A Policy Covers What It Says It Covers – Sometimes It’s Just That Simple

Life, Annuity, and Retirement Litigation   |   November 12, 2010

On October 15, 2010, District Judge Kenneth Marra issued an opinion in favor of Carlton Fields' client National Union Fire Insurance Company of Pittsburgh, PA. In that opinion, Judge Marra ruled that National Union’s D&O Policy did not cover the nearly $22 million in investigation costs incurred during an SEC investigation and an internal audit committee investigation that the insured, Office Depot, Inc., was demanding.

National Union disputed Office Depot’s claims by arguing that the plain language of the policy clearly and unambiguously excluded coverage for investigations of Office Depot and the policy said there was no coverage until individual directors and officers received a subpoena or a Wells Notice. National Union argued since the Policy was unambiguous, the Court should not consider expert testimony or other extrinsic evidence in determining coverage. National Union further argued that Office Depot’s interpretation of the Policy’s notice provision negated key coverage terms. Judge Marra agreed with National Union on all points. He noted at the outset that there was no grant of coverage to Office Depot for regulatory investigations of the company. And because the scope of coverage afforded by the Policy was unambiguous, the Court need not consider extrinsic evidence. He further noted common sense dictates that "potential claims" were not covered under National Union’s claims-made policy, and the notice provision in the Policy did not change that fact. The only purpose of that provision was to associate "Claims" made after the policy period with the correct policy period. Judge Marra’s full opinion can be found at Office Depot, Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa., et al., 2010 WL 4065416 (S.D. Fla. Oct. 15, 2010).

Practice Pointer: When conducting a coverage analysis, it is essential that you expend the necessary time and energy to assess whether the claims at issue fall within the scope of the insuring clause. The insured can have no greater coverage than the coverage afforded under the insuring clause. When the policy says that a particular item is not covered, it means it, and the insured’s tortured reading of other, non-insuring provisions of the policy -- read in isolation and in such a way that negates the insuring provisions -- should not be credited over the plain meaning of the policy’s terms when read as a whole. Further, for each coverage argument the insured advances, you should take the time to identify the other terms in the policy that the insured’s argument negates. This technique can be a powerful argument against an insured’s position that the court should rule in favor of coverage simply because there are two equally reasonable coverage interpretations. Finally, you should dispute the insured’s use of extrinsic evidence to prove coverage, or in some instances ambiguity, under the subject policy.

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