               Case: 14-12723      Date Filed: 06/22/2015      Page: 1 of 42




                                                                     [DO NOT PUBLISH]


                 IN THE UNITED STATES COURT OF APPEALS

                           FOR THE ELEVENTH CIRCUIT

                            __________________________

                                   No. 14-12723
                            __________________________

                          D.C. Docket No. 1:12-cv-02422-SCJ

THE LANGDALE COMPANY,

                                                                        Plaintiff-Appellant,

                                           versus

NATIONAL UNION FIRE
INSURANCE COMPANY OF
PITTSBURGH, PENNSYLVANIA,
                                                                       Defendant-Appellee.

                            __________________________

                     Appeal from the United States District Court
                        for the Northern District of Georgia
                          __________________________

                                      (June 22, 2015)

Before WILLIAM PRYOR and JORDAN, Circuit Judges, and ROSENTHAL, *
District Judge.


       *
         Honorable Lee H. Rosenthal, United States District Judge for the Southern District of
Texas, sitting by designation.
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PER CURIAM:

      Mixing family and family-owned business can be complicated. When the

mix produces litigation, complications can multiply. When the litigation involves

misconduct allegedly committed by family members serving simultaneously as

officers of the family business and as trustees of the family trust holding large

amounts of the company’s stock, the complications abound. Add the question of

insurance coverage for the litigation to the mix, and you have this case.

      We are asked to decide whether the district court erred in finding no

coverage under a director’s and officer’s (“D&O”) insurance policy for claims

asserted by beneficiaries of a family trust against their family-owned corporation

and against two individual family members who served simultaneously as directors

or officers of the corporation and as trustees of the trust. The beneficiaries alleged

violations of duties owed to and by the corporation, and violations of duties owed

to the trust.     The D&O policy excluded coverage for alleged misconduct

committed in a capacity other than as a corporate officer or director. The issue is

whether the underlying lawsuits alleged misconduct that was covered or that was

excluded from coverage.

      Plaintiff-Appellant The Langdale Company (“TLC”) sued its D&O insurer,

the National Union Fire Insurance Company (“National Union”), for denying

coverage and refusing to advance defense costs incurred in litigation filed in the



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Georgia state court.         The district court granted National Union’s summary

judgment motion, and TLC appealed. We find that the district court did not err,

and we affirm.

                                     I. BACKGROUND

       A court determines whether there was D&O coverage triggering a duty to

advance defense costs by looking to the allegations in the underlying lawsuits.1

The pleadings filed in the underlying litigation recount the family history. In 1947,

Judge Harley Langdale, Sr., incorporated The Langdale Company, known as TLC.

It “functions as a holding company for subsidiaries that conduct a number of

businesses (including forest products, auto dealerships, and banks).” Nalley v.

Langdale, 734 S.E.2d 908, 910 n.1 (Ga. Ct. App. 2012). Its “assets include

substantial tracts of timberland.” Id. Judge Langdale kept 25 percent of the stock

and gave an equal amount to each of his three sons, John, Billy, and Harley, Jr.

       In 1959, Judge Langdale created the Virginia Miller Langdale Family Trust

for the benefit of his daughter and her children. Judge Langdale transferred his 25-




       1
           See Penn-America Ins. Co. v. Disabled Am. Veterans, Inc., 490 S.E.2d 374, 376 (Ga.
1997) (directing courts to look to “the allegations of the complaint against the insured” to
“determine whether a liability covered by the policy is asserted” (alterations and emphasis
omitted)); George L. Smith II Ga. World Congress Ctr. Auth. v. Miller Brewing Co., 566 S.E.2d
361, 363 (Ga. Ct. App. 2002) (distinguishing the “duty to indemnify . . . for liabilities and claims
of liability” from “the legally separate duty to defend . . . or to pay for expenses of litigation or
attorney fees”).


                                                 3
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percent interest in TLC to the Trust, and the Trust beneficiaries received the TLC

stock dividends. Judge Langdale’s sons, Harley and John, were the trustees.

       In 1992, Judge Langdale’s grandson, Johnny, became TLC’s chief executive

officer. Two years later, while still serving as TLC’s CEO and as a director,

Johnny Langdale replaced his ailing father, John, as a trustee for the Virginia

Miller Trust. His uncle, Harley Langdale, also a TLC director, remained as the

other trustee. The Trust still held 24.8 percent of TLC’s outstanding voting stock.2

Of the remaining TLC voting shares, Johnny Langdale and his father jointly owned

25 percent; Harley, Johnny’s uncle and co-trustee, owned 25 percent; and Billy, his

other uncle, owned 25 percent.          Johnny and Harley Langdale were the only

trustees.

       In May 2009, the Trust beneficiaries sued Johnny and Harley Langdale in

Georgia state court. See Langdale Miller Nalley, et al. v. John W. Langdale, Jr.;

Harley Langdale, Jr.; and John W. Langdale Jr., as Executor of the Estate of John

W. Langdale, Sr., Civil Action No. 2009-CV-1343, Superior Court of Lowndes

County, Georgia. They asserted several claims: (1) breach of trust; (2) breach of

fiduciary duty to the Trust beneficiaries; (3) breach of fiduciary duty as directors of

TLC to the company’s minority shareholders, the Trust beneficiaries (“Count III”);



       2
         Another trust, established by Judge Langdale’s 1970 will for the benefit of John and
Billy Langdale’s children, held 0.19 percent.


                                             4
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(4) fraud; (5) constructive trust; (6) conspiracy; (7) attorneys’ fees; and

(8) equitable relief.

       The beneficiaries’ state-court complaint alleged that beginning in 1994,

Johnny and Harley Langdale “embarked on a scheme” to consolidate “their control

over TLC” by “hav[ing] TLC redeem the Trust’s stock” in TLC “at an absurdly

low price.” [R. 77-52, at 31.] The scheme was implemented in 1997, when

Virginia Langdale Miller was engaged in her own estate planning. Johnny and

Harley Langdale allegedly told Virginia Langdale Miller that the Trust would

terminate on December 31, 1999. This was false; the Trust did not have an end

date. Because terminating the Trust would result in distributing TLC’s shares—

rather than merely the dividend income—to Virginia Langdale Miller and her

children, a termination date would create estate-planning and tax problems for

them. Johnny and Harley Langdale also allegedly made statements about the

stock’s limited liquidity and value. The beneficiaries allege that these statements

were false as well. They allege that based on the false information about the Trust

termination date and the problems they faced in selling their stock, Virginia

Langdale Miller and the other Trust beneficiaries agreed to sell their shares back to

TLC for “only a fraction of [their] real value.” [R. 77-52, at 33.]

       On May 27, 1999, Johnny Langdale resigned as a trustee of the Trust. He

continued serving as a TLC corporate officer and director. The next day, Johnny



                                          5
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Langdale, acting as TLC’s chief executive officer, signed a Redemption

Agreement that allowed TLC to purchase all of the Trust’s Class A voting shares

and roughly 20 percent of the Trust’s Class B non-voting shares. Harley Langdale,

acting as trustee, signed for the Trust. That same day, Harley Langdale executed

an Option Agreement that allowed him to purchase the remaining 80 percent of the

Trust’s Class B non-voting shares at a later date. On January 28, 2000, Harley

Langdale assigned his rights under the Option Agreement to TLC, which

purchased the Trust’s remaining Class B non-voting shares.              The Trust

beneficiaries received “approximately $27 million for the Trust’s stock in TLC.”

[R. 77-52, at 45.] The stock they sold was allegedly “worth well over $150 million

in 1999.” [R. 77-52, at 45.]

