Everest Re unit not obliged to defend or indemnify financial adviser
Reprints
A federal appeals court on Thursday affirmed a lower court ruling and held that an Everest Re Group Ltd. unit does not have to defend or indemnify a financial adviser who sold a financial instrument issued by a company later sued by the U.S. Securities and Exchange Commission.
William Saoud, of Clinton Township, Michigan-based Bill Saoud Financial LLC, which had sold insurance-related products, began to offer his clients a “memorandum of indebtedness” issued by Hollandale, Florida-based 1 Global Capital LLC in 2017, according to the ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in William Saoud, Patricia Boland-Saoud, and Bill Saoud Financial LLC v. Everest Indemnity Insurance Co.
“Unfortunately, the investment opportunity was too good to be true,” the ruling said, noting that 1 Capital declared bankruptcy and was sued by the SEC for alleged violations of the Securities and Exchange Act. [
Several of Bill Saoud Financial’s clients filed lawsuits against the company, Mr. Saoud and his wife, which were eventually settled for an undisclosed amount.
After Everest Indemnity refused to defend or indemnify it under its professional liability policy, Bill Saoud Financial sued the insurer in U.S. District Court in Detroit. The court ruled in Everest Indemnity’s favor.
A three-judge appeals court panel affirmed the lower court’s ruling, agreeing that an “unregistered security exclusion” in the policy applied.
While the panel agreed with the plaintiffs that the duty to defend is broader than the duty to indemnify, it said — citing an earlier case — “The insurer is not required to defend against claims for damage expressly excluded from policy coverage.”
Attorneys in the case had no comment or did not respond to a request for comment.
Earlier this month, a U.S. district court ruled that an attorney charged with embezzling funds from lottery winners was entitled to defense costs under his professional liability policy.
