Finci v. American Casualty Co. of Reading

RODOWSKY, Judge. First Maryland Savings and Loan, Inc. (FMSL), a Maryland chartered, capital stock, savings and loan association, is insolvent, and State of Maryland Deposit Insurance Fund Corporation (MDIF) is its receiver. This action involves the construction of a directors’ and officers’ (D & 0) liability insurance policy issued to FMSL by American Casualty Company of Reading, Pennsylvania (ACCO). In an underlying action MDIF obtained substantial judgments against former directors and officers of FMSL.

Three of the judgment debtors, as part of settlements with MDIF, assigned their claims under the D & 0 policy to MDIF, which sued ACCO. A fourth director, who settled with MDIF, but who retained his claim against ACCO, also sued ACCO on the policy. The effect of the judgments entered in the trial court was to award to MDIF all of the D & 0 policy proceeds. The principal issues before us are whether ACCO’s policy covers the claims against the directors, and, if so, whether MDIF is entitled to all of the proceeds.

The Court of Special Appeals held that two D & 0 policy exclusions, on which ACCO relied, were void because they “would circumvent what we perceive to be the intent of the legislature, and thus the public policy of the State: to empower MDIF to recover, from the assets of failed savings and loan associations, every dollar available in ³⁶⁴ order to protect not only the depositors and creditors of those associations but, ultimately, to protect the taxpayers of this State.” Finci v. American Casualty Co., 82 Md.App. 471, 485 , 572 A.2d 1092, 1099 (1990). The Court of Special Appeals also affirmed the trial court’s holding that MDIF had priority to all of the D & 0 policy proceeds, thus rendering moot whether the fourth director had any enforceable claim against ACCO on the insurance policy. For the reasons set forth below, we shall reverse and remand. MDIF was appointed conservator for FMSL on November 20, 1985, by the Circuit Court for Montgomery County.

The conservator filed the underlying suit against Julian Seidel and others on March 14, 1986 (the Seidel action). The conservatorship was converted into a receivership in June of 1986, and MDIF’s original complaint evolved to a third amended complaint. With one exception, all of the claims asserted by MDIF against former directors and officers of FMSL, as such, were asserted as receiver, because the claims were based on duties of care and loyalty owed to FMSL. 1 In January 1988 judgments in the Seidel action were entered in favor of MDIF, including judgments, each in excess of $64 million, against Robert J. Corletta (Corletta), Frank J. Calcara (Calcara), and Benjamin Maisel (Maisel). These three judgment debtors had been directors of FMSL.

For policy periods of October 1, 1984, to October 1, 1985, and of October 1, 1985, to October 1, 1986, ACCO issued D & 0 liability policies to FMSL under each of which the ³⁶⁵ aggregate limit of liability for the respective policy year was $3 million. The policy ending October 1, 1985, had eight endorsements, while the policy ending October 1, 1986, had twenty endorsements. MDIF, as receiver of FMSL, sued ACCO in April 1988. The complaint alleged that ACCO had issued a D «fe 0 liability policy “to FMSL for the policy period from October 1, 1984 to October 1,1985 (‘the policy’)” and that ACCO had “renewed the policy for the period from October 1, 1985 to October 1, 1986.” The complaint further alleged entry of the judgments against various of the defendants in the Seidel action, that “[t]he policy is a contract,” and that ACCO had breached the contract.

Thereafter, as part of settlements with MDIF of the underlying Seidel action, the judgment debtors, Corletta, Calcara, and Maisel, assigned their claims against ACCO under the D «fe 0 policies to MDIF. MDIF held two of those assignments before judgment was entered in its favor against ACCO in the instant action. Another defendant in Seidel was Michael Finci (Finci), who also had been a director of FMSL. During the course of the Seidel action Finci settled with MDIF.

