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In an order today, Judge Berman ruled that insurance company USF&G was not obligated to reimburse Ashley Reed Inc. for a $30 million judgment against it for selling counterfeit Fendi bags.  The USF&G policy insured against “Advertising Injury,” which Judge Berman ruled was separate from the company’s actual counterfeiting of the bags.

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In a complaint filed today, AIG seeks to enjoin the New York State Department of Financial Services from any enforcement action arising from the Department’s investigation into a former AIG subsidiary called ALICO.  The Department has allegedly threatened to fine AIG based on the allegation that ALICO was conducting an unlicensed insurance business in New York.  AIG’s complaint argues it would be unconstitutional to apply the statute at issue, New York Ins. Law § 1101(b) (defining “insurance business”), to ALICO because ALICO marketed insurance products only to out-of-state customers:
Continue Reading AIG Brings Constitutional Challenge to N.Y. Regulation of Insurance Sales to Out-of-State Customers

In an opinion issued yesterday, Judge Engelmayer granted the motion of Level Global and the hedge funds’ management team to preliminarily enjoin their insurer, XL Specialty Insurance, from cutting off the advancement of legal fees. After Level Global and its managers became the subject of a criminal insider trading investigation by the U.S. Attorneys’ Office in 2010, XL began advancing defense costs in connection with the investigation. On January 18 of this year, a day after indicting Level Global founder Anthony Chiasson, the U.S. Attorneys’ Office unsealed a guilty plea of a mid-level Level Global employee on insider trading charges. In the guilty plea, the employee allocuted to the following facts:

From 2007 to 2010 I agreed, with others, to commit securities fraud. Namely, I agreed to obtain, directly and indirectly, material non-public information from employees of public companies. I knew that the inside information I received was disclosed by the company employees in violation of duties of trust and confidence. I agreed to share that information with the other individuals at other companies as well as with others at the hedge fund where I worked. When I gave the inside information to the others at the hedge fund where I worked, I knew the information would be used to execute trades. Moreover, I did in fact obtain such information and provide it to others. For example, on August 27, 2008, I spoke with others at the hedge fund where I worked and discussed with them inside information that I obtained indirectly from an employee at [Dell].

On March 5, XL informed Level Global and its management that it would no longer advance legal fees as a result of the facts admitted in the guilty plea. The XL insurance policy that covered Level Global’s defense costs had been executed in April 2010, at which time Level Global’s general counsel had certified that no one at the firm had knowledge of any facts or circumstances that would give rise to a claim against Level Global. Based on the plea allocution, XL stated that an individual at the fund necessarily had knowledge of the facts that gave rise to the very claims against which Level Global and its management were defending, and thus XL was not required to pay costs associated with those claims. XL told Level Global that it would not advance further funds and asked Level Global to return all funds advanced — nearly three-quarters of the $10 million policy. On the same day it sent Level Global its letter, XL filed a lawsuit seeking a declaratory judgment that it was not obligated to advance funds and was entitled to restitution of funds advanced.
Continue Reading Judge Engelmayer Preliminarily Enjoins Insurer from Cutting off Advancement of Hedge Fund’s Legal Fees