related, to be deemed part of same claim for purposes of an insurance policy, the focus is on the relationship between the facts that give rise to the claim rather than on any procedural grouping that occurs during litigation. See Colbert County Hosp. Bd. v. Bellefonte Ins. Co.,
The Worthington Lawsuit, filed on February 6, 2013, was originally brought by Judy Worthington (“Mrs. Worthington”), who raised direct claims on her own behalf and derivative claims on behalf of both WFH and its wholly-owned subsidiary, the Bank. (See Worthington Compl.). In that pleading, it is alleged as follows: Mrs. Worthington and her husband, William L. Worthington (“Mr. Worthington”) (collectively the “Worthingtons”), are substantial, but minority, shareholders in WFH and the namesakes of both it and the Bank (hereinafter the “Companies”). When the Companies were first organized in 2007, Mr. Worthington was the Chief Executive Officer (“CEO”) and the Chairman of the Board of Directors of each, and Mrs. Wor-thington’s business, Total Media Management, LLC (“Total Media”), was hired to do the Bank’s marketing and advertising, and it developed a sales system used by the Bank to field mortgage loan inquiry calls. (¶¶ 16, 18-22). However, the Wor-thingtons’ influence over the Companies’ Boards and the Bank’s senior management began to wane by July 2009 when a new President of the Bank was named, Tim Singleton, Jr., and he was given a position on the Board of Directors of both Companies. (¶23). In 2010, Singleton was appointed CEO of the Bank, and Mr. Wor-thington’s title was changed to Principal Executive Officer of the Bank, although he remained CEO of WFH. (¶ 23). Singleton, in turn, brought in Sandra Stephens as the Bank’s Chief Financial Officer. (Id.) In the Worthington Lawsuit, Mrs. Worthing-ton
(1) they assumed an “adversarial position” against Federal bank regulators who had investigated the Bank in 2011 and 2012 and had required it to abide by certain conditions relative to credit administration and capital management ('Worthington Compl. ¶¶ 24-26, 28, 33-35, 39, 44-48);
(2) they refused to negotiate with good-faith potential purchasers of the Bank’s assets substantively and in a timely manner on a deal which would greatly benefit the shareholders (id. ¶¶ 36, 39, 44^8);
(3) they prevented Mr. Worthington, as CEO and Chairman of the Board of WFH and Chairman of the Board and Principal Financial Officer of the Bank, from contacting regulators, shareholders, or employees (id. ¶¶ 28-31, 39, 44);
(4) they prevented Mr. Worthington from performing duties owed to the Bank and WFH and the shareholders, eventually causing him to resign, thus depriving the companies of his service (id. ¶¶ 26, 28-32, 39, 44, 46-48);
(5) they terminated the relationship with Mrs. Worthington’s company, Total Media, depriving the companies of its services (Worthington Compl. ¶¶ 16, 20-22, 27, 39, 44-53);
(6) they made false statements to WFH’s shareholders concerning their dispute with the Worthingtons, including in an email sent by Stephens on January 19, 2013 (id. ¶¶ 38-39, 44-48, 56-59);
(7) they made false statements to WFH shareholders, including at a shareholders meeting on January 28, 2013, concerning the Worthington Lawsuit Defendants’ failure to interact responsibly with the federal regulators (id. ¶¶ 35, 39, 44-48, 56-59); and
(8)they made false statements in which they knowingly depreciated the value of WFH’s shares which negatively impact their actual value (id. ¶¶ 37, 39, 44-48, 54-55)
The Brewer Lawsuit was filed in April 2014 by a group of 13 plaintiff shareholders of WFH that did not include Mr. or Mrs. Worthington. (See Brewer Compl. ¶¶ 1-13). Those plaintiffs, represented by the same attorneys acting as counsel for Mrs. Worthington in her lawsuit, asserted claims derivatively on behalf of the Bank and WFH, accusing the same defendants as those in the Worthington Lawsuit, i.e., Singleton, Stephens, Smith, Karabinos, Friday, and Zislin; plus two others, Joe Carden and Steven R. Denny, who were also alleged to have been members of the Board of Directors of both of the Companies. (7&¶¶ 15-23). The plaintiffs in the Brewer Lawsuit asserted Alabama state law claims under theories of breach of fiduciary duty, negligence or “gross negligence,” fraudulent misrepresentation, fraudulent suppression, and conspiracy, which were based on the following alleged acts and omissions attributable to the defendants in the Brewer Lawsuit, as follows:
