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WILMINGTON, Del.—Washington Mutual Inc. has sued 12 insurers that provided it with directors and officers liability coverage in 2008 and 2009, alleging the insurers breached their contracts and asking for $250 million in coverage.
Washington Mutual Inc. v. XL Specialty Insurance Co. et al., filed March 15 in U.S. Bankruptcy Court in Wilmington, Del., also accuses the insurers of breach of good faith and fair dealing.
According to the lawsuit, on Sept. 28, 2008, just 15 days before the Office of Thrift Supervision seized Washington Mutual Bank, several directors and officers of Washington Mutual Inc. ordered a “downstream capital contribution” of $500 million to the bank unit.
A “notice of circumstances resulting in potential claims” was sent to Washington Mutual Inc. and its directors and officers on April 27, 2009, by the official committee of unsecured creditors. A demand letter, indicating the intent to pursue litigation against the directors and officers in the absence of a resolution in connection with the capital contribution was sent Oct. 13, 2011.
Several of the directors and officers and Washington Mutual Inc. then sought coverage for the claims under the 2008-2009 policies, according to the complaint.
The insurers denied coverage citing four policy exclusions: a specified claims exclusion, a prior notice exclusion, an interrelated wrongful acts exclusion and an insured vs. insured exclusion
“Rather than honor their obligations, the 2008-09 insurers have insisted that the D&Os seek payment from some other source, including nearly exhausted insurance polices that (Washington Mutual Inc.) obtained for the 2007-08 period,” says the complaint.
In addition to primary insurer XL Specialty, a unit of the XL Group P.L.C., excess insurers named as defendants in the lawsuit are: National Union Fire Insurance Co. of Pittsburgh, Pa. and AIG Casualty Co., both units of Chartis Inc.; Columbia Casualty Co., a unit of CNA Financial Corp; AXIS Insurance Co., a unit of AXIS Capital Holdings Ltd; ACE American Insurance Co., a unit of ACE Ltd.; Arch Insurance Co., a unit of Arch Insurance Group Inc.; RSUI Indemnity Co., a unit of the RSUI Group Inc.; Houston Casualty Co., a unit of HCC Insurance Holdings Inc.; Lloyds of London; Allied World Assurance Co., a unit of Allied World Assurance Co. Holdings A.G.; and Scottsdale Indemnity Co., a unit of Nationwide Mutual Insurance Co.
Insurers named as defendants either declined comment or could not be reached for comment.
Washington Mutual announced Monday that it has successfully completed its Chapter 11 restructuring process.