Lloyd's must pay for Stanford's defence, judge says
Posted by editor on January 27 2010 00:00:00
HOUSTON, USA (Bloomberg) -- Allen Stanford can use his companies’ Lloyd’s of London directors and officers insurance policies to pay lawyers to defend him against charges he defrauded investors of more than $7 billion, a US judge ruled. Stanford had sued to force Lloyd’s to pay his defence costs.
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By Andrew M Harris and Laurel Brubaker Calkins
HOUSTON, USA (Bloomberg) -- Allen Stanford can use his companies’ Lloyd’s of London directors and officers insurance policies to pay lawyers to defend him against charges he defrauded investors of more than $7 billion, a US judge ruled.
US District Judge David Hittner in Houston Tuesday rejected requests by Lloyd’s underwriters to throw out the financier’s lawsuit seeking to enforce the policies.
Stanford, who’s accused of swindling investors with bogus certificates of deposit issued by Antigua-based Stanford International Bank Ltd., had sued to force Lloyd’s to pay his defense costs.
“The court has determined that the plaintiffs have a substantial likelihood of succeeding on their claim that the policies require underwriters to advance defense funds until a final judicial determination is made on the underlying litigation,” Hittner said in the ruling.
Joining Stanford in the insurance suit were three criminal case co-defendants including Stanford Financial Group Co. Chief Investment Officer Laura Pendergest-Holt.
The Lloyd’s underwriters had denied coverage in November, saying the policy was voided by the August guilty plea of James M. Davis, who had been chief financial officer for Stanford Financial.
Stanford’s attorneys argued the position taken by Lloyd’s effectively required him and his co-defendants to prove their innocence to the underwriters before getting money to hire lawyers to defend them in front of a jury.
The financier has denied all allegations of wrongdoing. He is being held without bail until a trial scheduled for next January on charges that could imprison him for decades.
“It is unreasonable for underwriters to believe that they can act as the sole judge and jury,” Lee Shidlofsky, the lawyer representing the criminal defendants against Lloyd’s, said in an e-mailed statement Tuesday reacting to Hittner’s ruling.
“Basically, underwriters sought to convict their own insureds,” he said. “And by doing so, underwriters undermined the very essence of the protections afforded by a D&O policy.”
Lloyd’s lawyer, Neel Lane, a partner at Washington-based Akin Gump Strauss Hauer & Feld LLP, declined to comment, citing the firm’s policy on pending litigation.
“Insurers are expected and even required to make ‘coverage determinations’ all the time,” Lane said in a Jan. 7 court filing urging Hittner to side with the insurer and deny the defendants coverage.
“It is not this court’s role to secure a more advantageous arrangement for them than the D&O policy’s terms provide,” Lane said then.
Dan Cogdell, an attorney for Pendergest-Holt, said Tuesday in an e-mail that he and his client were “relieved” by the decision. He called the denial of coverage by Lloyd’s improper.
“The judge’s order now allows us to properly defend our clients without fear of going into bankruptcy,” Cogdell said.