Friday, November 4, 2011

The FDIC Has Fighting Words for Lloyd's of London

The two most common targets of FDIC lawsuits are appraisers who appraised properties for bad loans held by failed lenders and former officers and directors of failed lenders.  They're in the same boat.

In this case, a Lloyd's of London syndicate issued $10 million of insurance coverage for the officers and directors of First National Bank of Arizona in June 2008. The very next month, after a merger with its affiliate First National Bank of Nevada, the bank failed and the FDIC was appointed receiver.  That put the FDIC in the position of pursuing potential claims against the parties it could blame for causing the bank's losses.  The FDIC's lawyers quickly focused their sights on the bank's officers and directors, blaming them for making risky loans.

The Lloyd's of London insurance syndicate denied coverage for the FDIC's claims.  Meanwhile, the FDIC sued two of the officers/directors and obtained judgments against them for $20 million each and settled claims against other officers/directors for over $3 million.  Now, the FDIC is suing the Lloyd's of London syndicate about the denial of insurance coverage and it has some fighting words for Lloyd's:

In all the FDIC seeks alleged compensatory damages of at least $43,500,000 against the Lloyd's syndicate and unspecified punitive damages.