A federal jury last week awarded Vermont’s insurance commissioner $119.9 million to distribute to creditors of the Ambassador Insurance Co., which failed more than two decades ago.
The verdict, which came after less than a day of deliberations, is the latest chapter in a legal saga that began over two decades ago.
“First and foremost, this verdict goes a long way towards allowing policyholders, claimants and other creditors to be fully compensated for their insured losses,” said John P. Crowley, head of the Vermont Department of Banking, Insurance, Securities & Health Care Administration.
The defendants are accounting giant PricewaterhouseCoopers, successor company to Coopers & Lybrand, which Vermont accused of negligent audits of Ambassador; and the estate of the late Arnold Chait, the Ambassador president accused by Vermont of mismanagement.
New York-based PricewaterhouseCoopers believes the verdict “is inconsistent with the facts and the law,” spokesman Steven G. Silber said. “We intend to challenge the verdict before the trial court and, if necessary, on appeal.”
Still to be determined is how responsibility for the award will be apportioned among the defendants, said Richard Whitney, a lawyer handling the case for Vermont.
U.S. District Judge Harold A. Ackerman, who presided over the trial that began May 3, could make such a determination in the next several weeks, Whitney said.
In 1983, Vermont’s insurance commissioner at the time, George Chaffee, seized control of Ambassador because it was insolvent, Crowley said. The company was incorporated in Vermont, but was based in North Bergen, N.J.
Vermont filed the lawsuit in 1985, charging that Ambassador’s financial statements concealed the company’s weakness from regulators. The company was liquidated in the late 1980s after Vermont courts upheld the receivership, Whitney said.
Because Ambassador was a “surplus lines company,” writing high-risk policies, it lacked guaranty fund protection in case of insolvency.
As a result, “over the course of the last 20 years, the receiver has been receiving and evaluating claims from policy holders and claimants of the company,” Whitney said. Of over 20,000 claims submitted, about 10,000 were allowed.
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