United States Court of Appeals,

Fifth Circuit.

No. 91–2782.

FIDELITY & DEPOSIT COMPANY OF MARYLAND, Plaintiff–Appellee Cross–Appellant,

v.

THOMAS R. CONNER, et al., Defendants–Appellants Cross–Appellees,

and

Federal Deposit Insurance Corporation, Defendant–Intervenor–Appellant Cross–Appellee.

Oct. 1, 1992.

Appeals from the United States District Court for the Southern District of Texas.

Before WISDOM, SMITH, and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

The Federal Deposit Insurance Corporati on (FDIC) appeals a judgment declaring that Fidelity

and Deposit Company of Maryland ("F & D") has no duty to provide coverage under a directors and

officers ("D & O") liabilit y insurance policy issued to Northwest Commercial Bank, N.A. ("the

Bank") for claims brought by the FDIC against former Bank directors. Concluding that (i) the FDIC's

claim does not constitute a derivative shareholder/ depo sit o r claim, (ii) public policy does not

invalidate the D & O policy exclusions at issue, and (iii) the regulatory exclusion is effective against

the FDIC, we affirm.

I

F & D brought this action to obtain a judgment declaring its rights and obligations under a

D & O policy it issued to the Bank. The policy—effective January 3, 1986 thro ugh January 3,

1987—provides up to $1 millio n in liabilit y coverage for (i) claims made against the Bank's directors

and officers during the policy perio d and (ii) potential claims against these directors and officers1 When the policy expired, the Bank exercised its right to purchase a 90–day extension of

coverage—effective through April 3, 1987—to discover claims arising from wrongful acts

committed prior to January 3, 1987. The Bank gave F & D notice of potential claims on

September 11, 1986; December 2, 1986; December 8, 1986; December 10, 1986; December

31, 1986; January 12, 1987; and April 2, 1987.

2 Record Excerpts of Federal Deposit Insurance Corporation as Appellant at 6, Conner &

FDIC v. Fidelity and Deposit Co. of Maryland, No. 91–2782 (5th Cir. filed Oct. 17, 1991)

["Record Excerpts"].

3 Id.

4 These former directors are Thomas R. Conner, Thomas K. Dreessen, Stan Goss, A. Gary

Kovacs, David W. McKinney, Duke R. Moreland, Roger Mott, and Kenneth G. Trausch. a rising out of occurrences about which F & D was notified. 1 The policy includes a regulat ory

exclusion, which provides:

It is understood and agreed that the Company shall not be liable to make payment for Loss

in connection with any claim made against the Directors and Officers by any State or Federal

Official or Agency, including but not limited to the Federal Deposit Insurance Corporati on or Federal Savings and Loan Insurance Corporation. 2

It also contains an insured v. insured exclusion:

It is understood and agreed that the Company shall not be liable t o make any payment for

Loss in connection with any claim made against t he Directors and Officers by any other

Director or Officer of the Bank/Associat io n o r by the Bank/Association, e xcept for a

shareholders' derivative action when such action is brought by a shareholder who is neither

a Director nor Officer of the Bank/Association nor a beneficial holder of shares for a Director

or Officer of the Bank/Association. 3

On June 11, 1987, the Office of the Comptroller of the Currency declared the Bank—a

federally-chartered national banking association—insolvent and appoin t ed the FDIC receiver in

accordance with 12 U.S.C. § 1821(c) (1987). The FDIC then so ld certain Bank assets it held as

receiver to the FDIC in its corporate capacity, including the Bank's right to assert claims against its

officers and directors arising from the performance of their duties as officers and directors.

On January 9, 1989, the FDIC filed suit in federal district court against a number of the Bank's

former directors. 4 The FDIC's complaint sought damages in excess of $2 million against the directorsfor breach of fiduciary duty, negligence, negligence per se, and breach of contract under federal law.

On February 1, 1990, Conner—a defendant in the FDIC action—filed a third-party complaint against

a number of former directors who had not been named as defendants by the FDIC, alleging that these

directors were jointly liable in connection with the acts and omissions alleged in the FDIC action. All

defendants ex cept McKinney notified F & D of the lawsuit, and all defendants except McKinney,

Goss, and Trausch demanded that F & D defend them under the terms of the D & O policy. F & D

refused to provide a defense.

