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Fiserv Solutions, Inc. v. Endurance American Specialty Insurance Co.

United States District Court, E.D. Wisconsin

September 30, 2016

FISERV SOLUTIONS, INC., Plaintiff,
v.
ENDURANCE AMERICAN SPECIALTY INSURANCE COMPANY, XL SPECIALTY INSURANCE COMPANY, NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PA, and CONTINENTAL CASUALTY COMPANY, Defendants.

          Fiserv Solutions Inc, Plaintiff, represented by Antony B. Klapper, Reed Smith LLP.

          Fiserv Solutions Inc, Plaintiff, represented by Daniel J. Vaccaro, Michael Best & Friedrich LLP, Matthew J. Schlesinger, Covington & Burling LLP, Patricia Linn Jenness, Michael Best & Friedrich LLP, Tara A. Brennan, Covington & Burling LLP & Amy L. Vandamme, Michael Best & Friedrich LLP.

          Endurance American Specialty Insurance Company, Defendant, represented by Jung H. Park, Ropers Majeski Kohn & Bentley, Blaise U. Chow, Ropers Majeski Kohn & Bentley, Eric C. Weissman, Ropers Majeski Kohn & Bentley, Geoffrey W. Heineman, Ropers Majeski Kohn & Bentley, Kirsten Lee Molloy, Ropers Majeski Kohn & Bentley & Michael R. Vescio, SmithAmundsen LLC.

          XL Specialty Insurance Company, Defendant, represented by Alexis J. Rogoski, Skarzynski Black LLC, Edward C. Carleton, Skarzynski Black LLC & Michael J. Cieslewicz, Kasdorf Lewis & Swietlik SC.

          Endurance American Specialty Insurance Company, Counter Claimant, represented by Jung H. Park, Ropers Majeski Kohn & Bentley, Blaise U. Chow, Ropers Majeski Kohn & Bentley, Eric C. Weissman, Ropers Majeski Kohn & Bentley, Geoffrey W. Heineman, Ropers Majeski Kohn & Bentley, Kirsten Lee Molloy, Ropers Majeski Kohn & Bentley & Michael R. Vescio, SmithAmundsen LLC.

          Fiserv Solutions Inc, Counter Defendant, represented by Matthew J. Schlesinger, Covington & Burling LLP, Amy L. Vandamme, Michael Best & Friedrich LLP, Matthew J. Schlesinger, Covington & Burling LLP & Amy L. Vandamme, Michael Best & Friedrich LLP.

          DECISION AND ORDER GRANTING TOWER 1 MOTIONS FOR SUMMARY JUDGMENT (DOCS. 133, 143), DENYING TOWER 2 MOTION FOR SUMMARY JUDGMENT (DOC. 137), GRANTING IN PART AND DENYING IN PART FISERV'S MOTION FOR SUMMARY JUDGMENT (DOC. 139), AND SETTING A STATUS CONFERENCE

          C.N. CLEVERT, Jr., District Judge.

         Policyholder Fiserv Solutions, Inc. sues four insurers under various claims-made policies for coverage of funds Fiserv paid to settle litigation in North Carolina. In that action, Bank of America sued First American Title Insurance Company, which then sued Fiserv in a third-party complaint. All parties move for summary judgment.

         Summary judgment is proper if the depositions, documents or electronically stored information, affidavits or declarations, stipulations, admissions, interrogatory answers or other materials show that there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a), (c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial burden of demonstrating it is entitled to summary judgment. Celotex, 477 U.S. at 323. Once this burden is met, the nonmoving party must designate specific facts to support or defend each element of its cause of action, showing that there is a genuine issue for trial. Id. at 322-24. In analyzing whether a question of fact exists, the court construes the evidence in the light most favorable to the party opposing the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

         The mere existence of a factual dispute does not defeat a summary judgment motion; there must be a genuine issue of material fact for the case to survive. Id. at 247-48. "Material" means that the factual dispute must be outcome-determinative under governing law. Contreras v. City of Chicago, 119 F.3d 1286, 1291 (7th Cir. 1997). Failure to support any essential element of a claim renders all other facts immaterial. Celotex, 477 U.S. at 323. To establish that a question of fact is "genuine, " the nonmoving party must present specific and sufficient evidence that, if believed by a jury, would support a verdict in its favor. Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 249.

