Opinion
05cv1396, Consolidated with 06cv0389.
October 16, 2006
MEMORANDUM OPINION
I. Introduction
This is a breach of contract and declaratory judgment action. Plaintiffs, MDL Capital Management, Inc., ("MDL"), Mark Lay ("Lay"), Steven Sanders ("Sanders"), and Edward Adatepe ("Adatepe") (collectively referred to as "MDL") who sought and obtained commercial insurance coverage (through a "Binder") with Federal Insurance Company ("Federal"), seeks damages and a declaration that Federal should defend and indemnify at least $5 million for claims asserted against plaintiffs in federal court litigation in Ohio for their alleged wrongdoing regarding investments they made on behalf of their client, the Ohio State Bureau Workers Compensation Bureau ("the Bureau").
Pending before this Court are the parties cross-motions for summary judgment (doc. nos. 106, 108, 116). While plaintiffs seek partial summary judgment as to liability arguing that the policy provides coverage as a matter of law, defendant also moves for summary judgment and contends: (1) that the policy contains exclusions which preclude coverage; (2) that the Conditional Binder ("the Binder") does not provide coverage because plaintiffs breached their duty to cooperate; (3) that the Binder had expired; and (4) that the Binder was rescinded and void ab initio based upon plaintiffs misrepresentations in securing coverage. After careful consideration, and for the reasons that follow, this Court will grant defendant's motion for summary judgment on the basis that the policy does not provide for coverage because of the language of the exclusions (doc. no. 106), and this Court will deny plaintiffs' motion for partial summary judgment (doc. no. 116). Further, the Court will deny as moot defendant's motion for summary judgment regarding rescission and that the policy is void ab initio (doc. no. 108).
Plaintiffs dispute the contention that "the Binder" was "Conditional." Accordingly, the Court will hereinafter refer to the document as "the Binder".
II. Background Facts
In the parties cross-motions for summary judgment, they compile over 180 pages of facts, many of which are disputed and not material. The facts, in a greatly condensed format, may be fairly summarized as follows.
Because this Court finds that the exclusions in the policy ultimately preclude coverage as a matter of law, this opinion will only set forth the facts relevant to that argument.
In May, 1998, MDL entered into an agreement with the Bureau whereby MDL agreed to perform professional investment advisory services for and on behalf of the Bureau. From 1998 to 2005, MDL provided professional investment advisory services to the Bureau in connection with a long bond account. Sometime between 2002 and 2003, MDL formed the MDL Active Duration Fund (the "ADF"), and the Bureau was the sole investor in that fund. MDL provided investment advisory services to the ADF in 2003 and 2004, and the ADF closed in 2004.
During the period from May 2003 to May 2005, American International Specialty Lines Insurance Company (AISLIC) provided Investment Advisers errors and omissions (E O) coverage and directors and officers (D O) insurance coverage to MDL with a combined limit of liability of $10 million. MDL, worked through a broker, Seubert Associates, to obtain a renewal of coverage. According to plaintiffs, Seubert also used the renewal application process to shop for coverage from other insurance companies because the costs of the premiums with AISLIC were too high. Although defendant Federal alleges that AISLIC did not plan to renew the policy and that was the reason MDL chose to seek other bids, this fact, although disputed, is not material to the issue at hand.
AISLIC was originally a named defendant in this action. However, because plaintiffs and AISLIC were able to reach a settlement, the parties filed a stipulation of dismissal on January 23, 2006, which this Court approved. Accordingly, Federal is the only remaining defendant.
Following the underwriting process, which included a meeting between representatives of MDL and Federal, in May 2005, MDL and Federal contracted for a Binder for Investment Advisers E O insurance, D O Liability insurance, and Employment Practices Liability (EPL) insurance, from May 19, 2005 to June 19, 2005. The E O and D O liability coverages under the Binder had an aggregate policy limit of $5 million. The term of the Binder was for the one-month period from May 19, 2005 to June 19, 2005. However, the Binder specified that the policy period was for the one-year period from May 19, 2005 to May 19, 2006. MDL paid the premium for the entire policy period in the amount of $91,885.
