Continental Off Hook For Tax Co.'s Ponzi Losses

Law360, New York (March 27, 2014, 4:02 PM EDT) -- A California federal judge on Wednesday excused Continental Casualty Co. from covering a defunct 1031 exchange company that ran a Ponzi-like real estate embezzlement scheme, ruling that allowing its receiver to recover client losses would reward criminality in violation of state insurance law.

U.S. District Judge Edward J. Davila determined that Vesta Strategies LLC receiver Thomas Dillon is barred from tapping employee dishonesty policies held by Vesta and its marketing affiliate because California Insurance Code Section 533 prohibits insureds from obtaining coverage for their own fraudulent...
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