Court Opinion

ID: 2658340
Source: CourtListenerOpinion
Date Created: 2014-03-28 18:17:54.788059+00
Date Added: 2024-06-11T12:34:35.868503
License: Public Domain

UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF COLUMBIA

                                 )
JONATHAN MOSES SILVER,           )
                                 )
                Plaintiff,       )
                                 )
     v.                          )   Civil Action No. 13-611 (EGS)
                                 )
AMERICAN SAFETY INDEMNITY        )
COMPANY,                         )
                                 )
                Defendant.       )
                                 )

                         MEMORANDUM OPINION

     Plaintiff Jonathan Silver brings this action against his

former insurer, American Safety Indemnity Company (“American

Safety”). Plaintiff alleges that American Safety breached the

insurance policy it issued him when it refused to provide

coverage for his legal expenses arising out of his former role

as Executive Director of the Department of Energy’s Loan

Programs Office.    Plaintiff also alleges American Safety

breached the duty of good faith and fair dealing by the same

conduct.   He seeks to recover compensatory and punitive damages.

     Pending before the Court is defendant’s Motion for Judgment

on the Pleadings and plaintiff’s Cross-Motion for Partial

Summary Judgment.   Upon consideration of the motions, the

responses and replies thereto, the entire record, and for the

reasons explained below, defendant’s motion is GRANTED.
Accordingly, because the court grants judgment on the pleadings,

plaintiff’s cross motion for summary judgment is DENIED as moot.

     I.   BACKGROUND

     A. Plaintiff’s Employment, and the Policy Purchased

     Plaintiff Jonathan Silver is a resident of the District of

Columbia. Compl. ¶ 2.   Defendant American Safety is an Oklahoma

corporation with its principal place of business in Georgia.

Compl. ¶ 3, Answer ¶ 3. Defendant is licensed to and does

transact business in the District of Columbia.      Compl. ¶ 3.

     In November 2009, plaintiff was appointed Executive

Director of the Loan Programs Office (“LPO”) of the United

States Department of Energy by Secretary of Energy, Steven Chu.

Compl. ¶ 6.    While serving in this position, plaintiff purchased

from American Safety a Federal Employee Professional Liability

Policy with certificate number P0169PF21031400 (the “Policy”).

Compl. ¶ 10.   The Policy Period was March 11, 2011 to March 11,

2012. Compl. Ex. A, Certificate of Insurance.      The Policy

provides two types of coverage.    Section I provides “civil suit

coverage,” and Section II provides “administrative and criminal

legal defense expense coverage.”       Compl. Ex. A, Policy §§ I, II.

Only Section II of the Policy is at issue in this case.

Coverage under Section II is provided as follows:

     The Company shall select counsel and pay the costs of
     defense . . . on each valid “Insured Member’s” certificate
     arising out of any “disciplinary proceedings”, “judicial

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       sanctions proceedings”, “criminal proceedings”, or any
       investigations into the “Insured Member’s” alleged
       misconduct, instituted against the Insured Member from any
       act, error or omission in Professional Services rendered or
       which should have been rendered in the “Insured Member’s”
       professional capacity as a full or part-time Employee of
       the United States Government.

Policy § II.A.    The Policy defines “Insured Member” as:

       Any full or part time civilian federal employee meeting the
       definition of 5 U.S.C. § 2105(a) . . . .

Id. § IV.H.

       Finally, the Policy places conditions on coverage under

Section I and, separately, under Section II.    Policy § VII.

Among the conditions for Section II Coverage is:

       Benefits under the Administrative and Criminal Legal
       Defense Coverage cease when the “Insured Member” no longer
       meets the definition of “Insured Member”.

Policy § VII.B (emphasis in original) (hereinafter “Condition

B”).    The Policy does not contain a similar condition for

Section I coverage.

       B. Plaintiff’s Position at the Department of Energy,
          Departure from the Government and Government
          Investigations into Solyndra LLC

       Mr. Silver worked as Executive Director of the LPO from

November 2009 to October 2011.    Compl. ¶¶ 6, 9.   In that post,

Plaintiff oversaw certain loan programs created by the 2005

Energy Policy Act and 2009 Energy Recovery Act, intended to

support commercial deployment of clean and renewable energy.