The parties appear to agree that at some point prior to the issuance of the Binder, Federal advised and MDL agreed that Federal would not insure as a named insured either the ADF or the Core Bond Fund. However, while MDL claims that it understood that Federal would generally provide coverage for all of the investment advisory activities of MDL, Federal contends that it advised MDL two times during an April 28, 2005 meeting that Federal would not provide coverage for those funds and the MDL's activities related to those funds would not be covered. In addition, Federal states that the insurance quote and the Binder itself expressly stated that the D O Policy would contain endorsement #17-02-1224 — "Professional Services Exclusion — Complete" and that the Investment Advisers E O Policy would contain a manuscript "Broad Private Fund Exclusion — MDL Broad Marked Fixed Income Fund, MDL Core Fund and MDL Active Duration Fund, Ltd."
On June 10, 2005, the Bureau brought suit against MDL, Lay, Adatepe, Sanders, the ADF and the ADF's other directors, and the case was subsequently removed to the United States District Court for the Southern District of Ohio. Ohio Bureau of Workers' Compensation v. MDL Active Duration Fund, Ltd., no. 2:05-cv-00673 (S.D. Ohio). The multiple count complaint brought by the Bureau alleges mismanagement of and enormous losses in the ADF. Shortly after the filing of the complaint by the Bureau, the Securities Exchange Commission (SEC) commenced a non-public investigation related to the litigation pending in Ohio.
On June 14, 2005, the day MDL provided notice to Federal of the ADF litigation, MDL employee Mimi Beal sent a letter to Federal asking Federal to "add the MDL Active Duration Fund" to the Policy. On June 17, 2005, Holly Scott of Federal inform Beal of MDL that Federal was unable to offer coverage for the ADF. On June 29, 2005, MDL notified Federal of the SEC investigation. On October 5, 2005, the instant action followed.
A. Investment Advisers E O Policy Form
The insuring agreement of the Investment Advisers E O policy form referenced in the Binder provided that:
[Federal] shall pay on behalf of the Insureds all Loss for which the Insureds shall become legally obligated to pay as a result of any Claim first made against the Insured after the Original Policy Date as noted in ITEM 8 [sic] of the Declarations arising out of any Wrongful Act committed by the Insureds during or prior to the Policy Period in the performance of Professional Services.
(Doc. No. 127, ¶ 20).
Federal's Investment Adviser E O policy form referenced in the Binder defined "insureds" to mean "the Parent Organization, Insured Organization and/or Insured Persons." (Doc. No. 127, ¶ 21). The Binder identified MDL as the Parent Organization, but the parties dispute whether the Binder identified MDL as the insured organization. Further, the Investment Advisers E O policy form defined Insured Person as "any past, present or future trustee, director, officer or employee of an Insured Organization while acting solely in their capacity as such." (Doc. No. 127, ¶ 23).
The Investment Adviser E O policy form referenced in the Binder defined "Loss" to mean, in pertinent part, "the total amount which the Insured becomes legally obligated to pay on account of each Claim and for all Claims made against them for Wrongful Acts for which coverage applies, including, but not limited to, damages, judgments, settlements, costs, and Defense costs." (Doc. No. 127, ¶ 24).
The Investment Adviser E O policy form referenced in the Binder defined "Claim" to mean, in pertinent part, "(I) a civil proceeding commenced by the service of a complaint or similar pleading; (ii) any investigation into possible violations of law or regulation initiated by any governmental body or self regulatory organization (SRO), or any proceeding commenced by the filing of a notice of charges, or formal investigative order or similar document; or (iii) a written Demand, against an Insured for a Wrongful Act. . . ." (Doc. No. 127, ¶ 26).