         Because the parties in this case have filed cross-motions for summary judgment, many facts are undisputed. When no genuine issue of material fact exists, the sole question is whether the moving party is entitled to judgment as a matter of law. Logan v. Commercial Union Ins. Co., 96 F.3d 971, 978 (7th Cir. 1996). Nevertheless, when two parties have moved for summary judgment, both are required to show that no genuine issue of material fact exists, taking the facts in the light most favorable to the party opposing each motion. See Lac Courte Oreilles Band of Lake Superior Chippewa Indians v. Voigt, 700 F.2d 341, 349 (7th Cir. 1983).

         COMMENTS ON LOCAL SUMMARY JUDGMENT PROCEDURE

         Civil L.R. 56(b)(1) requires each summary-judgment movant to file statements of material facts to which all parties have stipulated plus statements of proposed material facts as to which the movant contends there is no dispute. The statements shall consist of "short numbered paragraphs, including within each paragraph specific references" to the evidence. Civil L.R. 56(b)(1)(C)(i). Opposing parties then respond to each proposed factual statement, "including, in the case of any disagreement, specific references to the affidavits, declarations, parts of the record, and other supporting materials relied upon." Civil L.R. 56(b)(2)(B)(i). The opponent may file additional statements of proposed facts, again consisting of "short numbered paragraphs, " that the party believes require the denial of summary judgment. The movant in reply then responds to the additional facts in the same way the opposing party responded to the initial proposed facts. Civil L.R. 56(b)(3)(B). Any statement that is not controverted properly is deemed admitted for summary-judgment purposes. Civil L.R. 56(b)(4).

         In this case, the court encouraged the parties to submit a set of stipulated facts to the extent possible, expecting that they could agree on matters such as insurance-policy language and the contents of notice letters. A document titled "Joint Stipulation of Facts, " was filed, but the bulk of the stipulated "facts" are actually agreements respecting the identification and admissibility of documents. For instance, paragraph 19 reads: "On June 25, 2009, prior to the expiration of the policy period for the 08-09 Tower, Fiserv submitted to the 08-09 insurers a letter entitled, Notice of Potential Claims.' (Attached hereto as Stip. Ex. 21 is a true and correct copy of the June 25, 2009 letter entitled, Notice of Potential Claims, ' Bates-labeled FISERV-001213977-93[.)]" (Doc. 122, ¶ 19.) And paragraph 24 reads: "On June 9, 2010, Hiscox, the primary 08-09 insurer, sent a letter responding to Fiserv's March 9, 2010 letter. (Attached hereto as Stip. Ex. 28 is a true and correct copy of the letter from L. Kamaiko to M. Schlesinger (June 9, 2010), Bates-labeled FISERV-001285175-209[.)]" (Doc. 122, ¶ 24.)

         The stipulations concerning exhibits assists the court regarding admissibility of evidence and by providing the pertinent documents in one set of binders. The court simply notes that the parties likely could have stipulated to much more. For instance, proposed statements of fact from multiple parties set forth the same language from the Hiscox and National Union policies and from the potential-claims notice (described below). The court urges the parties (not just those in this case, but in all cases) to seek stipulations on the content of or text within exhibits as well as the dates and admissibility of the exhibits. It truly assists decision making. Here, the court had to sift through twenty-two different documents matching hundreds of proposed facts and responses-with several of the proposed facts quoting or paraphrasing identical language from the same documents that were submitted by separate parties.

         Though the above is merely a suggestion, many of the responses to statements of proposed fact require additional comment. National Union, in response to many statements of fact (for instance, most proposed statements of fact by Endurance and XL), stated that the terms and conditions of a particular document speak for themselves and that the proposed statement of fact is disputed "to the extent inconsistent therewith." ( See, e.g., Doc. 173, ¶¶ 4-15.) For example, National Union, in response to a quote of a Hiscox policy provision in proposed fact 13 in Document 152, responded: "NUFIC states that the terms and conditions of the Hiscox Policy speak for themselves, and disputes ¶ 13 of Endurance and XL's Statement of Additional Facts to the extent inconsistent therewith. NUFIC further states that ¶ 13 only refers to a portion of the Hiscox Policy, and the policy must be read as a whole." (Doc. 173, ¶ 13.) Such a response is not a proper response. It fails to answer whether the statement is accurate and fails to direct the court to a specific disagreement-which is the point of the statements of proposed fact. Either the quote is correct or it is not. National Union should have responded with an admission or a denial and, if the latter, a correction of the language. (See, e.g., Continental's response in document 179, paragraph 29, which provides the full quote when Continental thought a partial quotation was incomplete.) Instead, National Union essentially told the court: "judge, go look at the whole document and figure out how we object." (The Hiscox policy, by the way, is forty-six pages. (Doc. 122, Ex. 6.)) The court should not be expected to read four insurance policies and guess what these parties are disputing. Similarly, statement 52 in Document 152-that a witness testified using quoted language-merited an admission or denial, not the by-then usual refrain that the deposition testimony "speaks for itself, " is disputed "to the extent inconsistent therewith, " and "must be read as a whole." Again, either the quote was correct or it was not. Because responses such as these avoid the whole point of statements of proposed fact, the court has generally disregarded them.[1]

