Former Officer of Troubled S & L Sues Insurer for Canceling Liability Coverage
A former officer of North America Savings & Loan has filed a $10-million lawsuit against an insurance company that canceled North America’s liability coverage for directors and officers just eight months before the S & L collapsed.
Clarence R. White Jr., once a senior vice president at North America in Costa Mesa, claims in the suit that Fidelity & Deposit Co. of Maryland breached its contract with North America and acted in bad faith.
According to the suit, Fidelity & Deposit failed to defend White and did not cover his potential liability in connection with a lawsuit filed by a federal regulatory agency against White and other North America directors and officers.
White’s suit, filed in Orange County Superior Court last week, claims that Fidelity & Deposit knew about substantial lending and financial problems at the S & L before it canceled coverage in May, 1986. Officials at Fidelity & Deposit could not be reached for comment Monday.
White’s lawyer, Fred Rucker of Los Angeles, said that the insurance carrier had been told of the problems and listed them among eight reasons for canceling its insurance.
Those difficulties led regulators to seize the S & L in January, 1987. Only then did regulators learn that the reason for the problems was alleged insider fraud perpetrated by North America’s sole owner, the late Duayne D. Christensen, and his confidante and business manager, Janet F. McKinzie, according to court documents.
Federal regulators later filed a $43-million lawsuit in U.S. District Court in Los Angeles against Christensen’s estate, McKinzie, and other directors and officers, including White. The $43-million suit claims that the other directors and officers should have known what Christensen and McKinzie were doing.
Christensen died in a single-car crash only hours before state regulators seized the S & L.
The S & L, which was moved to Costa Mesa last fall from Santa Ana, is being run by a management team installed by federal regulators.
