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Bancinsure, Inc. v. McCaffree

United States District Court, D. Kansas

February 27, 2014

BANCINSURE, INC., Plaintiff,
CARL L. MCCAFFREE, et al., Defendants.


KATHRYN H. VRATIL, District Judge.

In this removed action, BancInsure, Inc. seeks a declaratory judgment that it owes no duty of coverage under a directors and officers insurance policy which it issued to the Columbian Bank and Trust Company and its directors and officers for claims which the Federal Deposit Insurance Corporation ("FDIC") asserted against former bank directors. Defendants in this case are former bank directors Carl L. McCaffree, Jimmy D. Helvey and Sam McCaffree ("individual defendants") and FDIC.[1] The individual defendants bring counterclaims for declaratory judgment. This matter is before the Court on the following cross-motions for summary judgment: (1) Plaintiff's Motion For Summary Judgment (Doc. #127) filed May 6, 2013; (2) Defendants Carl McCaffree's, Sam McCaffree's, And Jim Helvey's Motion For Summary Judgment (Doc. #147) filed June 10, 2013; and (3) the Motion For Summary Judgment Of Defendant Federal Deposit Insurance Corporation As Receiver Of The Columbian Bank And Trust Company (Doc. #151) filed June 10, 2013. For reasons set forth below, the Court finds that BancInsure's motion should be sustained and that the motions of the individual defendants and FDIC should be overruled.

Legal Standards

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247 (1986); Vitkus v. Beatrice Co. , 11 F.3d 1535, 1538-39 (10th Cir. 1993). A "genuine" factual dispute is one "on which the jury could reasonably find for the plaintiff, " and requires more than a mere scintilla of evidence. Liberty Lobby , 477 U.S. at 252. A factual dispute is "material" only if it "might affect the outcome of the suit under the governing law." Id. at 248.

The moving party bears the initial burden of showing that there are no genuine issues of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 322-23 (1986); Justice v. Crown Cork & Seal Co. , 527 F.3d 1080, 1085 (10th Cir. 2008). Once the moving party meets this burden, the burden shifts to the nonmoving party to show that a genuine issue remains for trial with respect to the dispositive matters for which the nonmoving party carries the burden of proof. Nat'l Am. Ins. Co. v. Am. Re-Ins. Co. , 358 F.3d 736, 739 (10th Cir. 2004); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586-87 (1986). As to these matters, the nonmoving party may not rest on the pleadings but must set forth specific facts. Fed.R.Civ.P. 56(e)(2); Matsushita , 475 U.S. at 586-87; Justice , 527 F.3d at 1085. Conclusory allegations not supported by evidence are insufficient to establish a genuine issue of material fact. Jarvis v. Potter , 500 F.3d 1113, 1120 (10th Cir. 2007); see Kidd v. Taos Ski Valley, Inc. , 88 F.3d 848, 853 (10th Cir. 1996).

When applying this standard, the Court must view the factual record in the light most favorable to the party opposing the motion for summary judgment. Duvall v. Ga.-Pac. Consumer Prods., L.P. , 607 F.3d 1255, 1260 (10th Cir. 2010); see Ricci v. DeStefano , 557 U.S. 557, 586 (2009). Summary judgment may be granted if the nonmoving party's evidence is merely colorable or is not significantly probative. Liberty Lobby , 477 U.S. at 250-51. Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52.


The following facts are stipulated or uncontroverted:

BancInsure issued Directors and Officers Liability Insurance Policy No. 15DO00163-2 ("the Policy") to Columbian Bank and Trust Company effective May 11, 2007 to May 11, 2010, subject to an annual renewal process. On August 22, 2008, the Kansas State Bank Commissioner declared the bank insolvent and appointed FDIC as receiver. Three years later, FDIC filed suit in this Court against former Columbian officers and directors, including the individual defendants. FDIC v. McCaffree, Civil Action No. 11-2447-JAR/KGS (filed Aug. 9, 2011) ("the underlying D&O action"). In that case, FDIC alleged that defendants had breached their fiduciary duties and acted negligently in originating and/or approving risky commercial real estate loans from November of 2004 through May of 2008 and failing to properly supervise bank lending functions. FDIC claimed damages of $52 million.

Before FDIC had filed suit but after it asserted claims against the individual defendants and other bank officers and directors (collectively "the insured officers and directors"), the insured officers and directors requested coverage under the Policy. After agreeing to advance defense costs under a reservation of rights, BancInsure filed this action against the insured officers and directors in the District Court of Johnson County, Kansas, seeking a declaration that the Policy provides no coverage for any claims that FDIC might assert against them.

By way of a settlement between BancInsure, the individual defendants and FDIC in February of 2013, the parties resolved the underlying D&O action. Specifically, the individual defendants agreed to confess judgment in favor of FDIC for $5 million (the amount of the Policy limits). The parties agree that the amount of the confessed judgment is reasonable in light of the FDIC claims and the likelihood of a jury verdict substantially in excess of policy limits if the case had proceeded to trial. To date, the individual defendants have paid $750, 000 and BancInsure has paid $250, 000 in partial satisfaction of the judgment.[2]

The Policy

The Policy is a claims-made policy in which BancInsure, in relevant part, agrees to pay "on behalf of the Insured Persons, Loss which the Insured Persons shall be legally obligated to pay." Policy § I.A. (Doc. #128-3). The individual defendants are "Insured Persons" under the Policy. Id . § IV.A-B, Decl. Item 1. The Policy contains a so-called "insured v. insured" exclusion which provides that "[t]he Insurer shall not be liable... for Loss in connection with any Claim made against the Insured Persons based upon, arising out of, relating to, in consequence of, or in any way involving... a Claim by, or on behalf, or at the behest of, any other Insured Person, the Company, or any successor, trustee, assignee or receiver of the Company." Id . § V.11. The Policy defines "the Company" to include the bank. Id . § IV.A, Decl. Item 1.

The Policy also contains a regulatory exclusion which relieves BancInsure of liability for "any action... brought by or on behalf of any federal or state regulatory or supervisory agency or deposit insurance organization ("Agency"), ... [including] any type of legal action which any such Agency may bring as receiver." Id . § V.12. The insureds purchased an endorsement to the Policy which negates that exclusion. Specifically, the endorsement stipulates that the Policy "is hereby amended by the deletion of the [Regulatory] Exclusion." Id. at Endorsement No. BI-DO-00316, Regulatory Exclusion Endorsement. The endorsement further provides as follows: "Nothing herein contained shall be held to vary, waive or extend any of the terms, conditions, provisions, agreements, or limitations of the above mentioned policy other than as above stated." Id.

Events Following Bank Closing

On July 15, 2008, FDIC and the Kansas Office of the State Bank Commissioner ("OSBC") jointly entered a cease and desist order to which the Bank consented. On Friday, August 22, 2008, OSBC closed the Bank and appointed FDIC as receiver. BancInsure learned of the closure no later than the following Monday. On September 2, 2008, BancInsure received from FDIC a letter dated August 28, 2008, which gave notice of potential claims that FDIC ...

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