         Notably, National Union was not the only party to provide such (non)responses to statements of proposed fact. Continental provided similarly unhelpful responses to quotations from letters or emails. ( See Doc. 166, ¶ 5 (responding to quotations with "Continental admits only that Dave Stokes wrote to Steve Winkler on October 19, 2006. The correspondence speaks for itself and must be read as a whole.") Fiserv, too, at times fell into this type of response. ( See Doc. 176, ¶¶ 40-48 ("Undisputed that the referenced document says what it says. FLS disputes these proposed facts to the extent they mischaracterize the referenced document which speaks for itself."); see also id. ¶ 37.) Again, the court disregarded such nonspecific and unhelpful responses.

         Next, Fiserv objected to various statements of proposed fact from Endurance and XL because they were not limited to a single factual proposition. However, though a prior version of the local rules limited each proposed finding of fact to one factual statement, the present version of the local rules does not. As stated above, the present local rule requires only short, numbered paragraphs. Civil L.R. 56(b). The court has reviewed Endurance and XL's proposed statements of fact and concludes that they do not violate the rule.

         Interestingly, even though the court has sifted through hundreds of proposed material facts and responses, it does not appear that any of them set forth some important language from the 2009-2010 policies. In their briefs, Fiserv and Endurance and XL discuss the ACE Westchester policy's "prior notice exclusion" and definition of "Interrelated Wrongful Act." Yet the court did not find any proposed findings of fact setting forth that policy language. Perhaps the court missed it. But factual references in briefs must include cites to the stipulation or proposed statement of fact, and for some quotations of policy language Endurance and XL cite only to a page number in the parties' joint exhibit 16 rather than to a statement of fact, suggesting that there was no such proposed fact. ( See, e.g., Doc. 137, Ex. 2 at 5-7.) Without pertinent language having been presented properly, the court could deny both summary judgment motions. However, neither party objected to the other's failure, Endurance and XL pointed to and quoted pertinent policy language in their brief, and the court can confirm the provisions in exhibit 16. Therefore, the court will address the merits. But again, a better presentation of the facts would have made the court's task easier. Finally, the court has disregarded statements of proposed fact that rely upon the two experts whose opinions have been rejected.

         GENERAL UNDISPUTED FACTS

         The following facts describe the general background of this case. Specifics regarding policy language and various notices will be discussed later.

         On March 5, 2010, Bank of America (BOA) sued United General Title Insurance Company and First American Title Insurance Company in state court in North Carolina: Bank of America, N.A. v. United General Title Insurance Co., No. 10-CVS-5415 (N.C. Super. Ct.) (the "BOA action"). (Doc. 152, ¶¶ 32, 47; Doc. 122, ¶ 1; Doc. 135, ¶ 18; Doc. 146, ¶¶ 10, 11.) On April 1, 2010, First American, in turn, filed a third-party complaint against Fiserv (the "First American action"). (Doc. 152, ¶ 47; Doc. 122, ¶ 1; Doc. 146, ¶ 11.) The BOA action and the First American action arose out of Fiserv's "QuickClose Lien Protection Insurance Program." (Doc. 122, ¶ 2; see Doc. 146, ¶ 1.)

