United States Court of Appeals For the First Circuit
No. 18-2244
CRAIG R. JALBERT, in his capacity as Trustee of the F2 Liquidating Trust,
Plaintiff, Appellant,
v.
ZURICH SERVICES CORPORATION, d/b/a Zurich American Insurance Co.; and X.L. GLOBAL SERVICES, INC., d/b/a XL Catlin Specialty Insurance Co.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Rya W. Zobel, U.S. District Judge]
Before
Howard, Chief Judge, Torruella, and Thompson, Circuit Judges.
Andrew B. Ryan, with whom Robert J. Giglio, Jr., Ryan Law Partners LLP, William Baldiga, and Brown Rudnick LLP were on brief, for appellant. Andrew L. Margulis, with whom Ropers, Majeski, Kohn & Bentley, P.C. was on brief, for appellee Zurich American Insurance Co. Cara Tseng Duffield, with whom Wiley Rein LLP was on brief, for appellee XL Specialty Insurance Co.
March 20, 2020 TORRUELLA, Circuit Judge. This case involves an
insurance coverage dispute between plaintiff-appellant Craig R.
Jalbert ("Jalbert"), in his capacity as trustee of the
F2 Liquidating Trust -- a trust established during the bankruptcy
proceedings of former investment advisory firm F-Squared
Investments, Inc. ("F-Squared")1 -- and two of F-Squared's excess
insurers.
Jalbert filed suit against Zurich American Insurance Co.
("Zurich") and XL Specialty Insurance Co. ("XL") (collectively,
the "Excess Insurers") to recover unreimbursed defense costs that
F-Squared incurred in connection with a Securities and Exchange
Commission ("SEC") investigation of F-Squared. Jalbert claimed
that the Excess Insurers' refusal to cover those costs constituted
a breach of their insurance contracts. The Excess Insurers argued
that F—Squared is not entitled to coverage because the underlying
claim at issue here should be deemed to have been "first made"
before their respective policies took effect on October 3, 2013.
Jalbert, on the other hand, asserted that enforcement proceedings
against F-Squared were not a reasonable possibility until after
1 The F2 Liquidating Trust was "established . . . to recover on behalf of F-Squared as its successor-in-interest." Jalbert v. SEC, 945 F.3d 587, 589 (1st Cir. 2019).
-2- the Excess Insurers' policy period began to run and thus, that the
underlying claim was first made within the policy period.
The Excess Insurers filed motions for summary judgment,
which Jalbert opposed. In granting summary judgment for the
Excess Insurers, the district court held that an SEC order issued
on September 23, 2013 -- before the start of the Excess Insurers'
coverage period -- initiated an investigation of F-Squared based
on information tending to show that F-Squared had violated federal
securities laws. The court ruled that this order triggered the
policy's "deemed-made" clause, which meant that the claim was
deemed "first made" at that time, prior to the Excess Insurers'
policy taking effect. Jalbert now appeals the grant of summary
judgment to the Excess Insurers. After careful review, we affirm,
finding that the SEC investigation is a claim that is deemed to
have been first made when the SEC order issued on September 23,
2013, prior to the inception of the Excess Insurers' policies and
thus outside of their coverage period.
I. Background
A. Factual Background
1. The SEC Investigation
On September 23, 2013, the SEC began a private
investigation of F-Squared by issuing an "Order Directing Private
Investigation and Designating Officers to Take Testimony" in a
-3- non-public document captioned "In the Matter of F-Squared
Investments, Inc., (B-2855)" (the "Formal Order"). The Formal
Order indicated that the SEC had information that tended to show
that, from at least January 1, 2009, F-Squared and some of its
affiliated entities and individuals had distributed false and
misleading advertisements to clients or prospective clients in
possible violation of the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Advisers Act of 1940, and the
Investment Company Act of 1940. It ordered "that a private
investigation be made to determine whether any persons or entities
ha[d] engaged in, or [were] about to engage in, any of the reported
acts or practices or any acts or practices of similar purport or
object." The Formal Order also empowered certain SEC officers to
issue subpoenas, take evidence, and require the production of
relevant documents. On September 30, 2013, the SEC issued a
"Supplemental Order Designating Additional Officers" to the
investigation. The order shared the same caption as the Formal
Order.
