by Christopher Graham and Joseph Kelly

Today’s post is our second about a case in Iowa, Progressive Casualty Ins. Co. v. FDIC, et al, Case No. C 12-4041-MWB (N.D. Iowa Jan. 23 2015). In our first post here, we addressed how the court found that the FDIC’s Claim as receiver fell outside of a D&O policy’s insured-versus-insured exclusion. Today’s post addresses an exception to the D&O policy’s Loss definition, for investment loss—which the court also concluded was inapplicable to the FDIC’s Claim. Hog heaven for the FDIC and bank directors and officers!

Here’s the scenario: Bank fails; FDIC is appointed receiver; it sues directors and officers for negligence and otherwise; they ask D&O insurer to pay for a defense; although the D&O policy has no regulatory exclusion, the insurer denies coverage based on insured-versus-insured exclusion; it also cites an investment loss carve-out in the policy’s Loss definition; it advances defense costs while reserving rights; coverage litigation follows.

What’s different about this failed bank case? (Allegations about investment decisions): Most failed bank cases have been about bad decisions relating to loans, many of which were real estate loans. But in this case, the FDIC’s Claim as the court described it was “based primarily on its allegations that the D&O Defendants caused Vantus Bank to use $65 million—120 percent of its core capital—to purchase fifteen high risk collateralized debt obligations backed by Trust Preferred Securities (CDO-TruPS) without due diligence and in disregard and ignorance of regulatory guidance about the risks of and limits on purchase of securities, resulting in losses of some $58 million.”

What else is different? (An investment loss carve-out): Given the FDIC’s focus on damages resulting from investing in Trust Preferred Securities, a central issue in the coverage litigation between the FDIC and directors and officers, on one hand, and the D&O insurer, on the other, was the effect of a part of the D&O policy’s Loss definition, providing that “Loss shall not include: . . . (6) the depreciation (or failure to appreciate) in value of any investment product, including securities, commodities, currencies, options or futures due to market fluctuation unrelated to any Wrongful Act.”

The D&O insurer’s main argument: The D&O insurer cited the investment loss carve-out as an additional ground—besides the insured-versus-insured exclusion—for why the D&O policy supposedly didn’t cover the FDIC’s Claim. As stated in the court’s decision, the D&O insurer argued “that the investment loss that FDIC-R seeks to recover is precisely the result of depreciation in the value of the securities and that depreciation was undeniably caused by market fluctuation, not by the alleged Wrongful Acts of the D&O Defendants.” Under the D&O insurer’s reading of the investment loss carve-out, “Loss does not include ‘depreciation . . . in value of any investment product,’ where depreciation is ‘due to market fluctuation,’ and that ‘market fluctuation’ is ‘unrelated to any Wrongful Act’”—meaning the Wrongful Act had no “causal effect on the ‘market fluctuation,’” as supposedly was the case in this instance.

The Decision: “As a matter of law, the ‘investment loss carve-out’ does not bar coverage for the D&O Defendants for the FDIC-R’s claims,” said the court. The court rejected the D&O insurer’s argument that the phrase “unrelated to any Wrongful Act” modifies the phrase “market fluctuation” and that “market fluctuation” “unrelated to any Wrongful Act’” means a Wrongful Act having no “causal effect” on the “market fluctuation.”

According to the court, the phrase “unrelated to any Wrongful Act” instead could be read—as FDIC and directors and officers argued—to modify the phrase “depreciation (or failure to appreciate) in value of any investment product”—rather than “market fluctuation”; so “depreciation in value” rather than “market fluctuation” would have to be “unrelated to” a Wrongful Act.

Given that there’s more than one reasonable way to read the investment loss carve-out, there’s an ambiguity and, in those circumstances, the reading favorable to the insureds controls.

As the court also explained:

Yet, even if “unrelated to any Wrongful Act” unambiguously modifies “market fluctuation,” the appropriate construction still requires coverage for the FDIC-R’s claims against the D&O Defendants, in light of the interpretation of “unrelated to” as unambiguously meaning “having no connection to.” The FDIC-R’s allegations, if proved, would establish some “connection” between the Wrongful Acts and the “market fluctuation” in the value of the securities at issue, even if the Wrongful Acts did not directly cause the “market fluctuation”—for example, by artificially manipulating the value of the securities for a time or actually causing the crash in the value of the securities. Again, it is the interrelationship or interplay of the alleged Wrongful Acts and the “market fluctuation” that ultimately caused the damage to the Bank, where the alleged Wrongful Acts were purchasing and holding the securities in question, or too many of those securities, which were subject to such “market fluctuation.”

