Disgorgement Is Not Covered As “Damages”

A judgment that required the investment bank Bear Stearns to disgorge $25 million in commissions is not covered under a professional liability policy, a New York trial court ruled. The case is Vigilant Ins. Co. v. Bear Stearns Companies, Inc., 2006 WL 118368 (N.Y. Cty. Sup. Ct. January 11, 2006). The purpose of disgorgement, the court said, is to deprive a defendant of ill-gotten gains. Public policy precludes insurance coverage of illegal conduct, the court explained.

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