Court Opinion

ID: 147942
Source: CourtListenerOpinion
Date Created: 2010-06-07 14:10:34+00
Date Added: 2024-06-11T08:06:36.365078
License: Public Domain

09-1052-cv
     Federal Deposit Insurance Corporation v. Great American Insurance Company

 1                        UNITED STATES COURT OF APPEALS
 2                             FOR THE SECOND CIRCUIT
 3                            _______________________
 4
 5                                August Term 2009
 6
 7       (Argued: November 16, 2009                   Decided: June 7, 2010)
 8
 9                             Docket No. 09-1052-cv
10                            _______________________
11
12                   FEDERAL DEPOSIT INSURANCE CORPORATION,
13                AS RECEIVER OF CONNECTICUT BANK OF COMMERCE,
14
15                                 Plaintiff-Counter-Defendant-Appellant,
16
17                                    -against-
18
19                      GREAT AMERICAN INSURANCE COMPANY,
20
21                                 Defendant-Counterclaimant-Appellee.
22
23
24   Before:     POOLER and WESLEY, Circuit Judges, and KEENAN,
25               District Judge.*
26                          _______________________

27          Appeal from an order of the United States District Court for

28   the District of Connecticut (Bryant, J.) entered on February 13,

29   2009, granting summary judgment to Defendant in an action for

30   breach of an insurance contract, and finding that Defendant was

31   entitled to rescind a fidelity bond on the basis of material

32   misrepresentations      contained    in   Plaintiff’s     application       for

33   insurance.

34          AFFIRMED.
     *
          The Honorable John F. Keenan, United States District Judge
     for the Southern District of New York, sitting by designation.
 1                           _______________________
 2
 3                          KYLE M. KEEGAN, CHRISTOPHER D. KIESEL, Roy,
 4                          Kiesel, Keegan & DiNicola, PLC, Baton Rouge,
 5                          LA; JOHN B. HUGHES, Assistant United States
 6                          Attorney, for NORA R. DANNEHY, Acting United
 7                          States Attorney for the District of
 8                          Connecticut; LAWRENCE H. RICHMOND, JACLYN C.
 9                          TANER, Federal Deposit Insurance Corporation,
10                          Arlington, VA, for Plaintiff-Counter-
11                          Defendant-Appellant.
12
13                          F. JOSEPH NEALON (Jennifer E. Lattimore on
14                          the brief), Eckert Seamans Cherin & Mellott,
15                          LLC, Washington, DC; MARGARET LITTLE, Little
16                          & Little, Stratford, CT for Defendant-
17                          Counterclaimant-Appellee.
18                           _______________________
19

20   KEENAN, District Judge:

21                                I. BACKGROUND

22         The following facts are not in dispute.      In 1999, Connecticut

23   Bank of Commerce (“CBC”), having assets of approximately $89

24   million, entered into a Purchase and Assumption Agreement (the “P&A

25   Agreement”) to acquire MTB Bank (“MTB”), a New York bank with

26   approximately $299 million in assets.      CBC purchased substantially

27   all   of   MTB’s   assets,   including   its   factoring   unit.   This

28   transaction required Federal Deposit Insurance Corporation (“FDIC”)

29   approval, which MTB sought on August 4, 1999 and obtained on

30   February 5, 2000.     At the time MTB and CBC entered into the P&A

31   Agreement, MTB had a 15-year insurance relationship with Lloyd’s of

                                         2
 1   London and was covered by a Lloyd’s fidelity bond set to expire on

 2   June 30, 2000.

 3         Several events which occurred prior to the closing of the P&A

 4   Agreement     bear   on   the     contract    dispute    at   hand.      First,   in

 5   September of 1999, MTB management discovered that one or more of

 6   MTB’s agents advanced $950,000 based on fraudulent invoices under

 7   a factoring agreement with a company called Harmony Designs, Inc.