F & D filed this action on March 17, 1989, seeking a declaratory judgment that it has no duty

to provide coverage under the D & O policy for claims asserted against the Bank's directors by the

FDIC. The FDIC intervened in this action and moved for partial summary judgment declaring that

the regulatory and insured v. insured exclusions in the D & O policy do not preclude coverage for

its claims; F & D cross-moved for summary judgment declaring that these exclusions preclude

coverage.

The district court granted summary judgment in favor of F & D, holding that coverage for the

claims asserted by the FDIC is barred by the regulatory exclusion. Although the district court found

it unnecessar y t o reso lve issues regarding applicability and enforceability of the insured v. insured

exclusion, it did hold that this exclusion bars coverage for the third-party claims asserted by Conner.

II

Appealing the district court's grant of summary judgment in favor of F & D, the FDIC and

Conner (together referred to as "the FDIC") assert that:

A. The district court's holding that the regulatory exclusion bars coverage for the FDIC's claims

violates public policy because it deprives the FDIC of the rights of the Bank's shareholders

and depositors—rights Congress specifically granted to the FDIC; and

B. The regulatory and insured v. insured exclusions do not unambiguously e xclude coverage for

claims asserted by the FDIC.5 Brief of Federal Deposit Ins. Corp. as Appellant at 2, Conner and FDIC v. Fidelity and

Deposit Co. of Md., No. 91–2782 (5th Cir. filed Oct. 17, 1991) ["FDIC Brief"]. A

1

The FDIC challenges the district court's grant of summary judgment in favor of F & D on the

grounds that such coverage is barred by the D & O policy's regulatory exclusion clause. In

considering this summary judgment challenge, we review the record de novo, and with the guidance

of Rule 56 of the Federal Rules of Civil Procedure and several Supreme Court cases interpreting this

rule. S ee Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.1992), citing Celotex Corp. v. Catrett,

477 U.S. 317, 322–23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986), cert. denied, 484 U.S. 1066,

108 S.Ct. 1028, 98 L.Ed.2d 992 (1988); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–52,

106 S.Ct. 2505, 2509–12, 91 L.Ed.2d 202 (1986); M atsushita Elec. Ind. Co. v. Zenith Radio Corp.,

475 U.S. 574, 586–87, 106 S.Ct. 1348, 1355–56, 89 L.Ed.2d 538 (1986), ce rt. denied, 481 U.S.

1029, 107 S.Ct. 1955, 95 L.Ed.2d 527 (1987). The summary judgment standard is securely settled:

"Summary judgment is proper if the movant demonstrates that there is an absence of genuine issues

of material fact." Topalian, 954 F.2d at 1131.

2

The FDIC asserts that:

[j]udicial enforcement of the Regulatory Exclusion (or the Insured v. Insured Exclusion) to

bar coverage for the claims asserted by the FDIC in the FDIC Action would violate pu b lic

policy because it would substantially impair the congressional policy to grant the FDIC "all

rights, titles, powers, and privileges" o f t he shareholders and depositors of Northwest

Commercial Bank with respect to the assets of the Bank. Among the assets of the

shareholders an d depositors of the Bank under federal law is the right to assert derivative

claims against the Bank's officers and directors for mismanagement. 5

Untangled, these contentions separate into the following: (a) the FDIC's claim is a derivative

shareholder claim and, to the extent that the regulatory exclusion bars the FDIC from bringing such

claims but does not bar shareholders, the exclusion is invalid as a matter of public policy because the6 Record Excerpts at 6.

7 Section 1821(d)(2)(A)(i) provides, in pertinent part, that:

The Corporation shall, as conservator or receiver, and by operation of law,

succeed to—

(i) all rights, titles, powers, and privileges of the insured depository institution, and

of any stockholder, member, accountholder, depositor, officer, or director of such

institution with respect to the institution and the assets of the institution....

