Tyco Execs Sue Insurer Over Legal Fees

October 15, 2004

The two former top executives of Tyco International who face a retrial in January on charges of looting the conglomerate of $600 million have sued to force an insurance company to pay their legal bills.

Former Tyco chief executive Dennis Kozlowski and Mark Swartz, the company’s one-time chief financial officer, asked a court to direct Twin City Fire Insurance to pay legal bills that they say have surpassed $25 million.

The first trial of Kozlowski and Swartz on charges of stealing $170 million in unauthorized pay and $430 million in profits from manipulated stock ended in a mistrial in April. Their second trial is scheduled Jan. 18.

Court papers filed this week in Manhattan Supreme Court say Twin City, a unit of Hartford Financial Services Group, is obligated help cover their legal bills.

The pair has already exhausted the first $25 million of coverage provided by Federal Insurance Co. The Twin City policy provides an additional $25 million in coverage.

The lawsuit says neither Federal, a unit of Chubb Corp., nor Twin City has acknowledged its obligation to pay the executives’ defense costs. The suit asks the court to direct the insurance companies to pay.

Sue Honeyman, a spokeswoman for Twin City, said she could not comment on pending litigation.

A similar suit was filed last week against Twin City by Mark A. Belnick, Tyco’s former general counsel, acquitted in July of charges he abused company loan programs and accepted an improper bonus of $17 million from Kozlowski.

And last month, Twin City sued Belnick, Kozlowski and Swartz, asking a court to declare it is not responsible for their legal bills.

Separately, Federal is appealing the March 5 court ruling earlier this year that ordered it to pay Kozlowski’s defense costs. The company contends the coverage is outside the terms of its policy.

Tyco, based in Bermuda but with U.S. headquarters in West Windsor, New Jersey, makes everything from telecommunications equipment to home alarm systems. In 2003, the conglomerate had about 250,000 employees worldwide and sales of about $36 billion.

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