Jenner & Block

Client Alert: New York Court Sharply Limits Ability of Insurers to Escape Coverage of "Disgorgement"

Reversing a prior dismissal, the New York Court of Appeals (New York’s highest court) held that J.P. Morgan Securities (JPM) may seek recovery from its insurers of a settlement amount paid to the SEC constituting disgorgement of ill-gotten gains received by JPM’s customers, not by JPM.  Insurers frequently argue that disgorgement is not a covered loss given public policy considerations, as well as the holdings in certain, pre-existing case law.  Partner, Brian Scarborough and Associate, Jan Larson note that this decision serves as an important victory to policyholders by narrowing the ability of insurers to rely on such public policy rationales, particularly in the context of SEC settlements.