Looking Past the Labels: How to Determine Whether Disgorgement or Restitution Payments Are Insured

Since as early as 2001, insurers have argued that settlements or judgments against an insured for disgorgement or restitutionary relief are uninsurable as a matter of law. Insurers have particularly relied on settlements or judgments labeled “disgorgement” or “restitution” as a basis for denying coverage. But numerous decisions over the years have recognized that courts (and insurers) must look past mere labels of the settlement or judgment and instead look closely at the true nature of the loss to determine whether such payments are insurable. Two particular decisions in 2021 have further recognized that disgorgement or restitutionary payments may be insurable.

Defining “Disgorgement” and “Restitution”

While often used interchangeably, “disgorgement” and “restitution” are related but distinct terms. Disgorgement is an equitable remedy meant to deter wrongdoers from enriching themselves by their wrongful acts.³ Restitution is an equitable remedy meant to restore to a plaintiff something of value that is wrongfully in the possession of a defendant.⁴ Both disgorgement and restitution deprive defendants of their ill-gotten gains.⁵ An award disgorging ill-gotten gains can be used to pay restitution to a plaintiff.⁶

Level 3’s Interpretive Principle: “Loss” Does Not Include Restoration for Ill-Gotten Gains

The U.S. Court of Appeals for the Seventh Circuit’s 2001 decision in Level 3 Communications, Inc. v. Federal Insurance Co.⁷ is the most frequently cited case addressing the insurability of disgorgement and restitutionary payments. Level 3 established the interpretive principle that “loss” within the meaning of an insurance policy does not include the restoration of an ill-gotten gain.⁸

In Level 3, former shareholders of a company brought a securities fraud lawsuit against Level 3, alleging that Level 3 acquired shares in the company under false pretenses. Their company could no longer be reconstituted, so these shareholders sought as damages the monetary value of the shares. That is, the shareholders sought as damages “the difference between the value of the stock at the time of trial and the price they had received for the stock from Level 3.”⁹

Level 3 eventually settled the lawsuit for approximately $12 million. Level 3 sought insurance coverage under its D&O policy for the settlement payment, but the insurer denied coverage, arguing that it would be against public policy to use the insurance policy to insure a thief against the cost of disgorging its stolen proceeds. The district court disagreed with the insurer and held that the settlement qualified as a loss within the meaning of the policy.¹⁰

But the Seventh Circuit reversed the district court. The Seventh Circuit agreed with the insurer that “a ‘loss’ within the meaning of an insurance contract does not include the restoration of an ill-gotten gain.”¹¹ The court explained that “[a]n insured incurs no loss within the meaning of the insurance contract by being compelled to return property that it had stolen, even if a more polite word than ‘stolen’ is used to characterize the claim for the property’s return.”¹² The Seventh Circuit found that although the underlying plaintiffs were not seeking the return of their shares or the value of the shares on the date they were purchased, the relief they sought was “restitutionary in nature” in that they sought to divest Level 3 of the value of the unlawfully obtained stock minus the cost to Level 3 of obtaining the stock—that is, the net benefit of its unlawful act.¹³ Therefore, the Seventh Circuit reversed the district court and entered judgment for the insurer.

For a time, courts would routinely grant motions to dismiss or for summary judgment in the insurer’s favor and deny coverage for payments characterized as disgorgement or restitution. For example, Conseco, Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA¹⁴ is an unpublished but often-cited case relied on by insurers to deny coverage for disgorgement and restitutionary payments. In that case, investors sued Conseco in several securities fraud class actions that asserted claims under section 11 of the Securities and Exchange Act of 1934. Conseco settled the lawsuits for $120 million, allocating approximately $81 million of that amount to the plaintiffs’ section 11 claims. Conseco sought insurance coverage under its D&O policy for the $81 million, but the insurer denied coverage. The court ultimately granted the insurer’s motion to dismiss, holding that the $81 million settlement payment was not insurable because it represented the funds that Conseco wrongfully acquired from its investors. Relying on Level 3, the court held that the $81 million settlement was restitutionary in character. The court held that “[i]t is axiomatic that insurance cannot be used to pay an insured for amounts an insured wrongfully acquires and is forced to return.”¹⁵ The court also held that restitution is not insurable even if no wrong is involved, stating that “an insured has no greater right to something wrongfully acquired by mistake or accident than it does to something acquired by fraud—the critical factor is that the money or property does not belong to the insured, and it has to be returned.”¹⁶