On October 2, 2013, the SEC's Division of Enforcement
served a subpoena on F-Squared in connection with F-Squared's
"formal investigation." The subpoena requested documents
pertaining to, among other things, F-Squared's advertisements,
marketing materials, presentations, documents, due diligence and
-4- performance records, and communications concerning one of its
investment strategies. The subpoena bore the same caption as the
Formal Order and expressly referenced the Formal Order as
authorizing its issuance. On October 7, 2013, the SEC served
deposition subpoenas on F-Squared's CEO, Howard Present, and its
Managing Director, Richard Tomney. Both subpoenas bore the same
caption as the Formal Order and the October 2, 2013 subpoena.
On October 17, 2013, F-Squared requested a copy of the
Formal Order from the SEC, which the SEC provided the next day,
along with a copy of the supplemental order designating additional
officers. F-Squared amassed millions of dollars in defense costs
as a result of the investigation.
2. The Insurance Policies
a. The 2012-2013 Policies
F-Squared had a primary $5 million insurance policy from
Columbia Casualty Company ("Columbia") for the period of
October 3, 2012 to October 3, 2013. F-Squared also obtained an
excess policy from Federal Insurance Company ("Federal") for an
additional $5 million in excess coverage (after the Columbia policy
exhausted its $5 million limit) for the same period. The Federal
policy is a "follow-form" policy to Columbia's, meaning that
-5- coverage is subject to the terms and conditions of the primary
policy (here, Columbia), unless otherwise specified.2
The Columbia policy (and therefore the Federal policy)
covers only "any claim first made against [F-Squared] during the
policy period." The policy defines "Claim" to include:
a formal regulatory proceeding (civil, criminal or administrative) against or formal investigation of an Insured, including when such Insured is identified in a written Wells3 or other notice from the SEC or a similar state or foreign government authority that describes actual or alleged violations of securities or other laws by such Insured . . . for a Wrongful Act . . . .
A "Wrongful Act," in turn, is defined as "any actual or alleged
error, misstatement, misleading statement, act, omission, neglect
or breach of duty."
The key policy provision for this appeal is the
"Deemed-Made Clause," which provides guidance to determine when
2 For this reason, we will look to the language of the Columbia policy when analyzing Jalbert's claims against the Excess Insurers. 3 The SEC defines a Wells Notice as "a communication from the staff to a person involved in an investigation that: (1) informs the person the staff has made a preliminary determination to recommend that the [SEC] file an action or institute a proceeding against them; (2) identifies the securities law violations that the staff has preliminarily determined to include in the recommendation; and (3) provides notice that the person may make a submission to the [SEC's] Division [of Enforcement] and the [SEC] concerning the proposed recommendation." SEC Div. of Enf't, Enforcement Manual 19-20 (2017).
-6- certain claims are deemed "first made" and therefore, whether they
are covered by the policy. With respect to a formal investigation,
the clause provides that "[a] Claim shall be deemed first made"
upon "an Insured being identified by name in an order of
investigation, subpoena, Wells Notice or target letter . . . as
someone against whom a civil, criminal, administrative or
regulatory proceeding may be brought."
b. The 2013-2014 Policies
F-Squared renewed both the Columbia and Federal policies
for the policy period running from October 3, 2013 to
October 3, 2014. For this same period, F-Squared also sought
additional excess coverage from the Excess Insurers. Zurich
issued a $5 million second excess policy and XL issued a $5 million
third excess policy for F-Squared.4 Thus, for the 2013-2014 policy
period, F-Squared had a total of $20 million in liability insurance
coverage. The Excess Insurers' policies followed the terms,
conditions, and limitations of the 2013-2014 Columbia policy and
the other underlying policies (which also followed the Columbia
policy). All four 2013-2014 policies, thus, applied "only to any
claim first made against [F-Squared]" between October 3, 2013 and
4 Coverage under the Zurich policy applied once the primary and first excess policies had been exhausted, and coverage under the XL policy applied when the first two and the Zurich policies' limits were reached.
