AIG does not give up easily.
As reported here in April, both the District of Puerto Rico and the First Circuit ruled that AIG could not evade coverage for claims brought by Westernbank of Puerto Rico against its former officers and directors, and ordered AIG to pay defense costs, even though the FDIC “stepped into the shoes” of Westernbank and could be considered an insured.
In W Holding Co. v. AIG Ins. Co., (D. P.R. July 2014), AIG and other excess insurance companies brought a new motion for summary judgment – raising this exact same issue – and lost again. AIG and the insurance companies also lost on the issue of whether a group of claims relating to one set of loans originated by the bank were interrelated with claims for all loans alleged to have been made under allegedly similar, reckless loan origination policies.
Noting that “AIG first poses a question the court already addressed”, the District of Puerto Rico ruled again that the exclusion does not apply, for all of its previously stated reasons, including some that would apply to cases not involving the FDIC or banks taken over by any other entity, such as the fact that the claims were not collusive, which was noted to be the presumed basis for Insured vs. Insured exclusions, even though the particular exclusion at issue here states that it applies whether or not the claim is collusive.
Turning to new business, the court also ruled the new claims brought by the FDIC did not relate back to an earlier set of claims that concerned a single set of loans made to en entity known as Inyx. The newer FDIC claims concern several sets of loans, including, but not limited to the Inyx loans. The court noted that AIG and other insurance companies want the newer claims to relate back to the first set, which were handled under policies in effect from 2006-07, because that would leave a partially reduced set of limits to cover the new claims. In contrast, the D&Os plus the FDIC wanted the new claims covered under a 2008-09 tower whose limits have both previously been eroded.
Reviewing the facts of both sets of claims, the court ruled that – apart from the Inyx loans common to both claims – nothing else united them more than an allegedly common practice of loose and even reckless loan origination procedures. The court quoted a Ninth Circuit decision stating “the mere existence of an aggressive loan policy is insufficient as a matter of law to transform disparate acts and omissions made by five directors in connection with issuance of loans to [many] borrowers into a single loss.”
Accordingly, the court ruled that the Inyx loan portion of the new claims would be covered under the 2006-07 policies, while the remainder of the new claims would be handled under the 2008-09 policies, and in so doing, maximizing the amount of limits available to cover all of the claims.