The opinion of the court was delivered by: WOODS
HENRY WOODS, UNITED STATES DISTRICT JUDGE.
Pending now are the cross-motions for summary judgment of the plaintiff, American Casualty Company of Reading, Pennsylvania (American), and the defendants, the Federal Savings and Loan Insurance Corporation, as Receiver for FirstSouth, F.A. (FSLIC), and several former officers and directors of FirstSouth. American brought this action seeking a judgment declaring that it is not liable to the former officers and directors of FirstSouth, under a Directors' and Officers' Liability Insurance Policy issued to FirstSouth, for losses and expenses incurred in connection with three lawsuits brought by the FSLIC against the former officers and directors. For the reasons that follow, American's motion is denied and summary judgment is granted in favor of the defendants.
American issued a Directors' and Officers' Liability Insurance Policy to FirstSouth, F.A., a federally chartered and insured stock savings and loan association, effective from November 17, 1985 to November 17, 1986. The policy insured the individual officers and directors of FirstSouth against losses they become obligated to pay as the result of certain "wrongful acts" committed in the discharge of their duties. The policy also insured FirstSouth against loss for which it was required to, or had lawfully indemnified its officers and directors. "Wrongful Act" was defined in the policy to include misstatement, misleading statement or neglect or breach of duty by the officers and directors in the discharge of their duties.
On December 4, 1986 FirstSouth was declared by the Federal Home Loan Bank Board to be insolvent and, on that same day, the FSLIC was appointed the sole receiver of FirstSouth by the FHLBB. FirstSouth's failure, as could be expected, spawned a wave of litigation. Three lawsuits brought by the FSLIC, as receiver, against FirstSouth's former officers and directors are at issue here.
In the "Officer and Director" suit, the FSLIC, as receiver, seeks judgment of not less than 150 million dollars against the former officers and directors for breach of their fiduciary duties to FirstSouth. A similar suit was filed against defendant R. Reed in the bankruptcy court and will be tried primarily on the record produced in the officer and director suit. The FSLIC, as receiver, has also sued defendant Weichern, former Chairman of the Board and Chief Executive Officer of FirstSouth, together with FirstSouth's two largest shareholders, alleging liability of $ 279 million for RICO violations, fraud and breach of fiduciary duty.
American filed its complaint in this action seeking a declaration that the D&O policy described above affords no coverage for the former officers and directors with respect to the FSLIC lawsuits. Its claim is based on two endorsements attached to the policy and referred to herein respectively as the "Insured vs. Insured" exclusion and the "Regulatory" exclusion. All parties agree that interpretation of the D&O policy is governed by Arkansas law.
The law applicable to this case is straightforward, contrary to the impression one would get from reading the parties' briefs. In Arkansas, contracts of insurance are construed according to general contract principles. Allstate Insurance Co. v. USF&G, 663 F. Supp. 548, 553 (W.D. Ark. 1987). Legal effect must be determined by considering the language of the entire policy and the object sought to be accomplished thereby. Continental Casualty Co. v. Davidson, 250 Ark. 35, 463 S.W.2d 652 (1971); Pate v. USF&G, 14 Ark. App. 133, 685 S.W.2d 530 (1985); Kramer Grocery Co., Inc. v. Glens Falls Ins. Co., 497 F.2d 709 (8th Cir. 1974) (Arkansas Law). The terms used are to be given their common, plain ordinary and popular meaning. CNA Insurance Co. v. McGinnis, 282 Ark. 90, 666 S.W.2d 689 (1984).
If, applying these principles, there is but one interpretation possible, it is the court's duty to construe the policy according to the plain import of its language. Wilson v. Countryside Casualty Co., 5 Ark. App. 202, 634 S.W.2d 398 (1982); Allstate Insurance Co. v. Johnson's Estate, 539 F. Supp. 421 (W.D. Ark.1982) (Arkansas Law). But, if a provision is susceptible to more than one equally reasonable construction, one which would justify recovery and one which would not, the ambiguity must be interpreted in favor of the insured. Drummond Citizens Insurance Co. v. Sergeant, 266 Ark. 611, 588 S.W.2d 419 (1979). Any intent to exclude coverage should be expressed in clear, unambiguous and unmistakable language. Milwaukee Insurance Company v. Wade, 238 Ark. 565, 383 S.W.2d 105 (1964); Union Bankers Insurance Co. v. National Bank of Commerce of Pine Bluff, 241 Ark. 554, 408 S.W.2d 898 (1966).
A. Insured vs. Insured Endorsement
Endorsement nine (9) to the D&O policy, captioned "Insured vs. Insured," provides that:
It is understood and agreed that the Insurer shall not be liable to make any payment for loss, as defined in Clause 1(d) hereof, which is based upon or attributable to any claim made against any Director or Officer by any Director or Officer or by the Institution defined in Clause 1(a) of the policy (hereinafter called "Institution"), except for a shareholder's derivative action brought by a shareholder of the Institution other than an Insured.
American claims that the FSLIC, as receiver, stands in the shoes of FirstSouth, for purposes of the actions against the former officers and directors which are at issue here, because it acquired all claims and causes of action which FirstSouth had against the officers and directors and brought the underlying actions "for the benefit of FirstSouth." See 12 U.S. C. § 1789(b). Since an action brought by FirstSouth against its own officers and directors would have been expressly excluded from coverage by the Insured vs. Insured ...