Court Opinion

ID: 3176580
Source: CourtListenerOpinion
Date Created: 2016-02-11 05:16:18.664125+00
Date Added: 2024-06-11T12:17:04.732453
License: Public Domain

District of Columbia
                                Court of Appeals
No. 14-CV-659                                                           FEB 11 2016

CARLYLE INVESTMENT MANAGEMENT, LLC, et al.,
                               Appellants,

         v.                                                    CAB-3190-13

ACE AMERICAN INSURANCE COMPANY, et al.,
                                Appellees.

              On Appeal from the Superior Court of the District of Columbia
                                    Civil Division

     BEFORE: Thompson and Easterly, Associate Judges; and Reid, Senior Judge.

                                    JUDGMENT

               This case came to be heard on the transcript of record, the briefs filed, and
was argued by counsel. On consideration whereof, and as set forth in the opinion filed this
date, it is now hereby

              ORDERED and ADJUDGED that the trial court‘s order of dismissal is
vacated, and the case is remanded to the trial court for discovery, and for dispositive
motions or trial.

                                          For the Court:

Dated: February 11, 2016.

Opinion by Senior Judge Inez Smith Reid.
Notice: This opinion is subject to formal revision before publication in the
Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the
Court of any formal errors so that corrections may be made before the bound
volumes go to press.
                                                                               2/11/16
             DISTRICT OF COLUMBIA COURT OF APPEALS

                                  No. 14-CV-659

         CARLYLE INVESTMENT MANAGEMENT L.L.C., et al., APPELLANTS,

                                         v.

             ACE AMERICAN INSURANCE COMPANY, et al., APPELLEES.

                          Appeal from the Superior Court
                            of the District of Columbia
                                  (CAB-3190-13)

                    (Hon. Frederick H. Weisberg, Trial Judge)

(Argued May 12, 2015                                   Decided February 11, 2016)

      Stephen A. Weisbrod, with whom Martin Bienstock, Andrew W. Lamb, and
Sean J. Williams, were on the brief, for appellants.

     Louis H. Kozloff, with whom Lawrence H. Mirel, Luke D. Lynch, Jr., and
David Kuffler, were on the brief, for appellees.

      Before THOMPSON and EASTERLY, Associate Judges, and REID, Senior Judge.

      REID, Senior Judge: This case involves efforts by appellants, Carlyle

Investment Management (―CIM‖), TC Group, L.L.C. (―TCG‖), and TCG Holdings,

L.L.C. (―TCGH‖) (collectively, ―appellants‖), to obtain declaratory relief indicating

that they are entitled to insurance coverage for defense costs incurred or to be

incurred in underlying lawsuits. The trial court granted the Super. Ct. Civ. R. 12
                                         2

(b)(6) motion of appellees, Ace American Insurance Company and fifteen other

insurance companies, including Chartis Property Casualty Company and Chartis

Specialty Insurance Company (―the insurance companies‖), and dismissed

appellants‘ complaint. The trial court concluded that, as a matter of law, all of the

claims in the underlying lawsuits arise from ―professional services‖ provided to the

Carlyle Capital Corporation (―CCC‖), and hence, the claims fall under the insurance

policies‘ ―Carlyle Capital Corp Exclusion‖ (―the professional services exclusion‖ or

―the CCC exclusion‖). For the reasons stated below, we vacate the trial court‘s

order of dismissal and remand the case to the trial court for discovery, and for

dispositive motions or trial.

                                FACTUAL SUMMARY

      According to appellants‘ complaint, The Carlyle Group formed CCC as an

independent company under the laws of the Island of Guernsey, Channel Islands, in