      According to the complaint, Johnny and Harley Langdale had caused TLC to

adopt a Shareholders’ Agreement that gave TLC the right to redeem any stock the

Trust wanted to sell to a third party before the Trust could make the sale. The

Agreement set the redemption price; the complaint alleged that it was far below the

stock’s value. The complaint alleged that Johnny and Harley Langdale “used their

systemic refusal to pay income to the beneficiaries, their knowledge of estate

planning problems caused by the belated revelation that the Trust would terminate

in 1999, and their ability to persuade the beneficiaries that the ‘Shareholders’

Agreement’ applied to TLC’s redemption or purchase of the Trust’s stock to



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induce Virginia Langdale Miller and her children to sign documents ‘consenting’

to the transfer of the Trust’s stock to TLC” at this unfair price. [R. 77-52, at 33.]

The complaint also alleged that Harley and Johnny Langdale hid what they did and

said to the Trust beneficiaries from the TLC Board of Directors because they

feared that their fellow directors, Billy and Robert Langdale, would alert the

Virginia Langdale Miller Trust beneficiaries that they were about to sell their stock

to TLC at a price far below fair market value.

      TLC held an insurance policy with D&O coverage from National Union.

The policy required the insurer to advance defense costs for, and indemnify TLC

against, lawsuits seeking damages for the wrongful acts of its directors and officers

committed in that capacity. The policy provided four types of D&O coverage.

Two, Coverage A and Coverage B, are relevant here. Those policy provisions

state as follows:

      COVERAGE A: INDIVIDUAL INSURED INSURANCE
      This D&O Coverage Section shall pay the Loss of an Individual
      Insured [an employee, executive, or outside entity executive] of the
      Company [TLC] arising from a Claim made against such Individual
      Insured for any Wrongful Act of such Individual Insured, except when
      and to the extent that the Company [TLC] has indemnified such
      Individual Insured. The Insurer [National Union] shall, in accordance
      with and subject to Clause 7 of this D&O Coverage Section, advance
      Defense Costs of such Claim prior to its final disposition.

      COVERAGE B: PRIVATE COMPANY INSURANCE
      This D&O Coverage Section shall pay the Loss of the Company
      [TLC] arising from a:



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       (i) Claim made against the Company [TLC], or
       (ii) Claim made against an Individual Insured [an employee,
       executive, or outside entity executive],

       for any Wrongful Act but, in the case of Coverage B(ii) above, only
       when and to the extent that the Company [TLC] has indemnified the
       Individual Insured for such loss. The Insurer [National Union] shall,
       in accordance with and subject to Clause 7 of this D&O Coverage
       Section, advance Defense Costs of such Claim prior to its final
       disposition.

       ....

[R. 52-1, at 20 (emphasis omitted).] The policy defined a covered “Wrongful Act”

in two ways:

       (i) with respect to any Executive or Employee of a Company,
       any breach of duty, neglect, error, misstatement, misleading
       statement, omission or act by such Executive or Employee in
       their respective capacities as such, or any matter claimed
       against such Executive or Employee of a Company solely by
       reason of his or her status as an Executive or Employee of a
       Company; and

       (ii) with respect to a Company, any breach of duty, neglect,
       error, misstatement, misleading statement, omission or act by a
       Company. 3

[R. 52-1, at 24–25 (emphasis omitted).]

       The policy required National Union to “advance . . . Defense Costs prior to

the final disposition of a Claim,” on the Insured’s written request. National Union



       3
         The policy provided a third definition for Wrongful Acts committed “with respect to
service on an Outside Entity.” [R. 52-1, at 25 (emphasis omitted).] Neither TLC nor National
Union contends that this definition applies; the Trust is not an “Outside Entity” under the policy.


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could “withhold consent to any . . . Defense Costs . . . to the extent such Loss is not

covered under” either Coverage A or B. [R. 52-1, at 30–31 (emphasis omitted).]

      TLC sought defense costs under the policy based on the director-misconduct

allegations in Count III of the beneficiaries’ state-court complaint. Count III

alleged that Johnny Langdale breached the fiduciary duties he owed TLC as a

director. Johnny Langdale sought and received indemnification from TLC, which

paid all the fees incurred in the underlying suit.

      TLC had filed a separate action in Georgia state court against the Trust

beneficiaries, seeking a declaratory judgment that TLC held clear title to certain

company stock. See The Langdale Company v. Harley Langdale, Jr. et al., Civil

Action No. 2009-CV-2747, Superior Court of Lowndes County, Georgia. On

November 13, 2009, the Virginia Miller Trust beneficiaries filed an answer and

counterclaim against TLC (the “TLC counterclaim”) in the separate action. The

TLC counterclaim asserted claims for: (1) fraud; (2) conspiracy; (3) tortious

interference with fiduciary duties and aiding and abetting breach of trust and

fiduciary duties; (4) receipt of Trust property with knowledge of the breach of

trust; (5) TLC’s respondeat superior liability for its officers’ misconduct (“Count

V”); (6) attorneys’ fees; and (7) equitable relief. The TLC counterclaim alleged

that TLC had aided and abetted Johnny and Harley Langdale in misrepresenting




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the value of the beneficiaries’ stock and their need to sell it to the company, and

that TLC was liable for its officers’ misconduct.

       TLC demanded advance payment of the costs to defend against the

allegations in Count III of the state-court complaint that Johnny Langdale had

breached the fiduciary duties he owed TLC as an officer and director.                       On

November 12, 2009, National Union denied coverage. It cited Exclusion 4(g),

which applies to any claim “alleging, arising out of, based upon or attributable to”

TLC directors’ or officers’ “actual or alleged act[s] or omission[s]” in any capacity

other than as a director or officer of TLC. 4 [R. 52-1, at 25–26; see also R. 52-11.]

        TLC also demanded advance payment of the costs to defend against the

allegations in Count V of the counterclaim that TLC was vicariously liable for the

misconduct by its officers and directors, Johnny and Harley Langdale. National

Union denied coverage, asserting that Exclusion 4(g) applied because the

counterclaim “arose out of” Johnny Langdale’s actions in his capacity as trustee,

not as an officer or director of TLC.

       The beneficiaries’ state-court complaint and the TLC counterclaim were

consolidated into one action in Georgia state court, referred to together as the “the




       4
         National Union also cited another exclusion, Endorsement 15, but the parties agree that
it was not part of the policy during the relevant period.


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underlying litigation.” In April 2011, the state court granted Johnny Langdale’s

motion for summary judgment and dismissed the claims against him. 5

       TLC again sought the costs it had spent obtaining the summary judgment

dismissing the Trust beneficiaries’ claims against Johnny Langdale.                    National

Union denied the claim, citing not only Exclusion 4(g) but also Endorsement 8 and

Exclusion 4(d). These provisions exclude coverage for claims that arise out of, are

attributable to, or are related to, events that are either: (1) specifically listed and

excluded in Endorsement 8; or (2) were previously tendered to an insurance

carrier. According to National Union, the complaint and the counterclaim related

to allegations raised in a 2008 state court suit and a 2008 federal court suit that

other Langdale family members had filed against Johnny Langdale. 6

       In July 2012, Johnny Langdale and TLC sued National Union in federal

district court based on diversity jurisdiction. They sought (1) damages for breach

of the insurance contract, (2) a declaratory judgment that National Union had a




       5
           The Georgia Court of Appeals reversed this decision in part. See Nalley, 734 S.E.2d at
920–21.
       6
          National Union at one point offered to advance defense costs for only Count III of the
state-court complaint and Count V of the TLC counterclaim. The record does not reveal whether
TLC accepted this offer, but TLC does not argue that National Union waived, or should be
estopped from asserting, Exclusion 4(g). See Aplt. Br. at 35; see also Oral Arg. Recording at
7:17–45 (counsel for TLC acknowledging that the panel may affirm only if it agrees with the
district court that Exclusion 4(g) precluded coverage), 17:25–37 (discussion with counsel for
National Union regarding TLC’s failure to raise waiver or estoppel with respect to Exclusion
4(g)).


