Citations
- 80 F. Supp. 3d 923
Full opinion text
MEMORANDUM OPINION AND ORDER REGARDING CROSS-MOTIONS FOR SUMMARY JUDGMENT AND MOTION TO STRIKE AFFIDAVIT
MARK W. BENNETT, District Judge.
TABLE OF CONTENTS
J. INTRODUCTION. 927
A. Factual Synopsis.927
B. Progressive’s Declaratory Judgment Action.927
C. The FDIC-R’s Lawsuit .928
D. The Pending Motions.928
II. PROGRESSIVE’S MOTION TO STRIKE.929
A. Factual Background.929
1. The affiant.929
2. The challenged statements.929
3. Other discovery responses .930
B. Arguments Of The Parties.932
C. Analysis.934
1. Applicable standards.934
2. Application of the standards.935
3. Summary .936
III. THE CROSS-MOTIONS FOR SUMMARY JUDGMENT.936
A. Factual Background.937
1. Vantus Bank and the D&O Defendants.937
2. The Vantus Policy and the Discovery Period (Activation) .937
3. Closure of Vantus Bank and the FDIC-R’s claims. .940
B. Applicable Legal Standards .940
1. Summary judgment standards.940
2. Standards for interpretation and construction of an insurance
contract 941
C. The Effect Of The “Insured Vs. Insured Exclusion ”.944
1. Arguments of the parties .944
2. Analysis.946
a. Interpretation .946
b. Construction.'..950
3. Summary . 03 U3 05
D. The Effect Of The “Investment Loss Carve-Out ”. 05 W) 05
1. Arguments of the parties . 03 lO 05
2. Analysis. V U3 05
a. Interpretation . lo 05
b. Construction. OO in 05
3. Summary . 05 U5 05
E. The Effect Of The Dispositions Above On The D & 0 Defendants’ Counterclaims . 05 tO 05
1. Arguments of the parties . 05 IO 05
2. Analysis . t — 1 CO 05
3. Summary . 03 05
IV. CONCLUSION. .962
I. INTRODUCTION
A. Factual Synopsis
Plaintiff Progressive Casualty Insurance Company (Progressive) filed this action, on April 25, 2012, seeking a declaration that there is no coverage under a Directors & Officers/Company Liability Insurance Policy (the Vantus Policy) from Progressive for the claims asserted by the Federal Deposit Insurance Corporation, as Receiver for Vantus Bank, (FDIC-R) against the former directors and officers (D & 0 Defendants) of Vantus Bank in Sioux City, Iowa (Vantus Bank or Bank). Vantus Bank’s Board of Directors purchased the Vantus Policy in 2006 for the period April 13, 2006, to April 13, 2009. Progressive notified Vantus Bank by letter dated February 4, 2009, that it would not renew the Vantus Policy, but in April 2009, Progressive extended the Policy Period of the Vantus Policy by 30 days to allow Vantus Bank sufficient time for deliberation on proposals for a replacement policy. Van-tus Bank then purchased an extended Discovery Period (Activation) endorsement for the Vantus Policy with an effective date of May 13, 2009, and an end date of May 13, 2010. The Office of Thrift Supervision (OTS) closed Vantus Bank on September 4, 2009. On May 7, 2010, counsel for the FDIC-R sent a demand letter to the D & O Defendants, copying Progressive, demanding money damages caused by the D & O Defendants’ negligence, gross negligence, and/or breaches of fiduciary duties or other wrongful acts.
B. Progressive’s Declaratory Judgment Action
In this action for declaratory judgment, Progressive named as defendants the FDIC-R and the D & O Defendants. In three separate counts of its Complaint (docket no. 2), Progressive seeks declarations that three separate provisions of the Vantus Policy bar coverage for the FDIC-R’s claims. I will describe those provisions as the “insured vs. insured exclusion,” the “loan loss carve-out,” and the “investment loss carve-out.” In a fourth count, Progressive “reserved all of its rights under the Policy and applicable law.”
The FDIC-R filed its Answer, Affirmative Defenses And Jury Demand (docket no. 17) in this lawsuit on June 26, 2012. On July 3, 2012, the D & O Defendants filed their Answer To Plaintiffs Original Complaint; Affirmative Defenses; Counterclaim; And Jury Demand (docket no. 19). In their Counterclaim, the D & O Defendants assert the following claims against Progressive: in Count I, a claim for breach of contract; in Count II, a claim for breach of implied warranty; and, in Count III, a claim for declaratory judgment that the Vantus Policy provides insurance coverage for the claims asserted or to be asserted by the FDIC-R against the D & 0 Defendants. Progressive filed its Answer And Affirmative Defenses To Defendant Directors’ And Officers’ Counterclaim (docket no. 25) on July 26, 2012.
C. The FDIC-R’s Lawsuit
The FDIC-R eventually filed a separate lawsuit, on May 20, 2013, against the D & 0 Defendants, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1811 et seq., alleging the D & 0 Defendants’ gross negligence, negligence, and breach of fiduciary duty. See FDIC v. Dosland, C 13-4046-MWB (N.D.Iowa). The FDIC-R’s claims are based primárily on its allegations that the D & 0 Defendants caused Vantus Bank to use $65 million — 120 percent of its core capital — to purchase fifteen high risk collaterized debt obligations backed by Trust Preferred Securities (CDO-TruPS) without due diligence and in disregard and ignorance of regulatory guidance about the risks of and limits on purchases of such securities, resulting in losses of some $58 million. The claims ultimately made by the FDIC-R in its Complaint have limited the dispute in this declaratory judgment action by Progressive to the effect of the “insured vs. insured exclusion” and the “investment loss carve-out” in the Vantus Policy.
D. The Pending Motions
On February 27, 2014, this case was transferred to me. See Order (docket no. 57). This case is now before me on the following cross-motions for summary judgment: (1) the FDIC-R’s September 5, 2014, Motion For Summary Judgment (docket no. 118); (2) Progressive’s September 5, 2014, Motion For Summary Judgment (docket no. 120); and (3) the D & O Defendants’ September 5, 2014, Motion For Summary Judgment (docket no. 125). The cross-motions for summary judgment were all duly resisted and replies in further support of them were duly filed.
This case is also before me on Progressive’s September 29, 2014, Motion To Strike And Exclude, In Part,' The Affidavit Of Arlene Curry (Motion To Strike) (docket no. 145). The affidavit in question had been offered by the FDIC-R and the D & O Defendants as part of their Joint Appendix in support of their Motions For Summary Judgment, and they relied upon it as record evidence supporting their Joint Statement Of Undisputed Facts. On October 23, 2014, the FDIC-R filed its Opposition (docket no. 171) to Progressive’s Motion To Strike and the D & O Defendants filed their Resistance (docket no. 172). Progressive filed a Reply (docket no. 181) in further support of that Motion on November 10, 2014.
