Appeal from the United States District Court for the Western District of Pennsylvania, D.C. Civil No. 86-275.
Seitz and Stapleton, Circuit Judges, and Brotman, District Judge.*fn*
Defendant MGIC Indemnity Corporation ("MGIC") appeals an order of the district court granting summary judgment in favor of plaintiff James P. Little. This court has jurisdiction under 28 U.S.C. § 1291 (1982).
Beginning in 1983, Union National Bank ("UNB") was named as defendant in a series of lawsuits brought by other lending institutions. In each of these actions the institutions allege that two UNB customers obtained funds from them on the basis of fraudulent letters of credit issued by UNB. UNB subsequently named Little as a third-party defendant in each of these lawsuits. Little was, until September 1983, a vice president and officer in the commercial loan department of UNB. UNB's third-party complaints allege that Little issued the fraudulent letters of credit pursuant to a conspiracy with the customers to place the credit of UNB at risk.
In 1982 UNB had purchased a directors' and officers' insurance policy ("the policy") from MGIC. In general terms, the policy insured directors and officers of UNB, including Little, against liabilities they might incur as a result of their conduct as employees. This policy was in effect during the time of Little's alleged malfeasance and at the time UNB filed its claims against him. Faced with the prospect of having to defend several lawsuits and unable, for obvious reasons, to obtain financial assistance from UNB, Little sought to have MGIC assume the costs of his defense under the terms of the policy. MGIC refused, maintaining that its obligation to pay Little's defense costs arises, if at all, only after the disposition of the claims against him.
Little then filed this declaratory judgment action against MGIC in the district court, seeking a determination that MGIC was required under the policy to pay his defense costs as they came due. Upon Little's motion for summary judgment, the district court found that the language of the policy was ambiguous on this point and should therefore be construed against the insurer.*fn1 Accordingly, the court ordered MGIC to make contemporaneous payment of Little's attorneys' fees and other defense costs. This appeal followed.
Our review of a grant of summary judgment is plenary. Like the district court, we must determined whether the record reveals a disputed issue of material face and, if not, whether the moving party is entitled to judgment as a matter of law. The district court found, and we agree, that the material facts of this case are not in dispute.*fn2 Determination of the proper coverage of the policy is therefore a question of law. Niagara Fire Ins. Co. v. Pepicelli, Pepicelli, Watts & Youngs, P.C., 821 F.2d 216, 219 (3d Cir. 1987). Both parties agree that Pennsylvania law governs our determination.
Because interpretation of the policy centers on the interaction of several of its provisions, it is necessary to quote these provisions at length. Language particularly significant in the present dispute is italicized.
[T]he Insurer agrees: (A) With the Directors and Officers of the Association that if, during the policy period, any claim or claims are made against the Directors and Officers, individually or collectively, for a Wrongful Act, the INsurer will pay, in accordance with the terms of this policy, on behalf of the Directors and Officers or any of them, their heirs, legal representatives or ...