Conseco rebuffed in insurance challenge

September 10, 2008

Conseco Inc. just wants its $10 million back. But federal judges keep saying no.

The Carmel-based insurance company lost another round in court yesterday when the U.S. Court of Appeals for the Seventh Circuit affirmed that an insurance policy that Conseco once held cannot be applied to the $10 million Conseco paid in 2005 to settle a class-action lawsuit.

Conseco wanted Illinois-based RLI Insurance Co. to cover the cost of its settlement payment to Roderick W. Russell and other former Conseco employees. Russell claimed former Conseco executives failed to reveal the company's true financial condition as it veered toward bankruptcy in 2002, which led employees to continue to buy Conseco stock as part of their retirement plans.

Conseco emerged from bankruptcy in September 2003. It settled the Russell lawsuit in March 2005.

But two years later, U.S. District Court Judge Larry McKinney declared that RLI owed Conseco nothing. He ordered Conseco to pay RLI $1.5 million in legal fees.

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