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duty to advance defense costs, and (3) damages for National Union’s bad faith.

Georgia law applied.

      After discovery, both parties moved for summary judgment, TLC on its

claims for breach of contract and a declaratory judgment, and National Union on

all claims. TLC argued that National Union had waived reliance on, or was

estopped from invoking, Endorsement 8 and Exclusion 4(d) to deny coverage

because it had failed to identify these grounds in its initial denial letter. National

Union argued that it could raise both because the duty to advance costs differed

from the duty to defend and because belated assertion did not result in waiver or

forfeiture. National Union also argued that Exclusion 4(g), which it did initially

invoke, separately precluded coverage.

      In a thorough and careful opinion, the district court granted National

Union’s motion for summary judgment and denied TLC’s cross-motion. The court

agreed with TLC that National Union’s obligation to advance defense costs was

the same obligation as a duty to provide a defense, and that TLC had met its initial

burden to show coverage. The court also agreed with National Union that it could

rely on all three policy exclusions and had met its burden to show that all three

precluded coverage. The court held that under the leading Georgia case, Hoover v.

Maxum Indem. Co., 730 S.E.2d 402 (Ga. 2012), National Union’s failure to raise

Endorsement 8 or Exclusion 4(d) in the initial denial-of-coverage letter did not



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result in waiver because these were coverage defenses, not policy defenses. That

is, National Union invoked Endorsement 8 and Exclusion 4(d) to argue that the

D&O policy did not cover the claims in the underlying litigation, not to argue that

the insureds failed to fulfill a procedural requirement for coverage that would

otherwise apply.

      The district court held that Exclusion 4(g), which National Union had timely

asserted, applied and excluded coverage.        The court followed Georgia cases

holding that the phrase “arising out of” in a policy exclusion triggers the but-for

causation standard used to decide cause-in-fact tort liability. Under this standard, a

court deciding coverage looks to the “‘underlying facts and circumstances of the

claims asserted to determine whether or not a policy exclusion applies.’” [R. 110,

at 47 (quoting Hays v. Ga. Farm Bur. Mut. Ins. Co., 722 S.E.2d 923, 927 (Ga. Ct.

App. 2012) (citations omitted)).] That determination turns on the “‘genesis of the

underlying plaintiff’s claims.’” [Id. (quoting Hays, 722 S.E.2d at 927).] “‘[T]he

exclusionary clause is focused solely upon the genesis of the underlying plaintiff’s

claims—if those claims arose out of the excluded acts . . . then coverage need not

be provided. Claims arise out of [t]he excluded conduct when ‘but for’ that

conduct, there could be no claim against the insured.’” [Id. (quoting Hays, 722

S.E.2d at 927).]    The district court reviewed the pleading allegations in the




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underlying litigation and held that “the genesis of the underlying plaintiffs’ claims

involve[s] the acts of the trustees.” [Id.]

      The district court explained that:

             the Claims (or allegations of wrongdoing) against [TLC]
             and Johnny [Langdale] would not have occurred but for
             the acts (in the form of breach of fiduciary duty) of the
             trustees. Because the insurance policy specifically
             excludes any claim “arising out of” an act of an Insured
             serving in any capacity other than as an
             Executive/Employee, National Union had no duty to
             advance defense costs to Johnny [Langdale] or to [TLC].

             To the extent that the Underlying Litigation includes
             Count Three of the [beneficiaries’ complaint against
             Harley and Johnny Langdale,] titled “Breach of Fiduciary
             Duty of Director,” several allegations specifically
             directed to [Johnny] Langdale’s conduct as an officer and
             director of [TLC], and [] Count V [of the beneficiaries’
             counterclaim against TLC], alleging “Respondeat
             Superior Liability of [TLC] for its Officers’
             Misconduct,” the conclusion does not change, as the facts
             that gave rise to these causes of action arose out of the
             trustee’s     alleged       wrongful      actions.     These
             counts/allegations are within the policy exclusion of 4(g)
             . . . [and TLC’s] arguments focusing on the individual
             counts in the complaint and the acts of the officers is not
             determinative, as “the Exclusion is worded as excluding
             the Claim—not individual acts,” and the “term Claim is
             defined as ‘a civil . . . proceeding for monetary . . . relief
             which is commenced by service of a complaint or similar
             pleading.’”

[R. 110, at 47–48 (quoting R. 85, at 4).] The district court went on to hold that

Endorsement 8 and Exclusion 4(d) also barred coverage for the claims asserted in




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the underlying litigation. The district court granted summary judgment to National

Union on all of TLC’s claims.

      TLC timely appealed. We have jurisdiction under 28 U.S.C. § 1291, and we

affirm.

                         II. THE LEGAL STANDARDS

      We “review[] the district court’s disposition of cross-motions for summary

judgment de novo, applying the same legal standards used by the district court,

viewing the evidence and all factual inferences therefrom in the light most

favorable to the non-movant, and resolving all reasonable doubts about the facts in

favor of the non-moving party.” Am. Bankers Ins. Grp. v. United States, 408 F.3d

1328, 1331 (11th Cir. 2005).

      Under Georgia law, “whether an insurer has a duty to defend depends on the

language of the policy as compared with the allegations of the complaint. If the

facts as alleged in the complaint even arguably bring the [claim] within the

policy’s coverage, the insurer has a duty to defend the action.” Hoover, 730 S.E.2d

at 418 (internal quotation marks and citation omitted). “Where the claim is one of

potential coverage, doubt as to liability and [the] insurer’s duty to defend should be

resolved in favor of the insured.” Perur-Am. Ins. Co., 490 S.E.2d at 376 (internal

quotation marks omitted). “[T]o excuse the duty to defend[,] the [complaint] must

unambiguously exclude coverage under the policy.”           BBL-McCarthy, LLC v.



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Baldwin Paving Co., 646 S.E.2d 682, 685 (Ga. Ct. App. 2007) (quotation omitted).

“[A]n insurer has a correlative duty to defend its insured against all claims covered

under a policy, even those that are groundless, false, or fraudulent.” So. Guar. Ins.

Co. v. Dowse, 605 S.E.2d 27, 29 (Ga. 2004).

      “[A]n insurer seeking to invoke a policy exclusion carries the burden of

proving its applicability in a given case.”     First Specialty Ins. Corp., Inc. v.

Flowers, 644 S.E.2d 453, 455 (Ga. Ct. App. 2007). “Exclusions from coverage are

to be strictly construed, and ‘[i]t is the understanding of the average policyholder

which is to be accepted as a court’s guide to the meaning of words, with the help of

the established rule that ambiguities and uncertainties are to be resolved against the

insurance company.’” Fidelity Nat’l Title Ins. Co. v. Keyingham Invs., LLC, 702

S.E.2d 851, 853 (Ga. 2010) (quoting Cunningham v. Middle Ga. Mut. Ins. Co., 601

S.E.2d 382, 386 (Ga. Ct. App. 2004)). “An insurer can carry its burden of showing

that a policy exclusion applies by relying exclusively upon the allegations against

the insured in the underlying complaint.” First Specialty Ins., 644 S.E.2d at 455.

“If the insurer meets its burden, ‘the burden then shifts to the [insured] to come

forward with other evidence creating a genuine issue of fact over whether the

exclusion is applicable.’” Id. at 455 n.2 (quoting St. Paul Reinsurance Co., Ltd. v.

