In a 2-to-1 unsigned decision which was not released for publication nor for citation within the Ninth Circuit, a panel of the Ninth Circuit1 reversed a District Court's declaratory judgment that a failed bank's D&O policy covered the bank's directors' and officers' alleged fiduciary breaches that allegedly caused the alleged bank to fail. FDIC v. Bancinsure, Inc., ___ F. App'x ___, No. 14-56132, 2017 WL 83489 (9th Cir. January 10, 2017). Chief Judge Rawlinson dissented.
In a fairly unique opinion, in which the two judges in the unsigned majority included one Judge from the Court of International Trade where apparently insurance issues are not often found, the appellate panel held, in dicta and in effect, that well, no, the D&O policy's "insured-to-insured" exclusion preempted Federal law and would bar the Federal Deposit Insurance Corporation from suing the banks' directors and officers for their alleged breaches of fiduciary duties even if the bank's board of directors had authorized a direct action. Here, the bank's board of directors had not authorized a direct action against the alleged perpetrators, but even if that fact existed (which, again, it did not) it would not have made any difference, the two judges wrote, because the insured-to-insured exclusion would have barred the FDIC's lawsuit in this case.
Since the insured-to-insured exclusion is universally found in D&O policies, future cases may see this decision cited for its eye-opening dicta, even in cases filed in courts outside of the Ninth Circuit's boundaries.
In addition, the appellate panel deciding this insurance question offered their opinion on banking and finance law that, although this case did not present the fact of a shareholder resolution authorizing a derivative action to sue the alleged perpetrators, either, i.e., there was no shareholder resolution to sue the former directors and officers of the corporation, that even if there was such a corporate resolution that it would not have made any difference.
1It may be of interest to readers that none of the three judges on this panel decided the recent case involving immigration and refugees.
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