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Financial Industry Regulatory Authority, Inc. v. Axis Insurance Co.

United States District Court, D. Maryland

June 12, 2013

FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC., Plaintiff,
v.
AXIS INSURANCE CO., Defendant

Page 827

For Financial Industry Regulatory Authority, Inc., Plaintiff: Kenneth R West, LEAD ATTORNEY, Abrams and West PC, Bethesda, MD; Judith Feinberg Goodman, Lester Lee Chanin, PRO HAC VICE, Goodman and Jacobs LLP, New York, NY.

For AXIS Insurance Company, Defendant: Stacey Ann Moffet, LEAD ATTORNEY, Eccleston and Wolf PC, Hanover, MD; Joan N Gilbride, PRO HAC VICE, Kaufman Borgeest and Ryan LLP, New York, NY; Leonard B Cooper, Robert A Benjamin, PRO HAC VICE, Kaufman Borgeest and Ryan LLP, Valhalla, NY.

OPINION

Page 828

MEMORANDUM OPINION

Paul W. Grimm, United States District Judge.

This Memorandum and Order addresses Defendant AXIS Insurance Company's Motion to Dismiss Plaintiff's Complaint, or in the Alternative, Motion for Summary Judgment, ECF No. 35, and supporting memorandum, ECF No. 35-1; Plaintiff Financial Industry Regulatory Authority's Cross-Motion for Summary Judgment, ECF No. 37, and supporting memorandum, ECF No. 37-1; Defendant's Reply and Opposition, ECF No. 38; and Plaintiff's Reply, ECF No. 39. I find that a hearing is unnecessary in this case. See Local Rule 105.6. For the reasons stated below, Defendant's Motion for Summary Judgment is GRANTED and Plaintiff's Cross-Motion for Summary Judgment is DENIED.

I. BACKGROUND

AXIS issued two employment liability insurance policies to the Financial Industry Regulatory Authority (" FINRA" ), one covering the period from March 31, 2010 to March 31, 2011 (" 2010/2011 Policy" ), and the other covering the period from March 31, 2011 to March 31, 2012 (" 2011/2012 Policy" ) (together, the " Policies" ).[1] Of import, the Insuring Agreements of both Policies state that AXIS will provide coverage for a claim against FINRA, as the Insured, if

the Claim is first made against the Insureds during the Policy Period or the Extended Reporting Period, if applicable, and reported in writing to the Insurer as soon as practicable after the Director of Human Resources, General Counsel, or Risk Manager of the Policyholder, or the functional equivalent thereof, first becomes aware of such Claim, but in no event later than sixty (60) days after the expiration of the Policy Period or the Extended Reporting Period, if applicable.

Compl. Ex. D & E, Policies § I, ECF Nos. 2-5 - 2-8. The Policies define " claim" as " the receipt by any Insured of . . . a written demand against any Insured for monetary or non-monetary relief[.]" [2] Policies § III.D.1.a.

When FINRA received notice on April 22, 2011 that Hans-Linhard Reich, a former FINRA employee, had filed an Equal Employment Opportunity Commission (" EEOC" ) Charge of Discrimination against FINRA on March 31, 2011 (" EEOC Proceeding" ), FINRA sought

Page 829

AXIS's coverage. AXIS agreed to participate in FINRA's defense, pursuant to the 2011/2012 Policy, but reserved its rights to deny coverage at a later date. Reich then brought an age discrimination suit against FINRA in a United States District Court on August 30, 2011 (" Reich Action" ), which ultimately settled.

On February 15, 2012, AXIS denied coverage for the Reich Action on the basis that FINRA failed to make a timely report to AXIS of the " written demand" it received, as required under the 2010/2011 Policy. AXIS identified as the " written demand" a February 3, 2011 email to FINRA's associate vice president and associate general counsel, Gary Lipkin. In the email, Reich's attorney, James Batson, wrote:

Not to quibble, but just so that we are clear, I did not ask for 5 years of " severance pay." I said that Mr. Reich believed that FINRA's decision to terminate his employment was discriminatory, in that his age was a motivating factor. I added that Mr. Reich would settle that claim for a sum equal to 5 years' pay. You said that you could get him 12 months, but no more than that and that if Mr. Reich chose not to accept that, his last day would be March 31.
Mr. Reich rejects your counter-offer.

Compl. Ex. H, Feb. 3, 2011 email, ECF No. 2-11. AXIS argued that the 2010/2011 Policy obligated FINRA to report the demand, which FINRA received during the 2010/2011 Policy, within sixty days of the 2010/2011 Policy's expiration. According to AXIS, FINRA submitted a report of the claim on August 9, 2011, and AXIS received it on August 12, 2011, more than sixty days after the 2010/2011 Policy expired.

FINRA contends that the email " was not a 'written demand for monetary or non-monetary relief,'" and therefore not a " claim," but rather " merely a recounting of an oral conversation of the day before." Compl. ¶ 17, ECF No. 2. FINRA claims that the email was " intended 'just' to avoid any uncertainty or confusion on [FINRA's general counsel's] part as to what [Reich's attorney] had said in an oral conversation regarding the possible resolution of the dispute between Reich and FINRA." Id.

FINRA brought suit against AXIS in state court, claiming breach of contract based on AXIS's alleged breach of its duty to indemnify under the Policies, and seeking a declaratory judgment. According to Plaintiff in Count I for " Breach of Contract and Declaratory Judgment Under the 2011/2012 Policy," FINRA received notice of the EEOC Proceeding and notified AXIS of the " claim" within the 2011/2012 Policy. Alternatively, in Count II for " Breach of Contract and Declaratory Judgment Under the 2010/2011 Policy," Plaintiff contends that, if it received notice of the EEOC Proceeding within the 2010/2011 Policy, then its delay in notifying AXIS " was de minimis and did not result in actual prejudice to AXIS, as is required under MD Code, Insurance § 19-110." Compl. ¶ 30. AXIS removed the action to this Court and now moves to dismiss or for summary judgment, and FINRA has filed a cross-motion for summary judgment.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) provides for " the dismissal of a complaint if it fails to state a claim upon which relief can be granted." Velencia v. Drezhlo, No. RDB-12-237, 2012 WL 6562764, at *4 (D. Md. Dec. 13, 2012). This rule's purpose " 'is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the ...


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