         Fiserv (actually Fiserv Loan Servicing (FLS), a division or subsidiary of Fiserv) offered a number of loan-closing-related services, from traditional title agency services (such as closings, full title searches and full appraisals) to automated property appraisals and more. (Doc. 141, ¶ 23.) Fiserv devised QuickClose to permit lenders to close home equity loans without waiting for a title search and title policy. (Doc. 135, ¶ 13; Doc. 161, ¶ 13; Doc. 127, Ex. 47 at 25-30.) QuickClose allowed lenders to forego a traditional preclosing title search to shorten the preclosing process, while still receiving insurance protection for undisclosed title issues that might affect the lender's lien priority. (Doc. 146, ¶ 2; Doc. 153, ¶ 2.) QuickClose involved borrowers, lenders, title insurers, and a title agent. (Doc. 146, ¶ 3; Doc. 153, ¶ 3.) The borrower would apply for the loan, the lender would process the loan application and credit report, Fiserv acted (among other things) as the title agent, and the title insurer would issue lien-protection insurance (LPI) to protect the lender against losses arising from undisclosed title issues. (Doc. 146, ¶ 4; Doc. 153, ¶ 4.) The LPI policies insured against losses suffered by lenders if their loans to defaulting borrowers did not have the lien priority that the lenders expected them to have. (Doc. 135, ¶ 30.) Fiserv provided the certificates of insurance to lenders showing a loan was added to the program. (Doc. 141, ¶ 25.)

         BOA was a lender involved in QuickClose, and First American was an LPI insurer. (Doc. 146, ¶ 8; Doc. 160, ¶ 8.) Fiserv entered a Master Services Agreement and Statement of Work (SOW) with BOA. Separately, Fiserv entered a National Agency Agreement with First American. (Doc. 146, ¶ 9; Doc. 153, ¶ 9; Doc. 160, ¶ 9.)

         In QuickClose, Fiserv acted as an agent for First American and other title insurers in the issuance of LPI policies to lenders, among other things. (Doc. 135, ¶¶ 13, 30; Doc. 152, ¶ 13; Doc. 161, ¶¶ 13, 30.) Fiserv's duties included verifying ownership, documenting the property description, recording the lien, issuing a certificate of insurance, collecting premiums, and transmitting to First American information regarding the transactions to effect coverage. (Doc. 135, ¶ 30; Doc. 146, ¶ 5; Doc. 153, ¶ 5.)

         If, after borrower default, a home equity credit line was found not to be in the intended lien position and the collateral was unavailable to the lender, the lender would submit a claim to the title insurer, such as First American, for coverage. (Doc. 141, ¶ 26.) Fiserv facilitated the submission of lender claims to First American. (Doc. 141, ¶ 31.) Fiserv (possibly acting with the title insurers) developed a claim submission form that BOA used to report LPI claims to Fiserv, which would package those claims and present them to the title insurer. (Doc. 146, ¶ 6; Doc. 153, ¶ 6; Doc. 160, ¶ 6.) For its services to lenders and First American, Fiserv was paid a fee. (Doc. 141, ¶ 32.)

         If Fiserv determined that it made a recording-type mistake under QuickClose, it attempted to correct or reform it. (Doc. 141, ¶ 29.) Fiserv's former head of claims explained that Fiserv's QuickClose errors and omissions "wouldn't even register a fraction of a fraction in terms of the total number of transactions. I mean, it's negligible." (Doc. 141, ¶ 30; Doc. 128, Ex. 52 at 240.)

         Fiserv offered QuickClose services for approximately seven years, from 2001 to December 2007. (Doc. 122, ¶ 3.) During one fiscal year, QuickClose business represented 37% of revenue of Fiserv's subsidiary FLS. (Doc. 135, ¶ 29; Doc. 146, ¶ 7, Doc. 153, ¶ 7.)

         QSS was a replacement service for QuickClose. (Doc. 135, ¶ 15.) Fiserv created QSS after First America ceased issuing new QuickClose LPI coverage or withdrew Fiserv's authority to issue QuickClose certificates in December 2007. (Doc. 141, ¶¶ 34, 35; Doc. 154, ¶ 34.) QSS involved contract-performance insurance rather than indemnity insurance. (Doc. 127, Ex. 47 at 89-95.) Under QSS, Fiserv offered certain lien and recording-related services to the lenders, but if a lien was found not to be in its intended position after default, the lender would make a claim against Fiserv, rather than a lien protection insurer. (Doc. 162, ¶ 7.) Fiserv procured insurance to cover QSS lien-position claims from a new form of coverage insurer. (Doc. 162, ¶ 9; Doc. 170, ¶ 9.) At least one other difference between QuickClose and QSS was that QSS required a preclosing vesting report. (Doc. 137, Ex. 2, ¶ 19; Doc. 166, ¶ 19; Doc. 159, ¶ 19.)

