Barnes & Thornburg Wins Coverage Dispute for Directors and Officers of Financial Services Firm

Barnes & Thornburg secured an important victory for the directors and officers (D&O) of StratFS, formerly known as Strategic Financial Solutions, when a Delaware federal judge ruled that two D&O insurance companies must provide defense coverage for the individuals that founded and operated the New York-based financial services firm against an enforcement action brought by the Consumer Financial Protection Bureau (CFPB) and a multistate coalition of attorneys general.

On Sept. 16, 2026, U.S. District Judge Jennifer L. Hall ruled on cross-motions for judgment on the pleadings that Federal Insurance Company and Argonaut Insurance Company breached their policies and have a duty to defend the founders of StratFS. Judge Hall also refused to dismiss the insureds’ bad faith claims against Federal (Chubb).

In January 2024, the CFPB and seven state attorneys general (New York, Colorado, Delaware, Illinois, Minnesota, North Carolina and Wisconsin) sued StratFS and its D&Os, accusing the company of running an illegal debt-relief enterprise and froze all of the company’s and named individuals’ assets, leaving them without the resources to defend themselves. The B&T insurance coverage team brought claims against the primary and excess D&O insurers in Delaware District Court seeking declaratory relief, breach of contract and bad faith denial of coverage, in order to secure defense coverage and provide a lifeline to the named individuals.

The insurance companies invoked the professional services exclusion to deny coverage for the suit, arguing that all claims against management arose out of the “professional services” that the firm provided to customers. But in February 2026, U.S. Magistrate Judge Laura Hatcher issued a Report and Recommendation concluding that the professional services exclusion does not bar coverage for all of the claims asserted in the CFPB action, such as allegations about deceptive marketing and advertising, and therefore a duty to defend exists and the insurers must defend the entire action.

In her Sept. 16 opinion, District Court Judge Hall (relying on a prior Delaware Supreme Court ruling that this B&T insurance team secured in ACE v. Guaranteed Rate, Inc.) agreed with and affirmed the Report and Recommendation, and held that: “As at least one claim in the CFPB action is outside the scope of the professional services exclusion, there is a duty to defend.”

The decision made headlines in Bloomberg Law.

The Barnes & Thornburg team is led by partner Lilit Asadourian (LA) and includes partners Alice Kyureghian (LA) and Chad Stover (DE) and associate Daihana Estrada (CHI).