The Investment Adviser E O policy form referenced in the Binder defined "Policy Period" to mean, in pertinent part, "the period of time specified in ITEM 4 of the Declaration, subject to prior termination in accordance with Section 21. . . ." (Doc. No. 127, ¶ 27). While plaintiffs allege that ITEM 4 specified the time period to mean May 19, 2005 to May 19, 2006, defendant contends that the Binder terminated automatically on June 19, 2005 because plaintiffs failed to "satisfy its subjectivities, including providing Federal with a copy of its 2004 audited financial statements." (Doc. No. 127, ¶ 28).
The Investment Adviser E O policy form referenced in the Binder defined "Wrongful Act" to mean "any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed, attempted, or allegedly committed or attempted, by an Insured while performing or failing to perform Professional Services." (Doc. No. 127, ¶ 29).
Additionally, the Investment Adviser E O policy form referenced in the Binder defined "Professional Services," to mean services "performed or required to be performed by an Insured solely in its capacity as an Investment Adviser for or on behalf of a customer of the Insured pursuant to an agreement between such customer and the Insured for a fee, commission, or other monetary consideration or other remuneration which inures to the benefit of the Insured." (Doc. No. 127, ¶ 30).
The Investment Adviser E O policy referenced in the Binder defined "Investment Advisor" as "any person acting as investment advisor as defined in Section 202(11) of the Investment Advisers Act of 1940, as amended." (Doc. No. 127, ¶ 31).
B. D O Liability Policy Form
While plaintiffs allege that Federal's D O Policy Form referenced in the Binder provided coverage to: (1) an Insured Person; (2) for all Loss the Insured Person becomes legally obligated to pay; (3) on account of any Claim; (4) first made against the Insured Person during the Policy Period; (5) for a Wrongful act; (6) allegedly committed or attempted before or during the Policy Period; and (7) while serving in an Insured Capacity, defendant denies that assertion and states that the D O Policy, assuming its validity, and subject to its term and conditions including any applicable exclusions, would provide coverage for:
all Loss for which the Insured Person . . . becomes legally obligated to pay on account of any Claim first made against such Insured Person, individually or otherwise, during the Policy Period . . . for a Wrongful Act committed, attempted, or allegedly committed or attempted by such Insured Person before or during the Policy Period.
(Doc. No. 127, ¶ 33).
C. Exclusions and Endorsements
The insurance quotation and the Binder both contained an endorsement #17-02-1224 — "Professional Services Exclusion — Complete," which bars coverage for:
Loss on account of any Claim based upon, arising from or in consequence of the rendering of or failure to render professional services, including but not limited to the following services:
i. broker;
ii. dealer;
iii. financial adviser;
iv. investment adviser;
v. investment banker;
vi. investment manager;
vii. clearing agent;
viii. trustee, fidicuiary or agent within the Organization's Trust Department for individuals, governments, corporations or other entities.
(Doc. No. 137, ¶ 183).
The Investment Adviser E O Policy form listed in the Binder provides specified coverage only for wrongful acts committed in the performance of "Professional Services":
The Company shall pay on behalf of the Insureds all Loss which the Insured shall become legally obligated to pay as a result of any Claim first made against the Insured after the Original Policy Date as noted in ITEM 8 of the Declarations arising out of any Wrongful Act committed by the Insured during or prior to the Policy Period in the performance of Professional Services.
(Doc. No. 137, ¶ 184).
"Professional Services" is defined in the Investment Adviser E O Policy form as "only those services performed or required to be performed by an Insured solely in its capacity as an Investment Adviser for or on behalf of a customer of the Insured pursuant to an agreement between such customer and the Insured for a fee, commission or other monetary consideration or other remuneration which inures to the benefit of the Insured." (Doc. No. 137, ¶ 185).
The Investment Adviser E O Policy form defines "Investment Adviser" as "any person acting as an investment adviser as defined in Section 202(11) of the Investment Adviser Act of 1940, as amended." (Doc. No. 137, ¶ 186).
Furthermore, the quotation and the Binder both state that the Investment Adviser E O Policy would contain an endorsement with a "Broad Private Fund Exclusion — MDL Broad Market Fixed Income Fund, MDL Core Fund and MDL Active Duration Fund, Ltd. (endorsement wording to be developed)".