The movants all requested oral arguments on their Motions For Summary Judgment — in the case of the FDIC-R, by separate Motion (docket no. 123). My crowded schedule does not allow me to accommodate the parties’ requests for oral arguments on the present motions in a timely manner. More importantly, I find that the parties’ briefing adequately addresses all pertinent issues and that holding oral arguments on the motions would only unnecessarily increase the cost to the parties and unnecessarily delay the proceedings. Therefore, I will consider the parties’ cross-motions for summary judgment, as well as Progressive’s Motion To Strike, fully submitted on the parties’ written submissions.
Progressive’s September 29, 2014, Motion To Strike concerns the record that I may properly consider on the parties’ cross-motions for summary judgment. Therefore, I deem it appropriate to consider the Motion To Strike before considering the cross-motions for summary judgment.
II. PROGRESSIVE’S MOTION TO STRIKE
A. Factual Background
Progressive seeks an order striking and excluding certain paragraphs of the affidavit of Arlene T. Curry, one of the D & O Defendants, offered in support of the FDIC-R’s and the D & O Defendants’ Motions For Summary Judgment. Specifically, Progressive challenges paragraphs 15, 16, and 20-22 of Ms. Curry’s affidavit.
1. The affiant
Arlene T. Curry, a citizen of South Dakota, was a Director of Vantus Bank from 2002 until the OTS closed the Bank on September 4, 2009. Indeed, she was the Chair of the Board from October 27, 2005, to September 4, 2009. Ms. Curry is the only D & O Defendant to offer an affidavit in support of or resistance to any party’s Motion For Summary Judgment.
2. The challenged statements
In the challenged paragraphs of her affidavit, Ms. Curry avers as follows:
15. Based on the email exchange and meeting with Ms. Coughlin [elsewhere identified as a representative of insurance broker Holmes Murphy & Associates], I reasonably concluded (as were all members of the Vantus Board and Mr. Moderski) that, in the absence of a regulatory exclusion, claims “brought by regulators” (including claims of the type being asserted by the FDIC-R in this case) would be covered claims under the Progressive Policy.
16. In addition, to my knowledge, and based on a review of documents from this period of time, no effort was made by Progressive or its agent, Holmes Murphy, to refute our understanding that, absent a regulatory exclusion, coverage would exist for “claims brought by regulators.”
20. Based on all of the foregoing, I believe that at all times the Vantus -Board and Mr. Moderski reasonably believed that the policy being extended would cover any and all “claims by regulators,” including claims which have been asserted against them by the FDIC in FDIC, as Receiver for Vantus Bank v. Dosland, et. a., N.D. Iowa Case No. 5:31-cv-04046, and which are presently pending.
21. To my knowledge, and based on a review of material from 2006 and 2009, at no time was it ever brought to the attention of Vantus or its directors, officers, employees, agents, or other representatives that the “insured v. insured ” exclusion presently relied on by Progressive to deny coverage for the claims of, the FDIC would have any effect on claims brought by the FDIC or any other regulator.
22. Finally, it was my understanding and expectation (and I believe the understanding and expectation of the Van-tus Board and Mr. Moderski) that the Progressive Policy was to provide insurance coverage for any claims of wrongful conduct or alleging wrongful acts that might be asserted against Vantus officers or directors relating to management of Vanus.
Affidavit Of Arlene Curry, Defendants’ Joint Appendix, Part I (docket no. 118-3), 6-7 of 647.
3. Other discovery responses
Progressive argues that these aver-ments must be compared with the D & O Defendants’ responses to certain interrogatories. Progressive points to the parts of the D & O Defendants’ answer to Interrogatory No. 2 stating that “Michael Dos-land ... was the primary individual who had direct contact with Holmes Murphy representative Diane Coughlin regarding the application and purchase of D & O insurance” and that “Arlene Curry ... had no direct contact with Holmes Murphy or Progressive other than in relation to meetings of the Board of Directors.” Progressive also points to part of the D & 0 Defendants’ answer to Interrogatory No. 3 stating that “Arlene Curry, Gary Evans, Ronald Jorgensen, Michael Moderski, David Roederer, and Charles Terlouw do not presently recall if the Bank discussed or considered any Other Policies.” In addition, Progressive characterizes the D & 0 Defendants’ answer to Interrogatory No. 4 as indicating that “several Board members, including Michael Moderski and Michael Dosland, have no recollection of conversations regarding the Policy’s coverage of particular claims, such as those asserted by the FDIC-R against the Board members.” Progressive Memorandum In Support Of. Motion To Strike (docket no. 146), 5.
B. Arguments Of The Parties
In support of its Motion To Strike, Progressive contends that Ms. Curry relies solely on the minutes of several Vantus Board meetings and correspondence with Holmes Murphy, the insurance broker, to support her averments about what all members of the Board and Mr. Moderski “reasonably believed” or “reasonably concluded.” Progressive argues, however, that none of the minutes or correspondence contain any discussion of the coverage provided by the Vantus Policy. Thus, Progressive contends that Ms. Curry’s affidavit fails to set forth facts demonstrating her personal knowledge, so that it does not meet the admissibility requirements of Rule 56(c)(4) of the Federal Rules of Civil Procedure. Indeed, Progressive argues that it is unclear how one can determine from the records cited by Ms. Curry what the beliefs of any, let alone every, member of the Board might be regarding coverage under the Vantus Policy, where there is no indication in those records that the Board or the insurance broker discussed that issue. Progressive contends that simply attributing statements to Ms. Curry’s “information and belief’ is also inadequate. Progressive argues that, because Ms. Curry has no personal knowledge, the challenged parts of her affidavit must rely on inadmissible hearsay. Progressive argues that there is no exception for the hearsay in question, because the “state of mind” exception in Rule 803(3) of the Federal Rules of Evidence does not exempt statements of memory or belief to prove the fact remembered or believed, ie., that the Policy did provide coverage consistent with Ms. Curry’s and other D & 0 Defendants’ alleged understanding. Finally, Progressive argues that Ms. Curry lacks any personal knowledge of Progressive’s attempts to inform Board members of the “insured vs. insured exclusion.” Progressive argues that one cannot simply equate absence of information with personal knowledge.
The FDIC-R and the D & 0 Defendants counter that there is sufficient indication of the factual basis for Ms. Curry’s challenged averments from her statements about her service on the Board, participation in its meetings, and review of pertinent business documents. The FDIC-R and the D & 0 Defendants point out that an affiant’s conclusions may be based on personal observations and review of business records in the affiant’s official capacity. They then argue that Ms. Curry’s review of materials provided by Progressive prior to the March 23, 2006, meeting at which the Board approved the purchase of the Vantus Policy, which Ms. Curry states provided part of the basis for her averments, included documents setting out precisely the matters to which Ms. Curry avers. They also argue that the minutes of Board meetings do adequately indicate discussions of pertinent issues to support Ms. Curry’s personal knowledge of the matters to which she avers.
