When The FDIC Comes Calling: Protecting D&O Coverage For A Failed Bank's Directors And Officers

Article by William G. Passannante and Raymond A. Mascia Jr.*

Originally published in AKO Financial Services Alert, December, 2009.

The Federal Deposit Insurance Corporation has begun the process of pursuing the directors and officers of failed FDIC-insured financial institutions by sending "claim letters" to former officials informing them of the FDIC's intent to sue. As of December 1, 2009, 124 FDIC-insured banks have failed this year—over four times the number in 2008—and the FDIC most likely will allege that some former directors and officers are responsible for the failures, as it has done after roughly a quarter of all seizures since 1985. In addition to FDIC-related claims, ousted directors and officers may in the coming months face shareholder claims, securities and ERISA class action suits, and even criminal investigations and prosecutions.