not replace FSLIC and FSLIC was still in existence, the regulatory exclusion would operate to bar coverage of claims based upon or attributable to an action brought by the FSLIC. Thus, if the Court were to adopt RTC's interpretation of the regulatory exclusion claims brought by FSLIC would be subject to the regulatory exclusion but identical claims brought by the RTC would not. The Court finds that this reading of the regulatory exclusion is strained and unreasonable and therefore rejects the RTC's interpretation of the regulatory exclusion. RTC is a regulatory agency within the meaning of the regulatory exclusion.
The Court is also of the opinion that the regulatory exclusion was intended to exclude coverage for claims brought by the successor of an enumerated regulatory agency. Since any claim based upon or attributable to an action brought by FSLIC, an enumerated agency, would be subject to the regulatory exclusion, the Court finds that similar claims brought by the RTC, as FSLIC's successor, are also subject to the regulatory exclusion.
The parties assert conflicting arguments as to whether Congress views the RTC as a regulatory agency. However, the Court fails to see the relevance of these conflicting arguments. The issue before the Court is whether the parties intended the term "other regulatory agency" to include the RTC. Therefore, Congress' position as to whether the RTC is a regulatory agency is not relevant to the contract interpretation issue presently before the court.
The RTC also argues that the parties only intended to bar secondary claims, which the RTC defines as claims that are asserted against officers and directors by third parties (such as borrowers from the institution or providers of professional services to the institution), which are based upon or attributable to claims first asserted against such third parties by a regulatory agency or by the RTC. The RTC argues that the exclusion does not bar coverage for claims brought directly by the RTC against the directors and officers of ACC.
This Court agrees with the vast majority of courts to consider this question, that the RTC's interpretation of the regulatory exclusion is strained and unreasonable.
See e.g., St. Paul Fire and Marine Ins. Co. v. FDIC, 968 F.2d 695, 701 (8th Cir. 1992) citing American Casualty Co. v. FDIC, 944 F.2d 455, 460 (8th Cir. 1991) ("when read as a whole, the regulatory exclusion covers any claim, direct or secondary, brought against the directors and officers of the bank by the FDIC in any capacity"); FDIC v. American Casualty Co., 975 F.2d 677, 690 (10th Cir. 1992) (awkward "based upon or attributable language" simply acts as a link between general excluding language and the specific types of claims excluded); FSLIC v. Shelton, 789 F. Supp. 1367 (M.D. La. 1992) (holding that phrase "based upon or attributable to" is not ambiguous and rejecting secondary suit construction); American Casualty Co. v. Baker, 758 F. Supp. 1340, 1347 (C.D. Cal. 1991) (regulatory exclusion is not ambiguous and that the FDIC's reading of the exclusion is strained); Gary v. American Casualty Co, 753 F. Supp. 1547, 1150-51 (W.D. Okla. 1990) ("reading the [exclusion] as a whole, without placing undue emphasis on the words 'based upon or attributable to,' it is clear the insured's intent was to exclude coverage for any Loss resulting from any action brought by or on behalf of the FDIC in any capacity against a bank director or officer); FDIC v. Zaborac, 773 F. Supp. 137 (C.D. Ill. 1991) (holding similar regulatory exclusion is not ambiguous and rejecting secondary suit construction).
The RTC recognizes that most courts have rejected their interpretation of the regulatory exclusion as strained and unreasonable. However, the RTC argues that certain documents presented in this case, but not presented in other litigation, support its position. As noted by the Court at oral argument, these documents have no impact on the Court's conclusion that the regulatory exclusion unambiguously bars coverage for claims brought directly by the RTC.
The Court concludes that the Policy clearly and unambiguously precludes coverage for any loss in connection with a claim based on an action brought by the RTC. Accordingly,
IT IS on this 25th day of June, 1993 ORDERED that ACC's motion for summary judgment is granted;
IT IS FURTHER ORDERED that the RTC's cross-motion for partial summary judgment is denied.
John C. Lifland
United States District Judge