Insured v. Insured Exclusion Bars Coverage When FDIC Acts as Receiver

The United States Court of Appeals for the Ninth Circuit, applying California law, has held that an insured v. insured exclusion in a bank’s insurance policy bars coverage for a claim brought by the Federal Deposit Insurance Corporation (FDIC) in its capacity as a receiver of the insured bank. Hawker v. Doak, 2017 WL 1147131 (9th Cir. Mar. 27, 2017).

The exclusion provided that “[t]he Insurer shall not be liable to make any payment for loss in connection with any claim based upon, arising out of, relating to, in consequence of, or in any way involving … a claim by, or on behalf of, or at the behest of, any other insured person, the company, or any successor, trustee, assignee or receiver of the company[.]” The FDIC admitted that it was acting as a receiver, but argued that the exclusion did not apply to the FDIC as receiver. The court rejected that interpretation, noting that the plain language of the policy excluded coverage. The court also noted that the omission of a regulatory exclusion present in a prior policy did not change its analysis: “the fact that an exclusion is deleted from a policy does not necessarily mean that everything that was included in the exclusion is now covered under the policy.” The court also held that extrinsic evidence offered by the FDIC did not make the exclusion reasonably susceptible to its proposed interpretation. Finally, the court held that the case was distinguishable from other cases where federal courts have not applied insured v. insured exclusions to bar claims by the FDIC as receiver because none of the cases involved policies with an express exclusion for claims brought by a receiver.