In April 1988 Finci also sued ACCO to recover the sums he had paid to MDIF in that settlement, as well as to recover the sums paid to Finci’s attorneys as fees for defending both Seidel and a suit brought by a depositors’ committee. 2 ACCO raised a number of defenses in the MDIF case, all of which were rejected by the trial court. These included certain policy exclusions in addition to the two exclusions to which we shall give principal attention in this opinion. The circuit court granted summary judgment on liability in favor of MDIF against ACCO for all of the reasons presented by MDIF in written memoranda and orally. ³⁶⁶ MDIF also sought a ruling in MDIF v. ACCO that all of the proceeds under the D & 0 policy were payable to it to the exclusion of Finci, and of any other potential claimants. The trial court then consolidated the Finci and MDIF cases against ACCO.

After giving notice and an opportunity to be heard to all potential claimants of the D & 0 policy proceeds, objections to MDIF’s request were received only from Finci, and from one other claimant who has not appealed. 3 The circuit court then held that MDIF enjoyed priority. A judgment in MDIF v. ACCO was entered for $2,995,000 in favor of MDIF, representing all of the D & 0 policy proceeds of $3 million less a $5,000 deductible. In Finci v. ACCO, the court ruled that Finci’s contract claims against ACCO were moot and entered judgment for ACCO on the merits, but against ACCO for costs. ACCO and Finci appealed to the Court of Special Appeals, which affirmed.

It held void the two exclusions from coverage on which ACCO principally had relied in its brief, and the court also held that MDIF was entitled to all of the policy proceeds. ACCO and Finci separately petitioned this Court for certiorari, which we granted. The D & 0 policies for the years ending October 1, 1985, and October 1, 1986, were claims made policies. Although the circuit court made no finding as to when MDIF made claims against the defendants in Seidel, MDIF alleged in its complaint against ACCO that, on December 19, 1985, it had put ACCO on notice of its claims against directors and officers.

There are two insuring agreements in each policy. ACCO agreed “[w]ith the Directors and Officers of the Association that if, during the policy period, any claim or claims are made against the Directors and Officers ... for a Wrongful Act, the Insurer will pay, in accordance with the terms of ³⁶⁷ [the] policy ... all Loss which the Directors and Officers ... shall become legally obligated to pay.” ACCO also agreed to pay to FMSL “all Loss” for which FMSL was required to indemnify, or, to the extent lawful, had indemnified, directors and officers. 4 “Loss” and “Wrongful Act” are defined terms in the policy. “Loss” has two aspects. One ties into the insuring agreement with FMSL and deals with its indemnification of directors and officers. The second aspect concerns the insuring agreement with directors and officers.

Under the latter “[t]he term ‘Loss’ shall mean any amount which the Directors and Officers are legally obligated to pay ... for a claim or claims made against the Directors and Officers for Wrongful Acts and shall include ... damages, judgments, settlements, costs ... and defense of legal actions, claims or proceedings and appeals therefrom — ” The policy also defines “[t]he term ‘Wrongful Act’ [to] mean any actual or alleged ... act or omission, or neglect or breach of duty by the Directors or Officers in the discharge of their duties solely in their capacity as Directors or Officers of the Association____” The difference between the policy forms for the two years lies in the endorsements. One of the two exclusions struck down by the Court of Special Appeals, the “regulatory exclusion,” is found only in the D & 0 policy for the period ending October 1, 1986. The other exclusion struck down by the Court of Special Appeals, the “insured vs. insured” exclusion, is found in the policies for both periods. ³⁶⁸ In addition, contract interpretation arguments are presented that neither of these exclusions applies to MDIF’s claims against the former FMSL directors and officers in Seidel. We shall consider the applicability and validity of the regulatory exclusion in Part I, infra, and of the insured vs. insured exclusion in Part II.

