Ninth Circuit Correctly Recognizes That Insured-Versus-Insured Exclusion Does Not Bar FDIC From Pursuing Coverage Under Failed Bank's D&O Policy

The Ninth Circuit recently held in St. Paul Mercury Insurance Co. v. Federal Deposit Insurance Corp. that a D&O policy's insured-versus-insured exclusion does not prevent the Federal Deposit Insurance Corporation ("FDIC"), as receiver of an insured failed bank, from obtaining coverage under such policy. In so doing, the Court of Appeals follows the Eleventh Circuit and other courts that have addressed this issue and sided with the policyholder. This decision, while unpublished, is a timely one for policyholders, as regulators including the FDIC litigate these claims arising out of the financial crisis. Just this week, a Georgia jury returned a verdict in favor of the FDIC that awarded almost $5 million in damages for claims relating to a bank's negligent management by its former officers and directors.