Hartford’s Money-Losing Brokerage Unit Expected to Attract Bids

AIG, LPL, Cetera and Ladenburg declined to comment.

The heavyweight of independent brokers is LPL Investment Holdings, which amassed 12,847 advisers partly through a series of takeovers since 2005. It is an unlikely contender, as LPL says it now prefers deals that don’t just add scale but can expand product and service capabilities, such as retirement planning or fund-manager research for very wealthy investors.

Advisor Group CEO Larry Roth at a conference this month said the firm is in talks with a few “mid-sized” broker-dealers to expand its ranks of more than 4,800 advisers.

One insurer that is still keen on the independent brokerage business is American International Group, which operates three broker-dealers through its Advisor Group unit – SagePoint Financial, Royal Alliance and FSC Securities.

Both Cetera and Ladenburg have said they would look to expand their independent brokerage businesses. Ladenburg CEO Richard Lampen in August told Reuters he intended to purchase more brokers once Securities America is digested.

Another potential suitor is Ladenburg Thalmann Financial Services, a holding company that in August bought Securities America from Ameriprise Financial for $150 million in cash. Ladenburg, which owns Triad Advisors and Investacorp, more than doubled its number of advisers and assets by adding 1,700 advisers and $50 billion in assets.

In January the firm agreed to buy a broker unit from Genworth Financial for $79 million, plus future payments. That deal added nearly 2,000 brokers and about $13 billion in assets to Cetera, which had 5,000 advisers and $75 billion in assets. Cetera last month agreed to take on all 290 brokers from Pacific West Securities Inc after that firm closed.

Among the potential Woodbury bidders, bankers said, is Cetera Financial Group, formed when private equity investor firm Lightyear Capital acquired ING Advisors Network in 2009.

“There’s no question we’re seeing the independent-brokerage industry consolidate and seeing insurers bail out of the business,” said former ING Advisors CEO John Simmers, who now runs consulting firm Pension Resources Institute.

The Compliance Department, a consulting firm that tracks broker-dealer launches and withdrawals, forecasts industry ranks will shrink by an additional 10 percent to 4,000 by 2015. Indeed, there have been a rash of deals in recent months.

Since 1999, the ranks of brokerages registered with the Financial Industry Regulatory Authority, a regulator of Wall Street brokerages, have plunged by more than 1,000, or 19 percent, to 4,435 firms mostly through mergers.

“The great thing about this business is there are real economies of scale. The costly part is developing software and building the network. Adding brokers doesn’t cost you a penny,” said Bentley Associates investment banker Timothy Hurley, who specializes in brokerage deals.

The Hartford said the sales process will last about six months, with the transaction to be completed over the following year.

That is why the unit is likely to attract bids from rival independent brokers looking to bolster their own margins by spreading overhead costs across more revenue-producing advisers, investment bankers said.

“The firm could generate profits consistent with those other broker-dealers that focus on current net income,” he wrote.

Richard Fergesen, Woodbury’s chief financial officer, in an email statement told Reuters that Hartford has managed Woodbury for “long-term value to the broader enterprise” rather than for profit. Woodbury invests in developing advisers’ practices and providing support services, which in turn provide a sales channel for Hartford’s other businesses.

On the surface, Woodbury appears a tough sell. It lost $18,000 last year after $2 million in investment losses and $252 million in expenses, according to documents filed with the Securities and Exchange Commission. Woodbury has not reported a profit since at least 2007, according to SEC filings.

Brokers employed by a traditional brokerage, such as Merrill Lynch, receive about 40 percent but office space, technology and other overhead costs are covered by the firm. Actual payouts vary by firm and the overall production of the adviser.

Woodbury was the 12th-largest independent securities brokerage with $254 million in revenue last year. Yet like its rivals, profit margins have been squeezed by technology, compliance and other costs. Independent advisers receive roughly 90 percent or more of the commissions and fees they generate, but they also are responsible for paying their own business expenses.

Last week the insurer announced it was selling its life insurance businesses to focus on property/casualty, benefits and mutual funds. Hartford also said it will seek buyers for Minnesota-based Woodbury and its 1,400 brokers who oversee $24 billion in client assets.

Hartford Financial Services Group’s independent brokerage unit Woodbury Financial Services hasn’t posted a profit for at least five years, but some investment bankers say that won’t deter a small circle of expansion-minded rivals from bidding on the business.

Posted by insurance - October 9, 2018 at 10:16 am

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Great American Launches FleetFusion Program for Motor Carriers

FleetFusion’s package of services will be available to all motor carrier policyholders as a complement to the competitive coverage and programs they already receive through Great American Insurance Group.

The third aspect of FleetFusion is a Motor Carrier Driver Administration System which is an internet-based driver management system. It allows carriers to get a clear, accurate picture of their owner operator business processes. The system provides one location to organize and share driver insurance information, which can help eliminate billing and coverage errors and ensure driver compliance. From onboarding to settlement deduction, it’s a way to manage owner operator documents, coverage, billings and more. This program is being offered in conjunction with Focus Solutions.