Because the conclusions reached in those parts are not completely dispositive, we consider MDIF’s priority argument in Part III and, in Part IV, arguments by ACCO concerning additional defenses stricken by the circuit court. I In this Part I, the “policy” is ACCO’s D & 0 policy for the period October 1, 1985, to October 1, 1986. It contains the regulatory exclusion which reads as follows: “It is understood and agreed that the Insurer shall not be liable to make any payment for Loss in connection with any claim made against the Directors o[r] Officers based upon or attributable to: any action or proceeding brought by or on behalf of the Federal Deposit Insurance Corporation, the Federal Savings & Loan Insurance Corporation, any other depository insurance organization, the Comptroller of the Currency, the Federal Home Loan Bank Board, or any other national or state regulatory agency (all of said organizations and agencies hereinafter referred to as ‘Agencies’), including any type of legal action which such Agencies have the legal right to bring as receiver, conservator, liquidator or otherwise, whether such action or proceeding is brought in the name of such Agencies or by or on behalf of such Agencies in the name of any other entity or solely in the name of any Third Party.” A Here we consider whether the regulatory exclusion is ambiguous. Ambiguity is said to result from the words, ³⁶⁹ “based upon or attributable to” any action by a regulatory agency.

The argument is that the exclusion relates only to secondary actions, brought by one other than a regulatory agency, which are precipitated by the regulatory proceeding or action. Under that interpretation loss due to the claim made by the regulatory agency is covered. The claimed ambiguity first achieved judicial recognition in American Casualty Co. v. Federal Deposit Ins. Corp., 677 F.Supp. 600 (N.D.Iowa 1987) (Iowa No. 1).

Iowa No. 1 relied on the ambiguity to deny summary judgment for ACCO in a declaratory judgment case. Later in that litigation ACCO renewed its motion for summary judgment, but the court continued to rule that the interpretation of the regulatory exclusion was a question of material fact. American Casualty Co. v. Federal Deposit Ins. Corp., 713 F.Supp. 311, 315 (N.D.Iowa 1988) (Iowa No. 2).

After trial in that same litigation the court concluded that the regulatory exclusion “clearly excludes claims by FDIC and is not ambiguous.” American Casualty Co. v. Federal Deposit Ins. Corp., Civil No. 86-4018, 1990 WL 66505 , 1990 U.S.Dist. LEXIS 6065 (N.D.Iowa Feb. 26, 1990) (Iowa No. 3). 5 Federal Sav. & Loan Ins. Corp. v. Mmahat, Civil No. 86-5160, 1988 WL 19304 , 1988 U.S.Dist.

LEXIS 1825 (E.D.La. Mar. 3,1988), followed the reasoning of Iowa No. 1 in denying summary judgment to ACCO. Summary judgment was granted to the insured based on the “secondary suit” ambiguity in Federal Sav. & Loan Ins. Corp. v. Heidrick, Civil No. HM 86-77 (D.Md. Jan. 25, 1991).

Although applying Maryland law, the opinion in the latter case does not present an analysis of the policy as a whole. In construing insurance contracts in Maryland we give the words of the contract their ordinary and accepted meaning, looking to the intention of the parties from the ³⁷⁰ instrument as a whole. Pacific Indem. Co. v. Interstate Fire & Casualty Co., 302 Md. 383, 388 , 488 A.2d 486, 488 (1985).

Under the facts here the “Loss” includes the amount of judgment entered against the assigning directors in Seidel. That loss was “in connection with [a] claim made,” the MDIF complaint, which charged “Wrongful Acts,” by way of neglect of duty as directors. The claim was made in an action by a “state regulatory agency,” MDIF. It was a “type of legal action which such Agenc[y] ha[d] the legal right to bring as receiver, conservator, liquidator or otherwise[.]” There is no ambiguity.

In addition to Iowa No. 3, the regulatory exclusion has been held to be unambiguous in American Casualty Co. v. Baker, 758 F.Supp. 1340 (C.D.Cal.1991) (reading the regulatory exclusion to apply to the Resolution Trust Corporation is natural and reasonable), Gary v. American Casualty Co., 753 F.Supp. 1547 (W.D.Okla.1990) (FDIC construction of the regulatory exclusion found to be strained and unreasonable), and Continental Casualty Co. v. Allen, 710 F.Supp. 1088 (N.D.Tex.1989). The policy insures against “Loss.” It is not a reasonable interpretation that the words, “based upon or attributable to,” carve out of the exclusion “Loss in connection with any claim made” by a regulatory agency, so as to leave the exclusion operative only as to claims secondary to the agency claim. Under the insuring agreement with directors and officers “Loss” is a legal liability to pay money to the injured party, to defense counsel, or to a court clerk for costs. Under the insuring agreement with the association, however, “Loss” is not directly concerned with the liability of the association to injured parties.

