ACE American Insurance is fighting to avoid covering trustees accused of mishandling a family trust worth tens of millions of dollars.
The insurer went to federal court in Illinois this month asking a judge to declare it has no obligation to pay claims against Steven Noble and Janelle Straszheim, two trustees who allegedly bungled their management of the Burton M. Lustine Inter-vivos Trust. The filing came December 9, though ACE continues to provide a defense for now while reserving its right to walk away.
At the heart of the dispute are allegations that would make any beneficiary wince. According to the underlying lawsuit filed in Maryland state court, Noble purchased golf clubs with trust money the day after the decedent died in October 2021.
The beneficiaries, Camille R. Wahl and Stephanie R. Wahl, claim the trustees then proceeded to leave between $65 million and $74 million sitting in checking accounts for ten months, earning less than 0.01 percent interest while better investment options went unexplored. That decision alone allegedly cost the trust more than $6 million.
The filing describes other eyebrow-raising transactions. Noble allegedly deposited personal funds into trust entity accounts multiple times in 2022, only to wire identical amounts back to his own accounts shortly thereafter. Meanwhile, both trustees collected more than $1.45 million each in compensation that the beneficiaries say was excessive and improper.
ACE's main argument for denying coverage turns on dates. The policy carries a retroactive date of February 6, 2023, meaning it covers only incidents that occurred on or after that date. Since much of the alleged misconduct took place in 2021 and 2022, the insurer says the claim falls outside the coverage period. The policy language states that coverage applies only for claims arising from professional incidents "which first occurs on or after the Retroactive Date."
Even if some wrongdoing happened after February 2023, ACE contends those acts are tied to earlier misconduct through the policy's interrelated incidents provision. That clause treats connected incidents as a single event dated to the earliest occurrence.
The insurer is also leaning on several policy exclusions. One bars coverage for fraudulent or intentional acts and for gaining improper financial advantage. Another eliminates coverage for commingling funds. A third excludes claims for loss of money held by the insured. And a fourth blocks coverage for the trustees' own fees.
ACE adds another wrinkle: it alleges Noble lied on the policy application. When asked in January 2024 whether trust funds had been commingled with other funds, he checked "No," despite allegedly knowing that extensive commingling had already taken place. The policy allows the insurer to deny coverage when applications contain misrepresentations that materially affect whether it would have accepted the risk.
