NY Ruling Undercuts SEC Disgorgement Coverage

NY Ruling Undercuts SEC Disgorgement Coverage

October 26, 2018, Law360

Mitchell Dolin is quoted in Law360 regarding a New York appeals court decision which applied

the U.S. Supreme Court's Kokesh decision to rule that part of Bear Stearns' settlement with the SEC is a penalty, and therefore not covered by insurance.

Mr. Dolin said the appellate decision contravenes Bear Stearns’ reasonable expectations about what its policies would cover. He emphasized that the SEC itself took the position in Kokesh that disgorgement is not a penalty, to avoid application of the five-year limitations period. He says, “The rules of policy construction call for a court to interpret exclusionary language strictly and to interpret all policy language through the lens of what reasonable parties would have understood. The parties would not have reasonably understood that monetary relief the SEC itself declined to recognize or label as a penalty would be construed as such for insurance purposes.”