Ross et al., 622 S.E.2d 374, 378 (Ga. Ct. App. 2005)) (alteration in original).




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                                 III. DISCUSSION

      TLC argues that the district court made three errors. The first error was

finding that National Union could rely on the two policy exclusions it had failed to

invoke in its initial coverage-denial letters. Second, the court erred in finding that

all three asserted exclusions precluded coverage for TLC’s claims. Finally, the

court erred in finding that TLC’s bad-faith claim failed as a matter of law. We find

that National Union timely and properly denied coverage under Exclusion 4(g), the

sole policy exclusion that it did identify in its initial letters denying coverage. We

need not and do not decide whether the district court erred in concluding that

National Union could rely on the two additional exclusions. Because coverage was

properly denied, National Union did not act in bad faith.

      A.    Exclusion 4(g)

      Exclusion 4(g) provides:

      The Insurer shall not be liable to make any payment for Loss in
      connection with any Claim made against an Insured:
      ....
           (g) alleging, arising out of, based upon or attributable to
           any actual or alleged act or omission of an Individual
           Insured serving in any capacity, other than as Executive
           or Employee of a Company, or as an Outside Entity
           Executive of an Outside Entity.

[R. 52-1, at 25–26 (emphasis omitted).] The district court concluded that this

provision excluded TLC’s claim for coverage and advancement of defense costs.

The court ruled that the genesis of the allegations in the state-court complaint and

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in the TLC counterclaim arose out of alleged wrongdoing by Johnny and Harley

Langdale as the Virginia Miller Trust’s trustees, rather than as TLC’s directors or

officers. TLC argues that the district court erred by interpreting Exclusion 4(g) to

apply to allegations of corporate, rather than merely individual, wrongdoing;

reading “Claim” too broadly; and misapplying Exclusion 4(g)’s “arising out of”

language.

               1. The Argument that Exclusion 4(g) Does Not Apply

          TLC contends that Exclusion 4(g) applies only to claims against a

company’s individual directors or officers, not to claims against the company

itself.    Coverage A provides “Individual Insured Insurance” and Coverage B

provides “Private Company Insurance.” [R. 52-1, at 20.] Coverage B is divided

into B(i), providing coverage for claims “made against the Company,” and (B)(ii),

for claims “made against an Individual Insured.” [Id.] TLC asserts that Exclusion

4(g) applies only to claims made under Coverage A or Coverage B(ii), but not

under Coverage B(i). TLC argues that “Exclusion 4(g) has no field of operation as

to TLC when allegations are made directly against TLC” because it could be

“potentially liable only if its” executives or employees “were acting in their

capacity as such.” Aplt. Br. at 26. TLC argues that because it indemnified Johnny

Langdale in the suit the Trust beneficiaries filed against him, and because TLC was

itself sued in the counterclaim the beneficiaries filed, the defense costs it incurred



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were to defend against allegations that it—not just Johnny Langdale—committed

wrongful acts.    TLC contends that Exclusion 4(g), which applies only to

allegations of wrongdoing by individual directors or officers such as Johnny and

Harley Langdale, simply does not apply. We disagree.

      Exclusion 4(g) does not distinguish between claims that fall under Coverage

A or under Coverage B. Nor does it distinguish between claims under the two

Coverage B subparts. Exclusion 4(g) excludes coverage for “any Claim” made

against “an Insured,” such as TLC, arising out of the alleged wrongdoing by “an

Individual Insured,” such as Johnny or Harley Langdale, committed in any

capacity other than as a director or officer.    The policy does not state that

Exclusion 4(g) applies only to coverage for individuals under Coverage A, only to

claims against the insured Company under Coverage B(i), or only to claims against

an Individual Insured under Coverage B(ii). By contrast, a separate exclusion,

Exclusion 4(t), is expressly limited to “Coverage B(i) only.” [R. 52-1, at 29.] A

“reasonable person in [TLC’s] position would [not] understand” that the policy

limited Exclusion 4(g) to specific coverage categories. See Am. Strategic Ins.

Corp. v. Helm, 759 S.E.2d 563, 566 (Ga. Ct. App. 2014).

      And, in any event, TLC based its claim for defense costs under the policy on

the state-court complaint allegations that Johnny Langdale had committed

wrongful acts as a trustee of the Virginia Langdale Miller Trust and as a TLC



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officer and director. Exclusion 4(g) excludes coverage for the claims against

Johnny and Harley Langdale based on the acts they allegedly committed in

capacities other than as TLC officers or directors. Exclusion 4(g) also applies to

exclude coverage for claims against TLC itself, so long as those claims arise out of

the alleged acts Johnny and Harley Langdale committed as trustees of the Virginia

Miller Langdale Trust.

          2. The Argument that Each Cause of Action is a “Claim”

      TLC argues that the district court interpreted the term “Claim” too broadly

by treating the claims in the consolidated underlying litigation as a single “Claim.”

See Aplt. Br. at 29 (arguing that it is “nonsensical for an entire lawsuit to constitute

a single claim when applying a claims-made policy”). TLC argues that the policy

language and Georgia law required the court to treat each cause of action as a

separate “Claim” for the purpose of Exclusion 4(g). According to TLC, because

National Union had the duty to defend at least one claim alleged in the complaint

or counterclaim, it had the “duty to defend all the claims asserted.” See HDI-

Gerling Am. Ins. v. Morrison Homes, Inc., 701 F.3d 662, 666 (11th Cir. 2012).

TLC contends that the district court’s overly broad approach to claims led it to ask

whether the litigation as a whole arose out of allegations that Johnny and Harley

Langdale committed wrongful acts as trustees rather than as TLC officers or

directors. TLC argues that this is the wrong question and that the right question is



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whether the specific claims the Trust beneficiaries asserted against TLC arose out

of TLC’s own alleged wrongful acts or only out of Johnny and Harley Langdale’s

alleged wrongful acts as TLC officers or directors as well as trustees of the Trust.

          The policy defines “Claim” as: (i) “a written demand for monetary or non-

monetary relief (including any request to toll or waive any statute of limitations);

(ii) “a civil . . . proceeding for monetary . . . relief which is commenced by . . .

service of a complaint or similar pleading”; or (iii) “a civil, criminal,

administrative or regulatory investigation of an Individual Insured.” [R. 52-1, at

21 (emphasis omitted).]7 The policy language provides some support for both

parties’ arguments, but we need not resolve this question. Even accepting TLC’s

narrower interpretation of “Claim,” the district court did not err in holding that

Exclusion 4(g) precluded coverage. See Miller v. Harget, 458 F.3d 1251, 1256

(11th Cir. 2006) (“We may affirm the [d]istrict [c]ourt on any basis supported by

the record.”). As discussed below, even if each cause of action is treated as a

separate “Claim” for the purpose of applying Exclusion 4(g), both Count III of the

state-court complaint and Count V of the counterclaim “arose out of” allegations

that Johnny and Harley Langdale committed wrongful acts as trustees of the Trust.

                   3. The Argument that the Causes of Action for Officer or
                      Director Misconduct Did Not “Arise Out Of” Johnny and
                      Harley Langdale’s Alleged Wrongful Acts as Trustees

          7
              The term also “include[s] any Securities Claim and any Derivative Demand.” [R. 52-1,
at 21.]


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      “When the phrase ‘arising out of’ is found in an exclusionary clause of an

insurance policy, [Georgia courts] apply the ‘but for’ test traditionally used to

determine cause-in-fact for tort liability.”   Hays, 722 S.E.2d at 927 (quoting

Barrett v. Nat. Union Fire Ins. Co., etc., 696 S.E.2d 326, 331–32 (Ga. Ct. App.