Finally, the quotation and the Binder both stated that the applicable contract form for the EPL Policy was 17-02-1345.
The EPL Policy form provides specified coverage for a "Claim first made against the Insured." "Claim" is defined in the EPL policy contract form as:
a. a written demand for monetary damages;
b. a civil proceeding commenced by the service of a complaint or similar pleading, including any appeal therefrom;
c. an arbitration proceeding; or
d. a formal administrative or regulatory proceeding commenced by the filing of a notice of charges, form investigative order or similar document,
which is brought and maintained by or on behalf of any past, present or prospective employee(s) of the Insured Organization against any Insured for any Wrongful Act in connection with any actual or alleged wrongful dismissal, discharge or termination of employment, breach of any oral or written employment contract or quasi-employment contract, employment-related misrepresentation, violation of employment discrimination laws (including workplace sexual harassment), wrongful failure to employ or promote, wrongful discipline, wrongful deprivation of a career opportunity, failure to grant tenure, negligent evaluation, invasion of privacy, employment related defamation or employment-related wrongful infliction of emotional distress.
(Doc. No. 137, ¶ 190).
III. Standard of Review
Summary judgment under Fed.R.Civ.P. 56(c) is appropriate "`if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Woodside v. School Dist. of Philadelphia Bd. of Educ., 248 F.3d 129, 130 (3d Cir. 2001), quoting Foehl v. United States, 238 F.3d 474, 477 (3d Cir. 2001) (citations omitted). In deciding a summary judgment motion, the court must "view the evidence . . . through the prism of the substantive evidentiary burden" to determine "whether a jury could reasonably find either that the plaintiff proved his case by the quality and quantity of the evidence required by the governing law or that he did not." Anderson v. Consolidated Rail Corp., 297 F.3d 242, 247 (3d Cir. 2002), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986).
When the non-moving party will bear the burden of proof at trial, the moving party's burden can be "discharged by `showing' — that is, pointing out to the District Court — that there is an absence of evidence to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party has carried this burden, the burden shifts to the non-moving party who cannot rest on the allegations of the pleadings and must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1230 (3d Cir. 1993). Thus the non-moving party cannot rest on the pleadings, but instead must go beyond the pleadings and present "specific facts showing that there is a genuine issue for trial," Fed.R.Civ.P. 56(e), and cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989) ( citing Celotex, 477 U.S. at 325 (1986)). The non-moving party must respond "by pointing to sufficient cognizable evidence to create material issues of fact concerning every element as to which the non-moving party will bear the burden of proof at trial." Simpson v. Kay Jewelers, Div. Of Sterling, Inc., 142 F. 3d 639, 643 n. 3 (3d Cir. 1998), quoting Fuentes v. Perskie, 32 F.3d 759, 762 n. 1 (3d Cir. 1994).
"In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of the evidence; instead, the non-moving party's evidence `is to be believed and all justifiable inferences are to be drawn in his favor.' Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)." Marino v. Industrial Crating Co., 358 F.3d 241, 247 (3d Cir. 2004.) See also Doe v. County of Centre, PA, 242 F.3d 437, 446 (3d Cir. 2001) (court must view facts in the light most favorable, draw all reasonable inferences, and resolve all doubts, in favor of the nonmoving party).
IV. Discussion
Plaintiffs move for summary judgment arguing that the Binder provides coverage as a matter of law, while defendant Federal advances several arguments in support of its theory that there is no coverage as a matter of law. Defendant alleges that the (1) that the policy contains exclusions which preclude coverage; (2) that the Binder does not provide coverage because plaintiffs breached their duty to cooperate; (3) that the Binder had expired; and (4) that the Binder was rescinded and void ab initio based upon plaintiffs misrepresentations in securing coverage.
Without addressing defendant's alternative arguments, and assuming arguendo that the Binder was valid, this Court finds the policy contains exclusions which preclude coverage for the underlying lawsuit brought against plaintiffs MDL, Lay, Sanders, and Adatepe by the Ohio Bureau of Workers Compensation regarding its losses in the MDL ADF.
