Lovell White Durrant is gearing up for a court battle with the Massachusetts' insurance regulator next month following her proposals to settle multi-million-dollar environmental claims between General Electric (GE) and its captive insurer Emlico.
Lovells, representing some of the 400 reinsurers who may have to stump up the money, said the regulator, Linda Ruthardt, had excluded the reinsurers from a deal made with GE, Emlico and its liquidator, Coopers & Lybrand.
In 1995 Ruthardt, Massachusetts' state commissioner of insurance, granted Emlico permission to move from Massachusetts to Bermuda. Three months later the company went into liquidation facing massive environmental and asbestosis claims from GE.
Lovells claims Emlico knew it was about to go into liquidation and moved to Bermuda because reinsurers can be forced to pay more under Bermudan insolvency laws.
It claims it also has evidence that Coopers advised Emlico in Massachusetts on its move to Bermuda long before it was appointed as liquidator.
The insurance regulator sent the Bermudan authorities a letter querying this last November. Coopers says the letter is “the subject of serious settlement negotiations”.
Ruthardt was investigating claims that she had been defrauded by Emlico and had subpoenaed Emlico's liquidators, requesting more documents. But on 13 March she announced that she was proposing a settlement of the environmental claims between GE and Emlico. Her proposals need approval from the Supreme Court of Suffolk County, Massachusetts. Lovells intends to object at the court hearing scheduled for April.
Lovells solicitor Michael Davison, who together with partner Christopher Grierson and Chicago partner Joe McCullough is representing reinsurer Hannover Re and Kemper Re, said: “Ruthardt wants the Massachusetts court to appoint a master to approve the settlement but he will not be allowed to exercise his discretion, or to ask for any more information than that provided by the liquidators and he can be removed at the request of GE if they think he is taking too long. It's a rubber stamping exercise.
“The whole thing seems extraordinary; the commissioner is supposed to be a regulator investigating fraud.
“Just when she seems to be making progress she throws up her hands and says lets have a settlement because it's taking too long.”