A recent law.com story, “Insurers No Longer Must Cover Allen Stanford’s Legal Bills, Judge Rules” reports that R. Allen Stanford and two other Sanford  Financial Group (SFG) executives are cut off from insurance money to pay their legal bills.  U.S. District Judge Nancy Atlas in Southern Texas issued an opinion (pdf) that two insurance companies holding directors-and-officers (D&O) policies for SFG are not required to pay the defense of three former SFG executives in a criminal case, United States v. Robert Allen Stanford, et al.  She also ruled that insurance companies do not have to pay for the defense in a separate Securities and Exchange Commission (SEC) civil suit. 

The underlying case accuses Stanford and other executives at SFG of running a massive Ponzi scheme and engaging in money laundering.  The underwriters, Lloyds of London and Arch Specialty Insurance Co., paid $11.2 million in defense costs for work through July 14, and a portion of the $3.2 million billed by the plaintiffs for the period through Sept. 15.  Atlas also denied a stay of her order pending appeal.  She wrote that granting a stay of her order would harm the underwriters because they would have to continue to pay attorney fees and expenses with little chance to recoup the funds.