The FDIC-R and the D & 0 Defendants also argue that Ms. Curry’s averments about the shared beliefs and expectations of the Board members are based on specific representations that Progressive made to the entire Board regarding the purchase of the Vantus Policy in 2006 and the extended Discovery Period coverage in 2009. The FDIC-R also argues that portions of interrogatory answers not cited by Progressive also support such shared beliefs and expectations. The FDIC-R contends that, because Ms. Curry was involved in pertinent Board meetings, she has not based her challenged averments simply on inadmissible hearsay. Similarly, the D & O Defendants argue that Ms. Curry was in a position to know and understand the circumstances and to observe the relations of the parties. The FDIC-R argues that Rule 803(3) makes admissible statements such as those challenged by Progressive regarding the expectations of Ms. Curry’s fellow board members, because those statements are indicative of Ms. Curry’s and the other D & O Defendants’ then-existing state of mind. The FDIC-R argues that the matter for which the statements are offered is precisely to show Ms. Curry’s and the other D & O Defendants’ state of mind or understanding regarding coverage, not to prove that the Vantus Policy did actually provide the coverage that Ms. Curry and the other D & O Defendants expected. Similarly, the D & O Defendants argue that an affiant may properly state what the affiant believed another’s state of mind was, based on the affiant’s observations of the other’s statements or conduct. As to Ms. Curry’s aver-ments concerning the “insured vs. insured exclusion,” the FDIC-R and the D & O Defendants argue that Ms. Curry did have personal knowledge about what statements Progressive did not make, as well as what statements Progressive did make, and did not simply rely “upon information and belief.”
In reply, Progressive argues that the sources of information cited by Ms. Curry for the challenged averments do not demonstrate a factual basis for her specific averments, because they do not indicate any discussion or mention of the matters to which Ms. Curry avers. Progressive also argues that “to my knowledge” is not a magic phrase that demonstrates personal knowledge for any and every fact stated. Because the challenged averments are not based on personal knowledge, Progressive argues that they must be based on inadmissible hearsay about the beliefs of others offered to prove the fact believed, i e., that the Policy provides coverage for the FDIC-R’s claims.
C. Analysis
1. Applicable standards
The Eighth Circuit Court of Appeals “review[s] the admission of evidence for consideration at the summary judgment stage for an abuse of discretion.” Gannon Int’l, Ltd. v. Blocker, 684 F.3d 785, 793 (8th Cir.2012) (citing Warner Bros. Entm’t, Inc. v. X One X Prods., 644 F.3d 584, 591 (8th Cir.2011)). Rule 56(c)(2) provides, “A party may object that the material cited to support or dispute a fact [at the summary judgment stage] cannot be presented in a form that would be admissible in evidence.” Fed.R.Civ.P. 56(c)(2). When an objection is made to evidence relied on at summary judgment, “the burden is on the proponent of the evidence to show that the material is admissible as presented or to explain the admissible form that is anticipated.” Gannon Int’l, Ltd., 684 F.3d at 793 (citing Fed.R.Civ.P. 56, advisory committee’s note).
Rule 56(c)(4) provides, “An affidavit or declaration used to support or oppose a motion [for summary judgment] must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Fed.R.CivP. 56(c)(4). Thus, “ ‘[w]hen an affidavit contains an out-of-court statement offered to prove the truth of the statement that is inadmissible hearsay, the statement may not be used to support or defeat a motion for summary judgment.’ ” Jenkins v. Winter, 540 F.3d 742, 747 (8th Cir.2008) (emphasis added) (quoting Brooks v. Tri-Systems, Inc., 425 F.3d 1109, 1111 (8th Cir.2005)). Similarly, statements in an affidavit based on what the affiant “learned” or “heard” about a decision or a decision-making process are hearsay and do not satisfy the “personal knowledge” requirement. Ward v. International Paper Co., 509 F.3d 457, 462 (8th Cir.2007).
In contrast, statements in an affidavit that are the affiant’s own and based on his or her own personal knowledge may be considered on summary judgment. Brooks, 425 F.3d at 1111; Fed.R.CivP. 56(c)(4). The Eighth Circuit Court of Appeals has held that an affiant “certainly” possesses “personal knowledge” of his or her own reasons for making a particular decision. Brannon v. Luco Mop Co., 521 F.3d 843, 847-48 (8th Cir.2008); Aucutt v. Six Flags Over Mid-Am., Inc., 85 F.3d 1311, 1317 (8th Cir.1996), Also, an affidavit is admissible if it states the affiant’s personal knowledge or perception acquired through review of records prepared in the ordinary course of business. See Eckelkamp v. Beste, 315 F.3d 863, 872 (8th Cir.2002) (citing Burlington N. R.R. Co. v. Nebraska, 802 F.2d 994, 1004 (8th Cir.1986)).
In addition, I have explained,
“[A]ffidavits asserting personal knowledge must include enough factual support to show that the affiant possesses that knowledge.” El Deeb v. University of Minn., 60 F.3d 423, 428 (8th Cir.1995). An affirmation on “information and belief is insufficient.” Camfield Tires, Inc. v. Michelin Tire Corp., 719 F.2d 1361, 1367 (8th Cir.1983).
Guinan v. Boehringer Ingelheim Vetmedica, Inc., 803 F.Supp.2d 984, 992 (N.D.Iowa 2011) (quoting Helm Fin. Corp. v. Iowa N. Ry. Co., 214 F.Supp.2d 934, 953 (N.D.Iowa 2002)). Thus, “[t]he test for admissibility is whether a reasonable trier of fact could believe the witness had personal knowledge.” Id.
I have also recognized that the “personal knowledge” requirement does not necessarily make an affiant’s opinion about the state of mind of another, even such an opinion in conclusory terms, inadmissible for summary judgment purposes. See Marsh v. Hog Slat, Inc., 79 F.Supp.2d 1068, 1074 (N.D.Iowa 2000) (citing Kehoe v. Anheuser-Busch, Inc., 995 F.2d 117, 119 n. 3 (8th Cir.1993)). Rather, “ ‘[i]f the affiant[] ha[d] ‘personal knowledge,’ Fed.R.Civ.P. 56(3) [now Fed.R.Civ.P. 56(c)(4) ], there is no reason why [he or she] should not be permitted to summarize [his or her] impressions’ ” about another person’s state of mind. Id. (quoting Kehoe, 995 F.2d at 119 n. 3). Consequently, “[t]he question is not whether the affidavit states the affi-ant’s opinion about another’s state of mind, but whether the affiant had ‘personal knowledge’ of the matters about which the affiant made the statement,” based, for example, on the affiant’s opportunity to have observed the person whose state of mind the affiant describes. Id. (citing Kehoe, 995 F.2d at 119 n. 3, and then — Fed. R. Civ. P. 56(e), now Fed.R.Civ.P. 56(c)(4)).