12 U.S.C. § 1821(d)(2)(A)(i).

8 Specifically, the FDIC asserts that the regulatory exclusion deprives it of the opportunity to

subrogate to the shareholders' and depositors' right to bring a covered derivative claims against

the directors:

Under F & D's interpretation of [the policy's] Exclusions, such derivative claims

are covered claims if asserted by shareholders and depositors, but are excluded

from coverage if asserted by their statutory successor, the FDIC. Judicial

enforcement of the Exclusions would seriously impair the FDIC's ability to

accomplish the congressional mandate following the FDIC to exercise all rights,

titles, powers, and privileges of the Bank's shareholders and depositors with

respect to assets such as the derivative claims at issue here. FDIC is entitled to exercise all sharehold ers' and depositors' rights and privileges, and, (b) more

generally, the D & O policy exclusions deprive the FDIC o f its statutory rights under 12 U.S.C. §

1821(d)(2)(A)(i) as subrogee of the Bank or as subrogee of the Bank's stockholders and depositors.

(a)

The D & O policy unambiguously excludes coverage for losses "in connection with any claim

made against the Directors and Officers by any State or Federal Official or Agency, including but not

limit ed to the Federal Deposit Insurance Corporati on or Federal Savings and Loan Insurance

Corporati on." 6 Therefore, although section 1821(d)(2)(A)(i) empowers the FDIC to act as successor

to the rights of the Bank, its stockholders, depositors, and directors, 7 the policy's regulatory exclusion

explicitly omits coverage for all of these entities for claims brought by the FDIC.

The FDIC attem

pts to ride aroun d t his exclusion by characterizing its action as a

shareho lder/depositor derivative action. 8 We find that the FDIC's action is not "derivative" fo rFDIC Brief at 7.

9 Rule 23.1 provides:

In a derivative action brought by one or more shareholders or members to enforce

a right of a corporation or of an unincorporated association, the corporation or association

having failed to enforce a right which may properly be asserted by it, the complaint shall

be verified and shall allege (1) that the plaintiff was a shareholder or member at the time

of the transaction of which the plaintiff complains or that the plaintiff's share or

membership thereafter devolved on the plaintiff by operation of law, and (2) that the

action is not a collusive one to confer jurisdiction on a court of the United States which it

would not otherwise have. The complaint shall also allege w ith particularity the efforts,

if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or

comparable authority and, if necessary, from the shareholders or members, and the reasons

for the plaintiff's failure to obtain the action or for not making the effort.

F ED .R.C IV .P. 23.1 (emphasis added).

10 Texas courts held long ago that unwillingness of corporate management to assert the

"derivative" claim, whether shown by demand and refusal or inferred from the circumstances, is

more than mere formality: It is what makes a derivative claim a derivative claim. See New section 1821(d)(2)(A)(i) purposes.

The FDIC's complaint makes no attempt to show an independent breach of duty toward the

Bank's depositors or share ho lders—a requirement for independent shareholder liability. S ee

Commonw ealth of Mass. v. Davis, 140 Tex. 398, 407–08, 168 S.W.2d 216, 221–22 (1942)

(Although the general rule is that "individual st o ckholders have no independent right of action for

injuries suffered by the corporati on[,].... exception has been applied more often in cases where there

was a fiduciary relationship which required the wrongdoer to protect the interest of the stockholder

... and full relief to the stockholder could not be had through a recovery by the corporati on."), cert.

denied, 320 U.S. 210, 63 S.Ct. 1447, 87 L.Ed. 18 48 (1943). In fact, the com pl ai nt, devoi d of

derivative action allegations, makes no effort to comply with Rule 23.1 of the Federal Rules of Civil

Procedure. 9 The pleading requirements of Rule 23.1 reflect the fact that a shareholder's or depositor's

right to bring a derivative action on behalf of the corporati on arises out of unwillingness on the part

of management of that corporati on to bring the claim directly. In short, "[t]he right to sue arises from

the fact that the corporati on itself refuses to sue." 13 W. F LETCHER

, C YCLOPEDIA OF THE L AW OF

P RIVATE C ORPORATIONS § 5954 (rev. ed. 1991). 10 Therefore, we find that the FDIC's claims againstBirmingham Iron & Land Co. v. Blevens, 12 Tex.Civ.App. 410, 34 S.W. 828, 833 (1896) (A

shareholder suing in derivative capacity "must show to the satisfaction of the court that he has

exhausted all the means within his reach to obtain, within the corporation itself, the redress of his

grievances, or action in conformity to his wishes."); see generally, Note, Demand on Directors

and Shareholders as a Prerequisite to a Derivative Suit, 73 H ARV .L.R EV . 746 (1960).

