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Lessard v. Continental Casualty Co.

United States District Court, E.D. Virginia, Alexandria Division

August 19, 2014



CLAUDE M. HILTON, District Judge.

THIS MATTER comes before the Court on Defendant Continental Casualty Company's ("Defendant") Motion for Summary Judgment.

Defendant issued a directors and officers liability insurance policy to Lessard Group, Inc. and certain other companies ("Lessard Companies") in which Plaintiff Christian J. Lessard ("Lessard") or ("Plaintiff") was involved. The policy binds Defendant to pay all "Loss" resulting from any "Claim" made against any "Insured Person" during the "Policy Period" for a "Wrongful Act." The policy applies only to any Claim first made during the February 2, 2011 to February 2, 2012 Policy Period. Plaintiff seeks a judgment against Defendant for refusing to defend and indemnify him in connection with a lawsuit brought by Wells Fargo Bank, N.A. ("Wells Fargo" or the "bank") on August 12, 2011 in the Circuit Court of Fairfax County, Virginia against him and other alleged Insureds. Defendant's Motion here claims that the policy's language unambiguously relieves it from such coverage and accordingly entitles it to judgment as a matter of law.

Wells Fargo began issuing loans to the Lessard Companies in 2003. The Lessard Companies gave Wells Fargo a security interest in the corporations' property to secure the loans. Wells Fargo also entered into a loan with related company Metropolitan Development, LLC ("Met Dev"), which was secured by security agreements from Lessard and others.

Thereafter, the Lessard Companies and Met Dev defaulted under the loan documents. On September 21, 2010, the Lessard Companies confessed judgment in favor of Wells Fargo in the amount of $5, 058, 866.93, plus interest and costs, including attorney's fees and collection fees. Met Dev confessed judgment in excess of $12 million that same day. Wells Fargo alleges that, after it obtained the confessed judgments, the debtors and certain officers, including Lessard, engaged in an intentional scheme of invalid, fraudulent, and voluntary transfers of assets to avoid the debt obligations. Wells Fargo's attempts to collect on the defaulted loans continued past the filing of its lawsuit on August 12, 2011, where it claims that Lessard and other defendants - among other things - engaged in fraudulent conveyance to avoid their debts to Wells Fargo.

On February 1, 2011, before purchasing the policy with Defendant, Plaintiff reported the dispute concerning Wells Fargo's loan collection efforts to its then-insurance-carrier. Travelers Casualty and Surety Company of America ("Travelers"). Meanwhile, counsel for Wells Fargo and Lessard continued to exchange settlement demands and offers throughout the spring of 2011. Wells Fargo eventually accepted a lump sum settlement of $5, 925, 000, plus $391, 755.78 from an earlier garnishment proceeding. The settlement resolved all of Wells Fargo's Claims against Lessard, the Lessard Companies, and Met Dev, and the President of Lessard Companies and a Met Dev principal, Carlos Vazquez. Travelers ultimately agreed to defend the Claim and settled all Claims for defense costs and indemnity under its policy by contributing $600, 000 toward the settlement between Lessard and his companies and Wells Fargo.

Plaintiff first gave notice of the Claim to Defendant by letter dated January 24, 2012, and Plaintiff's defense counsel had already generated $475, 496.00 in fees and expenses by the time Defendant received Plaintiff's Claim on January 26, 2012.

Plaintiff seeks recovery under the policy with Defendant for both amounts paid in settlement to Wells Fargo and defense costs incurred with Wells Fargo's collection action. Plaintiff filed this action in the Circuit Court of Fairfax County, Virginia in December 2013 and the Defendant removed the action to this Court in January 2014. Defendant now moves here for summary judgment pursuant to Fed.R.Civ.P. 56.

Summary judgment is appropriate if the pleadings and evidence before the Court show no genuine dispute as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986). "The interpretation and construction of insurance policies is a matter of law, and therefore, such cases are particularly amenable to summary judgment." John Deere Ins. Co. v. Shamrock Indus. Inc. , 929 F.2d 413, 417 (8th Cir. 1991). Here, the instant policy was issued to a Virginia insured and Virginia law accordingly applies to interpret it. See Dreher v. Budget Rent-A-Car Sys., Inc. , 272 Va. 390, 395 (Va. 2006). Interpreting insurance policies, "like other contracts, " is done "in accordance with the intention of the parties gleaned from the words they have used in the document." See Transcon. Ins. Co. v. RBMW, Inc. , 262 Va. 502, 512 (2001) (quoting Floyd v. N. Neck Ins. Co. , 245 Va. 153, 158 (1993)); see also Nat'l Hous. Bldg. Corp. v. Acordia of Va. Ins. Agency, Inc. , 267 Va. 247, 251 (2004) ("It is not [a court's] function to make a new contract for the parties different from that plainly intended and thus create a liability not assumed by the insurer.") (internal quotations and citations omitted).

Defendant puts forth five arguments in favor of summary judgment based on the policy's language: (1) the policy affords coverage only for Claims first made during the Policy Period, and Wells Fargo's Claim against Plaintiff was made before the policy period; (2) the policy's coverage exclusion for any matter that was the subject of notice to a prior insurer squarely applies given Plaintiff's prior notice to Travelers of the Wells Fargo dispute; (3) Plaintiff does not seek amounts that qualify as a "Loss" within the policy's meaning; (4) even if the Claim were made within the Policy Period, it is untimely under the policy's provisions; and (5) the policy prohibited the Plaintiff's precise conduct: a settlement offer tendered before the Defendant's consent, forfeiting Plaintiff's right to recovery.

Turning to Defendant's first argument, a review of the policy's Declarations, General Terms & Conditions reveals its applicability only to Claims first made during the February 2, 2011 to February 2, 2012 Policy Period. For purposes of the policy's directors and officers liability coverage, a Claim includes a written demand for monetary damages or non-monetary relief against any Insured Person alleging a Wrongful Act. As only Claims that are first made during the Policy Period are coverable, the timing of Wells Fargo's Claim against Plaintiff is crucial.

The facts reveal that Wells Fargo's Claim was first made prior to the Policy Period. Lessard Companies defaulted under the relevant loans in 2010 and Wells Fargo had made written demands to Lessard to pay the amounts owed and resolved any dispute regarding the confessed judgments no later than January 2011; a fact evinced by the January 13, 2011 settlement letter between Wells Fargo and the Lessard Companies. Even before buying Defendant's insurance policy, let alone notifying Defendant of the Claim, Lessard provided notice of its dispute with Wells Fargo to Travelers in an attempt for it to cover the bank's Claim.

The Plaintiff contends that a genuine dispute of material fact nevertheless remains here because Wells Fargo only made written demands to Plaintiff's companies, but not to Plaintiff personally, prior to the bank's August 12, 2011 lawsuit. This argument fails. The policy states that a Claim is deemed made "in the case of a written demand for monetary damages or non-monetary relief, on the Named Company Insureds' receipt of such written demand." The "Named Company Insureds" include "the Named Company, any Subsidiary, Plans and Insured Persons covered under any Coverage Part." Here, the "Named Company" includes the various Lessard Companies. It is undisputed that Wells Fargo made a written demand on multiple Lessard Companies to pay amounts owed under the loan documents and these demands were made prior to the Policy period's inception. Accordingly, whether Plaintiff personally received a written demand is immaterial to determining whether the Claim was made within the Policy Period.

Plaintiff also fails to find a genuine dispute of material fact in attempting to characterize the pre-lawsuit demands by Wells Fargo against the Lessard Companies as a separate Claim from the later-filed lawsuit that included Plaintiff. Even if the two matters were separate Claims, the policy would ...

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