An insurance company says it’s not responsible for covering former officers of failed ShoreBank as the Federal Deposit Insurance Corp. seeks to recoup $73 million in losses.
St. Paul Mercury Insurance Co. on Tuesday sued five former ShoreBank executives and the FDIC, which in August 2013 had filed a lawsuit against the officers, saying they were negligent in making nearly 30 bad loans that contributed to the Chicago-based bank’s demise in 2010. The FDIC was appointed the bank’s receiver.
St. Paul said it had issued a management liability policy to ShoreBank and noted in the lawsuit that the officers had requested coverage.
But St. Paul said the policy was effective from November 2008 to November 2009. At that point, the policy wasn’t renewed, the lawsuit said. An automatic 60-day extension kicked in but that ended on Dec. 31, 2009.
“The ShoreBank action was filed on Aug. 16, 2013, after the expiration of the policy period, Nov. 1, 2009, and the 60-day automatic discovery period, Dec. 31, 2009, for the policy,” said the lawsuit, filed in federal court in the Northern District of Illinois.
On Oct. 30, 2009, the bank’s parent, ShoreBank Corp., sent a letter to the insurer alerting it of potential claims, but no other letters were sent before the policy and extension expired, and the October letter didn’t include specific information as required by the policy, the lawsuit said.
The FDIC declined to comment on Thursday. The insurer wants the court to rule that it’s not responsible for any coverage because no claims were made during the policy period or extension.