At issue in Medical Mutual was coverage under the Management Liability portion of a D&O policy for an administrative complaint and civil lawsuit filed against the insured, Medical Mutual Insurance Company of Maine (“MMIC”), by its former CEO. MMIC’s former CEO alleged discriminatory conduct on the part of MMIC and its officers and directors. The complaints named MMIC as a defendant but did not identify the officers and directors by name. MMIC settled the civil suit and sought reimbursement from its D&O insurer, Indian Harbor Insurance Company. Indian Harbor denied coverage on the ground that the claim was only made against MMIC the company, and not any MMIC officers or directors. Interestingly, there is no evidence in either court’s opinion that Indian Harbor relied on an insured v. insured exclusion to deny coverage given that most D&O policy forms contain an exclusion that bars coverage for claims brought by one insured against another insured.
MMIC subsequently filed a lawsuit against Indian Harbor seeking payment of the settlement. On cross-motions for summary judgment, the U.S. District Court of Maine granted Indian Harbor’s motion for summary judgment, concluding that the D&O policy did not provide coverage for losses resulting from either the administrative or civil complaints. MMIC appealed.
In affirming the ruling in favor of Indian Harbor, the First Circuit analyzed the language of the D&O policy in connection with coverage for the administrative complaint. In order for an administrative complaint to qualify as a “Claim,” the policy specifically requires that an Insured Person be identified as a person against whom the proceeding is initiated. Given that no specific officer or director was named in the administrative complaint as an adverse party, the First Circuit determined that the administrative complaint did not qualify as a “Claim.”
In analyzing coverage for the judicial complaint, the First Circuit held that the complaint qualified as a “ Claim” because it falls under the definition of “claim” as a “civil proceeding in a court of law.” The court next considered whether the complaint qualified as a “Claim” “made against” an Insured Person as required by the Insuring Agreement. The court concluded that under the unambiguous plain meaning of the phrase “made against,” in order for a complaint to be “made against” an Insured Person, it must identify the Insured Person as a defendant. The judicial complaint did not identify an Insured Person as a defendant.
In finding for Indian Harbor, the First Circuit rejected MMIC’s assertion that because the relief sought included an injunction against “MMIC, its agents, [and] employees…,” the complaint qualified as a “Claim,” because “Claim” was also defined to include a “written demand for monetary or non-monetary relief.” The First Circuit concluded that because such relief does not demand relief from the officers and directors in their personal capacity, it is not enough to qualify as a “Claim.”
Finally, the First Circuit also rejected MMIC’s argument that the fact that the settlement agreement in the underlying matters released all potential liability against MMIC and its directors and officers shows that the Claims were brought against MMIC and its directors and officers. In rejecting MMIC’s argument, the First Circuit noted that while MMIC did the prudent thing by requiring such a broad release, it did not expand “the parameters of the civil actions.”
