RULING

LITTLE, District Judge.

The issues before the court on this motion and cross-motion for summary judgment concern the requirement of notice under a claims-made directors and officers' liability insurance policy ("D O policy"). The movant insurance company, Fidelity and Deposit Company of Maryland ("F D"), asserts that the insured directors and officers failed to comply with the notice requirement of the D O policy. Therefore, F D concludes that it is excused from all liability for the insureds' alleged wrongdoing and it should be dismissed as a party defendant in this suit. The opponent, Federal Deposit Insurance Corporation ("FDIC"), disputes F D's contention that the insureds failed to give the requisite notice, but asserts that even if the insureds did not adequately perform their contractual obligations, F D remains liable for the insureds' wrongdoing under the Louisiana Direct Action Statute. The FDIC thus concludes that summary judgment should appropriately be granted in its favor. The facts are stipulated. For the reasons that follow, this court GRANTS F D's motion, DENIES the FDIC's cross-motion, and DISMISSES F D as a party defendant.

I.

In August 1985, F D issued a claims-made D O policy to First Citizens Banc-shares Corporation, the holding company for First Bank of Pineville, Louisiana ("First Bank" or "the bank"). The policy covered the period from 7 August 1985 to 7 August 1986.

The policy insured First Bank's directors and officers against liability for: (i) actual claims asserted against them during the policy term, and (ii) "wrongful acts" which they committed during the policy term, but which gave rise to claims asserted against them after the policy terminated (hereinafter "potential claims"). The policy required, as a condition precedent to coverage, that the directors and officers (or the bank) give F D written notice of claims, "as soon as practicable," but not later than the date the policy terminated. In the event F D canceled or refused to renew the policy, the directors and officers (or the bank) could elect to extend the time for communicating notice of claims beyond the termination date; however, coverage was limited to wrongful acts that occurred prior to the policy's termination date.

Upon issuing the D O policy, F D implemented procedures to monitor First Bank's financial performance and continued eligibility for coverage. Throughout the policy term, F D kept a close watch on (i) the bank's capital to asset ratio and (ii) the aggregate value of the bank's past-due loans. As the policy term neared its conclusion, these indicia of financial stability deteriorated. The bank's capital to asset ratio fell from 6.1% in June 1985 to 5.8% in August 1986. Past due loans increased from $252,000 in March 1985 to $989,691 in May 1986. Despite these signs of malady, however, when the policy term expired F D authorized a one-year extension or "renewal" of the bank's D O liability insurance-subject to the addition of certain endorsements and exclusions of coverage not present in the original policy.

In addition to the standard exclusions listed in the bank's original D O policy, the renewal policy excluded coverage for: loans to insiders, adversely classified loans, and regulatory noncompliance. In correspondence with the bank's insurance agent R.W. Graham (a member of the bank's board of directors and a defendant in this suit), F D explained that the additional exclusions were necessary to offset the added risk presented by the bank's deteriorated financial condition. Graham forwarded this information to the bank's president, defendant John Marzullo, and urged him to review the additional exclusions carefully. Marzullo directed the bank to pay the renewal premium in accordance with the policy terms.

Meanwhile, as F D was evaluating the bank's eligibility for insurance coverage, the FDIC was examining the bank's lending practices. In October 1986, the FDIC issued a report criticizing the bank's officers, for their "liberal lending philosophy," and the bank's directors, for their failure to adequately supervise the lending function. The report noted the bank's failure to maintain the regulatory minimum capital to asset ratio (6.0%) and threatened civil penalties of $1,000 per day for continued violations. The FDIC held a meeting with the bank's directors and officers in December 1986 to discuss this report and informed them that the FDIC considered the bank a "problem institution" and that the FDIC would probably pursue a cease and desist action to obtain regulatory compliance.

Despite the pressure applied by the FDIC, First Bank's wounds continued to bleed. As of 31 December 1986, the bank reported a capital to asset ratio of 5.3% and past due loans of $3,500,000. A bank rating service downgraded its assessment of the bank. F D then canceled the bank's D O policy. By registered mail dated 26 February 1987, F D's underwriter informed the bank's designated agent (defendant Marzullo) that the bank's D O insurance coverage would cease, effective 2 April 1987. At Marzullo's instance, the bank exercised the "discovery" option to extend the time for communicating notice of claims until 1 July 1987.