2006.1 CCC is governed by a small Board of Directors, and is managed by CIM

      1
          CCC has described The Carlyle Group as ―a private global investment
firm‖ that, among other activities, ―originates, structures and acts as lead equity
investor in management-led buyouts . . . [and in] equity private placements . . . .‖
Appellants‘ complaint also characterizes (1) The Carlyle Group as ―a global private
                                                                     (continued…)
                                         3

and its affiliates—TCG and TCGH.2

      ―CCC invested primarily in AAA-rated residential mortgage-backed

securities issued by Fannie Mae and Freddie Mac.‖ Initially Class A shares in CCC

were issued to beneficial voting shareholders. In September 2006, CCC prepared a

private placement memorandum governing the private placement of non-voting

shares. In late 2006 and in part of 2007, CCC offered its Class B shares to qualified

investors and raised $945 million. Among the investors in CCC were Michael

Huffington, and the National Industries Holding Group (―NIG‖) of Kuwait. After

CCC collapsed in 2008, due to ―the confluence of the mortgage and liquidity crises,‖

several legal actions were filed against The Carlyle Group, CCC, CCC Directors,

CIM, TCG, TCGH, and David Rubenstein (co-founder of The Carlyle Group);

plaintiffs in these actions included Mr. Huffington (2011 complaint), NIG (2009

complaint), the CCC liquidators (2012 complaint), and various shareholders (2011

complaint). As the legal actions unfolded in various courts, CIM, TCG and TCGH

gave the insurers notice of the lawsuits and made claims against the insurance

(…continued)
equity firm comprised of numerous companies, including CIM, TCG and TCGH‖;
(2) CIM as ―a subsidiary of TCG‖; and (3) TCG as ―a subsidiary of TCGH.‖
      2
       CCC and CIM (but not TCG and TCGH) executed an Investment
Management Agreement on September 20, 2006.
                                         4

companies for the advancement and reimbursement of defense costs. The insurers

have denied the claims.

      After the formation of CCC, The Carlyle Group had arranged for expanded

insurance coverage through a $15 million policy issued to TCG by American

International Specialty Lines Insurance in 2006/2007, and a $10 million policy

issued to TCG by the same company in 2007/2008 and 2008/2009. In 2009/2010,

Chartis Specialty Insurance Company (the new name for the former insurance

company) issued a $10 million private equity management and professional liability

policy to TCG; this policy was known as the TCG Program. Other insurers issued

excess policies to TCG, beginning with $50 million excess coverage for the year

2006/2007, $75 million in 2007/2008, $100 million in 2008/2009, and $145 million

in 2009/2010. In addition, The Carlyle Group and CCC purchased another policy

for CCC through Chartis Europe Limited; this policy was known as the CCC

Program and covered CCC Directors and CIM only for professional liability claims.

      In 2007 (and continuing through the 2009/2010 insurance coverage period),

American International Specialty Lines, Chartis Specialty Insurance, and the excess

insurers added Endorsement #2, the ―Carlyle Capital Corp Exclusion,‖ to the TCG

policy. This professional services exclusion specified that, ―In consideration of the
                                          5

premium charged, it is hereby understood and agreed that the Insurer shall not be

liable to make any payment for Loss in connection with any Professional Services

Claim arising from Professional Services provided to Carlyle Capital Corp.‖3

      3
          The 2009/2010 policy defined ―professional services claim‖ as ―a [c]laim
made against any [i]nsured arising out of, based upon or attributable to
[p]rofessional [s]ervices provided by an [i]nsured.‖        The policy defined
professional services as:

            (1) [T]he giving of financial, economic or investment
                advice regarding investments in any debt, equity or
                convertible securities, collateralized debt obligations,
                collateralized loan obligations, collateralized mortgage
                obligations, . . . , including without limitation the
                giving of financial advice to or on behalf of any [f]und
                (or any prospective [f]und) or any separately managed
                account or separate account holder or any limited
                partner of any [f]und (or prospective [f]und) or any
                other investor or client of, in or with an [o]rganization;

            (2) [T]he rendering of or failure to render investment
                management services, including without limitation
                investment management services concerning any of
                the foregoing investments, and including without
                limitation, the rendering of or failure to render
                investment management services to or on behalf of any
                [f]und (or any prospective [f]und) or any separately
                managed account or separate account holder or any
                limited partner of any [f]und (or prospective [f]und) or
                the rendering or failure to render investment
                management services to or on behalf of any other
                investor or client of, in or with an [o]rganization;