Comments: If there’s more than one reasonable way to read policy wording, it’s not unusual for the policyholder’s reading to control. The “rule” that ambiguous policy wording gets construed against the insurer is an application of the broader rule applicable to contracts generally that ambiguous wording gets construed against the drafter. If the policy was a negotiated contract, perhaps a manuscript policy, with sophisticated parties on both sides, then the rule that wording gets construed against the insurer may not apply. In some instances, where there’s ambiguity, extrinsic evidence may be considered to attempt to resolve an ambiguity. All of these issues are matters of state law.

As this court pointed out, there was a “dearth” of case law on the investment loss carve-out. We couldn’t find any case about it, other than this one.

What has been more typical in bank D&O policies has been unpaid loan carve outs in loss definitions, which may apply, for example, to “any unrepaid, unrecoverable or outstanding loan, lease or extension of any credit to any Affiliated Person or Borrower.”

And there’s been a bit of litigation about those during the recent wave of failed bank litigation. See, for example, discussion here in Kevin La Croix’s D&O Diary.

Tags: Iowa, directors and officers liability insurance, D&O insurance, insured-versus-insured exclusion, IVI exclusion, derivative suit exception, insured versus insured exclusion, FDIC, FDIC-R, failed bank, directors, officers , investment loss carve out, Loss, community banks, regulatory exclusion, collusion, Company defined, “on behalf of”

by Christopher Graham and Joseph Kelly

Introduction: A date-certain notice requirement refers to the absolute time limit found in claims-made policies for reporting claims—namely as soon as practicable, but in no event more than 30, 60 or 90 days or the like following the policy term. In Craft v. Philadelphia Ins. Co., Case No. 14SA43 (Feb. 17, 2015), a landmark decision that brought in heavy-weight friend-of-the court briefs from insurance trade associations, policyholder groups, and trial lawyers, the Colorado Supreme Court joined a number of other courts in refusing to extend the so-called notice prejudice rule to a date-certain notice requirement in a claims-made policy. Doing so, concluded the court, would change the fundamental nature of claims-made insurance.

Underlying suit: Dean owned a cement contracting business. He was its president. One day he sold 10% of his shares to Suburban, entering into a stock purchase and merger option agreement, warranting and representing that his company had certain water rights. But that allegedly was untrue. About two years after the sale, his company acquired his remaining shares. Dean was out. About a year later, Suburban sued Dean for breaching the purchase agreement, based on alleged misrepresentations about the company’s water rights. Later his company became a plaintiff and a fraud claim was added.

The D&O policy and notice: At the time of the suit, the company had a D&O policy, with a 1-year policy period, effective November 1, 2009-2010. As an express condition precedent to coverage, the policy required an insured to provide written notice to the D&O insurer “as soon as practicable” after becoming aware of a claim, but “not later than 60 days” after the policy period expired, so by December 30, 2010.

The company and Suburban purchased the D&O policy, but Dean didn’t know about it. So he defended himself against the claims by Suburban and the company.

In about March 2012, about 16 months after the D&O policy expired, Dean finally learned about the D&O policy and provided the D&O insurer notice of the suit, but received no response.

The coverage suit: Dean settled the suit by Suburban and the Company and then sued the D&O insurer for coverage. As a defense, the D&O insurer raised Dean’s failure to report the claim by the policy’s December 30, 2010 reporting deadline. Dean argued the D&O insurer couldn’t avoid coverage based on late notice absent proof that it was prejudiced by the delay. The D&O insurer argued that the notice-prejudice rule didn’t apply to a date-certain notice requirement in a claims-made policy.

The Federal District court granted the D&O insurer’s motion to dismiss Dean’s claims. Dean appealed. The Tenth Circuit then certified two questions to the Colorado Supreme Court: (1) whether the notice-prejudice rule applies to claims-made liability policies in general; and (2) if so, whether the rule applies to both types of notice requirements in those policies.

The case generated national interest from policyholders and insurers alike. There were friend-of-the-court briefs by the insurance industry including the American Insurance Association, Complex Insurance Claims Litigation Association, and Property Casualty Insurers Association of America; from trial lawyers, including The Colorado Trial Lawyers Association; and from a policyholder group, United Policyholders.

