In March 2023, we wrote about the failure of Silicon Valley Bank (“SVB”) and potential implications of its takeover by the Federal Deposit Insurance Company (“FDIC”). As we noted then, the FDIC, as receiver for SVB, has broad discretion to manage the bank’s assets and liabilities, including selling assets for the benefit of creditors and bailing out the distressed bank.
One significant area in which the FDIC’s broad discretion has materialized is in its management of insurance claims seeking recovery for losses SVB suffered before its failure. In a recent decision in SVB Financial Group, et al., v. Federal Insurance Company, et. al., No. 23-95, 2026 WL 1786411 (E.D.N.C. June 22, 2026), a federal court in North Carolina sided with the FDIC in a dispute over control of the failed bank’s insurance claim, holding that a claim under a fidelity bond insuring SVB against forgery losses was recoverable by the FDIC in its capacity as receiver, not by Silicon Valley Bank Financial Group (“SVBFG”) directly, even though SVBFG was SVB’s parent company and was also expressly identified as a named insured under the bond.
Back in 2021, SVB extended a $150 million line of credit to JES Global Capital III, run by Elliot Smerling. Shortly thereafter, SVB discovered that in doing so it had relied on forged documents meant to induce it to extend the loan. Smerling was sentenced to prison and ordered to repay the bank, but SVB was only able to recover a small portion of the loss.
Federal Insurance Company (“Federal”) and Berkley Regional Insurance Company (“Berkley”) had issued financial institution bonds with $30 million in aggregate limits, insuring SVB and its parent company, SVBFG, against losses resulting from SVB’s reliance on forged documents. The bonds included a “joint assured” provision, which provided as follows:
Only the first named ASSURED shall be deemed to be the sole agent of the others for all purposes under this Bond, including but not limited to the giving or receiving of any notice or proof required to be given and for the purpose of effecting or accepting any amendments to or termination of this Bond. Each and every other ASSURED shall be conclusively deemed to have consented and agreed that none of them shall have any direct beneficiary interest in or any right of action under this Bond and neither this Bond nor any right of action shall be assignable . .. . All losses and other payments, if any, payable by the COMPANY shall be payable to the first named ASSURED without regard to such ASSURED’S obligations to others[.]
SVB Financial Group, 2026 WL 1786411, at *2. SVBFG was included as “first named” assured under the bond, and SVB was also an insured. SVB and SVBFG filed a coverage action against the insurers after they denied coverage of SVB’s losses. After the bank failed in March 2023, the FDIC intervened. The FDIC and SVBFG then filed competing motions for summary judgment seeking declarations as to which entity would control the claim and be entitled to any proceeds therefrom, fighting each other in addition to the insurers.
The court’s decision turned on the first two sentences of the bond’s “joint assured” provision, quoted above. SVBFG contended that under the express terms of this provision, any claim on the bond was payable solely to it and SVB had waived any beneficiary interest or right to sue under the bond, such that SVB (and therefore the FDIC) had no standing to pursue the claim. SVBFG asserted that it was pursuing the claim on its own behalf, not as agent for SVB.
The court rejected SVBFG’s reading of the joint assured provision, and instead interpreted the provision “in light of the agency relationship described in its first sentence.” Id. at *3. According to the court, SVB disclaimed only the right to “direct” beneficiary interests “because SVBFG will pursue them on SVB’s behalf, as its agent.” Id. But here, as the court noted, SVBFG disclaimed any agency relationship with SVB, seeking to recover under the policies for its own benefit. And in any event, SVBFG and SVB were adverse to one another in the lawsuit, such that any agency relationship between the two had dissolved. The court concluded that “[s]ince SVBFG is not acting as SVB’s agent, and cannot pursue the claims in its own right, the claims belong to the FDIC as receiver.” Id.
The court relied heavily on Lubin v. Cincinnati Insurance Co., 677 F.3d 1039 (11th Cir. 2012), where the Eleventh Circuit construed a similar provision and rejected the contention that the joint assured provision allowed only the holding company to recover for losses to a failed subsidiary or precluded the FDIC from pursuing the claim as receiver. The Lubin court noted instead that the parent company included as “first named assured” could pursue claims for loss to the subsidiary only in its capacity as agent and loss payee, declaring that “[t]he fact that [the holding company] was entitled to receive payment . . . does not mean that it could keep it.” Thus, SVB and Lubin stand for the proposition that when that agency relationship dissolves, the holding company loses its right to pursue the claim.
The SVB decision is a cautionary reminder that, when a bank or other regulated subsidiary fails, policy language designating a parent as the “first named” insured or loss payee may not be enough to preserve the parent’s control over or entitlement to insurance recoveries arising from the subsidiary’s losses. The case highlights the importance of scrutinizing joint insured and loss payment provisions at placement, evaluating how those provisions may operate in an insolvency or receivership scenario, and, when a claim arises, developing an early strategy around claim ownership, agency, and standing before competing interests between the parent company and a receiver may harden. On the other hand, the FDIC or another receiver may rely on these provisions to contend that claims tied to a failed institution’s losses belong to the receivership estate. Planning ahead can help focus recovery efforts on the insurers, rather than resulting in unproductive litigation over rights to the proceeds of the insurance claim itself.
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