Martha Seeks $3.7M In Legal Fees From Insurers

By Mark E. Ruquet

NU Online News Service, March 18, 12:33 p.m. EST?Martha Stewart Living Omnimedia said its directors and officers insurance policy should cover $3.7 million of Ms. Stewart's legal fees, but an attorney said the firm may have a hard time collecting.[@@]

In its 10-K filing with the Securities and Exchange Commission this week, the company said its namesake, convicted of conspiracy, obstruction of an agency proceeding and making false statements to federal investigators, would be reimbursed for some of her defense expenses.

Ms. Stewart filed a claim with her company for the cost of defending against the allegation she made false and misleading statements intended to influence the price of her corporation's stock. She was not convicted on that count.

The company said it believes that any reimbursement to Ms. Stewart for the defense cost will be covered under the company's D&O insurance policy, resulting in no expense to the corporation.

But an attorney who specializes in representing policyholders in D&O cases said the company may not have an easy time collecting.

William G. Passannante, an attorney with Anderson Kill & Olick, P.C., in New York, said that experience has shown that insurers may not be too anxious to cover the costs, especially given the size of the claim.

While he could not speak specifically to the Stewart case, generally, carriers are resisting paying large claims?"anything north of seven figures."

"In D&O, any claim where there is a substantial award for defense costs, the policyholder will have a fight on their hands," he said.

Should an executive be cleared of charges, Mr. Passannante continued, the executive should be eligible to put a claim in under the D&O policy.

"If there is a situation where an insurer gets a claim for defense costs after it is found that the executive should not have been convicted, absolutely, the insurer should pay," he said.

Ms. Stewart is currently appealing her conviction.

Ms. Stewart served five months in federal prison in West Virginia and must serve an additional two years of supervised release. Five months of that portion of the sentence involves home confinement, which she is now serving.

A call to Martha Stewart Living Omnimedia seeking the names of the insurers providing the company's coverage was not returned.

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Martha Seeks $3.7M In Legal Fees From Insurers

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