                                                                        (continued…)
                                         6

      Appellants‘ complaint for declaratory relief and damages, filed in the

Superior Court of the District of Columbia on May 7, 2013, alleged two causes of

(…continued)
           (3) [T]he organization or formation of, the purchase or sale
               or offer or solicitation for the purchase or sale of any
               interest(s) in, the calling of committed capital to, a
               [f]und or prospective [f]und;

            (4) [A]ny activity relating to the offer, purchase or sale or
                solicitation for the purchase or sale, or disposition or
                divestiture of any [p]ortfolio [e]ntity (or prospective
                [p]ortfolio entity) or any interest(s) in a [p]ortfolio
                [e]ntity (or prospective [p]ortfolio [e]ntity);

            (5) [T]he providing of advisory, consulting, management,
                monitoring, administrative, investment, financial or
                legal advice or other services for, or the rendering of
                any advice to, or with respect to, an [o]rganization, a
                [f]und (or any of its limited partners or members) or a
                [p]ortfolio [e]ntity (or a prospective [o]rganization,
                [i]nvestment [f]und or [p]ortfolio [e]ntity)

            (6) The solicitation, offer, syndication, promotion or
                calling of capital by an [i]nsured for any manner of
                co-investment in a [p]ortfolio [e]ntity or [p]rospective
                [p]ortfolio [e]ntity, including but not limited to
                fund-raising, road show, investor relations or pre-IPO
                activities;

            (7) [T]he payment or non-payment of any distribution,
                dividends, redemption (whether in cash or in-kind) by
                any [i]nsured], [p]ortfolio [e]ntity or any of their
                respective parents, subsidiaries or affiliates; or

            (8) Other similar or related services.
                                           7

action. Count one sought a declaratory judgment concerning its policies, and, as

relief, appellants requested, in part, ―a judgment declaring that Carlyle has satisfied

the terms and conditions of the policies,‖ as well as:

             a judgment declaring Carlyle‘s rights to coverage under
             the policies in the TCG Program for CCC-related claims,
             including Carlyle‘s rights to advancement of defense
             costs, Carlyle‘s rights to reimbursement of
             indemnification payments made to or on behalf of the
             CCC Directors and Mr. Rubenstein, and Carlyle‘s rights
             with respect to payments of judgments or settlements.

Count two alleged breach of contract and requested damages.

      In response to the complaint, appellees filed a joint motion to dismiss on July

19, 2013, pursuant to Super. Ct. Civ. R. 12 (b)(6). Appellants lodged an opposition

to the motion on September 20, 2013; appellees filed a reply and appellants a

surreply. The parties also filed exhibits in support of the motion and opposition.

In addition, on March 19, 2014, appellees moved to stay discovery pending a

decision on their motion to dismiss. Appellants opposed the motion on April 17,

2014, and the parties filed additional pleadings pertaining to the motion to stay

discovery. On April 29, 2014, the trial court granted the motion to stay discovery,

asserting that despite the passage of time since the filing of the motion to dismiss, ―it

would be inefficient, and potentially unfair to [Appellees], to launch the parties into
                                          8

expensive discovery while the court considers whether [Appellants] have a basis to

go forward with their complaint.‖

      Subsequently, on May 15, 2014, the trial court signed an order granting

appellees‘ motion to dismiss. In essence, the trial court concluded that key terms

are so broadly defined in the insurance contract that everything alleged in the various

underlying complaints (Huffington, NIG, etc.), for which appellants sought defense

costs, is excluded from coverage. Specifically, the court declared that the terms

―Professional Services‖ and ―Professional Services Claim‖ ―are specifically defined

in the contract, the definitions are broad and unambiguous and, as used in the

Exclusion, they operate to exclude coverage for all of the losses (and defense costs)

at issue in this case.‖ The court asserted:

             Although plead in a plethora of different legal theories and
             multiple counts, the gravamen of all of the underlying
             complaints is that [appellants] enticed the investors into
             unsafe investments by falsely promising high returns with
             minimal risk, misled or failed to warn investors about
             increasing risk, and mismanaged the investments by
             failing to guard against their inherent risk, even after
             deteriorating market conditions should have dictated a
             variety of conservative strategies designed to decrease
             leverage and prevent the insolvency of the company and
             investor losses that occurred in 2008.