Finally, purported inconsistencies between statements in an affidavit and other discovery responses do not make the affidavit inadmissible at summary judgment, if the affidavit appears to clarify and not contradict the prior discovery responses. See Brannon, 521 F.3d at 847.
2. Application of the standards
Progressive’s Motion To Strike appears to rely, in the first instance, on alleged inconsistencies between Ms. Curry’s challenged averments and the D & O Defendants’ responses to certain interrogatories. When the responses to the interrogatories are viewed in full, however — as they are set forth in the margins, above — it is readily apparent that the affidavit clarifies, but does not contradict, the basis for Ms. Curry’s knowledge of the process that the Vantus Board went through in selecting the Vantus Policy. Thus, those interrogatory responses do not make the challenged averments inadmissible at summary judgment. See Brannon, 521 F.3d at 847. Indeed, as the FDIC-R and the D & O Defendants argue, a review of the interrogatory responses in conjunction with Ms. Curry’s affidavit, read as a whole, would lead a reasonable trier of fact to believe that Ms. Curry had personal knowledge of the matters to which she avers in the challenged paragraphs of her affidavit. See Guinan, 803 F.Supp.2d at 992 (stating this as the test for admissibility of an affidavit at summary judgment).
As to the challenged statements of Ms. Curry’s own beliefs regarding what the Vantus Policy would cover and her reasons for approving that Policy, Ms. Curry “certainly” possessed “personal knowledge.” See Brannon, 521 F.3d at 847-48; Brooks, 423 F.3d at 1111; Aucutt, 85 F.3d at 1317; Fed.R.Civ.P. 56(c)(4). The affidavit properly avers that Ms. Curry acquired such “personal knowledge,” inter alia, from her review of records prepared in the ordinary course of business at the pertinent times — before selecting the Vantus Policy in 2006 and before obtaining the Discovery Period coverage in 2009. See Eckelkamp, 315 F.3d at 872. Contrary to Progressive’s assertions, the fact that specific minutes of Board meetings and some documents do not reflect discussion of the specific matters to which Ms. Curry avers does not demonstrate that there is no adequate factual basis for her averments. Although affidavits must include enough factual support that the affiant possessed personal knowledge, see Guinan, 803 F.Supp.2d at 992 (citing El Deeb, 60 F.3d at 428), the FDIC-R and the D & O Defendants have pointed to documents that Ms. Curry states that she reviewed that demonstrate a factual basis for her understanding of the coverage under the Vantus Policy and the Discovery Period extension. Indeed, it is ridiculous to imagine that minutes of a Board meeting would necessarily detail each and every issue discussed by the Board members. More importantly, a review of the documents, cited by the FDIC-R and the D & 0 Defendants, which were provided to the Board before making the decisions in question, and Ms. Curry’s involvement in the decision-making process would lead a reasonable trier of fact to believe that Ms. Curry had personal knowledge of the matters to which she avers in the challenged paragraphs of her affidavit. See id. (stating this as the test for admissibility of an affidavit at summary judgment).
Nor do I find Ms. Curry’s averments about the state of mind or beliefs of other D & 0 Defendants to be inadmissible at summary judgment. Such averments are not necessarily inadmissible. See Marsh, 79 F.Supp.2d at 1074 (citing Kehoe, 995 F.2d at 119 n. 3). Here, Ms. Curry plainly participated in the decision-making process with the other D & 0 Defendants and had more than adequate opportunity to observe their statements and conduct and the statements and conduct of the insurance broker’s representative. Her participation and observations are sufficient to give her “personal knowledge” of the beliefs and understanding of the other D & 0 Defendants and the reasons for their decisions at the time of those decisions. See id. Again, Ms. Curry’s involvement in the decision-making process and the pertinent meetings would lead a reasonable trier of fact to believe that Ms. Curry had personal knowledge of the beliefs, understanding, and reasoning of the other D & 0 Defendants at the pertinent times. See id. (stating this as the test for admissibility of an affidavit at summary judgment).
Finally, Progressive’s “hearsay” objection is unavailing. First, Ms. Curry does not aver to what she merely “learned” or “heard” about the decisions of others, compare Ward, 509 F.3d at 462, nor are her averments based merely on “information and belief.” See Guinan, 803 F.Supp.2d at 992 (averments based on “information and belief’ are inadequate to demonstrate “personal knowledge”). Rather, Ms. Curry states her cam state of mind at the time and her summary of her impressions of the state of mind of the other D & 0 Defendants at the time. See Marsh, 79 F.Supp.2d at 1074 (citing Kehoe, 995 F.2d at 119 n. 3). Also, Progressive’s arguments concerning the applicability of Rule 803(3) are wrong-headed, not least because it appears to me that the FDIC-R and the D & O Defendants have not offered Ms. Curry’s statements of the state of mind of others to prove that the Vantus Policy provides coverage for the FDIC-R’s claims. Rather, they have offered those statements to prove the D & O Defendants’ expectations and beliefs about coverage, which falls squarely within the Rule 803(3) exception.
3. Summary
In short, Progressive’s September 29, 2014, Motion To Strike is denied in its entirety. Consequently, I may consider Ms. Curry’s affidavit, in its entirety, in my analysis of the parties’ cross-motions for summary judgment.
III. THE CROSS-MOTIONS FOR SUMMARY JUDGMENT
In their cross-motions for summary judgment, the parties contest the applicability of two provisions of the Vantus Policy, the “insured vs. insured exclusion” and the “investment loss carve-out.” Progressive also asserts that resolution of these two issues, as well as other undisputed facts or matters of law, require summary judgment in its favor on the D & O Defendants’ counterclaims. I will consider these distinct issues in turn. First, however, I will survey the nucleus of facts necessary to put in context the parties’ arguments, then summarize the standards applicable to a motion for summary judgment and the standards, under Iowa law, for interpreting and construing an insurance contract.
A. Factual Background
I find that a much more circumscribed statement of facts — disputed and undisputed — than the parties have offered is sufficient to put in context the parties’ arguments concerning their cross-motions for summary judgment. Indeed, I find that the nucleus of facts most relevant to disposition of the cross-motions for summary judgment involves little more than the pertinent terms of the Vantus Policy and the nature of the claims in the related lawsuit by the FDIC-R against the D & 0 Defendants, FDIC v. Dosland, C 13-4046-MWB (N.D.Iowa). Unless I indicate otherwise, the facts set out here are undisputed.