In Vigilant Insurance Co. v. Credit Suisse First Boston Corp.,¹⁷ after the insured, Credit Suisse First Boston Corp. (CSFB), settled with the U.S. Securities and Exchange Commission (SEC) following an investigation for securities regulation violations, the court affirmed summary judgment in favor of the insurers and held that the insured was not entitled to recover the portion of the settlement that represented the disgorgement of funds. Citing to Level 3, the court held that “[t]he risk of being directed to return improperly acquired funds is not insurable.”¹⁸ The court explained that “[a]lthough the final judgment directing the disgorgement here at issue was based on a settlement and not on an adjudication after trial . . . , the final judgment expressly states that the money ordered disgorged was ‘obtained improperly by CSFB as a result of the conduct alleged in the Complaint.’”¹⁹ The court also noted that CSFB executed consent agreements with the SEC where CSFB “agreed not to contest the allegations of the complaint.”²⁰

Courts Now Look at the True Nature of the Disgorgement or Restitutionary Payment

While courts still generally support the interpretive principle set by Level 3, courts have become more critical in determining whether the relief sought in the underlying lawsuit is disgorgement and/or restitutionary relief. For example, in St. Paul Mercury Insurance Co. v. Foster,²¹ the court denied, in part, an insurer’s motion for summary judgment, holding that material issues of fact still existed as to whether the relief sought was truly restitutionary in nature. The court explained that “[d]epending on the facts ascertained at trial in the underlying litigation, different measures of damages may theoretically be available.”²² The court described one measure of damages sought in the underlying lawsuit and concluded that “that amount cannot reasonably be construed as relief divesting an insured of the net benefit of his unlawful actions, an amount that the insured had gained from [its] officers’ misbehavior, or the restoration of an ill-gotten gain.”²³ Thus, the court held that it could not “find as a matter of law that all potential relief sought in that case is restitutionary in nature.”²⁴

In William Beaumont Hospital v. Federal Insurance Co.,²⁵ where the insured hospital was sued in an underlying antitrust lawsuit for increasing its profits by allegedly underpaying nurses, the court granted judgment on the pleadings in favor of the hospital and held that the insurer was obligated to indemnify the hospital. The court held that the damages sought by the underlying plaintiffs were not “disgorgement and/or restitutionary relief” in character. The court explained that the damages sought by the underlying plaintiffs for alleged violations of section 1 of the Sherman Act were ordinary compensatory damages because the damages focused on injury to the plaintiffs rather than on the hospital’s gains. The court rejected the insurer’s claim that this relief was restitutionary, finding that the settlements were “wholly consistent with this focus on the injury suffered by the plaintiff RNs, as opposed to the defendant hospitals’ profits or ill-gotten gains.”²⁶ Thus, the court held that the settlement was a covered loss under the policy.

U.S. Supreme Court Says SEC Disgorgement Is a Penalty

For years, courts looked closely at alleged disgorgement and restitutionary payments to see if they truly represented ill-gotten gains. However, in 2017, a U.S. Supreme Court decision gave insurers a new basis to deny coverage.

In Kokesh v. SEC,²⁷ the SEC launched an enforcement action in 2009 against Charles Kokesh for allegedly misappropriating $34.9 million in investors’ funds between 1995 and 2006. A jury ultimately found that Kokesh violated several investor and securities laws. The district court determined that under 28 U.S.C. § 2462—which states that an “enforcement of any civil fine, penalty, or forfeiture” must be “commenced within five years from the date when the claim first accrued”—the five-year limitations period precluded any penalties for misappropriation occurring prior to October 27, 2004, five years prior to the date on which the SEC filed its complaint. But the district court determined that disgorgement is not a “penalty” within the meaning of § 2462. Thus, the district court determined that no limitations period applied and entered a disgorgement judgment for the entire $34.9 million. The U.S. Court of Appeals for the Tenth Circuit affirmed, holding that § 2462’s statute of limitations does not apply to SEC disgorgement claims.