 8   MTB submitted a claim for indemnity under the Lloyd’s fidelity

 9   bond.    However, MTB eventually settled with Harmony Designs for an

10   amount which reduced its loss below the deductible of the Lloyd’s

11   bond; therefore MTB never recovered payment from Lloyd’s for this

12   claim.    Additionally, in March 2000, the president and several

13   other officers of MTB were indicted in an alleged conspiracy

14   involving the importation of Argentinian minerals.                    MTB submitted

15   a claim to Lloyd’s for its losses relating to the conduct resulting

16   in the indictments.          On March 31, 2000, the P&A Agreement was

17   finalized.

18         After the completion of the P&A Agreement, CBC was added to

19   MTB’s insurance policy with Lloyd’s.             As the bond expired on June

20   30,   2000,   CBC    began   to    seek   renewal   of    the   Lloyd’s     policy.

21   However, Lloyd’s was concerned about the two claims that MTB had

22   made, and it refused to renew coverage unless CBC representatives

23   went to Lloyds’ headquarters in London for a meeting.                   No one from

24   CBC went to London.       Two weeks prior to the bond’s expiration, CBC

                                               3
 1   requested a 30-day extension of coverage, but Lloyd’s declined to

 2   offer any extension beyond the June 30, 2000 expiration date.

 3        CBC then sought the assistance of an insurance broker to

 4   procure fidelity insurance to replace the Lloyd’s policy.        CBC’s

 5   Chief Financial Officer, Barbara Van Bergen (“Van Bergen”), filled

 6   out an application for insurance from Reliance Insurance Company

 7   (the “Reliance application”) on behalf of CBC.   Van Bergen signed

 8   the Reliance application on June 19, 2000 and gave it to CBC’s

 9   insurance broker, who, following common practice in the industry,

10   submitted it to multiple insurers to receive quotes.   On June 30,

11   2000, CBC’s insurance broker submitted the Reliance application to

12   Great American Insurance Company (“GAIC”).

13        The application contained the following questions:

14        List all losses sustained during the past three years,
15        whether reimbursed or not;
16
17        [Does CBC have] any knowledge of or information
18        concerning any occurrence or circumstance whatsoever
19        which might materially affect this [insurance] proposal?;
20
21        Has any insurance of this nature been       declined   or
22        cancelled during the past three years?
23
24   Van Bergen on behalf of CBC answered “None,” “No,” and “No,” to

25   these three questions, respectively.

26        The Reliance application included the following affirmance

27   above the signature line:     “The Applicant represents that the

28   information furnished in this application is complete, true and
                                      4
 1   correct.         Any   misrepresentation,       omission,     concealment,    or

 2   incorrect statement of a material fact, in this application or

 3   otherwise, shall be grounds for the rescission of any bond issued

 4   in reliance upon such information.”

 5         In late June, GAIC issued a quote for fidelity insurance to

 6   CBC   on   the    basis   of   information      contained    in   the   Reliance

 7   application.      On July 19, 2000, GAIC issued a fidelity bond to CBC

 8   with coverage retroactive to June 30, 2000.                  After GAIC bound

 9   coverage, CBC additionally completed a GAIC insurance application.

10   Just as she did in the Reliance application, Van Bergen stated in

11   the GAIC application that CBC had not sustained any losses and no

12   insurance had been declined or cancelled in the prior three years;

13   however, the GAIC application did not contain a question regarding

14   any knowledge or information which might materially affect the

15   insurance proposal.        The GAIC fidelity bond states that “[t]he

16   Insured    represents      that   the       information     furnished   in    the

17   application for this bond is complete, true and correct.                     Such

18   application constitutes part of this bond.            Any misrepresentation,

19   omission, concealment or any incorrect statement of a material

20   fact, in the application or otherwise, shall be grounds for the

21   rescission of this bond.” The fidelity bond further specified that

22   GAIC issued coverage “in reliance upon all statements made and

23   information furnished to the Underwriter by the Insured in applying

24   for this bond.”