The Decision: The court reframed the Tenth Circuit’s certified questions, limiting the issue to whether the notice-prejudice rule applies to the date-certain notice requirement in a claims-made policy. It then answered that question as “no.”

Colorado, like many states, required that an insurer issuing an occurrence policy prove prejudice to avoid coverage based on late notice. In refusing to extend the notice-prejudice rule to claims-made policies, the court stressed the fundamental differences between occurrence and claims-made policies:

The conceptual differences between occurrence and claims-made liability policies lie at the core of this case. The Colorado Division of Insurance defines an occurrence policy as “an insurance policy that provides liability coverage only for injury or damage that occurs during the policy term, regardless of when the claim is actually made.” 3 Colo. Code Regs. 702-5:5-1-8 (2014). A claims-made policy, by contrast, is “an insurance policy that provides coverage only if a claim is made during the policy period or any applicable extended reporting period.” Id. Thus, occurrence policies and claims-made policies are almost the mirror image of each other: an occurrence policy provides coverage for events that happen during the policy period, even if the claim is brought many years in the future; a claims-made policy provides potential coverage for claims brought against the insured during the policy period, even if the underlying event giving rise to liability occurred many years in the past. See 1 Steven Plitt, Daniel Maldonado & Joshua D. Rogers, Couch on Insurance § 1:5, at 15-16 (3d ed. 2009 & Supp. 2014). With an occurrence policy, an occurrence entitles the insured to benefits under coverage that already exists, and timely notice is merely a condition of retaining that coverage. 3 Allan D. Windt, Insurance Claims and Disputes § 11:5 (6th ed. 2013). Claims-made policies, on the other hand, provide only potential coverage because timely notice of the claim to the insurer is a prerequisite to coverage under such policies. Id. In other words, coverage is triggered only if the insured provides timely notice of the claim.

This conceptual difference has important practical implications for the risks that insurers undertake and the premiums that insureds pay. Claims-made policies proliferated in the 1970s as a solution to the problems many insurers were facing in writing professional malpractice insurance policies. See Sol Kroll, The Professional Liability Policy “Claims Made”, 13 Forum 842, 849-50 (1978). In setting premiums for occurrence policies, underwriters had difficulty predicting decades into the future considerations such as inflationary trends, jury verdicts that outpaced inflation, and new theories of liability. Id. at 846, 848. Faced with increasing costs of doing business, the typical insurer either had to raise premiums, offer fewer products, or withdraw from the professional liability insurance market altogether. Id. at 847. With claims-made policies, however, the risk to the insurer passes when the policy period expires. Given this limitation, “a more predictable rate structure” could be assembled and justified for such policies, and, thus, rates bore a “more reasonable relationship to the current fiscal situation in a given state.” Id. at 848.

Both occurrence and claims-made policies generally require an insurer to provide some sort of prompt notice of a claim. The critical difference between the policies is the date-certain or absolute reporting deadline in claims-made policies. As the court explained:

Claims-made policies typically contain a second type of notice requirement not found in occurrence policies: the requirement that the insured provide notice of a claim within the policy period or a defined reporting period thereafter. See 13 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 186:13, at 32 (3d ed. 2005 & Supp. 2014). Such a date-certain notice requirement fulfills a very different function than a prompt notice requirement. Whereas a prompt notice requirement serves to allow the insurer to investigate the claim and negotiate with the third party asserting the claim, the date-certain notice requirement defines the “temporal boundaries of the policy’s basic coverage terms.” Id. In other words, timely notice of a claim is the event that triggers coverage. See 3 Allan D. Windt, Insurance Claims and Disputes § 11:5 (6th ed. 2013). For this reason, although excusing late notice and applying a prejudice requirement make sense in the context of a prompt notice requirement, extending such concepts to a date-certain notice requirement “would defeat the fundamental concept on which coverage is premised.” Id.

Tags: D&O, professional liability, errors and omissions, claims-made, notice, date-certain notice requirement, prejudice, occurrence, absolute reporting deadline, claims made and reported, Colorado

by Christopher Graham and Joseph Kelly

Today’s post is about a federal case in Iowa, Progressive Casualty Ins. Co. v. FDIC, et al, Case No. C 12-4041-MWB (N.D. Iowa Jan. 23 2015), which explains the happy hog pictured above. But you won’t hear any squeals of joy from the insurer about the decision in this case.

