Insurer: Not liable for Claims of Embezzlement in New Mexico Matter

Another insurance company has gone to federal court in New Mexico to avoid paying millions of dollars in claims from victims whose trust funds and savings were embezzled.

The Albuquerque Journal reported the Cincinnati Insurance Co., based in Fairfield, Ohio, is seeking a declaratory judgment that the company isn’t liable for coverage of the losses because the insurance policy it sold to Desert State Life Management of Albuquerque doesn’t cover the “wrongful acts” by former Desert State CEO Paul Donisthorpe.

Donisthorpe, who is not in federal custody, is awaiting sentencing after pleading guilty to federal criminal charges of wire fraud and money laundering.

A proposed class action lawsuit filed on behalf of victims is still pending in federal court, as is a lawsuit filed by Evanston Insurance Co., which provided “professional liability” insurance for the firm.