The court acknowledged that appellants correctly contended:

             that the court is required to consider each claim in each
                                          9

             complaint in deciding the coverage issue presented, but
             the ‗eight corners rule‘ neither requires nor permits the
             court to scrutinize each count in each complaint with a
             dictionary in one hand and The Chicago Manual of Style
             in the other to see if there is an allegation that could be
             contorted so as to bear an interpretation that would take it
             out of the Exclusion[;] [t]he exclusion is not ambiguous.[4]

      The trial court rejected appellants‘ argument that ―‗management-liability

claims‘—those related to acts, errors, and omissions in corporate governance or

‗D&O‘ claims—are not excluded.‖ As the court put it:

             Whatever might be true in the insurance industry
             generally, in [the] insurance contract [at issue], ―Loss in
             connection with any Professional Services Claim arising
             from Professional Services provided to Carlyle Capital

      4
          The trial court concluded:

                    Each claim in each complaint arises from the
             provision of Professional Services to CCC, whether it
             relates to the alleged false marketing of the shares to
             private investors (Huffington and NIG), the alleged failure
             to make required disclosures to purchasers of publicly
             traded shares (Shareholder Class Action), CIM‘s alleged
             mismanagement of CCC under the IMA (Huffington,
             NIG, Shareholder Class, and Liquidators), the alleged
             misrepresentations or failure to warn investors and failure
             to take appropriate actions to maintain adequate liquidity
             when the market was showing signs of collapse and CCC
             was over-leveraged (same), or the operation of CCC with
             divided loyalties by acting as ―de facto directors‖ or
             ―shadow directors,‖ allegedly for the benefit of other
             Carlyle interests and to the detriment of CCC and its
             outside shareholders (Liquidators).
                                          10

                 Corp.‖ was expressly excluded from coverage[;] [t]hose
                 terms were defined in the contract broadly enough to
                 include virtually all of the conduct alleged against
                 [appellants] (and those they are indemnifying) in the
                 underlying lawsuits, whether or not such conduct would
                 be characterized as professional services or corporate
                 management in the industry generally or in some other
                 insurance contract.

                           THE PARTIES’ ARGUMENTS

       Appellants contend that the trial court erred by granting appellees‘ motion to

dismiss, pursuant to Super. Ct. Civ. R. 12 (b)(6). They essentially argue that the

trial court erred by construing the professional services exclusion ―broadly‖ and

―expansively‖ rather than ―narrowly.‖ They assert that the court further erred by

failing to recognize that the professional services exclusion of the insurance contract

is ‗―reasonably or fairly susceptible to different constructions or interpretations,‘ at

least one of which allows some coverage,‖ and that the professional services

exclusion ―is reasonably construed not to apply to the many [u]nderlying [c]laims

concerning CCC‘s corporate governance; conduct occurring after CCC was publicly

traded; or statements allegedly made to induce investors to hold onto interests in

CCC, which plainly are not ‗solicitation[s] for the purchase or sale of any

interest[s].‘‖     They also argue that the professional services exclusion is not

reasonably construed to apply to de facto and shadow director claims in the
                                          11

liquidators‘ law suit; and that the trial court wrongly branded as ―irrelevant‖ the

professional services definition‘s ―recipient-entity requirements‖ (that is, for

example, the requirement in some of the subparts of the definition that the services

be rendered to a ―Fund,‖ ―Organization,‖ or ―Portfolio Entity).‖ They fault the trial

court for failing to ―specif[y] what part of the ―[p]rofessional [s]ervices‖ definition

purportedly applies unambiguously to corporate governance,‖ and for failing to

―consider[] whether the definition of ‗[p]rofessional [s]ervices‘ is ambiguous due to

its use of undefined phrases such as ‗investment management services‘ and

‗management services‘‖ (emphasis in original).