2010)). “[T]he exclusionary clause is focused solely upon the genesis of the

underlying plaintiff’s claims—if those claims arose out of the excluded acts . . .

then coverage need not be provided. Claims arise out of [t]he excluded conduct

when ‘but for’ that conduct, there could be no claim against the insured.” Id.

(internal quotation marks omitted). A “claim does not ‘arise out of’ a circumstance

if, independent of that circumstance, the claim could still exist.” USMoney Source,

Inc. v. Am. Int’l Specialty Lines Ins. Co., 288 F. App’x 558, 560 (11th Cir. 2008)

(internal quotation marks omitted).

      Count III of the state-court complaint sought damages for Johnny and Harley

Langdale’s breaches of the fiduciary duties they owed as TLC directors to TLC’s

minority shareholders, the Trust beneficiaries. Count III alleged that Johnny and

Harley Langdale “had documents created and caused the execution of agreements

that granted Harley [Langdale] the right to purchase TLC stock both from the Trust

itself and from the beneficiaries individually” and “induced the beneficiaries to

grant those rights.” [R. 77-52, at 73–74.] Count III alleged that Johnny and Harley

Langdale “were personally enriched” by TLC’s 1999 and 2000 redemption of the

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beneficiaries’ shares that had been held in the Trust, and that they “failed to deal

fairly with the beneficiaries” by “fail[ing] to disclose” and “deliberately

conceal[ing] critical information.” [Id. at 74.]

      Count V of the counterclaim sought to hold TLC vicariously liable “for its

officers’ misconduct.” [R. 77-53, at 91.] Like Count III of the complaint, Count V

of the counterclaim alleged that Harley and Johnny Langdale, and Johnny’s father,

John Sr., breached the fiduciary duties they owed as TLC directors and officers to

the Trust beneficiaries by engaging in self-dealing; and by failing to disclose

material information to, and by deliberately concealing critical information from,

the beneficiaries, relating to TLC’s adoption of the Shareholders’ Agreement and

the Redemption Agreement, and to the redemption transaction itself.

      Both the self-dealing and the misrepresentation causes of action arose out of

Johnny and Harley Langdale’s alleged breaches of their duties as trustees. The

state-court complaint and the counterclaim alleged that, beginning in the early to

mid-1990s, “[t]he Trustees and TLC embarked on a scheme . . . to make the

Trustees’ control over TLC permanent, to have TLC redeem the Trust’s stock, and

to do so at an absurdly low price.” [R. 77-53, at 37.] The alleged scheme

included: (1) causing TLC to adopt a Shareholders’ Agreement to enable the

company to redeem the Trust’s stock at a favorable price before the Trust

beneficiaries could sell their stock to third parties; (2) misrepresenting the Trust’s



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termination date to convince the beneficiaries to sell by 1999 to avoid potentially

devastating estate and tax consequences; (3) telling the beneficiaries that Johnny

and Harley Langdale would not take any action as TLC directors to increase the

dividends or liquidity of TLC stock; (4) telling the beneficiaries that there was no

market for their TLC stock because it represented only a minority interest;

(5) hiding the redemption of the beneficiaries’ stock from the co-directors, Billy

and Robert Langdale, so that they could not tell the beneficiaries truthful

information before the plan was executed; and (6) terminating the Shareholders’

Agreement after the stock was redeemed so that Johnny Langdale could purchase

Harley Langdale’s voting stock “without having to first offer that stock to TLC or

other shareholders.” [R. 77-53, at 38–39; see also R. 77-52, at 31–32, 41–42.]

      According to the counterclaim, “[e]ach of these acts were part and parcel of

the Trustees’ fraudulent scheme to obtain 2/3 control of TLC by . . . redeeming the

stock at an absurdly low price, in which scheme TLC was fully complicit.” [R. 77-

53, at 39.] The counterclaim alleged that “[t]he Trustees and TLC were complicit

in the scheme to breach the Trustee’s [sic] duties to the beneficiaries by procuring

adoption of the ‘Shareholders’ Agreement.’” [R. 77-53, at 51.] The counterclaim

alleged that Johnny and Harley Langdale “did not inform Virginia and her

surviving children that they had initiated adoption of the ‘Shareholders’

Agreement,’” which Johnny and Harley “signed [as trustees] . . . on the



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beneficiaries’ behalf.” [R. 77-52, at 37.] Nor did Johnny and Harley Langdale

inform their co-directors, Billy and Robert Langdale, “about the purpose of the

‘Shareholders’ Agreement’ or their plans to use it and then terminate it.” [R. 77-

52, at 37.]

      The counterclaim also alleged that Johnny and Harley Langdale’s

misrepresentation to the Trust’s beneficiaries that “the Trust terminated in 1999,

with the attendant estate tax consequences to Virginia, was the very premise on

which the sale of the Trust’s stock to TLC was based.”          [R. 77-53, at 47.]

“Without the misrepresentation about termination in 1999,” the counterclaim

alleged, “the beneficiaries would not have consented to the sale of the stock, thus

thwarting the Trustees’ scheme to cheat the beneficiaries and gain total control of

TLC.” [Id.]

      The counterclaim allegations include statements that Johnny and Harley

Langdale acted in their capacities as TLC officers and directors in carrying out the

scheme that resulted in the Trust beneficiaries selling their TLC stock to the

company at the redemption price. But the pleadings make it clear that Johnny and

Harley Langdale’s alleged misconduct as officers and directors necessarily arose

out of their alleged breaches of the fiduciary duties they owed as trustees to the

Trust beneficiaries.    The underlying litigation pleadings confirm that the

allegations against the Langdales in their capacities as TLC officers and directors



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arose out of actions they took in their capacities as trustees. Both the state-court

complaint and the counterclaim alleged that “[e]very action undertaken by the

Trustees or any of them with respect to the Trust or which affected the Trust or the

Trust’s stock in TLC or the interests of the beneficiaries was necessarily a matter

connected to the Trustees’ role as a trustee [sic], which invoked the Trustee’s [sic]

fiduciary duty.” [R. 77-53, at 68; see also R. 77-52, at 56.]

      The underlying litigation allegations describe TLC’s financing of the

transaction redeeming the Trust beneficiaries’ TLC stock. Count III of the state-

court complaint alleged that “[b]uying the Trust’s stock themselves would cost

[Johnny and Harley Langdale] money. But if TLC redeemed the Trust’s stock,

then [Johnny and Harley Langdale] would have permanent control over TLC

because they would control two-thirds of the outstanding voting stock, at no cost”

to themselves. [R. 77-52, at 30.] “Every dollar saved by TLC in purchasing the

trust’s stock—and every dollar denied to the beneficiaries—redounded to Johnny[]

and Harley [Langdale’s] own individual benefit, because each of them had a one-

third interest in that dollar saved.” [R. 77-52, at 34.] Count V of the Trust

beneficiaries’ counterclaim against TLC alleged that it was vicariously liable for

Johnny and Harley Langdale’s misconduct as TLC officers and directors.

      The allegations against TLC in Count III of the beneficiaries’ state-court

complaint and Count V of the counterclaim meet the but-for test. See Hays, 722



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S.E.2d at 927 (“Claims arise out of [t]he excluded conduct when ‘but for’ that

conduct, there could be no claim against the insured.” (internal quotation marks

omitted)). The allegations are of acts and omissions that would not have occurred

had Johnny and Harley Langdale not breached their duties as trustees by using the

redemption mechanism to consolidate control over TLC without having to

purchase the Trust beneficiaries’ TLC shares themselves.         The allegations of

officer and director misconduct arose out of the allegations of misconduct as

trustees of the Virginia Miller Trust.

