Court Opinion

ID: 9479043
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:06:20.826194+00
Date Added: 2024-06-11T17:46:47.173124
License: Public Domain

COX, Circuit Judge,
specially concurring:
I concur in the judgment of the court, but only because International has misconceived the issue in the case with respect to the applicability of exclusion 5(b). The majority agrees with the district court in holding that exclusion 5(b) is inapplicable because of its conclusion that in fact the PIP was not an instance of the appellees’ “gaining ... any personal profit or advantage to which they were not legally entitled.” International argues against this conclusion by asserting that, in fact, the PIP was an instance of corporate waste of the sort which is excluded from the policy’s coverage by 5(b). The relevant inquiry, in my opinion, is not whether, in fact, the PIP was an instance of corporate waste of the sort excluded from coverage by 5(b); rather, the relevant inquiry is whether the claim made by the plaintiff in the underlying shareholder’s derivative action was that the PIP was corporate waste of the sort excluded from coverage by 5(b). The relevant language of exclusion 5(b) is as follows:
“The insurer shall not be liable to make any payment for loss in connection with any claim made against the Insured’s: ... (b) based upon or attributable to their gaining in fact any personal profit or advantage to which they were not legally entitled.”
It is what the claim is predicated upon which determines the applicability of the exclusion. It is no more appropriate to conclude that the exclusion is not applicable because these officers and directors were entitled to the monies they received than it would be to conclude that there was no loss within the meaning of the insuring clause because there was no “wrongful act.” It is the nature of the claim that determines both the existence of a loss within the meaning of the insuring clause and the applicability of exclusion 5(b). Exclusion 5(b) seems to be designed to exclude coverage for claims based upon a contention that an insured has wrongfully lined his own pockets with money to which he was not entitled. An argument that coverage was excluded in this case by 5(b) for some of these claims because of the nature of the claims made in the shareholders’ derivative action would appear to have merit, and had that argument been made by International in the district court and in this court, I would have reached a different result. Because we should not create an argument for the appellant as a basis for reversing a judgment of the district court, however, I concur in the judgment of the court.