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A federal appeals court on Tuesday affirmed a district court ruling against a Tokio Marine Holdings Inc. unit in complex litigation stemming from a bank scam.
In 2010, Wilmington, Delaware-based WSFS Financial Corp. purchased Wilmington-based Christiana Bank & Trust Co. from the predecessor in interest of Charlotte, North Carolina-based Truist Financial Corp., according to the ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in Houston Casualty Co., WSFS Financial Corp. et al. v. Truist Financial Corp.
After a trust managed by Christiana was scammed in 2014, the trust’s beneficiary threatened litigation and ultimately started arbitration proceedings.
WSFS requested coverage for these legal proceedings, first from its insurer, Tokio Marine unit HCC, and then from Truist. WSFS eventually settled its dispute without assistance from either HCC or Truist, paying $12 million out of pocket.
WSFS then sued HCC, seeking reimbursement for the $12 million. Without admitting liability, HCC settled for $5 million.
Following the settlement, HCC sued Truist, seeking to recover the $5 million it had paid out. WSFS intervened in the litigation, alleging that Truist was further liable for the remaining portion of its $12 million payout.
The U.S. District Court in Wilmington ruled HCC could not recover its $5 million payout, and that Truist was liable for the remaining portion of WSFS’ $12 million payout.
Its rulings were affirmed by a three-judge appeals court panel. On the insurance issue, the appeals panel cited the terms of the indemnification agreement between Truist and WSFS, which “unambiguously states that “Truist’s obligations are ‘net of any proceeds received by (WSFS).’”
“That plain text precludes WSFS from recovering $5 million from Truist, which necessarily precludes HCC — as WSFS’s subrogee — from recovering it as well,” the ruling said, in affirming the lower court.
Attorneys in the case did not respond to requests for comment.