Here’s the scenario: D&O policy is issued without a regulatory exclusion; bank fails; FDIC is appointed receiver; it sues directors and officers for negligence and otherwise; they ask D&O insurer to pay for a defense; insurer denies coverage based on an insured-versus-insured exclusion, but advances defense costs while reserving rights; coverage litigation follows.

The decision: This Iowa court held that the insured-versus-insured exclusion did not apply to the FDIC’s Claim. It granted a summary judgment for the FDIC and directors and officers, finding that (1) the exclusion’s “on behalf of . . . the Company” wording is “unambiguous,” (2) the exclusion’s purpose—as shown by the wording—is to except collusive suits from coverage, (3) there was no evidence of collusion, (4) there’s no ambiguity merely because there are conflicting court decisions about what the exclusion means, and (5) with no ambiguity, there’s no need to consider “extrinsic” evidence. Those five points set this case apart from other recent cases addressing the exclusion, including some finding similar wording ambiguous.

The wording: The exclusion provided:

The Insurer shall not be liable to make any payment for Loss in connection with any Claim by, on behalf of, or at the behest of the Company, any affiliate of the Company or any Insured Person in any capacity except where such Claim is brought and maintained:

(1) in the form of a cross-claim or third-party claim for contribution or indemnity which is part of and results directly from a Claim which is not otherwise excluded by the terms of the Policy;

(2) by an Insured Person solely as a customer of the Company; provided such Claim is brought independently of, and totally without the solicitation, assistance, participation, or intervention of any other Insured; or

(3) by a security holder of the Company as a derivative action on behalf of the Company or such affiliate; provided such Claim is brought independently of, and totally without the solicitation, assistance, participation, or intervention of any Insured of any affiliate of the Company. (Emphasis added).

The court’s explanation: The court explained its decision against the insurer as follows:

(1) The FDIC’s Claim was not a Claim “by the Company”. Company as defined in the policy didn’t include a receiver. When the insurer addressed receivers or successors, moreover, it used explicit wording. As the court pointed out, the policy definition of “Financial Impairment” included “appointment of any state or federal official, regulatory agency or court of any receiver . . . .” The policy by express language also extended coverage to “legal representatives or assigns” of Insured Persons. “Thus, when the [bank’s] Policy intended to address coverage issues relating to ‘receivers’ and other successors to the Bank, it expressly identified such successors.”

(2) The FDIC’s Claim also was not by “any affiliate of the Company” and wasn’t by an Insured Person. The FDIC as receiver wasn’t an affiliate. Nor was the Claim by any Insured Person—obviously! The insurer didn’t argue otherwise on either point.

(3) The FDIC’s Claim was not “at the behest of the Company.” That phrase was undefined—so the dictionary definition—a “command, injunction or bidding”—controlled. “The insurer has not asserted as an undisputed fact any involvement of the Bank in commanding or bidding the FDIC-R to bring its claims against the [directors and officers],” said the court. It didn’t even argue the FDIC’s Claim was “at the behest of the Company.”

(4) The Claim was not “on behalf of . . . the Company. Without a policy definition, an Oxford dictionary definition controlled—defining “on behalf of” as, “On the part of [another], in the name of, as the agent or representative of, on account of, for, instead of (With the notion of official agency)” (brackets in original). The FDIC’s Claim, said the court, wasn’t “on behalf of . . . the Company . . . ,” as that phrase is commonly understood based on that standard definition. There also was “no basis to graft onto this interpretation of ‘on behalf of . . . the Company’ an action by a receiver or other successor.’” Indeed, “when the [bank’s] Policy intended to address coverage issues relating to ‘receivers’ and other successors to the Bank, it expressly identified such successors.”

(5) Policy wording demonstrated that “the intent of the ‘insured-versus-insured exclusion’ was to preclude collusive suits by and among the Company and Insured Persons, such as the [directors and officers], to recover for mismanagement.” “This intent is apparent from the interplay between the definition of Claim, inter alia, as a civil lawsuit against an Insured Person or against the Company’ and the ‘insured vs. insured exclusion,’ which bars coverage ‘by, on behalf of, or at the behest of’ the same entities.”

(6) The FDIC’s Claim was not “collusive”. “[I]t was brought . . . well after [the] Bank was closed” and under the FDIC’s “independent statutory authority”; and the insurer “identified no evidence to suggest or show beyond dispute that the [FDIC as receiver’s] lawsuit involved the solicitation, assistance, involvement, or participation of anyone from the Bank in bringing or maintaining the claims.”

