Opinion ID: 156794
Heading Depth: 3
Heading Rank: 3

Heading: Allocation of Recoveries Under the Bond Provisions

Text: 47 The FDIC also asserts that Defendants cannot obtain relief under Rule 60(b) because (1) they failed to preserve their rights to subrogation or assignment in this case; (2) they have no subrogation or assignment rights to the collateral under the terms of the bonds until Defendants have paid on the bonds; (3) they cannot acquire subrogation rights to collateral already liquidated; and (4) they failed to preserve any subrogation or assignment claim they may have had against the general receivership estate. All of these issues are resolved by Defendants' reliance on section 7(c) of the bonds rather than on sections 7(a) and 7(b), the assignment and subrogation provisions of the bonds. 48 Sections 7(a) and 7(b) of the bonds provide that after the insurer makes payment under the bond, the insurer is entitled to the insured's rights of recovery by assignment or subrogation against any person or entity to the extent of such payment. The FDIC asserts Defendants have not effectively pursued their rights under these sections. Although Defendants may not have pursued their assignment or subrogation rights under the bonds, however, they nevertheless remain entitled to a credit for net recoveries obtained by the FDIC on the losses covered by the bonds pursuant to section 7(c) of the bonds. See United Pac. Ins. Co., 20 F.3d at 1083; see also FDIC v. Fidelity & Deposit Co. of Md., 827 F.Supp. 385, 389 (M.D.La.1993), aff'd 45 F.3d 969 (5th Cir.1995). 49 Section 7(c) provides the manner in which recoveries by either the insured or the insurer must be allocated. Section 7(c) provides that recoveries shall be applied, net of the expense of such recovery, first, to satisfy the insured's loss in excess of the amount paid under the bond, second, to the insurer as reimbursement of amounts paid in settlement of the insured's claim, and third, to the insured to satisfy any deductible amount. Therefore, if the FDIC has obtained a net recovery on the loss which exceeds the difference between its total loss and the bond limits, Defendants are entitled to a credit from the FDIC's net recovery. 4 The failure to effectively pursue the rights provided by sections 7(a) and 7(b) of the bonds does not affect the operation of section 7(c). 50