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http://nycourts.law.com/CourtDocumentViewer.asp?view=Document&docID=46669 Justice Freedman PLAINTIFF INSURER provided defendant corporation’s former chief executive officer (CEO) and others with liability coverage. The CEO advised plaintiff of lawsuits alleging that he and other officers artificially inflated the corporation’s stock value by mis-stating its finances. When he demanded that plaintiff defend him or pay his defense costs, the insurer rescinded the policies and returned the premiums on the grounds that misrepresentations of the corporation’s finances constituted wrongful acts. In the insurer’s action for a declaration that the policies were void ab initio, the former CEO sought a declaration that the insurer must defend him or pay his defense costs. The court held that because the insurer’s rescission claims had not yet been litigated and decided in its favor, the policies remain effective, and it must pay the CEO’s defense costs. If the insurer’s policies are declared void, it may be able to recover its cost of defending the CEO.

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