Under the insuring agreement with the association, coverage is afforded for “Loss” by way of indemnifying directors and officers for claims made against them. The latter type of “Loss” will always be “attributable” to a claim made against a director or officer. Inclusion of the “based upon or attributable to” language in an exclusion means that direct “Loss” to a director or officer and indemnifying “Loss” to the associa ³⁷¹ tion, attributable to the director’s or officer’s loss, are both excluded. Consideration of the policy as a whole confirms that the use of the “based upon or attributable to” language is not intended to limit the exclusion to secondary claims while retaining coverage for an initial claim made by an agency.

The usage is simply a drafting style. Under the policy the insurer is not liable to make any payment for “Loss” based upon or attributable to —Charges of environmental pollution (Endorsement No. i); —Wrongful Acts as administrator or trustee of an individual retirement account (Endorsement No. 6); —Wrongful Acts which would have been covered by insurance agency errors and omissions insurance (Endorsement No. 8); —Claims arising out of repurchase or reverse repurchase agreements, financial futures trading and/or hedging or commitments to purchase or sell securities or loans in the future (Endorsement No. 15); 6 —Suits by any stockholder, including a derivative action, and any claim made by any other director or officer or by the institution (Endorsement No. 16); —Any suit brought by any uninsured depositors (Endorsement No. 18); and —Claim by a merger partner or acquiring entity (Endorsement No. 19). Clearly the policy is not to be read to mean that the initial claim of all of these types is covered and only a secondary claim of these types is excluded. Loss based upon or attributable to the Seidel action is excluded from coverage ³⁷² by the terms of the regulatory endorsement.

We therefore turn to the issue of that endorsement’s validity. B MDIF’s public policy argument is that “[application of [the regulatory exclusion] to MDIF would impair significantly MDIF’s ability to perform its statutory responsibilities,” and that “[accordingly, it should not be enforced.” Brief of Respondent MDIF at 28. The argument is inspired and supported by some decisions of federal courts involving insolvent financial institutions. The concept’s genesis was Federal Sav. & Loan Ins.

Corp. v. Oldenburg, 671 F.Supp. 720 (D.Utah 1987). Oldenburg was followed on this issue in Federal Sav. & Loan Ins. Corp. v. Mmahat, supra, and in Branning v. CNA Ins. Cos., 721 F.Supp. 1180 (W.D.Wash.1989).

Oldenburg was also cited favorably in Federal Sav. & Loan Ins. Corp. v. Aetna Casualty & Sur. Co., 701 F.Supp. 1357, 1363 (E.D.Tenn.1988), where the court voided, as contrary to public policy, a provision in a blanket fidelity bond which terminated the period for discovering loss when operation of the insured institution was assumed by the Federal Savings and Loan Insurance Corporation (FSLIC). Oldenburg saw the question to be “whether public policy will allow [the insolvent association] to bargain away the rights of the FSLIC to carry out its statutory function.” Oldenburg, 671 F.Supp. at 723 .

The Oldenburg court gave two reasons for invalidating the regulatory exclusion. First, it analogized to a decision involving the household exclusion in an automobile liability policy. Secondly, the court said that enforcing the exclusion would “seriously hamper the FSLIC in carrying out its duties.” Id. at 724 . The household exclusion decision relied on in Oldenburg was Farmers Ins.

Exch. v. Call, 712 P.2d 231 (Utah 1985). That decision was cited by this Court in State Farm Mut. Auto. Ins.

Co. v. Nationwide Mut. Ins. Co., 307 Md. 631 , ³⁷³ 642 n. 7, 516 A.2d 586 , 591 n. 7 (1986). The latter two cases involved the rule, established in Maryland in Jennings v. Government Employees Ins.

