Hinshaw Legal Team Wins Ninth Circuit Appeal in $48 Million Insurance Coverage Dispute

March 31, 2017

A Hinshaw legal team led by partners Ed Donohue and Peter Isola recently secured an appellate victory in an insurance coverage case at the Ninth Circuit. The claims in the case stemmed from a $48.5 million stipulated judgment obtained by the Federal Deposit Insurance Company (FDIC) against insured bank officers, after the FDIC had been appointed receiver of Merced, California-based County Bank. The bank officers had previously sued the client insurer for breach of contract after coverage was denied and later assigned their rights to the FDIC.

Donohue and Isola prevailed on summary judgement in District Court, successfully arguing that an “insured v. insured” exclusion in the client's policy expressly barred claims by receivers. The FDIC then appealed that decision to the Ninth Circuit.

In its verdict, the Ninth Circuit panel found that the FDIC was "indisputably acting as a receiver and had not filed a derivative action, and that the omitted regulatory exclusion expressly did not 'vary, waive or extend' other provision of the policy." According to Donohue, the decision was notable because of the court's rejection of the FDIC's argument that only a regulatory exclusion could be used to deny coverage, explaining that "the FDIC's position was that this was a categorical imperative, and the court rejected that."

The unpublished opinion was described in a Law360 article titled "9th Circ. Hands BancInsure Win in FDIC Coverage Suit" (subscription required)

The case is Thomas T. Hawker et. al. v. John D. Doak, case number 15-16013, in the United States Court of Appeals for the Ninth Circuit. Read a copy of the decision (PDF)

Hinshaw & Culbertson LLP is a national law firm with approximately 500 attorneys providing coordinated legal services across the United States and in London. Hinshaw lawyers partner with businesses, governmental entities and individuals to help them effectively address legal challenges and seize opportunities. Founded in 1934, the firm represents clients in complex litigation and in regulatory and transactional matters.