FILED U.S. COURT OF A P P E A LS E LE V EN T HC IR C U IT May 28, 2008 THOMAS K. KAH

N CLERK [ DO NO T P UB L I S H] I N THE UN I TE D STATE S C OU RT OF APPE ALS F O R T H E E L E V E N T H C IR C U IT

________________________ N o. 07- 14678

________________________ D
. C
. D ocketN o. 04 -025 23 -C V -C A P -1 E X E C U T I V E R I S K I N D E M N I T Y I N C ., P l ai nt i ff -C ou nt er D e f e n d a n t- A p p e lla n t,
v ersu s A F C E N T E R P R I S E S I N C ., F R A N K J . B E L A T T I , G E R A L D J . W I L K I N S , D I C K R . H O L B R O O K , D ef endant s- C ou nt er C la im a n ts - A p p e lle e s , S A M U E L N . F R A N K E L , M A R K J . D O R A N , P A U L F A R R A R , M A T T L . F I G E L , P E T E R S T A R R E T T , e t a l., D efen d an t s-A p p el l ees.

________________________ A pp ea l fr om t he U ni t ed S t at es D i stri ctC ou rt f o rth e N o r th e r n D is tr ic t o f G e o r g ia

_________________________ ( M ay 28, 2008)Honora

ble Susan C. Buc klew, United States District Judge f or the Middle District of F lorida, * sitti ngby designation. 2 B ef ore C A R N E S and M A R C U S , C i rc ui tJudg es , and B U C K L E W , D i stri ctJudg e. * P E R C U R I A M: In t hi s i nsurance c as e, E xecut i ve R i sk Indem nity Inc. (“ E xecut i ve R i sk”)
a ppe a l s fro m a fi na l j udgm e nte nt e r e d by the U ni t e d S t a t e s D i s tr i c tC our tf ort he N ort hern D i stri ctof G eorgi a, af t era bench t ri al , aw ar di ng A F C E n terp ri se s I nc. $ 2 4 ,2 9 5 ,8 9 0 .4 0 in d a m a g e s f o rb r e a c h o f

c o n tr a c t. E xe c ut i ve Ri s k ma ke s f ou r ba s i c c l a i ms on a pp e a l
. Fi r s t , i t s a y s the di st ri ct
c our te r r e d i n f

i ndi ng tha t A F C m ad e no m a t e r i a l m i s r e pr e s e nt a t i ons i n c onne c t i on
w i t h t he re new al of an i nsurance pol i cy . S ec on d, i tcl ai m s th at the t ri al court ab u se d it s d iscr etio n in d en yin g it s m o ti o n to co m p el d isco v er y f ro m A F C ’s
a c c o u n ta n t, K P M G . T h ir d , it c o n te n d s t h a t th e c o u r t a b u s e d its d is c r e tio n in denyi ng i t s m ot i on t o am end t he com pl ai nt . F i nal l y, i tar gu es thatthe di stri ctcourt
e r r e d i n c onc l udi ng tha tE xe c ut i ve R i s k w a s no t en t i t l e d t o a n a l l oc a t i on of the lo s s e s i n c u r r e d b y A F C in s e ttlin g a n u m b e ro f s e c u r itie s a n d d e r iv a tiv e la w s u its in 2003 ( ‘ t he unde r l y i ng a c t i ons ” )
. A f t e rr e vi e w , w e a f

f i r m the j udgm e ntof

the di s t r i c tc our tba s e d on i t s t hor ough a nd w e l l
- r e a s one d opi ni on of S e pt e m be r21, 2007. A s t o t he que st i o n o f al l oc a t i on, how e ve r , w e a dd thi s obs e r va t i on. P ur s ua ntIn p e rtinent p art , th e po lic y state s: 1 I f both L oss covered by this P olicy

and L oss not covere d by

this P olicy

are incurre d, either be causea Claim made ag ainst the Insureds include s both covere d and uncovered matters, or be causea Claim is made ag ainst both Insureds a nd oth e rs no t in c lud e d w ith in t hede fi nition

of “ Ins ure d”
. . . , [theIns ure ds ] agre e to us e the ir be st e ff or ts t o d e te rm inea

fair and prop e r allo c atio n o f all s uc h amou nts .

. . . In th e e ve nt t

hat an allo c atio n c ann ot b e a gre e d to , th e n [E xec uti veRis k] sh a ll be oblig ated to makean interim pay ment of the amount of L oss, Including De fens e Expe ns e s, wh ic h th e pa rtie s a gre e is n ot i n disp uteuntila fi nal amou

nt i s agree d upon or dete rmined pursua nt to the provisions of this P olicy and applicablelaw. The Policy

§ V, ¶ (B )(5) (empha sis added). 3 to th e te r m s o f

th e in s u r a n c e p o l i c y , E x e c u tiv e R is k c a n s e e k a n a llo c a tio n o n ly
w here bo th “ Los s c ov e r e d b y thi s Pol i c y a nd Los s no tc ov e r e d b y t hi s Pol i c y ar e i ncurre d ,” th ati s, ei ther ( 1) w here “ a C l ai m m ade a gai nstthe Insure ds i ncl ud es b o th c o v e r e d a n d u n c o v e r e d m a tte r s ,” o r( 2 ) w h e r e “a C la im i s m a d e a g a in s t b o th Insure ds and o thers no ti ncl ud ed w i thi n t h e def i ni t i on of ‘ Insure d. ’ ” N ei t her 1 ci rc um st ance i s pre se nt ed i n t hi s c as e. T here is n o di sput e thatthe “ cl ai m s” ra i se d in th e u n d e r ly in g a c tio n s in v o lv e d o n l y c o v e r e d “m a tte r s .” M o r e o v e r , it is undi s put e d tha ta l l of

the unde r l y i ng a c t i ons w e r e r a i s e d a ga i ns t“ I ns ur e d” pe r s ons
ore nt i t i e s . O n thi s pol i c y , E xe c ut i ve R i s k i s not en t i t l e d t o a n a l l oc a t i on of the
s e ttle m e n t lo s s e s . A c c o r d i n g l y , w e a f

f i r m. AF F I R ME D