Compl. ¶ 7.    During plaintiff’s tenure at LPO, one of the solar

                                  3
energy companies that had been awarded a loan guarantee,

Solyndra LLC, began facing financial difficulties. Compl. ¶ 23.

It could not meet its loan obligations, and in September 2011 it

filed for bankruptcy.      Id.   Shortly thereafter, a number of

investigations into the loan guarantee program and its loan to

Solyndra were initiated by various governmental entities.

Compl. ¶ 25.

     In October 2011, Mr. Silver left his position at the

Department of Energy.   Compl. ¶ 9.        In November 2011, the FBI

requested that he make himself available to be interviewed

regarding a government investigation into the loans to Solyndra.

Compl. Ex. B, Oct. 3, 2012 letter from J. Murray to A. Vergnetti

(“Oct. 3, 2012 Letter”).     In December 2011, the White House made

a similar request.   Id.    Finally, in a letter dated July 12,

2012, the U.S. House of Representatives Committee on Oversight

and Governmental Reform (“Committee”) informed Plaintiff that

his use of unofficial email addresses while at the LPO could

violate a variety of federal statutes, including some punishable

by criminal or civil penalties.          Id. (Enclosure: Jul. 12, 2012

Letter from D. Issa, J. Jordan to J. Silver).          The Committee

instructed him to produce documents for its ongoing

investigation into the loan guarantee program.          Id.

     On or about December 20, 2011, Plaintiff’s counsel

contacted American Safety to provide notice of the proceedings

                                     4
pending and to request legal counsel under the Policy.    Compl.

¶¶ 28—29.   Between December 20, 2011 and January 18, 2013,

Plaintiff’s counsel and various representatives of American

Safety corresponded regarding the Policy.   Compl. ¶¶ 29—30;

Compl. Exs. B—F.

     In written correspondence, American Safety acknowledged

that the proceedings involving Plaintiff qualified as

“disciplinary proceedings” under Section II of the Policy.

Compl. Ex. C, Oct. 8, 2012 letter from D. Sherman to J. Silver

(“Oct. 8, 2012 Letter”).   However, defendant denied the claim:

     We regret to inform you that there is no coverage afforded
     to you for this disciplinary proceeding. Your “Insured
     Member” status effectively terminated upon your resignation
     from federal service on or about October of 2011. Your
     first notice to American Safety was . . . after your
     resignation was finalized and your “Insured Member” status
     expired. Accordingly, you reported this investigation
     after your policy ceased to provide you with coverage.

Id. p.3.1

     Plaintiff filed this lawsuit on April 30, 2013.     Count One

alleges breach of contract; Count Two alleges breach of the duty

of good faith and fair dealing.   After filing an Answer,

1
  The parties dispute the date plaintiff first notified American
Safety of the proceedings against him. Plaintiff contends he
provided notice in December 2011; defendant claims it was July
2012. At the motion for judgment on the pleadings stage, the
Court takes the facts in the Complaint as true. As set forth
below, however, the relevant date in this case is October 2011,
when Plaintiff resigned from government employment. As both
December 2011 and July 2012 occur after that date, the parties’
disagreement is irrelevant.

                                  5
American Safety moved for judgment on the pleadings and Mr.

Silver cross-moved for partial summary judgment.   The motions

are ripe for resolution by the Court.

     II.   STANDARD OF REVIEW

     A Rule 12(c) motion is “functionally equivalent” to a Rule

12(b)(6) motion and governed by the same standard.    Rollins v.

Wackenhut Servs., Inc., 703 F.3d 122, 130 (D.C. Cir. 2012).      A

motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)

“tests the legal sufficiency of a complaint.” Browning v.

Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002).   A complaint must

contain “a short and plain statement of the claim showing that

the pleader is entitled to relief, in order to give the

defendant fair notice of what the . . . claim is and the grounds

upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,

555 (2007) (quotation marks omitted; alteration in original).

While detailed factual allegations are not necessary, plaintiff

must plead enough facts “to raise a right to relief above the

speculative level.” Id.

     “The court is limited to considering acts alleged in the

complaint, and documents attached to or incorporated by

reference in the complaint, matters of which the court may take

judicial notice, and matters of public record.”    Maniaci v.

