Unambiguous Language In a Rider and an Exclusion In a Financial Institution Bond Precluded Coverage of Losses Stemming from the “Madoff” Ponzi Scheme

The First Department reversed Supreme Court and determined a rider and an exclusion of coverage in a financial institution bond applied to the “Madoff” Ponzi scheme. The losses associated with the Ponzi scheme were therefore not covered by the bond.  The rider covered loss resulting from dishonest acts of named persons (including Madoff) “solely” with respect to such persons’ duties as an “outside investment advisor.” Because the losses stemmed from Madoff’s hybrid duties as both an “outside investment advisor” and a “securities broker,” the rider did not cover the losses.  In addition, a specific exclusion from coverage included losses caused by the dishonest acts of a non-employee securities broker (i.e., Madoff). Jacobson Family Invs., Inc. v National Union Fire Ins. Co. of Pittsburgh, PA, 2015 NY Slip Op 05273, 1st Dept 6-18-15