A. Applicable Law
The parties agree that Pennsylvania law governs the interpretation of the Binder. The Supreme Court of Pennsylvania recently summarized the law of insurance contract interpretation in 401 Fourth Street, Inc. v. Investors Ins. Group, 583 Pa. 445, 879 A.2d 166 (2005), where it stated as follows:
[W]e begin our analysis by setting forth the well-established rules of insurance contract interpretation. "The task of interpreting [an insurance] contract is generally performed by a court rather than by a jury." Madison Construction Co. v. Harleysville Mutual Ins. Co., 557 Pa. 595, 735 A.2d 100, 106 (1999) (citations omitted); Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 469 A.2d 563, 566 (1983). The purpose of that task is to ascertain the intent of the parties as manifested by the terms used in the written insurance policy. Gene Harvey Builders, Inc. v. Pennsylvania Manufacturers' Association Ins. Co., 512 Pa. 420, 517 A.2d 910, 913 (1986) ( quoting Standard Venetian Blind Co. (citations omitted)). When the language of the policy is clear and unambiguous, a court is required to give effect to that language. Id. When a provision in a policy is ambiguous, however, the policy is to be construed in favor of the insured to further the contract's prime purpose of indemnification and against the insurer, as the insurer drafts the policy, and controls coverage. See id. "Contractual language is ambiguous `if it is reasonably susceptible of different constructions and capable of being understood in more than one sense.'" Madison Construction Co., 735 A.2d at 106 ( quoting Hutchison v. Sunbeam Coal Co., 513 Pa. 192, 519 A.2d 385, 390 (1986)). Finally, "[i]n determining what the parties intended by their contract, the law must look to what they clearly expressed. Courts in interpreting a contract, do not assume that its language was chosen carelessly." Steuart v. McChesney, 498 Pa. 45, 444 A.2d 659, 662 (1982) ( quoting Moore v. Stevens Coal Co., 315 Pa. 564, 173 A. 661, 662 (1934)). Thus, we will not consider merely individual terms utilized in the insurance contract, but the entire insurance provision to ascertain the intent of the parties.879 A.2d at 171. See also J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 363-65 (3d Cir. 2004) (summarizing Pennsylvania law on the interpretation of insurance contracts).
The rule that any ambiguity must be resolved in favor of coverage for the insured recognizes that insurance policies are contracts of adhesion between parties of usually unequal bargaining power, especially regarding the language of such contracts that has been drafted by the insurance industry, McMillan v. State Mut. Life Assur. Co. of America, 922 F.2d 1073, 1075 (3d Cir. 1990), and that "transactions between insurers and insureds are fundamentally different from those between parties to contracts as envisioned by the common law." Bensalem Tp. v. Int'l. Surplus Lines Ins. Co., 38 F.3d 1303, 1309-10 (3d Cir. 1994).
The fundamental rule in construing a contract is to ascertain and give effect to the intention of the parties. Lower Frederick Tp. v. Clemmer, 518 Pa. 313, 543 A.2d 502 (1988). In Bensalem Tp. v. Int'l. Surplus Lines Ins. Co., 38 F.3d at 1309, the United States Court of Appeals for the Third Circuit instructed courts applying Pennsylvania law to "examine the totality of the insurance transaction involved to ascertain the reasonable expectation of the insured." However, the reasonable expectations doctrine "is only applied in very limited circumstances to protect non-commercial insureds from policy terms not readily apparent and from insurer deception." Canal Ins. Co. v. Lloyd's London, 435 F.3d 431, 440 (3d Cir. 2006).
The intention of the parties must be ascertained from the document itself, if its terms are clear and unambiguous. Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385 (1986). A contract is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. State Highway Bridge Auth. v. E.J. Albrecht Co., 59 Pa.Cmwlth. 246, 430 A.2d 328 (1981). A determination of whether a contract is ambiguous also is a question of law for the court. Hutchison, supra.
