By Joseph Ax

NEW YORK, Dec 11 (Reuters) - Members of a family that invested in Bernard Madoff's multibillion-dollar Ponzi scheme can only file insurance claims for the actual losses they suffered, not the losses shown on Madoff's fraudulent account statements, a New York state appeals court ruled Tuesday.

Jacobson Family Investments and a number of related corporate entities sued the insurers in 2010 after Madoff's scheme collapsed, seeking to collect up to $50 million in coverage from a primary policy from National Union Fire Insurance Company and from excess coverage policies from several other insurers.

The Appellate Division, First Department, held that Jacobson and the other entities could not claim more than $100 million in losses because many of the purported losses were based on the fictitious profits Madoff used to hide his scheme from investors.

"It is not reasonable to claim that the revelation that an asset, once thought to exist, did not exist, constitutes a 'loss,'" wrote Justice Angela Mazzarelli for a unanimous five-judge panel.

The decision said that the insurers must, however, address losses from each Jacobson entity as a separate claim, rather than aggregating all of them into a single claim, which would have allowed them to avoid coverage. As a whole, the entities made money from the Madoff scheme, with some coming out ahead and others behind, according to the court.

The decision largely affirmed a pair of rulings from Manhattan Supreme Court Justice Richard Lowe.

The First Department held, however, that if the claims were to be treated as separate, a $3 million deductible should apply to each one individually. That holding, which modified Lowe's earlier ruling, means that entities whose net losses total less than $3 million will not be able to seek coverage.

Adam Ziffer of Kasowitz, Benson, Torres & Friedman, an attorney for Jacobson, said his clients were happy with parts of the ruling but disagreed with other aspects and were considering legal options.

Attorneys for the insurers either did not comment or did not respond to requests for comment.

Madoff pleaded guilty in 2009 and is serving a 150-year prison sentence.

The First Department panel also included Justices Leland DeGrasse, Rosalyn Richter, Sheila Abdus-Salaam and David Saxe.

The case is Jacobson Family Investments v. National Union Fire Insurance Co, Appellate Division, First Department, No. 7961.

For Jacobson: Adam Ziffer, Marc Kasowitz and Robin Cohen of Kasowitz, Benson, Torres & Friedman.

For National Union Fire Insurance: Robert Novack and Charles Stotter of Bressler, Amery & Ross.

For Continental Casualty: Joseph McNulty and Douglas Eisenstein of Carroll McNulty & Kull.

For Fidelity and Deposit Company of Maryland and Great American Insurance: Geraldine Cheverko and F. Joseph Nealon of Eckert Seamans Cherin & Mellot.

(A prior version of this story misspelled the last name of Adam Ziffer in paragraph 8.)

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