No Coverage Where Final Judgment Found That Insured Had Engaged in Intentional Fraud
June 21, 2017 | Robert Tugander |A magistrate judge has recommended that a federal district court dismiss a coverage action brought by an insured where a final judgment had determined that the insured had engaged in intentional fraud in his securities transactions.
The Case
Daniel Imperato sued the insurance company that had issued a directors and officers liability insurance policy to his corporation, Imperiali, Inc., after the insurer declined to defend and indemnify him in a civil action brought against him by the Securities and Exchange Commission (“SEC”).
The insurer moved to dismiss.
The Court’s Decision
A magistrate judge recommended that the district court grant the insurer’s motion.
In his decision, the magistrate judge found that Imperato’s “conclusory statement” that the insurer was obligated to provide him with a defense and indemnification in the underlying action brought by the SEC was “baseless.” Indeed, the magistrate judge continued, the insurance policy provided coverage only for negligent misstatements by the insured in securities transactions, and specifically excluded coverage where there had been a final adjudication that the insured had deliberately engaged in fraudulent conduct.
The magistrate judge then pointed out that a final judgment had been entered in favor of the SEC based on a finding that Imperato had:
inten[ded] to deceive by knowingly making blatantly false and deceptive material statements . . . which were subsequently disseminated to potential investors via the internet [and that] [t]hese falsities were then included in Imperiali’s filings with the SEC. . . . These deceptions, which this Court finds to be material, were all part of Imperato’s scheme to lure investors to the company, and establish his liability as a primary violator of the antifraud provisions. . . .
Given the adjudication of Imperato as an insured who had “engaged in intentional fraud in his securities transactions,” the insurer had no duty to provide coverage under the policy, the magistrate judge concluded.
The case is Imperato v. Navigators Ins. Co., No. 14-80586-Civ-Rosenberg/Hopkins (S.D. Fla. May 10, 2017).
