Medical Mutual Insurance Company of Maine v. Indian Harbor Insurance Company
(1 Cir. (Me.), October 8, 2009)
The CEO of the policyholder suffered a stroke, and shortly thereafter was ousted from his position. As a result, he filed complaints with the EEOC and his state's human rights commission claiming disabilty complaints Those resulted in "Right to Sue" letters.
In the ensuing legal proceeding, the former CEO named only the corporation as defendant, but he did allege wrongful conduct attributable to directors and officers. He also included a request for an injunction from the corporation's "agents, employees and successors" in his prayer for relief.
The corporation settled with the CEO, and made a claim for reimbursement from its directors and officers' insurer. The insurer denied, asserting that the claims had been made against the corporation, not the directors or officers. The policy provided coverage claims the Company is rqeuired to pay as indemnification for any "insured person resulting from a Claim first made against the Insured Persons" during the policy period. "Insured Person" was defined in the policy as "any past, present or future director or officer, or member of the Board of Managers, of the Company."
The policyholder argued that even though the sole defendant was the corporation, the policy applied because the complaint's allegations of wrongful acts by the directors and officers constituted "claims made against Insured Persons."
Rejecting this argument, the court held that according to common usage, a "claim made against" an insured person must name the insured person as a defendant, stating "D&O policies exist to fund indemnification covenants that protect corporate directors and officers from personal liability, not to protect the corporation by which they are employed. The position advanced by the company in this case — extending coverage to situations in which the directors and officers are not themselves the actual targets of the claims made — would if accepted transmogrify D&O policies into comprehensive corporate liability policies."
For a copy of the opinion, click here
Sarah Delaney and Joanna Roberto