Federal Deposit Insurance Corporation v. Great American Insurance Company

09-1052-cv Federal Deposit Insurance Corporation v. Great American Insurance Company 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 _______________________ 4 5 August Term 2009 6 7 (Argued: November 16, 2009 Decided: June 7, 2010) 8 9 Docket No. 09-1052-cv 10 _______________________ 11 12 FEDERAL DEPOSIT INSURANCE CORPORATION, 13 AS RECEIVER OF CONNECTICUT BANK OF COMMERCE, 14 15 Plaintiff-Counter-Defendant-Appellant, 16 17 -against- 18 19 GREAT AMERICAN INSURANCE COMPANY, 20 21 Defendant-Counterclaimant-Appellee. 22 23 24 Before: POOLER and WESLEY, Circuit Judges, and KEENAN, 25 District Judge.* 26 _______________________ 27 Appeal from an order of the United States District Court for 28 the District of Connecticut (Bryant, J.) entered on February 13, 29 2009, granting summary judgment to Defendant in an action for 30 breach of an insurance contract, and finding that Defendant was 31 entitled to rescind a fidelity bond on the basis of material 32 misrepresentations contained in Plaintiff’s application for 33 insurance. 34 AFFIRMED. * The Honorable John F. Keenan, United States District Judge for the Southern District of New York, sitting by designation. 1 _______________________ 2 3 KYLE M. KEEGAN, CHRISTOPHER D. KIESEL, Roy, 4 Kiesel, Keegan & DiNicola, PLC, Baton Rouge, 5 LA; JOHN B. HUGHES, Assistant United States 6 Attorney, for NORA R. DANNEHY, Acting United 7 States Attorney for the District of 8 Connecticut; LAWRENCE H. RICHMOND, JACLYN C. 9 TANER, Federal Deposit Insurance Corporation, 10 Arlington, VA, for Plaintiff-Counter- 11 Defendant-Appellant. 12 13 F. JOSEPH NEALON (Jennifer E. Lattimore on 14 the brief), Eckert Seamans Cherin & Mellott, 15 LLC, Washington, DC; MARGARET LITTLE, Little 16 & Little, Stratford, CT for Defendant- 17 Counterclaimant-Appellee. 18 _______________________ 19 20 KEENAN, District Judge: 21 I. BACKGROUND 22 The following facts are not in dispute. In 1999, Connecticut 23 Bank of Commerce (“CBC”), having assets of approximately $89 24 million, entered into a Purchase and Assumption Agreement (the “P&A 25 Agreement”) to acquire MTB Bank (“MTB”), a New York bank with 26 approximately $299 million in assets. CBC purchased substantially 27 all of MTB’s assets, including its factoring unit. This 28 transaction required Federal Deposit Insurance Corporation (“FDIC”) 29 approval, which MTB sought on August 4, 1999 and obtained on 30 February 5, 2000. At the time MTB and CBC entered into the P&A 31 Agreement, MTB had a 15-year insurance relationship with Lloyd’s of 2 1 London and was covered by a Lloyd’s fidelity bond set to expire on 2 June 30, 2000. 3 Several events which occurred prior to the closing of the P&A 4 Agreement bear on the contract dispute at hand. First, in 5 September of 1999, MTB management discovered that one or more of 6 MTB’s agents advanced $950,000 based on fraudulent invoices under 7 a factoring agreement with a company called Harmony Designs, Inc. 8 MTB submitted a claim for indemnity under the Lloyd’s fidelity 9 bond. However, MTB eventually settled with Harmony Designs for an 10 amount which reduced its loss below the deductible of the Lloyd’s 11 bond; therefore MTB never recovered payment from Lloyd’s for this 12 claim. Additionally, in March 2000, the president and several 13 other officers of MTB were indicted in an alleged conspiracy 14 involving the importation of Argentinian minerals. MTB submitted 15 a claim to Lloyd’s for its losses relating to the conduct resulting 16 in the indictments. On March 31, 2000, the P&A Agreement was 17 finalized. 18 After the completion of the P&A Agreement, CBC was added to 19 MTB’s insurance policy with Lloyd’s. As the bond expired on June 20 30, 2000, CBC began to seek renewal of the Lloyd’s policy. 21 However, Lloyd’s was concerned about the two claims that MTB had 22 made, and it refused to renew coverage unless CBC representatives 23 went to Lloyds’ headquarters in London for a meeting. No one from 24 CBC went to London. Two weeks prior to the bond’s expiration, CBC 3 1 requested a 30-day extension of coverage, but Lloyd’s declined to 2 offer any extension beyond the June 30, 2000 expiration date. 3 CBC then sought the assistance of an insurance broker to 4 procure fidelity insurance to replace the Lloyd’s policy. CBC’s 5 Chief Financial Officer, Barbara Van Bergen (“Van Bergen”), filled 6 out an application for insurance from Reliance Insurance Company 7 (the “Reliance application”) on behalf of CBC. Van Bergen signed 8 the Reliance application on June 19, 2000 and gave it to CBC’s 9 insurance broker, who, following common practice in the industry, 10 submitted it to multiple insurers to receive quotes. On June 30, 11 2000, CBC’s insurance broker submitted the Reliance application to 12 Great American Insurance Company (“GAIC”). 