The Supreme Court disagreed. The Supreme Court held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of § 2462, and so disgorgement actions must be commenced within five years of the date the claim accrues.”²⁸ First, the Court explained that SEC disgorgement is imposed by the courts as a consequence for violating public laws.²⁹ Second, the Court explained that disgorgement is imposed for punitive purposes; the purpose is to deter violations of the securities laws by depriving violators of their ill-gotten gains.³⁰ Finally, the Court explained that, in many cases, SEC disgorgement is not compensatory; instead, “disgorged profits are paid to the district court, and it is ‘within the court’s discretion to determine how and to whom the money will be distributed.’”³¹

Thus, the Supreme Court held that because disgorgement is imposed as a consequence of violating public law and is intended to deter and not to compensate, SEC disgorgement “bears all the hallmarks of a penalty.”³² Therefore, the Supreme Court held that § 2462’s five-year statute of limitations applies to SEC disgorgement.³³

Following Kokesh, state and federal courts relied on Kokesh to hold that insurers are not required to defend SEC enforcement actions or indemnify disgorgement payments because disgorgement is a penalty and thus uninsurable as a matter of law. For example, in Marcus v. Allied World Insurance Co.,³⁴ the insured sought defense and indemnity coverage in an underlying lawsuit where the SEC sued it for securities fraud violations. But the court, relying on Kokesh, held that the insurer had no duty to defend the SEC lawsuit “because disgorgement is a penalty not covered under the policy.”³⁵

However, a New York Court of Appeals decision in 2021, J.P. Morgan Securities Inc. v. Vigilant Insurance Co.,³⁶ recognized that an SEC disgorgement is not a “penalty” in the context of an insurance policy. And a Northern District of Illinois decision in 2021, Astellas US Holding, Inc. v. Starr Indemnity & Liability Co.,³⁷ further demonstrated what should be analyzed when determining whether disgorgement and restitutionary payments are insurable.

Vigilant: SEC Disgorgement Payment Is Not an Excludable Penalty

In Vigilant, the SEC began investigating Bear Stearns in 2003 for facilitating late trading and deceptive marketing practices by its customers in connection with the purchase and sale of shares of mutual funds. In 2006, following the investigation, Bear Stearns settled with the SEC: Bear Stearns did not admit or deny any misconduct but agreed to pay the SEC a $160 million “disgorgement” payment and a $90 million “civil money penalties” payment. Both payments were to be deposited in a fund to compensate mutual fund investors allegedly harmed by the improper trading practices.

Bear Stearns had insurance coverage for “wrongful acts” of Bear Stearns, and the policy particularly provided coverage for “loss” that Bear Stearns became liable to pay in connection with any civil proceeding or governmental investigation into violations of laws or regulations. The policy defined “loss” to include coverage for various types of damages “where insurable by law” but excluded coverage for “fines or penalties imposed by law.”³⁸ Bear Stearns sought insurance coverage for the disgorgement payment, but the insurers denied coverage, asserting that the payment was a penalty imposed by law.

In 2009, Bear Stearns sued its insurers for breach of contract and for a declaration that the disgorgement payment was covered by the insurance policy. After years of motions practice, Bear Stearns moved for summary judgment, seeking a declaration that $140 million of the disgorgement payment represented disgorgement of its clients’ gains, as compared with Bear Stearns’s own revenue, and was therefore an insurable loss under the policy. The insurers opposed the motion and cross-moved for summary judgment, arguing that the $140 million did not represent client gains and that various policy exclusions and public policy–based arguments precluded coverage.

The New York Supreme Court (New York’s trial court) denied the insurers’ cross-motions and granted summary judgment for Bear Stearns, concluding that the disgorgement of $140 million in client gains constituted an insurable loss. But the New York Supreme Court, Appellate Division, relying on Kokesh, reversed and granted the insurers’ cross-motions and denied Bear Stearns’s motion for summary judgment, holding that the disgorgement payment was a penalty and was therefore not an insurable loss.

