Jones

I. INTRODUCTION

Respondent Executive Risk Indemnity, Inc. (ERII), issued a $10 million insurance policy to STARS Holding Company, Inc. (STARS, formerly known as myCFO, Inc.), providing coverage for claims arising from investment advice and financial planning services. Appellant Reese M. Jones (Jones), a former client of STARS, brought an arbitration proceeding against STARS to recover damages for faulty investment and financial planning advice STARS gave him. From the start, ERII was aware of Jones’s claim, and was repeatedly requested and encouraged to participate in the proceedings. ERII refused to do so, resting on the fact that its policy did not promise STARS a defense, only reimbursement of defense costs subject to a $250,000 retention. STARS was insolvent, a fact known to ERII, and was unable to mount a defense in the proceedings. Jones ultimately received an arbitration award against STARS for over $22 million following an uncontested hearing, which was judicially confirmed. ERII refused to pay any portion of the judgment, instead bringing this coverage action claiming that it had no obligations under the policy issued to its insured STARS.

This appeal arises…