      Appellants contend that ―[r]eversal is warranted here, [because] the terms

‗investment management services‘ and ‗management . . . services‘ do not

unambiguously encompass corporate governance,‖ that ―corporate governance is

not a ‗service,‘‖ and interpreting those services ―as not encompassing corporate

governance comports with common usage in the business world.‖ Appellants

further contend that ―[n]o other part of the [p]rofessional [s]ervices definition comes

close to encompassing corporate governance.‖5 Finally, appellants emphasize that

      5
         Appellants further claim that their policy interpretation is ―reasonable‖
under principles of contract interpretation, and ―fits the objective context in which
the parties agreed to the [p]olicy and [e]xclusion,‖ a context that recognizes
                                                                       (continued…)
                                          12

the trial court must ―analyz[e] each cause of action in each [underlying] lawsuit‖

(emphasis in original). And, they insist that, here, the trial court failed to apply the

correct standard in dismissing its complaint under Rule 12 (b)(6) – the ―defense-cost

standard‖ that ―precludes dismissal unless beyond doubt there is no possibility for

any coverage for any [u]nderlying [c]laim.‖

      Appellees urge this court to ―hold as a matter of law that there is no coverage

for the [u]nderlying [l]awsuits and affirm the Superior Court‘s dismissal of the

[c]omplaint.‖    Appellees stress the plain words of the professional services

exclusion and the presence of the term ―arising out of‖ in the professional services

claim definition. Specifically, they contend that, ―The breadth of the definition . . .

assures Carlyle broad coverage for the range of activities it undertakes as part of its

private equity operations,‖ but ―it bars coverage for [c]laims ‗arising from‘ the

provision of those same services to CCC.‖ They further maintain that, ―[b]ecause

the CCC Exclusion excludes ―‘[p]rofessional services claims arising from

[p]rofessional [s]ervices provided to Carlyle Capital Corp.‘ [emphasis in original],

(…continued)
―industry custom and usage,‖ as well as ―the simultaneous underwriting of the TCG
and CCC Programs‖ and ―the CIM-CCC relationship.‖ They maintain that the trial
court erred by failing (in the absence of the benefit of discovery) to understand that
the professional services exclusion was an ―E&O‖ (errors and omissions) exclusion
and not a ―D&O‖ (directors and officers) exclusion.
                                           13

the [c]ourt need not determine that literally every allegation in the [u]nderlying

[l]awsuits alleges an [i]nsured‘s provision of [p]rofessional [s]ervices to CCC.‖

They insist that each underlying claim arises from professional services provided to

CCC.

       Appellees ―push back‖ against appellants‘ arguments by stressing the broad

definition of professional services, which they claim is unambiguous. They declare

that, ―the breadth of the definition of [p]rofessional [s]ervices‖ simply bolsters the

Superior Court‘s conclusion that whatever phrases like ‗management services‘ and

‗professional services‘ might mean in the abstract and out of context, as used in the

[p]olicy, they easily encompass both ‗operational management‘ and ‗corporate

governance‘ services.‖ Moreover, appellees agree with the trial court that whether

CCC, ―at any given point in time, was a [f]und, [o]rganization or some other form of

entity relevant to the [p]olicy‘s definition of [p]rofessional [s]ervices,‖ is irrelevant,

because ―the CCC Exclusion explicitly provides that it applies to all [p]rofessional

[s]ervices ‗provided to CCC.‘‖

                                      ANALYSIS

       Standard of Review
                                          14

      ―We review de novo the trial court‘s dismissal of a complaint under Super. Ct.

Civ. R. 12 (b)(6).‖ Logan v. LaSalle Bank Nat’l Ass’n, 80 A.3d 1014, 1019 (D.C.

2013) (citation omitted). In this notice pleading jurisdiction, which has ―adopted

the pleading standard[s] articulated by the Supreme Court,‖ Equal Rights Ctr. v.

Properties Int’l, 110 A.3d 599, 602 (D.C. 2015) (per curiam), a complaint must

contain sufficient factual matter, accepted as true, to state a claim to relief that is

plausible on its face.‖ Logan, supra, 80 A.3d at 1019 (citing Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009)) (internal quotation marks omitted); see also Comer v. Wells

Fargo Bank, 108 A.3d 364, 371 (D.C. 2015) (―to survive a motion to dismiss, a

complaint must contain sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face.‖) (internal quotation marks and citation omitted).

