A federal judge has approved an insurance settlement between bankrupt telecommunications company WorldCom Inc. and National Union Fire Insurance Company, a unit of AIG.
According to Dow Jones, the approval was reached days before a deadline after which WorldCom’s directors and officers would lose additional liability coverage from the carrier.
The AIG unit had intended to rescind its three D&O policies for WorldCom just prior to its bankruptcy last July, asserting that the company had bought the policies by misrepresenting its financial situation.
According to the settlement, National Union will maintain coverage of WorldCom’s directors and officers, but only individually—not as a group. Also, any coverage pertaining to WorldCom as an entity will be rescinded, provided such action does not affect the coverage of staff members deemed not culpable for fraudulent activity.
WorldCom will be allowed to buy supplemental coverage from National Union for future directors and officers, as well as for current staff members.
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