Rivero Mestre wins first decision in banking crisis on Insured v. Insured issue in D&O insurance dispute

MIAMI – Law360 reported on Rivero Mestre’s representation of Westernbank’s former officers and directors in their suit against Chartis Insurance Company (“Chartis”):

U.S. District Judge Gustavo A. Gelpí also rejected a group of insurers’ arguments that the FDIC cannot try to force them to provide liability coverage, rejecting the group’s argument that a so-called insured vs. insured policy exclusion barred the FDIC’s claims against them because the regulator is now Westernbank’s receiver.

. . .

The insurers had argued that the FDIC, since it stands in the shoes of Westernbank, should be barred from bringing the suit under a policy exclusion that blocks coverage for claims brought by one insured against another.

But Judge Gelpí wrote Tuesday that the exclusion is intended to protect insurance companies from collusive suits among insured parties and that the FDIC would not reap the benefits enjoyed by those kinds of actors.

“The FDIC’s role as a regulator sufficiently distinguishes it from those whom the parties

intended to prevent from bringing claims under the exclusion,” the order said.

The judge also noted the FDIC had sued on behalf of depositors, account holders and a depleted insurance fund, as opposed to Westernbank shareholder W Holding. (Click here to see full article; click here to see the court order).

Andrés Rivero, Jorge A. Mestre, Alan H. Rolnick, Charlie Whorton, and M. Paula Aguila of Rivero Mestre, represent six directors and officers of Westernbank of Puerto Rico. Over the course of fifty-two years, Westernbank grew from a small, community institution into one of the largest, most profitable, and healthiest banks in the Commonwealth of Puerto Rico. It did so by working hand in hand with the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (“OCFI”) and with federal regulators, rising from humble beginnings as a local Mayaguëz bank to become the Commonwealth’s second-largest, with branches throughout the island. Federal regulators and the OCFI conducted annual examinations and awarded Westernbank the highest possible score for twelve consecutive years, from 1993 to 2005. In 2010, while Westernbank, like everyone else, was working hard to ride out a global recession, the OCFI closed its doors, seized it, and appointed the FDIC as receiver. Now, the FDIC demands that Westernbank’s long-serving directors, officers, and their spouses be held personally liable for operating a bank to which federal regulators gave the highest marks until months before a worldwide economic collapse.