1. Vantus Bank and the D & 0 Defendants
Although the fact is not set out in any parties’ statement of undisputed facts, it appears from the record that no party would dispute that Vantus Bank was a federal savings bank with its home office in Sioux City, Iowa, and that it was, at one time, known as First Federal Bank. It also appears from the record that no party would dispute that Michael Dosland, now a citizen of Wisconsin, was Vantus Bank’s Chief Executive Officer and President, as well as a member of the Board of Directors, from January 2006 until he resigned in July 2008; Michael S. Moderski, also now a citizen of Wisconsin, was the Bank’s Chief Financial Officer and Controller from April 2006 until the Office of Thrift Supervision (OTS) closed Vantus Bank on September 4, 2009; Barry E. Baekhaus, a citizen of Iowa, was a Director from 1987 until the OTS closed the Bank, and the Bank’s Interim President from July 2008 to December 2008; Arlene T. Curry, a citizen of South Dakota, was a Director from 2002 until the OTS closed the Bank; Gary L. Evans, a citizen of Iowa, was a Director from 1989 until the OTS closed the Bank; Ronald A. Jorgen-son, a citizen of Iowa, was a Director from July 2005 until the OTS closed the Bank; Jon C. Cleghorn, a citizen of South Dakota, was a Director from 1998 until the OTS closed the Bank; and Charles D. Terlouw, a citizen of Iowa, was a Director from July 2006 until the OTS closed the Bank. These are the individuals described herein as the D & O Defendants.
2. The Vantus Policy and the Discovery Period (Activation)
As stated at the outset of this decision, Vantus Bank’s Board of Directors purchased Directors & Officers/Company Liability Insurance Policy For Financial Institutions Policy No. 100322780-01 (the Vantus Policy) from Progressive in 2006 for the period April 13, 2006, to April 13, 2009. The Vantus Policy was created by Progressive. In quoted portions of the Vantus Policy, terms in bold in the original indicated that those terms were defined in the Policy.
There does not appear to be any dispute that, as used in the Vantus Policy, Insurer means Progressive and that Insured Persons include the D & O Defendants. See Vantus Policy, § IV(A) and (E), Defendants’ Joint Appendix II, 207-208. There also does not appear to be any dispute that Company includes Vantus Bank. Nevertheless, the definitions of Company in the Vantus Policy and in the subsequent Discovery Period (Activation) endorsement may be at issue in this case, so I will set forth those definitions here. First, the Vantus Policy defines Company as follows:
Company means the entity or entities set forth in Item 1 of the Declarations, any Subsidiary created or acquired as of the inception date set forth in Item 2 of the Declarations, and, subject to Section XII(B), any bank Subsidiary created or acquired during the Policy Period.
Vantus Policy, § IV(E), Defendants’ Joint Appendix II at 207. Item 1 of the Declarations lists the following entities: Vantus Bank, First Federal Bankshares, Inc., First Federal Bank, First Financial Corporation of Sioux City, Sioux Financial Company, United Escrow, Inc., Equity Services, Inc., Sioux Abstract Company, and Rerick Abstract Company. Vantus Policy, Amendment To Declarations (effective 09/04/2007), Defendants’ Joint Appendix II at 204. The Discovery Period (Activation) endorsement expressly replaces the definition of Company above with the following definition:
Company, means the entity or entities set forth in Item 1 of the Declarations, any Subsidiary created or acquired as of the inception date set forth in Item 2 of the Declarations, and the acquiring entity, but only for Wrongful Acts involving the entity or entities set forth in Item 1 of the Declarations and only for Wrongful Acts occurring prior to the termination date of this Policy.
Vantus Policy, Discovery Period Activation, Amendment to § IV(E), Defendants’ Joint Appendix at 198. Item 1 of the Declarations Page for the Discovery Period (Activation) endorsement lists the identical entities as the original Vantus Policy, although “Vantus Bank” has been handwritten into the list. Vantus Policy, Discovery Activation, Declarations Page, Item 1, Defendants’ Appendix II at 200.
The Vantus Policy provides for Insured Persons Liability Coverage as follows:
The Insurer will pay on behalf of the Insured Persons, Loss resulting from Claims first made during the Policy Period or the Discovery Period against the Insured Persons for which the Insured Persons are legally obligated to pay for Wrongful Acts, except for Loss the Company pays as indemnification.
See Vantus Policy, § 1(A), Defendants’ Joint Appendix II at 205.
Claim is defined in the Vantus Policy, in pertinent part, as follows:
Claim, either' in singular or plural, means any of the following instituted against an Insured Person or against the Company, but only to the extent coverage is granted to the Company:
(1) a written or oral demand for monetary damages or non-monetary relief;
(2) a civil proceeding commenced by the service of a complaint or similar pleading;
for a Wrongful Act including any appeal from such proceeding.
Vantus Policy, § IV(C)(1) and (2), Defendants’ Joint Appendix II at 207. There does not appear to be any dispute that the FDIC-R’s claims, as asserted in the Demand Letter and the separate lawsuit, as described below, are Claims within the meaning of the Vantus Policy. Of course, that does not mean that there is necessarily coverage under the Vantus Policy for such Claims.
Wrongful Act is defined in the Vantus Policy, as follows:
Wrongful Act, either in singular or plural, means any actual or alleged act, 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 or while acting solely in the capacity as director, officer, or member of the board of trustees of a not-for-profit entity pursuant to Section 11(B);
(2) any Insured Person in the discharge of their duties while acting solely in the capacity as administrator, custodian or trustee under any individual retirement account (IRA) or H.R. 10 Plan (Keogh Plan) outside of the scope of any Trust Department or Trust Subsidiary of the Company; or
(3) the Company or any person or entity for which the Company is legally responsible, but only to the extent that coverage is granted to the Company by Insuring Agreement made a part of this Policy.
Vantus Policy, § IY(X), Defendants’ Joint Appendix II at 210.
The definition of Loss under the Vantus Policy is critical in this case, because it includes, as subsection (6), the “investment loss carve-out,” which Progressive asserts is a bar to coverage for the FDIC-R’s claims against the D & 0 Defendants. The definition of Loss, in pertinent part, is as follows:
Loss means Defense Costs and any amount which the Insured Persons or the Company (if applicable) are legally obligated to pay resulting from a Claim, including damages, judgments, settlements, pre- and post-judgment interest, punitive or exemplary damages and the multiple portion or any multiplied damage award where insurable by law. Loss shall not include:
* * *
(6) the depreciation (or failure to appreciate) in value of any investment product, including securities, commodities, currencies, options or futures due to market fluctuation unrelated to any Wrongful Act[.]
Vantus Policy, § IV(N)(6), Defendants’ Joint Appendix II at 209.