-7- October 3, 2014. The relevant provisions of the 2013-2014
Columbia policy remained substantively unchanged from those in the
2012-2013 Columbia policy, which we have already described.
3. F-Squared Seeks Coverage
On November 7, 2013, F-Squared emailed Columbia a
"notice of claim" letter informing it of the October 2 and
October 7 subpoenas in connection with "a formal investigation by
the [SEC]," for which it had retained counsel. F-Squared attached
the subpoenas (but not the Formal Order) and requested coverage
under the 2012-2013 policy "or its renewal which ha[d] not yet
been received," as well as "confirmation of coverage under all
applicable policies issued by [Columbia]."5 It also forwarded the
letter to Federal, Zurich, and XL. On December 10, 2013, Columbia
agreed to provide coverage under the 2012-2013 policy for the
defense costs incurred, and ultimately paid up to the $5 million
limit of liability. Federal also paid its $5 million limit of
liability under its 2012-2013 policy. The Excess Insurers,
however, denied coverage to F-Squared on the basis that the SEC
investigation constituted a claim first made prior to the 2013-2014
policy period and thus outside the policies' coverage.
5 In the letter's subject line, F-Squared made reference to "Policy Number: 287443198 (renewed)."
-8- B. Procedural History
On November 10, 2017, after F-Squared filed for
bankruptcy, Jalbert sued the Excess Insurers in the United States
District Court for the District of Massachusetts for breach of
contract. Jalbert alleged that the Excess Insurers breached their
contractual duty under their respective insurance policies to
reimburse F-Squared for defense costs incurred in connection with
its response to the SEC investigation. On February 28, 2018, the
Excess Insurers each filed motions for summary judgment on multiple
grounds, including that F-Squared was not entitled to coverage
because the underlying claim was not deemed to have been first
made during the effective policy period commencing on October 3,
2013. 6 Jalbert countered that the Deemed-Made Clause was
inapplicable because the Formal Order did not state that the SEC
would bring a proceeding against F-Squared.
On September 5, 2018, the district court granted the
Excess Insurers' motions for summary judgment. Jalbert v. Zurich
Servs. Corp., 325 F. Supp. 3d 212 (D. Mass. 2018). The court
found that based on the plain language of the policy, the Formal
Order "clearly fit[]" within the Deemed-Made Clause because "it
sufficiently identifie[d] F-Squared 'as someone against whom a
6 XL joined and incorporated the arguments in Zurich's motion for summary judgment into its own motion.
-9- civil, criminal, administrative, or regulatory proceeding may be
brought.'" Id. at 215. Specifically, it pointed out that the
Formal Order "identifie[d] F-Squared by name, allege[d] numerous
'possible violation[s]' of federal securities laws, and direct[ed]
the commencement of an investigation." Id. The court also
rejected Jalbert's argument that the policy was ambiguous, instead
finding that the Deemed-Made Clause's language was "expansive" and
that the clause was satisfied "by an order that presages the
likelihood of proceedings." Id. at 215-16. It reasoned that the
Formal Order met that "low bar because it initiated a private
investigation based on information tending to show that F-Squared
had violated numerous federal laws." Id. at 215. The court
concluded that "[s]ince that order [was] issued on September 23,
201[3],7 before the coverage period of the Zurich and XL policies,
neither defendant is obligated to reimburse F-Squared for its
defense costs." Id. (footnote added). F-Squared then appealed
the district court's order.
7 Initially, the district court correctly pointed out that the Formal Order had issued on September 23, 2013. Jalbert, 325 F. Supp. 3d at 213. Later in the opinion, presumably inadvertently, it began referring to the order as issued on September 23, 2012. It is undisputed that the SEC issued the Formal Order on September 23, 2013.