"An insurance contract must be construed as a whole, and not in discrete units." Luko v. Lloyd's London, 573 A.2d 1139, 1142 (Pa.Super. 1990) (citations omitted). Therefore, the entire Binder, including the endorsements, must be considered in determining what risk the policy covers and what risk it does not cover. Rorer Group, Inc. v. Ins. Co. of N. Am., 655 A.2d 123, 125 (Pa.Super. 1995).
B. The D O Policy's "Professional Services Exclusion — Complete" Excludes Coverage
As rehearsed, the quotation and the Binder itself explicitly alerted MDL that the D O Policy would contain endorsement number 17-02-1224 — "Professional Services Exclusion-Complete," which states that coverage is barred for: "[A]ll Loss on account of any Claim based upon, arising from or in the consequence of rendering of or failure to render professional services, including but not limited to . . . investment adviser [and] investment manager."There is no genuine issue of material fact that the allegations against plaintiffs in the ADF litigation are based upon, arise from, or are the consequence of rendering or failing to render investment adviser services, and therefore, this exclusion bars coverage under the D O Policy. Further, there is no genuine issue of material fact that plaintiffs rendering of investment adviser and investment manager services are "professional services" within the meaning of the exclusion.
While plaintiffs argue that the phrase "professional services" should not be given overly broad meaning and cites an unreported decision of the District Court of Hawaii, this Court does not find that analysis to be instructive here. Here, the actual language of the exclusion cites to precisely the type of "professional services" plaintiffs were performing — that of investment adviser and/or investment manager. The claims made against plaintiffs encompass and fall directly within the exclusionary language quoted above and the exclusionary language is clear and unambiguous on its face. In fact, the allegations in the underlying complaint center on plaintiffs' conduct as investment advisers and/or investment managers to the ADF, and therefore, this claim falls squarely within the scope of the "Professional Services Exclusion — Complete." See Piper Jaffray Companies Inc. v. National Union Fire Ins. Co. of Pittsburgh, 38 F.Supp. 2d 771 (D. Minn. 1999) (In granting summary judgment in favor of the insurer regarding a settlement of two of a series of class action lawsuits based on allegations of mismanagement of client investments, the court held that coverage was barred by the professional services and investment services exclusions).
Federal Insurance Company v. Hawaiian Electric Industries, Inc., no. 94-00125HG, 1997 U.S. Dist. LEXIS 24129 (D. Hawaii December 23, 1997).
C. The Investment Adviser E O Policy "Broad Private Fund Exclusion" Excludes Coverage
The Binder expressly stated that the Investment Adviser Policy would contain an endorsement with a "Broad Private Fund Exclusion — MDL Broad Market Fixed Income Fund, MDL Core Fund and MDL Active Duration Fund, Ltd." While defendant admits that actual specific wording of the exclusion had not been issued as of the date of inception of the Binder, defendant argues, and this Court agrees, that the exclusion for "MDL Active Duration Fund" could have only one meaning: that the Investment Adviser Policy would not extend to claims based upon MDL's provision of professional services related to the three listed funds — including the ADF. In fact, the title of the endorsement itself explains that the MDL Broad Market Fixed Income Fund, the MDL Core Fund and the MDL Active Duration Fund, Ltd. would be excluded from coverage under the Investment Adviser Policy. Again, the Binder unambiguously states that the above funds would be excluded from the Investment Adviser Policy, and that exclusion is not reasonably susceptible of any different meaning. Therefore, because the language of this exclusion is unequivocal, "its meaning must be determined by its contents alone." East Crossroads Ctr., Inc. v. Mellon-Stuart Co., 205 A.2d 865, 866 (Pa. 1965).
Although plaintiffs now attempt to argue that they understood the exclusion referenced in the Binder was meant only to exclude the funds themselves and not the claims against plaintiffs arising out of investment adviser services to the funds, this Court will decline to delve into plaintiffs' subjective interpretations because "[a] written contract, if unambiguous, must be held to express all of the negotiations, conversations, and agreements made prior to its execution, and neither oral testimony, nor prior written agreements are admissible to explain or vary the terms of such a contract." Lenzi v. Hahnemann Univ., 664 A.2d 1375, 1379 (Pa.Super. 1995).
