Hanover questions insurance liability
New All Blacks sponsor AIG locked horns with the owner of Hanover Finance in court today as a battle began over insurance cover for directors of the failed finance company.
The outcome could affect potential payouts if the Financial Markets Authority succeeds in civil claims filed over the finance company's debenture offers after December 2007.
Hanover Group Holdings, parent of Hanover Finance, wants the High Court to determine the extent of cover under a directors and officers (D&O) policy issued in November 2007 by Chartis Insurance New Zealand.
D&O policies typically insure directors and senior executives against claims arising from their decisions on company boards.
Chartis, previously named AIG, resumed using the AIG brand this month.
Hanover claims that Chartis agreed on October 25, 2007, that if Hanover renewed its policy in November 2007, it would provide D&O cover for all prospectuses on issue by the group.
Nathan Gedye, for Hanover, said in his opening address at Auckland High Court this morning that agreement was reached between its broker Grant Dawson and Vincent Barker, the underwriter at AIG handling the matter.
"The agreement was reached on the phone and Hanover proceeded to renew on November 2, 2007, on that basis," he said.
He said Hanover had purchased D&O policies from AIG for one year periods commencing November 1 2004 through to 2006. Each of those policies had an endorsement limiting cover for liabilities arising out of the prospectuses, Gedye said.
For those premium years the endorsements excluded cover for any prospectus where the amount to be raised was more than $400 million.
Gedye said the policy covered subsidiaries Hanover Finance, United Finance and Hanover Capital and a property company. Evidence will be heard about the company's concerns at the time over the ambiguity of the $400m limit policy wording and that coverage was too small given Hanover Finance held some $920m of investor funds, said Gedye.
The case continues.
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