                                             5
 1        When the Reliance application was completed and submitted, CBC

 2   knew about both the Harmony Designs claim and the indictments of

 3   MTB’s officers.       CBC also knew that Lloyd’s had declined to renew

 4   or extend coverage of its fidelity bond.                 The GAIC agent who

 5   reviewed CBC’s application testified that GAIC would not have

 6   issued the fidelity bond had CBC disclosed this information.

 7        CBC went into FDIC receivership on June 26, 2002.             On January

 8   18, 2006, the FDIC, standing in the shoes of CBC, brought this suit

 9   claiming that GAIC breached its contractual duty by dishonoring

10   claims for coverage under the fidelity bond for losses sustained by

11   CBC related to a loan scheme that was used to fund the acquisition

12   of MTB.   The district court granted summary judgment to GAIC on the

13   ground    that   it    properly    rescinded    the   fidelity   bond   due   to

14   omissions and misstatements made by CBC in its application for the

15   fidelity bond.

16                                     II. DISCUSSION

17                              A. Standard of Review

18        We review de novo the district court’s grant of summary

19   judgment.    N.Y. State Rest. Ass’n v. N.Y. City Bd. of Health, 556

20   F.3d 114, 122 (2d Cir. 2009).               Summary judgment is appropriate

21   where “the pleadings, the discovery and disclosure materials on

22   file, and any affidavits show that there is no genuine issue as to

23   any material fact and that the movant is entitled to judgment as a

24   matter of law.”       Fed. R. Civ. P. 56(c).       The moving party bears the
                                             6
 1   initial burden of demonstrating “the absence of a genuine issue of

 2   material fact.”           Celotex Corp. v. Catrett, 477 U.S. 317, 323

 3   (1986).       Where the moving party meets that burden, the opposing

 4   party must come forward with specific evidence demonstrating the

 5   existence of a genuine dispute of material fact.                        Anderson v.

 6   Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).                    In determining

 7   whether there is a genuine issue as to any material fact, “[t]he

 8   evidence of the non-movant is to be believed, and all justifiable

 9   inferences are to be drawn in his favor.”              Id. at 255.        To defeat

10   a summary judgment motion, the non-moving party “must do more than

11   simply show that there is some metaphysical doubt as to the

12   material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

13   475    U.S.    574,   586    (1986),   and    “may   not   rely    on    conclusory

14   allegations or unsubstantiated speculation,” Scotto v. Almenas, 143

15   F.3d 105, 114 (2d Cir. 1998).           Where it is clear that no rational

16   finder of fact “could find in favor of the nonmoving party because

17   the evidence to support its case is so slight,” summary judgment

18   should be granted.          Gallo v. Prudential Residential Servs., Ltd.

19   P’ship, 22 F.3d 1219, 1224 (2d Cir. 1994).

20                                  B.    Section 1823(e)

21          The FDIC argues that 12 U.S.C. § 1823(e), which protects the

22   FDIC from defenses not apparent on the face of an asset it acquires

23   as    receiver   of   a     failed   bank,    bars   GAIC’s   misrepresentation

24   defense.      In pertinent part, Section 1823(e) reads as follows:

                                               7
 1        No agreement which tends to diminish or defeat the
 2        interest of the [FDIC] in any asset acquired by it . .
 3        . as receiver of any insured depository institution,
 4        shall be valid against the [FDIC] unless such
 5        agreement-
 6
 7                   (A) is in writing,
 8
 9                   (B) was executed by the depository
10                   institution and any person claiming an
11                   adverse interest thereunder, including the
12                   obligor, contemporaneously with the
13                   acquisition of the asset by the depository
14                   institution,
15
16                   (C) was approved by the board of directors of
17                   the depository institution or its loan
18                   committee, which approval shall be reflected
19                   in the minutes of said board or committee,
20                   and
21
22                   (D) has been, continuously, from the time of
23                   its execution, an official record of the
24                   depository institution.
25
26        The FDIC contends that the district court erred by limiting

27   the statute’s definition of “asset” to exclude fidelity bonds,

28   and thus the rescission clause of the bond should not apply.    Two

29   Courts of Appeals previously have decided this issue:   the Sixth

30   Circuit, which held similarly to the district court that fidelity

31   bonds are not assets under the purview of Section 1823(e)(1), and

32   the Tenth Circuit, which held that a fidelity bond is an “asset.”