11 See, e.g., supra note 7, quoting 12 U.S.C. § 1821(d)(2)(A)(i).

12 In Jackson Purchase Rural Elec. Coop. Assoc. v. Local Union 816, 646 F.2d 264 (6th

Cir.1981), the Sixth Circuit set forth the factors that should be considered in performing this

balancing test: the Bank's directors are asserted as subrogee of the Bank and do n ot constitute the exercise of

shareholder/depositor derivative rights.

(b)

The FDIC also raises a more general public policy challe nge to the validi ty of the D & O

policy exclusions. Specifically, the FDIC asserts that the D & O policy exclusions deprive the FDIC

of its statutory rights under the Financial Institutions Reform, Recovery and Enforc e ment Act of

1989, Pub.L. No. 101–73, § 220(b)(3), 103 Stat. 183, 265–66 (FIRREA), codified at 12 U.S.C. §§

1811–1833(e) (1989). We find that, although FIRREA arms the FDIC with public policy braided

from strong, well-defined fibers, 11 the FDIC swings it s public policy lasso too broadly in the case

before us.

Whether an insurance policy exclusion violates public p o licy, "[l]ike other questions of

contract interpretation, ... is a question of law which we review de novo." St. Paul Fire & Marine

Ins. Co. v. FDIC, 968 F.2d 695, 702 (8th Cir.1992), citing FDIC v. Aetna Cas. & Surety Co., 903

F.2d 1073, 1077 (6th Cir.1990). "The general rule is that competent persons shall have the utmost

liberty of contract and that their agreements voluntarily and fairly made shall be held valid and

enforced in the courts." T win City Pipe Line v. Harding Glass, 283 U.S. 353, 356, 51 S.Ct. 476,

477, 75 L.Ed. 1112 (1931). Although contract ual agreements may be invalidated on grounds of

public policy, public policy opens only a narrow exception within this general rule—an exception to

be applied cautiously and only in plain cases invo lving dominant public interests. 12 S ee Twin City, 283[1] the justified expectations of the parties; [2] the forfeiture that would result

from non-enforcement of the agreement; [3] any special public interest in

enforcement; [4] the strength of the public policy that the agreement violates, as

shown by legislation or court decision; [5] the likelihood that refusal to enforce

will further that policy; and [6] the seriousness of the misconduct.

646 F.2d at 267, citing R ESTATEMENT (S ECOND ) OF C ONTRACTS § 320(1) (Tent.Draft No.

12, 1977).

13 The amorphous and didactic nature of "public policy" was recognized by the Supreme Court

long ago:

[T]he theory of public policy embodies a doctrine of vague and variable quality,

and, unless deducible in the given circumstances from constitutional or statutory

provisions, should be accepted as the basis of a judicial determination, if at all, only

with the utmost circumspection. The public policy of one generation may not,

under changed conditions, be the public policy of another.

Patton v. United States, 281 U.S. 276, 306, 50 S.Ct. 253, 261, 74 L.Ed. 854 (1930).

Therefore, "[a]s the term "public policy' is vague, there must be found definite indications

in the law of the sovereignty to justify the invalidation of a contract as contrary to the

policy." Muschany, 324 U.S. at 66; 65 S.Ct. at 451. To justify invalidating a contractual

agreement, public policy must be "well defined and dominant." Local 759, 461 U.S. at U.S. at 356, 51 S.Ct. at 477; s ee also Muschany v. United States, 324 U.S. 49, 66, 65 S.Ct. 442,

451, 89 L.Ed. 744 (1945) ("Only dominant public policy would justify such action."). In exercising

this exception, courts may not apply their own substantive views of public policy: "Public policy is

to be ascertained by reference to the laws and legal precedents and not from general considerations

of supposed public interests." M uschany, 324 U.S. at 66, 65 S.Ct. at 451; s ee United Paperworkers

Int'l. Union v. Misco, Inc., 484 U.S. 29, 43, 108 S.Ct. 364, 373, 98 L.Ed.2d 286 (1987) (holding that

court's refusal to enforce arbitrator's interpretation of contract is limit ed to situations where contracts

as interpreted would violate explicit, well-defined public policy) (quoting Muschany, 324 U.S. at 66,

