In a June 16, 2011 decision by Justice Lowe the court found there were a number of issues of fact which precluded awarding summary judgment to an insurer declaring that it was not obligated to cover Madoff loses. The insurer used a multi-pronged attack arguing that the insurance policy was void and should be rescinded, that the Madoff loses fell under a policy exclusion and that the losses should be limited to the monies actually paid to Madoff minus any redemptions (i.e. no coverage for fictitious gains in the account).
The court found that the insureds did not have to disclose Madoff’s fraud in their insurance applications because they were not aware of the fraud. The court, nevertheless, found there were certain contractual ambiguities which precluded summary judgment on the issue of over-all coverage. The court did grant summary judgment to the insurer on one issue, finding that the insureds’ loss did not include fictitious profits allegedly lost by Maddof and the loss was restricted to the monies invested minus the monies withdrawn from Madoff accounts.
United States Fire Insurance Company v. Nine Third FEF Investments LLC et al. Sup Ct, New York County, June 16, 2011, Lowe, J, Index No. 603284/09.