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McCullough v. Fidelity & Deposit Co. (1993)
1. Facts.
D issued four directors' and officers'(D O) liability policies to four affiliate banks. D continued to express concern about the banks' financial condition and continued to request Call Reports and other information. As requested by D, the banks provided F D Call Reports1 that described increasing loan losses and delinquencies. The banks provided D a 1984 annual report. The bank did not send the order itself. After a merger of the subsidiary banks, the OCC declared the bank insolvent declared the FDIC(P) as Receiver. P sued the banks' directors and officers for improperly or illegally making, administering, or collecting loans. D denied coverage to the officers and directors under the D O policies.
2. Issue.
The issue is whether, pursuant to § 6(a)(2) of the "claims made" policy, they provided F D sufficient written notice of potential claims during the policy period.
3. Rule.
Section 6(a)
(1) receive written or oral notice from any party that it is the intention of such party to hold the Directors and Officers, or any of them, responsible for a specified Wrongful Act.
American Casualty Co. v. FDIC
Notice of an institution's worsening financial condition is not notice of an officer's or director's act, error, or omission.
FDIC v. Continental Casualty Co.
We agree with courts which hold that the relevant question is whether the insured objectively complied with this provision.
4. Application.
We agree with F D that the policy requires the insured to give notice of specified wrongful acts of officers and directors. § 6 of the policy provides that coverage will be provided if the Bank notifies the insurer of: any act, error, or omission which may subsequently give rise to a claim being made against Directors and Officers, or any of them, for a specified Wrongful Act . . .The policy language makes sense only if we read it to require notice of specified wrongful acts, errors, or omissions that may give rise to a claim. Notice, as provided in the policy, is required in a claims made policy to trigger coverage.
We next must determine whether the insureds gave adequate notice of specified wrongful acts. Critically, the banks did not furnish F D with a copy of the cease and desist order. The banks' annual report simply referred to it. But even if we assume that notice of the issuance of a cease and desist order informs the insurer that the bank is having some difficulty, the issuance of such an order does not identify specified wrongful acts. The banks gave F D no notice of the particular subsidiary involved, the particular agents, officers, or directors involved, the time period during which the events occurred, the identity of potential claimants, and the specific unsound practices made the basis of the order. Because, notice of an institution's worsening financial condition is not notice of an officer's or director's act, error, or omission. American Casualty Co. v. FDIC
We agree with courts which hold that the relevant question is whether the insured objectively complied with this provision. FDIC v. Continental Casualty Co. We consider the notice the insured sends the insurer and determine objectively whether that notice meets the policy requirements.
5. Conclusion.
The insured failed to give F D adequate notice to trigger coverage under the "claims made" insurance policy, we affirm.
AFFIRMED.
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강의를 통해서 기업의 이사 또는 임원을 보호하는 책임보험이 있음을 알 수 있었으며, 통지요건에 관하여 배울 수 있었습니다.
[1] Directors and officers(D&O)의 책임 보험은 기업의 이사 또는 임원으로 근무한 결과 개인이 소송을 당하는 경우 개인 손실로부터 개인을 보호하기 위한 보험입니다. 대부분의 정책은 사기와 범죄를 배제합니다.
[2] 보험 회사는 일반적으로 보험 기간 동안 발생한 wrongful act에 대한 손실을 지불하는 데 동의합니다. 위법 행위는 “오류, 누락, 허위 진술, 의무 위반 등의 행위”로 정의될 수 있습니다. 회사의 법률 고문, 위험 관리자, 최고 경영자 등은 가능한 한 빨리 모든 claim에 대해 통지해야 합니다. 그러나 보험 기간 종료 후 60일을 초과해서는 안 됩니다. 대부분의 D&O 정책에는 적시 통지 요건을 소급 적용할 수 있는 일종의 상호 관련된 불법 행위 조항이 포함되어 있습니다. 이것은 이전에 이루어진 청구와 관련된 경우 청구가 이루어지기 전에 통지해야 할 수도 있다는 의미입니다.
[1] Directors and officers (D&O) liability insurance is insurance coverage intended to protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization. Most policies exclude fraud and criminal offenses. Directors and Officers Liability Insurance, Investopedia, Aug 29, 2021
[2] In the insuring agreement, the insurance company typically agrees to pay the loss for a “wrongful act” that takes place during the policy period. A wrongful act may be defined as “any actual or alleged error, omission, misleading statement, misstatement, neglect, breach of duty or act negligently committed or attempted” by any Director or Officer while acting in their capacity. A typical notice provision requires notice “of any Claim as soon as practicable after the Company’s general counsel, risk manager, chief executive officer or chief financial officer (or equivalent positions) first becomes aware of such Claim, but in no event later than sixty (60) days after the end of the Policy Period.” Most D&O policies contain some form of an “interrelated wrongful acts” provision that can effectively render timely notice requirements retroactive. What this means for policyholders is that you may have to give notice of a claim before it is made if it is related to claims that were previously made. GIVE NOTICE ON YOUR D&O CLAIM ... YESTERDAY, Anderson Kill, February 19, 2015
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