Citing policy violations, Hanover Insurance Company
refused
to cover Vemma’s legal fees with respect to the
FTC lawsuit
filed against them.

In response, Vemma filed for a preliminary injunction that would force Hanover to

reimburse them for their defense expenses to date and, going forward, paying their expenses within ten days of receiving invoices until the applicable policy limits are exhausted.

On July 29th Vemma’s motion was denied.

In denying Vemma coverage for the FTC lawsuit, Hanover argued that it was a “related” pyramid scheme claim.

Several other pyramid scheme claims have been made against Vemma prior to the FTC action a year ago.

Vemma’s policy with Hanover only protected them against ‘
claims first made against the insureds
‘, and so the insurer argued that the FTC action was not covered.

The court ultimately agreed with Hanover’s decision.

Vemma’s argument simply ignores the terms of the policy related to covered claims.

Hanover concedes the FTC action is a claim under the policy only to the extent that it is a Related Claim—one arising from the same facts or circumstances as claims against Defendants from earlier policy periods that were never brought to Hanover’s attention.

Hanover does not concede that the FTC action is a claim first made under the 2015-16 policy.

By the express terms of the 2015-16 Policy, the Court agrees with Hanover that the Court need not reach policy exclusions if the FTC action is not a claim first made under that policy.

One point the court agreed with Vemma on though was that their policy

is not so broad as to mean that any former claim using the words “pyramid scheme” precludes any later pyramid scheme claim from coverage under the policy.

They must arise from the same “facts, circumstances, situations, transactions, results, damage or events” under the policy, which is by its very nature a fact-intensive inquiry.

As far as the court is concerned, a related claim must arise from ‘
the same facts or circumstances as claims against Vemma from earlier policy periods’.

It is not clear from the Complaint and the associated judicially-noticed public records whether the prior claims with respect to Vemma’s alleged operation of a pyramid scheme were based on the same marketing and compensation scheme, or “policies and procedures,” as the FTC action.

Hanover’s allegations as to prior claims brought to Vemma’s attention are not sufficient for the Court to conclude as a matter of law that the prior claims were Related Claims under the policy to those brought in the FTC action.

This conclusion, among others, saw Hanover’s request for judgement on their pleadings struck down.

With respect to Vemma’s requested preliminary injunction, interestingly enough the court evaluated the matter by separating BK Boreyko from Vemma.

No evidence before the Court indicates that the FTC action is not a claim

first made against Mr. Boreyko as an Insured Individual, and Mr. Boreyko is thus likely to succeed

🤖 Quick Answer

What was the outcome of Vemma's preliminary injunction motion against Hanover Insurance?
Vemma's preliminary injunction motion was denied on July 29th. Hanover Insurance Company refused to cover Vemma's legal defense expenses related to the FTC lawsuit, citing policy violations and arguing that the claim was related to previous pyramid scheme allegations, which fell outside the policy's coverage for claims first made against the insureds.

Why did Hanover Insurance refuse to cover Vemma's FTC lawsuit defense costs?
Hanover Insurance denied coverage by arguing the FTC lawsuit constituted a "related" pyramid scheme claim. Since Vemma's policy only protected against claims first made against the insureds, and previous pyramid scheme claims existed before the FTC action, Hanover maintained the current claim fell outside applicable coverage limits and policy conditions.

🔗 Related Articles

- FTC seeks NetForce contempt judgment + civil sanctions
- FTC denied Netforce Seminars contempt sanctions
- Herbalife facing “pending law enforcement action”
- Juan Herman cops $250,000 Traders Domain contempt fine
- Make Wellness’ prelaunch is a pyramid scheme