A federal appellate court has upheld a lower court ruling that a Chubb Ltd. entity is not obligated to compensate a conciliation and clearing company for claims paid under a former employee's fraudulent scheme under its financial institution.
Chubb unit Federal Insurance Co. issued a financial bond to Omaha-based COR Clearing LLC, which allows independent broker-dealers to access public stock markets and do business for their clients, according to Monday's ruling from the 8th U.S. Circuit Court of Appeals in St. Louis. Louis i Federal Insurance Co. against Axos Clearing LLC. San Diego-based Axos acquired COR in January 2019.
The bond was issued in April 201
A pump and dumping program is an attempt to increase the share price through recommendations based on false or misleading claims.
COR filed a claim with its liability insurance company, a subsidiary of XL Specialty Insurance Co., now an Axa unit, for VGTel and others. according to the decision.
COR also filed a claim under Chubb's bond to recover its losses for the VGTel settlements. Chubb denied coverage and brought an action before the U.S. District Court in Omaha, seeking a declaratory ruling that COR's claims were not covered by the bond's insurance clauses. COR then filed a counterclaim for breach of contract.
The district court granted Chubb a summary judgment.
A unanimous panel court with three judges agreed with the district court that one of the bond's insurance clauses did not apply because COR's payments to settle claims were not directly due to the former representative's documents.
It was also agreed that a second clause did not apply as there was no evidence that the representative committed nasty acts.
Lawyers in the case did not respond to the request for comment.