On November 7, 2007, Judge Timothy C. Batten of the United States District Court for the Northern District of Georgia issued an Order ruling that a Directors and Officers (“D&O”) Policy may provide coverage for the costs incurred, including attorneys' fees and other investigatory costs, in responding to a Department of Justice (“DOJ”) grand jury subpoena. See Order Granting in Part and Denying in Part Defendant’s Motion to Dismiss, N.D. GA Case No. 1:07-cv-00096-TCB.
The D&O policy at issue provided coverage for a “claim,” defined in relevant part to include, “. . . a formal civil administrative or regulatory proceeding against any Insured Person commenced by the filing of a notice of charges, formal investigative order or similar document . . . .” Defendant St. Paul Mercury Insurance Company (“St. Paul”) took the position that a DOJ subpoena for the production of documents—issued in connection with antitrust bid-rigging allegations—did not constitute a “claim” as a matter of law and, thus, the insured’s claims should be dismissed. Judge Batten ruled otherwise, reasoning that the subpoena could be considered a “regulatory proceeding” under the above definition of “claim.” See Order, p.15. .
The Order is also significant because it re-affirms the well-established principle that ambiguous language in an insurance policy shall be construed in favor of the insured. In particular, the Court held that the above definition of “claim” was ambiguous because the adjective “civil” could be read to modify either “administrative proceedings” alone or “administrative and regulatory proceedings.” In light of this ambiguity, the Court construed the definition of “claim” in favor of the insured to include both civil administrative and civil regulatory proceedings.