The Federal Deposit Insurance Corporation brought suit against directors and officers of a bank for which it was acting as 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 was not applicable to claims of the FDIC in its receivership capacity; it represented the interests of uninsured shareholders as well as 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 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.)