Insurer not liable in case involving jailed Illinois governor

An RSUI Group unit is not obligated to defend or indemnify an online sports betting company under an exclusion in its directors and officers liability policy, in a case whose underlying litigation is related to bribery charges against jailed former Illinois Gov. Rod Blagojevich.

Atlanta-based RSUI Indemnity Co. had issued D&O liability coverage to Melrose Park, Illinois-based Worldwide Wagering Inc. for the period April 2014 through April 2017, according to Monday’s ruling by the U.S. District Court in Chicago in RSUI Indemnity Co. v. Worldwide Wagering Inc.

The coverage included an exclusion for any claim in connection with the “riverboat matter,” a case involving Mr. Blagojevich, who allegedly received a $100,000 bribe in a case involving Illinois riverboat casinos. Mr. Blagojevich, who was convicted on charges including wire fraud, extortion and soliciting bribes while governor, is now in prison. 

A creditor trustee for a racing club involved in the Blagojevich case filed suit charging the Worldwide directors and the company with manipulating assets to conceal them from creditors. They were charged with of various acts, errors and breaches of fiduciary duty, according to the ruling.

When Worldwide sought coverage in the matter, RSUI denied it, citing the exclusion. Worldwide then filed suit, contending “the Riverboat Matter involved a bribe to Governor Blagojevich, while the underlying litigation involves the corporate mismanagement” of Worldwide, said the ruling.

“The claims in the underlying litigation, at least in part, arise for the Riverboat Matter,” said the ruling. “It is clear that Defendants’ fraudulent scheme to transfer assets, as alleged in the underlying litigation, was a direct effort to avoid paying the judgment in the Riverboat Matter and to shield and plunder the assets of their entities before creditors from the Riverboat Matter could reach them.

“These essential allegations, which form the basis of each count in the underling litigation, clearly arise, at least in part, from the Riverboat Matter and the judgment in that case.”

The ruling denied Worldwide’s motion for summary judgment and granted RSUI’s motion for judgment on the pleadings.