Washington Mutual Sues Its D&O Insurers, Seeks Up to $250M

By | March 26, 2012

Washington Mutual Inc. recently filed a lawsuit against a dozen insurance companies that had provided directors’ and officers’ coverage. The troubled bank holding company that just completed its Chapter 11 restructuring process says its insurers improperly denied D&O claims.

Insurers named in the lawsuit include: XL Specialty; National Union Fire Insurance; AIG Casualty; Columbia Casualty; AXIS Insurance; ACE American Insurance; Arch Insurance; RSUI Indemnity; Houston Casualty; Lloyd’s of London; Allied World Assurance; and Scottsdale Indemnity.

These insurers provided D&O liability coverage for Washington Mutual in 2008 and 2009. Washington Mutual is looking to recoup up to $250 million.

According to the lawsuit, filed on March 15, a number of directors and officers at Washington Mutual ordered downstream capital reallocation of $500 million to its troubled banking unit in 2008, just days before the company was seized by the Office of Thrift Supervision.

In 2009, unsecured creditors of Washington Mutual sent a notice of circumstances resulting in potential claims to the company and its directors and officers. The notice was followed by an intent to sue directors and officers for the $500 million capital reallocation unless a resolution is reached.

Some of these directors and officers filed D&O claims but insurers denied claims and pointed to policy exclusions including a prior notice exclusion and an interrelated wrongful acts exclusion. The case is Washington Mutual Inc. v. XL Specialty Insurance Co. et al., United States Bankruptcy Court, District of Delaware.

Topics Lawsuits Carriers Washington Directors Officers

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