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Lloyd's must pay Stanford D&O claims: Court

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HOUSTON, March 15 (Reuters)--A federal appeals court said Monday that Lloyd's of London underwriters must pay claims related to alleged swindler Allen Stanford's defense.

Mr. Stanford, his former Chief Investment Officer Laura Holt, and former accounting executives Gilbert Lopez and Mark Kuhrt sued Lloyd's after it stopped providing coverage under a directors and officers policy last year, citing a money laundering exclusion.

But U.S. District Judge David Hittner in Houston ruled in January that Lloyd's must pay costs and expenses that had been submitted by Mr. Stanford and his attorneys. Lloyd's appealed that decision to the 5th U.S. Court of Appeals.

The appeals court on Monday upheld Judge Hittner's ruling but also sent the case back to the district court for additional arguments on the coverage question. The Lloyd's underwriters must pay in the meantime, the court said in a 24-page ruling.

"The underwriters are enjoined from refusing to advance defense costs as provided for in the D&O policy unless and until a court 'determines in fact' by clear and convincing evidence" that money laundering occurred, the ruling said.

The defendants face criminal and civil charges for for defrauding investors in a $7 billion Ponzi scheme centered around certificates of deposit.. They have denied any wrongdoing. Mr. Stanford, 59, is waiting in a Houston jail for his January 2011 trial.