Full opinion text
MEMORANDUM OPINION ROBERT E. PAYNE, Senior District Judge. This matter is before the Court, following a bench trial, on SunTrust Mortgage, Inc.’s (“ST”) affirmative defense to Count IV of DEFENDANT UNITED GUARANTY RESIDENTIAL INSURANCE COMPANY OF NORTH CAROLINA, INC.’S ANSWER TO PLAINTIFFS’ [sic] AMENDED COMPLAINT AND COUNTERCLAIM (Docket No. 47) (“Counterclaim”). For the reasons set forth below, ST has met its burden on the affirmative defense (alternatively, “first material breach defense”). Judgment therefore will be entered for ST on Count IV of UG’s Counterclaim. PROCEDURAL HISTORY Count IV of UG’s Counterclaim seeks a “declaratory judgment stating that Sun-Trust is obligated under [the insurance policy] to continue making annual renewal premium payments on all loans in each of the Loan Pools, notwithstanding that the Maximum Cumulative Liability amount has been reached with respect to a particular Loan Pool.” On April 26, 2011, 784 F.Supp.2d 600 (E.D.Va.2011), the Court entered summary judgment for UG on Count TV of the Counterclaim. Specifically, it held: “[t]he insurance policy clearly and unambiguously requires SunTrust ... to pay annual premiums to United Guaranty ... for the life of the insured loans, notwithstanding that UG’s Maximum Cumulative Liability ... for loss on those loans has been reached.” However, in so holding, the Court failed to address ST’s first material breach defense, which was pled by ST as an affirmative defense to Count IV of the Counterclaim and which had been briefed, albeit in a skimpy fashion, in opposing UG’s motion for summary judgment on Count IV. ST’s first material breach defense was that UG materially breached the insurance policy by “(a) continuing to collect and failing to refund premiums on [performing] IOF Combo 100 Loans when United Guaranty knew it would not pay claims on those loans; and (b) relying on a legally unsupportable basis for denying Sun-Trust’s claims [on defaulted IOF Combo 100 Loans].” The consequence of those alleged breaches, said ST, was that UG may not “enforc[e] any contractual obligation of SunTrust to continue paying renewal premiums under the Policy.” The Court realized its failure to consider ST’s first material breach defense in a conference call with the parties on May 3, 2011. To allow ST to be heard on its affirmative defense, the Court vacated the order entering summary judgment for UG on Count IV of the Counterclaim. A briefing schedule was set for ST’s first material breach defense and the issue was set for oral argument on May 23, 2011, with an evidentiary hearing to follow, if necessary, on May 25, 2011. The Court heard oral argument on ST’s first material breach defense, and, finding genuine disputes of material fact, received evidence on the affirmative defense on May 25-26, 2011. That, in effect, was a denial of SUNTRUST MORTGAGE, INC.’S MOTION FOR SUMMARY JUDGMENT ON COUNT IV OF UNITED GUARANTY’S COUNTERCLAIM (Docket No. 468), which ST filed on May 9, 2011, pursuant to the briefing schedule set by the Court. Following the bench trial, the Court ordered the parties to file post-trial findings of fact and conclusions of law. The Court informed the parties that consideration of ST’s first material breach defense would be limited to evidence adduced at the bench trial. Accordingly, the Court’s findings of fact are based exclusively on evidence received at trial. Of course, Count IV of UG’s Counterclaim is just one part of this litigation, it having developed out of the events which gave rise to ST’s breach of contract claim, as presented in Count I of the THIRD AMENDED COMPLAINT (Docket No. 121) (“TAC”). In brief, Count I of the TAC alleges that UG breached the insurance policy when, from the spring of 2007 through 2009, it denied ST’s claims on IOF Combo 100 Loans. Count I of the TAC thus overlaps the second of the two alleged breaches in ST’s first material breach defense: that UG breached the insurance policy by denying claims on IOF Combo 100 Loans. ST was awarded summary judgment on Count I of the TAC on May 13, 2011. The Court held that UG’s denial of claims on IOF Combo 100 Loans breached the insurance policy. It therefore is not necessary to decide in this opinion whether UG’s denial of claims on IOF Combo 100 constituted a breach of the insurance policy. It did. The questions that must be answered now are whether the improper collection of premiums alleged in ST’s first material breach defense was in fact a breach of the insurance policy, and, if so, whether that breach, and the breach already found by the Court, were material in view of the policy. Some preliminary procedural questions must be answered as well, but the substantive questions are limited to those outlined above. FINDINGS OF FACTS ST is a corporation based in Virginia. It is a subsidiary of SunTrust Bank. ST’s business is the origination of mortgage loans on residential real property. It sold some loans, retained others in its portfolio, and serviced those that it retained as well as some that it sold. See Trial Transcript of Evidentiary Hearing of May 25-26, 2011 (“Trial Tr.”) 53:15-17; see also id. at 55:1-6. UG provided ST with mortgage insurance to cover losses on second-lien loans in the event of borrower default. Id. at 258:20-24. A written insurance policy effectuated the coverage. The policy consisted of a “Master Policy” issued circa 1998, as modified by a “SunTrust Mortgage Agreement Closed-End Purchase Money Seconds-Flow Business Risk Sharing Program — June 23, 2004” (“2004 Flow Plan”) and a “SunTrust Mortgage Agreement Closed-End Purchase Money Seconds-Flow Business Risk Sharing Experienced Rating Plan — October 17, 2005” (“2005 Flow Plan”). Under the insurance policy, the insured party, ST, underwrote the loans and submitted them for coverage on a monthly basis. The- insurer, UG, in turn extended coverage to the loans that ST had submitted by issuing them unique certificate numbers. See ST Ex. 3 §§ 1.2, 3.1(a); Trial Tr. 271:12-13. In addition to evidencing coverage under the policy, the certificate numbers assisted UG in tracking the loans, verifying that premiums had been paid on them, and, among other things, qualifying and processing claims on them. Trial Tr. 271:14-18. UG did not endeavor to determine whether a submitted loan in fact conformed to the underwriting parameters unless and until ST made a claim on the loan. If, after a claim was made on a loan, UG determined that the loan did not in fact meet the agreed-to parameters, UG rescinded coverage on the loan and returned any premiums that it had collected on the loan. All the loan products covered under the policy fell under an umbrella of products referred to as “Combo Loans.” Id. at 69:21-25, 70:6-10. ST began offering Combo Loans around 2000 and continued to offer them when it filed this action in July 2009. Combo Loans were second-lien mortgage loans that had been originated with a first-lien mortgage loan on the same parcel of real estate. Id. at 54:6-55:19. ST generally sold the first-lien mortgage loan on the secondary market and retained the second-lien loan for its loan portfolio and had it insured. Id. at 55:1-6. ST offered at least eight general types of Combo Loans between 2000 and 2009. Id. at 264:3-13. See generally UG Ex. 48. One such type of Combo Loan permitted borrowers to obtain loans with a maximum loan-to-value ratio of up to 90%; another type permitted borrowers to obtain loans with a