In a recent case in the state of Florida, a group of investors alleged they were victims of a Ponzi scheme and filed an action against a company and its directors. The group of creditors, the plaintiffs in the case, fell victim to a Ponzi scheme when they invested in a company that was in the business of providing medical monitoring devices to people, mainly the elderly, which enabled them to alert emergency services in the event of an in-home emergency. Evidently, the company purchased only a fraction of the devices it had purported to put into service. Instead, the company used investors’ money to pay new investors in a classic Ponzi scheme. The scheme was apparently perpetrated by the company president.
The company had an insurance company that provided coverage to the company under two commercial comprehensive general liability insurance policies that included liability coverage and an umbrella policy, but the insurance company refused to defend the directors of the company in the lawsuit on the basis that there was no coverage for the type of claim asserted by the plaintiffs. The directors sued the insurance company for breach of contract and declaratory relief. The directors then entered into a consent judgment with the plaintiffs and assigned their claim against the insurance company to the plaintiffs. The plaintiffs moved for a judgment to be entered against the insurance company in the amount of the consent judgment. The defendant insurance company filed a motion to dismiss the complaint on the grounds of failure to state a cause of action.