Co., 302 Md. 352 , 488 A.2d 166 (1985), that the household exclusion is invalid because it conflicts with the public policy expressed in the compulsory automobile liability insurance statute. The Oldenburg court struck down a regulatory exclusion despite the absence of any statute or regulation requiring savings and loan associations insured by FSLIC to carry D & 0 coverage, or to keep such coverage available for a conservator or receiver as a source of recovery for claims made by the association after insolvency. The second reason in Oldenburg was based on the duties of conservators and receivers. The court emphasized 12 U.S.C. § 1729 (d) (1935) under which FSLIC, in the liquidation of an insured institution, has the power “ ‘to carry on the business of and to collect all obligations to the insured institutions____ 671 F.Supp. at 723 .

Of course, where the contract of insurance excludes from coverage the particular claim made, there is no obligation of the insurer to the insured institution, and there is nothing for the receiver to collect under the policy. On the other hand there are decisions that have upheld the regulatory exclusion against public policy challenges by regulatory agencies. Continental Casualty Co. v. Allen, 710 F.Supp. 1088 , pointed out that Oldenburg’s reliance on statutorily required minimum automobile insurance was inapplicable to optional D & 0 coverage for financial institutions. An analysis of the public policy underpinnings of Oldenburg is found in Gary v. American Casualty Co., 753 F.Supp. 1547 .

Requiring, as a matter of judicially recognized public policy, that the regulatory agency has the same rights under a D & 0 policy as the association was said to miss the mark because in that case, as here, an insured vs. insured exclusion denied coverage to directors and officers ³⁷⁴ who were sued by their own institution. 7 We believe that this reason simply shifts the ground of the battle over interpretation and public policy to a different exclusion. Secondly, the Gary court said that the amount paid to insured depositors is not affected by the collectability of the recovery against defendant directors and officers. With respect to MDIF, the same is true. As the opinion of the Court of Special Appeals in this case bluntly makes plain, the public policy that was applied in the instant matter has to do with taxpayers.

The third reason given in Gary is that, if the regulatory exclusion seriously hampers the regulatory agency from carrying out its duties, “then a bank’s failure to obtain directors’ and officers’ liability insurance would also violate public policy to the same extent because in that instance the FDIC would also have to look solely to the assets of the directors and officers to collect any judgment against them for breach of their statutory and common law duties. Yet there is no statutory or regulatory requirement that a bank ... obtain or maintain officers’ and directors’ liability insurance.” Id. at 1553 . American Casualty Co. v. Baker, supra, also sustained the regulatory exclusion. That decision relied on Muschany v. United States, 324 U.S. 49 , 65 S.Ct. 442 , 89 L.Ed. 744 (1945), where the Court said: ³⁷⁵ “Public policy is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests.

As the term ‘public policy’ is vague, there must be found definite indications in the law of the sovereignty to justify the invalidation of a contract as contrary to that policy.” Id. at 66 , 65 S.Ct. at 451 , 89 L.Ed. at 756 (citation omitted). Baker found no such definite indications in the statutes and regulations pertaining to the resolution of the affairs of insolvent financial institutions by regulatory and insuring governmental agencies. The Muschany approach to public policy was also applied by the Sixth Circuit in Federal Deposit Ins. Corp. v. Aetna Casualty & Sur.

Co., 903 F.2d 1073 (6th Cir.1990), in sustaining the provision of a fidelity bond under which the bond terminated upon take over of the insolvent insured institution by federal regulators. The court expressly rejected the reasoning of the Eastern District of Tennessee, within that circuit, in Federal Sav. & Loan Ins. Corp. v. Aetna Casualty & Sur. Co., 701 F.Supp. 1357 , discussed above. 8 In addition, recent unreported decisions have rejected FDIC’s public policy contention.

See Fidelity & Deposit Co. v. Corner, Civil No. H-89-0872 (S.D.Tex. May 31, 1991); St. Paul Fire & Marine Ins. Co. v. Federal Deposit Ins. Corp., 765 F.Supp. 538 (D.Minn.1991); Powell v. American ³⁷⁶ Casualty Co., No. CIV-90-897-W, 1991 U.S.Dist.