maximum loan-to-value ratio of up to 95%; and a third type permitted borrowers to obtain loans with a maximum loan-to-value ratio of up to 100%. All of the loan products were further characterized by customizing features that the borrowers selected — for instance, first- and/or second-lien loans that required interest-only payments for a specified period of time, first- and/or second-lien loans that required principal and interest payments for a specified period of time, or some combination thereof. See, e.g., ST Ex. 34 at 24-99. The loans at issue here are second-lien loans made behind an interest-only first-lien loans with a combined loan-to-value ratio of up to 100%. See n. 7, supra. The second-lien loans were the riskier of the two loans on a real estate parcel. This fact was not lost on ST. It understood that, in the event of foreclosure, the amount owed on the second-lien loans would be satisfied only after the amount owed on the first-liens had been satisfied. Trial Tr. 55:5-11, 56:23-58:24. It also understood that the risk associated with the second-lien loans would increase in a declining residential real estate market. See id. at 57:16-58:24. ST understood, too, that the residential real estate market historically was prone to fluctuation. See id. at 60:15-61:17. Being aware of such risks, particularized and systemic, ST paid UG for mortgage insurance on the second-lien loans in its portfolio. Id. at 55:4-11, 60:11-13. ST “borrow[ed] on [its] earnings in the good times[ ] to protect [itself] in the bad times.” Id. at 61:9-17. From the insurance policy’s inception, all the insured loans were grouped into loan pools. Each loan pool corresponded to a “Policy Year,” which Section 1.33 of the Master Policy defined as the “annual period from the Effective Date of this Policy until 12:01 a.m. (Eastern Time) of the same day of the following year and each subsequent time period similarly calculated.” ST Ex. 3 § 1.33. The effect of Section 1.33 was that all loans issued in a twelve-month interval, the beginning of which was marked by the “effective date of [the] Policy,” were placed in the same pool. Trial Tr. 70:17-21; see also ST Ex. 71 ¶ 11. The individual characteristics of the loans therefore had no bearing on their placement in the pools; the singular determinant was their date of origination. This method of placing the loans in pools resulted in the pools each containing different types and quantities of Combo Loans. Trial Tr. 71:16-20. In the policy’s nomenclature, the “maximum cumulative liability” referred to UG’s coverage obligation under the policy. Pursuant to Section 1.26 of the Master Policy, the maximum cumulative liability was based on a percentage of the aggregate total of the loan amounts insured in each pool. Specifically, the maximum cumulative liability was “an amount to be determined for each Policy Year” that was equal to ten percent of the aggregate total of the insured loan amount in a pool, less ten percent of the aggregate total of the loan amount in a pool for which coverage had ceased for certain enumerated reasons, including rescission of a loan (“cancell[ation] by [UG] in accordance with Section 3.6”) and exclusion of a loan from coverage (“ex-clu[sion] under Section 4”). ST Ex. 3 § 1.26. Two realities followed from the maximum cumulative liability being so determined. First, each pool imposed its own coverage obligation on UG. This meant that UG’s coverage obligation for a particular loan extended only so far as its coverage obligation for the pool containing the loan. Second, each pool imposed a coverage obligation on UG that, in being dependent on the total amount insured in the pool (which, of course, changed as new loans were insured, loan amounts were paid down, and coverage of existing loans was cancelled), was variable in nature. Although a pool corresponded to a “Policy Year,” the amount in the most current pool (i.e., the one to which newly originated loans were added) was updated on a monthly basis. At the end of each month, ST bundled the Combo Loans that it had issued during the month and submitted the loans for coverage. Trial Tr. 73:14-21, 74:5-11. When the twelve-month period allotted for a loan pool expired, the loan pool was closed, meaning that no other Combo Loans would be added to it, and another loan pool was commenced. Loans were then added to the newly created pool on a recurring monthly basis for the next twelve months. The insurance policy called for this process to be repeated ad infinitum. See ST Ex. 3 § 1.33. The Master Policy established the basic framework for the payment of premiums. Section 3.3 of the Master Policy provided for the payment of an “Initial Premium” for each newly insured loan under the policy. Id. § 3.3. Section 3.4 of the Master Policy provided for the payment of “Renewal Premiums” on the loans for which an initial premium already has been paid: “[t]he insured’s obligation for the payment of [renewal] premium due ... shall continue for each Loan insured [under the policy] ... notwithstanding the payment by [UG] of Losses ... during a Policy Year in an amount equal to the Maximum Cumulative Liability for such Policy Year....” Id. § 3.4. Although Sections 3.3 and 3.4 stated that an initial premium and renewal premium, respectively, were to be paid for each loan insured under the policy, they did not specify how those premiums were to be calculated. Before the 2005 Flow Plan, UG calculated the premiums without reference to language in the insurance policy. UG’s actuaries analyzed data of every loan with all lenders, not just ST, that UG had insured dating back twenty years. Then, based on the analysis of that data, the actuaries established rate factors for each general category of ST loan that was insured under the policy, with each rate factor corresponding to the predicted risk of the loan category to which it was to be applied. The premium for each loan was calculated by applying the rate factor matching that loan’s category to the outstanding balance of the loan. See Trial Tr. 285:20-287:3. The 2005 Flow Plan changed the method of calculating the premiums and, for the first time, linked the calculation of the premium to language in the insurance policy. In the mid-2000s, in response to ST’s requests for lower premiums, UG offered ST the opportunity to have the performance of its entire loan portfolio “earn” lower premiums. Id. at 275:3-10. UG did this because it valued ST’s business and because ST’s portfolio had outperformed the majority of its other lenders’ portfolios. See id. at 274:20-275:15. The 2005 Flow Plan accordingly established an “Experience Rating Plan”: “a special lender pay program that features potential changes in the rate for new and existing business based on the cumulative loss ratio of the insured business.” ST Ex. 5. Notwithstanding that the Combo Loans insured under the policy had different risk characteristics (as evidenced by the fact that they had been assigned different rate factors before the 2005 Flow Plan according to the general loan category), the 2005 Flow Plan called for the “cumulative loss ratio” to be calculated by taking the cumulative losses paid out by UG on all the loans insured under the policy and dividing that figure by the cumulative premiums collected by UG on all the loans insured under the policy. Id.; Trial Tr. 276:19-277:14. Also according to the 2005 Flow Plan, the cumulative loss ratio was to be calculated each calendar year (after the 2005 Flow Plan went into effect) using the loss and premium data for the most recent seven-year experience of all the loans insured under the policy. ST Ex. 5. UG was to apply a rate factor to the outstanding balances of all the loans insured under the policy according to a table in the 2005 Flow Plan listing eleven different rate factors for eleven different cumulative loss ratio ranges. The rate factors increased as the values in the cumulative loss ratio ranges increased as set forth below: Paid Loss Ratio Annual Rate 0-15 0.35% 15-25 0.40% 25-35 0.50% 35-45 0.60% 45-55 0.70% 55-65 0.80% 65-75 0.95% 75-85 1.00% 85-90 1.05% 90-100 1.15% 100 + 1.35% Id. The premiums for the first two years under the 2005 Flow Plan, however, did not make use of the cumulative loss ratio. Pursuant to the 2005 Plow Plan, UG set the “initial rate ... based on the most recent experience with the lender [ST] as well as the quality of business expected in the future.” Id. The initial rate was in effect for two years, with UG applying that rate to the outstanding balances of the insured loans to calculate the premiums for each loan. Use of the cumulative loss ratio (as set forth in the preceding table) to calculate premiums began in the third year of the 2005 Flow Plan and continued each year thereafter. Trial Tr. 338:25-339:2. UG calculated the cumulative loss ratio based on the seven-year experience of all of ST’s loans covered by the policy; it then matched the calculated cumulative loss ratio with the ranges listed on the table in the 2005 Flow Plan to determine the applicable rate factor; and, finally, it applied the applicable rate factor to the outstanding balance of all the loans insured under the policy to calculate the premiums for all the loans. UG issued a bill to ST each month stating a gross premium for all the loans insured under the policy. Attached to the monthly bills was a detailed statement stating the portion of the gross amount applicable to each loan. Id. at 181:3-19. The initial dispute in this action arose in the spring of 2007 when UG began denying claims on IOF Combo 100 Loans that had not been underwritten using Fannie Mae’s automated underwriting system, “Desktop Underwriting” (“DU”). This dispute is the subject of Count I of the TAC. UG took the position that IOF Combo 100 Loans that had not been underwritten using DU were excluded from coverage under the terms of the insurance policy. ST disagreed. The IOF Combo 100 Loans that are at issue in Count I of the TAC are housed in six loan pools. ST Ex. 71 ¶ 151; see also id. at Ex. C (listing the loan pools). ST began originating loans of this kind in late 2004 after the execution of the 2004 Flow Plan, see id. at Ex. C; see also Trial Tr. 190:23-25, but ST originated the majority of the loans between 2005 and 2007 after the execution of the 2005 Flow Plan, see ST Ex. 71 at Ex. C. ST originated and submitted IOF Combo 100 Loans for coverage under the policy for more than three years before the coverage dispute in Count I of the TAC arose. By January 2008, UG was categorically denying claims on IOF Combo 100 Loans that had not been underwritten using DU. In early 2008, word that UG had begun systematically to deny claims of loans for non-use of the DU method reached Robert Partlow, a Senior Vice President of ST. Trial Tr. 86:21:24. Mr. Partlow initiated communications with UG in an effort to resolve the dispute. During these communications, Mr. Partlow corresponded with John Gaines, a Senior Vice President of UG. Id. at 87:11-14. In June 2008, Mr. Partlow received a letter from Mr. Gaines indicating that UG had denied claims on IOF Combo 100 Loans that had not been underwritten using DU. ST Ex. 10. The letter also indicated that “[t]here are undoubtedly a large percentage of loans remaining in force that will similarly be denied should they default,” and that “without [ST’s] help, [UG is] unable to identify those loans with interest only first mortgages that are lacking the required DU approval.” The letter from Gaines also stated: “[i]t is not appropriate for us [UG] to continue to accept premium on loans that are not eligible for claim payment.” Id. In the months after receiving the letter, Mr. Partlow engaged in additional discussions with Mr. Gaines to resolve the dispute. Trial Tr. 88:7-11. But, the dispute persisted. Accordingly, on October 28, 2008, the parties entered into an agreement (the “Tolling Agreement”) recognizing “the intent of the Parties to preserve the status quo as of September 30, 2008 with respect to claims or potential claims between the Parties in connection with [UG’s denial of claims on IOF Combo 100 Loans that had not been underwritten using DU].” ST Ex. 56. The Tolling Agreement was to remain in force until November 17, 2008. Id. It was extended not less than seven times while the parties continued negotiations, carrying its effective expiration date through July 31, 2009. See ST Exs. 57-63; Trial Tr. 88:24-89:2, 89:14-20. In response to the statement in the Gaines letter that “without [ST’s] help, [UG is] unable to identify those loans with interest only first mortgages that are lacking the required DU approval,” ST sent UG a list of all IOF Combo 100 Loans insured under the policy that, it believed, had not been underwritten using DU. ST Ex. 6. The list of loans was attached to an email dated February 6, 2009, from Mr. Partlow to Mr. Gaines. Id. It was compiled at Mr. Partlow’s direction, Trial Tr. 90:14-16, and Mr. Partlow believed its contents to be accurate, id. at 90:23-24. The number of loans on the list totaled 11,981. Id. 217:24-218:4. By way of an email dated February 14, 2009, UG informed ST that it had “match[ed] all of the loans [on the list]” with its own loan records. ST Ex. 9; see also Trial Tr. 91:17-22. Of the 11,981 loans on the list, 1,069 (approximately 9%) had in fact been denied coverage before ST sent UG the list on February 6, 2009. ST Ex. 70 ¶¶ 6, 8. Therefore, not all the loans on the list were performing loans — i.e., loans that had not defaulted and on which ST had not submitted claims. Of course, the vast majority of the loans on the list were performing loans. For those loans, UG submitted to ST bills for millions of dollars in premiums, which ST has paid. Before UG received the Partlow list, from May 1, 2007, through February 28, 2009, UG billed premiums of, and ST paid premiums in, an amount not less than $10,977,351 for the performing loans on the list. Id. at Ex. A. And, after receiving the list, from March 1, 2009, through March 31, 2011, UG demanded premiums of, and ST paid premiums in, an amount not less than $12,027,250 for the performing loans on the list. Id. For all such performing loans on the list for which ST has not submitted claims and are otherwise performing, UG has continued to bill and collect premiums. Id. ¶ 15. In early July 2009, the parties had reached what appeared to be a final resolution of the dispute and had prepared a settlement agreement. However, UG abruptly and without explanation refused to execute the agreement and declined to further discuss settlement. Trial Tr. 92:24-93:4. By that time, the negotiations had been ongoing for months. As of June 30, 2009, UG had denied not less than $63,894,849 in claims on IOF Combo 100 Loans, ST Ex. 71 ¶ 18, Ex. E; see also Trial Tr. 196:19-25, which, at that time, equated to more than 25% of the total coverage liability of UG for the six loan pools at issue in