McCullough v. Fidelity & Deposit Co.
Fifth Circuit Court of Appeals
2 F.3d 110 (1993)
Fidelity and Deposit Company of Maryland (F & D) (defendant) issued directors’ and officers’ (D & O) liability policies to an affiliate bank and its subsidiary banks. The policy covered claims against directors and officers, provided written notice of claims or potential claims was given to the insurer during the policy period. The insured banks provided F & D with financial reports describing significant loan losses and a worsening financial condition, and making reference to the issuance of a cease and desist order to one of the subsidiary banks by its primary regulator. F & D canceled the banks’ insurance policies. The banks were later declared insolvent. The Federal Deposit Insurance Corporation (FDIC) was declared as receiver, and sued the banks’ directors and officers for improperly making or collecting loans. F & D denied insurance coverage to the directors and officers. FDIC filed a declaratory judgment action against F & D, asking the court to determine whether F & D must provide coverage under the D & O liability policies. The district court found that there was no coverage under the policies because F & D did not receive written notice of any potential claims during the policy period, and granted summary judgment for F & D. FDIC appealed.
Rule of Law
Holding and Reasoning (Davis, J.)