The New York Court of Appeals (New York’s highest court) ultimately overturned the appellate division, holding that the disgorgement payment was not a “penalty” within the meaning of the insurance policy. The court of appeals explained that the primary issue in this case—whether the $140 million disgorgement payment is a penalty imposed by law and therefore not an insurable “loss”—was a question of contract interpretation.³⁹ When interpreting an insurance policy, courts must look to the specific terms used in the policy and interpret those terms, in pertinent part, consistent with the reasonable expectation of the average insured at the time of contracting. Furthermore, policy exclusions are narrowly construed in favor of coverage, and an insurer has the burden to prove that an exclusion applies to defeat coverage.⁴⁰

With this in mind, the court of appeals explained that the insurers had the burden to prove that a reasonable insured in 2000 (when the policy was issued) would have understood the phrase “penalties imposed by law” to preclude coverage for the $140 million disgorgement payment. The court of appeals ultimately held that the insurers failed to meet this burden.

First, the court of appeals explained that the term “penalty,” which was not defined in the policy, “is commonly understood to reference a monetary sanction designed to address a public wrong that is sought for purposes of deterrence and punishment rather than to compensate injured parties for their loss.”⁴¹ “In other words, a penalty is distinct from a compensatory remedy and a penalty is not measured by the losses caused by the wrongdoing.”⁴² Furthermore, before Bear Stearns’s insurance policy was issued, New York courts had held that “where a sanction has both compensatory and punitive components, it should not be characterized as punitive in the context of interpreting insurance policies.”⁴³ As such, “at the time the parties contracted [in 2000], a reasonable insured would likewise have understood the term ‘penalty’ to refer to non-compensatory, purely punitive monetary sanctions.”⁴⁴

Second, the court of appeals explained that Bear Stearns demonstrated that the $140 million was compensatory in nature. Bear Stearns submitted evidence regarding the settlement negotiations between Bear Stearns and the SEC, which showed that the $140 million was calculated based on valuations of Bear Stearns’s customers’ gains—not Bear Stearns’s gains—and investors’ corresponding injury resulting from the challenged trading practices.⁴⁵ Specifically, “after negotiations regarding the appropriate valuation method, Bear Stearns estimated third party gains to approximate $140 million and Bear Stearns ultimately agreed with the SEC to incorporate that amount into the settlement as representative of client gains and the concomitant investor losses.”⁴⁶ The court of appeals held that

[i]nasmuch as it was derived from estimates of the ill-gotten gains and harm flowing from the improper trading practices, and was intended—at least in part—to compensate those injured by the wrongdoing allegedly facilitated by Bear Stearns, the $140 million disgorgement payment could not fairly have been understood as a “penalty” in the context of this wrongful act professional liability insurance policy.⁴⁷

The $90 million “civil money penalties” payment, on the other hand, was not derived from any estimate of harm or gain flowing from the improper trading practices and related to Bear Stearns’s ill-gotten gains.⁴⁸ The court of appeals concluded that the $90 million was not compensatory and qualified as a penalty because Bear Stearns was required to treat only the $90 million payment as a penalty for tax purposes, and it could not use the $90 million to offset private claims against Bear Stearns;⁴⁹ and in a footnote, the court of appeals pointed out that documentation related to the settlement negotiations indicated that “it was contemplated that Bear Stearns would not seek insurance coverage for the civil penalty.”⁵⁰

Third, the court of appeals explained that, in considering the expectation of a reasonable insured at the time the policy was purchased, the SEC’s primary enforcement remedies were injunctive relief, disgorgement, and monetary penalties. When Bear Stearns purchased the insurance policy, the SEC believed that it had the power—as an equitable remedy and not as a monetary penalty—to require an entity to “disgorge” profits wrongfully obtained.⁵¹