      TLC contends that the causes of action against TLC for Johnny and Harley

Langdale’s acts that allegedly breached the duties they owed not as trustees but as

officers or directors could have existed independently from the beneficiaries’

causes of action against Johnny and Harley Langdale for breaching the duties they

owed as trustees of the Virginia Miller Trust. We agree that “a claim does not

‘arise out of’ a circumstance if, independent of that circumstance, the claim could

still exist.” USMoney, 288 F. App’x at 560 (internal quotation marks omitted).

But we do not agree that the beneficiaries’ claims against TLC could have existed

independent of their claims against Johnny and Harley Langdale as trustees.

Because the causes of action alleged against TLC could not have existed in the

absence of the claims that Johnny and Harley Langdale committed wrongful acts in

the uninsured capacity as trustees, Exclusion 4(g) applies.



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      The allegations of TLC’s liability for its officers’ and directors’ misconduct

asserted against TLC in Count III of the state-court complaint and in Count V of

the counterclaim arise from, and necessarily rely on, the allegations that Johnny

and Harley Langdale conspired as trustees to manipulate the Trust’s beneficiaries

into selling their shares back to TLC at an unfairly low price, enabling Johnny and

Harley Langdale to consolidate their control over TLC at no personal financial

cost. The allegations that TLC is vicariously liable because Johnny and Harley

Langdale breached their duties as TLC officers and directors could not have

existed independent of the allegations that Johnny and Harley Langdale breached

their fiduciary duties as trustees of the Virginia Miller Trust.

      Continental Cas. Co. v. H.S.I. Fin. Servs., Inc., 466 S.E.2d 4 (Ga. 1996), is

instructive. The insurer, Continental Casualty, had issued a professional liability

policy to a law firm and its three named partners, Page, Sevy, and Henderson. See

id. at 5.   The policy excluded coverage for “[a]ny claim arising out of any

dishonest, fraudulent, criminal, or malicious act by [an insured] or any of [an

insured’s] partners, officers, stockholders, or employees.”        Id. (alterations in

original). HSI Financial Services, a client, sued the firm and the named partners,

alleging that “Page had improperly withdrawn funds from HSI’s escrow account

for his personal use” and that his partners, Sevy and Henderson, had negligently

“failed to supervise and ensure the proper accounting of HSI’s escrowed funds.”



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Id. The law firm and partners presented the claim to Continental Casualty, which

sued for a declaratory judgment that it was not obligated to provide a defense

against HSI’s claims. Continental Casualty invoked the “dishonest, fraudulent,

criminal, or malicious act” policy exclusion. See id. at 6. The federal district court

ruled in the law firm’s favor, applying Georgia law.

      On appeal, the Eleventh Circuit “noted that Page’s theft of the funds clearly

[fell] within the exclusionary clause,” but certified the following question to the

Georgia Supreme Court about the claims against the other two partners: “Does a

claim for a law partner’s negligence with respect to supervising and mitigating a

fellow partner’s criminal act ‘arise out of’ ‘any dishonest, fraudulent, criminal or

malicious act’ within the meaning of this insurance policy exclusion?” Id. The

Georgia Supreme Court answered the certified question in the affirmative and

explained why:

      First, as noted above, there is no doubt that Page’s theft of the
      escrowed funds fell within the exclusion relating to “dishonest,
      fraudulent, criminal and malicious act[s].” Second, it is clear that
      HSI’s claim against Sevy and Henderson “arose out of” Page’s
      actions, because but for Page’s actions, there could be no claim
      against Sevy and Henderson. Sevy and Henderson argue that because
      HSI’s claims against them are based upon allegations that they
      negligently failed properly to supervise HSI’s accounts, the claims
      merely assert independent and concurrent causes of HSI’s loss, for
      which coverage must be provided. However, this argument misses the
      mark, because the exclusionary clause is not at all concerned with
      whether ancillary acts of less culpable partners may have contributed
      to the loss which HSI suffered as a result of Page’s actions. Rather,
      by its express terms, the exclusionary clause is focused solely upon

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      the genesis of HSI’s claims—if those claims arose out of Page’s
      culpable conduct, as they did, then coverage need not be provided.
      Consequently, the fact that Sevy and Henderson may have negligently
      allowed Page to perpetuate his theft of HSI’s funds does not negate
      the plain effect of the policy’s exclusionary clause.

Id. at 6 (emphasis in original).

      Just as the negligence claims against Page’s law partners in Continental

Casualty arose out of Page’s excluded conduct, the misconduct claims against TLC

based on Johnny and Harley Langdale’s alleged officer or director misconduct

“arose out of [their] culpable conduct” as trustees. See id. The breach of their

duties as trustees was the genesis of the claims against TLC for the breach of their

duties as officers and directors. The claims against TLC arose out of Johnny and

Harley Langdale’s allegedly culpable conduct as trustees, and could not have

existed without that alleged wrongdoing.

      The allegations that TLC’s acts or omissions contributed to allowing Johnny

and Harley Langdale to obtain control of TLC without personal cost, breaching

their duties as trustees, does not negate the application of the exclusion. As in

Continental Casualty, the focus is on the genesis of the underlying plaintiffs’

claims. See id. The beneficiaries’ allegations that Johnny and Harley Langdale’s

acts as TLC directors and officers “may have [] allowed” them to more easily

“perpetuate” their scheme to control TLC by arranging for TLC to purchase the




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beneficiaries’ stock “do[] not negate the plain effect of the policy’s exclusionary

clause.” See id.

      TLC points to three cases in which courts rejected the insurer’s argument

that an “arising out of” exclusion barred coverage: Cotton States Mut. Ins. Co. v.

Crosby, 260 S.E.2d 860 (Ga. 1979); Fireman’s Fund Ins. Co. v. Univ. of Ga.

Athletic Assoc., Inc., 654 S.E.2d 207 (Ga. Ct. Ap. 2007); and USMoney, 288 F.

App’x 558 (11th Cir. 2008). Each case is distinguishable. In those cases, the

nexus between the uninsured acts and the insured acts was more attenuated than in

this case. None of those cases involved allegations, similar to the allegations in

this case, of dual-capacity misconduct committed by the same actors.

      In Cotton States, the Georgia Supreme Court considered whether a policy

provision excluding losses arising from “bodily injury” precluded a rape victim’s

claims against school officials for negligently failing to safeguard the school

premises and for unlawfully detaining her after she was raped. 260 S.E.2d at 861.

The court concluded that the negligence claims arose out of bodily injury and were

excluded from coverage, but the unlawful-detention claim did not arise out of the

alleged bodily injury and was not subject to the exclusion. Id. at 861–63. The

complaint in the underlying litigation did not allege that the school officials

committed the act—rape—that caused the bodily injury. The exclusion applied to

the allegations that the school officials’ acts facilitated or failed to prevent the rape.



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The exclusion did not apply to allegations that the school officials committed

separate wrongs that did not depend on or arise from the rape. In contrast, the

beneficiaries’ pleadings in the underlying litigation alleged that the same

individuals who breached their duties as trustees—Johnny and Harley Langdale—

also breached their duties as TLC officers and directors to obtain personal benefits

at the Trust’s and beneficiaries’ expense.

