Confidential
Settlement – $4,850,000Judge
Court
USDC Central
Attorneys
Plaintiff
Defendant
Facts
In 1984 Defendant issued a $5,000,000 crime policy to a national insurance broker. The policy afforded coverage for loss resulting from theft or forgery by employees of the broker. In 1985 a major oil company filed a suit against the broker for recovery of $22,500,000 of premium paid through the broker for what was later revealed to be a fictitious reinsurance policy. The broker had delivered the premium by wire transfer to an account controlled by conspirators who had misrepresented that the reinsurer was a well-known London underwriter. However, when the fictitious reinsurance documents were delivered, the risk taker was revealed not to be the London underwriter, but a non-existent insurer. Eventually, more than $20,000,000 of the stolen premium was transferred to a secret Swiss bank account. Plaintiffs afforded errors and omissions coverage to the broker. In 1986, Plaintiffs, other insurance companies, and the broker settled the oil company's claims for $32,000,000, the amount required to purchase replacement coverage. As part of the settlement, the broker assigned to Plaintiffs all rights and interests under the $5,000,000 crime policy issued by the Defendant. The parties entered into a stand-still agreement to investigate whether an employee of the broker participated in the fraud. In April of 1993, following the sealed indictment of a former officer, Plaintiffs brought suit against Defendant for recovery of benefits under the crime policy. When later unsealed, the indictment alleged that the former officer received $1,125,000 of the stolen premium. Bank records confirmed the allegations.
Settlement Discussions
Plaintiffs contend they demanded $5,000,000 and Defendant offered $4,800,000.
Damages
$5,000,000 in addition to prejudgment interest.
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