A Philadelphia-based insurer doesn’t have to cover the cost of restitution a client must pay to an aviation company it was charged with defrauding out of more than $400,000, the U.S. Court of Appeals for the Eleventh Circuit has ruled.

The ruling, which affirmed a lower court decision, was a victory for Philadelphia Indemnity co-counsel Valerie Shea, a partner in Goldberg Segalla’s Miami office and a leader of the firm’s Global Insurance Services practice. It was Valerie who persuaded the lower court—U.S. District Court for the Southern District of Florida—that a Tokio Marine Group unit of Philadelphia Indemnity had no duty to underwrite the repayment of “ill-gotten gains.”

The gains in this case were “gotten” allegedly by the Florida-based Sabal Insurance Group and its owner, Ian Sabal, who were charged in 2014 with five counts of grand theft for overbilling the Miami-Dade Department of Aviation and Quality Aircraft for workers’ compensation and general liability insurance with false invoices. The state of Florida alleged that Sabal fraudulently obtained more than $416,000 from Philadelphia Indemnity’s Tokio Marine unit. The amount obtained within the statute of limitations was more than $180,800.

Ian Sabal—who, according to testimony, sometimes delivered the falsified quarterly bills in person—settled the charges with the state of Florida by agreeing to make three payments: more than $183,800 to the aviation department; a $100,000 donation to a memorial fund; and $20,000 to the aviation department, to cover the cost of a 30-month inspector general’s office investigation into the alleged scheme.

Though Philadelphia Indemnity funded Sabal’s defense, the insurer refused to cover the cost of restitution paid by Sabal and filed suit. U.S. District Court in Miami ruled in Philadelphia Indemnity’s favor and that ruling was unanimously upheld by a three-judge appeals-court panel. “As matter of Florida law,” the panel ruled, “insurance contracts do not insure the restitution of ill-gotten gains.”

Quoted in Business Insurance, which covered the notable ruling, Valerie said “I think it’s an important decision that affirms the fact that one cannot insure against intentional misconduct and that ill-gotten gains will not be covered as a matter of contract interpretation and public policy.”

More about Goldberg Segalla’s Global Insurance Services:

Goldberg Segalla is one of the premier law firms advising and representing the global insurance and reinsurance industry. Our 75-lawyer Global Insurance Services practice, which Law360 ranks among the largest in the United States, exists to serve insurers, reinsurers, and all others operating in the insurance arena. Our attorneys advise insurers on matters ranging from new policy formation, transactions, and thorny regulatory concerns to complex insurance and reinsurance coverage disputes, bet-the-company litigation, bad faith and extracontractual claims, fraud, and professional liability defense for insurance agents and brokers.