## Facts

- Sphinx International, Inc. obtained a claims-made directors’ and officers’ (D&O) liability policy covering claims made during the policy period.
- The policy included an insured-versus-insured exclusion barring coverage for claims brought “by, on behalf of, or at the behest of” any insured, including any past director or officer.
- George Taylor, a former Sphinx officer/director and a shareholder, was terminated from Sphinx and later brought a federal securities-fraud class action against Sphinx and certain officers.
- Taylor solicited other shareholders to join the litigation, and the complaint was amended to add additional shareholder plaintiffs.
- Sphinx tendered the defense/coverage request to its insurers; Genesis Indemnity Insurance Company denied coverage based on the insured-versus-insured exclusion.
- The district court entered summary judgment for Genesis, concluding the exclusion barred coverage; Sphinx appealed.

## Issues

1. Whether an insured-versus-insured exclusion in a D&O policy bars coverage for a securities-fraud class action initiated by a former officer/director who sues as a shareholder and class representative.
2. If the exclusion applies to the former officer/director, whether coverage must be allocated to preserve coverage for the portions of the class action attributable to non-insured shareholder plaintiffs.

## Decision

- The Eleventh Circuit affirmed summary judgment for Genesis.
- The court held the insured-versus-insured exclusion unambiguously barred coverage because the action was “brought by” a former officer/director.
- The court rejected limiting the exclusion to collusive suits, enforcing the policy text as written.
- The court rejected allocating coverage between the former officer/director and non-insured class members; the exclusion barred coverage for the entire action.

## Legal Principles

- Under Florida insurance-contract law, unambiguous policy language is enforced according to its plain meaning; courts will not rewrite provisions based on perceived purpose or fairness.
- An insured-versus-insured exclusion may apply based on the claimant’s status as a past director/officer, even if the claimant sues in another capacity (including as a shareholder or class representative).
- Absent policy language authorizing allocation, an exclusion triggered by an insured claimant can preclude coverage for the whole claim, including claims joined by non-insured plaintiffs.

## Conclusion

The Eleventh Circuit held that a D&O policy’s insured-versus-insured exclusion barred coverage for a securities-fraud class action initiated and pursued by a former director/officer, and it refused to allocate coverage to non-insured shareholder plaintiffs because the policy language barred the action in full once the exclusion was triggered.


Sphinx Int'l, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 412 F.3d 1224 (11th Cir. 2005)