LEXIS 9910 (W.D.Okla. Feb. 26, 1991). This Court’s method of determining whether a contractual provision is contrary to public policy is not dissimilar to the analysis in the cases holding that the regulatory exclusion does not contravene federal public policy. This Court was presented with the contention that a liability policy’s coverage provision, which in terms embraced an award of punitive damages, was unenforceable on public policy grounds in First Nat’l Bank of St. Mary’s v. Fidelity & Deposit Co., 283 Md. 228 , 389 A.2d 359 (1978).

We there quoted from Patton v. United States, 281 U.S. 276, 306 , 50 S.Ct. 253, 261 , 74 L.Ed. 854, 867 (1930), the following: “ ‘The truth is that the theory of public policy embodies a doctrine of vague and variable quality, and, unless deducible in the given circumstances from constitutional or statutory provisions, should be accepted as the basis of a judicial determination, if at all, only with the utmost circumspection. The public policy of one generation may not, under changed conditions, be the public policy of another.’ ” 283 Md. at 239 , 389 A.2d at 365 . This Court reviewed the differing opinions in the case law on the issue and evaluated the rationale. We noted that insuring against the discretionary penalty of double workers’ compensation where a minor was injured was statutorily prohibited, but that there was no comparable prohibition against insurance for punitive damages.

We considered the practical implications, particularly on owners of small businesses, of a judicially recognized public policy invalidating coverage against punitive damages. This Court concluded that, absent a General Assembly pronouncement on the subject, the coverage was enforceable. 283 Md. at 243 , 389 A.2d at 367 . Here, the validity vel non of the regulatory exclusion has generated a difference of opinion in the cases, but we find the rationale sustaining the exclusion to be more per ³⁷⁷ suasive. There was and is no Maryland statute requiring a state chartered savings and loan association to maintain D & 0 insurance, similar to the mandatory coverages for automobiles registered in this State.

See Md.Code (1977, 1987 Repl.Vol.), § 17-103 of the Transportation Article. There is no statute which prohibits exclusion of D & 0 coverage for claims made against an officer or director by a regulatory agency as receiver for an association. In contrast, in the field of liability coverages, the General Assembly has both required provisions to be inserted in policies and prohibited certain other provisions, when it concluded public policy so required. See Md.Code (1957, 1991 Repl.

Vol.), Art. 48A, §§ 480 through 482C. 9 The statutes on which MDIF and the Court of Special Appeals relied are basically Md.Code (1980, 1986 Repl.Vol.), Title 9, Subtitle 7, and Title 10 of the Financial Institutions Article (FI). They deal with conservatorships and receiver-ships of savings and loan associations and with the creation of, and duties imposed on, MDIF. In general, these are the statutes enacted or modified at the special sessions of the General Assembly in 1985 to address the savings and loan crisis in this State. Particularly impressive to the Court of Special Appeals was MDIF’s power under FI § 9-708(d), “as receiver, [to] marshall and collect the assets and exercise all of the powers necessary to liquidate the business affairs of a failed savings and loan association.” Find, 82 Md.App. at 482 , 572 A.2d at 1097 .

Here, before MDIF can ³⁷⁸ distribute as assets of FMSL the amounts claimed against ACCO by the assigning directors, MDIF must demonstrate that ACCO is liable on the policy. The MDIF statutes do contain a declaration of public policy, but it points away from the direction in which MDIF would have us go. FI § 10-116 declares: “It is the policy of this State that funds will be appropriated to [MDIF] to the extent necessary to protect holders of savings accounts in member associations, and to enable [MDIF] to meet its obligations under a hardship withdrawal plan or partial distribution of assets.” To invalidate a contractual provision based on statutorily based public policy, it is not necessary that the statute in terms prohibit the provision. The lesser the relationship becomes, however, between a statute and a contractual provision, the greater is the reluctance of this Court to invalidate the provision on the basis of the public policy embraced in statute.

