SDNY Rules SEC Investigation Is A "Claim" Within Pending And Prior Acts Exclusion

The U.S. District Court for the Southern District of New York has held that a long-running investigation by the SEC constituted a "Claim" triggering the pending and prior claims exclusion in an excess directors and officers ("D&O") policy. See Patriarch Partners, LLC v. AXIS Ins. Co., No. 16-cv-2277 (VEC) (S.D.N.Y. Sept. 22, 2017).

This case stems from a high-profile SEC investigation into plaintiff Patriarch Partners, LLC ("Patriarch") relating to certain Patriarch investments known as the "Zohar funds." When the investigation began in December 2009, the SEC had referred to it as only an "informal inquiry" concerning certain unspecified Patriarch investments. In May 2011, however, the SEC started issuing more detailed requests for information pursuant to what it then referred to as an "informal investigation." At this time, the SEC began targeting the Zohar funds.