On 31 March 1987, Marzullo sent a letter to F D stating that First Bank had become aware of "an act, error or omission, which may subsequently give rise to a claim being made against the directors and officers . . . for a specified wrongful act." The letter did not describe the underlying "specified wrongful act" upon which potential claims were based; however, it identified the source of such claims as the FDIC. The letter stated, "the [b]ank has received written and oral notice . . . that it is the [FDIC's] intention to hold the directors and officers . . . responsible for any wrongful acts noted or in connection with [an examination performed by the FDIC]."

On 21 May 1987, F D responded to Marzullo's letter by informing him that the terms of the D O policies required that he provide specific information regarding "wrongful acts" that may give rise to claims being asserted against the bank's directors and officers. F D requested that Marzullo promptly inform it of the nature of any wrongful acts that may subsequently give rise to a claim, or advise it of any notice Marzullo had received that the directors and officers would be held liable for wrongdoing. Marzullo did not respond, and the "discovery period" expired on 1 July 1987 without further communication between First Bank and F D.

Following the expiration of the discovery period, First Bank renewed its relationship with the FDIC. On 13 July 1987, the bank's directors and officers met with the FDIC and entered into a "corrective action resolution" in an attempt to bring the bank into regulatory compliance. On 11 March 1988, however, the FDIC conducted an examination of First Bank and later issued a report critical of the bank's directors and officers. On 7 July 1989, the FDIC conducted another examination of the bank and issued another report criticizing the bank's directors and officers. On 10 November 1989, FDIC conducted a final examination of the bank and, based on its findings, recommended that the bank be closed.

On 8 December 1989, the Office of the Comptroller of the Currency declared the bank insolvent and appointed the FDIC as receiver. The FDIC, as receiver, then assigned certain bank assets — including the bank's right to assert claims against its directors and officers — to the FDIC in its corporate capacity. On 7 December 1992, the FDIC filed the present suit against certain former directors and officers of First Bank (and against F D pursuant to the Louisiana Direct Action Statute). In its complaint, the FDIC alleged that the named directors and officers were grossly negligent and breached their fiduciary duties, causing First Bank to sustain losses in excess of $5 million.

On 10 May 1993, F D moved for summary judgment. F D alleged that the insureds (the defendant directors and officers and the bank) failed to give timely notice of claims as required by the D O policy. Thus, F D concluded that the FDIC's claims, as derived from the bank's rights under the policies, were precluded as a matter of law. The FDIC opposed F D's motion and filed a cross-motion for summary judgment, alleging that President Marzullo's 31 March 1987 letter was sufficient to put F D on notice of a potential claim against the defendant directors and officers. Alternatively, the FDIC alleged that it stood in the shoes of an "injured party" under the Louisiana Direct Action Statute, and as such, it could proceed against F D despite any notice deficiency.

II.

Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). The underlying facts are not in dispute. Thus, the court is charged with determining, as a matter of law: (i) whether Marzullo's letter was sufficient to invoke coverage under the F D policy, and (ii) if not, whether failure to give notice of claims was excused under the Louisiana Direct Action Statute. See Guaranty Nat'l Ins. Co. v. North River Ins. Co., 909 F.2d 133, 135 (5th Cir. 1990). Louisiana substantive law guides the court's determination of these issues. See Old Republic Ins. Co. v. Comprehensive Health Care Assoc., 2 F.3d 105, 107 (5th Cir. 1993).

A.

Under Louisiana law, "insurance contracts are to be construed as a whole, and one portion thereof should not be construed separately at the expense of disregarding another." Gulf Island, IV v. Blue Streak Marine, Inc., 940 F.2d 948, 952 (5th Cir. 1991) (quotation marks, citation omitted). Moreover, such contracts must be enforced as written so long as the terms are clear and unambiguous and do not lead to absurd consequences. La.Civ. Code Ann. art. 2046 (West 1992); Pareti v. Sentry Indem. Co., 536 So.2d 417, 420 (La. 1988); Oil Well Supply Co. v. New York Life Ins. Co., 214 La. 772, 38 So.2d 777, 780 (1949).

Under the express terms of the D O policy, notice of actual or potential claims was a condition precedent to the insurer's obligation under the contract. The policy insured against claims which the insured discovered and reported to the insurer during the policy term; notice served to demonstrate the insured's discovery of claims. See McCullough v. Fidelity Deposit Co., 2 F.3d 110, 112 (5th Cir. 1993) (notice "triggers" coverage in a claims-made policy); FDIC v. Barham, 995 F.2d 600, 604 n. 9 (5th Cir. 1993) ("notice of a claim or potential claim defines coverage under a claims-made policy"). As such, the policy's notice provisions must be strictly construed to ensure that the insured could not, through a broadly phrased "notice of claims," unilaterally expand the insurer's risk beyond that agreed in the contract of insurance. Barham, 995 F.2d at 604 n. 9; see also McCullough, 2 F.3d at 112.

