In Re: Refco, Inc.

09-1362-bk(L), 09-1365-cv(Con)
In Re: Refco, Inc.

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order
filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a document
filed with this court, a party must cite either the Federal Appendix or an electronic database
(with the notation “summary order”). A party citing a summary order must serve a copy of it
on any party not represented by counsel.

At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
York, on the twenty-third day of March two thousand and ten.

PRESENT:

JOSÉ A. CABRANES,
BARRINGTON D. PARKER,
Circuit Judges,
EVAN J. WALLACH ,
Judge.*
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JOSEPH MURPHY , WILLIAM M. SEXTON , GERALD M.
SHERER, PHILIP SILVERMAN , RICHARD N. OUTRIDGE , LEO
R. BREITMAN , NATHAN GANTCHER, DAVID V. HARKINS,
SCOTT L. JAECKEL, THOMAS H. LEE , RONALD L.
O’KELLEY , SCOTT A. SCHOEN , DENNIS A. KLEJNA,

Plaintiffs-Appellants,

TONE GRANT,

Plaintiff,

v. Nos. 09-1362-bk(L)
09-1365-cv(Con)
ALLIED WORLD ASSURANCE COMPANY (U.S.), INC .,
ARCH INSURANCE COMPANY ,

*
The Honorable Evan J. Wallach of the United States Court of International Trade, sitting by designation.
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 Defendants-Appellees,

JOHN D. AGOGLIA, PETER MC CARTHY ,

Defendants-Counterclaimants-Appellants,

STEPHEN GRADY , PHILLIP R. BENNET, EDWIN L. COX ,
SUKHMEET DHILLON , ERIC G. LIPOFF, SANTO C. MAGGIO ,
ROBERT C. TROSTEN , FRANK MUTTERRER,

Defendants.
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FOR PLAINTIFFS-APPELLANTS: Greg A. Danilow (Michael F. Walsh, on the
brief), Weil Gotshal & Manges LLP, for
plaintiffs-appellants Leo R. Breitman, Nathan
Gantcher, David V. Harkins, Scott L. Jaeckel,
Thomas H. Lee, Ronald L. O’Kelley, and Scott A.
Schoen.

Helen B. Kim (Philip A. Nemecek, on the brief),
Katten Muchin Rosenman LLP, New York,
NY, and Los Angeles, CA, for plaintiff-appellant
Dennis A. Klejna.

Claire P. Gutekunst (Jessica Mastrogiovanni,
on the brief), Proskauer Rose LLP, New York,
NY, for plaintiff-appellant Richard N. Outridge.

Larry H. Krantz (David Kirby, on the brief),
Krantz and Berman LLP, New York, NY, for
plaintiff-appellant Philip Silverman.

John J. Jerome (Joyce A. Kuhns, on the brief),
Saul Ewing LLP, New York, NY, and
Baltimore, MD, for plaintiff-appellant Joseph
Murphy.

Stuart I. Friedman (Ivan Kline, on the brief),
Friedman & Wittenstein, P.C., New York,
NY, for plaintiffs-appellants William M. Sexton and
Gerald M. Sherer.

FOR DEFENDANTS-
COUNTERCLAIMANTS-APPPELANTS: William Fleming, Gage Spencer & Fleming
LLP, New York, NY, for defendants-

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 counterclaimants-appellants John D. Agoglia and
Peter McCarthy.

FOR DEFENDANTS-APPELLEES: Daniel J. Standish (Marc E. Rindner and Cara
Tseng Duffield, on the brief), Wiley Rein LLP,
Washington, DC, John H. Eickemeyer,
Vedder Price P.C., New York, NY, for
defendant-appellee Arch Insurance Company.

John D. Hughes (Robert W. DiUbaldo, on the
brief), Edwards Angell Palmer & Dodge LLP,
Boston, MA, and New York, NY, for defendant
-appellee Allied World Assurance Company (U.S.),
Inc.

Appeal from a judgment of the United States District Court for the Southern District of
New York (Gerard E. Lynch, Judge).

UPON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the order of the District Court is AFFIRMED.

Appellants, all of whom are, or were, directors or officers of the now-bankrupt brokerage
firm Refco, Inc., appeal from an order of the District Court dated March 2, 2009, granting summary
judgment to defendants-appellees Arch Insurance Company and Allied World Assurance Company
(U.S.), Inc. (“Allied World”) (together, “defendants”). Defendants were, at all times relevant, the
providers of appellants’ excess director and officer liability insurance policies. The District Court
granted summary judgment to defendants upon finding that (1) the excess policies’ prior knowledge
exclusions precluded coverage where any insured had knowledge of facts that might give rise to a
claim and (2) the claims for which appellants sought coverage all arose from facts that were known
by at least one insured at the time the policies were entered into. XL Specialty Ins. Co. v. Agoglia, Nos.
08 Civ. 3821, 08 Civ. 4196, 08 Civ. 5252, 2009 WL 1227485, at *8-9, *13 (S.D.N.Y. Apr. 30, 2009).1
We assume the parties’ familiarity with the remaining factual and procedural history of the case.

We find no error in the District Court’s comprehensive and well-reasoned analysis. First, we
agree with the District Court that “[i]n the context of the [prior knowledge exclusions], the words
‘any insured’ unambiguously preclude coverage for innocent co-insureds.” Id. at *13. Moreover,
because that language in the excess policies cannot be reconciled with the severability provision of
the underlying policy, the language in the excess policies controls. See id. (citing Home Ins. Co. v. Am.

1
The District Court’s Opinion and Order was originally entered on March 2, 2009, but re-entered on April 30,
2009 to correct a scanning error.

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Home Prods. Corp., 902 F.2d 1111, 1113 (2d Cir. 1990)).

We further agree that the prior knowledge exclusions’ “arising out of” requirement was
satisfied. All of the claims for which appellants sought coverage “arose from the fraudulent
concealment of the Refco Receivable” scheme that one of the directors was aware of. Id. at *9
(explaining that “New York courts have given the phrase ‘arising out of’ a ‘broad’ interpretation,
defining it as ‘originating from, incident to, or having connection with’” (quoting Maroney v. N.Y.
Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467, 472 (2005))).

Finally, we reject appellants’ argument that defendant Allied World is precluded from relying
on the prior knowledge exclusion because the language of that exclusion was not part of the “policy
binder” that provided the terms of coverage before the final policy issued. We agree with the
District Court that the binder’s inclusion of an “Inverted Warranty Endorsement as of Inception”
was the equivalent of a prior knowledge exclusion and would have been understood as such by the
parties. See id. at *14-15.

CONCLUSION

We have considered all of appellants’ arguments and find them to be without merit. For the
foregoing reasons, the order of the District Court is AFFIRMED.

FOR THE COURT,
Catherine O’Hagan Wolfe, Clerk of Court

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