Count I of the TAC, ST Ex. 71 at Ex. E; Trial Tr. 197:1-5. Within two weeks of the unexpected end of settlement talks to UG, ST filed the present action. ST continued paying premiums during the pendency of the action because it feared that UG could use its failure to do so to invoke Section 3.6 of the Master Policy to cancel coverage on all loans for which premiums had not been paid. Trial Tr. 178:22-179:12. After receiving the list of loans from Mr. Partlow in February 2009, and even after UG broke off settlement discussions in July 2009, UG has not exercised its contractual right to audit the loans on the list. Id. at 252:22-23. ST Ex. 3 § 7.6; see also Trial Tr. 252:18-21. Thus, UG has not ever determined whether those loans are in fact eligible for coverage under its interpretation of the insurance policy — an interpretation on which it has denied tens of millions of dollars in claims made by ST on IOF Combo 100 Loans that have defaulted. And, at no time between receiving the list of loans from Mr. Partlow in February 2009 and responding to ST’s first material breach defense in May 2011, did UG dispute the accuracy of the loan list. Trial Tr. 94:25-95:19. It was only during the course of this litigation, and quite far into the process, that UG raised the specter of the list being unreliable. The foregoing findings of fact provide a basic factual context for discussion of the procedural and substantive legal issues relevant to ST’s first material breach defense. Further findings of fact are made as appropriate in the ensuing legal discussion and conclusions. CONCLUSIONS OF LAW Each of the procedural and substantive legal issues relevant to ST’s first material breach defense are decided in turn below. I. ST Did Not Waive Its Right To Assert Its First Material Breach Defense A. Position Of The Parties UG argues that the doctrine of waiver prevents ST from asserting its first material breach defense. Central to UG’s argument is 13 Williston on Contracts § 39:31 (4th ed.), which provides: “when a contract not fully performed on either side is continued in spite of a known excuse, the right to rely upon the known excuse is waived [and] in turn, the defense based on the excuse is lost.” UG contends that ST lost its right to rely upon UG’s improper denial of claims on the IOF Combo 100 Loans as a predicate for its first material breach defense to Count IV of UG’s counterclaim, because ST allegedly knew in June 2008, after receiving the Gaines letter, that UG had denied claims on the loans and that UG would continue to deny claims on them, yet it continued to pay premiums under the policy and continued to accept millions of dollars in insurance payouts. In other words, UG maintains that, having been informed of UG’s breach in June 2008, and having subsequently performed under and having nonetheless accepted the benefits of the policy, ST cannot now cite that breach as a reason to be released from further performance under the policy. ST counters that it did not waive its right to rely upon UG’s denial of claims on the loans as a predicate for its first material breach defense, because, “by its words and deeds, [it] consistently and repeatedly asserted its position that United Guaranty’s refusal to pay claims [on the loans] was contrary to United Guaranty’s obligations under the insurance policy.” And, in any event, says ST, UG did not carry its burden to prove waiver. B. Analysis In Virginia, “[a] party claiming waiver has the burden of showing two essential elements of waiver, namely ‘knowledge of the facts basic to the exercise of the right [waived] and the intent to relinquish that right’ These elements must be shown by ‘clear, precise and unequivocal evidence.’ ” Stuarts Draft Shopping Ctr. v. S-D Assocs., 251 Va. 483, 468 S.E.2d 885, 889-90 (1996) (quoting Stanley’s Cafeteria v. Abramson, 226 Va. 68, 306 S.E.2d 870, 873 (1983)) (emphasis and brackets in original). The requisite elements of waiver do not conflict with the general principle articulated in 13 Williston on Contracts § 39:31 (4th ed.), and they control its application under Virginia law. The record shows that UG has failed to carry its burden on its waiver argument. Contrary to evidencing an intent to relinquish its rights, ST’s actions in the wake of its receipt of the June 2008 letter from UG demonstrate that it intended to preserve those rights. When ST received the Gaines letter, it did not accept the position announced by UG that IOF Combo 100 Loans that had not been underwritten using DU were not eligible for coverage under the policy. Rather, ST immediately , stated its disagreement and then set out to resolve the dispute through negotiations with UG. When negotiations had not resolved the dispute by October 2008, ST and UG entered into the Tolling Agreement, which, as a result of multiple extensions executed in the midst of continued negotiations, remained in effect through July 2009. In addition to tolling the limitations period for claims related to the coverage dispute, the Tolling Agreement provided in clear terms that “SunTrust wishes to preserve and protect its right to prosecute any and all claims SunTrust may have against UG related to the Dispute, the Policies, [and] insurance coverage obligations under the Policy for certain SunTrust insurance claims stemming from SunTrust mortgage products.” ST Ex. 56. ST’s conduct after receiving the Gaines letter and the terms of the Tolling Agreement foreclose a finding that, by continuing to pay premiums, it intended to relinquish its known right to assert against UG any rights it had respecting its insurance coverage. And, not more than two weeks after UG informed ST in July 2009 that it was no longer amenable to resolving the dispute through negotiations, ST sued UG, alleging, among other things, a breach of the insurance policy on account of UG’s denials of claims on IOF Combo 100 Loans that had not been underwritten using DU. Then, when UG filed its Counterclaim, Count IV of which sought a declaratory judgment to enforce provisions of the insurance policy providing for continued payment of renewal premiums after the exhaustion of UG’s coverage obligation, ST timely pled its first material breach defense as an affirmative defense to the relief sought by UG. ST continued to pay the premiums because UG led ST to believe that the dispute could be settled, and ST did not want UG to cancel the coverage for non-payment of premiums under Section 3.6 of the Master Policy while the parties were working to compromise the dispute. Nothing in the record demonstrates that ST continued to pay premiums on the loans because it agreed with UG’s stated position in the Gaines letter, or because it had excused UG’s denial of claims on the loans. Accordingly, UG has failed to show by clear, precise, and unequivocal evidence that ST intended to relinquish its right to raise ST’s denial of claims on IOF Combo 100 Loans as a basis for its first material breach defense. UG’s reliance on American Chlorophyll, Inc. v. Schertz, 176 Va. 362, 11 S.E.2d 625 (1940), and federal cases citing to it, for its waiver argument is without merit. First, American Chlorophyll is factually inapposite. In American Chlorophyll, “the parties specifically contracted that no breach should be grounds for terminating the contract unless two notices were given, the first stating that a breach had occurred, and the second that the thirty-day ‘period of grace’ had expired and that the