MIAMI – The American Banker reported on Rivero Mestre’s representation of six officers and directors of Westernbank, a Puerto Rican bank in FDIC receivership. Andrés Rivero, Jorge A. Mestre, Alan H. Rolnick, M. Paula Aguila, and Charlie Whorton of Rivero Mestre, represent the D&Os in their suit against Chartis to obtain coverage in the investigation, and potential lawsuit, brought by the FDIC. The complaint was filed on October 6, 2011, and Chartis has yet to file a response (Click here to see complaint).
The American Banker reported that
[t]he case of WesternBank’s directors illustrates how much is now up in the air. The Mayaguez, Puerto Rico bank was seized in April, 2010 by the FDIC, which seized its assets and transferred them to Banco Popular. Following the failure, the FDIC notified WesternBank’s management and directors that it was considering a $367 million suit against them.
The directors hired Miami law firm Rivero Mestre to defend them and notified its D&O insurer, AIG subsidiary Chartis, that it wished to tap its $50 million policy to cover legal fees. Chartis told the law firm that it did not intend to pay for the board’s defense or subsequent judgments, according to a complaint filed by the directors.
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The firm filed its suit in Mayaguez, Puerto Rico, WesternBank’s home town, which Rivero describes as a “favorable” location. The FDIC has not yet intervened in the case, though it has the legal right do so.
WesternBank’s D&O policy does not include regulatory exclusion provisions, meaning that “the battle’s going to be on the insured versus insured issue,” Rivero says.
On the issue of D&O coverage, the interests of the FDIC and the directors are closely aligned. If directors are able to tap insurance coverage, Rivero says, he’ll likely try to hand over the policy proceeds to the FDIC in exchange for the agency’s agreement to drop claims against the personal assets of the bank’s former officials.
Rivero argues that the insurer rejected his client’s claim because it wants to hold the line against future litigation. If Chartis pays out on one claim, he says, the insurer would likely face a flood of similar claims.
“As soon as they pay somebody it’s going to break the dam,” he says. “We have another bank that we have done work for, and they’re insured by Chartis,” Rivero says. “We’re expecting a similar situation there, unless we set a precedent.”
About Rivero Mestre LLP
Rivero Mestre, from its offices in Miami and New York, represents clients from investigation to verdict and appeal in complex business disputes in U.S. federal courts, state courts, and domestic and international arbitration proceedings. The firm’s practice focuses primarily on representing corporate and institutional clients in a broad range of complex commercial disputes including financial institution matters, intellectual property disputes, and litigation and arbitration relating to Latin American trade and investment. For more information, visit www.riveromestre.com.