13 The application contained the following questions: 14 List all losses sustained during the past three years, 15 whether reimbursed or not; 16 17 [Does CBC have] any knowledge of or information 18 concerning any occurrence or circumstance whatsoever 19 which might materially affect this [insurance] proposal?; 20 21 Has any insurance of this nature been declined or 22 cancelled during the past three years? 23 24 Van Bergen on behalf of CBC answered “None,” “No,” and “No,” to 25 these three questions, respectively. 26 The Reliance application included the following affirmance 27 above the signature line: “The Applicant represents that the 28 information furnished in this application is complete, true and 4 1 correct. Any misrepresentation, omission, concealment, or 2 incorrect statement of a material fact, in this application or 3 otherwise, shall be grounds for the rescission of any bond issued 4 in reliance upon such information.” 5 In late June, GAIC issued a quote for fidelity insurance to 6 CBC on the basis of information contained in the Reliance 7 application. On July 19, 2000, GAIC issued a fidelity bond to CBC 8 with coverage retroactive to June 30, 2000. After GAIC bound 9 coverage, CBC additionally completed a GAIC insurance application. 10 Just as she did in the Reliance application, Van Bergen stated in 11 the GAIC application that CBC had not sustained any losses and no 12 insurance had been declined or cancelled in the prior three years; 13 however, the GAIC application did not contain a question regarding 14 any knowledge or information which might materially affect the 15 insurance proposal. The GAIC fidelity bond states that “[t]he 16 Insured represents that the information furnished in the 17 application for this bond is complete, true and correct. Such 18 application constitutes part of this bond. Any misrepresentation, 19 omission, concealment or any incorrect statement of a material 20 fact, in the application or otherwise, shall be grounds for the 21 rescission of this bond.” The fidelity bond further specified that 22 GAIC issued coverage “in reliance upon all statements made and 23 information furnished to the Underwriter by the Insured in applying 24 for this bond.” 5 1 When the Reliance application was completed and submitted, CBC 2 knew about both the Harmony Designs claim and the indictments of 3 MTB’s officers. CBC also knew that Lloyd’s had declined to renew 4 or extend coverage of its fidelity bond. The GAIC agent who 5 reviewed CBC’s application testified that GAIC would not have 6 issued the fidelity bond had CBC disclosed this information. 7 CBC went into FDIC receivership on June 26, 2002. On January 8 18, 2006, the FDIC, standing in the shoes of CBC, brought this suit 9 claiming that GAIC breached its contractual duty by dishonoring 10 claims for coverage under the fidelity bond for losses sustained by 11 CBC related to a loan scheme that was used to fund the acquisition 12 of MTB. The district court granted summary judgment to GAIC on the 13 ground that it properly rescinded the fidelity bond due to 14 omissions and misstatements made by CBC in its application for the 15 fidelity bond. 16 II. DISCUSSION 17 A. Standard of Review 18 We review de novo the district court’s grant of summary 19 judgment. N.Y. State Rest. Ass’n v. N.Y. City Bd. of Health, 556 20 F.3d 114, 122 (2d Cir. 2009). Summary judgment is appropriate 21 where “the pleadings, the discovery and disclosure materials on 22 file, and any affidavits show that there is no genuine issue as to 23 any material fact and that the movant is entitled to judgment as a 24 matter of law.” Fed. R. Civ. P. 56(c). The moving party bears the 6 1 initial burden of demonstrating “the absence of a genuine issue of 2 material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 3 (1986). Where the moving party meets that burden, the opposing 4 party must come forward with specific evidence demonstrating the 5 existence of a genuine dispute of material fact. Anderson