In addition to the definition and limitation on Loss, the Vantus Policy also includes the following “insured vs. insured exclusion,” which Progressive also argues bars coverage for the FDIC-R’s claims against the D & 0 Defendants:
Insured vs. Insured Exclusion — The Insurer shall not be liable to make any payment for Loss in connection with any Claim by, on behalf of, or at the behest of the Company, any affiliate of the Company or any Insured Person in any capacity except where such Claim is brought and maintained:
(1) in the form of a cross-claim or third-party claim for contribution or indemnity which is part of and results directly from a Claim which is not otherwise excluded by the terms of the Policy;
(2) by an Insured Person solely as a customer of the Company; provided such Claim is brought independently of, and totally without the solicitation, assistance, participation, or intervention of any other Insured; or
(3) by a security holder of the Company as a derivative action on behalf of the Company or such affiliate; provided such Claim is brought independently of, and totally without the solicitation, assistance, participation, or intervention of any Insured of any affiliate of the Company.
Vantus Policy, § V(J), Defendants’ Joint Appendix II at 212.
There is no dispute that the Vantus Policy does not include any provision expressly identified as an exclusion of coverage for “regulatory” claims or any provision that expressly excludes “regulatory” claims, such as claims by the FDIC-R, as sometimes appear in comparable director and officer liability policies from Progressive and other insurers.
Progressive notified Vantus Bank by letter dated February 4, 2009, that it would not renew the Vantus Policy. In April 2009, however, Progressive extended the Policy Period of the Vantus Policy by 30 days to allow Vantus Bank sufficient time for deliberation on proposals for a replacement policy. Vantus Bank then purchased an extended Discovery Period (Activation) endorsement for the Vantus Policy with an effective date of May 13, 2009, and an end date of May 13, 2010. The extended Discovery Period (Activation) endorsement extended the original Policy’s termination date, but it expressly applied only to specified coverages, including Directors And Officers Liability and Fiduciary Liability, during the effective period. Vantus Policy, Discovery Period (Activation), ¶¶ 1-2, Defendants’ Joint Appendix II at 198.
3. Closure of Vantus Bank and the FDIC-R’s claims
On September 4, 2009, during the extended Discovery Period for the Vantus Policy, the OTS closed Vantus Bank and appointed the FDIC-R as Receiver. On May 7, 2010, also during the extended Discovery Period for the Vantus Policy, counsel for the FDIC-R sent a letter (the Demand Letter) via certified and overnight mail to the D & O Defendants, copying Progressive, demanding money damages caused by the D & O Defendants’ negligence, gross negligence, and/or breaches of fiduciary duties or other wrongful acts. Progressive has not disputed that the FDIC-R’s Demand Letter asserted Claims within the meaning of the Vantus Policy against the D & O Defendants prior to the expiration of the Vantus Policy’s extended Discovery Period.
As explained above, the FDIC-R eventually filed a separate lawsuit, on May 20, 2013, against the D & O Defendants, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1811 et seq. See FDIC v. Dosland, C 13-4046-MWB (N.D.Iowa). In that lawsuit, the FDIC-R asserts claims against the D & O Defendants for their gross negligence, negligence, and breach of fiduciary duty. Progressive has not asserted that these claims are inconsistent with claims in the Demand Letter, although, as explained above, at page 5 and note 2, the claims in the lawsuit are narrower than the claims in the Demand Letter as to the wrongful conduct in question. Somewhat more specifically, the FDIC-R’s claims in its lawsuit are based primarily on its allegations that the D & O Defendants caused Vantus Bank to use $65 million — 120 percent of its core capital — to purchase fifteen high risk collaterized debt obligations backed by Trust Preferred Securities (CDO-TruPS) without due diligence and in disregard and ignorance of regulatory guidance about the risks of and limits on purchases of such securities, resulting in losses totaling some $58 million. The FDIC-R’s claims do not allege wrongdoing concerning loans. Progressive contends that the claims by the FDIC-R in its lawsuit fall outside of the coverage provided by the Vantus Policy, but only on the basis of the “insured vs. insured exclusion” and the “investment loss carve-out.”
B. Applicable Legal Standards
1. Summary judgment standards
Summary judgment is only appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R.Crv.P. 56(c) (emphasis added); see Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir.2005) (“Summary judgment is appropriate if viewing the record in the light most favorable to the nonmov-ing party, there are no genuine issues of material fact and the moving party is enti-tied to judgment as a matter of law.”); see generally Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Thus, “[t]he movant ‘bears the initial responsibility of informing the district court of the basis for its motion,’ and must identify ‘those portions of [the record] ... which it believes demonstrate the absence of a genuine issue of material fact.’ ” Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir.2011) (en banc) (quoting Celotex, 477 U.S. at 323, 106 S.Ct. 2548). In response, “[t]he nonmov-ant ‘must do more than simply show that there is some metaphysical doubt as to the material facts,’ and must come forward with ‘specific facts showing that there is a genuine issue for trial.’ ” Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
When the parties have met their burden, the district judge’s task is as follows:
“On a motion for summary judgment, ‘facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts.’” Ricci v. DeStefano, 557 U.S. 557, 129 S.Ct. 2658, 2677, 174 L.Ed.2d 490 (2009) quoting Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (internal quotations omitted). “Credibility determinations, the weigh-ing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).“ ‘Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.’ ” Ricci, 129 S.Ct. at 2677, quoting Matsushita, 475 U.S. at 587, 106 S.Ct. 1348.
Torgerson, 643 F.3d at 1042-43.
“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Ryan v. Capital Contractors, Inc., 679 F.3d 772, 776 (8th Cir.2012). However, summary judgment is particularly appropriate when only questions of law are involved, rather than factual issues that may or may not be subject to genuine dispute. See, e.g., Cremona v. R.S. Bacon Veneer Co., 433 F.3d 617, 620 (8th Cir.2006).
2. Standards for interpretation and construction of an insurance contract
As mentioned just above, summary judgment must be determined in light of the “governing law.” See, e.g., Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The “governing law” here necessarily relates to the interpretation and construction of an insurance contract. Notwithstanding references by the parties to decisions outside of this state and federal circuit, there does not appear to be any dispute that Iowa law governs my interpretation and construction of the Vantus Policy.
The most recent comprehensive discussion of insurance policy interpretation and construction under Iowa law is set out in Boelman v. Grinnell Mutual Reinsurance Company, 826 N.W.2d 494 (Iowa 2013). In Boelman, the Iowa Supreme Court observed, first, that there are “differences between interpretation and construction of an insurance policy.” 826 N.W.2d at 501. Specifically, “[interpretation requires [the court] to give meaning to contractual words in the policy.” Id.; see also Hagenow v. American Family Mut. Ins. Co., 846 N.W.2d 373, 376 (Iowa 2014) (describing “interpretation” of an insurance policy as the court’s “fundamental task”); Osmic v. Nationwide Agribusiness Ins. Co., 841 N.W.2d 853, 858 (Iowa 2014) (quoting this definition of “interpretation” from Boelman); Nationwide Agri-Business Ins. Co. v. Goodwin, 782 N.W.2d 465, 470 (Iowa 2010) (“ ‘[Interpretation is the process of determining the meaning of the words used in the policy.’ ” (quoting Thomas v. Progressive Cas. Ins. Co., 749 N.W.2d 678, 681 (Iowa 2008))). In contrast, “[c]onstruction is the process of giving legal effect to a contract.” Id.