contract was henceforth at an end.” 11 S.E.2d at 628 (emphasis in original). Because the plaintiff failed to terminate the contract in the prescribed manner after the defendant had breached, the court found that the plaintiff had waived his right to assert the defendant’s prior breach as a bar to the defendant’s counterclaim for damages. Id. The facts at issue here are not at all like those in American Chlorophyll. The insurance policy does not limit the ability of a party to cancel the policy based on the breach of another party. And, ST and UG executed the Tolling Agreement explicitly preserving then-extant and potential claims related to the dispute, and they extended it many times. The Tolling Agreement establishes that, from the nascent stages of the dispute, ST intended to preserve its rights related to the dispute (and, moreover, gave notice of its intention to do so to UG). On facts such as these, which were not before the American Chlorophyll court (or any court which since has cited that decision), it cannot be said that ST waived its right to rely on UG’s denial of claims as a predicate for its first material breach defense. Second, even if American Chlorophyll were factually applicable (and it is not), this district recently held that American Chlorophyll is no longer good law for the waiver principle for which UG cites it. See Tandberg, Inc. v. Advanced Media Design, Inc., No.l:09cv863, at 9-11 (E.D.Va. Dec. 11, 2009) (Order) (finding “plainly merit-less” the proposition that “American Chlorophyll and its progeny remain good law in Virginia” based on the “weight of authority supporting application of Count'i-yside and Horton” and at least twenty other decisions in Virginia state and federal courts permitting operation of the first material breach doctrine to prevent enforcement of a contract by the breaching party even when both parties continued to perform the contract). The decision in Tandberg is well-documented, and independent assessment of the underlying authorities counsels that it is correct. Hence, the Court adopts Tandberg here. II. ST May Sue For Contract Damages And Raise As An Affirmative Defense Its First Material Breach Defense A. Position of the Parties UG argues that, “awarding expectation damages and excusing [ST’s] own obligations are overlapping and duplicative remedies that would result in a double recovery and an unjustified windfall.” “Thus,” UG argues, “the doctrine known as the election of remedies holds that ‘[w]hen a material breach of contract has occurred, a party has two recourses: rescind the contract and recover the value of any performance made by it or affirm the contract and recover damages for the breach.’ ” According to UG, “a party cannot do both.” ST meets that argument by pointing out that it is not seeking a double recovery. “The only remedy sought by SunTrust in this case,” argues ST, “is damages for UG’s breach.” ST clarifies that “[t]he material breach affirmative defense is not a remedy. Rather, it is the interposition of a legal reason why United Guaranty is not entitled to the remedy it seeks, i.e., a declaratory judgment that it can continue to collect premiums after the coverage under its policy is exhausted.” It follows, according to ST, that it may seek damages as a remedy for its breach of contract claim in Count I of the TAC and plead its first material breach defense as an affirmative defense to UG’s requested relief in Count IV of the Counterclaim. B. Analysis UG’s election of remedies argument must be rejected. It conflates two distinct concepts in the civil litigation process: a remedy sought under a cause of action and an affirmative defense raised as a bar to a cause of action. In this action, ST seeks but one remedy: damages for UG’s breach of contract. ST seeks that remedy in Count I of the TAC, which ST filed in its capacity as a plaintiff before UG filed its Counterclaim. ST’s first material breach defense, on the other hand, is an affirmative defense, not a remedy. An affirmative defense is a “response to a plaintiffs claim which attacks the plaintiffs legal right to bring an action.” Black’s Law Dictionary 60 (6th ed. 1990). ST’s first material breach defense, which ST raised in its capacity as a defendant, thus is a response to UG's request for declaratory relief that attacks UG’s legal right to the declaratory judgment that is sought in Count IV of the Counterclaim. With ST’s first material breach defense properly conceived as the affirmative defense that it is, the election of remedies doctrine simply has nothing to say about ST’s ability to plead it in this action. It appears that Virginia courts have never squarely addressed, in the election of remedies context, the ability of a party to seek damages for breach of contract and absolution from further performance under the same contract as a result of the other party’s material breach. However, they have, commensurate with the inherent distinction between remedies and affirmative defenses, permitted the award of contract damages in conjunction with the operation of the first material breach doctrine. The decision in Shen Valley Masonry, Inc. v. S.P. Cahill and Associates, No. 00-75, 2001 WL 34038625 (Va.Cir.Ct Dec. 11, 2001), is illustrative. There, the court both awarded a plaintiff subcontractor $332,033 in “completed but unpaid labor” and $4,585 in “clean up and equipment removal costs” stemming from a defendant general contractor’s breach of a subcontract and denied the defendant general contractor’s prayer for liquidated damages based on the latter’s “initial material breach” of the subcontract. Shen Valley Masonry, 2001 WL 34038625, at *8-9. The court articulated the first material breach doctrine as follows: “[t]he party who commits the first breach of a contract is not entitled to enforce the contract.” Id. at *6 (citing, among other cases, Countryside Orthopaedics v. Peyton, 261 Va. 142, 541 S.E.2d 279 (2001); Horton v. Horton, 254 Va. 111, 487 S.E.2d 200 (1997)). Significantly, the court said nothing about the first material breach doctrine’s precluding a plaintiff (even one who benefits from the doctrine’s operation) from suing for damages on the contract. The court’s silence in this regard is not surprising, because, as explained above, the first material breach doctrine operates not as a remedy requested by a party in its capacity as a plaintiff, but as an affirmative defense pled by a party in its capacity as a defendant. The Supreme Court of Virginia’s decision in ADC Fairways Corp. v. Johnmark Construction, Inc., 231 Va. 312, 343 S.E.2d 90 (1986), further undermines UG’s assertion that contract damages and the first material breach doctrine are mutually exclusive “remedies.” In ADC Fairways, the court permitted a plaintiff contractor to recover damages for delays in performance that the trial court had held were a breach of the defendant real estate developer’s obligations under the contract. When the defendant argued that it was entitled to an offset against the damages awarded to the plaintiff, the Supreme Court responded that the defendant “could only recover an offset if it had not breached.” ADC Fairways, 343 S.E.2d at 93. It explained: “[b]ecause the trial court ruled that [the defendant] breached the contract and because we have upheld that ruling, it follows that the trial court did not err in denying [the defendant’s] claim of offset.” Id. The allowance of the plaintiffs recovery of contract damages