The court of appeals was also not persuaded by the appellate division’s reliance on Kokesh. The court of appeals did not consider Kokesh to be controlling because Kokesh did not interpret the term “penalty” in the context of an insurance policy, and the court noted that the “Supreme Court has since clarified that SEC-ordered disgorgement is not always properly characterized as a penalty insofar as the SEC may seek ‘disgorgement’ of a defendant’s net gain for compensatory purposes as ‘equitable relief’ in civil actions.”⁵²

For these reasons, the court of appeals reversed the appellate division’s decision.⁵³

Astellas: FCA Settlement Payment Is Covered as Compensatory Damages

In Astellas, Astellas was under investigation by the U.S. Department of Justice (DOJ) for violating the Anti-Kickback Statute (AKS) and the False Claims Act (FCA). The DOJ alleged that Astellas used charities to funnel impermissible co-pay assistance to Medicare beneficiaries, thereby causing these beneficiaries to submit false claims for reimbursement to Medicare. In other words, the DOJ alleged that Astellas was providing financial assistance to Medicare beneficiaries “explicitly to increase [Astellas’s] sales and revenue . . . at the expense of Medicare.”⁵⁴

In 2018, Astellas settled with the DOJ: Astellas did not admit or deny any misconduct but agreed to pay the United States $100 million plus interest, and $50 million of the settlement was characterized as “restitution to the United States.”⁵⁵

Astellas had an excess insurance policy with Federal Insurance Co., which provided a $10 million limit of liability. The policy provided coverage for loss arising from claims made against Astellas for wrongful acts. “Loss” was defined to include “damages, settlements or judgments” but excluded “matters which may be deemed uninsurable under applicable law.”⁵⁶ Astellas demanded that Federal reimburse Astellas for $10 million of the settlement payment, the full amount of the policy limit. Federal denied coverage for any portion of the settlement payment, asserting that the settlement payment was a penalty “uninsurable under applicable law.” Astellas sued Federal seeking, among other things, a declaration that Federal must pay the full amount of its $10 million limit of liability.

Astellas and Federal each filed a motion for summary judgment. The district court ultimately granted Astellas’s motion for summary judgment and denied Federal’s motion, holding that the settlement payment constituted a loss under the Federal policy and that public policy does not bar coverage.

The court noted that the crux of the parties’ dispute was whether the settlement payment constituted a loss under the policy, and specifically whether it fell within the “uninsurable under applicable law” exception to the definition of “loss.” Astellas argued that the settlement payment constituted a damages payment to compensate the government for a loss or injury done to it, but Federal argued that the settlement payment was instead intended to divest Astellas of the net benefit it received as a result of its alleged wrongdoing. To resolve this dispute, the court explained that it must determine whether the settlement payment constituted damages or restitution.

First, the court discussed the classification of the settlement payment. Although $50 million of the settlement payment was designated as “restitution to the United States,” the court noted that the phrase “restitution to the United States” was used so that the settlement payment could qualify for tax deductibility under the Tax Cuts and Jobs Act of 2017.⁵⁷ The court said that this part of the settlement labeled as “restitution” did not support a finding that the government sought to disgorge profits from Astellas.

Second, the court agreed with Astellas that the FCA allows only civil penalties and compensatory damages, not restitution in the form of disgorgement of the violator’s unjust gains.⁵⁸ In other words, a settlement payment made pursuant to an alleged FCA violation is compensatory and therefore insurable.

Third, the court discussed the intent of the settlement agreement.⁵⁹ The court agreed with Astellas that, despite the government’s allegations and “themes” about Astellas’s intent to profit from its donations to the charities, the damages sought by the government and agreed upon in the settlement agreement were primarily compensatory damages under the FCA meant to cover the government’s losses in the form of Medicare payments.