65 S.Ct. at 451); W

.R. Grace & Co. v. Lo cal 759, 461 U.S. 757, 766, 103 S.Ct. 2177, 2183, 76

L.Ed.2d 298 (1983) (Stating that, although court may not enforce agreement contrary to public

policy, "[s]uch a policy, however, must be well defined and dominant ..."); c f. FDIC v. Jenkins, 888

F.2d 15 37, 1546 (11th Cir.1989) ("We are not convinced that Congress considered collections

against parties such as the bank-related defendants in this case as a necessary part of the recovery to

the deposit insurance fund. Any such prio rit y o ver third-party lawsuits will have to come from

Congress, not this court."). 13766, 103 S.Ct. at 2183.

14 FDIC Brief at 20.

15 The language proposed by the FDIC is as follows:

The Corporation may enforce any contract entered into by the financial institution

to the same extent as the financial institution in default, notwithstanding any

provision of the contract to the contrary, which it deems in its discretion to be

necessary for the orderly execution of its duties.

S. 413, 101st Cong., 1st Sess. § 211(2), proposing language to be codified at 12 U.S.C. §

1821(c)(2)(H).

16 Concerned that refusing to permit regulatory and insured v. insured exclusions might

eliminate the market for D & O coverage for financial institutions, Congress commissioned a

comprehensive study which consisted of written submissions from numerous insurers, banking

and insurance industry representatives, and others. See Brief of Appellee and Cross–Appellant

Fidelity and Deposit Co. of Md. at 36–37, FDIC v. Conner, No. 91–2782 (5th Cir. filed Dec. 18,

1991) ["F & D Brief"]. These submissions— see, e.g., Plaintiff's Exhibits 5 & 6—indicate concern

that refusing to permit regulatory and insured v. insured exclusions would result in a market with

few or no providers and little or no affordable coverage. Conscious of this concern, Senator

Garn, one of FIRREA's sponsors, made a statement of neutrality as to the enforceability of the

regulatory exclusion:

[w]ith respect to Directors' and Officers' liability insurance contracts, there has

been a substantial split in the decisions relating to the validity of regulatory The FDIC contends that enforcement of the regulatory exclusion would "seriously impai[r]

the congressional policy reflected in FIRREA." 14 However, FIRREA's legislative history includes a

chapter in which the FDIC submitted proposed statutory language that would have granted the FDIC

what it seeks in the case before us—that is, st at ut ory authority to avoid regulatory and insured v.

insured exclusions in D & O policies. 1 5 Just as we now reject the FDIC's interpretatio n o f t he

congressional policy surrounding FIRREA, Con gress rejected the FDIC's proposed language and

opted for the following:

The conservator or receiver may enforce any contract, other than a director's or offic er's

liability insurance contract or a depository institution bond, entered into by the depository

institution notwithstanding any provision of the contract providing for termination, default,

acceleration, or exercise of rights upon, or solely by reason of, solvency or the appointment

of a conservator or receiver.

12 U.S.C. § 1821(e)(12)(A) (1989) (emphasis added). In fact, FIRREA's legislative history reveals

that Congress intended to remain neutral regarding regulatory exclusions. 16 We conclude, therefore,exclusion clauses that prohibits a regulator from enforcing rights under the

contract. Compare Continental Casualty Co. v. Allen w ith Branning v. CNA Ins.

Companies (citations omitted). It is not the intent of the conferees to influence

these decisions or to affect the development of case law or statutory provisions

relating to the validity of these clauses and directors' and officers' liability insurance

contracts or fidelity or indemnity bonds. The intent of the conferees is to remain

neutral on these matters.