(1) they refused to negotiate with good-faith potential purchasers of the Bank’s assets substantively, for fair value, and in a timely manner on a deal which would greatly benefit the shareholders (Brewer Compl. ¶¶ 42, 51);
(2) they misled the Bank’s investors, including at shareholder meetings on January 28, 2013 and June 10, 2013, that they had a plan to make the Bank more profitable and that the Bank’s condition was improving under their leadership (id. ¶¶ 38-39, 51);
(3) they caused Worthington to leave the Bank due to a personality dispute, depriving the Bank of his services (id. ¶¶ 34-37, 40, 51);
(4) they caused the Companies to lose a significant amount of assets and profits after causing Will Worthing-ton to resign (id. ¶¶ 44-46, 51);
(5) they terminated or “[ran] off’ other key Bank employee or officers who were instrumental to the Bank’s profitability and customer relationships (Brewer Compl. ¶¶ 41, 46, 51);
(6) they failed to speak truthfully to the Companies’ shareholders concerning the dispute with Worthington, including in a January 19, 2013 email from Stephens and at shareholder meetings in January 2013 and June 2013 (id. ¶¶ 37-39, 51) and
(7) they made statements in which they knowingly depreciated the value of WFH shares which negatively impact their actual value (id. ¶¶ 43, 51).
Frankly, even a cursory comparison of the relevant complaints makes it obvious that Everest cannot demonstrate as a matter of law that claims in the Brewer Lawsuit are not “based upon or aris[e] out of the same Wrongful Act or Interrelated Wrongful Acts” as those underlying the claims in the Worthington Lawsuit. While the Brewer Lawsuit adds two new defendants, the other six individual defendants are the same in each case. Everest emphasizes that the Brewer Lawsuit, unlike the Worthington Lawsuit, does not include claims by which any plaintiff seeks to recover personally under a “shareholder oppression” or “squeeze out” theory. But that does not alter the fact that both lawsuits do raise shareholders derivative claims, which by their nature all seek to recover on behalf of WFH and the Bank for injuries allegedly suffered by them. Everest attempts to cast the pleading in each case as merely “containing] a listing of generalized grievances concerning the management of the Bank at the hands of [the] offers and director[s].” (Doc. 38 at 21). That characterization, however, borders on the disingenuous. The court agrees with Everest that alleged acts of corporate officers or directors are not necessarily “related” or “interrelated” just because it is claimed that such acts all caused or contributed to a single injury in the form of a drop in stock price. And it is also true that the Brewer Lawsuit contains allegations related to some events after the Worthington Lawsuit was filed. Nonetheless, many of the claims in the Brewer Lawsuit are unmistakably based on the very “same” wrongful acts pled in support of derivative liability in the Worthington Lawsuit. Such acts include those that allegedly forced Mr. Worthington out of the Companies; misrepresentations in an email that Stephens sent to shareholders dated January 19, 2013; misrepresentations made at a January 28, 2013, shareholders meeting and otherwise in relation to the defendants’ rift with the Worthing-tons and the performance of the Companies; refusing to negotiate in good faith with potential purchasers of the Bank; and making false statements demeaning the value of the Companies’ stock. Even if all of the wrongful acts referenced in the Bretver Complaint do not entirely overlap with those in the Worthington Complaint, Everest has failed to show that the acts alleged in the two cases are not at least “interrelated” because they share “a common nexus any fact, circumstance, situation, event, transaction or series of related facts, circumstances, situations, events or transactions.” As a result, Everest has failed to establish that, for purposes of the “single claim” provision of the Everest Policy, the Worthington Lawsuit and the Brewer Lawsuit are not part of the same claim such that the latter might be deemed subject to coverage despite having been
