A federal district court in New York ruled on Tuesday that units of American International Group Inc. and Tokyo Marine are not liable to reimburse Hertz Global Holdings Inc. for $ 27 million in costs incurred in connection with an investigation by Securities and Exchange Commission.
AIG Unit National Union Fire Insurance Co. had issued Bonito Springs, Florida-based Hertz an insurance policy of $ 15 million that made it possible to recover for security claims against the company and for claims against insured, according to the decision of the US District Court in New York Hertz Global Holdings Inc. against National Union Fire Insurance Co., Pittsburgh, et al.
Tokyo Marine provided an additional $ 1
A securities group application was filed against Hertz in November 2013, and in July 2014, Hertz notified insurers that the SEC was a dean according to documents related to the company's financial statements for certain previous years.
Insurers informed Hertz that while the lawsuit qualified as a securities claim under the policy, the SEC investigation did not.
The SEC subsequently issued an order authorizing its officials to sue witnesses and documents, and Hertz incurred $ 27 million in fees and expenses related to the investigation.
Hertz reached a settlement agreement with the SEC that provided for a $ 16 million penalty in December 2018.
It then sued the insurers for breach of the agreement for failing to cover the costs of the investigation. The court agreed with the insurers' proposal to reject the complaint due to failure to state a claim.
The Court stated that it agreed with the insurers' position that the SEC Inquiry "expressly excluded from coverage under the clear terms of the parties" insurance contracts. "
The policy defines a securities claim as" a requirement other than an investigation of an organization ", the decision states. "This language unequivocally excludes an SEC investigation against Hertz from coverage," as the phrase "is not receptive to" more than one sentence when viewed objectively, "the statement said in an earlier case.
" Despite the fact that the policy covers explicitly not investigations by Hertz, the plaintiff tries to fit the SEC's formal order, a square stick, into a number of round holes in the agreement, "but" these attempts fail, "the court said.
Lawyers in the case did not respond to requests for
Experts have stressed the importance of companies receiving coverage for SEC investigations by their board members and officials.