      In Fireman’s Fund, a college football player informed the school’s assistant

athletic director that he wanted to get school-sponsored disability insurance. 654

S.E.2d at 211. The assistant athletic director solicited quotes and took other steps

to obtain that insurance, but he had not yet obtained the insurance a few days later,

when the athlete was paralyzed in a football game. The athlete sued the assistant

athletic director and the school’s athletic association for breach of fiduciary duties,

breach of contract, and negligence in failing to have the disability insurance in

place. The school’s insurer asserted a policy exclusion barring claims “arising out

of, in consequence of or in any way related to [b]odily [i]njury.” Id. The Georgia

Court of Appeals held that the bodily-injury exclusion did not apply. The court

concluded that the claims against the school officials for failing to obtain the

insurance before the athlete played arose out of the allegations that the athlete had

to “face[] the hazards inherent in playing the game of football without the

protection that would have been afforded by the disability insurance he requested,”



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not out of his subsequent bodily injury. Id. at 214. The defendants’ “actionable

breaches of fiduciary or contractual duties, and/or duty of ordinary care were

complete” before the athlete was hurt. Id. As a result, “[n]o conduct of the

insureds [was] causally related to [the athlete’s] bodily injury.” Id. The “nexus”

between the injury and the claims was “too attenuated to bring his claims within

the ambit of the bodily injury exclusion.” Id. at 213–14.

      Here, by contrast, Johnny and Harley Langdale’s alleged breaches of their

duties as trustees started before, and continued throughout, the period when they

allegedly breached their duties as TLC officers and directors. The breaches of the

duties they owed as trustees of the Trust allegedly caused or created the harm to

the beneficiaries—the sale of their stock at a below-market price. Fireman’s Fund

was “not a case in which the plaintiff claim[ed] that the insured’s wrongful conduct

caused or created the conditions giving rise to bodily injury to the plaintiff.” Id. In

this case, by contrast, the allegations in the underlying litigation are that Johnny

and Harley Langdale’s wrongful conduct as trustees “caused or created the

conditions giving rise to” the harm to the beneficiaries, facilitated by the

Langdales’ wrongful acts as TLC directors or officers that are the basis for the

direct and vicarious liability claims against TLC. See id.

      In the third case TLC cites, USMoney, 288 F. App’x 558, TierOne Bank had

advanced loans to the insured, USMoney, under a line of credit agreement.



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USMoney used the loans to originate residential mortgages for sale on the open

market. Id. at 559. When USMoney failed to repay the loans, TierOne sued, “in

part because the loans were not secured by a valid and enforceable first lien on

each of the subject properties.” Id. TierOne obtained a money judgment for

USMoney’s breach of the line-of-credit agreement, negligently submitting the

funding requests, and negligently including misrepresentations in the funding

requests. Id. USMoney sought indemnification from its insurer, American, which

invoked an exclusion barring claims “arising out of any defective deed or title.”

Id. at 560. USMoney argued that, regardless of the lien status, TierOne still

“would [] have had valid claims against [USMoney] based upon its negligence and

breach of contract in submitting forged appraisals and fraudulent insured closing

letters.” Id. at 561 (internal quotation marks omitted). USMoney asserted that

“TierOne’s damages resulted as much from the forged appraisals and lack of

closing insurance as they did from the lack of valid title, because forged appraisals

and lack of closing insurance renders the mortgages unmarketable.” Id. The

insurer responded that “the fraudulent closing letter and forged appraisal would not

have been necessary if USMoney had valid title to the property, because the

borrowers could have obtained a legitimate appraisal and a legitimate closing

letter.” Id. at 561–62 (internal quotation marks omitted).




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       The Eleventh Circuit, applying Georgia law, found that “both parties [were]

partially correct.” Id. at 562. The court held that American was “under a duty to

indemnify USMoney against two of TierOne’s claims—breach of contract and

negligent misrepresentation.” Id. The court reached this conclusion “because the

excluded circumstance—defective title—was not necessary to [these claims]”:

       [A]lthough . . . USMoney breached the Line of Credit Agreement in
       part because it failed to ensure TierOne had a valid first lien on the
       real estate for which the loans at issue were made[,] . . . USMoney
       [also] breached the Agreement by submitt[ing] funding requests to
       TierOne with representations and covenants containing false and
       inaccurate information. Examples of false information submitted by
       USMoney include the names and licensures of various closing
       companies or their agents.         Because USMoney breached the
       Agreement in ways unrelated to defective title, the breach of contract
       claim does not “arise out of” the exclusion.

       ....

       Similarly, although the court found that USMoney negligently
       represented that the loans . . . were secured by valid first liens on the
       real estate, it went on to list further negligent representations by
       USMoney. USMoney could have made these negligent representations
       even with good title, and therefore, this claim does not “arise out of”
       defective title.

Id. at 562 (internal quotation marks, ellipses, and citations omitted) (emphasis

added).    Because TierOne “could have maintained” its claims for breach of

contract and negligent misrepresentation “against USMoney even if USMoney had

obtained valid first liens securing the loans,” the court held that neither “arose out”

of the defective title. Id.



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      Here, unlike the breach-of-contract and negligent-misrepresentation claims

in USMoney, Count III of the beneficiaries’ state-court complaint and Count V of

the counterclaim did not allege that TLC’s directors committed wrongful acts “in

ways unrelated” to Johnny and Harley Langdale’s wrongdoing as trustees. The

allegations could not have been made if Johnny and Harley Langdale had not

approved the Shareholders’ Agreement on the Trust beneficiaries’ behalf,

misinformed the beneficiaries about the Trust’s termination date, or misrepresented

the value of the Trust’s TLC stock. The claims in the underlying litigation against

TLC for corporate wrongdoing necessarily included claims that Johnny and Harley

Langdale breached the duties they owed as trustees to the Virginia Miller Trust

beneficiaries, who were also the company’s minority shareholders. The allegedly

wrongful acts committed by TLC and by TLC directors would not have occurred

but for Johnny and Harley Langdale’s alleged wrongful acts as trustees.

      TLC contends that because Johnny and Harley Langdale were TLC directors

and officers when they perpetrated the scheme to obtain control of TLC by causing

TLC to purchase the beneficiaries’ shares at an unfairly low price, they necessarily

acted in a capacity within the D&O coverage. But although Johnny and Harley

Langdale were TLC directors during this period, their wrongful acts as TLC

directors arose out of their wrongful acts as trustees of the Trust. For example, the

underlying litigation pleadings allege that before breaching their duties to TLC as



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directors, and before causing TLC to approve the Redemption Agreement, they

breached their duties as trustees by signing the Shareholders’ Agreement on the

Trust beneficiaries’ behalf; misinforming the Trust beneficiaries about the Trust’s

termination date; and misrepresenting the value of the Trust’s TLC shares. But for

these alleged wrongful acts, Johnny and Harley Langdale would not have been able

to breach their duties as TLC directors and officers, or cause TLC to commit

allegedly wrongful acts, by approving the Redemption Agreement and executing

the transaction without their co-directors’ or the minority shareholders’ approval.

      To the extent that Johnny and Harley Langdale were allegedly acting as

directors and officers, that misconduct was so inextricably entwined with their

alleged misconduct as trustees that the duty to advance defense costs was not

triggered. See Cont’l Cas. Co. v. Adams, No. 3:CV02-1122, 2003 WL 22162379,

at *9 (M.D. Pa. Sept. 12, 2003) (applying a similar policy exclusion because “the

allegations . . . in the Underlying Action plainly show[ed] Adams and Leighton

acting simultaneously in dual capacities: as officers and directors of both the

insured and the uninsured corporations” and “[t]heir alleged negligent supervision

of Sabol applie[d] both in their capacities as officers and directors of HSC, as well

as in their capacities as officers and directors of HSCM”); Coregis Ins. Co. v.

