The Federal Deposit Insurance Corp. has found itself in a legal quagmire, and the context of this dilemma should be of great interest to lenders and insurers whenever they create directors and officer's (D&O) liability insurance policies.

D&O insurance policies protect companies from costs stemming from any legal liabilities produced by executives and officers running a company.

Alison Frankel with Thomas Reuters has the full story. The legal reporter explains how the FDIC recently won an $168 million verdict against three former IndyMac officers for their respective roles in approving 23 troubled loans right before the housing market crashed.

The only question is whether the FDIC can actually collect from the now defunct IndyMac. Apparently, the insurance companies that provided the coverage for IndyMac says the policies do not cover the issues raised in the FDIC case.

The dispute is not over, and there are multiple viewpoints, but the dilemma does show how often cases involving lenders inevitably spawn lawsuits over insurance coverage.

Click here to read Frankel's full analysis for her On The Case blog.