2. Security National’s Motion
Security National’s motion for summary judgment is essentially the flip side of Everest’s motion. The Security National Policy provided coverage to Plaintiffs from December 14, 2013 to December 14, 2014, that is, for the one-year period following the expiration of the Everest Policy. Accordingly, the Security National Policy was in force in April 2014 when the Brewer Lawsuit was filed. However, the Security National Policy, like the Everest Policy, expressly identifies itself as a “claims made” policy (Doc. 38-2 at 1), under which Security National promises to pay a “loss that is the result of a claim ... first made during the policy period.” (Id. at 5 (emphasis omitted)
For the reasons stated in connection with Everest’s motion, the court agrees with Security National that, under Black-bum, it is possible that Brewer Lawsuit would not trigger coverage under the Security National Policy if it is determined that the Brewer Lawsuit is deemed, for purposes of the “single claim” provision, to be part of the same “claim” arising from the Worthington Lawsuit. Plaintiffs argue, however, that it is improper to even undertake that inquiry because, Plaintiffs say, this court may not look at the Worthington Complaint to assess whether Security National has a duty to advance defense costs. In support, Plaintiffs emphasize that, in Tanner v. State Farm Fire & Cas. Co.,
Plaintiffs read Tanner too broadly. In Tanner, the Court held that, where the underlying complaint alleges facts showing a covered accident or occurrence, a court may not absolve the insurer of a duty to defend based on contrary extrinsic evidence tending to show either that the actual facts of the case did not give rise to a covered accident or occurrence or that the plaintiff on whose behalf such pleading was filed subjectively eon-
As discussed in conjunction with Everest’s motion, all of the individual defendants in the Brewer Lawsuit were also defendants in the Worthington Lawsuit, and the claims in both suits are in numerous instances based upon the very same
In addition, many of the allegations from the Brewer Lawsuit that Plaintiffs frame as “wholly unrelated to the claims at issue in the Worthington Lawsuit” (Doc. 40 at 8) actually appear in that prior lawsuit. For example, Plaintiffs quote a paragraph in the Brewer Complaint that cites false statements supposedly made by defendants Singleton and Karabinos at a shareholder meeting on January 28, 2013. (Doc. 40 at 8, quoting Brewer Compl. ¶ 38; see also Brewer Compl. ¶ 59). However, the same or materially similar allegations of fraudulent statements by Singleton and Karbinos at that meeting also form the basis of claims in the Worthington Complaint. (See Worthington Compl. ¶¶ 35, 59). Plaintiffs similarly cast as an “unrelated” allegation a claim made in the Brewer Lawsuit that, “after a battle for control of the Companies ..., [Mr.] Worthington was ultimately compelled to resign his position at the Companies,” “his shares were redeemed and his involvement with the Companies ended.” (Doc. 40 at 9, quoting Brewer Compl. ¶ 40). But the claim that defendants fought Mr. Worthington for control of the Companies, minimized his role, and eventually forced him out is quite obviously a primary focus of the Worthing-ton Lawsuit, including as it related to derivative liability. (See Worthington Compl. ¶¶ 23, 26, 28-32, 36, 38-39, 44). Plaintiffs also rely upon allegations in the Brewer Lawsuit that defendants failed to adequately consider overtures to purchase the Bank and that they made false statements on several occasions understating the value of WFH shares, which could potentially adversely impact the price of the Bank in any sales negotiations. (Doc. 40 at 8-9, quoting Brewer Compl. ¶¶ 42, 43). But, again, such allegations are in the Worthington Lawsuit as well. (Worthing-ton Compl. ¶¶ 36, 37).