135 C ONG .R EC . S10198 (daily ed. Aug. 4, 1989) (statement of Sen. Garn) (emphasis

added; see also H.R.R EP . No. 101–54(I), 101st Cong., 1st Sess. 331, 416–17, reprinted

in 1989 U.S.C.C.A.N. 86, 127, 212–13. that t he FDIC cannot rely upon FIRREA as creating public policy against enforcement of the

regulat ory exclusion. S ee St. Paul, 968 F.2d at 702 (Where court rejected FDIC challenge to

regulatory exclusion in D & O policy on grounds of public policy, holding that "[t]he FDIC's public

policy argument is undermined by FIRREA and its legislative history."); A merican Cas. Co. v. Baker,

758 F.Supp. 1340, 1347 ( C.D.Cal.1991) ("There is no statute, including various provisions of

FIRREA, which expressly invalidates the exclusionary clauses in director and officer liability

policies."); c

f. FDIC v. Aetna Cas. & S urety Co., 903 F.2d 1073, 1078 (6th Cir.1990) (where

termination provisions of blanket bond were challenged as against public policy, holding that FIRREA

does not "provide the basis for a "dominant public policy' which wo uld justify voiding" applicable

bond provisions).

In sum, the Bank owned the right to pursue certain claims directly against its directors. The

FDIC-receive r succeeded to this right by statute, and the FDIC-corporate then succeeded to it by

assignment. Nevert heless, the right of an allegedly injured third party (such as the Bank) and,

correspondingly, the right of a subrogee of that third party (such as the FDIC-receiver) or that

subrogee's assignee (such as FDIC-corporate) to recover on an insurance contract is confined within

the scope of the insurance contract's coverage. S ee, e.g., Pacific Indem. Co. v. Acel Delivery Serv.,

Inc., 485 F.2d 1169, 1177 (5th Cir.1973) ("Generally, th e right of any injured party to proceed

against the insurer under the policy depends upon the insured's right of action against the insurer. The

claimant has no greater rights than the insured.") (citations omitted), cert. denied, 415 U.S. 921, 94

S.Ct. 1422, 39 L.Ed.2d 476 (1974); S eguros Tepeyac, S.A. v. Bostrom, 347 F.2d 168, 178 (5th17 Presently, although applicable regulations authorize the purchase of D & O policies by

insured institutions, 12 C.F.G. § 7.5217(d), and expressly prohibit certain D & O policy coverage,

id. (policy must exclude coverage for formal order assessing civil money penalties against bank

director or employee), insured institutions are not required to obtain D & O coverage. If the

FDIC's inability to collect on D & O insurance policies inflicts unacceptable violence upon the "

"compelling federal interest' in the maintenance of the integrity of federal deposit insurance funds

to prevent the federal treasury from having to shoulder the burden of an inadequate fund," FDIC

Brief at 20, Congress and the FDIC should require member banks to carry such insurance policies

without regulatory exclusions—that is, require banks to purchase D & O coverage for the risk of

bank failure.

18 See, e.g., St. Paul, 968 F.2d at 702 ("In light of this express statutory provision exempting

enforcement of D & O liability policies by a conservator or receiver, we cannot see how

enforcement of the regulatory exclusion would violate public policy."); American Cas. Co. v.

FDIC, 944 F.2d 455, 460 (8th Cir.1991) (regulatory exclusion excluding coverage in connection

with claim brought by FDIC is not unconscionable); FDIC v. Zaborac, 773 F.Supp. 137, 141

(C.D.Ill.1991) ("This Court adopts the holding and reasoning ... [that the regulatory] exclusion

unambiguously excludes coverage when read as a whole."); Pow ell v. American Cas. Co., 772

F.Supp. 1188, 1190 (W.D.Okla.1991) ("Plaintiffs' argument that the exclusion doesn't apply to

the FDIC action is a strained interpretation of the endorsement language."); American Cas. Co.

v. Baker, 758 F.Supp. 1340, 1343–47 (C.D.Cal.1991) (holding that regulatory exclusion bars Cir.1965) ("In the absence of statutory provisions or required form policies, it is generally held that

the injured person stands in the shoes of the insured, and his rights against the insurer are no greater

and no less than those of

t he insured.") (quoting 8 A P PELMAN

, I NSURANCE L AW AND P RACTICE §

4811 (1962 rev. ed.)); K

lein v. Century Lloyds, 154 Tex. 160, 162, 275 S.W.2d 95, 96 (1955) ("It

should be kept in mind that this is a suit on an insurance policy executed to [the insured] and that it

can benefit pe t it io ners only to the degree which it affords protection to [the insured]."). In short,

public policy does not create insurance coverage that never existed:

FDIC argues that to hold the [regulatory and insur ed v. insured] endorsements

enforceable gives the parties the right to bargain away FDIC's statutory right to marshal and

collect assets. However, the FDIC overlooks the very important fact that in order to marshal

and collect an asset, the failed bank must have it as an asset. Here, the bank did not own as

an asset directors' and officers' liabilit y insurance without an FDIC endorsement. Therefore,

such argument fails. Nothing in the endorsement affects FDIC as receiver to have all the

rights and claims that the failed banking institution would have had.