―Bare allegations of wrongdoing that are no more than conclusions are not entitled

to the assumption of truth, and are insufficient to sustain a complaint.‖ Logan,

supra, 80 A.3d at 1019 (citing Iqbal, supra, 556 U.S. at 679). ―However, [w]hen

there are well-pleaded factual allegations, a court should assume their veracity and

then determine whether they plausibly give rise to an entitlement to relief.‖ Id.

(internal quotation marks and citation omitted). We draw all inferences from the

factual allegations of the complaint in the plaintiff‘s favor. Equal Rights Center,

supra, 110 A.3d at 603 (citing Grayson v. AT&T Corporation, 15 A.3d 219, 288

(D.C. 2011) (en banc)). ―A complaint should not be dismissed because a court does
                                            15

not believe that a plaintiff will prevail on [its] claim[;] [i]ndeed it may appear on the

face of the pleadings that a recovery is very remote and unlikely but that is not the

test.‖ Logan, supra, 803 A.3d at 1019 (citing Grayson, supra, 15 A.3d at 229

(internal quotation marks omitted)). ―Dismissal is proper only where it appears,

beyond doubt, that the plaintiff can prove no facts which would support the claim.‖

Schiff v. American Ass’n of Retired Persons, 697 A.2d 1193, 1196 (D.C. 1997)

(citations omitted).

       Discussion

       In this ―private equity management and professional liability insurance‖

contract case, that the trial court dismissed under Rule 12 (b)(6) and that involves a

demand for a declaratory judgment indicating that appellants are entitled to coverage

for defense costs and for settlements and judgments, we are unable to agree with the

trial court and appellees that appellants did not state a claim to relief that is plausible

on its face because, as a matter of law, the policy‘s professional services exclusion is

so broad and unambiguous that it precludes any coverage pertaining to appellants‘

defense of underlying lawsuits filed against them by Mr. Huffington, NIG, the CCC

liquidators, and shareholders. Before explaining our conclusion, we set forth legal

principles governing insurance contract interpretation.
                                            16

       Legal Principles Governing Interpretation of the Insurance Policies

       Contract principles are applicable to the interpretation of an insurance policy.

Stevens v. United Gen. Title Ins. Co., 801 A.2d 61, 66 (D.C. 2002) (citation omitted).

―The proper interpretation of a contract, including whether a contract is ambiguous,

is a legal question, which this court reviews de novo.‖ Tillery v. District of

Columbia Contract Appeals Bd., 912 A.2d 1169, 1176 (D.C. 2006) (citation

omitted). This court ―adheres to an objective law of contracts, meaning that the

written language embodying the terms of an agreement will govern the rights and

liabilities of the parties regardless of the intent of the parties at the time they entered

the contract, unless the written language is not susceptible of a clear and definite

meaning.‖ Aziken v. District of Columbia, 70 A.3d 213, 218-19 (D.C. 2013)

(quotation marks and citation omitted). ―The writing must be interpreted as a

whole, giving a reasonable, lawful, and effective meaning to all its terms, and

ascertaining the meaning in light of all the circumstances surrounding the parties at

the time the contract was made.‖ Debnam v. Crane Co., 976 A.2d 193, 197 (D.C.

2009) (internal quotation marks and citation omitted).             ―Where the contract

language is not susceptible of a clear and definite meaning—i.e., where the contract

is determined by the court to be ambiguous—external evidence may be admitted to
                                          17

explain the surrounding circumstances and the positions and actions of the parties at

the time of contracting.‖ Aziken, supra, 70 A.3d at 219 (internal quotation marks

and citation omitted).

      ―[I]f the provisions of the contract are ambiguous, the correct interpretation

becomes a question for a factfinder.‖          Debnam, supra, 976 A.2d at 197-98.

However, ―a contract is not ambiguous merely because the parties do not agree over

its meaning, and courts are enjoined not to create ambiguity where none exists.‖

Tillery, supra, 912 A.2d at 1177 (internal quotation marks and citation omitted).

