Toronto’s Fairfax Financial Holdings announced that a London court has ruled in its favor in a case brought by a subsidiary, Sphere Drake Insurance, against underwriting agents who, it alleged, fraudulently obtained a binding authority in conspiracy with brokers, who were also defendants.
The case, originally involved Odyssey Re, Sphere Drake and several other insurers and brokers who brought suit against Bermuda-based Stirling Cooke Brown (now AlphaStar) and a number of other intermediaries in Bermuda, the U.S. and the U.K., concerning the use of the binding authority to write excess-of loss- reinsurance contracts on U.S. workers’ compensation business which they alleged were grossly under-priced. The case was originally filed in New York, but was ordered removed to the U.K., as the U.S. District Court determined that most of the treaties and contracts had been concluded there.
“The judgment,” said Fairfax, “upheld Sphere Drake’s allegation that in accepting business, the underwriting agents acted in dishonest breach of fiduciary duties owed to Sphere Drake, that the brokers dishonestly assisted in committing those breaches, and that the underwriting agents and the brokers were both dishonest and collusive.”
AlphaStar’s Chairman, President and CEO Stephen A. Crane, stated “Needless to say, we are very disappointed with the Judge’s decision, which obviously has serious negative ramifications for our Company. The Company is currently evaluating the decision and attempting to determine the effect of this development on the Company’s future operations.” He also indicated that AlphaStar was considering an appeal of the Commercial Court’s decision, but needed additional time to review the judgment.
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