Court Opinion

ID: 9709954
Source: CourtListenerOpinion
Date Created: 2023-08-26 03:58:19.043605+00
Date Added: 2024-06-11T18:22:53.007010
License: Public Domain

SUNDBY, J.
(dissenting). The majority concludes that the following issue is dispositive: did the MGIC Indemnity Corporation policy cover Richard and Kathryn Myers' claim against George Ballard, cashier of Farmers Savings Bank, and Robert Chittenden, presi*410dent of Farmers Savings Bank? I conclude that the plain language of MGIC's policy provided coverage to the bank. I therefore dissent.1
MGIC's policy provides liability coverage to the bank's directors and officers and reimbursement coverage to the bank. Under its policy, MGIC agreed:
(B) With the Bank that if, during the policy period, any claim or claims are made against the Directors and Officers, individually or collectively, for a Wrongful Act, the Insurer will pay, in accordance with the terms of this policy, on behalf of the Bank, all Loss for which the Bank is required to indemnify or for which the Bank has, to the extent permitted by law, indemnified the Directors and Officers. [Emphasis added.]
The policy defines "Wrongful Act" as follows:
The term "Wrongful Act" shall mean any actual or alleged error, misstatement, misleading statement, act or omission, or neglect or breach of duty by the Directors or Officers in the discharge of their duties solely in their capacity as Directors or Officers of the Bank individually or collectively, or any matter claimed against them solely by reason of their being Directors or Officers of the Bank.
MGIC's policy defines "Loss" as follows:
*411The term "Loss" shall mean any amount... for which the Bank has, to the extent permitted by law, indemnified the Directors and Officers, for a claim or claims made against the Directors and Officers for Wrongful Acts and shall include but not be limited to .. . settlements .. ..
It is undisputed that Ballard and Chittenden were officers and directors of the bank. It is also undisputed that the Myers allege that Ballard injured them by a misstatement or misleading statement that the bank would lend the Myers money to cover overdrafts as it had in the past.2 The Myers alleged that in reliance on Ballard's representations, they turned over funds to the bank that were used to satisfy prior debt. When the bank failed to cover their overdrafts, the Myers suffered economic damage.
On November 14,1984, the board of directors of the bank unanimously adopted the following resolution: "BE IT ... RESOLVED, that the Bank shall and hereby does indemnify each of George Ballard and Robert Chit-tenden and agrees to hold them harmless from any judgments, ... settlements and reasonable expenses actually incurred by them in connection with [the Myers' lawsuit].1' Thus, all of the conditions for coverage under the policy are satisfied: claims were made against officers of the bank for "Wrongful Act[s]" and the bank suffered a "loss" by indemnifying the officers for such claims.
MGIC argues that "loss" means only an amount which a director or officer is "legally obligated to pay." However, as to the bank, the definition of "loss" is in the disjunctive. The "legally obligated to pay" language does not apply to the coverage which the policy provides the *412bank. It is enough under the plain language of the policy that the bank has indemnified a director or officer for a claim made against the officer or director for a wrongful act. Undoubtedly the definition of "loss" was written so that the bank would have coverage for any settlement which it might make on behalf of a director or officer without having to establish through litigation the legal obligation of the officer or director to pay a claim.3
MGIC asks us to rewrite the policy to include a provision that it need not provide coverage for the bank unless the legal obligation of the officer or director who is indemnified has been established. It is not our function to rewrite the insurers' policy. If the policy is ambiguous, it is to be construed in favor of coverage. Wood v. American Family Mut. Ins. Co., 148 Wis. 2d 639, 652, 436 N.W.2d 594, 599 (1989).
The majority concludes thát adopting the bank's position would transform a directors' and officers' policy into a corporate liability policy. The majority ignores the fact that MGIC's policy is titled "Directors' And Officers' Liability Insurance Policy Including Bank Reimbursement.” (Emphasis added.) MGIC's policy is not exclusively a directors' and officers' policy. It provides coverage not only to the directors and officers, but to the bank itself. In view of the plain language of the policy, it is pointless to argue principles of agency. MGIC agreed to provide coverage to the bank if the bank indemnified an officer or director for the settlement of a claim against the officer or director. I would hold MGIC *413to its agreement unless it can establish some other policy defense.

 My tentative conclusion is that the dispositive issue may be whether the insurer has a policy defense because the bank and Ballard and Chittenden settled the Myers' claim without the agreement of the insurer. Despite the parties' agreement that there are no disputed issues of material fact, a trial may be necessary if we decide that the insurer must show prejudice to avoid coverage because of the insureds' failure to cooperate as required by the policy.

 Apparently Chittenden was sued because he was president of the bank. The Myers do not allege that Chittenden made misrepresentations or misstatements to them.

I do not suggest that MGIC must reimburse the bank for bad faith, or even improvident, settlements. MGIC has the right to approve settlements. It may have a policy defense based on the bank's failure to obtain its approval of the settlement. It makes no sense, however, to require litigation to establish the director's or officer's "legal obligation to pay" before coverage is triggered.