(Article from Insurance Law Alert, January 2017)
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Previous Alerts have discussed conflicting decisions relating to the application of an insured vs. insured exclusion to claims brought by the Federal Deposit Insurance Corporation (“FDIC”).
See January 2015 Alert;
October and
April 2014 Alerts. In a recent decision, the Ninth Circuit ruled that an insured vs. insured exclusion squarely bars coverage for claims brought by the FDIC in its capacity as receiver.
Fed. Deposit Ins. Corp. v. BancInsure, Inc., 2017 WL 83489 (9
th Cir. Jan. 10, 2017).
The exclusion at issue precludes coverage for losses arising from actions brought “by, or on behalf of, or at the behest of” Security Pacific (the insured company), or “any successor, trustee, assignee or receiver” of Security Pacific. The court held that this language unambiguously applies to claims brought by the FDIC as receiver. The court rejected the FDIC’s argument that other provisions of the policy evidenced an intent to cover FDIC claims, or at a minimum, created ambiguity as to coverage. In particular, the court dismissed the FDIC’s contention that it was not a “receiver” within the meaning of the exclusion because it had a “unique role” representing “multiple interests.” Similarly, the court declined to find that a shareholder derivative claim exception restored coverage for the FDIC’s claims. The court explained: “The shareholder derivative suit exception does not . . . render the insured-versus-insured exclusion ambiguous with respect to the FDIC as receiver merely because the FDIC also succeeded to the right of Security Pacific’s shareholders to bring a derivative action” (emphasis in original). Finally, the court rejected the argument that the deletion of a regulatory exclusion (which had barred coverage for losses arising from “any action or proceeding brought by or on behalf of any federal or state regulatory or supervisory agency or deposit insurance organization”) evidenced an intent to establish coverage for formerly excluded claims.
As reported in our October 2014 Alert, a California federal district court reached the opposite conclusion in
St. Paul Mercury Ins. Co. v. Hahn, 2014 WL 5369400 (C.D. Cal. Oct. 8, 2014),
aff’d, 2016 WL 6092400 (9
th Cir. Oct. 19, 2016), which was affirmed by the Ninth Circuit. There, the court concluded that an insured vs. insured exclusion that barred claims “brought or maintained by or on behalf of any Insured or Company . . . in any capacity” was ambiguous in the context of FDIC receiver claims. Notably, the exclusion there did not explicitly reference “receiver.”