In the end, Plaintiffs’ argument that the Brewer Lawsuit is based at least in part upon wrongful acts unrelated to those underlying the Worthington Lawsuit rests
Y. CONCLUSION
Based on the foregoing, the court rules as follows: Everest’s motion for summary judgment (Doc. 37) is DENIED in its.entirety. Security National’s motion for summary judgment (Doc. 35) is GRANTED IN PART AND DENIED IN PART. It is DENIED to the extent it seeks a determination that Security National owes no duty to indemnify Plaintiffs for any losses they might suffer by virtue of a judgment against them in the Brewer Lawsuit. Because that action remains pending in state court, resolution of such issue is premature. Security National’s motion is GRANTED, however, insofar as it relates to claims by Plaintiffs that Security National owes them a duty to advance defense expenses in the Brewer Lawsuit.
Notes
. References herein to "Doc(s).._" are to the document numbers assigned by the Clerk of the Court to the pleadings, motions, and other materials in the court file, as reflected on the docket sheet in the court's Case Management/Electronic Case Files system. Unless otherwise noted, pinpoint citations are to the page of the electronically filed document, which may not correspond to pagination on the original “hard copy.”
. The decisions of the former Fifth Circuit handed down before October 1, 1981 are binding in the Eleventh Circuit. Bonner v. City of Prichard,
. The court believes that complete diversity is quite clear in light of all of the materials cited in the text. However, to the extent that any party has qualms with or doubts about the propriety of the court taking judicial notice of some or all of the webpages cited herein or the court's analysis of the citizenship of Wor-thington Federal Bank, it might be advisable for such party to file an amended notice of removal, amended pleading, or other supplement that explicitly sets forth additional facts relevant to the citizenship of Worthington Federal Bank.
. The court notes that in their amended complaint, Plaintiffs suggest that, irrespective of diversity, the court might possess jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201. (Doc. 21 at 2, ¶¶ 5, 6). However, the Declaratory Judgment Act is not an independent grant of federal jurisdiction. Skelly Oil Co. v. Phillips Petroleum Co.,
. Throughout the Everest Policy, certain terms appear in bold type to identify the term as one appearing in the definition section of that policy. Whenever the Everest Policy is quoted herein, the bold emphasis for defined terms is omitted.
. While the difference between a “claim” and an “occurrence” can be crucial because it may determine whether and when the insurer's obligation is triggered, in analyzing "related acts” provisions, courts typically employ the same analysis regardless whether the issue is the number of "claims” or "occurrences.” See Zulkey, supra, 50 Tort Trial & Ins. Prac. L.J. at 87-88.
. It is alleged in the briefs that an amended complaint was filed in the Worthington Lawsuit on March 22, 2013, by which Mr. Wor-thington and one Neal Webster were named as additional plaintiffs. (Doc. 36 at 3). Defendants here have also both indicated that their respective summary judgment evidentiary submissions include a copy of both an original complaint and amended complaint from the Worthington Lawsuit. (See id.; Doc. 38 at 3, ¶ 4). However, the cited exhibits contain only an original complaint (Doc. 36-2, Doc. 38-3), although one does also include' a verification page signed by Mr. Worthington on April 4, 2013, which suggests that he was then a party to the suit. (Doc. 38-3 at 24). Ultimately, however, it is immaterial to the court's resolution of the instant motions for summary judgment whether the Worthington Lawsuit is deemed to have been brought by Mrs. Worthington alone or in conjunction with her husband and Webster.
. As with the Everest Policy, the Security National Policy uses boldface to designate terms specifically defined by the policy, but when quoting the Security National Policy, the court omits such emphasis.
. 'Technically speaking, Plaintiffs made this acknowledgment in reference to the term “interrelated wrongful acts” as defined in the Everest Policy. However, the Security National Policy defines the same term using materially similar language, as previously set forth in the text.