Lloyd’s of London does not have to pay the U.S. government’s Federal Deposit Insurance Corp. $3 million in judgment interest because the FDIC waited too long —18 months after a final judgment — to try to collect it.
The action stems from insurance proceeds that Lloyd’s paid to the FDIC under an insurance policy issued to Omni Financial Services for the period of June 9, 2008 through June 9, 2009. The policy was subject to a maximum aggregate liability limit of $10 million for the policy period.
Timothy C. Batten, Sr., U.S District Judge for the Northern District of Georgia, ruled that because the underlying judgment provided coverage in a specific amount, that was the final amount. Because the FDIC did not demand interest before this judgment was entered, its demand was not timely.
“Allowing FDIC to recover millions of dollars in pre-judgment interest without having timely demanded that interest would be unjust and inconsistent with Georgia law regarding the recoverability of pre-judgment interest,” Batten wrote in rejecting FDIC’s bid.
The dispute over the interest payment came about following an investigation into improprieties in Omni Bank’s loan and redevelopment departments. the bank was closed, and the FDIC was appointed as receiver. The FDIC sent a demand letter to various Omni Bank directors and officers and copied Lloyd’s; it also sent a separate letter to counsel for Lloyd’s. Lloyd’s underwriters denied coverage, triggering three separate lawsuits in 2012.
Two of these actions were settled and the court granted summary judgment in the other (which was affirmed by the Eleventh Circuit Court of Appeals). Specifically, on October 11, 2016, the court entered an order finding that the policy provided coverage in the amount of $10 million.
On April 2, 2018—18 months after the final judgment was entered in the last remaining case—the FDIC informed Lloyd’s for the first time that it believed it was liable for approximately $3 million in pre-judgment interest. Neither the FDIC nor any of Omni’s officers or directors had mentioned the statute or prejudgment interest before this.
Lloyd’s responded that the FDIC had waived any rights under the statute and on July 27, paid the $10 million policy limit to the FDIC in addition to federal post-judgment interest.
The FDIC sued to collect the prejudgment interest and Lloyd’s sought summary judgment to dismiss the FDIC claim.
The court, citing past cases, said a party may not recover interest under Georgia’s statute unless it has expressly demanded the interest before entry of a final judgment as to the principal amount due because the party opposing the award of interest is entitled to an opportunity to contest it before judgment.
The parties disputed whether the FDIC’s demand was timely. From FDIC’s perspective, the earlier judgment resolved only whether coverage existed under the policy, not a final amount due. However, as Lloyd’s pointed out, the final judgment stated that its policy provided coverage for the $10 million in stipulated judgments that the FDIC obtained against the insured defendants
The case is Federal Deposit Insurance Corporation, As Receiver For Omni National Bank, Plaintiff, v. Certain Underwriters At Lloyds, London.
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