Furthermore, an insured, such as plaintiffs, cannot validly assert that its understanding or "reasonable expectation" of coverage, uncommunicated to the insurer, should control over the plain language of the insurance agreement. Kearns v. Minn. Mut. Life Ins. Co., 75 F. Supp. 2d 413, 419 (E.D. Pa. 1999). Moreover, the Court declines to apply "reasonable expectation" doctrine in this case because MDL is a sophisticated insured who used a broker to purchase liability insurance policies for its business. See Canal Ins. Co., 435 F.3d at 440 (reasonable expectations doctrine "is only applied in very limited circumstances to protect non-commercial insureds from policy terms not readily apparent and from insurer deception.")
D. The EPL Policy does not provide coverage for the ADF Litigation
The EPL Policy Form 17-02-01345, which the quotation and the Binder both state are applicable, provides specified coverage for defined employment-related wrongful acts.
The EPL Policy Form provides specified coverage for a "Claim first made against the Insured." "Claim" is defined in the EPL policy contract form as:
a. a written demand for monetary damages;
b. a civil proceeding commenced by the service of a complaint or similar pleading, including any appeal therefrom;
c. an arbitration proceeding; or
d. a formal administrative or regulatory proceeding commenced by the filing of a notice of charges, form investigative order or similar document,
which is brought and maintained by or on behalf of any past, present or prospective employee(s) of the Insured Organization against any Insured for any Wrongful Act in connection with any actual or alleged wrongful dismissal, discharge or termination of employment, breach of any oral or written employment contract or quasi-employment contract, employment-related misrepresentation, violation of employment discrimination laws (including workplace sexual harassment), wrongful failure to employ or promote, wrongful discipline, wrongful deprivation of a career opportunity, failure to grant tenure, negligent evaluation, invasion of privacy, employment related defamation or employment-related wrongful infliction of emotional distress.
(Doc. No. 137, ¶ 190) (emphasis added).
Again, the plain language of the EPL Policy Form does not cover the allegations raised in the ADF litigation. Rather, this EPL Policy covers situations where employees would sue MDL in its capacity as the employer for wrongful actions such as employment discrimination and sexual harassment. This Court, construing the language of the EPL Policy, finds that the above language explicitly provides coverage for certain wrongful employment practices and not for situations like the ADF litigation. The claims brought against plaintiffs are not by employees, and the language of the Policy does not encompass the claims brought against them. Accordingly, the EPL Policy does not provide coverage for plaintiffs' alleged wrongdoings.
V. Conclusion
In conclusion, while plaintiffs ask this Court to obligate defendant Federal to defend and indemnify them for claims asserted against plaintiffs in the federal court litigation in Ohio, the clear and unmistakable policy language to which the parties agreed either excludes coverage or the claims do not fall within the scope of coverage. Although plaintiffs urge this Court to construe the policy terms in light of their subjective interpretations of what risks they believed the Binder covered, this Court will decline to look beyond the terms of the contract because those terms are unambiguous. Further, the Court will decline plaintiffs' invitation to follow the "reasonable expectations" doctrine because the insured in this case is a sophisticated commercial enterprise who hired a broker to negotiate on their behalf. While plaintiffs, in their motion for summary judgment and supporting documentation, emphasis select portions of the Binder, interestingly, they omit any mention of the exclusions, which in turn tells only part of the story. The contract as whole, not discrete pieces, must be interpreted, and whereas here, the terms of that contract are clear and unambiguous, the Court will find that the policy contains exclusions which preclude coverage as a matter of law.
Accordingly, for these reasons, plaintiffs' motion for partial summary judgment (doc. no. 116) will be DENIED, defendant's motion for summary judgment on the grounds that the policy does not provide for coverage (doc. no. 106) will be GRANTED, and finally, defendant's motion for summary judgment regarding rescission (doc. no. 108) is DENIED AS MOOT. An appropriate order follows.