Continental Cas. v. Allen, 710 F.Supp. 1088, 1099–1100 (N.D.Tex.1989). In fact, it would not have

been against public policy for the Bank to have purchased no D & O coverage at all. 17 Accordingly,

this court joins the overwhelming majority of courts which, confronted with this issue, have ruled that

regulatory exclusions are enforceable. 18claims made by Resolution Trust Corporation against officers and directors); Gary v. American

Cas. Co., 753 F.Supp. 1547, 1550–51 (W.D.Okla.1990) (regulatory exclusion excludes coverage

for FDIC's claims); id. at 1552–53 (rejecting FDIC's public policy arguments parallel to those

raised in the suit before us); Continental Cas. Co. v. Allen, 710 F.Supp. 1088, 1098–1100

(N.D.Tex.1989) (rejecting FDIC's public policy arguments); FDIC v. Bow en, 824 P.2d 41, 43

(Colo.Ct.App.1991) ("[W]e are not persuaded that there is any public policy which precludes this

contractual limitation on [insurer's] liability under the policy."); see also Finci v. American Cas.

Co., 323 Md. 358, 372–81, 593 A.2d 1069, 1076–80 (1991) (finding regulatory exclusion

unambiguous and that it does not violate public policy by barring claims brought by state

depositor insurance fund). Contra Branning v. CNA Ins. Cos., 721 F.Supp. 1180, 1183–84

(W.D.Wash.1989) (exclusionary clause hinders FSLIC's exercise of federal powers and is,

therefore, contrary to public policy); FSLIC v. Mmahat, No. 86–5160, 1988 WL 19304, at * 2

(E.D.La. Mar. 3, 1988) ("In sum, not only are both exclusions ambiguous, but their application to

this case would contravene public policy."); FSLIC v. Oldenburg, 671 F.Supp. 720, 723–24

(D.Utah 1987) (exclusion is void as against public policy).

19 The FDIC argues that it holds much more—that "courts have consistently held that the FDIC

does not simply "stand in the shoes' of a failed institution in asserting claims against the

institutions directors and officers, but instead has broader rights pursuant to its statutory

authority." FDIC Brief at 32 (citations omitted). Although the FDIC is armed with potent public

policy powers ( see, e.g., Texas Refrigeration Supply v. FDIC, 953 F.2d 975, 978–80 (5th

Cir.1992), where this court discusses expansion of the doctrine of D'Oench, Duhme ), we have

concluded that such assertions are misplaced in the case before us because "the power to refuse to

enforce contracts on the ground of public policy is limited to occasions where the contract would

violate "some explicit public policy' that is "well defined and dominant ...' " St. Paul, 968 F.2d at

702, quoting St. Paul Mercury Ins. Co. v. Duke Univ., 849 F.2d 133, 135 (4th Cir.1988); see

supra Part II.A.2. In short, for the purposes of overcoming the D & O policy's exclusions, the

FDIC's public policy arguments are "undermined by FIRREA and its legislative history." St. Paul,

968 F.2d 702.

20 See text accompanying supra note 2 (quoting the regulatory exclusion in its entirety). B

As an alternative to its "public-policy trumps exclusions" assertion, the FDIC contends that

the regulatory and insured v. insured exclusions do not unambiguously exclude coverage for claims

asserted by the FDIC. We disagree.

The FDIC was init ially a stranger to this policy and acquired rights under it only by virtue of

receivership, which subrogated the FDIC to the policy rights of the Bank and its shareholders and

depositors. The FDIC holds all of the rights under the D & O policy held by its predecessors in

interest, 19 but that policy explicitly excludes (i) coverage for "Loss in connection with any claim made

against the Directors and Officers by

... the Federal Deposit Insurance Corporati on or Federal Savings

and Loan Insurance Corporati on" 20 and (ii) "Loss in connection with any claim made against the21 See text accompanying supra note 3 (quoting the insured v. insured exclusion in its entirety).