and concurrent denial of the defendant’s right to a damages offset based on the latter’s material breach of the contract in ADC Fairways is inconsistent with UG’s argument that a plaintiffs request for damages under a contract and invocation of the first material breach doctrine to excuse further performance under the same contract is an either-or proposition. In sum, the distinct nature of a remedy and an affirmative defense and the distinct functions they serve in the litigation process, as confirmed by Virginia decisions, counsel that a litigant may seek the remedy of damages under a cause of action for breach of contract and, in response to his adversary’s countervailing breach of contract claim, may also invoke the first material breach doctrine, all without running afoul of the election of remedies doctrine. III. UG Breached The Insurance Policy Both In Denying Claims On ST’s IOF Combo 100 Loans And In Continuing To Demand And Collect Premiums On Performing IOF Combo 100 Loans For Which It Knew Claims Would Be Denied A. Position of the Parties ST argues that UG breached the insurance policy in two ways. First, it argues that UG breached the insurance policy “by failing to pay SunTrust’s claims on the loans at issue in Count I of the Third Amended Complaint.” Second, ST argues that “United Guaranty’s billing for and collecting premiums on [performing] loans on which it [knew] it [would] not pay claims constitutes a ... breach of the policy.” ST contends that “[t]he undisputed facts show that United Guaranty made the corporate decision in the second quarter of 2008 that it would not pay a claim on any IOF Combo 100 loan that was not underwritten using Fannie Mae’s Desktop Underwriter ... automated program,” yet it continued to bill for, and collect, premiums on performing IOF Combo 100 Loans that had not been underwritten using DU.” ST argues that, pursuant to Section 3.6 of the Master Policy, UG had two options when it decided that the policy did not require it to pay claims on IOF Combo 100 Loans that had not been underwritten using DU: to cancel coverage and return the premiums paid on the loans or not cancel coverage, continue to collect premiums, and pay ST’s claims on such loans despite the fact that it believed the policy did not obligate it to do so. According to ST, UG instead opted for a course forbidden by the policy: “continuing to collect premiums but providing no coverage.” UG concedes, as it must, based on the Court’s earlier entry of summary judgment for ST on Count I of the TAC, that, for purposes of applying the first material breach doctrine, it must be considered to have breached the insurance policy when it denied claims on IOF Combo 100 Loans that had not been underwritten using DU. However, UG argues that its acceptance of premiums on performing IOF Combo 100 Loans was not a breach of policy. First, it contends that “no provision in the Master Policy, the 2004 Flow Plan, and the-2005 Flow Plan ... requires UG to reject premiums sent by SunTrust on in-force loans.” Second, UG refutes ST’s claim that it accepted premiums on “specific loans knowing that it would never pay a claim on that loan.” UG argues that ST was slow to respond to Mr. Gaines’ June 2008 request for ST’s assistance in identifying IOF Combo 100 Loans that had not been underwritten using DU, noting that ST did not send UG the list of loans that, in ST’s estimation, had not been underwritten using DU until February 2009. UG also argues that the list itself was inaccurate. It notes that claims have been made on about 4,400 of the loans on the list and, further, that 341 of these claims were paid by UG. According to UG, the fact that it found those 341 claims to be valid proves that, contrary to ST’s representations, not all the loans on the list were non-DU loans. Finally, UG argues that it received the list of loans at a time when settlement discussions were ongoing with ST. UG contends that, if it had stopped demanding and collecting premiums on the performing IOF Combo 100 Loans, it would have jeopardized the efficacy of those discussions and breached the Tolling Agreement by disturbing the “status quo” relationship of the parties. B. Analysis ST rests its breach argument respecting UG’s continued collection of premiums principally on Section 3.6 of the Master Policy. ST also repeatedly argues that UG acted improperly in continuing to collect premiums on performing IOF Combo 100 Loans when it knew that it would never pay a claim on those loans. In considering the record and the parties’ post-trial briefs, the Court construed these arguments to be that UG’s continued collection of premiums breached its duty to deal in good faith with its insured on a matter of the insurance contract. The Court ordered the parties to state their respective positions on UG’s continued collection of premiums in respect to the duty of good faith and fair dealing after the close of trial, and ST confirmed the Court’s construction of its arguments as alleging that, in continuing to collect premiums on performing IOF Combo 100 Loans, UG “fail[ed] to deal fairly and in good faith” with ST. As explained below, ST’s agreement based on Section 3.6 of the Master Policy is not well taken. But, ST is correct that, in billing for, and accepting premiums on loans which it knew it would not cover, UG breached the duty of good faith and fair dealing it owed to ST. 1. Section 3.6 of the Master Policy Section 3.6 of the Master Policy, the provision on which ST relies, does not forbid the conduct in which UG engaged respecting the performing loans on the list. The most that can be said about that provision is that it provided UG with a “right,” exercisable at “its option,” to cancel coverage on a loan for certain prescribed reasons. See ST. Ex. 3 § 3.6. It does not follow that UG was precluded by that provision from continuing to collect premiums on IOF Combo 100 Loans — or any loans, for that matter — that it had decided were not eligible for coverage. That is because Section 3.6 simply does not speak to UG’s ability under the policy to collect, or to continue to collect, premiums. 2. Implied Duty of Good Faith and Fair Dealing However, UG’s conduct in billing for and collecting premiums knowing that it would not pay claims was a breach of the insuranee policy because it was a breach of the duty of good faith and fair dealing owed to ST. Although it appears that the Supreme Court of Virginia has never expressly adopted Section 205 of the Restatement (Second) of Contracts (“Restatement”), which states that “[ejvery contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement,” the Court holds that it would do so here. The task of a district court exercising diversity jurisdiction over an action the substance of which concerns state law is to interpret and apply the relevant state law to the controversy at issue. Where the highest court of a state has yet to address a legal issue that must be decided during the course of the federal litigation, the task of a district court sitting in diversity is to predict, as best as possible, how the state’s highest court would decide the issue. See Nature Conservancy v. Machipongo Club, Inc., 579 F.2d 873, 874-75 (4th Cir.1978). In carrying out this task, the Court should consider all of the authority on the undecided issue — of course, giving the most weight to applicable decisions of the state’s highest court. The weight of authority counsels that, in Virginia, parties