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
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
"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
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
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
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.
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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