Reorganization and Liquidation

General Electric (“GE”) brought an action for breach of contract against the joint liquidators of the entity formerly known as Electric Mutual Liability Insurance Company (“EMLIC”). Years ago, a solvent EMLIC had refused to defend and indemnify GE in regards to liability for environmental contamination. OneBeacon America Insurance Company (“OneBeacon”), whose predecessor reinsured EMLIC in connection with GE’s claims, intervened as the defendant and asserted three counterclaims. GE then filed a motion for summary judgment on the third counterclaim, which alleged a breach of fiduciary duty by GE regarding EMLIC’s wrongful redomestication to Bermuda to declare itself insolvent and to pursue liquidation. The court granted GE’s motion, ruling that GE, as sole policyholder, shareholder, and creditor to EMLIC, owed no fiduciary duty to EMLIC. The court then stated that, even if GE owed a fiduciary duty, no breach occurred because EMLIC was not harmed by the redomestication. Finally, the court denied OneBeacon, standing in EMLIC’s shoes, equitable relief from its contractual obligations because EMLIC was complicit in the wrongful redomestication. General Elec. Co. v. Lines, Case No. 2006-3106 (Mass. July 2009).

This post written by Dan Crisp.

General Electric (“GE”) brought an action for breach of contract against the joint liquidators of the entity formerly known as Electric Mutual Liability Insurance Company (“EMLIC”). Years ago, a solvent EMLIC had refused to defend and indemnify GE in regards to liability for environmental contamination. OneBeacon America Insurance Company (“OneBeacon”), whose predecessor reinsured EMLIC in connection with GE’s claims, intervened as the defendant and asserted three counterclaims. GE then filed a motion for summary judgment on the third counterclaim, which alleged a breach of fiduciary duty by GE regarding EMLIC’s wrongful redomestication to Bermuda to declare itself insolvent and to pursue liquidation. The court granted GE’s motion, ruling that GE, as sole policyholder, shareholder, and creditor to EMLIC, owed no fiduciary duty to EMLIC. The court then stated that, even if GE owed a fiduciary duty, no breach occurred because EMLIC was not harmed by the redomestication. Finally, the court denied OneBeacon, standing in EMLIC’s shoes, equitable relief from its contractual obligations because EMLIC was complicit in the wrongful redomestication. General Elec. Co. v. Lines, Case No. 2006-3106 (Mass. July 2009).

This post written by Dan Crisp.

We reported on September 3 of the court approval of a settlement and commutation between Reliance Insurance Company (in liquidation), and Munich Reinsurance America. The liquidation court has also approved settlement/commutation agreements betwen Reliance and the Clarendon group of companies and with XL Reinsurance. The benefit to the estate of the agreement with the Clarendon group of companies is $9.498 million; the benefit to the estate of the agreement with XL Re is $6.325 million. Ario v. Reliance Insurance Co., Case No. 269 M.D. 2001 (Pa. Commw. Ct. July 16, 2009).

This post written by Rollie Goss.