(7) O’Melveny & Meyers v. FDIC, 512 U.S. 79 (1994), the insurer’s principal authority, was irrelevant. Like other insurers, this insurer argued that under O’Melveny, the FDIC as receiver “steps into the shoes” of a failed bank and, thus, its Claim is “on behalf of” the Company (the bank) and within the Insured-versus-insured exclusion. But, as the Iowa court explained:

a. O’Melveny didn’t address a D&O policy, let alone an insured-versus-insured exclusion, and wasn’t even an insurance case;

b. Equating “on behalf of” with “stepping into the shoes” as used in O’Melveny was a “hypertechnical,” rather than “reasonable viewpoint” as required under Iowa law; and

c. O’Melveny didn’t equate “steps into the shoes” with “on behalf of”, didn’t address what “on behalf of” means or even the word “behalf”, didn’t hold (as the insurer argued) that “the claims by the FDIC are necessarily claims of or that belonged to a failed bank”, didn’t address federal law providing that the FDIC succeeds not only to the rights of the failed institution, but to those “of any stockholder, member, accountholder, depositor, officer, or director of such institution with respect to the institution and the assets of the institution”, and didn’t consider whether federal law authorized a suit by the FDIC on its own behalf, rather than just by “stepping into the shoes” of a failed bank.

(8) There is no ambiguity merely because there are conflicting court decisions about what the exclusion means and, thus, there is no need to consider extrinsic evidence. This was the opposite of what the Eleventh Circuit concluded in St. Paul Mercury Ins. Co. v. FDIC, et al, Case No. 13-14228 (11th Cir. 2014), decided under Georgia law and involving the scenario of this Iowa case. The Georgia district court in St. Paul Mercury held, moreover, that virtually identical “on behalf of . . . the Company” wording unambiguously excluded coverage for the FDIC’s suit—the opposite of this Iowa federal court’s holding finding coverage; and it refused to consider extrinsic evidence or allow further discovery. The Eleventh Circuit found ambiguity and, therefore, reversed and returned the case to the Georgia district court for consideration of evidence that may resolve it. It also explained that “the most compelling argument” for ambiguity was “that the courts which have addressed similarly worded insured v. insured exclusions have reached different results.”

The Iowa court attributed the Eleventh Circuit’s decision to differences between Iowa and Georgia law about reading insurance policies and explained further: “While I acknowledge that different courts have reached different conclusions on whether or not the ‘insured vs. insured exclusion’ bars coverage for claims by the FDIC, I do not believe that the difference of opinion establishes ambiguity as to the meaning of the exclusion, even if it creates some uncertainty about the construction or legal effect of the exclusion.”

Other IvI arguments: The parties disputed whether the shareholder derivative exception to the IvI exclusion applied; in arguing for the exception, the FDIC stressed that its claims as receiver were at least in part on behalf of shareholders, as provided by statute.

The parties also disputed whether extrinsic evidence showed that the exclusion “was intended to bar claims such as the [FDIC as receiver] has brought against the D&O Defendants and whether extrinsic evidence can be considered at all”; “whether the ‘reasonable expectations’ of the D&O Defendants demonstrate that the ‘insured vs. insured exclusion’ does not apply and whether such ‘reasonable expectations’ are relevant”; and “whether the industry practice demonstrates that ‘regulatory exclusions,’ rather than ‘insured vs. insured exclusions,’ are used when the insurer intends to bar coverage for claims by the [FDIC as receiver] and whether any evidence concerning ‘regulatory exclusions’ is relevant, where [the bank’s] Policy contained no such exclusion.”

But the court didn’t address any of the above arguments as it was unnecessary given its holding.

“Investment loss carve-out”: The Iowa court also addressed an “investment loss carve-out” in the Loss definition, holding as a matter of law against the insurer and for the FDIC and directors and officers that the carve-out didn’t apply. We plan to cover this part of the court’s decision soon in a separate post.

What’s different about this case: The Iowa court’s decision about the exclusion is distinct from other recent cases in that it held the exclusion unambiguously inapplicable to FDIC claims as receiver.

