FDIC's Latest Failed Bank Lawsuit Defendants Include Outside Directors and D&O Insurers; Also, Number of Problem Banks Declines

On August 22, 2011, when the FDIC filed a lawsuit related to the collapse of Silverton Bank, which is Georgia's largest failed bank, the named defendants included not only bank officers that the regulators allege are responsible for the bank's failure, but also the bank's former outside...

FDIC Failed Bank Litigation and the Insured vs. Insured Exclusion

An inevitable part of the current wave of bank failures has been the FDIC's filing of lawsuits against former directors and officers of the failed institutions. And though the FDIC's initiation of this litigation has been gradual, the lawsuits have now started to accumulate in significant...

A Time-Ripened Tale of Toxic Assets, a Corporate Spin-Out and a Failed Bank

Guaranty Bank of Austin, Texas's August 21, 2009 closure is the fourth-largest bank failure during the current wave of bank failures and the tenth largest bank failure in U.S. history. The bank's failure, which came just 15 months after its publicly traded holding company spun out of Temple...

Two Questions: Bank Closures Winding Down? FDIC WaMu Lawsuit Settled?

Whether the process is just winding down for the year or the process is actually winding down for good, the bank closure rate has recently fallen off dramatically. The FDIC has not taken over any banks for three weeks straight, with no bank closure at all so far during the month of December. And...

FDIC's Latest Failed Bank Lawsuit Includes D&O Insurer Defendant

In the FDIC's latest lawsuit filed in its role as receiver of a failed bank, the FDIC not only named as defendants nineteen former directors and officers of the failed bank, but also included as defendants seventeen of their spouses and the failed bank's D&O insurer. A copy of the FDIC's...

Comfort Orders in Bankruptcy Court To Advance Defense Costs for Directors and Officers Insurance

After entity coverage began to be added to the D&O insurance policy a couple of decades ago, a recurring problem in the bankruptcy context was whether or not the D&O policy proceeds were property of the estate under Bankruptcy Code Section 541 (a) and subject to the automatic stay under Bankruptcy...

LIBOR-Scandal Litigation: After Federal Court Dismissal, Schwab Pursues State Court Suit

When Southern District of New York Judge Naomi Reice Buchwald entered her order in the consolidated LIBOR litigation on March 29, 2013, she dismissed the plaintiffs' antitrust and RICO claims against the LIBOR rate-setting banks, and she also declined to exercise supplemental jurisdiction over...

Perkins Coie LLP on Britt v. Twin City: Private Equity Firms Should Review the Scope of the Insurance Purchased to Cover Claims Against Them and the Individuals They Place as Directors

Excerpt: The recent decision in Britt v. Twin City Fire Insurance Co. , C.A. No. 8SACV 12-1355-JST (JPRx), slip op. (C.D. Cal. June 26, 2013), highlights some important insurance considerations for private equity funds and the individuals they place as directors or officers at portfolio companies...

Banks: Forget Too Big to Fail, How About Too Small to Succeed?

According to the FDIC’s latest Quarterly Banking Profile ( here ), as of September 30, 2013, there were 6,891 federally insured banking institutions, down from 6,940 at the end of the second quarter and down from 7,141 as of September 30, 2012. There were 8,680 banking institutions as recently...

D&O Insurance: Health Care Organizations Face Increasing Rates, Tightening Terms

Largely as a result of changes in the industry following the enactment of the Affordable Care Act, health care organizations have seen their D&O insurance rates increasing and the available terms and conditions tightening, according to a December 10, 2013 report from Marsh. Moreover, these changes...

Private Companies: Risks, Exposures and Insurance

In general, and at least in the United States, executives at public companies don’t need to be convinced that their companies need to have D&O insurance. That is not always true with officials at private companies. Some officials at some private companies – particularly very closely held...

Why Did the Bank Fail?: Defending Failed Bank Directors and Officers

Since the early stages of the financial crisis, nearly 500 banks have failed across the U.S., and even though we are now well past the peak of the financial crisis, banks continue to fail. Yet during the same time as scores of banks were failing, many more banks did not fail – which raises the...

Georgia Federal Court Rules FIRREA Blocks Jurisdiction for Failed Bank’s D&O Insurer’s Declaratory Judgment Action

As part of our beat here at The D&O Diary , we have to read a lot of judicial decisions. We are well acquainted with the fact that court rulings vary quite a bit, but every now and then we read an opinion that makes us stop and say – “ What? ” That was our reaction to a recent set...

