U.S. Court O.K.s $183 Million Award in Accounting Case

September 12, 2008

A federal appeals court has upheld a $183 million malpractice award against accounting giant PricewaterhouseCoopers stemming from audits of a collapsed insurance company.

The money will go to policy holders, claimants and other creditors of Ambassador Insurance Co., which was deemed insolvent and seized by Vermont’s insurance department in 1983.

Vermont officials charged that Ambassador’s financial statements — audited by Coopers & Lybrand, a predecessor to the defendant, in 1981 and 1982 — had concealed the company’s weakness from regulators.

The insurance company was incorporated in Vermont, although it operated from North Bergen, N.J.

After years of litigation capped by a 2005 federal trial in New Jersey, a jury awarded damages of about $120 million to the creditors. The award grew to $183 million with pretrial interest.

The jury assigned 40 percent of the liability to
PricewaterhouseCoopers and 60 percent to the insurer’s founder and
president, the late Arnold Chait. But courts said the defendants
had joint liability, leaving the firm responsible for the entire

Ambassador was a “surplus lines company,” writing high-risk policies, and therefore lacked protection for policyholders in the event of insolvency.

About 22,000 creditors are entitled to share in the award, plaintiffs’ lawyer Richard Whitney said.

Additionally, some creditors who received partial payments over the years will now be made whole, Vermont Insurance Commissioner Paulette J. Thabault told The Associated Press on Wednesday.

PricewaterhouseCoopers, through an attorney, said it was reviewing Tuesday’s ruling and declined comment.

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