As the Iowa Supreme Court explained in Boelman, “Policy interpretation is always an issue for the court, unless [the court is] required to rely upon extrinsic evidence or choose between reasonable inferences from extrinsic evidence.” Id. (citing Connie’s Constr. Co. v. Fireman’s Fund Ins. Co., 227 N.W.2d 207, 210 (Iowa 1975)). The court then identified several rules of “interpretation.” First, “[i]f the policy does not define a term, [the court must] give the word its ordinary meaning.” Id. (citing Interstate Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 754 (Iowa 1999)); accord Farm Bureau Life Ins. Co. v. Holmes Murphy & Assocs., Inc., 831 N.W.2d 129, 134 (Iowa 2013) (“When words are left undefined in a policy, we give them their ordinary meanings — meanings which a reasonable person would give them.”). More specifically, “[i]n searching for the ordinary meanings of undefined terms in insurance policies [Iowa courts] commonly refer to dictionaries.” Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134. Second, “[t]he plain meaning of the insurance contract generally prevails.” Boelman, 826 N.W.2d at 501 (citing Thomas, 749 N.W.2d at 682). Third, the court must “read the policy as a whole, ... not seriatim by clauses,” because “ ‘[w]ords in an insurance policy are to be applied to subjects that seem most properly related by context and applicability.’ ” Id. (quoting Jones v. State Farm Mut. Auto. Ins. Co., 760 N.W.2d 186, 188 (Iowa 2008)); accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 (“We read the insurance contract in its entirety, rather than reading clauses in isolation, to determine whether a policy provision is subject to two equally proper interpretations.”). Fourth, the court “will not interpret an insurance policy to render any part superfluous, unless doing so is reasonable and necessary to preserve the structure and format of the provision.” Id. at 502 (citing Thomas, 749 N.W.2d at 685). Fifth, the court must “interpret the policy language from a reasonable rather than a hypertechnical viewpoint.” Id. (citing Steel Prods. Co. v. Millers Nat’l Ins. Co., 209 N.W.2d 32, 36 (Iowa 1973)); accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 (“We do not typically give [undefined terms] meanings only specialists or experts would understand.”).
“If an insurance policy and its exclusions are clear, the court ‘will not “write a new contract of insurance” ’ for the parties.” Boelman, 826 N.W.2d at 502 (quoting Thomas, 749 N.W.2d at 682, in turn quoting Cairns v. Grinnell Mut. Reins. Co., 398 N.W.2d 821, 824 (Iowa 1987)); accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 (“Ultimately, if there is no ambiguity, the court will not rewrite the policy for the parties.”). An “ambiguity” arises, however, applying an “objective test,” “if the language is susceptible to two reasonable interpretations,” reading the policy as a whole. Id. at 501 (emphasis in the original); see also Hagenow, 846 N.W.2d at 377 (“We have said ‘[a]n ambiguity exists when, after application of our relevant rules of interpretation, a genuine uncertainty results as to which of two or more meanings is proper.’ ” (quoting American Family Mut. Ins. Co. v. Petersen, 679 N.W.2d 571, 576 (Iowa 2004))); Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 (in determining ambiguity, “we examine whether the policy language, viewed objectively, is fairly susceptible to two interpretations”). “An insurance policy is not ambiguous, however, just because the parties disagree as to the meaning of its terms.” Id. at 502 (citing Essex Ins. Co. v. Fieldhouse, Inc., 506 N.W.2d 772, 776 (Iowa 1993)); accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 (“Mere disagreement, however, as to the meaning of the terms, does not establish ambiguity.”).
Although “interpretation” is an issue for the court in most circumstances, “construction” — determining the “legal effect” of policy language, as interpreted— “is always a matter of law for the court.” Id. at 501. As the Iowa Supreme Court explained in Boelman,
The cardinal rule of construing insurance policies is that except in cases of ambiguity, the intent of the parties must control, and the court determines the intent of the parties by looking at what the policy itself says. [Thomas, 749 N.W.2d at 682.] We consider the parties’ intent at the time the policy was sold, not in hindsight. Ferguson v. Allied Mut. Ins. Co., 512 N.W.2d 296, 299 (Iowa 1994). We will not strain the words or phrases of the policy in order to find liability that the policy did not intend and the insured did not purchase. Thomas, 749 N.W.2d at 682.
Boelman, 826 N.W.2d at 501; accord Holmes Murphy & Assocs., Inc., 831 N.W.2d at 133-34. If the policy is ambiguous, however, the court must “adopt the construction most favorable to the insured.” Id. at 502 (citing Hamm v. Allied Mut. Ins. Co., 612 N.W.2d 775, 778 (Iowa 2000)); cf. Holmes Murphy & Assocs., Inc., 831 N.W.2d at 134 (“If a word is susceptible to two interpretations, typically we adopt an interpretation favoring the insured.”).
As to “exclusions” of coverage in insurance policies — the provisions specifically at issue on the parties’ cross-motions for 'summary judgment in this case — the Iowa Supreme Court explained in Boelman, “ ‘ “Am insurer assumes a duty to define any limitations or exclusionary clauses in clear and explicit terms.” ’ ” Id. (quoting Thomas, 749 N.W.2d at 682, in turn quoting Hornick v. Owners Ins. Co., 511 N.W.2d 370, 374 (Iowa 1993)). Thus, courts must “strictly construe exclusions against the insurer.” Id. (citing Ferguson v. Allied Mut. Ins. Co., 512 N.W.2d 296, 299 (Iowa 1994)). Doing so is appropriate, “because insurance policies constitute adhesion contracts.” Id. (citing Allied Mut. Ins. Co. v. Costello, 557 N.W.2d 284, 286 (Iowa 1996)).
C. The Effect Of The “Insured Vs. Insured Exclusion ”
The first provision that I must interpret and construe on the parties’ cross-motions for summary judgment concerning coverage is the “insured vs. insured exclusion.” Because this case is before me on cross-motions for summary judgment, I find it most appropriate to summarize all of the respective arguments by the FDIC-R and Progressive without regard to whether those arguments were presented in an opening brief or reply brief in support of the party’s own motion or in a brief in response to the opposing party’s motion.
