Allen Stanford and his fellow executives can ask their Director and Officer insurer to pay for their defence, a Houston federal judge ruled today.
Stanford, former Chief Investment Officer Laura Pendergest-Holt and other executives face charges relating to a $7 billion fraud scheme.
Reuters: Lloyd’s initially agreed to reimburse some legal expenses for Pendergest-Holt, but Ralph Janvey, the receiver in the case, argued proceeds are assets of the Stanford estate and should be set aside for investors.
Janvey had threatened to hold [D&O policy issuer Lloyd’s of London] in contempt of court if they made payments to the executives, court records show.
“Today the court holds only that its prior orders do not bar Lloyd’s from disbursing policy proceeds to fund directors’ and officers’ defence costs in accordance with the D&O polices’ terms and conditions,” U.S. District Judge David Godbey said in a nine-page order.
Stanford’s attorneys should not start counting their money yet, however. Lloyd’s previously said that money laundering and fraudulent and criminal acts are excluded from coverage.
This ruling, therefore, likely means more litigation. Now that the judge has said Stanford and company could have their defence costs covered if the policy applies, it is doubtful the indicted executives would accept Lloyd’s denial of coverage without a fight.
Though insurance coverage cases are not usually attention grabbers, this one could get interesting. Standford currently has top-notch public defenders. This, therefore, is the strange case where it is in the public’s interest for an insurance carrier to pay for the defence of a a disgraced financier.
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