33   This Court has never decided whether a fidelity bond is an asset

34   for the purposes of Section 1823(e)(1), although, as discussed in

35   detail below, that is not necessarily determinative of this

36   appeal.   Nonetheless, we believe the district court erred in

37   ruling that the fidelity bond is not an “asset.”

                                      8
 1        We agree with the Tenth Circuit’s holding in Federal Deposit

 2   Insurance Corporation v. Oldenburg, 34 F.3d 1529 (10th Cir.

 3   1994), that a fidelity bond qualifies as an “asset” for the

 4   purposes of Section 1823(e).   Citing Eighth Circuit precedent,

 5   that court held that if a statute’s plain language is unambiguous

 6   - as is Section 1823(e) - it must apply that patent meaning

 7   unless the result would be “demonstrably at odds with the

 8   intentions of its drafters.”   Id. at 1552 (citing N. Ark. Med.

 9   Ctr. v. Barrett, 962 F.2d 780, 787 (8th Cir. 1992)).

10        We do not believe that applying Section 1823(e) to a

11   fidelity bond is beyond the intent of Congress.   As the Tenth

12   Circuit found:

13        Federal regulators expressly rely on a bank’s fidelity
14        coverage as one factor in determining whether a bank is
15        financially capable of continuing its operations.
16        While it is true that insurance contracts, due to their
17        conditional nature, are not as prone to instantaneous
18        assessment as promissory notes, it does not logically
19        follow that unrecorded or collateral agreements which
20        may diminish or defeat the interest of the Corporation
21        in fidelity bonds should therefore be exempt from
22        coverage under the statute. Despite the conditional
23        nature of some insurance contracts, the FDIC’s
24        evaluation of a bank’s fidelity bonds both before and
25        during the course of a purchase and assumption
26        transaction is certainly facilitated if the acquired
27        bonds are not subject to side agreements or collateral
28        conditions completely beyond the scope of the bonds.
29        Banking examiners who inspect and evaluate the bank
30        records reasonably expect the records of regular
31        banking transactions to reflect all of the rights and
32        liabilities of the bank regarding such regular banking
33        transactions. This proposition is as applicable to
34        fidelity bonds as it is to promissory notes and
35        negotiable instruments.
36
37   Id. at 1553-54 (internal quotation marks and citations omitted).
                                      9
 1        We do not accept the position of the Sixth Circuit as set

 2   forth in Federal Deposit Insurance Corporation v. Aetna Casualty

 3   & Surety Company, 947 F.2d 196 (6th Cir. 1991).   Congress made no

 4   real effort to limit the term “asset” in the statute.   Congress

 5   knew, when passing 12 U.S.C. § 1823(e), that the FDIC as receiver

 6   acquires all of a failed banks rights, not just traditional

 7   banking assets.   Moreover, despite a fidelity bond’s conditional

 8   nature, this interpretation is most consistent with our previous

 9   holding that the term “asset” in Section 1823(e) “should be

10   interpreted broadly.”   Inn at Saratoga Assocs. v. Fed. Deposit

11   Ins. Corp., 60 F.3d 78, 81-82 (2d Cir. 1995).

12        Even though we consider the fidelity bond to be an asset

13   under 12 U.S.C. § 1823(e), this provision exists to bar “secret”