Bartos, Broughal & DeVito, LLP, 37 F. Supp. 2d 391, 394 & n.4 (E.D. Pa. 1999)

(holding that a similar exclusion precluded coverage for an insured’s employee



                                         37
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who “was an officer, director and shareholder of . . . a business enterprise other

than the named insured” and who “solicited investors” on behalf of that noninsured

business enterprise); cf. McAninch v. Wintermute, 491 F.3d 759, 772 (8th Cir.

2007) (holding that “an insurer may not avoid its duty to indemnify for alleged

wrongful conduct merely by arguing the director was also an owner, shareholder,

etc., without some explanation as to how this dual capacity relates to or facilitated

the wrongful conduct alleged” (emphasis added)).

      TLC argues that Johnny Langdale’s actions as trustee could not have been

the but-for cause of the Redemption Agreement and transaction because he was no

longer a trustee when the Agreement was signed and the redemption sale occurred.

TLC supports this assertion by pointing to the Redemption Agreement, which

Harley Langdale—and not Johnny Langdale—signed as trustee. But the gravamen

of the state-court complaint and the counterclaim is that Johnny and Harley

Langdale conspired to breach their duties as trustees well before the Redemption

Agreement was signed, to deprive the beneficiaries of the proper value of their

TLC shares and consolidate their own control over TLC. The pleadings allege that

“[n]otwithstanding Johnny’s strategically timed resignation, he planned and

participated in the conspiracy to transfer the Trust’s stock at an unfair and absurdly

low price.” [R. 77-52, at 45.] The state-court complaint and the counterclaim

alleged that Johnny Langdale resigned as trustee just before Harley Langdale



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signed the Redemption Agreement for the Trust, agreeing to sell the Trust shares to

TLC at a below-market price. Johnny Langdale signed for TLC. The pleadings

allege that Johnny Langdale resigned as a trustee of the Trust to avoid signing the

Redemption Agreement on behalf of both TLC and the Trust. The counterclaim

allegations also make clear, however, that the Redemption Agreement was signed

and the redemption sale occurred because Johnny and Harley Langdale had

previously approved the Shareholders’ Agreement on the Trust’s behalf as trustees;

failed to disclose material information to the Trust beneficiaries; and repeatedly

misled the beneficiaries, all while Johnny Langdale was still a trustee.

      TLC argues that its decision to indemnify Johnny Langdale shows that the

claims asserted in the underlying litigation did not arise out of his “actions in a

capacity other than as a TLC [e]xecutive.” Aplt. Br. at 23. Georgia Code § 14-2-

853 allows corporations to “advance funds to pay for or reimburse the reasonable

expenses incurred by a director who is a party to a proceeding because he or she is

a director if he or she delivers to the corporation”: (1) “[a] written affirmation of

his or her good faith belief that he or she has met the relevant standard of conduct,”

including acting in the company’s best interests in “his or her official capacity”;

and (2) a written agreement to “repay any funds advanced if it is ultimately

determined that the director is not entitled to indemnification.” GA. CODE ANN. §§

14-2-853; 14-2-851. TLC argues that Johnny Langdale’s written affirmation “that



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his actions alleged in the lawsuit against him were conducted as an officer and

director of” TLC “contradicts” the district court’s conclusion that the claims arose

out of Johnny Langdale’s actions in a noninsured capacity. Aplt. Br. at 23. But, as

TLC itself acknowledges, “an insured company could agree to indemnify an

employee for something he/she has done that had nothing whatsoever to do with

the company’s business.” [Id.] The risk of an insured creating coverage by

agreeing to indemnify a director who allegedly committed wrongful acts is greater

when, as here, the director has substantial control over the insured company,

including over deciding whether to indemnify. TLC’s affirmation about Johnny

Langdale and the capacity in which he acted and was sued does not bring the

claims within the policy’s coverage.

      TLC contends that National Union’s letters offering to advance defense

costs for only Count III of the state-court complaint and Count V of the

counterclaim have “evidentiary value with respect to how National Union

interprets its own policy” and “should preclude the grant of summary judgment”

on Exclusion 4(g). Aplt. Br. at 35. But “[i]n summary judgments involving

contract cases, the construction of a contract is a question of law for the trial court

‘where the language of a contract is clear and unambiguous and capable of only

one reasonable interpretation as applied to the subject matter.’” Nolley v. Md. Cas.

Ins. Co., 476 S.E.2d 622, 624 (Ga. Ct. App. 1996) (quoting Bress v. Keep-Safe



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Indus., 271 S.E.2d 867, 869 (Ga. Ct. App. 1980)). TLC does not argue that

National Union waived, or should be estopped from asserting, Exclusion 4(g). See

Aplt. Br. at 35.8

       The claims against TLC for Johnny and Harley Langdale’s alleged

misconduct as directors and officers could not have existed independent from their

alleged misconduct as trustees of the Virginia Miller Trust. The claims against

Johnny and Harley Langdale as TLC directors and officers could not have existed

independent from their alleged misconduct as trustees.                     The allegations of

wrongdoing in Counts III and V of the state-court complaint and the counterclaim

“arose out of” Johnny and Harley Langdale’s wrongful acts in their capacities as

trustees, and are subject to Exclusion 4(g). 9




       8
         TLC also argues that National Union’s admission that the underlying litigation
“includes allegations made against Mr. Langdale in his insured capacity as an
Executive/Employee of [TLC]” shows that Exclusion 4(g) does not apply. Aplt. Br. at 27–28
(emphasis omitted). [See also R. 84, ¶ 121.] But TLC misunderstands Exclusion 4(g). The
exclusion applies to exclude otherwise covered wrongful acts that happen to “aris[e] out of” acts
undertaken in a non-covered capacity. That is the case here.
       9
          TLC argues that this conclusion makes coverage “illusory” and undermines
longstanding Georgia law that the duty to defend extends to every claim that arguably falls
within the scope of coverage and that “where an insurer has a duty to defend a single claim the
complaint presents, it has a duty to defend all the claims asserted.” HDI-Gerling Am. Ins. Co.,
701 F.3d at 666. But just as the duty to defend may extend to claims that do not arguably fall
within the scope of coverage because of one covered claim, it may be excluded from claims that
otherwise do fall within the policy’s terms if the exclusion is an “arising out of” provision, such
as Exclusion 4(g). “[T]hat is the nature of an exclusion—to exclude things that otherwise would
be covered, when certain conditions are met.” Cynergy, LLC v. First Am. Title Ins. Co., 706 F.3d
1321, 1327 (11th Cir. 2013).


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      We affirm the district court’s grant of summary judgment dismissing TLC’s

claims for breach of contract and for a declaratory judgment on the basis that

Exclusion 4(g) bars coverage.

      B. Whether TLC’s Bad Faith Claim Fails as a Matter of Law

      TLC also appeals the district court’s grant of summary judgment dismissing

its bad-faith claim. Because the district court properly found no coverage under

the D&O policy, we affirm the grant of summary judgment dismissing TLC’s bad-

faith claim. See OneBeacon Am. Ins. Co. v. Catholic Diocese of Savannah, 477 F.

App’x 665, 673 (11th Cir. 2012) (“Under Georgia law, there can be no recovery

for bad faith when there is no coverage.” (citing Morris v. Ins. Co. of N. Am., 151

S.E.2d 813, 814 (Ga. Ct. App. 1966)); BayRock Mortg. Corp. v. Chicago Title Ins.

Co., 648 S.E.2d 433, 435 (Ga. Ct. App. 2007) (requiring that the insured prove

“that the claim is covered under the policy” to prevail on a bad-faith claim under

GA. CODE ANN. § 33-4-6).

                                IV.   CONCLUSION

      We AFFIRM the judgment of the district court.




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