A US Court ruling that supported a division of Everest Re Group Ltd. has been affirmed by a federal appeals court, Business Insurance has reported.

The lower court ruling said the Everest Re unit does not have to defend or indemnify a financial adviser who sold a financial instrument issued by a company that was later sued by the US Securities and Exchange Commission.

A federal appeals court on Thursday agreed in the case, William Saoud, Patricia Boland-Saoud, and Bill Saoud Financial LLC v. Everest Indemnity Insurance Co.

William Saoud, of Clinton Township, Michigan-based Bill Saoud Financial LLC, sold insurance-related products.

He began to offer his clients a “memorandum of indebtedness” issued by Hollandale, Florida-based 1 Global Capital LLC in 2017.

According to the ruling by the 6th US Circuit Court of Appeals in Cincinnati: “Unfortunately, the investment opportunity was too good to be true,” noting that 1 Capital declared bankruptcy and was sued by the SEC for alleged violations of the Securities and Exchange Act.

Several of Bill Saoud Financial’s clients filed lawsuits against the company, Mr Saoud and his wife, which were eventually settled for an undisclosed amount.

After Everest Indemnity refused to defend or indemnify it under its professional liability policy, Bill Saoud Financial sued the insurer in US District Court in Detroit. The court ruled in Everest Indemnity’s favour.

A three-judge appeals court panel affirmed the lower court’s ruling, agreeing that an “unregistered security exclusion” in the policy applied.

While the panel agreed with the plaintiffs that the duty to defend is broader than the duty to indemnify, it said – citing an earlier case – “The insurer is not required to defend against claims for damage expressly excluded from policy coverage.”