A federal appeals court on Tuesday upheld a district court’s ruling against a unit of Tokio Marine Holdings Inc. in complex litigation stemming from a bank fraud.
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 of the Third 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 defrauded in 2014, the trust’s beneficiaries threatened litigation and eventually entered arbitration.
WSFS sought coverage for these legal proceedings, first from its insurer, Tokio Marine unit HCC, and then from Truist. WSFS eventually settled its dispute without help from either HCC or Truist, paying $1
2 million out of pocket.WSFS then sued HCC, seeking reimbursement for $12 million. Without admitting liability, HCC settled for $5 million.
After the settlement, HCC sued Truist to recover the $5 million it had paid out. WSFS intervened in the lawsuit, arguing that Truist was further liable for the remaining portion of its $12 million payout.
The U.S. District Court in Wilmington ruled that HCC could not recover its $5 million payout and that Truist was liable for the remaining portion of WSFS’s $12 million payout.
Its ruling was upheld by a three-judge panel of the Court of Appeal. On the insurance issue, the appellate panel referred to the terms of the indemnification agreement between Truist and WSFS, which “unequivocally states that “Truist’s obligations are ‘net of any revenue received by (WSFS)’.”
“The plain text bars WSFS from recovering the $5 million from Truist, which necessarily bars HCC — as WSFS’s subrogee — from recovering it as well,” said the ruling, which affirmed the lower court.
Attorneys in the case did not respond to requests for comment.
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