Article ID: 686a9807cacaacf8f562e70597e09842e17e9e414a3aa50c7f6e7d7bc03d8781
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URL: https://www.businessinsurance.com/cash-lender-owed-no-defense-in-1-billion-fraud-case-judge-rules/
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Cash lender owed no defense in $1 billion fraud case, judge rules - Business Insurance Skip to content Register for free Search Search Log In Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Cash lender owed no defense in $1 billion fraud case, judge rules by Richard Sine Claims Disputes , D&O Aug 12, 2026 Argonaut Insurance does not have to pay defense costs for a merchant cash advance company that settled a New York fraud lawsuit for about $1 billion over claims it gouged small businesses, a federal judge ruled. In Yellowstone Capital LLC and Yitzhak Stern v. Argonaut Insurance Company , decided Tuesday in the United States District Court for the District of New Jersey, Judge Jamel K. Semper found that Yellowstone’s conduct was excluded under its policy and that it failed to obtain required consent to incur defense costs. New York’s attorney general had accused Yellowstone of running an illegal lending scheme disguised as merchant cash advances, charging small businesses usurious interest rates while falsely advertising the loans as risk-free purchases of future revenue rather than loans requiring collateral or personal guarantees. Jersey City, New Jersey-based Yellowstone and its chief executive Yitzhak Stern settled with the state in 2024, then sought coverage from Argonaut under a directors and officers liability policy the insurer had issued in 2018. Argonaut denied coverage, citing a policy exclusion for claims arising from false advertising and unfair business practices, among other grounds. Yellowstone had argued that the exclusion didn’t apply because the attorney general’s action was “primarily based on the alleged violations of New York’s banking and lending laws for which there is no exclusion.” But the judge wrote that the banking and lending claims “maintain a substantial nexus with, and thus arise out of, Yellowstone’s fraudulent and misleading conduct.” The court separately dismissed Yellowstone’s claims for defense costs tied to individual employees, finding the company failed to address Argonaut’s argument that it never obtained the insurer’s written consent before incurring those costs. The judge granted Argonaut’s motion to dismiss Yellowstone’s claims, while allowing claims brought by Mr. Stern. Argonaut Insurance is a subsidiary of Argo Group, based in New York. 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