to an insurance contract are bound by an implied duty of good faith and fair dealing. It follows that UG owed ST a duty of good faith and fair dealing in its performance of the insurance policy, including the collection of premiums. Two courts have found that an implied duty of good faith and fair dealing obtains in first-party insurance relationships in Virginia, and that a breach of the duty gives rise to a contract claim. It seems that only one Virginia court has had occasion to decide whether Virginia law imposes an implied duty of good faith and fair dealing in first-party insurance relationships; and that court found that it did. See Harris v. USAA Cas. Ins. Co., 37 Va. Cir. 553, 568 (1994) (stating “this case ... involves the application of Virginia law in a first-party insurance context. It is the opinion of this court, after careful consideration of what authority exists in Virginia and nationwide, that the Virginia Supreme Court would imply a duty of good faith in a first-party insurance context [and] would find the breach of same to give rise to a claim for breach of contract... ,”). The Fourth Circuit has likewise held that an implied duty of good faith and fair dealing governs first-party insurance relationships in Virginia. In A & E Supply Co. v. Nationwide Mutual Fire Ins. Co., 798 F.2d 669 (4th Cir.1986), the Fourth Circuit explained that, pursuant to Section 205 of the Restatement, “[a]ll contracting parties owe to each other a duty of good faith in the performance of the agreement.” 798 F.2d at 676. And, citing Carpenter v. Virginiar-Carolina Chemical Co., 98 Va. 177, 35 S.E. 358 (1900), the Court of Appeals concluded that “the Virginia Supreme Court has long enforced ... bonds [of good faith] in contract despite an absence of an express promise among the parties.” A & E Supply, 798 F.2d at 676-77. Moved in part by such authorities, the Fourth Circuit held that, “in a first-party Virginia insurance relationship, liability for bad faith conduct is a matter of contract,” with the contract itself and general contract law “governing] the measure of recovery.” IcL; see also Florists’ Mutual Ins. Co. v. Tatterson, 802 F.Supp. 1426, 1436 (E.D.Va.1992) (citing A & E Supply for the proposition that “[i]n first-party Virginia relationships, liability for bad faith conduct can only arise from the contract and extends only to situations connected with the policy”). And, one decision in this district, when addressing allegations of an insurer’s bad-faith refusal to pay benefits under a policy, has stated that, “[u]nder Virginia law, every contract contains an implied covenant of good faith and fair dealing in the performance of the agreement.” Penn. Life Ins. Co. v. Bumbrey, 665 F.Supp. 1190, 1195 (E.D.Va.1987). Outside the context of insurance, numerous Virginia state and federal courts in Virginia have acknowledged that an implied duty of good faith and fair dealing obtains in contractual relationships under Virginia law. Many of those courts have done so in cases involving contracts governed by the Uniform Commercial Code, which, pursuant to Va.Code § 8.1A-304, there is no question “impose[] an obligation of good faith in [their] performance and enforcement.” See, e.g., Charles E. Brauer Co., Inc. v. NationsBank of Virginia, 251 Va. 28, 466 S.E.2d 382, 385 (1996) (stating “[t]he breach of an implied duty under the U.C.C. gives rise ... to a cause of action for breach of contract”). Many of those decisions, however, have acknowledged an implied duty of good faith and fair dealing in cases involving contracts not governed by the Uniform Commercial Code, and therefore outside Va.Code § 8.1A-304’s ambit. See, e.g., Stepp v. Outdoor World Corp., 18 Va. Cir. 106, 111 (1989) (recognizing an “implied covenant of good faith and fair dealing by all parties in the performance” of a contract for the sale of real estate); Virginia Vermiculite, Ltd. v. W.R. Grace & Co., 156 F.3d 535, 542 (4th Cir.1998) (announcing, during its construction of a contract for the sale of land and conveyance of mining rights, that “it is a basic principle of contract law in Virginia, as elsewhere, that although the duty of good faith does not prevent a party from exercising its explicit contract rights, a party may not exercise contractual discretion in bad faith, even when such discretion is vested solely in that party” (emphasis in original)); Enomoto v. Space Adventures, Ltd., 624 F.Supp.2d 443, 450 (E.D.Va.2009) (stating “[i]n Virginia, every contract contains an implied covenant of good faith and fair dealing,” and, in so stating, rejecting the argument that an implied covenant of good faith could not exist under Virginia law when there was an express contract setting forth the parties’ duties); Johnson v. D & D Home Loans Corp., No. 2:07cv204, 2007 WL 4355278, at *3 (E.D.Va. Dec. 6, 2007) (noting, in response to defendants’ argument that Virginia law did not recognize an implied duty of good faith and fair dealing respecting a contract for the deed of real property, that “[ujnder Virginia law, every contract contains an implied covenant of good faith and fair dealing”). The decisions that have recognized an implied duty of good faith and fair dealing in non-Uniform Commercial Code contracts have done so in line with the position adopted by the majority of jurisdictions: that a duty of good faith and fair dealing governs all contracts at common law. See generally Steven J. Burton, Breach of Contract and the Common Law Duty To Perform In Good Faith, 94 Harv. L.Rev. 369, 369 (1980) (explaining “[a] majority of American jurisdictions ... recognize the duty to perform a contract in good faith as a general principle of contract law”); id. at 404 (appendix) (providing an extensive list of state and federal cases “explicitly recognizing] a general obligation of good faith performance in every contract at common law”). Of course, this is the position taken by Section 205 of the Restatement, the origins of which, notably, trace to the Uniform Commercial Code provision that served as a genesis for Va. Code § 8.1A-304. See Restatement (Second) of Contracts § 205 cmt. a (1981) (explaining the concept of “good faith” by referencing Uniform Commercial Code §§ 1-201(19) and 2-103(l)(b)). Some who have argued against finding an implied duty of good faith and fair dealing under Virginia law have relied on Ward’s Equipment, Inc. v. New Holland North America, 254 Va. 379, 493 S.E.2d 516 (1997). There, the Supreme Court of Virginia wrote: “in Virginia, when parties to a contract create valid and binding rights, an implied covenant of good faith and fair dealing is inapplicable to those rights. This is so under either the common law or the Uniform Commercial Code....” Ward’s Equipment, 493 S.E.2d at 520. Taken in isolation, it has been maintained that the statement in Ward’s Equipment counsels against finding an implied duty of good faith and fair dealing under Virginia law. But, the statement was not made in isolation, and therefore it should not be so construed. In the sentence directly following the passage quoted above, the Supreme Court of Virginia wrote: “[generally such a covenant cannot be the vehicle for rewriting an unambiguous contract in order to create duties that do not otherwise exist.” Id. (citations omitted). From this latter statement it is clear that the Court was not saying in Ward’s Equipment that an implied duty of good faith and fair dealing did not exist at all