D&O Policy Excluding “Receiver” Claims Bars Coverage for FDIC Failed Bank Lawsuit

In an interesting April 7, 2014 opinion ( here ), Magistrate Judge Stanley A. Boone of the Eastern District of California, applying California law, held that a D&O insurance policy’s insured vs. insured exclusion precludes coverage for claims brought against former officers of the failed County...

D&O Insurance: Guilty Pleas Trigger Coverage Exclusions, Entitle Insurer to Recoupment

In a detailed April 23, 2014 opinion ( here ), Eastern District of Virginia Judge Liam O’Grady , applying Virginia law, held that the guilty pleas of executives of Protection Strategies, Inc. triggered four separate exclusions in the D&O coverage section of PSI’s management liability...

Survey: Existing and Potential Bank Directors Unwilling to Serve Due to Fear of Personal Liability

Banking industry commentators have long contended that aggressive efforts by the FDIC and others to hold bank developers liable is having a chilling effect on the willingness of existing and potential directors to serve on bank boards. An April 2014 American Association of Bank Directors report of a...

Looted Art, Provenance, and D&O Claims

The recent discovery in the Munich apartment of Cornelius Gurlitt of a massive trove of Nazi-looted art has drawn renewed attention to the fraught and murky world of art provenance – that is, the ownership history of art works, which can be critical for determining who holds proper title to the...

D&O Insurance: Later Securities Suit and Prior FDIC Failed Bank Claim Held Unrelated, Securities Suit Not Covered

On May 8, 2014, Southern District of New York Judge Deborah Batts, applying New York law, held that a there was not a sufficient “factual nexus” between a securities suit filed after the expiration of a failed bank’s D&O insurance policy and an FDIC claim that had been first made...

D&O Insurance: Liberalization Endorsement Allows Insureds to Rely on New Policy Form’s Enhanced Insured vs. Insured Exclusion Carve-Back

On June 19, 2014, in a case involving so many unusual coverage issues that it seems more like a law school exam question than an actual coverage dispute, New York (New York County) Supreme Court Judge Melvin Schweitzer, applying New York law, granted summary judgment for the former directors of the bankrupt...

D&O Insurance: Excess Insurance Not Triggered Due to Insolvency of Underlying Insurer and Due to Insufficient Loss

In a long and convoluted opinion befitting the long and convoluted case in which it was entered, Judge David Grine of the Pennsylvania (Centre Country) Court of Common Pleas, applying Pennsylvania law, entered summary judgment for an excess D&O insurer, holding that the excess insurer’s payment...

D&O Insurance: FDIC’s Claims Against Failed Bank’s Directors and Officers Not Related to Earlier Claims, Trigger Separate Policy Period

On July 9, 2014, in yet another in the ever growing line of cases examining whether or not separate D&O claims involve interrelated wrongful acts, District of Puerto Rico Judge Gustavo Gelpi , applying Puerto Rico law, held that the FDIC’s claims against the former directors and officers of...

Georgia Supreme Court Affirms, Elucidates Business Judgment Rule – and Its Limitations

A recurring issue in FDIC litigation against the former directors and officers of failed banks has been whether the business judgment rule insulates the defendants from claims of ordinary negligence. This question has been particularly important in Georgia, where there were more bank failures than any...

Despite Policyholder’s Delayed Notice, Insurer Must Cover Subsequent Claims Related to Earlier Timely Claim

On July 16, 2014, the Eighth Circuit, applying New York law, concluded that because a financial services firm’s professional liability insurance policy was ambiguous on the question whether the policy’s timely notice requirements apply to later claims related to a timely original claim, the...

The Pre-IPO Company and “Failure to Launch” Claims

Due to a combination of favorable circumstances, the number of companies completing initial public offerings is currently at the highest level in years. According to a recent study from Cornerstone Research ( here ), with the 112 IPOs in the first half of 2014, IPO activity is on pace to increase for...

Another Environmental Disclosures Securities Suit Survives Initial Pleading Hurdles

In recent months, there have been a number of securities class action lawsuits filed based on alleged misrepresentations of the defendant company’s environmental compliance. On August 7, 2014, the securities suit filed against Exide Technologies and certain of its directors and officers based on...