14   defenses which would diminish the FDIC’s interest in a failed

15   bank’s assets.    See Timberland Design, Inc. v. First Serv. Bank

16   for Sav., 932 F.2d 46, 49-50 (1st Cir. 1991); Howell v. Cont’l

17   Credit Corp., 655 F.2d 743, 746 (7th Cir. 1981); see also Fed.

18   Sav. & Loan Ins. Corp. v. Two Rivers Assocs., Inc., 880 F.2d

19   1267, 1275 (11th Cir. 1989) (FSLIC acting as receiver).   Defenses

20   raised by the bond itself may prevent recovery by the FDIC.    It

21   is GAIC’s position that rescission of the fidelity bond was in

22   accord with its terms allowing such action on the basis of a

23   “misrepresentation, omission, concealment or any incorrect

24   statement of a material fact, in the application or otherwise.”

25   As the grounds for rescission were plainly stated on the face of
                                      10
 1   the bond, there is nothing secret about GAIC’s misrepresentation

 2   defense, and no cause to apply Section 1823(e).   To honor the

 3   FDIC’s position and allow it to recover despite

 4   misrepresentations in CBC’s insurance application would be to

 5   strike the rescission clause from the bond.

 6        The FDIC theorizes that the district court confused the

 7   Reliance application with GAIC’s own insurance application such

 8   that, in allowing GAIC to rescind the fidelity bond on the basis

 9   of statements in the Reliance application, the court applied a

10   defense beyond the face of the bond.   We find no such error,

11   first and foremost, because the fidelity bond itself specified

12   that “any misrepresentation, omission, concealment or any

13   incorrect statement of a material fact, in the application or

14   otherwise, shall be grounds for the rescission of this bond.”

15   (emphasis added).   There is no basis for the FDIC’s argument that

16   the fidelity bond incorporated only GAIC’s own application and

17   not the Reliance application.    Provisions in the bond specifying

18   that GAIC relied on “all statements made and information

19   furnished . . . by the Insured in applying for this bond,” and

20   that CBC “represents that the information furnished in the

21   application for this bond is complete, true and correct [and

22   such] application constitutes part of this bond” are not so

23   limiting as the FDIC suggests.   In this case, CBC submitted two

24   substantially similar applications, neither of which reported any

25   losses or insurance cancellation in the prior three years.    GAIC
                                      11
 1   was entitled to consider the Reliance application part of the

 2   “information furnished” and “such application” and to rescind the

 3   bond based on statements made therein to the extent they were

 4   material misrepresentations.

 5                  C. Grounds for Rescission in the Bond

 6        Therefore, the relevant inquiry is whether CBC’s failure to

 7   report the Harmony Designs loss, the indictments of MTB officers,

 8   and Lloyds’ decision not to renew or extend its fidelity bond

 9   were in fact material misrepresentations.   Although a single

10   misrepresentation entitles GAIC to rescind the bond, we will

11   consider each of the three statements individually.    As did the

12   district court, we borrow general principles of Connecticut

13   insurance law to interpret the terms of the fidelity bond.    Under

14   Connecticut law, an insurance policy is voidable by the insurer

15   if the applicant made “[m]aterial representations . . ., relied

16   on by the company, which were untrue, and known by the assured to

17   be untrue when made.”   Middlesex Mut. Assurance Co. v. Walsh, 590

18   A.2d 957, 963 (Conn. 1991) (quoting State Bank & Trust Co. v.

19   Conn. Gen. Life Ins. Co., 145 A. 565, 567 (Conn. 1929)) (emphasis

20   omitted).   To succeed on a defense of misrepresentation, GAIC as

21   the movant bears the burden of establishing “(1) a

22   misrepresentation (or untrue statement) by the plaintiff which

23   was (2) knowingly made and (3) material to defendant’s decision

24   whether to insure.”   Pinette v. Assurance Co. of Am., 52 F.3d

25   407, 409 (2d Cir. 1995).   The determination of whether an answer
                                      12
 1   in an insurance application is untrue must be made “in light of

 2   the question asked.”    Walsh, 590 A.2d at 964.   Where a question

 3   in the application is ambiguously worded and the applicant “could

 4   reasonably have understood the question as calling for a

 5   particular response, and the response given in accordance with

 6   that understanding is not false, the response does not amount to

 7   a misrepresentation.”    Id. at 965.

