INSURER FILES FRAUD SUIT; PAIR OF REINSURERS ARE BLAMED IN COVERAGE LOSS.Byline: Dave McNary Staff Writer Superior National Insurance Group announced Wednesday it has filed a contract fraud suit against two reinsurers, seeking more than $200 million in damages for canceling workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. coverage. The suit, filed in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. Superior Court, alleges American Re-Insurance Co. and Inter-Ocean Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Co. Ltd. have illegally backed out of a 1998 agreement to provide Superior's Business Insurance Group subsidiary with $175 million in coverage. It seeks compensatory and punitive damages Monetary compensation awarded to an injured party that goes beyond that which is necessary to compensate the individual for losses and that is intended to punish the wrongdoer. . ``The fraudulent actions of American (Re-Insurance) and Inter-Ocean that Superior National has alleged are, in my opinion, the most egregious that we have seen in the recent history of the reinsurance industry,'' said Robert Nagle, Superior's general counsel. Superior bought its Business Insurance Group from Foundation Health Systems in late 1998 after, as a condition of the $285 million sale, requiring FHS FHS - Filesystem Hierarchy Standard to obtain the reinsurance for the group in order to boost its $522 million in reserves. According to Nagle, FHS accepted American Re-Insurance's offer of $175 million in coverage for $28 million, even though one actuary estimated the reserves might go as much as $275 million higher. By the end of last year, Superior made a claim with the reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. to cover an additional $175 million in losses at the group. New Jersey-based American Re-Investment and Inter-Ocean, a Bermuda-based affiliate, notified Superior in July that the agreement had been rescinded and demanded arbitration of the issue, claiming they had been misled during the due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. period last year. The reinsurers did not respond Wednesday to a request for comment on the suit. Nagle said the dispute reflects a growing trend among reinsurers to stall and force renegotiation of contracts after obtaining the contract by underpricing Underpricing Issuing securities at less than their market value. underpricing The pricing of a new security issue at less than the prevailing price of the same security in the secondary market. Underpricing helps ensure a successful sale. the potential losses. ``Superior National views their actions as an attempt to bully a smaller company into an arbitration process in which American (Re-Investment) and Inter-Ocean perceive they have little or nothing to lose,'' he added. Superior's stock has lost about 40 percent of its value since July and declined 37.5 cents to $14.375 a share Wednesday. Superior employs about 400 people locally and 1,400 worldwide. In August, it reported $654 million in premiums in force as of the end of June and posted second-quarter earnings of $2.2 million, or 13 cents a share. |
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