-10- II. Discussion
Because Jalbert appeals from a grant of summary judgment
to the Excess Insurers, we review the order below de novo,
affirming only "if there is no genuine issue of material fact and
[the Excess Insurers are] entitled to judgment as a matter of law."
BioChemics, Inc. v. AXIS Reinsurance Co., 924 F.3d 633, 638
(1st Cir. 2019). "The interpretation of an insurance policy is a
question of law," UBS Fin. Servs., Inc. of P.R. v. XL Specialty
Ins. Co., 929 F.3d 11, 20 (1st Cir. 2019) (quoting Valley Forge
Ins. Co. v. Field, 670 F.3d 93, 97 (1st Cir. 2012)), which we also
review de novo, Zurich Am. Ins. Co. v. Elec. Me., LLC, 927 F.3d
33, 35 (1st Cir. 2019) (citing Massamont Ins. Agency, Inc. v. Utica
Mut. Ins. Co., 489 F.3d 71, 72 (1st Cir. 2007)).
A.
Under Massachusetts law -- the law applicable in this
diversity case, see Sanders v. Phoenix Ins. Co., 843 F.3d 37, 42
(1st Cir. 2016) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78
(1938)) -- "we construe an insurance policy under the general rules
of contract interpretation, beginning with the actual language of
the policies, given its plain and ordinary meaning." Easthampton
Congregational Church v. Church Mut. Ins. Co., 916 F.3d 86, 91
(1st Cir. 2019) (quoting AIG Prop. Cas. Co. v. Cosby, 892 F.3d 25,
27 (1st Cir. 2018)). Along the way, we must be cognizant of "what
-11- an objectively reasonable insured, reading the relevant policy
language, would expect to be covered." Brazas Sporting Arms, Inc.
v. Am. Empire Surplus Lines Ins. Co., 220 F.3d 1, 4 (1st Cir. 2000)
(quoting GRE Ins. Grp. v. Metro. Boston Hous. P'ship, Inc., 61
F.3d 79, 81 (1st Cir. 1995)). We deem a term to be ambiguous if
it is "susceptible of more than one meaning and reasonably
intelligent persons would differ as to which meaning is the proper
one." Easthampton Congregational Church, 916 F.3d at 92 (quoting
U.S. Liab. Ins. Co. v. Benchmark Constr. Servs., Inc., 797 F.3d
116, 119-20 (1st Cir. 2015)). If that is the case, the ambiguity
will be construed against the insurer. Valley Forge Ins. Co., 670
F.3d at 97. An ambiguity will not exist, however, "simply because
the parties disagree about the proper interpretation of a policy
provision." Id. With this in mind, we turn to the relevant
policy provision.
B.
The Columbia policy (the primary policy), which the
excess policies follow, is a "claims made" policy. This type of
policy generally "covers acts and omissions occurring either
before or during the policy term, provided the claim is discovered
and reported to the insurer during the same policy term."
Lind-Hernández v. Hosp. Episcopal San Lucas Guayama, 898 F.3d 99,
101 (1st Cir. 2018) (citing DiLuglio v. New Eng. Ins. Co., 959
-12- F.2d 355, 358 (1st Cir. 1992)). This Court has explained that
"claims made" policies are based on the idea that
[a]s it is often difficult to ascertain the precise date of the act or omission which constituted the alleged [wrongful act] . . . the pivotal event for insurance coverage purposes becomes the date the claim is made against the insured, rather than the date of the act or omission forming the basis for the claim.
Id. at 101-02 (first and second alterations in original) (quoting
DiLuglio, 959 F.2d at 358).
In its Deemed-Made Clause, the Columbia policy contains
instructions to determine when a claim is "first made" and coverage
attaches. It states that:
A Claim shall be deemed first made on the following dates:
. . . .
