Hanover directors lose bid for cover
Hanover Group Holdings has lost a court fight with its insurer AIG over cover for its senior management.
The ruling means Hanover's directors and officers are not covered by AIG for claims arising out of the group's prospectuses issued after November 2007.
Hanover had claimed it had verbally negotiated complete cover with AIG, but the policy wording did not reflect the agreed terms. It wanted the court to rule the policy was what Hanover believed it to be.
But in a judgment issued today, Justice Christopher Allan said Hanover had not made out its claim for relief.
"Hanover needed to establish that [AIG underwriter Vincent] Barker had led [Hanover's insurance broker Grant] Dawson to believe that there would be full prospectus cover, and that AIG had subsequently resiled from that promise without giving notice to Hanover of its intention to do so. In my view, Hanover has not established that the terms of any promise or representation by Mr Barker were as Hanover now asserts."
Three Hanover Group companies - Hanover Finance, Hanover Capital and United Finance - collapsed in July 2008 owing $554 million and Hanover notified AIG that month of potential claims.
But AIG, relying on the terms of the policy issued in December 2007, said cover was not available.
In April this year the Financial Markets Authority filed civil proceedings against directors and promoters of the Hanover companies - Mark Hotchin, Eric Watson, Greg Muir, Sir Tipene O'Regan, Bruce Gordon and Dennis Broit. The FMA's action relates to statements made in the December 2007 prospectuses, subsequent advertising, and the March 2008 prospectus extension certificate.
The FMA seeks declarations, penalty orders and compensation for those who invested during the period December 7, 2007 to July 22, 2008. During that period new investments and reinvestments totalled $35m.