Everest Re unit need not defend broker in alleged Ponzi scheme

An Everest Re Group Ltd. unit does not have to defend or indemnify a securities broker in connection with charges she conspired as part of an alleged multimillion-dollar Ponzi scheme, a federal district court has ruled.

Everest Re unit Everest National Insurance Co. filed suit in U.S. District Court in Chicago seeking a declaratory judgment it did not have to defend or indemnify Cynthia Komarek under two securities broker/dealer professional liability policies it had issued to Royal Alliance Associates Inc., which is not a party in the litigation, according to Tuesday’s ruling in Everest National Insurance Co. v. Cynthia Komarek, et al.

Ms. Komarek was formerly a registered representative of a Royal Alliance unit, SagePoint Financial Inc.

Ms. Komarek was among defendants in two lawsuits filed in Illinois state court alleging she had participated in the Ponzi scheme while operating a separate entity from SagePoint.

The district court granted Everest summary judgment in Tuesday’s ruling. “Plaintiffs’ claims are not based on allegations that Komarek engaged in conduct…. performed in connection with the purchase or sale of a product approved by and offered for sale through SagePoint,” the ruling said.

“Everest thus has no duty to defend Komarek in connection with the Underlying Suits,” and therefore has no duty to indemnify her as well, the ruling said.

Attorneys in the case did not respond to requests for comment.