         ValueGuard was a program involving an insurance product that protected against loss resulting from computerized appraisals (performed by Fiserv in connection with a product called "Home ValueBot") if the appraisal turned out to be overstated. VSS was a replacement service for ValueGuard. (Doc. 135, ¶ 15.)

         Fiserv was insured under various claims-based policies[2] during the period leading up to and including the filing of the BOA action and First American action. Fiserv's insurance was set up in yearly "towers, " with policies running from July 1 to July 1. ( See Doc. 122, ¶ 7.) Fiserv's broker was Lockton Financial Services. (Doc. 122, ¶ 5.)

         The 2008-2009 insurance program ("Tower 1") included policies from Lloyd's Syndicate 33, managed by Hiscox Syndicates Limited as the primary insurer; National Union Fire Insurance Company, the first excess insurer; Continental Casualty Company, the second excess insurer; and ACE American Insurance Company, the third excess insurer. (Doc. 122, ¶ 4; Doc. 152, ¶ 64.) National Union issued to Fiserv Policy No. 00-623-70-91, providing insurance coverage in excess of the underlying limits of the Hiscox policy, and Continental issued to Fiserv Policy No. 287198208-01, providing insurance coverage in excess of the Hiscox and National Union policies. The National Union and Continental polices covered the policy period July 1, 2008, to July 1, 2009. (Doc. 122, ¶¶ 9, 10.) The pertinent policy limits are as follows:

         

Hiscox policy $20 million in excess of a $5 million retention National Union policy $10 million Continental policy $10 million.

         (Doc. 146, ¶¶ 25, 26; Doc. 157 at 33, ¶ 1.) Hiscox's policy limit was fully exhausted by other claims. (Doc. 122, ¶ 8; Doc. 146, ¶ 27.) ACE American was sued in this action but settled with Fiserv; all claims against ACE American were dismissed. (Doc. 100; Doc. 146, ¶ 27.) Therefore, the only remaining Tower 1 insurers in this litigation are National Union and Continental. (Doc. 146, ¶ 28.) Fiserv paid all premiums due on the Tower 1 policies were paid by Fiserv. (Doc. 122, ¶ 11.)

         The 2009-2010 insurance program ("Tower 2") included policies from Westchester Fire Insurance Company ("ACE Westchester") as the primary insurer; Endurance American Specialty Insurance Company, the first excess insurer; XL Specialty Insurance Company, the second excess insurer; Westchester Surplus Lines Insurance Company, the third excess insurer; and Illinois National Insurance Company, the fourth excess insurer. (Doc. 122, ¶ 12; Doc. 135, ¶ 11; Doc. 152, ¶ 11; Doc. 161, ¶ 11.) ACE Westchester issued the primary layer of coverage in Tower 1, effective July 1, 2009, to July 1, 2010, with an Extended Reporting Period of July 1, 2010 to December 11, 2015. The ACE Westchester primary policy was a claims-made policy. (Doc. 122, ¶ 14.) Endurance issued to Fiserv Fulfillment Services, Inc. dba Fiserv Lending Solutions, Policy No. PEL XXXXXXXXXXX, which provides insurance coverage in excess of the "Underlying Limit of Liability" of the ACE Westchester Primary Policy. (Doc. 122, ¶ 16.) XL issued to Fiserv Fulfillment Services, Inc., Policy No. ELU112306-09, providing insurance coverage in excess of the ACE Westchester and Endurance policies. (Doc. 122, ¶ 17.) The pertinent policy limits are as follows:

         

ACE Westchester policy $10 million in excess of a $25, 000 retention Endurance policy $15 million XL Specialty policy $15 million.

         (Doc. 146, ¶¶ 38, 39.) ACE Westchester settled with Fiserv, and all claims against it were dismissed. (Doc. 122, ¶ 15.) As part of their settlement, ACE Westchester and Fiserv agreed that the ACE Westchester policy was exhausted. (Doc. 146, ¶ 58.) All claims against Westchester Surplus and Illinois National were dismissed as well. (Doc. 122, ¶ 12.) Thus, the only Tower 2 insurers remaining in this litigation are Endurance and XL. Fiserv paid all premiums due on the 09-10 Tower. (Doc. 122, ¶ 18.)