The FDIC asserts that defendant Marzullo's 31 March 1987 letter constituted sufficient notice of a potential claim to invoke coverage under the D O policy. Marzullo's letter, however, did no more than recite the language of the policy's notice provision and identify the FDIC as the source of potential claims. The letter said nothing of: the types of practices alleged to constitute "wrongful acts," the agents, officers, or directors alleged to be involved in wrongdoing, or the time period during which the allegedly wrongful acts took place.

Failure to describe the basis of a claim in greater detail precludes coverage under the policy. See McCullough, 2 F.3d at 112; Barham, 995 F.2d at 604-05. The insured simply may not, through rote incantation of the policy terms, gain coverage under a claims-made policy for undiscovered, wrongful acts that in some sense "occurred" during the policy term. The court concludes that Marzullo's letter was insufficient notice of claims to invoke coverage under the D O policy.

B.

The Direct Action Statute embodies the notion that liability insurance in Louisiana is issued for the protection of the public as well as the insured. Quinlan v. Liberty Bank Trust Co., 575 So.2d 336, 339 (La. 1990). The Statute applies to every contract of liability insurance issued or delivered within the State and grants injured parties a separate and distinct cause of action against an injuring party's insurer. Davies v. Consolidated Underwriters, 6 So.2d 351, 357 (La. 1942); Quinlan, 575 So.2d at 352-53. This right of action arises at the time of injury, and once vested, cannot be limited by restrictive policy language. Holtzclaw v. Falco, Inc., 355 So.2d 1279, 1282 (La. 1977); see also Lumbermen's Mut. Casualty Co. v. Elbert, 348 U.S. 48, 51, 75 S.Ct. 151, 154, 99 L.Ed. 59 (1954) (Under the Louisiana Direct Action Statute, "the insurer is severely restricted in advancing technical defenses based upon the terms of policy.").

In the case of the typical, "occurrence" liability insurance policy, this means that the insurer cannot — absent a showing of prejudice — raise the insured's failure to give notice of accident or injury as a defense to the insurer's direct liability to the injured party. Auster Oil Gas, Inc. v. Stream, 891 F.2d 570, 577 (5th Cir. 1990); MGIC Indem. Corp. v. Central Bank, 838 F.2d 1382, 1387 (5th Cir. 1988). In a claims-made policy, however, the exact peril insured against is the insured's discovery and notice of claims. Livingston Parish Sch. Bd. v. Fireman's Fund Am. Ins. Co., 282 So.2d 478, 481 (La. 1973). Notice to the insurer, under such a policy, is not merely a "technical defense" to an injured party's claims, it defines the insurer's obligation, and thus the injured party's rights, under the law. See Barham, 995 F.2d at 604 n. 9; see also Livingston Parish, 282 So.2d at 481-82; Pareti, 536 So.2d at 420.

The Direct Action Statute states that actions brought under its terms are subject to "all of the lawful conditions of the policy or contract and the defenses which could be urged by the insurer to a direct action brought by the insured, provided the terms and conditions of such policy or contract are not in violation of the laws of this state." La.Rev.Stat.Ann. § 22:655(C). Insurance policies which limit coverage to claims made and reported to the insurer during the policy term are fully enforceable under Louisiana law. Livingston Parish, 282 So.2d at 481. Equitable considerations that may limit an insurer's reliance on contractual "fine print" do not hold sway in a case involving sophisticated consumers, fully informed of policy limitations. MGIC, 838 F.2d at 1387; see also FDIC v. Barham, 794 F. Supp. 187, 193 (W.D.La. 1991), aff'd on other grounds, 995 F.2d 600 (5th Cir. 1993).

An insured's failure to give adequate notice of claims under a claims-made policy therefore precludes the injured party's right of direct action. See Bank of Louisiana v. Mmahat, Duffy, Opotowsky Walker, 608 So.2d 218 (La.App. 1992), cert. denied, 613 So.2d 994 (La. 1993); Barham, 794 F. Supp. at 193, aff'd on other grounds, 995 F.2d 600 (5th Cir. 1993); see also MGIC, 838 F.2d at 1387 ("Louisiana cases involving `condition precedent' or similar language support the proposition that no recovery can be claimed where timely notice has not been given."); cf. FDIC v. Mijalis, 800 F. Supp. 397 (W.D.La. 1992). The court thus concludes that the bank's and the directors and officers' failure to comply with the D O policy's notice provisions precludes the FDIC's right of action against F D in this case.

III.