Publications

(Article from Insurance Law Alert, January 2015)

For more information, please visit the Insurance Law Alert Resource Center.

As reported in previous Alerts (see October and April 2014 Alerts), courts have issued conflicting decisions as to whether an "insured v. insured" exclusion in a directors and officers policy applies to claims brought by the Federal Deposit Insurance Corporation ("FDIC") as receiver for a defunct bank. The Eleventh Circuit recently weighed in on the issue, reversing a Georgia district court and finding that the exclusion is ambiguous in this context. St. Paul Mercury Ins. Co. v. Fed. Deposit Ins. Corp., 2014 WL 7172472 (11th Cir. Dec. 17, 2014).

St. Paul sought a declaration that it owed no duty to indemnify claims brought by the FDIC as receiver for a closed bank alleging tortious conduct on the part of the bank’s former officers. A Georgia district court granted St. Paul’s summary judgment motion, finding that the insured v. insured exclusion unambiguously barred coverage for claims brought by the FDIC. The district court reasoned that not applying the exclusion would have the effect of reading the phrase "on behalf of any Insured" out of the policy because "[a]side from a derivative action, the only party that could bring an action on a federally insured bank’s behalf is the FDIC."

In reversing the district court, the Eleventh Circuit noted that Georgia law sets a "low threshold for establishing ambiguity in an insurance policy." On this basis, the Eleventh Circuit ruled that the exclusion was susceptible to two reasonable interpretations. The Eleventh Circuit relied primarily on the existence of conflicting court decisions on the issue, finding that "the most compelling argument is that courts who have addressed similarly worded insured v. insured exclusions have reached different results." The court remanded the matter for consideration of extrinsic evidence to determine the parties’ intent.

For more information, please visit the Insurance Law Alert Resource Center.