Georgetown Univ., 510 F. Supp. 2d 50, 59 (D.D.C. 2007) (internal

citations omitted).   The Court must construe the complaint

                                6
liberally in plaintiff’s favor and grant plaintiff the benefit

of all reasonable inferences deriving from the complaint. Kowal

v. MCI Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994).

However, the Court must not accept plaintiff’s inferences that

are “unsupported by the facts set out in the complaint.” Id.

“Nor must the court accept legal conclusions cast in the form of

factual allegations.” Id. “[O]nly a complaint that states a

plausible claim for relief survives a motion to dismiss.”

Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

     III. ANALYSIS

     A. Choice of Law

     Federal courts sitting in diversity must apply the

conflicts of laws rules of the state in which they sit.    Klaxon

v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496—97 (1941).

Therefore, this Court applies the District of Columbia’s choice

of law analysis.    In insurance cases, where the insured is a

citizen of the District of Columbia and the underlying events

occurred here, courts have held that D.C. law applies.    See,

e.g., Nationwide Mut. Ins. Co. v. Richardson, 270 F.3d 948, 953

(D.C. Cir. 2001).

     The parties agree that District of Columbia law applies

because the insured, Plaintiff, is a citizen of the District,

the investigations which gave rise to his claim for coverage

took place here, and the legal services for which he seeks

                                  7
coverage were provided in the District of Columbia.      Compl. ¶¶

2, 6-8, 23-25, Compl. Ex. A; see also Def.’s Mot. for Judgment

on the Pleadings (“Def.’s Mot.”) at 7—8.

     B. Defendant’s Motion for Judgment on the Pleadings

       1. Breach of Contract

     American Safety contends that Mr. Silver’s resignation from

government employment in October 2011 – before he became

involved in any disciplinary proceedings or criminal proceedings

– renders him ineligible for coverage under Section II relating

to these proceedings.   Def.’s Mot. at 10.2     The insurer focuses

on two provisions of the Policy.       First is Condition B of the

Policy’s Section II Coverage, which provides “Benefits under

Administrative and Criminal Legal Defense Coverage cease when

the “Insured Member” no longer meets the definition of “Insured

Member””.   Policy § VII.B (emphasis in original).     Second is the

definition of an “Insured Member,” which is restricted, in

relevant part, to full or part-time civilian federal employees.

Policy § IV.H.1.   Defendant argues that these two provisions

unambiguously state that coverage under Section II “ends when an

insured ceases to be a federal government employee.”      Def.’s

Mot. 11.    The Complaint alleges that Mr. Silver left federal

government employment in October 2011, and the investigations

2
  Plaintiff only claims benefits under Section II of the Policy:
Administrative and Legal Defense Expense Coverage. See, e.g.,
Compl. ¶ 48.

                                   8
for which he seeks coverage did not begin until the following

month, November 2011.    Compl. ¶ 9, Ex. B, Oct. 3, 2012 Letter.

Accordingly, defendant argues, the Policy does not cover

plaintiff’s claim.   Def.’s Mot. 11.

     “An insurance policy is a contract between the insured and

the insurer, and in construing it [a court] must first look to

the language of the contract.”    Cameron v. USAA Prop. & Cas.

Ins. Co., 733 A.2d 965, 968 (D.C. 1999).     If that language is

not ambiguous, “the policy must be enforced as written, absent a

statute or public policy to the contrary.”     Nat’l R.R. Passenger

Corp. v. Lexington Ins. Co., 445 F. Supp. 2d 37, 41 (D.D.C.

2006) (citing Cameron, 774 A.2d at 968—69).     “The first step in

contract interpretation is determining what a reasonable person

in the position of the parties would have thought the disputed

language meant . . . .   The writing must be interpreted as a

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

its terms” – “[i]f a document is facially unambiguous, its

language should be relied upon as providing the best objective

manifestation of the parties’ intent.” 1010 Potomac Assocs. v.

Grocery Mfrs. of America, 485 A.2d 199, 205 (D.C. 1996)

(citations omitted).    If that language is ambiguous, “extrinsic

evidence of the parties’ subjective intent may be resorted

to[,]” id., and courts typically “interpret any ambiguous

provisions in a manner consistent with the reasonable

                                  9
expectations of the purchaser of the policy,” Cameron, 733 A.2d

at 968 (citations omitted).   “A contract is ambiguous only if

reasonable people may fairly and honestly differ in their

construction of the terms because the terms are susceptible of

more than one meaning.   A contract is not ambiguous merely

because the parties disagree over its meaning.” Nat’l R.R.

