NEW YORK (Bloomberg) — Refco Inc., the bankrupt futures trader, got approval to use $7.5 million in insurance proceeds to pay the defence costs of former chief executive officer Phillip R. Bennett and other former directors and officers.US Bankruptcy Judge Robert Drain in New York yesterday approved a request by Lexington Insurance Co. to draw on the policy. A prior $10 million policy from US Specialty Insurance Co. was almost used up, according to court filings.

Refco filed the 15th-biggest bankruptcy in US history on October 17, 2005, a week after disclosing that Bennett had concealed $430 million in company debt. Bennett pleaded not guilty to federal criminal fraud charges in November, 2005 and is set to go on trial October 9.

The US Specialty Insurance policy covered a range of litigation against individuals at Refco, including a securities suit, lawsuits brought by Austrian bank Bawag PSK and private equity firm Thomas H. Lee, regulatory investigations, and criminal matters. The Lexington policy also covers civil, regulatory and criminal defence costs.

Such directors-and-officers policies are usually considered property of the bankruptcy estate, though their proceeds are often not, so the insurers themselves need to seek court approval to use the money.

Lexington said in court papers that counsel from US Specialty has said the insured parties will seek reimbursement under Lexington’s policy “within 30 days if not sooner”.