22 See Kelly Assocs., Ltd. v. Aetna Cas. and Sur. Co., 681 S.W.2d 593, 596 (Tex.1984)

("When the language of a policy is susceptible of more than one reasonable construction, the

courts will apply the construction which favors the insured and permits recovery."), quoting

Ramsay v. Maryland Am. Gen. Ins. Co., 533 S.W.2d 344 (Tex.1976); see also Maryland Cas.

Co. v. State Bank & Trust Co., 425 F.2d 979, 982 (5th Cir.) (whether ambiguity exists in

language of an exclusionary provision of an insurance policy is a matter of law for the court to

decide), cert. denied, 400 U.S. 828, 91 S.Ct. 55, 27 L.Ed.2d 57 (1970).

23 See text accompanying supra note 3 (quoting the exclusion).

24 See supra Part II.A.2.(a). Directors and Officers by any other Director or Officer of the Bank/Association or by the

Bank/Association, except for a shareholders' derivative action...." 21 Although we construe ambiguity

in policy language in favor of the insured, 22 this court "has no right to read an ambiguity into the plain

language of an insurance contract in order to construe it against the insurer." St. Paul, 968 F.2d at

701 (internal quotati on omitted). Accordingly, we will not read ambiguity into the language of the

D & O policy exclusions. S ee Sharp v. FSLIC, 858 F.2d 1042, 1045 (5th Cir.1988) ("[C]ourts ought

not to strain to find such ambiguities, if, in so doing, they defeat probable intentions of the parties."),

quoting Calcasieu–Marine National Bank v. American Employers' Ins. Co., 533 F.2d 290, 296 (5th

Cir.), cert. denied, 429 U.S. 922, 97 S.Ct. 319, 50 L.Ed.2d 289 (1976).

We find that there is only one interpretation of the insured v. insured exclusion as it pertains

to the third-party claims asserted by Conner—that is, the plain langua ge of the insured v. insured

exclusion bars Conner's claims against his former colleagues. 2 3 S ee Continental Savings A ss'n v.

United States Fidelity Guar. Co., 762 F.2d 1239, 1245 (5th Cir.) (holding th at a provision is

ambiguo us o nly if it is subject to two or more reasonable interpretations which are inconsistent)

(citation omitted), amended in part, 768 F.2d 89 (5th Cir.1985). As for the FDIC's challenge to this

insured v. insured exclusion, we have already concluded that (i) the FDIC's claim does not constitute

a derivative shareholder/depositor claim, 24 (ii) public pol icy do es not invalidate the D & O policy25 See supra Part II.A.2.(b).

26 Id.

27 See, e.g., Gary v. American Cas. Co., 753 F.Supp. 1547, 1554 (W.D.Okla.1990) ("[T]he

FDIC is standing in the shoes of the bank in prosecuting these claims. As such, the "Insured v.

Insured' exclusion in the 1983 policy applies to the FDIC's claims and precludes D & O insurance

coverage therefor."); American Cas. Co. v. FDIC, 677 F.Supp. 600, 604 (N.D.Iowa 1987)

(finding an insured v. insured exclusion unambiguous as to it applicability regarding the FDIC);

Mount Haw ley Ins. Co. v. FDLIC, 695 F.Supp. 469, 481–83 (C.D.Cal.1987) (insured v. insured

exclusion applies to claim by FSLIC in its capacity as receiver of insured institution) ("FSLIC, in

its suit, has asserted claims belonging to CSB. These claims would not be covered under the

policy if asserted by CSB; it is difficult to argue that they should be covered when asserted on

behalf of CSB by its receiver."). exclusions, 25 and (iii) the regulatory exclusion is effective against the FDIC. 26 Therefore, although

a number of courts have recognized that, when both are suing the bank's officers and directors, an

insured bank and its receiver share equivalent status under an insured v. insured exclusion, 27 we do

not reach this issue in the case before us.

III

For the foregoing reasons, we AF FIRM the district court's grant of summary judgment in

favor of F & D.