United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
ROBERT M. DOW, Jr., District Judge.
Plaintiff Travelers Casualty and Surety Company of America ("Travelers") seeks a declaratory judgment as to any rights and obligations it has in connection with an insurance contract that is the subject of an action filed against Defendant Andrew Bernhardt. Currently before the Court is Plaintiff Travelers Casualty and Surety Company of America's motion for summary judgment . For the following reasons, the Court grants Plaintiff's motion for summary judgment  and will enter judgment in favor of Plaintiff Travelers Casualty and Surety Company of America and against Defendant Andrew Bernhardt.
In August 2013, Travelers issued a one-year insurance policy to Town Center Bank ("TCB"). Defendant Bernhardt was the president, CEO, and chairman of Town Center Bank ("TCB") during the relevant time period. The policy contains a Directors and Officers Liability Coverage Insuring Agreement ("D&O Policy"), which states as follows:
The Company will pay, on behalf of an Insured Person, Loss that is not indemnified by the Insured Organization and that the Insured Person becomes legally obligated to pay for any Claim first made against the Insured Person during the Policy Period, or any applicable Extended Reporting Period, for a Wrongful Act occurring before or during the Policy Period.
The D&O Policy has a limit of liability of $2, 000, 000, with a $100, 000 retention, and the retention applies to defense costs, settlements, or judgments. The policy's Liability Coverage Terms and Conditions section requires Travelers to advance defense costs if certain conditions are satisfied and states as follows:
[U]pon written request, the Company will advance Defense Expenses with respect to such Claim. Such advanced payments by the Company will be repaid to the Company by the Insureds severally according to their respective interests in the event and to the extent that the Insureds are not entitled to payment of such Defense Expenses under such Liability Coverage. As a condition of any payment of Defense Expenses under this subsection, the Company may require a written undertaking on terms and conditions satisfactory to the Company guaranteeing the repayment of any Defense Expenses paid to or on behalf of any Insured if it is finally determined that any such Claim or portion of any Claim is not covered under such Liability Coverage.
"Insured" is defined by the D&O Policy as "the Insured Persons and the Insured Organization." "Insured Organization" is defined by the D&O Policy as any "(1) entity named in ITEM 1 of the Declarations; (2) Subsidiary; and (3) such entity or Subsidiary as a debtor in possession under Chapter 11 of the United States of America Bankruptcy Code, as amended, or the equivalent of a debtor in possession under any applicable foreign law or regulation." Bernhardt admits that TCB is the entity named in ITEM 1. The D&O Policy further defines "Insured Person" as "any natural person who was, is, or becomes a duly elected or appointed director, officer, Manager, or in-house general counsel of the Insured Organization, or any functional equivalent position."
Exclusion 3 of the D&O Policy provides as follows:
INSURED VERSUS INSURED
The Company will not be liable for any Loss for any Claim against any Insured that is brought or maintained by or on behalf of any Insured in any capacity; provided, this exclusion will not apply to:
a. a Claim that is a Shareholder Derivative Demand or Shareholder Derivative Action brought and maintained by a person who is not an Insured Person and who brings and maintains the Claim without the active solicitation, assistance, or participation of any Insured; provided, any Insured Person's Whistleblower Activity alone will not be considered the active solicitation, assistance, or participation of an Insured;
b. a Claim brought and maintained by any Insured Person for contribution or indemnity, if the Claim directly results from another Claim covered under this Policy;
c. a Claim brought and maintained by a natural person who was a director, officer, or Manager of the Insured Organization, or any functional equivalent position, but who has not served in such capacity for at least four years preceding the date the Claim is first made and who brings and maintains the Claim without the active solicitation, assistance, or participation of any natural person who: (1) is serving as a director, officer or Manager of the Insured Organization, or any functional equivalent position; or (2) was serving in such capacity within such four-year period; ...