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An online provider of retail and institutional foreign-exchange trading has sued an American International Group Inc. unit for its refusal to pay claims under a professional liability policy in connection with litigation it faces involving a former client.
Bedminster, New Jersey-based Gain Capital Holdings Inc. is facing hundreds of claims in the United Kingdom in connection with London-based investment firm Cameron Farley Ltd., which had accounts with Gain and traded on its foreign-exchange platform, according to the lawsuit filed Tuesday in U.S. District Court in New York in Gain Capital Holdings Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA.
Cameron Farley has been determined by British regulators to be a Ponzi scheme and placed in liquidation, according to the lawsuit. Plaintiffs in litigation filed against Gain claim that it should have conducted more due diligence on Cameron Farley and that it was negligent or reckless in missing red flags in connection with the firm, according to the lawsuit. The litigation is ongoing, according to the ruling.
Gain's professional liability policy with AIG unit National Union Fire Insurance Co., which covers the period June 2011 to June 2012, is designed “to protect Gain against precisely the type of loss it has now incurred as result of defending the underlying claims,” says the lawsuit.
It states that AIG has denied coverage for reasons including that claimants were alleging wrongful acts by Cameron Farley, not by Gain, and that the claimants were not Gain's customers or clients. Gain is charging the AIG unit with breach of contract, among other things.
An AIG spokesman could not immediately be reached for comment.
The Federal Deposit Insurance Corp. has authorized lawsuits in connection with 150 failed financial institutions against 1,207 individuals for directors and office's liability.