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National Bank of Arizona v. St. Paul Fire and Marine Insurance Co.3/16/1999
AFFIRMED
National Bank of Arizona ("NBA") sought a declaratory judgment against St. Paul Fire and Marine Insurance Company ("St. Paul") regarding a Directors & Officers Liability Policy ("D & O Policy") NBA purchased from St. Paul. NBA alleged that its D & O Policy provided coverage for all costs, charges, and expenses NBA incurred in defending two lawsuits against it. In both lawsuits NBA was named as a defendant, but none of NBA's directors or officers were named as defendants. On cross-motions for summary judgment, the trial court ruled in favor of St. Paul. We affirm, holding that because no claim was made against any director or officer, the D & O policy was not triggered.
I.
In December 1991, NBA purchased from St. Paul a D & O Policy. Under this policy, NBA was the only named insured. The D & O Policy's Corporate Indemnification coverage provided that St. Paul would reimburse NBA for sums that NBA "may be required or permitted to pay" to its directors or officers arising out of claims made against them. The policy's coverage of Directors' and Officers' Liability provided that St. Paul would pay for losses arising out of any claims made against NBA's directors and officers. For Directors' and Officers' Liability, the policy defined "Loss" in part as "any amount the Insured is obligated to pay as respects his legal liability. . . ."
In June 1994, the first lawsuit, the Kesselman lawsuit, was served on NBA. The Kesselman plaintiffs were trustees and custodians of either profit sharing plans or trusts. Their complaint alleged that NBA was negligent because its representatives knew or should have known of misappropriation of trust account funds and overdrafts of its Charter Title escrow trust accounts. None of NBA's directors or officers were among the various defendants named.
The Kesselman plaintiffs sought to recover damages, costs, and attorney's fees from NBA, but the trial court granted NBA's motion for summary judgment. This court affirmed, and the Arizona Supreme Court denied the Kesselman plaintiffs' Petition for Review. NBA incurred costs, charges, and expenses in the Kesselman lawsuit totaling $69,164.10.
In early September 1995, the second lawsuit, the First American lawsuit, was filed against NBA. First American alleged that NBA violated the Uniform Fiduciaries Act by assisting persons at Charter Title, First American's agent, in converting customer funds for the personal benefit of insiders at Charter Title. Again, only NBA was named as a defendant; none of its directors and officers were sued.
Two weeks following the filing of the First American lawsuit, NBA's attorney submitted a copy of the First American complaint to St. Paul's agent in order to verify coverage under NBA's D & O Policy. St. Paul denied coverage because no NBA directors or officers were named as defendants, and the policy did not provide coverage for the corporate entity itself, except to the extent required or permitted to indemnify its directors and officers.
NBA then answered the First American complaint and defended that lawsuit. NBA and First American eventually settled and the case was dismissed with prejudice. NBA incurred costs, charges, and expenses totaling $262,910.04.
In December 1996, NBA requested under its D & O Policy reimbursement for the costs, charges, and expenses it had paid in defending the First American and Kesselman lawsuits. In February 1997, St. Paul again denied coverage under NBA's D & O Policy for the expenses of the two lawsuits because none of NBA's directors or officers were named as defendants or placed at risk of be
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