 8        Additionally, a fact is material if “it would so increase

 9   the degree or character of the risk of the insurance as to

10   substantially influence its issuance, or substantially affect the

11   rate of premium.”   Pinette, 52 F.3d at 411 (quoting Davis

12   Scofield Co. v. Agric. Ins. Co., 145 A. 38, 40 (Conn. 1929)).

13   “Matters made the subject of special inquiry are deemed

14   conclusively material.”    State Bank & Trust Co., 145 A. at 566;

15   see also id. (“Where the representation is contained in an answer

16   to a question contained in the application which is made a part

17   of the policy, the inquiry and answer are tantamount to an

18   agreement that the matter inquired about is material.”).

19        First, we take up CBC’s failure to report the $950,000

20   advanced by MTB agents based on fraudulent invoices under the

21   factoring agreement with Harmony Designs.    The Reliance

22   application (as well as the GAIC application) asked whether the

23   applicant had sustained any losses in the prior three years, and

24   CBC replied “None.”    We see no ambiguity in the question and no

25   reason to construe it, as Van Bergen allegedly did, to refer to
                                      13
 1   losses sustained by CBC but not MTB.      At the time she completed

 2   the application, the relevant applicant was the newly expanded

 3   CBC, a company which included MTB’s factoring business and

 4   eventually recouped some of the loss from Harmony Designs.       It is

 5   undisputed that CBC knew about the Harmony Designs loss when it

 6   acquired MTB’s factoring unit, knew that the loss played a role

 7   in Lloyds’ decision not to renew or extend its fidelity bond for

 8   the CBC-MTB entity, and knew about the loss when it applied for

 9   new fidelity coverage from GAIC.      Keeping in mind that the

10   application was for insurance that would cover precisely the type

11   of loss which occurred with the Harmony Designs fraud, no

12   reasonable interpretation of the question would lead to the

13   conclusion that “None” was a complete and truthful answer.

14          As prior losses were the subject of specific inquiry, CBC’s

15   response is presumptively material.      Moreover, “[c]ommon sense

16   tells us that an applicant’s prior loss history is material to a

17   reasonable insurance company’s decision whether to insure that

18   applicant or determination of the premium.”      Pinette, 52 F.3d at

19   411.    Consequently, there is no factual issue, and GAIC was

20   entitled to rescind the fidelity bond on the basis of CBC’s

21   material misrepresentation that it had not sustained any losses

22   in the prior three years.

23          Next, we turn to CBC’s failure to disclose the indictments

24   of MTB officers.    GAIC argues that this information was relevant

25   to the prompt for reporting losses in the previous three years,
                                      14
 1   as well as to a catch-all question which requested “any knowledge