Generally, we ―determine what a reasonable person in the position of the parties

would have thought the disputed language meant.‖ Travelers Indem. Co. v. United

Food & Commercial Workers Int’l Union, 770 A.2d 978, 986 (D.C. 2001) (internal

quotation marks and citation omitted). We also examine the document on its face,

giving the language used its plain meaning, unless, in context, it is evident that the

terms used have a technical or specialized meaning.‖ Interstate Fire & Cas. Co. v.

Washington Hosp. Ctr. Corp., 758 F.3d 378, 383 (D.C. Cir. 2014) (citing Beck v.

Continental Cas. Co. (In re May), 936 A.2d 747, 751 (D.C. 2007)) (internal

quotation marks omitted).      We follow ―[t]he general rule applicable in the

interpretation of an insurance policy . . . that, if its language is reasonably open to

two constructions, the one most favorable to the insured will be adopted.‖ Chase v.
                                         18

State Farm Fire & Cas. Co., 780 A.2d 1123, 1127 (D.C. 2001).

      The Contract’s Definition of Professional Services

      Here, the definition of ―professional services‖ in the insurance contract at

issue is not a simple one; nor are the corporate structure of CCC and the underlying

complaints simple. The professional services definition consists of eight subparts

and is not easy to interpret, although it generally uses ordinary words.

Significantly, important terms are not defined, including ―investment management

services‖ and ―management services,‖ although terms such as ―management

control‖ are defined. The definition of professional services makes no mention of

other important terms such as ―corporate governance‖ and whether that is subsumed

under the concept of ―management services.‖ Still other terms which are used

repeatedly in the subparts of the definition, including ―fund,‖ ―organization,‖ and

―portfolio entity,‖ are not defined, and there are no discovery documents or

depositions bearing on their meaning.         Nevertheless, principles of contract

interpretation require that we interpret the policy ―as a whole, giving a reasonable,

lawful, and effective meaning to all its terms, and ascertaining the meaning in light

of all the circumstances surrounding the parties at the time the contract was made.‖

Debnam, supra, 976 A.2d at 197. Thus, we cannot, as appellees urge in support of
                                          19

the trial court‘s approach, declare some parts of the professional services definition

as ―irrelevant,‖ instead of allowing the case to proceed to discovery so that the court

may have the benefit of ―the surrounding circumstances and the positions and

actions of the parties at the time of contracting.‖       We believe that the term

―professional services‖ as used in the insurance policy is reasonably open to more

than one construction, and hence, the one most favorable to the insured must be

adopted. Chase, supra, 780 A.2d at 1127. In short, we hold that the definition of

professional services in appellants‘ private equity management and professional

liability insurance contract is ambiguous, Aziken, supra, 70 A.3d at 219, and thus,

the correct interpretation [of the professional services definition and the contract]

[is] a ―question for a factfinder,‖ Debnam, supra, 976 A.2d at 197-98.

      Review of the Underlying Claims and the Duty to Defend

      There is another reason why we are constrained to reverse the trial court‘s

Rule 12 (b)(6) judgment in this case. Based on the record before us, we cannot be

sure that at the early Rule 12 (b)(6) phase of the litigation, the trial court applied

legal principles governing not only the disposition of Rule 12 (b)(6) motions, but

also pertinent legal principles governing both the duty of an insurance company to

defend the insured and the obligation of the trial court to compare the underlying
                                          20

complaints with the insurance contract. We previously indicated that the trial court

must accept as true the factual allegations in a well-pleaded complaint and must not

dismiss the complaint because the court believes that recovery by an appellant is

very remote and unlikely. See Logan, supra, 80 A.3d at 1019; Equal Rights Ctr.,
110 A.3d at 603. We now set forth other pertinent and applicable legal principles.

      Applicable Legal Principles

      To determine whether an insurance company has the duty to defend an

insured, this court examines both the underlying complaint and the insurance policy.

