Does $100M D&O Policy Require Lloyd's to Pay Stanford's Legal Bills? Federal Judge Will Decide
Jailed Texas financier R. Allen Stanford and three of his company’s former executives have racked up millions in legal bills as they defend themselves against accusations that they participated in a $7 billion Ponzi scheme.
So far, Lloyd’s of London has paid their criminal defense fees. But the famed insurer is seeking to turn off the financial spigot. It is contending in a federal lawsuit in Houston that its duty to defend under a $100 million policy of liability insurance for directors and officers of Stanford’s company is negated by the criminal conduct in which the four allegedly participated, according to Bloomberg and the Dealbook blog of the New York Times.
Specifically, Lloyd’s is arguing that the D&O policy has been voided because a clause that voids the policy if money-laundering occurs has been breached, explains the Guardian.
Stanford and his executives maintain their innocence and are not expected to be tried on the criminal charges they are facing until next year. However, they have been charged with money-laundering.
A federal district court in Houston this week began hearing evidence in the insurance coverage matter. U.S. District Judge Nancy Atlas said in court that one of the three ex-executives has settled with Lloyd’s, but she will decide the coverage question for Stanford and his two other former colleagues, reports the Houston Chronicle.
Attorney Robert Bennett, who represents Allen Stanford, told Atlas in his opening statement that the evidence will demonstrate there was no fraud and no misrepresentation, let alone a Ponzi scheme, Bloomberg says.
“Basically, the [Lloyd’s] underwriters sought to convict their own insureds,” said attorney Lee Shidlofsky, who represents Stanford’s colleagues in the coverage matter, in an e-mail earlier this year, the news agency reports.
“And by doing so, underwriters undermined the very essence of the protections afforded by a directors’ and officers’ policy,” Shidlofsky contended.
Lloyd’s attorney’s didn’t return calls seeking comment about the hearing on the attorney’s fees issue, reports the Associated Press.
They have reportedly already paid millions in attorney’s fees, including $6 million racked up by Allen Stanford.
A Reuters article provides additional details.
Earlier coverage:
ABAJournal.com: “5th Circuit Stays Judge’s Order That Insurer Must Pay Stanford’s Lawyers”
ABAJournal.com: “Alleged Ponzi Schemer Tells Judge He Doesn’t Know How His Lawyers Have Billed $6M So Far”