1. Arguments of the parties
The FDIC-R argues that the “insured vs. insured exclusion” does not bar coverage in this case, because the definition of Company in the Vantus Policy does not include or refer to the FDIC-R, regulators, receivers, or any liquidating entity. Thus, the FDIC-R argues that its action against the D & 0 Defendants is not “brought” or “maintained” “by, on behalf of, or at the behest of’ the Company, that is, the failed Bank. Indeed, the FDIC-R points out, it filed its own lawsuit against the D & 0 Defendants more than three years after Vantus Bank failed, and no one from Vantus Bank had any involvement with bringing or maintaining the FDIC-R’s claims. The FDIC-R also argues that it is wholly independent of the failed Bank and has statutory rights, duties, and interests beyond those of the failed Bank, including exclusive rights to bring certain claims, with the goal of maximizing recoveries for the receivership and its creditors, including the FDIC’s Deposit Insurance Fund. The FDIC-R argues that whether or not the claims it asserts might have “belonged” to the Bank before its failure is irrelevant, where the FDIC-R is empowered by statute to bring such claims now. The FDIC-R also argues that the undefined phrase “on behalf of’ in the “insured vs. insured exclusion” must be given its ordinary meaning, as defined in standard dictionaries, and that its action does not fit such an ordinary meaning as an action “on behalf of’ the failed Bank.
The FDIC-R also rejects Progressive’s contention that the FDIC-R merely “steps into the shoes” of the failed Bank, because the FDIC-R contends that it has statutory rights and responsibilities beyond acting as a mere instrumentality or representative of the failed Bank. For example, the FDIC-R argues that it has the specific power to bring “gross negligence” claims against directors and officers of failed institutions “on behalf of, ... [and] for the benefit of, the [FDIC],” pursuant to 12 U.S.C. § 1821(k). The FDIC-R argues that O’Melveny & Myers v. FDIC, 512 U.S. 79, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994), on which Progressive relies for its argument that the FDIC-R “steps into the shoes” of the failed Bank, is distinguishable, where, on remand, the lower courts held that the FDIC-R was not a typical successor in interest, the Supreme Court’s decision did not involve the scope of an “insured vs. insured exclusion,” and the Supreme Court was not asked to and did not explain whether “stepping into the shoes” of a failed bank has the identical legal effect of acting “on behalf of’ an open bank. The FDIC-R also argues that who “owned” the claim is not part of the test for coverage under or in the language of the “insured vs. insured exclusion.”
The FDIC-R contends that several courts have found that the “insured vs. insured exclusion” at issue here, or ones like it, are inapplicable to the FDIC-R, both in the wake of the banking crisis in the late 1980s and early 1990s, and in the wake of the “Great Recession” in the first decade of this century. The FDIC-R argues that the purpose of the “insured vs. insured exclusion” was to protect against “collusive cases” by bank insiders for the benefit of the bank, not to preclude actions by the FDIC-R. The FDIC-R points out that courts have also held that the “shareholder derivative exception” to the “insured vs. insured exclusion” applies, because, among other claims, the FDIC-R brings such claims on behalf of shareholders.
Progressive argues that the “insured vs. insured exclusion” applies on its face. First, Progressive argues that the FDIC-R’s claims are “by or on behalf of’ the Bank, because it “steps into the shoes” of the failed Bank, as explained in O’Melveny & Myers v. FDIC, 512 U.S. 79, 86-87, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994). Progressive argues that, no matter how many “hats” the FDIC-R claims to wear, it is plainly pursuing against the D & O Defendants claims that “belonged” to the Bank and seeks to recover losses that the Bank suffered as a result of the D & O Defendants’ wrongful acts. Progressive also argues that § 1821(k) merely establishes a “liability floor” for director and officer misconduct, but does not create a claim different from the Bank’s state-law claim against the directors and officers for mismanagement. Progressive also argues that the “shareholder derivative exception” does not apply to the FDIC-R’s claims, because the FDIC-R’s suit is not a shareholder derivative action.
As to pertinent case law, Progressive argues that O’Melveny & Myers supersedes any cases from the banking crisis in the 1980s and 1990s concerning the effect of the “insured vs. insured exclusion,” because it expressly holds that the FDIC-R “steps into the shoes” of the failed Bank and that any defenses good against the failed Bank are good against the FDIC-R. Progressive also argues that the purpose of the “insured vs. insured exclusion” is not simply to foreclose “collusive cases,” but whatever the “intent” of the clause was, that “intent” is irrelevant to the applicability of the clause to particular claims.
The parties also assert numerous arguments that I find it unnecessary to reach. Among those arguments, the parties dispute whether extrinsic evidence demonstrates that the “insured vs. insured exclusion” was intended to bar claims such as the FDIC-R has brought against the D & O Defendants and whether extrinsic evidence can be considered at all. They also dispute whether the “reasonable expectations” of the D & O Defendants demonstrate that the “insured vs. insured exclusion” does or does not apply and whether such “reasonable expectations” are even relevant. They also dispute whether the industry practice demonstrates that “regulatory exclusions,” rather than “insured vs. insured exclusions,” are used when the insurer intends to bar coverage for claims by the FDIC-R and whether any evidence concerning “regulatory exclusions” is relevant, where the Vantus Policy contained no such exclusion. Finally, they dispute whether the “insured vs. insured exclusion” in the Vantus Policy is “ambiguous.”
2. Analysis
a. Interpretation
I must first “interpret” the “insured vs. insured exclusion” — that is, “give meaning to contractual words in the policy”— “‘reading] the policy as a whole,’” not just this exclusion in isolation. Boelman, 826 N.W.2d at 501 (quoting Jones, 760 N.W.2d at 188). The focus of the parties’ dispute is on the meaning of the phrase “Loss in connection with any Claim by, on behalf of, or at the behest of the Company, any affiliate of the Company or any Insured Person in any capacity.” Vantus Policy, § V(J), Defendants’ Joint Appendix II at 212.
First, I must look to the Vantus Policy itself for express definitions of any terms in the “insured vs. insured exclusion.” The definitions of Company, however, in both the original Vantus Policy and the amended definition in the extended Discovery Period (Activation) endorsement, lack any express reference to a “receiver” as included within the meaning of Company. See Vantus Policy, § IV(E), Defendants’ Joint Appendix II at 207 (definition of Company); Vantus Policy, Amendment To Declarations (effective 09/04/2007), Defendants’ Joint Appendix II at 204 (Item 1 listing entities identified as the Company); Vantus Policy, Discovery Period Activation, Amendment to § IV(E), Defendants’ Joint Appendix at 198 (amending the definition of Company); Vantus Policy, Discovery Activation, Declarations Page, Item 1, Defendants’ Appendix II at 200 (Item 1 listing entities identified as the Company); see also, supra, page 937 (setting out the definitions and lists of entities). Thus, Company means, first of all, Vantus Bank itself, including only the specific entities identified in the Declarations, but does not mean the FDIC-R. Progressive does not contend that the FDIC-R is a “Subsidiary created or acqu