Tip of the Month, December 2010 - Preservation Obligations and Insurance Policy Notification Clauses
29 December 2010
Mayer Brown Newsletter
Scenario An accounting firm becomes aware through news reports of the collapse of an alleged Ponzi scheme. Several of its audit clients are investment funds that are victims of the scheme. The accounting firm consults with counsel about whether the accounting firm has insurance coverage if sued by the investment funds for failure to discover the fraud and is advised that it should give its insurers notice that a circumstance has arisen that may give rise to a claim. The accounting firm is unsure whether notifying its insurers also triggers its obligation to preserve evidence relevant to potential future litigation.