(c) with respect to a formal investigation[,] . . . upon:
i. an Insured being identified by name in an order of investigation, subpoena, Wells Notice or target letter . . . as someone against whom a civil, criminal, administrative or regulatory proceeding may be brought . . . .
(emphasis added). The parties agree that the SEC investigation,
commenced by the Formal Order, is a "formal investigation" and
thus a "Claim" as that term is defined in the policies. It is
further undisputed that the Formal Order is "an order of
investigation" that identifies F-Squared by name. Therefore, we
must only decide whether the September 23, 2013 Formal Order
-13- identifies F-Squared "as someone against whom a civil, criminal,
administrative or regulatory proceeding may be brought" such that
the claim is deemed first made upon its issuance and prior to the
Excess Insurers' coverage period beginning on October 3, 2013.
C.
Jalbert presses two main arguments in support of his
contention that the costs of the SEC investigation should be
covered under the Excess Insurers' policies. First, he argues
that the Deemed-Made Clause is not satisfied by the Formal Order
because the SEC investigation was not conclusive proof that
enforcement proceedings against F-Squared were a "reasonable
possibility." Second, he avers that the Deemed-Made Clause is
ambiguous and we should construe it in the manner most favorable
to F-Squared. We address each argument in turn.
1.
Jalbert begins by contending that the district court
erred in ruling that the phrase "may be brought" in the Deemed-Made
Clause was "plainly expansive" and that it was "satisfied by an
order that presages the likelihood of proceedings." According to
Jalbert, the word "may" commonly means "a reasonable possibility,"
and the court erred in equating it with "might," which represents
a possibility that is more tentative or remote. On the "continuum
of possibility," Jalbert avers, "may" denotes a "moderate
-14- possibility" of an event occurring, while "might" denotes a "weak
possibility."
Jalbert further believes the Formal Order fails to
indicate "whether (or to what extent) SEC proceedings against
F-Squared [were] a [reasonable] possibility" and therefore, he
contends that the district court erred in finding that the Formal
Order signified that a civil, criminal, administrative, or
regulatory proceeding might be brought against F-Squared. To make
his case, Jalbert asserts that a reasonable juror could find that
an investigation is distinct from an enforcement proceeding. He
further refers to the SEC Enforcement Manual to add weight to his
claim that the Formal Order was "purely investigatory," because it
"seeks to determine whether a violation of the federal securities
laws may have occurred or may be occurring"; moreover the
individuals running the investigation cannot adjudicate any claim
and any enforcement action must be authorized by the SEC.
Lastly, Jalbert attempts to further elucidate why the
Formal Order does not "incontrovertibly show" that SEC proceedings
were "a reasonable possibility" by contrasting a Wells Notice or
target letter with the Formal Order. He asserts that the former
"clearly, directly, and unequivocally tells the recipient that
proceedings may be brought against them" after securities-laws
violations have been preliminarily determined or a target of an
-15- investigation has been identified based on "substantial evidence."
The latter "neither threatens nor suggests possible proceedings."
We do not find Jalbert's arguments persuasive. Instead,
we agree with the district court that the Formal Order satisfies
the Deemed-Made Clause because the order "presages the likelihood
of proceedings." See Jalbert, 325 F. Supp. 3d at 215. In other
words, we find that the Formal Order identified F-Squared "as
Black's Law Dictionary defines the verb "may" as "[t]o
be permitted to"; "[t]o be a possibility"; "[l]oosely, is required
to; shall; must." May, Black's Law Dictionary (11th ed. 2019)
(emphasis added); see Brazas Sporting Arms, Inc., 220 F.3d at 4
(instructing that courts consider the plain and ordinary meaning
of policy language). Based on this ordinary meaning, a claim
relating to a formal investigation will be deemed first made when
an insured is identified by name in one of the qualifying documents
(here, an order of investigation) as someone against whom there is
a possibility that a proceeding will be brought. At a minimum,
the Formal Order expressed such a possibility. It indicated that
F-Squared may have violated several federal securities laws.