While the Iowa court attributed the Eleventh Circuit’s different result in St. Paul Mercury to “differences” between Iowa and Georgia law for determining the meaning of policy wording, a close reading of the law cited in the opinions suggests those differences really were matters of form rather than substance. At least from the opinions, it doesn’t appear that the FDIC argued that the insured-versus-insured exclusion was unambiguous. Neither the Eleventh Circuit, nor Georgia district court opinions in St. Paul Mercury address the meaning of “on behalf of” in any way similar to the Iowa court. Whether the policy, outside of the exclusion, addressed receivers or successors explicitly like the policy in the Iowa case isn’t stated in the opinions.

In our prior blog post here, about W Holding Company, et al v. AIG Insurance Company – Puerto Rico, Case No. 12-2008 (1st Cir. Mar. 31, 2014), the directors and officers won the initial “IvI” exclusion round as the insurer by preliminary injunction was required to advance their defense fees, albeit without waiving the right to repayment. But the First Circuit didn’t decide whether the exclusion applied to FDIC’s claims, only that there was a “likelihood” of a “remote possibility of coverage”; that’s all that was required in considering a preliminary injunction motion. There apparently was no argument that the IvI exclusions was unambiguous and no need to make the argument.

In our prior blog posts here about Hawker v. Bancinsure, Case No. 1:12-cv-01261 (E.D. Ca. Apr. 7, 2014), and here about Bancinsure v. McCaffree, et al., Case No. 12-2110-KHV (D. Kan. Feb. 27, 2014), the insurer won an initial round that the IvI exclusion applied, but the exclusion explicitly referenced a Claim by a “receiver.” Ironically, that insurer, Bancinsure, now known as Red Rock Insurance Co., later entered into a receivership itself! With the “receiver” included in the IvI exclusion, the FDIC obviously couldn’t make the same kind of argument as in the Iowa case.

In St. Paul Mercury Insurance Co. v. Hahn, Case # SACV 13-0424 AG (RNBx) (October 8, 2014 C.D. Cal.), a California federal court addressed “by or on behalf of” wording in a scenario like the Iowa case and granted a summary judgment for the FDIC that the IvI exclusion was inapplicable. Like the Iowa court, the Hahn court found O’Melveny irrelevant. Unlike the Iowa court, the Hahn court held that the exclusion was ambiguous, rather than unambiguous. But, under California law, ambiguity meant that the policy must be construed against the D&O insurer. So the insurer still lost.

From the opinion in Hahn, it appears that the FDIC didn’t argue that the exclusion was unambiguous. Like the Eleventh Circuit, the Hahn court found the exclusion ambiguous at least in part because there were conflicting decisions about whether it applied to claims by the FDIC and similar receivers. As the Hahn court stated, “the question presented in this case has been litigated numerous times over many years across the country.” And, “There can be little doubt that repeated disputes over the IvI exclusion have placed insurers on notice that it is ambiguous” (Emphasis added).

After highlighting the FDIC’s statutory power as receiver to sue on behalf of a failed bank’s shareholders, the Hahn court also stated that it “was unconvinced that the Shareholder [Derivative] Exception [to the IvI exclusion] does not apply to FDIC-R’s [(as receiver)] claims.” It thus “construe[d] the IvI Exclusion to allow coverage for [those] claims . . . .” The Hahn court stated, “The Shareholder Exception ‘evidences an intent to place on insurer the risk for actions against the D&O’s based upon allegations of mismanagement, waste, fraud, or abuse of a failed institution’” (quoting FDIC v Bancinsure, No. CV 12-09882, 2014 U.S. Dist. LEXIS, at * 26 (C.D. Cal. June 16, 2014)). The Iowa court had no need to address this issue.

The uncertainty of what a D&O policy gives bank directors and officers when a bank fails: Except when there were IvI exclusions explicitly addressing receiver claims, no insurer won outright any of the cases discussed above; but the FDIC and directors and officers won two of them outright on summary judgment. Any D&O insurer relying on an IvI exclusion to exclude FDIC claims as receiver may be in for an unpleasant surprise. But, as these cases show, brokers and bank risk managers, directors, and officers can’t necessarily count on D&O insurers to step up when disaster hits and the FDIC sues—even absent a regulatory exclusion or explicit IvI wording addressing receiver Claims. Isn’t it time for a change to how D&O policies address this issue? We’ll have more on this on a future post.

Tags Iowa, directors and officers liability insurance, D&O insurance, insured-versus-insured exclusion, IVI exclusion, derivative suit exception, insured versus insured exclusion, FDIC, FDIC-R, failed bank, directors, officers , investment loss carve out, Loss, community banks, regulatory exclusion, collusion, Company defined, “on behalf of”