v. 6 Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In determining 7 whether there is a genuine issue as to any material fact, “[t]he 8 evidence of the non-movant is to be believed, and all justifiable 9 inferences are to be drawn in his favor.” Id. at 255. To defeat 10 a summary judgment motion, the non-moving party “must do more than 11 simply show that there is some metaphysical doubt as to the 12 material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 13 475 U.S. 574, 586 (1986), and “may not rely on conclusory 14 allegations or unsubstantiated speculation,” Scotto v. Almenas, 143 15 F.3d 105, 114 (2d Cir. 1998). Where it is clear that no rational 16 finder of fact “could find in favor of the nonmoving party because 17 the evidence to support its case is so slight,” summary judgment 18 should be granted. Gallo v. Prudential Residential Servs., Ltd. 19 P’ship, 22 F.3d 1219, 1224 (2d Cir. 1994). 20 B. Section 1823(e) 21 The FDIC argues that 12 U.S.C. § 1823(e), which protects the 22 FDIC from defenses not apparent on the face of an asset it acquires 23 as receiver of a failed bank, bars GAIC’s misrepresentation 24 defense. In pertinent part, Section 1823(e) reads as follows: 7 1 No agreement which tends to diminish or defeat the 2 interest of the [FDIC] in any asset acquired by it . . 3 . as receiver of any insured depository institution, 4 shall be valid against the [FDIC] unless such 5 agreement- 6 7 (A) is in writing, 8 9 (B) was executed by the depository 10 institution and any person claiming an 11 adverse interest thereunder, including the 12 obligor, contemporaneously with the 13 acquisition of the asset by the depository 14 institution, 15 16 (C) was approved by the board of directors of 17 the depository institution or its loan 18 committee, which approval shall be reflected 19 in the minutes of said board or committee, 20 and 21 22 (D) has been, continuously, from the time of 23 its execution, an official record of the 24 depository institution. 25 26 The FDIC contends that the district court erred by limiting 27 the statute’s definition of “asset” to exclude fidelity bonds, 28 and thus the rescission clause of the bond should not apply. Two 29 Courts of Appeals previously have decided this issue: the Sixth 30 Circuit, which held similarly to the district court that fidelity 31 bonds are not assets under the purview of Section 1823(e)(1), and 32 the Tenth Circuit, which held that a fidelity bond is an “asset.” 33 This Court has never decided whether a fidelity bond is an asset 34 for the purposes of Section 1823(e)(1), although, as discussed in 35 detail below, that is not necessarily determinative of this 36 appeal. Nonetheless, we believe the district court erred in 37 ruling that the fidelity bond is not an “asset.” 8 1 We agree with the Tenth Circuit’s holding in Federal Deposit 2 Insurance Corporation v. Oldenburg, 34 F.3d 1529 (10th Cir. 3 1994), that a fidelity bond qualifies as an “asset” for the 4 purposes of Section 1823(e). Citing Eighth Circuit precedent, 5 that court held that if a statute’s plain language is unambiguous 6 - as is Section 1823(e) - it must apply that patent meaning 7 unless the result would be “demonstrably at odds with the 8 intentions of its drafters.” Id. at 1552 (citing N. Ark. Med. 9 Ctr. v. Barrett, 962 F.2d 780, 787 (8th Cir. 1992)). 10 We do not believe that applying Section 1823(e) to a 11 fidelity bond is beyond the intent of Congress. As the Tenth 12 Circuit found: 13 Federal regulators expressly rely on a bank’s fidelity 14 coverage as one factor in determining whether a bank is 15 financially capable of continuing its operations. 16 While it is true that insurance contracts, due to their 17 conditional nature, are not as prone to instantaneous 18 assessment as promissory notes, it does not logically 19 follow that unrecorded or collateral agreements which 20 may diminish or defeat the interest of the Corporation 21 in fidelity bonds should therefore be exempt from 22 coverage under the statute. Despite the conditional 23 nature of some insurance contracts, the FDIC’s 24 evaluation of a bank’s fidelity bonds both before and 25 during the course of a purchase and assumption 26 transaction is certainly facilitated if the acquired 27 bonds are not subject to side agreements or collateral 28 conditions completely beyond the scope of the bonds. 