While the J.P. Morgan decision will not be the final word on the insurability of disgorgement, the policy language at issue is commonplace and insurers certainly will cite the case to support denials of coverage. Additionally, courts in a number of states have held that fines and penalties are not insurable as a matter of public policy.[vi] It remains to be seen whether parties facing SEC investigations will be more reluctant to settle if they are unable to obtain coverage for amounts they would be required to pay in disgorgement. It also remains to be seen whether insurance providers, in an effort to gain a competitive market advantage, will revise their forms and/or offer endorsements specifically agreeing to cover disgorgement wherever permissible under the law.
‘Enforcement 40’ for 2020
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