Passenger Corp. v. Lexington Ins. Co., 2003 U.S. Dist. LEXIS

26405, at *15 (D.D.C. May 20, 2003) (citations omitted).

     Plaintiff first contends that Condition B, which states

that “benefits” under Section II “cease when the “Insured

Member” no longer meets the definition of “Insured Member””,

should be read to provide recovery for his legal expenses.    He

claims that the term “benefits” should be interpreted narrowly

as “the entitlement to coverage for any future acts, errors, or

omissions.   Under this interpretation, [Condition B] would only

bar recovery for prospective acts or omissions . . . that occur

after the former employee leaves government service.” Pl.’s

Opp’n and Cross Mot. at 16 (“Pl.’s Opp’n”).

     Plaintiff’s reading of Condition B cannot be reconciled

with the provision’s language or the Policy’s grant of coverage

under Section II.   The grant of coverage under Section II only

applies to “disciplinary proceedings”, “judicial sanctions

proceedings”, “criminal proceedings”, or other investigations

“instituted against the “Insured Member” from any act, error or

                                10
omission in Professional Services rendered or which should have

been rendered in the “Insured Member’s” professional capacity as

a full or part-time Employee of the United States Government.”

Policy § II.A.   The grant of coverage unambiguously limits

coverage to the alleged professional errors or omissions of a

government employee.   Plaintiff’s proffered interpretation of

Condition B would merely repeat the exact same limitation, thus

rendering it “useless, . . . meaningless or superfluous and,

hence” his interpretation “should be rejected.”     Anderson v.

D.C. Hous. Auth., 923 A.2d 853, 867 (D.C. 2007) (citations

omitted).

     Plaintiff next contends that the definition of “Insured

Member” is ambiguous because its use in Condition B is

“inconsistent with how [the term] is used in numerous other

provisions of the . . . Policy.”     Pl.’s Opp’n at 20-21

(discussing the Policy’s definition of “claims,” see Policy §

IV.B and the provisions of the Automatic Extended Reporting

Period, see Policy § I.B). Plaintiff fails to point out,

however, that these “numerous other provisions” to which he

refers all relate solely to the Policy’s coverage for Civil Suit

Liability under Section I, which is distinct from Section II

coverage and which does not apply to this case.     Id., see also

Def.’s Reply at 5-6.   Moreover, the Policy’s definition of

“Insured Member” unambiguously includes current, not former,

                                11
federal employees. Policy § IV.H.    To the extent that the Policy

provides certain extensions of coverage for a defined universe

of civil claims under Section I, this does not create an

ambiguity either in the definition of “Insured Member” or its

application to non-civil, Administrative and Criminal Legal

Defense claims under Section II.     See, e.g., 1010 Potomac

Assoc., 485 A.2d at 205 (“[T]he [contract] must be interpreted

as a whole, giving a reasonable, lawful and effective meaning to

all its terms.”)(citations omitted).

     Finally, the Plaintiff contends that American Safety’s

interpretation of the policy would render coverage under Section

II illusory because it would deny coverage for “disciplinary

proceedings” or “criminal proceedings” which occurred after

Plaintiff left government employment but before the expiration

of his Policy Period.   Plaintiff argues that this interpretation

of the policy denies coverage “exactly when [defendant’s] policy

holders most need, and reasonably expect, the insurance coverage

that they purchased.”   Pl.’s Opp’n at 23.   The Court disagrees

that coverage is illusory as a matter of law.    The Policy

provides current government employees with coverage for civil

suits under Section I, and defense costs associated with certain

administrative or criminal proceedings under Section II.       In

certain circumstances, coverage under Section I is extended

beyond the Policy Period and beyond the policyholder’s

                                12
resignation from government employment.    Policy §§ I.A, I.B,

IV.B, IV.H, VI.   Coverage under Section II, by contrast, always

ceases at the end of government employment. Policy §§ II, IV.H,

VII.B.   While the coverage afforded under Section II is

undoubtedly more limited than Section I, the Court cannot say

that it “is non-existent or de minimis,” Chase v. State Farm

Fire & Cas. Co., 780 A.2d 1123, 1131 (D.C. 2001), and therefore

illusory or otherwise invalid as a matter of public policy.

