In Medical Mutual Insurance Company of Maine (MMIC) v Indian Harbor Insurance Company (IHIC), the First Circuit Court of Appeals concluded that IHIC’s denial of MMIC’s claim made under a Directors and Officers (D&O) insurance policy was proper.

MMIC’s former CEO filed a lawsuit against it, alleging disability discrimination. MMIC settled the lawsuit and sought reimbursement from IHIC. IHIC declined because the lawsuit was filed against MMIC alone and did not name any of its directors or officers. MMIC filed suit. The district court granted IHIC’s motion for summary judgment, and MMIC appealed.

While MMIC contended that the CEO’s complaint centered on allegations of wrongdoing by MMIC’s directors and officers, the court disagreed and concluded that because MMIC was not listed as an insured person in the policy, it could not be afforded coverage. The court characterized MMIC’s argument as an attempt to transform the D&O policy into a comprehensive corporate liability policy. The court emphasized that while D&O policies protect directors and officers from personal liability, they do not protect the corporation by which directors and officers are employed.

The court also rejected MMIC’s argument that the settlement release signed by the CEO indicated a coverage obligation, insofar as the CEO agreed to waive any and all claims against MMIC “and its directors and officers.” The court stated “it would make no sense to allow an insured to manufacture coverage by the simple expedient of insisting, as a condition of settlement, that a plaintiff frame a release more broadly than the plaintiff had framed the claim actually made.”