29 Banking examiners who inspect and evaluate the bank 30 records reasonably expect the records of regular 31 banking transactions to reflect all of the rights and 32 liabilities of the bank regarding such regular banking 33 transactions. This proposition is as applicable to 34 fidelity bonds as it is to promissory notes and 35 negotiable instruments. 36 37 Id. at 1553-54 (internal quotation marks and citations omitted). 9 1 We do not accept the position of the Sixth Circuit as set 2 forth in Federal Deposit Insurance Corporation v. Aetna Casualty 3 & Surety Company, 947 F.2d 196 (6th Cir. 1991). Congress made no 4 real effort to limit the term “asset” in the statute. Congress 5 knew, when passing 12 U.S.C. § 1823(e), that the FDIC as receiver 6 acquires all of a failed banks rights, not just traditional 7 banking assets. Moreover, despite a fidelity bond’s conditional 8 nature, this interpretation is most consistent with our previous 9 holding that the term “asset” in Section 1823(e) “should be 10 interpreted broadly.” Inn at Saratoga Assocs. v. Fed. Deposit 11 Ins. Corp., 60 F.3d 78, 81-82 (2d Cir. 1995). 12 Even though we consider the fidelity bond to be an asset 13 under 12 U.S.C. § 1823(e), this provision exists to bar “secret” 14 defenses which would diminish the FDIC’s interest in a failed 15 bank’s assets. See Timberland Design, Inc. v. First Serv. Bank 16 for Sav., 932 F.2d 46, 49-50 (1st Cir. 1991); Howell v. Cont’l 17 Credit Corp., 655 F.2d 743, 746 (7th Cir. 1981); see also Fed. 18 Sav. & Loan Ins. Corp. v. Two Rivers Assocs., Inc., 880 F.2d 19 1267, 1275 (11th Cir. 1989) (FSLIC acting as receiver). Defenses 20 raised by the bond itself may prevent recovery by the FDIC. It 21 is GAIC’s position that rescission of the fidelity bond was in 22 accord with its terms allowing such action on the basis of a 23 “misrepresentation, omission, concealment or any incorrect 24 statement of a material fact, in the application or otherwise.” 25 As the grounds for rescission were plainly stated on the face of 10 1 the bond, there is nothing secret about GAIC’s misrepresentation 2 defense, and no cause to apply Section 1823(e). To honor the 3 FDIC’s position and allow it to recover despite 4 misrepresentations in CBC’s insurance application would be to 5 strike the rescission clause from the bond. 6 The FDIC theorizes that the district court confused the 7 Reliance application with GAIC’s own insurance application such 8 that, in allowing GAIC to rescind the fidelity bond on the basis 9 of statements in the Reliance application, the court applied a 10 defense beyond the face of the bond. We find no such error, 11 first and foremost, because the fidelity bond itself specified 12 that “any misrepresentation, omission, concealment or any 13 incorrect statement of a material fact, in the application or 14 otherwise, shall be grounds for the rescission of this bond.” 15 (emphasis added). There is no basis for the FDIC’s argument that 16 the fidelity bond incorporated only GAIC’s own application and 17 not the Reliance application. Provisions in the bond specifying 18 that GAIC relied on “all statements made and information 19 furnished . . . by the Insured in applying for this bond,” and 20 that CBC “represents that the information furnished in the 21 application for this bond is complete, true and correct [and 22 such] application constitutes part of this bond” are not so 23 limiting as the FDIC suggests. In this case, CBC submitted two 24 substantially similar applications, neither of which reported any 25 losses or insurance cancellation in the prior three years. GAIC 11 1 was entitled to consider the Reliance application part of the 2 “information furnished” and “such application” and to rescind the 3 bond based on statements made therein to the extent they were 4 material misrepresentations. 5 C. Grounds for Rescission in the Bond 6 Therefore, the relevant inquiry is whether CBC’s failure to 7 report the Harmony Designs loss, the indictments of MTB officers, 8 and Lloyds’ decision not to renew or extend its fidelity bond 9 were in fact material misrepresentations. Although a single 10 misrepresentation entitles GAIC to rescind the bond, we will 11 consider each of the three statements individually. As did the 12 district court, we borrow general principles of Connecticut 13 insurance law to interpret the terms of the fidelity bond. Under 14 Connecticut law, an insurance policy is voidable by the insurer 15 if the applicant made “[m]aterial representations . . ., relied 16 on by the company, which were untrue, and known by the assured to 17 be untrue when made.” Middlesex Mut. Assurance Co. v. Walsh, 590 18 A.2d 957, 963 (Conn. 1991) (quoting State Bank & Trust Co. v. 19 Conn. Gen. Life Ins. Co., 145 A. 565, 567 (Conn. 1929)) (emphasis 20 omitted). To succeed on a defense of misrepresentation, GAIC as 21 the movant bears the burden of establishing “(1) a 22 misrepresentation (or untrue statement) by the plaintiff which 23 was (2) knowingly made and (3) material to defendant’s decision 24 whether to insure.” Pinette v. Assurance Co. of Am., 52 F.3d 25 407, 409 (2d Cir. 1995). The determination of whether an answer 12 1 in an insurance application is untrue must be made “in light of 2 the question asked.” Walsh, 590 A.2d at 964. Where a question 3 in the application is ambiguously worded and the applicant “could 4 reasonably have understood the question as calling for a 5 particular response, and the response given in accordance with 6 that understanding is not false, the response does not amount to 7 a misrepresentation.” Id. at 965. 8 Additionally, a fact is material if “it would so increase 9 the degree or character of the risk of the insurance as to 10 substantially influence its issuance, or substantially affect the 11 rate of premium.” Pinette, 52 F.3d at 411 (quoting Davis 12 Scofield Co. v. Agric. Ins. Co., 145 A. 38, 40 (Conn. 1929)). 13 “Matters made the subject of special inquiry are deemed 14 conclusively material.” State Bank & Trust Co., 145 A. at 566; 15 see also id. (“Where the representation is contained in an answer 16 to a question contained in the application which is made a part 17 of the policy, the inquiry and answer are tantamount to an 18 agreement that the matter inquired about is material.”). 19 First, we take up CBC’s failure to report the $950,000 20 advanced by MTB agents based on fraudulent invoices under the 21 factoring agreement with Harmony Designs. The Reliance 22 application (as well as the GAIC application) asked whether the 23 applicant had sustained any losses in the prior three years, and 24 CBC replied “None.” We see no ambiguity in the question and no 25 reason to construe it, as Van Bergen allegedly did, to refer to 13 1 losses sustained by CBC but not MTB. At the time she completed 2 the application, the relevant applicant was the newly expanded 3 CBC, a company which included MTB’s factoring business and 4 eventually recouped some of the loss from Harmony Designs. It is 5 undisputed that CBC knew about the Harmony Designs loss when it 6 acquired MTB’s factoring unit, knew that the loss played a role 7 in Lloyds’ decision not to renew or extend its fidelity bond for 8 the CBC-MTB entity, and knew about the loss when it applied for 9 new fidelity coverage from GAIC. Keeping in mind that the 10 application was for insurance that would cover precisely the type 11 of loss which occurred with the Harmony Designs fraud, no 12 reasonable interpretation of the question would lead to the 13 conclusion that “None” was a complete and truthful answer. 14 As prior losses were the subject of specific inquiry, CBC’s 15 response is presumptively material. Moreover, “[c]ommon sense 16 tells us that an applicant’s prior loss history is material to a 17 reasonable insurance company’s decision whether to insure that 18 applicant or determination of the premium.” Pinette, 52 F.3d at 19 411. Consequently, there is no factual issue, and GAIC was 20 entitled to rescind the fidelity bond on the basis of CBC’s 21 material misrepresentation that it had not sustained any losses 22 in the prior three years. 23 Next, we turn to CBC’s failure to disclose the indictments 24 of MTB officers. GAIC argues that this information was relevant 25 to the prompt for reporting losses in the previous three years, 14 1 as well as to a catch-all question which requested “any knowledge 2 of or information concerning any occurrence or circumstance 3 whatsoever which might materially affect” the insurer’s decision 4 to issue fidelity coverage. Again, it is undisputed that CBC was 5 aware of the indictments and resulting losses - for which CBC 6 sought recovery under the Lloyd’s bond - at the time it applied 7 for new fidelity coverage. The FDIC argues that the indictments 8 had no bearing on its insurance risk profile because CBC did not 9 purchase the precious metals business or employ the indicted 10 officers. However, this