On October 10, 2009

All Aboard! Accused Fraudster Allen Stanford Rides the D&O Train, Courtesy of Lloyd’s

It’s never a good sign for the prosecution when the judge starts weeping for the defendant. But the case of R. Allen Stanford, who stands accused of masterminding a $7 billion investor-fraud scheme, could fare even worse for the insurance industry. Insurers such as Chubb, Ace and American International Group provide Directors and Officers insurance, in shorthand, “D&O.” Its purpose is to protect corporate board members, chief executives and other top officials who can be subjected to malicious lawsuits. Their companies buy it for them so they’ll be productive and happy. But insurers aren’t stupid. They always include a clause that says if the insured knowingly commits fraud or other crimes, the policy is void. Stanford made headlines when his…

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