A federal appeals court has ruled that insurer Lloyd’s of London must pay claims related to the alleged swindler Allen Stanford’s defense. Stanford, his former chief investment officer Laura Holt, and former accounting executives Gilbert Lopez and Mark Kuhrt sued Lloyd’s after the firm stopped providing coverage under a directors and officers policy last year, citing “a money laundering exclusion.” But U.S. District Judge David Hittner in Houston ruled in January that Lloyd’s must pay costs and expenses that had been submitted by Stanford and his lawyers. Lloyd’s appealed that decision to the U.S. Court of Appeals for the Fifth Circuit in New Orleans.
The Appeals Court upheld Judge Hittner’s ruling on March 15th, but also sent the case back to the District Court for additional arguments on the coverage question. However, the Appeals Court said in its ruling that Lloyd’s must pay in the meantime. The Court wrote:
The underwriters are enjoined from refusing to advance defense costs as provided for in the D&O policy unless and until a court ‘determines in fact’ by clear and convincing evidence …that money laundering occurred.
As we have reported, Stanford, Holt, Lopez, and Kuhrt face criminal and civil charges for defrauding investors in a $7 billion Ponzi scheme centered around certificates of deposit issued by Stanford’s Antiguan bank. Each has denied any wrongdoing. Stanford is now in jail awaiting his January 2011 trial. Hopefully, the courts will protect those persons and entities who were cheated by Stanford as well as these courts have protected the alleged swindler in their claims.
Source: Insurance Journal
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