A confusing element in filings of both trustees is that they bundle the different polices together. The SIPA statement concludes: “The coverage under the D&O policy is a valuable asset which should be protected and preserved by this Court for the benefit of MFGI customers, should the SIPA trustee determine that he has claims against any of the D&O policy’s insureds, or otherwise asserts an interest in the D&O policy proceeds.”
Witmeyer says, “Both trustees are deliberately trying to confuse matters by falsely saying that the MFG Assurance liability insurance policy is a ‘D&O’ policy and is therefore governed by the rules applicable to the U.S. Speciality Lines D&O policy. However, the MFG Assurance policy is not a D&O policy."
Straw man argument
In addition to not distinguishing between the different types of policies, the MFGI statement misinterprets Sapere’s argument. “The Sapere objection alleges that commodities customer’s segregated accounts may have been used to pay insurance premiums for Professional Liability Insurance Policies issued by MFG Assurance. ... Based on this, the SIPA Trustee looked in to the payment of premiums on those policies. That investigation yielded no information that any payments were made in October 2011, let alone after October 26, 2011.”
Witmeyer says, “The seg funds issue is not the basis for the motion in the SIPA case, but it is the fact that the MFG Assurance policies cover the commodities customers’ missing segregated funds.”
The relevant language in the MFA Assurance policies, according to Witmeyer, is, “Insurance Covers Professional Liability: The insurer shall pay on behalf of the insured for all loss arising out a wrongful act which gives rise to a claim first made against an insured by a third party during the policy period (or discovery period, if applicable) and reported in writing to the insurer pursuant to the terms of this policy.”
The policy also states that the insured covers the policy holders and its subsidiaries.