 2   of or information concerning any occurrence or circumstance

 3   whatsoever which might materially affect” the insurer’s decision

 4   to issue fidelity coverage.   Again, it is undisputed that CBC was

 5   aware of the indictments and resulting losses - for which CBC

 6   sought recovery under the Lloyd’s bond - at the time it applied

 7   for new fidelity coverage.    The FDIC argues that the indictments

 8   had no bearing on its insurance risk profile because CBC did not

 9   purchase the precious metals business or employ the indicted

10   officers.   However, this after-the-fact justification does not

11   diminish the materiality of the disclosures.   As we have already

12   established, information about previous losses is presumptively

13   material.   It follows that information that losses were incurred

14   under a cloud of criminal suspicion is also material.    Moreover,

15   the determination of risk is one properly left to the insurer,

16   not the insured, and the insurer cannot make an accurate risk

17   assessment without full disclosure from the applicant.    The very

18   purpose of such broadly worded catch-all questions is to prevent

19   the type of self-selective reporting that occurred here.   It must

20   be noted that CBC had specific reason to know that this

21   information would substantially influence a potential insurer’s

22   decision to issue a fidelity bond because Lloyd’s explicitly

23   stated that it was “very concerned at the allegations being made

24   against senior officials of [MTB]” and would not renew its CBC-

25   MTB bond absent a face-to-face meeting to discuss, among other
                                      15
 1   things, the indictments.   We find no issue of fact that CBC’s

 2   failure to report the indictments of MTB officers and resulting

 3   losses in the Reliance application constituted a material

 4   misrepresentation.

 5        Finally, we consider the issue of CBC’s failure to disclose

 6   Lloyds’ decision not to renew or extend its fidelity coverage.

 7   The Reliance and GAIC applications asked whether insurance of a

 8   similar nature had been declined or cancelled in the previous

 9   three years, and CBC answered “No.”   However, at the time it

10   responded, CBC was aware that Lloyd’s declined to renew its

11   fidelity coverage for the new CBC-MTB entity and it refused to

12   grant CBC a 30-day extension of its expiring coverage.   The FDIC

13   argues that CBC walked away from Lloyd’s and not vice versa, thus

14   CBC did not interpret the question to require information

15   regarding coverage it chose not to renew.

16        The FDIC urges a narrow and overly literal reading of the

17   question to include instances where an insurer cancelled a policy

18   prior to its expiration, or rejected a new application, but not

19   those where existing coverage was not renewed or extended.    We

20   find no ambiguity, either in the wording of the question or the

21   type of information it intends to solicit.   Both terms used in

22   the Reliance application - “declined” or “cancelled” - seek

23   information regarding another company’s unwillingness to insure.

24   Knowledge of Lloyds’ initial reluctance and ultimate refusal to

25   continue its bond would have alerted GAIC to potential red flags,
                                     16
 1   prompting a careful review of CBC’s application to accurately

 2   appraise the risks to be insured.     Although CBC ultimately did

 3   not take the necessary steps to renew the Lloyd’s bond, and in

 4   that sense “walked away” from its insurer, Lloyd’s made it clear

 5   that the only way to obtain continuing coverage would be to

 6   attend a meeting in London, and even that meeting could not

 7   guarantee renewal.    Furthermore, CBC sought a 30-day extension of

 8   the CBC-MTB fidelity bond, which Lloyd’s rejected in light of

 9   outstanding claims.   Lloyds’ actions fall within the scope of the

10   request for information about prior insurance cancellation or

11   declination.   As this was a subject of specific inquiry, the

12   information is material.

13        We additionally find that even if we were to agree with the

14   FDIC’s interpretation of the Reliance application, we would

15   nevertheless hold that the information regarding Lloyds’ non-

16   renewal and refusal to extend coverage should have been disclosed

17   in the catch-all question; no reasonable construal of the request

18   for any “information concerning any occurrence or circumstance

19   whatsoever which might materially affect this proposal” would

20   exclude CBC’s negotiations with Lloyd’s.     Therefore, CBC’s

21   statement that no coverage had been cancelled or declined was a

22   material misrepresentation for which GAIC was entitled to rescind

23   the fidelity bond.    We have considered the FDIC’s other arguments

24   and do not find them persuasive.

25

                                      17
1                              III. CONCLUSION

2        For the reasons set forth above, we conclude that, although

3   a fidelity bond is an asset for the purposes of 12 U.S.C. §

4   1823(e), defenses on the face of the bond entitled GAIC to

5   rescind coverage.   The district court properly granted summary

6   judgment in favor of Defendant, and its judgment of February 13,

7   2009 is hereby AFFIRMED.

                                     18