(Reuters) – A Manhattan federal judge has ordered an insurer to keep advancing legal fees of a hedge fund implicated in a criminal insider trading probe, saying the insurer was not excused because a fund analyst knew there might be a fraud when the policy was taken out.
Wednesday's decision by U.S. District Judge Paul Engelmayer is a defeat for XL Specialty Insurance Co, which had sought to rescind its $10 million policy for Level Global Investors LP and recoup more than $7.3 million already advanced, including to co-founder Anthony Chiasson.
Lawyers involved with the hedge fund industry have said a ruling favoring XL could have forced hedge funds to review their insurance policies. Level Global had claimed it would cause irreparable harm.
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