     Without saying so expressly, Plaintiff’s argument is based

on the “reasonable expectations” doctrine, in which courts

generally interpret ambiguous provisions in a manner consistent

with the reasonable expectations of the purchaser of the policy.

Chase, 780 A.2d at 1131.     This is not a “reasonable

expectations” case.   When unambiguous, all provisions of a

contract, even exclusion provisions, “must be enforced even if

the insured did not foresee how the exclusion operated,

otherwise courts will find themselves in the undesirable

position of rewriting insurance policies and reallocating

assignment of risks between insurer and insured." Capitol

Specialty Ins. Corp. v. Sanford Wittels & Heisler LLP, 793 F.

Supp. 2d 399, 409 (D.D.C. 2011) (internal citations and

quotation marks omitted).3    “If the policies are clear and

3
  The parties disagree whether Condition B operates as a
condition precedent or an exclusion, and thus whether it is

                                  13
unambiguous, they will be enforced by the courts as written.”

Chase, 780 A.2d at 1132 (internal quotations omitted).4

     For the foregoing reasons, coverage under Section II of the

Policy unambiguously ceased when Plaintiff resigned as a

government employee in October 2011.   Accordingly, American

Safety is entitled to judgment on the pleadings on Count One of

the Complaint because the facts alleged and exhibits presented

in the Complaint, even when accepted as true, establish that the

Policy does not cover plaintiff’s claim.

plaintiff’s burden to bring himself within the terms of the
policy or defendant’s burden to demonstrate the applicability of
an affirmative defense. Compare Def.’s Mot. at 9—10; Pl.’s
Opp’n at 10—14. The distinction is irrelevant in this case; for
the reasons set forth throughout, American Safety has met its
burden under either standard.
4
  In opposing defendant’s Motion for Judgment on the Pleadings,
plaintiff also suggests that defendant may be estopped from
relying on Condition B because, he alleges, “[defendant’s] own
claims administrator . . . never cited, let alone relied upon,
[Condition B].” Pl.’s Opp’n at 18—19. This argument is
unpersuasive. In its October 8, 2012 letter to plaintiff’s
counsel, defendant’s representative, although not specifically
quoting Condition B, stated “We regret to inform you that there
is no coverage afforded to you for this disciplinary proceeding.
Your “Insured Member” status effectively terminated upon your
resignation from federal service on or about October of 2011.
Your first notice to American Safety Indemnity Company of this
disciplinary proceeding was . . . after your resignation was
finalized and your “Insured Member” status expired.
Accordingly, you reported this investigation after your policy
ceased to provide you with coverage.” Compl. Ex. C, p.3.
Plaintiff’s contrary reading of the letter, therefore, cannot be
sustained.

                               14
         2. Bad Faith/Breach of Duty of Fair Dealing

     The parties disagree whether the District of Columbia

recognizes a tort of bad faith/breach of fair dealing in

insurance claims handling.   Compare Def.’s Mot. at 11—14; Pl.’s

Opp’n at 24.   Their disagreement need not be resolved here,

because the parties agree that such a claim, if it exists, would

arise only where an insurance company failed to pay a covered

claim.   Def.’s Mot. at 13 n.4, Pl.’s Opp’n at 24.     Because the

Court has determined that American Safety did not breach the

contract, plaintiff’s bad faith claim cannot succeed.

Accordingly, American Safety is entitled to judgment on the

pleadings on Count Two of the Complaint.

         3. Plaintiff’s Motion for Summary Judgment

     Plaintiff filed a cross-motion for partial summary judgment

on Count One of the Complaint.   Because the Court grants

defendant’s motion for judgment on the pleadings, it is

unnecessary to reach the cross-motion for partial summary

judgment.   Accordingly, plaintiff’s cross motion will be denied

as moot.

     IV.    CONCLUSION

     For the foregoing reasons, defendant’s Motion for Judgment

on the Pleadings is hereby GRANTED and plaintiff’s Cross-Motion

                                 15
for Partial Summary Judgment is hereby DENIED as moot.   An

appropriate Order accompanies this Memorandum Opinion.

     SO ORDERED.

Signed:   Emmet G. Sullivan
          United States District Judge
          March 26, 2014

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