Presentation is loading. Please wait.

Presentation is loading. Please wait.

2010 PLUS International Conference The Fraud Monster: The Effects of Fraud on Professional Lines Coverage.

Similar presentations


Presentation on theme: "2010 PLUS International Conference The Fraud Monster: The Effects of Fraud on Professional Lines Coverage."— Presentation transcript:

1 2010 PLUS International Conference The Fraud Monster: The Effects of Fraud on Professional Lines Coverage

2 2010 PLUS International Conference The Round Up… MODERATOR: Peter J. Biging, Esq., Partner, Lewis Brisbois Bisgaard & Smith LLP (New York, NY) PANELISTS: Serge Adam, Esq., Managing Claims Attorney, Monitor Liability Managers, Inc. Sally Combs, Technical Director - Professional Liability Claims, Firemans Fund Insurance Company Timothy J. Covello, JD, President, AXIS PRO, AXIS Insurance

3 2010 PLUS International Conference Introduction No drug... causes the fundamental ills of society. If were looking for the source of our troubles, we shouldnt test people for drugs, we should test them for stupidity, ignorance, greed and love of power. - P.J. ORourke His lack of education is more than compensated for by his keenly developed moral bankruptcy. - Woody Allen

4 2010 PLUS International Conference Whats Up… What is the impact of fraud on various business sectors? What is the impact of SOX on the detection of corporate financial fraud? What are key trends from SEC enforcement proceedings?

5 2010 PLUS International Conference Impact of Fraud on the Economy Jobs Corporate Investment Distortion of Resource Allocation Amongst Firms

6 2010 PLUS International Conference Does Fraud Go Up or Down Relative to the Economy? Prevailing Opinion Impact of Fraud on Various Business Sectors

7 2010 PLUS International Conference Fraud Across Multiple Business Sectors Top 3 Business Sectors for 2008 were: Natural Resources Construction and Engineering Financial Services

8 2010 PLUS International Conference Fraud Across Multiple Business Sectors for 2009 Top 3 Business Sectors for 2009 were: Financial Services Retail and Wholesale Distribution Healthcare, Pharmaceuticals and Biotechnology

9 2010 PLUS International Conference Prevailing Views on Who has Primary Responsibility to Detect Fraud Legal View Finance View

10 2010 PLUS International Conference Fraud Detectors SEC Lawyers Journalists Auditors Analysts Employees

11 2010 PLUS International Conference Compare Pre-SOX and Post-SOX SEC Lawyers Journalists Auditors Analysts Employees

12 2010 PLUS International Conference Incentives for Whistle blowing Altruism Reputation Career Money Revenge

13 2010 PLUS International Conference SEC Fraud Investigation Trends During 10 year period 1998-2007, the SEC alleged fraud involving 347 companies as described in 1,335 individual AAERs By comparison, the previous ten year study involved 300 companies described in 700 AAERs

14 2010 PLUS International Conference Key Characteristics of Fraudulent Companies Size Exchange Listing Primary Industry Duration of Fraud Location Management Fraud Techniques

15 2010 PLUS International Conference Board Comparison of Fraudulent versus No Fraud Firms Size of Board Tenure Stock Ownership Audit Committee Experience

16 2010 PLUS International Conference Underwriting Fraud

17 2010 PLUS International Conference Underwriting Fraud Question 12: Are you a lying, cheating grifter?

18 2010 PLUS International Conference Underwriting Fraud If only there were evil people somewhere insidiously committing evil deeds, and it were necessary only to separate them from the rest of us and destroy them. But the line dividing between good and evil cuts through the heart of every human being. And who is willing to destroy a piece of his own heart? Aleksandr Solzhenitsyn, The Gulag Archipelago, 1973 Mandy de Waal, The Psychology of Fraud, 2009

19 2010 PLUS International Conference Underwriting Fraud Fraud Triangle Environmental Individual Hot Environments Securities and Commodities Fraud Mortgage Fraud Insurance Fraud Profile of a Fraudster

20 2010 PLUS International Conference Underwriting Fraud Financial Fraud Predicting Material Accounting Misstatements Stanford Law School-Securities Class Action Clearinghouse PLUS D&O Diary

21 2010 PLUS International Conference Underwriting Fraud Liability Associated with Fraud Committed by Clients Accountants Lawyers Central Bank of Denver and Stoneridge Investment Partners Client Intake Insurance Agents

22 2010 PLUS International Conference Policy Features and Claims Issues

23 2010 PLUS International Conference Fraud Exclusion Based upon or arising out of any dishonest, fraudulent, criminal, malicious, intentional or willful act or omission by the Insured or any Loss expected or intended by the Insured;

24 2010 PLUS International Conference Guiding Maxim The duty to defend is broader than the duty to indemnify…

25 2010 PLUS International Conference Excluded conduct in fact Pendergast-Holt v. Certain Underwriters at Lloyds of London (S.D. TX August 2010) Only a judge could decide if coverage was voided by CFOs guilty plea to three felony counts and admission that the insured business was a fraudulent enterprise Carrier must defend until a lower court can formally decide the matter

26 2010 PLUS International Conference Final Adjudication …this exclusion shall not apply unless there is a judgment, final adjudication or admission adverse to such Insured establishing that such Insured committed such conduct.

27 2010 PLUS International Conference Separation of Insureds/ Innocent Insured …and applies only to the Insured who participated in, acted with knowledge of, or acquiesced to such conduct.

28 2010 PLUS International Conference Other Policy Provisions and Concepts Definition of Wrongful Act Unjust Enrichment Exclusion Definition of Claim Fortuity Doctrine

29 2010 PLUS International Conference Warranties Known Circumstances Severability Impact on Claims

30 2010 PLUS International Conference Carrier Remedies Disclaimer of Coverage Rescission based on Misrepresentation Declaratory Relief Action Reservation of Rights and Compromise Settlement/Allocation (Side Issue-Implications of Shaving for Excess Layers) Post-Adjudication Recovery

31 2010 PLUS International Conference Fraud Issues for Defense Counsel What are defense counsels ethical duties/concerns in reporting to the insurer? What are defense counsels duties/responsibilities in regards to corporate client in addressing evidence of fraud by employee? What are defense counsels duties/responsibilities with regard to reporting of fraud by client to regulatory authorities? Can evidence of actual fraud be used as leverage in settlement negotiations?

32 2010 PLUS International Conference Ethical and Moral Issues for Defense Counsel What can you report to insurance carrier? Can you/must you report fraud to corporate client? What, if any, obligations do you have to the victims of the apparent fraud? What, if any, obligations do you have to report the fraud generally? What do you do to navigate this sinking ship to shore in the context of the litigation?

33 2010 PLUS International Conference Questions & Answers

34 2010 PLUS International Conference Many Thanks To… Peter Biging Serge Adam Sally Combs Tim Covello


Download ppt "2010 PLUS International Conference The Fraud Monster: The Effects of Fraud on Professional Lines Coverage."

Similar presentations


Ads by Google