Court Opinion

ID: 8956447
Source: CourtListenerOpinion
Date Created: 2022-11-27 09:19:31.606284+00
Date Added: 2024-06-11T17:10:06.026212
License: Public Domain

STAPLETON, Circuit Judge, dissenting.
I respectfully dissent.
Under Pennsylvania law, an insurance “policy, like every other contract, must be read in its entirety and the intent gathered from a consideration of the entire instrument.” Smith v. Cassida, 403 Pa. 404, 408, 169 A.2d 539, 541 (1961). Meaning and effect must be given to all of its provisions. Galvin v. Occidental Life Ins. Co., 206 Pa.Super. 61, 64, 211 A.2d 120, 122 (1965). While an ambiguous “policy provision is to be construed in favor of the insured and against the insurer,” Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 305, 469 A.2d 563, 566 (1983), a “court should read policy provisions to avoid ambiguities, if possible, and not torture the language to create them.” St. Paul Fire & Marine Ins. Co. v. United States Fire Ins. Co., 655 F.2d 521, 524 (3d Cir.1981) (applying Pennsylvania law). In order to ascertain whether an ambiguity exists, a court must “determine if [the] words may reasonbly admit of different meanings.” Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011 (3d Cir.1980) (applying Pennsylvania law) (emphasis supplied). Thus to be reasonable and therefore capable of creating an ambiguity, an alternative reading of the policy must produce a rational result.
As the majority acknowledges, MGIC’s reading of the policy takes all of the policy provisions into account and produces a rational result. Little’s reading does neither of these things.
I perceive no “obscure interaction,” at 795, between Section 1(D) and Section 5(C) of the policy. Section 1(D) provides that this is a liability, rather than an indemnity, policy. Section 5(C) provides that the insurer has the “option” to pay “expenses which ... [Directors or Officers] have incurred in connection with claims made against them, prior to the disposition of such claims.” The only way the relationship between these two sections could be made any clearer is if Section 5(C) not only said that the insurer has an option to pay these expenses prior to the disposition of the claim, but also said that it has the option not to pay them prior to such disposition. Since the latter statement is clearly implicit in the former, however, it should not be necessary to include it.
In the final analysis, Little’s argument that the policy is ambiguous rests entirely upon the use of the phrase “costs, charges and expenses” in Section 5(A). He does not deny that attorney’s fees come within the commonly accepted meaning of “expenses which ... [Directors or Officers have] incurred in connection with claims made against them” as that phrase appears in Section 5(C). The ambiguity is said to be created by the inclusion of a statement in Section 5(A) that “no costs, charges and expenses shall be incurred ... without Insurer’s consent.” Little finds an, intentional distinction here which the majority declares to be “significant.” At 795. Neither Little nor the majority, however, suggests why these parties might want to draw a distinction between two categories of reimburseable items as inherently indistinguishable as “charges” and “expenses” when speaking of the timing of payments for litigation expenses. Because I can think of no “expense incurred in connection with a claim” that would not also be a “cost or charge incurred in connection with a claim,” Little’s suggested distinction, for me, “tortures the language of the policy” and reads MGIC’s option under Section 5(C) out of the agreement of the parties.
As the majority explains, because directors and officers are not covered by the policy when they are found to have acted with deliberate dishonesty, MGIC’s option to withhold payments for litigation expenses until after disposition of the claim is eminently reasonable; it follows that the district court erred in declaring that option unconscionable. Accordingly, I would remand with instructions to enter summary judgment for MGIC.