Picking Up The Tab For Disgorgement

Edited by Amy Mudge and Randy Shaheen

In many advertising cases, the FTC seeks disgorgement as equitable monetary relief.  We previously wrote about the history of and basis under which the FTC seeks that remedy.  Last week, a decision of New York's highest court may have changed the landscape on whether there is insurance coverage for advertisers faced with FTC disgorgement claims.

The case concerned J.P. Morgan's suit against its insurers for coverage for disgorgement paid to the SEC.  In 2006, two years before J.P. Morgan acquired it, Bear Stearns was being pursued by the SEC for a slew of securities law violations.  The SEC sought over $700 million from the failing firm.  Bear Stearns opted not to fight.  Despite their claim that they only kept $16.9 million of their ill-gotten gains, Bear Stearns agreed to settle the case with a payment including $160 million in disgorgement.  J.P. Morgan now claims that its insurance should have covered