         On June 25 and 26, 2009, prior to the expiration of the Tower 1 policies, Fiserv notified the Tower 1 insurers of claims made by four banks (TD Banknorth, Sovereign, Wachovia, and TCF Bank) concerning alleged damages from use of Fiserv's QuickClose, QSS, and ValueGuard programs. (Doc. 121, ¶ 20; Doc. 123, Ex. 22 at 2.) In addition, on June 25, 2009, Fiserv submitted to the Tower 1 insurers a letter entitled, "Notice of Potential Claims." (Doc. 122, ¶ 19.)

         By letter dated March 4, 2010, Fiserv provided notice to the Tower 1 insurers of a BOA demand of over $100 million, presented to Fiserv through a confidential PowerPoint presentation. (Doc. 152, ¶ 24; Doc. 122, ¶ 1; Doc. 137, Ex. 2, ¶ 22.) In the letter Fiserv reminded Hiscox of the letters from June 2009:

Recently, Bank of America made a specific written demand concerning damages it allegedly has suffered as a result of errors or omissions in the provision of services by Fiserv under the QuickClose and QSS programs. Among other things, Bank of America alleges that Fiserv: (1) breached its contractual obligations by failing to obtain appropriate insurance, (2) negligently performed services under the program, including but not limited to, failing to record liens in Bank of America's desired position, resulting in losses to Bank of America; and (3) misrepresented the program and the insurance that would be provided when it sold the program to Bank of America. These allegations are similar in nature to the claims made by Sovereign and Wachovia, about which Fiserv previously notified Hiscox about [sic] on June 25, 2009.

(Doc. 152, ¶ 25; Doc. 138, Ex. T at LOC-FISERV-001299200.)

         BOA filed the BOA action against First American on March 5, 2010, and First American filed its third-party action against Fiserv on April 1, 2010. (Doc. 152, ¶¶ 32, 47.) Fiserv notified the Tower 1 insurers of the First American action on April 9, 2010. (Doc. 122, ¶ 23; Doc. 123, Ex. 25; Doc. 135, ¶ 20; Doc. 152, ¶ 51; Doc. 146, ¶ 45.) The notice stated that the allegations in the First American action "are similar in nature to the claims made by Bank of America (and other Lenders) that Fiserv previously notified Hiscox." (Doc. 152, ¶ 51; Doc. 123, Ex. 25 at FISERV-001291512.)

         Hiscox responded to the notice of the First American action by reserving its rights to deny coverage under its primary policy. (Doc. 135, ¶ 23.) National Union issued a reservation of rights letter on August 6, 2009. On the other hand, Continental did not issue a reservation of rights letter. (Doc. 62, ¶ 33; Doc. 179, ¶ 33.)

         On or effective June 15, 2010, BOA and Fiserv executed a "tolling agreement, " whereby claims of BOA against Fiserv would be tolled for up to two years. (Doc. 152, ¶¶ 26-27; Doc. 138, Ex. U.) Hiscox was notified of the agreement prior to its execution but did not object. (Doc. 152, ¶¶ 27-28; Doc. 154 at 33, ¶¶ 29, 30.) However, Fiserv did not seek consent of any of the Tower 2 insurers. (Doc. 137, Ex. 2, ¶ 24; Doc. 154 at 33, ¶ 29.)

         No later than August 18, 2010, Fiserv notified the Tower 2 insurers of the First American action. (Doc. 135, ¶ 21; Doc. 161, ¶ 21; Doc. 146, ¶ 46; Doc. 160, ¶ 46.) In a December 13, 2010 letter, ACE Westchester stated that it would defend Fiserv in the First American action under its primary policy, subject to a reservation of rights. (Doc. 122, ¶ 29; Doc. 135, ¶ 22; Doc. 154 at 44, ¶ 81.) By July 29, 2011, ACE Westchester took the position that the First American action fell within Tower 1 but agreed to pay for Fiserv expenses in the First American action with the right to recoup them. (Doc. 154 at 45, ¶ 84; Doc. 176, ¶ 84; Doc. 126, Ex. 39 at FISERV-001229711 to FISERV-001229712.) On August 11, 2011, ACE Westchester issued its first check for a portion of the defense costs of the First American action. (Doc. 122, ¶ 36.)

         In a letter dated July 18, 2011, Endurance's counsel adopted ACE Westchester's coverage reservations, indicating that it learned in mid-June 2011 that Fiserv had noticed Tower 1 in June 2009 and expressing concerns as to whether the claim belonged under the Tower 1 program. (Doc. 154 at 45, ¶ 83; Doc. 125, Ex. 38.)

