Indian Harbor Insurance Co. v. Zucker for Liquidation Trust of Capitol Bancorp

860 F.3d 373 (2017)

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Indian Harbor Insurance Co. v. Zucker for Liquidation Trust of Capitol Bancorp

United States Court of Appeals for the Sixth Circuit
860 F.3d 373 (2017)

RW

Facts

Indian Harbor Insurance Company (Indian Harbor) (plaintiff) insured Capitol Bancorp Ltd. (Capitol) and its chief officers, Joseph and Cristin Reid (defendants), under directors-and-officers (D&O) policies that excluded coverage for claims made by, on behalf of, or in the name or right of one insured party against another insured party. Upon entering Chapter 11 bankruptcy proceedings, Capitol became a debtor-in-possession. In that capacity, Capitol assigned all its claims to a liquidation trust formed to represent the bankruptcy estate. When Clifford Zucker (defendant), the liquidation trust’s trustee, sued the Reids for breach of fiduciary duty, Indian Harbor sued Zucker and the Reids for a declaratory judgment that the insured-versus-insured exclusion relieved Indian Harbor of liability for any resulting damages award. Neither the bankruptcy court nor the federal district court found any evidence of collusion between Capitol and Zucker or the Reids. Nevertheless, the district court held that the insured-versus-insured exclusion applied and entered judgment for Indian Harbor. Zucker and the Reids appealed to the Sixth Circuit.

Rule of Law

Issue

Holding and Reasoning (Sutton, J.)

Dissent (Donald, J.)

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