Stevens, supra, 801 A.2d at 66; see also Fogg v. Fidelity Nat’l Title Ins. Co., 89 A.3d
510, 512 (D.C. 2014) (this court applies the ―eight corners rule‖ set forth in Stevens,

supra,—compare the four corners of the complaint with the four corners of the

insurance policy). We must construe the underlying complaints in favor of the

insured. Adolph Coors Co. & Brewing Co. v. Truck Ins. Exch., 960 A.2d 617, 623

(D.C. 2008). ―If the allegations of the complaint state a cause of action within the

coverage of the policy the insurance company must defend.‖ Stevens, supra, 801

A.2d at 66 n.5. ―The duty to defend is broader than the duty to indemnify, and an

insurer may have to defend before it is clear whether there is a duty to indemnify.‖

Centennial Ins. Co., v. Patterson, 564 F.3d 46, 50 (1st Cir. 2009) (citation omitted).
                                          21

If there is no duty to defend, there is no duty to indemnify. Massamont Ins. Agency,

Inc. v. Utica Mut. Ins. Co., 489 F.3d 71, 75 (1st Cir. 2007) (citation omitted).

      If a professional liability policy contains policy exclusions, the policy ―do[es]

not insure against all liability incurred by the insured.‖ See Zurich Am. Ins. Co. v.

O’Hara Reg’l Ctr. for Rehab., 529 F.3d 916, 924 (10th Cir. 2008). However,

―exclusions from coverage are to be strictly construed, and any ambiguity in the

exclusion must be construed against the insurer.‖          Hakim v. Massachusetts

Insurers’ Insolvency Fund, 675 N.E.2d 1161, 1165 (Mass. 1997) (internal quotation

marks and citation omitted). ―Where an insurer attempts to avoid liability under an

insurance policy on the ground that the loss for which recovery is sought is covered

by some exclusionary clause, the burden is on the insurer to prove the facts which

bring the case within the specified exception.‖ Cameron v. USAA Property & Cas.

Ins. Co., 733 A.2d 965, 968 (D.C. 1999).

      ―When the underlying lawsuit alleges injuries resulting from the provision of

both professional services and non-professional services, a professional services

exclusion does not negate the . . . duty to defend.‖ National Cas. Co. v. Western

World Ins. Co., 669 F.3d 608, 615 (5th Cir. 2012) (citation omitted).

―[P]rofessional services exclusions do not limit insurers‘ duty to defend lawsuits
                                           22

alleging injuries that result in part from the performance of administrative tasks….‖

Id. at 616.

      The Claims in the Underlying Lawsuits

      On the record in this case and at the Rule 12 (b)(6) phase of the litigation, we

have substantial doubt as to whether the trial court properly applied the ―eight

corners rule‖ in determining whether appellees had the duty to defend appellants.

We certainly agree with the trial court that it is not required ―to scrutinize each count

in each complaint with a dictionary in one hand and The Chicago Manual of Style in

the other‖ in reviewing the underlying complaints. However, more than a cursory

review of the underlying complaints and the policy exclusion is required in this case,

and it must be clear, without sweeping generalizations, that all claims in the

underlying complaints fall squarely within the professional services exclusion, and

thus, as a matter of law appellants have not stated a claim for relief that is plausible

on its face, Logan, supra, 80 A.3d at 1019, and they can prove no set of facts which

would support their claim for defense costs, Schiff, supra, 697 A.2d at 1196.

      The underlying amended CCC liquidators complaint covers approximately

121 pages and raises nineteen individual claims against CCC‘s directors, CIM, and
                                         23

Carlyle; these claims pertain to alleged breach of fiduciary and other duties, breach

of fiduciary duty as a de facto or shadow director, wrongful trading under Guernsey

law, breach of contract, gross negligence or negligence, unjust enrichment, and the

claim for the return of CCC‘s books and records and other property. It is not clear

from the trial court‘s order why all aspects of these claims, as pled, fall under the

policies‘ professional services exclusion, as a matter of law, given our conclusion

that the professional services definition is ambiguous.        With respect to the

Huffington complaint, filed first in Massachusetts and then in Delaware, it is not

clear from the trial court‘s order, as appellants contend, why misstatements and

omissions of material fact made after Mr. Huffington‘s investment took place, fall

under the professional services exclusion, as a matter of law. The same may be said

with respect to the shareholders complaint.

      Accordingly, for the foregoing reasons, we vacate the trial court‘s order of

dismissal and remand this case to the trial court for discovery, and for dispositive

motions or trial.

                                       So ordered.