Insured V. Insured Exclusion Did Not Bar Suit By
Receiver
Commercial Liability |
Directors & Officers |
Specialty Lines |
Errors & Omissions |
The Federal Deposit Insurance Corporation brought suit against
directors and officers of a bank for which it was acting as a receiver. The
bank's E & O insurer sought summary judgment to enforce the following
"insured v. insured" exclusion to bar coverage to the bank and,
therefore, bar the FDIC claims:
"It is understood and agreed that the Insurer shall not be
liable to make any payment for Loss....which is based upon or attributable to
any claim made against a Director or Officer by another Director or Officer or
by the Institution (the bank)....except for a shareholders derivative action
brought by a shareholder of the Institution other than the Insured."
The court cited numerous cases that would support a finding that
the exclusion did not apply to claims of the FDIC in its receivership capacity;
it represented the interests of uninsured shareholders and the bank. Uninsured
shareholder derivative actions were express exceptions in the pertinent
exclusion.
The court said that "the obvious intent behind the 'insured
v. insured' exclusion is to protect the insurer from collusive suits among its
directors and officers; but the FDIC's involvement is obviously not
collusive."
Noting that the FDIC "is granted all rights, titles, powers
and privileges of shareholders...." and that the D & O policy applied
to alleged mismanagement, fraud and abuse, etc., claims against directors and
officers, the court denied the insurer's motion for summary judgment on the
"insured v. insured" policy exclusion issue. The exclusion did not
apply to claims by the government agency.
Editor's Note: The court observed that some E & O policies
involved in the litigation have specifically included the FDIC in exclusionary
provisions of the kind reviewed. Such was not the case here.
American Casualty Co. Of
Reading, Pa., Plaintiff v. Federal Deposit Insurance Corporation ET AL.,
Defendants. United States District Court, Western District of Oklahoma. No.
CIV-91-1583-C. April 17, 1992. 791 F.Supp. 276.