Impac Mortgage Holdings, Inc. v. Houston Casualty Company

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IMPAC MORTGAGE HOLDINGS, INC.;
IMPAC FUNDING CORPORATION;
IMPAC SECURED ASSETS CORP.; IMH
ASSETS CORP; RICHARD J. JOHNSON;
JOSEPH R. TOMKINSON,
Plaintiffs - Appellants,
v.
HOUSTON CASUALTY COMPANY,
Defendant - Appellee.
No. 14-55071
D.C. No. 8:11-cv-01845-JLS-JCG
MEMORANDUM*
Appeal from the United States District Court
for the Central District of California
Josephine L. Staton, District Judge, Presiding
Submitted February 4, 2016 **
Pasadena, California
Before: WARDLAW and HURWITZ, Circuit Judges and RICE, *** Chief District
Judge.
* This disposition is not appropriate for publication and is not precedent except
as provided by 9th Cir. R. 36-3.
** The panel unanimously concludes this case is suitable for decision without
oral argument. See Fed. R. App. P. 34(a)(2).
*** The Honorable Thomas O. Rice, Chief United States District Judge for the
Eastern District of Washington, sitting by designation.
FILED
FEB 8 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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In this diversity action, Impac Mortgage Holdings, Inc., its subsidiaries, and
certain of its employees (“Impac”), alleges that two insurance companies, Houston
Casualty Company (“Houston”) and Certain Underwriters at Lloyd’s (“Lloyd’s”),
wrongfully denied coverage for certain losses incurred in connection with three
underlying actions. The district court granted summary judgment for Houston and
against Lloyd’s. Impac appeals the grant of summary judgment to Houston. We
affirm.
1. Impac bought a directors’ and officers’ (“D&O”) insurance policy from
Houston covering losses “arising out of, based upon or attributable to the purchase
or sale of . . . any securities of [Impac].” The three underlying actions asserted
claims arising out of Impac’s sale of mortgage-backed securities.
2. Impac argues that, because “of” denotes connection, the phrase “securities
of” in the D&O policy includes any securities to which it has a connection.
However, the phrase “securities of,” like “stock of,” is ordinarily understood as
meaning “shares in.” That is how an adjacent clause in the Houston policy uses the
phrase, expressly covering claims “brought by a security holder of an Organization
with respect to such security holder’s interest in securities of such Organization.”
Impac’s sole contrary examples, from 17 C.F.R. §§ 230.191(a) & 240.3b-19(a),
which are SEC regulations, merely demonstrate that “securities of” can mean

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“securities issued by” if the surrounding language so indicates; but here, the policy
contains no such indication.
3. Impac’s interpretation flies in the face of the California Supreme Court’s
warning not to elevate possible dictionary meanings over context in interpreting
language in insurance policies. MacKinnon v. Truck Ins. Exch., 73 P.3d 1205, 1214
(Cal. 2003), as modified on denial of reh’g (Sept. 17, 2003); see also Olympic Club
v. Those Interested Underwriters at Lloyd’s London, 991 F.2d 497, 500 (9th Cir.
1993) (“The policy, after all, is a Directors’ and Officers’ liability policy with an
endorsement protecting the Club; it is not an expanded comprehensive liability
policy insuring the Club against liability for everything it does.”). The record does
not support Impac’s claim that it expected its D&O policy to cover professional
errors; indeed, it purchased what otherwise would have been duplicative Errors and
Omissions (“E&O”) coverage from Lloyd’s.
4. Coverage is also barred by the Houston policy’s E&O Exclusion, which
excludes claims “arising out of, based upon or attributable to any Insured’s or
Organization’s performance of (or failure to perform) any professional services, or
any act, error or omission relating thereto.” Impac urges on appeal (contrary to its
successful argument against Lloyd’s below) that the underlying claims do not arise
out of its performance of professional services, because the claims allege liability
for approving offering documents and SEC filings, which are acts required by

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statute. But, drafting such documents, which describe complicated financial
products, plainly requires professional skill, whether or not the duty to file the
documents is imposed by statute.
AFFIRMED.

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