Jefferies & Company, an investment bank, has reportedly filed suit in L.A. Superior Court against Lloyd’s and American International Group for refusing to pay legal defense costs under D&O policies issued by the two insurance groups.
According to a bulletin from Reuters News Agency Jefferies’ officers and directors were the target of a lawsuit filed in 1998 by a client, Allen Paulson, who had failed to get financing to acquire two Las Vegas casinos. He reportedly set out five causes of action against Jefferies, alleging that the company and its officers violated securities laws, as well as Nevada gaming statutes. The case was settled last year.
According to the report Jefferies lawsuit claims that the two insurers refused to reimburse the company for some $3 million in legal expenses it incurred in defending itself against the Paulson lawsuit. The D&O policy apparently had $25 million policy limits, and was underwritten by Lloyd’s and AIG Europe. Lloyd’s reportedly contended that only 20 percent of defense costs were covered by the policy, and ultimately offered $400,000 to settle the case.
By the time Lloyd’s made its offer, Jefferies said its defense costs had risen to $6.5 million, and it then filed the suit, alleging breach of contract, and asking for an unspecified amount of damages.
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