         In the summer and fall of 2011, Fiserv engaged in a multi-phase mediation concerning the BOA action and the First American action. (Doc. 122, ¶ 37.) During July 2011, Fiserv held calls and meetings with the Tower 1 and Tower 2 insurers in which Fiserv provided information on the mediation. (Doc. 122, ¶ 38.) From July through October 2011, Fiserv provided the Tower 1 and Tower 2 insurers with mediation briefs, PowerPoint presentations, and demands and responses as exchanged in the mediation. Fiserv also provided the insurers with the pleadings in the First American action. (Doc. 122, ¶ 39.)

         In November and December 2011, at the end of a final three-day in-person mediation session, the BOA action and the First American action were resolved. (Doc. 122, ¶ 44; Doc. 135, ¶ 25; Doc. 152, ¶ 57.) The Tower 2 insurers attended most of the November 2 to 4 mediation but left before settlement was reached. (Doc. 141, ¶ 79.) Fiserv kept the Tower 1 and Tower 2 insurers apprised of certain mediation demands and counteroffers. (Doc. 141, ¶¶ 80, 81.)

         In December 2011, Fiserv and First American entered a settlement, and Fiserv and BOA entered a separate settlement agreement. (Doc. 152, ¶¶ 57, 58; Doc. 148 Exs. A, B.) Fiserv agreed to pay First American a multimillion-dollar amount that impacts the first two excess insurers under either tower. ( See Doc. 148, ¶ 1.) The Tower 1 and Tower 2 insurers did not object to the settlement between Fiserv and First American. (Doc. 122, ¶ 45.) However, no insurer agreed to provide coverage. (Doc. 122, ¶ 45.) The remaining insurers from both towers have denied any coverage for Fiserv's settlement payment in the First American action. ( See Doc. 122, ¶ 45.)

         On June 22, 2011, Fiserv filed the present case against the Tower 2 insurers. Fiserv amended the complaint on January 31, 2012, to add the Tower 1 insurers.

         DISCUSSION

         As an initial matter, the court rejects certain arguments, clearing the way for the main issues. First, various insurers contend that Fiserv has admitted that coverage belongs in one or the other tower, dooming its case against the insurers in the other tower. For instance, the Tower 2 insurers contend that Fiserv, in its briefs, admits that coverage belongs in the Tower 1 year. However, Fiserv's arguments for coverage in one year or the other were made in the alternative. Fiserv contends that the First American action was filed on April 1, 2010, during the Tower 2 policy period, thereby triggering the coverage obligations of the Tower 2 insurers. Alternatively, Fiserv maintains that if coverage is precluded under the Tower 2 policies, the First American action constitutes a potential claim noticed to the Tower 1 insurers. The court reads no admissions into these alternative arguments, even if Fiserv, when arguing for coverage under one tower, had to assume weaknesses in or failure of its case against the other tower. Cf. McCaskill v. SCI Mgmt. Corp., 298 F.3d 677, 681 (7th Cir. 2002) (Rovner, J., concurring) (discussing how the doctrine of judicial admissions applies to admissions of fact but not to the parties' legal opinions).

         Similarly, the court rejects the insurers' suggestions that statements and arguments in letters by Fiserv counsel to one tower or the other in an attempt to persuade them to cover the settlement constitute facts to be considered by this court. ( See, e.g., Doc. 154, ¶ 31.) For instance, legal arguments Fiserv counsel made to the Tower 1 insurers in March or April 2010 contending that claims by BOA or First American related back to prior claims or the potential claims noticed in June 2009 will not be considered evidence that the First American action actually relates back. Fiserv was arguing for coverage by Tower 1, not conceding that coverage did not exist under Tower 2. Fiserv should not be penalized for attempting to get coverage under one or both towers; it was prudently seeking coverage wherever it could.

         Third, the court does not find the settlement by ACE Westchester to constitute a fact favoring coverage in the Tower 2 year. ACE Westchester could have settled for any number of reasons. Its settlement does not constitute an admission of coverage to be used against the other Tower 2 insurers. Nor does the court find any acceptance of defense by ACE Westchester under a reservation of rights to constitute a fact in favor of coverage in the Tower 2 year or that somehow binds Endurance or XL.

         Fourth, the court is not persuaded that coverage must be found against either the Tower 1 or the Tower 2 insurers. Though there may be a presumption of continuous coverage for claims between two tower years, if Fiserv did not comply with its ...


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