Appeals court strips judgment for Emmis, rules for insurer

A federal appeals court has reversed a breach-of-contract ruling for Indianapolis-based media company Emmis Communications Corp. arising from a shareholder dispute. The 7th Circuit Court of Appeals ruled the district court should have found in favor of Emmis’ insurer instead.

Indianapolis-based Emmis sued Illinois National Insurance Co. when the latter refused to pay up on a directors and officers liability insurance policy purchased by Emmis to cover a period from Oct. 1, 2011 to Oct. 1, 2012. Emmis sought more than $4 million in legal fees that its insurer refused to cover.

That policy had an exclusion for any losses in connection with events that included “[a]ll notices of claim of circumstances as reported under policy 8181‐0068 issued to Emmis Corporation by Chubb Insurance Companies,” Emmis’ prior directors and officers liability insurance provider.

When three shareholders sued to stop Emmis from gaining control of its shares to go private, and Illinois National subsequently refused coverage, Emmis sought damages for breach of contract and breach of the duty of good faith and fair dealing.

Both parties sought summary judgment from the Southern District Court in Indianapolis. Emmis argued that coverage was appropriate, and Illinois National argued that the policy’s complex exclusion provisions prevented coverage. Illinois National further contended that the “as reported” provision excluded all notices that were reported to Chubb at any time, including the suit giving rise to this litigation.

However, Emmis claimed that it excluded only those notices that had been reported at the time that the policy went into effect two years prior to reported notice. The Southern District Court ultimately granted judgment in Emmis’ favor, concluding that while both interpretations of the term were reasonable, Emmis’ was better.

“The court thought that the past tense of ‘as reported’ must ‘refer[] to events that had already occurred at the time of drafting.’ It bolstered its holding by invoking the rule favoring coverage when multiple reasonable readings of an insurance policy might apply,” the 7th Circuit said.

But the appellate court found the entire case could be resolved on the single issue of the meaning of “as reported.” It disagreed with the district court, finding Illinois National’s proposed interpretation to be correct.

“The phrase has no discernable temporal limitations. Once Emmis or one of its agents reports a claim to Chubb, at any time, then that claim is ‘reported’ — and so is excluded. The timing of the report is irrelevant,” Circuit Judge Amy Coney Barrett wrote for the panel.

“Emmis acknowledged in its brief that it did in fact report its claim to Chubb. That resolves our inquiry,” the panel continued. “The exclusion applies, so summary judgment should have been entered in favor of Illinois National.”

The 7th Circuit thus reversed and remanded the case for proceedings.