Furthermore, it expressly directed "that a private investigation
be made to determine whether" F-Squared had actually engaged or
-16- was going to engage in "acts or practices" that violated any of
the securities laws listed in the order. Moreover, this order was
issued by the SEC's Division of Enforcement and designated officers
to issue subpoenas, take evidence, and request the production of
documents, which further supports an inference that the
institution of proceedings was possible. Indeed, the SEC served
a subpoena on F—Squared related to the matter in the Formal Order
as soon as October 2, 2013.
Based on the Formal Order alone, a reasonable jury would
have to find that a civil, criminal, administrative, or regulatory
proceeding against F-Squared was at least a possibility. It would
be unreasonable for a jury to interpret the Formal Order as not
carrying with it a possibility that an enforcement proceeding would
follow. Likewise, if the Formal Order had issued during the policy
period, a reasonable insured in F-Squared's position would have
expected to be covered under the policy for its expenses in
connection with the SEC investigation. See Brazas Sporting Arms,
Inc., 220 F.3d at 4 (noting that in construing the language of a
policy, we must consider "what an objectively reasonable insured,
reading the relevant policy language, would expect to be covered"
(quoting GRE Ins. Grp., 61 F.3d at 81)). The Deemed-Made Clause
requires nothing more. To that end, the clause is devoid of any
qualifying terms to express what degree of possibility is needed
-17- to satisfy it. Thus, while Jalbert attempts to make a distinction
between different levels of possibility, we agree with the district
court that the plain language of the clause is expansive and is
fulfilled by the possibility of proceedings that the Formal Order
presented.
Jalbert goes to great lengths to resist this conclusion
by attempting to distinguish the concept of an SEC investigation
from that of an enforcement action. He contends that based on
this distinction, a jury could find that the Formal Order did not
indicate whether an enforcement proceeding against F-Squared was
not a reasonable possibility. Jalbert points to Center for Blood
Research, Inc. v. Coregis Insurance Co., 305 F.3d 38 (1st Cir.
2002), for the proposition that an enforcement proceeding is
instituted separately from an investigation. He similarly relies
on MusclePharm Corp. v. Liberty Insurance Underwriters, Inc.,
citing part of that opinion that states that through a formal
order, "the SEC was not seeking relief, but was only gathering
information," 712 F. App'x 745, 754 (10th Cir. 2017), and
concluding that a regulatory investigation was not a proceeding,
id. at 755. Nevertheless, this argument misses the point. The
investigation does not need to be an enforcement action or
proceeding, or actually result in one, for the plain language "may
be brought" in the Deemed-Made Clause to be satisfied; there must
-18- be only a possibility of a future enforcement action for the claim
to be deemed first made. Thus, for purposes of this appeal,
Jalbert's distinction is one without any practical difference.8
Furthermore, Center for Blood Research, Inc. concerned
an investigative subpoena, which we found merely requested
information from a party. 305 F.3d at 42-43. In contrast, this
case involves a formal order from the SEC ordering investigation
into various of F-Squared's actions which, if verified, would
constitute violations of multiple federal laws. Unlike a mere
request for information, the Formal Order therefore identified
F-Squared "as someone against whom" an enforcement "proceeding may
be brought," which suffices to deem a "claim" to have been "first
made" under the Deemed-Made Clause here. Moreover, unlike the
contract in Center for Blood Research, Inc., F-Squared's policy
covers formal investigations and does not require a "judicial or
administrative proceeding in which [the] insured(s) may be
subjected to a binding adjudication of liability." Id. at 42.
MusclePharm Corp. is likewise distinguishable from the case at
hand. There, the court considered whether an SEC formal order and
subpoenas were "claim[s]" as defined in the applicable policy to
8 For these same reasons we find futile Jalbert's references to the SEC Enforcement Manual to attempt to show that the Formal Order was simply an investigation and not an enforcement action.
-19- include "a written demand for monetary or non-monetary relief" or
"a formal administrative or regulatory proceeding." 712 F. App'x
at 753. The court ultimately held that they were not. Id. at
755. The definition of "claim" in that case is remarkably
different from the provision at issue in this appeal, and a
comparison to this scenario is inapposite.