Federal relied on Level 3 and its progeny to argue that the settlement payment was uninsurable because it was intended to deprive Astellas of “the net benefit of its wrongful acts.”⁶⁰ However, the court held that Level 3 and its progeny were distinguishable from the present matter because Level 3 and its progeny sought damages based on a calculation of money that the insured had wrongfully taken directly from the plaintiff. In the present matter, the theory of damages advanced by the government under the FCA was the government’s own loss in the form of Medicare payments to third parties (such as pharmacies and hospitals). The court explained that there was never a calculation of the profits that Astellas made from its alleged wrongful acts because Astellas told the government that no one from Astellas calculated the return on investment from the donations to the charities. The court explained that all of the evidence established that the amount of the settlement payment was derived from the amount of “tainted” prescriptions paid by Medicare to third parties, not from any potential profits that Astellas received from its donations.

The court acknowledged that the DOJ was investigating Astellas’s conduct related to its donations and not just violations of one statute. But the court explained that the evidence was “undisputed that the primary focus of the DOJ investigation was a violation of the FCA with an underlying AKS violation.”⁶¹ The court therefore concluded that the settlement payment was an insurable loss under the policy.⁶²

Conclusion

There are a few important takeaways from Vigilant and Astellas:

Recognize that Kokesh does not apply to “penalties” in the insurance context. Vigilant emphasized that Kokesh’s analysis of “penalties” was in regard to 28 U.S.C. § 2462’s statute of limitations. To determine what “penalty” means in an insurance policy, a traditional contract interpretation analysis must be applied.

Look past the labels. Both Vigilant and Astellas rejected the notion that simply labeling the payments as “disgorgement,” “restitution,” or even “penalty” will render the payment uninsurable. Instead, the courts analyzed the true nature or intention of the settlement payments. If the payment is punitive or restitutionary in nature, then the payment is likely not insurable. However, if the payment is (at least partially) compensatory in nature, then the payment may be insurable.

Determine how the settlement amount is calculated. To determine whether the payments were compensatory or punitive, the courts analyzed how the settlement payments were calculated. In Level 3, the settlement amount was based on a calculation of money that the insured had wrongfully taken directly from the underlying plaintiffs. But in Vigilant, the $140 million was not based on money that Bear Stearns took directly from investors; instead, the $140 million represented third-party gains that Bear Stearns facilitated. And in Astellas, the settlement payment was not based on any calculation of wrongfully obtained profits; instead, damages were based on the government’s own loss in the form of Medicare payments to third parties.

Look for any other factors that show the true nature or intent of the payment. Vigilant and Astellas looked at other factors. For example, both courts looked at why the settlements were labeled “disgorgement” and “restitution.” In Vigilant, the court noted that “the SEC’s primary enforcement remedies were injunctive relief, disgorgement, and monetary penalties.” Vigilant also noted that the SEC viewed disgorgement payments as an equitable remedy and not as a penalty. The $140 million was labeled disgorgement because this was one of the three remedies available to the SEC. The $140 million was not meant to be a penalty, especially considering that a separate payment of $90 million was specifically labeled as a penalty. In Astellas, the settlement was labeled “restitution to the United States” to satisfy requirements for tax deductibility. Astellas also noted that the FCA allows only civil penalties and compensatory damages, not restitution in the form of disgorgement of the violator’s unjust gain.

Coverage for disgorgement or restitutionary payments will certainly continue to be a litigated issue. But Vigilant and Astellas make clear that a thorough analysis of the true nature of the payment is required to determine whether such payments are insured.

Notes

1. But some courts have recognized that insuring disgorgement or restitutionary payments is not against public policy in certain states. See, e.g., Cohen v. Lovitt & Touché, Inc., 308 P.3d 1196 (Ariz. Ct. App. 2013) (holding that no Arizona public policy prohibits insurance coverage for restitutionary payments); Sycamore Partners Mgmt., L.P. v. Endurance Am. Ins. Co., No. N18C-09-211 AML CCLD, 2021 WL 761639 (Del. Super. Ct. Feb. 26, 2021) (holding that insurance for disgorgement or restitution is not prohibited as a matter of public policy under Delaware law); U.S. Bank Nat’l Ass’n v. Indian Harbor Ins. Co., 68 F. Supp. 3d 1044 (D. Minn. 2014) (finding no Delaware authority declaring restitution uninsurable); Burks v. XL Specialty Ins. Co., 534 S.W.3d 458, 469 (Tex. App. 2015) (explaining that “no Texas court has held that insuring a settlement of a claim seeking restitution or disgorgement is against public policy or otherwise generally ‘uninsurable under the law’ of Texas”), judgment vacated pursuant to settlement, opinion not withdrawn, 534 S.W.3d 470 (Tex. App. 2016).

