US COURT DISMISSES INSURANCE CLAIMS FOR MADOFF-RELATED

A US District Court has ruled that New York-based insurer AIG does not have to make payments under its Fraud SafeGuard protection guarantee to two California residents who alleged a loss of $8.5m as a result of the Madoff Ponzi Scheme scandal. Robert and Harlene Horowitz had claimed the maximum $30,000 under the AIG policy, and had also sought class-action status on behalf of thousands of other policyholders, on the grounds that they thought that they had $8.5m in their account until the fraud was exposed in December 2008. AIG said that the Horowitzes had taken $226,000 more out of their Madoff account than they had put in. US District Judge Paul Crotty said that it would be absurd to credit former clients with amounts of money that were completely fictional. He agreed with Irving Picard, the court-appointed trustee for the Madoff operation, who claimed that losses should be based on the amount of money put into the scheme minus the amount of money taken out. Judge Crotty said in the Southern District of New York Court that the $8.5m was not taken from the Horowitzes by fraud, because it never existed.