PL Carrier Not Liable for Multi-Million Dollar SEC Settlement
A broker-dealer sued both its primary and excess professional liability insurers for breach of contract and seeking a declaratory judgment on coverage for settled claims with the Securities and Exchange Commission (SEC) and others. The underlying litigation arose out of its customers’ late trading and market timing facilitated by the broker-dealer as a clearinghouse. The New York Court of Appeals concluded the defendant insurers were entitled to summary judgment declaring the insureds are not entitled to coverage for the portion of the $140 million SEC disgorgement payment allegedly representing the improper profits acquired by third-party hedge fund customers. The insured's disgorgement payment to the SEC did not constitute a loss under either professional liability policy.