Tremont Group Holdings Inc. and other feeder funds to Bernard Madoff’s defunct investment advisory business have sued insurers, including a CNA Financial Corp. unit, for failing to cover Madoff-related litigation.
Tremont, a fund of funds in Rye, N.Y., that had about $3.3 billion invested with Madoff, is owned by OppenheimerFunds Inc., a unit of MassMutual Financial Group. Investors have filed more than 18 lawsuits against MassMutual, seeking to recoup Madoff-related losses.
Liability insurers for MassMutual’s directors and officers, and its primary fidelity bond insurers, have ignored repeated requests to pay defense costs, lawyers for MassMutual and the funds said in a complaint filed yesterday in Delaware Chancery Court. MassMutual seeks a court order declaring that Madoff’s theft resulted in multiple losses that are covered under its insurance policies.
In addition to CNA’s Continental Casualty Co., the complaint names some underwriters of the Lloyd’s of London insurance market and American Financial Group’s Great American Insurance Co.
Katrina Parker, a spokeswoman for Chicago-based CNA, had no immediate comment. American Financial Group officials couldn’t immediately be reached for comment.
CNA, which sold MassMutual its primary directors and officers policy, is at odds with bond underwriters as to their respective obligations to divide liability, according to the complaint. The D&O insurers claim they are liable only for a percentage of the joint defense costs related to executives and directors. Corporate defendants are insured under the primary bond underwriters policy, according to the complaint.
“The primary bond underwriters have refused to agree to pay any portion of the joint defense costs,’’ lawyers for MassMutual said in the filing.
Aon Corp., the world’s largest broker, said in January that Madoff’s Ponzi scheme may cost insurers as much as $3.8 billion in claims to reimburse clients for losses and legal expenses. Costs could be as low as $760 million, with the most likely expense being $1.8 billion, the Chicago firm said.
Madoff, 71, is serving a 150-year prison term after pleading guilty to defrauding investors by using money from new ones to pay off old ones in the $65 billion scheme.
source : Globe Newspaper Company
