discussed below, however, the FDIC itself has incurred losses as a result of the directors' alleged misfeasance, because of its unique statutory responsibility to bail out failing financial institutions. Its claims against the directors can therefore not be viewed in a strict and formalistic sense as merely the claims of the nonexistent Homestate, now subrogated to Homestate's "creditor", the FDIC.
Fidelity also overlooks the fact that in order to transfer Homestate to Old Stone, FSLIC had to pay out over $ 5 million. That amount represents the potential loss to creditors and depositors that FSLIC took upon itself, as required by law, in its attempt to avert loss to the third parties. Any recovery by FDIC in the underlying actions against the officers and directors is properly understood as a reimbursement for its loss incurred on behalf of the third parties, whose claims it holds. That these claims might originally have been assertable only against Homestate itself, not the directors and officers, is immaterial. FSLIC/Corporate incurred a $ 5 million loss allegedly caused by the actions of the underlying defendants, on behalf of the third parties. FDIC is entitled to attempt to recover that loss, and seeks to do so not only as a stand-in for Homestate, but as reimbursement for the money spent by FSLIC/Corporate to protect the creditors, depositors, and shareholders. See Branning v. CNA Ins. Companies, 721 F. Supp. 1180, 1185 (W.D. Wash. 1989). It thus necessarily represents the interests of the defunct FSLIC/Corporate itself (now the Resolution Fund) and is maintaining the underlying actions on the Fund's behalf. In a very real sense, therefore, it can be understood as possessing independent claims against the directors and officers.
In addition, the exclusion as applied to actions maintained by FSLIC/FDIC is ambiguous. Under California law, an ambiguous term in an insurance contract must be interpreted in favor of coverage. The exclusion at issue here does not state that it applies to actions brought "by or in the right of Homestate," cf. Evanston Ins. Co. v. FDIC, No. CV 88-0407 (C.D. Cal. May 17, 1988), or include similar language which would indicate an intent to include Homestate's successors. Further, Fidelity attempted to include, in the renewal policy, another separate exclusion (the "regulatory exclusion") which explicitly excludes coverage for actions brought by any government regulatory agency, including FDIC or FSLIC.
Taken together, these alternatives demonstrate that it was well within Fidelity's power and knowledge to clearly indicate any intent to include within the "insured v. insured" exclusion actions maintained by FDIC or FSLIC. See American Cas. Co. of Reading, Pa. v. FSLIC, 704 F. Supp. 898, 901 (E.D. Ark. 1989) (relying in part on existence of "regulatory exclusion" to find "insured v. insured" exclusion ambiguous as applied to action by FSLIC). The exclusion as written does not clearly indicate any such intent, and therefore does not meet the requirements of California law applicable to exclusion clauses. See Reserve Insurance Co. v. Pisciotta, 30 Cal. 3d 800, 808, 180 Cal. Rptr. 628, 632, 640 P.2d 764; Crane v. State Farm Fire and Cas. Co., 5 Cal. 3d 112, 115-16, 95 Cal. Rptr. 513, 514, 485 P.2d 1129 (1971).
A policy provision is ambiguous when it is capable of two or more constructions, both of which are reasonable. Producers Dairy Delivery Co. v. Sentry Ins. Co., 41 Cal. 3d 903, 912, 226 Cal. Rptr. 558, 562, 718 P.2d 920 (1986). That it is ambiguous is thus also evidenced by the fact that the courts which have considered the applicability of similar "insured v. insured" exclusions to actions maintained by the FDIC or FSLIC have reached varying conclusions. Of the courts which have ruled on this issue, nearly all have refused to hold as a matter of law that the exclusion applies against the FDIC/FSLIC,
while only two have held the opposite.
This division of judicial opinion is evidence that the "insured v. insured" exclusion is ambiguous, at best, as applied to the FSLIC or FDIC. See Annotation: Division of Opinion Among Judges . . . Considering Same Question, as Evidence that Particular Clause of Insurance Policy is Ambiguous, 4 A.L.R.4th 1253 (1981), and cases gathered therein. Fidelity clearly has not met its burden to establish that its interpretation of the exclusion "is the only reasonable construction which may fairly be placed on [it]." Steven v. Fidelity and Cas. Co. of New York, 58 Cal. 2d 862, 875, 27 Cal. Rptr. 172, 180, 377 P.2d 284 (1962) (emphasis in original).
For the foregoing reasons, Fidelity's motion for summary judgment is denied.
IT IS SO ORDERED.