under Virginia law. Rather, the Court was saying that an implied duty of good faith and fair dealing must yield to the express terms of the contract when the latter might be conceived as inconsistent with the former. See Enomoto, 624 F.Supp.2d at 450 (concluding “Ward’s ... addressed only conduct that Defendant was explicitly authorized to undertake by the contract”). And, in any event, it cannot be maintained that Ward’s Equipment rejected categorically an implied duty of good faith and fair dealing in Virginia since the Court, after all, cited Va.Code § 8.1-203, the predecessor to Va.Code § 8.1A-304. Like Va.Code § 8.1A-304, Va. Code § 8.1-203 imposed a duty of good faith and fair dealing in every contract under the Uniform Commercial Code. Thus, to read Ward’s Equipment as rejecting an implied duty of good faith and fair dealing as a matter of course is to make the rather untenable conclusion that the Supreme Court of Virginia either was unaware of or ignored a statutory provision which it itself cited. In summary, the weight of state and federal authority, inside and outside the insurance context, counsels that, commensurate with Section 205 of the Restatement, an implied duty of good faith and fair dealing obtained in the insurance policy executed between ST and UG. Analytically, there is no reason to differentiate between contracts falling under the Uniform Commercial Code and contracts that do not insofar as an implied duty of good faith and fair dealing is concerned. A legal regime that recognized the duty in contracts for the sale of goods but did not recognize the duty in contracts for the sale of land, or, as is relevant here, the provisioning of insurance, would be arbitrary in the extreme. This Court therefore joins the numerous courts that have concluded that Virginia law recognizes no such distinction. 3. UG’s Breach of the Implied Duty of Good Faith and Fair Dealing Having found that an implied duty of good faith and fair dealing governed the insurance policy, it must be determined whether UG breached the duty. As the state and federal caselaw instructs, if UG breached the duty, it breached the policy under Virginia law. a. The Duty Of Good Faith And Fair Dealing In The Context Of The Insurance Policy The duty of “good faith” defies a fast and true definition. But, at minimum, it includes “faithfulness to an agreed common purpose and consistency with the justified expectations of the other party [to a contract].” Restatement (Second) of Contracts § 205 cmt. a (1981); see also RW Power Partners, L.P. v. Virginia Elec. & Power Co., 899 F.Supp. 1490, 1498 (E.D.Va.1995) (citing, among other authorities, the commentary of Section 205 of the Restatement for a definition of “good faith”). It is beyond dispute that a “justified expectation” of the party who contracts for insurance with an insurance company is that the payment of premiums to the company secures from the company a promise to provide insurance. More specifically, the payment of premiums by the insured, and acceptance thereof by the insurer, secures a promise from the insurer to pay claims on the property for which the premium has been paid. Naturally, there will be some instances where, based on the terms of the insurance policy and the conduct of the insured, the payment of a claim is neither required nor appropriate after the insurance company has collected premiums. But, it strains credulity to accept as correct UG’s position that an insurance company is free to demand and retain premiums on items for which, prior to and contemporaneous with the demand and collection of premiums, the company actually knows it will not insure simply because the insurance policy does not expressly prohibit such conduct on the part of the company. That is especially true where, as here, the insurer actually has said that retention of premiums is improper. The demand and retention of premiums under such circumstances is so antithetical to the purpose of a contract for insurance that an express prohibition of the kind that UG indicates is absent from the insurance policy will hardly, if ever, be found. The record clearly shows that the common purpose that underlay the ST/UG insurance contract was to provide ST a measure of relief from the default of somewhat risky loans. Indeed, ST obtained insurance from UG on second-lien mortgage loans in part because the loans were riskier than their first-lien counterparts and because ST appreciated the historical volatility of the national real estate market. ST’s justified expectation was that, if it paid premiums, it would have the coverage for which it paid those premiums. According to ST’s records, UG insured about 26,000 second-lien loans affiliated with the IOF Combo 100 Loan product. Not later than June 2008, as evidenced by the Gaines letter, UG decided that it would not pay claims on IOF Combo 100 Loans that had not been underwritten using DU. In Gaines’ letter, UG requested ST’s assistance in identifying IOF Combo 100 Loans that, according to UG’s interpretation of the policy, would not be eligible for claim payments because they had not been underwritten using DU. ST expressed disagreement with UG’s interpretation of the policy, but, nonetheless, in February 2009, ST provided UG with a list of some 12,000 IOF Combo Loans that it believed were not subject to coverage under UG’s interpretation of the policy. UG confirmed that the loans on the list comported with its records. In the months after receiving the list of loans (March 1, 2009, through March 31, 2011), UG demanded and collected not less than $12,027,250 in premiums from ST for the loans on the list. b. UG’s Argument Respecting Parties’ Settlement Of ST’s Count I Fees And Costs UG argues that the “Settlement, Stay, and Tolling Agreement” (“Settlement Agreement”) executed between the parties bars ST from advancing the argument, in support of its first material breach defense, that UG breached its duty of good faith and fair dealing in continuing to collect premiums on performing IOF Combo 100 Loans. That position is not well-taken because the limited scope of the Settlement Agreement is evidenced by its clear terms: “Subject to the terms below, UG stipulates to a monetary amount for the fees and costs associated with ST’s claim, and ST agrees to accept that monetary amount in lieu of pursuing its fees and costs under Virginia Code § 38.2-209 with respect to Count I” (emphasis added). The Settlement Agreement thus effected a settlement on ST’s claim for attorney’s fees and costs pursuant to Va.Code § 38.2-209 due on account of UG’s refusal to pay the insurance on the loans at issue in Count I of the TAC. It did not effect a settlement on ST’s assertion that UG acted improperly in continuing to collect premiums on performing IOF Combo 100 Loans as that claim might relate to ST’s first material breach defense, which ST pled as an affirmative defense to Count IV of UG’s Counterclaim. In proffering the Settlement Agreement as a bar to the Court’s consideration of ST’s claim that UG acted improperly in continuing to collect premiums, UG conflates a claim brought by the insured in its capacity as a plaintiff that the insurer denied claims in bad faith with an affirmative defense brought by the insured in its capacity as a defendant that, by failing to perform the policy consonant with the duty of good faith and fair dealing, the insurer has materially breached the policy and therefore may not pursue its ow