In Maryland-Nat’l Capital Park & Planning Comm’n v. Washington Nat’l Arena, 282 Md. 588 , 386 A.2d 1216 (1978), a circuit court had invalidated the arena's covenant in a contract with the commission not to contest the taxability of the improvements on the arena’s realty under the property tax system. The circuit court considered the covenant contrary to public policy, because the taxpayer relinquished the statutory right of appeal from real property assessments. This Court rejected that view, saying: “Fearing the disruptive effect that invocation of the highly elusive public policy principle would likely exert on the stability of commercial and contractual relations, Maryland courts have been hesitant to strike down voluntary bargains on public policy grounds, doing so only in those cases where the challenged agreement is patently offensive to the public good, that is, where ‘the common sense of the entire community would ... pronounce it’ invalid. This reluctance on the part of the judiciary to nullify contractual arrangements on public policy grounds also serves to protect the public interest in having individuals ³⁷⁹ exercise broad powers to structure their own affairs by making legally enforceable promises, a concept which lies at the heart of the freedom of contract principle.” Id. at 606 , 386 A.2d at 1228-29 (citations omitted).

To have held that the policy providing administrative appeals and judicial review overrode the arena’s covenant would also have been to accept a principle that would have jeopardized many of the contractual mechanisms for alternate dispute resolution. In the instant matter MDIF’s standing to sue ACCO rests on the assignment from the judgment debtors, and only on that assignment, because FMSL in receivership will not, as a prelude to obtaining indemnification from ACCO, pay any part of the judgments which MDIF obtained against FMSL’s directors and officers. Ordinarily, an assignee’s contractual rights are no greater than those of the assignor. When MDIF’s claim against ACCO is viewed as the claim of the assigning directors to have the judgments paid in the underlying action, there is not even arguably a public policy implication.

This highlights that the public policy for which MDIF contends turns on the identity of the party who is seeking the insurance proceeds. Stripped to its essentials, MDIF’s argument is that the taxpayers of Maryland will have to pay any deficit in the insurance fund from which depositors in MSSIC insured, insolvent, Maryland savings and loan associations have been made whole, and that it is socially desirable to reduce that deficit to the maximum extent possible. The citizens of this State, and this Court, certainly endorse that concept in the abstract. But the problem presented here is the clash of that appealing result with the established policy of freedom of contract.

For example, if, in lieu of having taken assignments from the judgment debtors, MDIF sought to garnish policy proceeds in the hands of ACCO, MDIF’s theory would hold that the regulatory exclusion was extinguished, because “public policy” obliterates any contractual defense that stands between MDIF and the goal of obtaining maximum dollars. ³⁸⁰ There is no principled basis on which MDIF’s result legally can be achieved without imperiling all contractual defenses of private persons that are good against creditors from whom the State seeks money. Every statute that places a duty on a public official or public agency to collect funds for the commonweal embodies a public policy that the funds should be collected to the maximum extent possible. That desirable goal does not mean that the Comptroller, for example, on that basis alone, can invalidate a tenancy by the entireties provision in a deed under which an individual, delinquent taxpayer economically holds an interest in realty. Similarly, if the regulatory exclusion is unenforceable because it prevents the State from collecting money, then the $3 million limit of D & 0 coverage in the ACCO policy is likewise invalid, and ACCO would stand with the promise to pay unlimited sums for which the directors and officers are liable.

Consequently, the trial court erred in granting MDIF’s motion for summary judgment to the extent of striking the regulatory exclusion defense as to any claims by MDIF based on the policy in effect for October 1, 1985, to October 1, 1986. This holding will also control, on remand, the validity of the regulatory exclusion defense to the claims by Finci under the 1985-86 policy based on the Seidel action. II Finci’s complaint against ACCO, but not that of MDIF, contains two theories of the case as to which the regulatory exclusion is not defensive. Finci alleges that from the expiration of the policy ending October 1, 1985, through November 30, 1985, ACCO insured FMSL officials for D & 0 liability by a binder which continued in effect the coverage contained in the policy which, in terms, expired October 1, 1985.

According to these allegations there was a period of ten or eleven days while MDIF was conservator of FMSL during which the regulatory exclusion was not in effect. Finci further alleges that, during that period, “coverage circumstances arose which indicated that a claim for a ³⁸¹ wrongful act might be made,” that ACCO “had knowledge thereof,” and that, “[although written notice