Regulators’ New Focus On Director And Officer Liability Insurance; Other Considerations

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The Federal Deposit Insurance Corporation (the “FDIC”) issued an advisory statement on October 10, 2013, titled “Director and Officer Liability Insurance – Policies, Exclusions, and Indemnification for Civil Money Penalties.”

The advisory statement recommends that directors be well-informed about Directors & Officers (“D&O”) insurance and also be mindful of whether the policy contains “regulatory exclusions.” Although this is good advice in general, it is also self-serving for the FDIC. If an institution is closed by the FDIC, the existence of a regulatory exclusion cuts off one source of recovery for the FDIC and thus limits the ability of the FDIC to recover funds from the bank’s directors and officers post-resolution.

Originally Published in Missouri Independent Bankers Association Director's Supplement - February 2014.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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