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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

Bank Overdraft Suit Leads to Suit Against Insurers

January 27th, 2012 - One of the nation’s largest banks has sued ACE American Insurance Co. and  another insurer after they allegedly refused to indemnify it for damages it paid to settle  class-action lawsuit.

U.S. Bancorp and U.S. Bank N.A. filed suit in U.S. District Court in Minneapolis against the ACE Group unit and Indian Harbor Insurance Co. The Minneapolis-based bank seeks a declaration of its rights under a bankers professional liability policy issued by Indian Harbor and an excess policy sold to it by ACE.

Since 2007, U.S. Bank has been sued a number of times in various courts nationwide in connection with its assessment of overdraft fees against customers. Those actions eventually were consolidated into a multi-district litigation case in federal court for the Southern District of Florida.

Plaintiffs asked for more than $500 million in damages, alleging that U.S. Bank had ordered a debit sequence to customers’ transactions in a manner that improperly increased their overdraft fees.

U.S. Bank eventually settled the suit for $55 million. It said it obtained advance consent to the settlement from both ACE and XL (XL Group, of Ireland, owns Indian Harbor).

At the time of the suit, the bank had in place a primary policy from XL that carried $20 million of coverage over and above a $25 million deductible. ACE had sold U.S. Bank a policy that was good for $15 million of excess liability above the primary policy.

XL adopted the stance that U.S. Bank’s damage payout did not constitute a loss as defined in the policy. Likewise, U.S. Bank said ACE took essentially the same position. But those denials constitute a breach of the contracts, said U.S. Bank.

U.S. Bank asked the court to enter a declaratory judgment against the insurers that they must pay it all defense and settlement costs. It also asked for consequential damages.

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