2. See, e.g., Astellas US Holding, Inc. v. Starr Indem. & Liab. Co., 566 F. Supp. 3d 879 (N.D. Ill. 2021).

3. SEC v. Huffman, 996 F.2d 800, 802 (5th Cir. 1993).

4. First Nat’l Life Ins. Co. v. Sunshine-Jr. Food Stores, Inc., 960 F.2d 1546, 1553 (11th Cir. 1992).

5. FTC v. Bishop, 425 F. App’x 796, 798 (11th Cir. 2011).

6. See generally Raintree Homes, Inc. v. Village of Long Grove, 807 N.E.2d 439, 445 (Ill. 2004) (“[R]estitution is measured by the defendant’s unjust gain.”).

7. 272 F.3d 908 (7th Cir. 2001).

8. Id. at 910.

9. Id.

10. Id. at 909. The policy defined “loss” as “the total amount which any Insured Person becomes legally obligated to pay . . . including, but not limited to . . . settlements.”

11. Id. at 910.

12. Id. at 911.

13. Id. at 910.

14. No. 49D130202CP000348, 2002 WL 31961447 (Ind. Cir. Ct. Dec. 31, 2002).

15. Id. at *6.

16. Id. at *11.

17. 782 N.Y.S.2d 19 (App. Div. 2004).

18. Id. at 20.

19. Id.

20. Id.

21. 268 F. Supp. 2d 1035 (C.D. Ill. 2003).

22. Id. at 1045.

23. Id.

24. Id. at 1044.

25. No. 11-15528, 2013 WL 992552 (E.D. Mich. Mar. 13, 2013), aff’d, 552 F. App’x 494 (6th Cir. 2014).

26. Id. at *9.

27. 137 S. Ct. 1635 (2017).

28. Id. at 1639.

29. Id. at 1643.

30. Id. (quoting SEC v. Fischbach Corp., 133 F.3d 170, 175 (2d Cir. 1997)).

31. Id. at 1644 (quoting Fischbach, 133 F.3d at 175).

32. Id.

33. Id.

34. 384 F. Supp. 3d 115 (D. Me. 2019).

35. Id. at 117.

36. 183 N.E.3d 443 (N.Y. 2021).

37. 566 F. Supp. 3d 879 (N.D. Ill. 2021).

38. Vigilant, 183 N.E.3d at 448.

39. Id. at 447.

40. Id. at 448.

41. Id.

42. Id. at 449.

43. Id. at 450 (citing Zurich Ins. Co. v. Shearson Lehman Hutton, Inc., 642 N.E.2d 1065 (N.Y. 1994)).

44. Id.

45. Id.

46. Id. (emphasis added).

47. Id. at 451.

48. Id. at 450.

49. Id. at 451.

50. Id. at 451 n.8.

51. Id. at 451–52.

52. Id. at 452 (citing Liu v. SEC, 140 S. Ct. 1936, 1940 (2020)).

53. Id. at 453. In his dissent, Judge Rivera disagreed with the majority’s position that the SEC disgorgement was not a penalty. See id. at 453–67 (Rivera, J., dissenting).

54. Astellas US Holding, Inc. v. Starr Indem. & Liab. Co., 566 F. Supp. 3d 879, 887 (N.D. Ill. 2021).

55. Id. at 889.

56. Id. at 884.

57. Id. at 898.

58. Id. at 899.

59. Id. at 900.

60. Id. at 900–01.

61. Id. at 904.

62. Id. at 905. Federal also argued that coverage was precluded under the policy’s final adjudication exclusion. But the court held that this exclusion did not apply as the settlement was clearly not a final adjudication. The court also explained that nonadjudicated allegations of fraud that do not fall within the exclusion are covered.