after-the-fact justification does not 11 diminish the materiality of the disclosures. As we have already 12 established, information about previous losses is presumptively 13 material. It follows that information that losses were incurred 14 under a cloud of criminal suspicion is also material. Moreover, 15 the determination of risk is one properly left to the insurer, 16 not the insured, and the insurer cannot make an accurate risk 17 assessment without full disclosure from the applicant. The very 18 purpose of such broadly worded catch-all questions is to prevent 19 the type of self-selective reporting that occurred here. It must 20 be noted that CBC had specific reason to know that this 21 information would substantially influence a potential insurer’s 22 decision to issue a fidelity bond because Lloyd’s explicitly 23 stated that it was “very concerned at the allegations being made 24 against senior officials of [MTB]” and would not renew its CBC- 25 MTB bond absent a face-to-face meeting to discuss, among other 15 1 things, the indictments. We find no issue of fact that CBC’s 2 failure to report the indictments of MTB officers and resulting 3 losses in the Reliance application constituted a material 4 misrepresentation. 5 Finally, we consider the issue of CBC’s failure to disclose 6 Lloyds’ decision not to renew or extend its fidelity coverage. 7 The Reliance and GAIC applications asked whether insurance of a 8 similar nature had been declined or cancelled in the previous 9 three years, and CBC answered “No.” However, at the time it 10 responded, CBC was aware that Lloyd’s declined to renew its 11 fidelity coverage for the new CBC-MTB entity and it refused to 12 grant CBC a 30-day extension of its expiring coverage. The FDIC 13 argues that CBC walked away from Lloyd’s and not vice versa, thus 14 CBC did not interpret the question to require information 15 regarding coverage it chose not to renew. 16 The FDIC urges a narrow and overly literal reading of the 17 question to include instances where an insurer cancelled a policy 18 prior to its expiration, or rejected a new application, but not 19 those where existing coverage was not renewed or extended. We 20 find no ambiguity, either in the wording of the question or the 21 type of information it intends to solicit. Both terms used in 22 the Reliance application - “declined” or “cancelled” - seek 23 information regarding another company’s unwillingness to insure. 24 Knowledge of Lloyds’ initial reluctance and ultimate refusal to 25 continue its bond would have alerted GAIC to potential red flags, 16 1 prompting a careful review of CBC’s application to accurately 2 appraise the risks to be insured. Although CBC ultimately did 3 not take the necessary steps to renew the Lloyd’s bond, and in 4 that sense “walked away” from its insurer, Lloyd’s made it clear 5 that the only way to obtain continuing coverage would be to 6 attend a meeting in London, and even that meeting could not 7 guarantee renewal. Furthermore, CBC sought a 30-day extension of 8 the CBC-MTB fidelity bond, which Lloyd’s rejected in light of 9 outstanding claims. Lloyds’ actions fall within the scope of the 10 request for information about prior insurance cancellation or 11 declination. As this was a subject of specific inquiry, the 12 information is material. 13 We additionally find that even if we were to agree with the 14 FDIC’s interpretation of the Reliance application, we would 15 nevertheless hold that the information regarding Lloyds’ non- 16 renewal and refusal to extend coverage should have been disclosed 17 in the catch-all question; no reasonable construal of the request 18 for any “information concerning any occurrence or circumstance 19 whatsoever which might materially affect this proposal” would 20 exclude CBC’s negotiations with Lloyd’s. Therefore, CBC’s 21 statement that no coverage had been cancelled or declined was a 22 material misrepresentation for which GAIC was entitled to rescind 23 the fidelity bond. We have considered the FDIC’s other arguments 24 and do not find them persuasive. 25 17 1 III. CONCLUSION 2 For the reasons set forth above, we conclude that, although 3 a fidelity bond is an asset for the purposes of 12 U.S.C. § 4 1823(e), defenses on the face of the bond entitled GAIC to 5 rescind coverage. The district court properly granted summary 6 judgment in favor of Defendant, and its judgment of February 13, 7 2009 is hereby AFFIRMED. 18