In addition to the panel on class actions (which we blogged about here), we attended an interesting panel this morning about a less publicized outgrowth from the Madoff litigation — insurance coverage litigation.  In the case of Horowitz v. AIG Int’l Group, Inc., No. 09-cv-7312 (S.D.N.Y. Aug. 19, 2009), two Madoff investors sued their homeowner’s insurer on behalf of a class of insureds.  Plaintiffs alleged that the insurer wrongfully failed to cover the loss of money to Madoff’s scheme under a insurance policy provision covering loss “directly from fraud, embezzlement or forgery.”  The insurer took the position that only “net losses” are covered under the policy – i.e., where the investor paid more money to Madoff than he withdrew from Madoff.  The insurer has moved to dismiss on the grounds that the plaintiffs were actually net “winners.”

The session also addressed the recent success that feeder funds and auditors have had in defending against lawsuits by arguing that they were misled as well by Madoff’s scheme.