Jalbert's contrasting of the Formal Order with a Wells
Notice or target letter is similarly unavailing. The institution
of proceedings need not be a certainty. As we already said, the
Deemed-Made Clause here is satisfied by simply a possibility that
those proceedings will take place, and the Formal Order delineating
potential securities-law violations carries that future
possibility. Furthermore, Jalbert's proposed reading is
unsupported because the clause provides that the insured be named
in "an order of investigation, . . . Wells Notice or target
letter . . . as someone against whom [one of the qualifying
proceedings] may be brought." Jalbert's interpretation that a
Wells Notice or target letter, but not the Formal Order, satisfy
the possibility that an enforcement action would be commenced would
render meaningless the inclusion of "order of investigation" in
the Deemed-Made Clause. See UBS Fin. Servs., Inc. of P.R., 929
F.3d at 24 (stating that we would not construe a term in a way
that would render meaningless other terms of the policy). Because
-20- adopting Jalbert's view would require us to rewrite the policy in
a way that would change the terms of coverage, we refuse to do so.
2.
Unrelenting, Jalbert argues that the Deemed-Made Clause
is ambiguous, which he contends entitles him to the interpretation
of the policy that is more favorable to F-Squared. To prove
ambiguity, Jalbert asserts that "reasonably intelligent persons
would differ" about the interpretation of the clause based on "the
level of possibility" a person could assign to the word "may." He
asks us to solve the purported ambiguity against the insurer.
Jalbert's argument that the clause's use of the word
"may" renders it ambiguous is unpersuasive. Although it is
feasible the word "may" connotes differing levels of possibility
depending on the context, "the mere existence of multiple
dictionary definitions of a word, without more" does not suffice
to create ambiguity. Ctr. for Blood Research, 305 F.3d at 41
(internal quotations omitted). Nor does ambiguity exist because
a controversy exists between the parties. See Certain Interested
Underwriters at Lloyd's, London v. Stolberg, 680 F.3d 61, 66
(1st Cir. 2012) ("[A]mbiguity -- unlike beauty -- does not lie
wholly in the eye of the beholder. . . . A policy provision will
not be deemed ambiguous simply because the parties quibble over
its meaning."). A term "is ambiguous only if it is susceptible
-21- of more than one meaning and reasonably intelligent persons would
differ as to which meaning is the proper one." Id. (quoting
Citation Ins. Co. v. Gomez, 688 N.E.2d 951, 953 (Mass. 1998)). In
any event, we cannot see how an interpretation of the word "may"
having different "levels of possibility" would change the result
reached above.
Even if the Deemed-Made Clause required the "reasonable
possibility" of an enforcement proceeding, a reasonable insured
would read the Formal Order, which identified F-Squared as the
subject of an investigation into conduct that constituted or could
constitute violations of securities laws, to express a "reasonable
possibility" that an enforcement action would be brought against
it and would expect coverage at that point. See Brazas Sporting
Arms, Inc., 220 F.3d at 4. There is no supportable basis from
which a jury could find that the Deemed-Made Clause is not
triggered by the Formal Order. The claim here, then, is deemed
to have been made at the time the Formal Order was issued on
September 23, 2013. The Excess Insurers' policies did not take
effect until October 3, 2013, and thus the claim was deemed made
outside their coverage period. Accordingly, the Excess Insurers
are not obligated to reimburse F-Squared for its defense costs.9
9 Because we conclude that F-Squared's claim for the SEC investigation is deemed to have been first made outside the Excess Insurers' policies' coverage period, we need not reach the separate
-22- III. Conclusion
For the foregoing reasons, we affirm the district
court's decision granting summary judgment in favor of the Excess
Insurers. The parties shall bear their own costs.
Affirmed.
issues of whether the Prior Notice Exclusion or the Prior or Pending Exclusion bar coverage for the investigation.
-23-