For the Driver Roadside Assistance benefit, Great American has teamed up with Roadside MASTERS to service drivers who experience a breakdown and get them back on the road as quickly as possible. The service includes unlimited roadside assistance in the United States and Canada with such needs as towing, jump starts, delivery of gas and other fluids, and more. In addition, there is a concierge service that assists drivers with hotel and navigation information. Professional customer service personnel are able to assist drivers 24 hours a day, seven days a week.

The Driver Safety Initiative also includes a driver coaching component with training topics each month and fleet safety presentations and resources on such topics as road rage, drowsy driving, and coping with poor visibility. Great American is working with SafetyFirst to offer this service to policyholders. If utilized consistently, this driver safety system has the potential to reduce each fleet’s crash rate by up to 30% (based on SafetyFirst proprietary historical studies, results may vary).

FleetFusion’s Driver Safety Initiative is a proactive approach to increase driver safety and help reduce losses by giving carriers timely, credible information about drivers who are taking aggressive risks or are distracted behind the wheel. This “early warning system” provides details about the incident and materials to help coach drivers on proper procedures. The program begins with the installation of uniquely numbered “Safety is My Goal” stickers on select trailers with a toll-free hotline that motorists can call if they see good driving or risk-taking behaviors.
Great American Insurance Group’s Trucking Division has launched its FleetFusion program to help motor carriers manage an independent contractor division. The program consists of three different offerings meant to improve driver safety, offer roadside assistance and help enhance the carrier’s driver administration system.

Posted by insurance - October 9, 2018 at 10:16 am

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Whistleblowers Reaping Rewards in U.S. Mortgage Suits

“I think we’re kind of dead in this industry, to say the least,” Bibby added.

U.S. Financial Services at one time had about 50 employees, but is now basically out of business. They are not sure what they will do next.

Bibby, who is 46 and married with three children, and Donnelly, who is 56 and married, said they don’t have plans for their portion of the settlement. They will have to pay taxes and attorney fees out of the $11.7 million sum.

A spokesman for JPMorgan declined to comment. In the mortgage settlement documents filed this week, the bank said it did not admit liability. Bibby and Donnelly are continuing to press their case against the other lenders, including Bank of America, Citigroup and Wells Fargo.


Bibby, one of the Georgia mortgage brokers, said it was difficult not knowing if the government would take up their case and watching the fraud continue.

Legal releases in the $25 billion mortgage settlement indicated other whistleblower cases are still in the works.

Court documents have not been filed in the fifth case, which resulted in a $6.2 million settlement.

Prosecutors in New York said in February they had reached a $1 billion settlement with the bank over these practices, but have not yet filed court documents.

Two of the other settlements outlined this week – for $75 million and $6.5 million – appear to be related to an investigation into whether Bank of America and its Countrywide Financial unit knowingly made FHA-insured loans to unqualified borrowers.

Prosecutors said the $95 million payment is only a partial settlement, indicating other banks could be under scrutiny. Nettles would neither confirm nor deny the existence of an ongoing investigation.

Bill Nettles, the U.S. Attorney in South Carolina, said the $95 million settlement sparked by Green’s discovery also provided a strong return for taxpayers, considering the annual budget for his office is $10 million.

Szymoniak declined to comment.

Multiple employees in a mortgage document “sweat shop” in Georgia were using the name Linda Green to recreate missing mortgage assignment documents for the banks, the report said.

While trying to save her own home from foreclosure, according to the “60 Minutes” report, Szymoniak used her legal training to research other mortgages and discovered that a “Linda Green” had signed thousands of mortgage documents, in varying signature styles.

She gained national attention last year when CBS’ “60 Minutes” profiled her role in uncovering the robo-signing of foreclosure documents by large lenders.

The whistleblower in the case, Florida homeowner Lynn Szymoniak, will receive $18 million.

The lenders also used false assignments to submit Federal Housing Administration insurance claims, prosecutors said.

U.S. Attorneys in North Carolina and South Carolina said on Monday that five banks – Bank of America Corp., JPMorgan Chase, Wells Fargo & Co., Citigroup Inc. and Ally Financial – agreed to pay the amount to address allegations they participated in a nationwide practice of failing to obtain the required mortgage assignments, documents used to transfer ownership of loans.


Of the five settlements outlined in court documents this week, the largest was for $95 million.

The complaints were brought under a whistleblower provision in the U.S. False Claims Act, which allows private individuals with knowledge of wrongdoing to bring suits on behalf of the government and share in the proceeds of any settlement.

Details of the cases are emerging slowly as suits are unsealed and prosecutors disclose settlements.

The case is one of five whistleblower suits settled for a total of $227 million as part of the broader $25 billion deal with five lenders over foreclosure abuses, according to court documents filed this week.

The wait paid off in the form of a $45 million government settlement with JPMorgan Chase & Co. that became public this week. Bibby and Donnelly and their attorneys will receive 26 percent, or $11.7 million.

“For both our families being hushed for such a long time and holding this inside was unbearable,” Donnelly said in an interview. “It puts a lot of stress on you.”

The suit remained under seal to give the government time to investigate. Bibby and Donnelly had to keep mum for more than five years and try to find ways to avoid charging the hidden fees.

After lenders ignored their concerns, Bibby and Donnelly hired an attorney and filed a whistleblower suit.

The pair, who worked for U.S. Financial Services Inc., a mortgage brokerage firm in Alpharetta, Georgia, said they became suspicious when lenders told them not to show an amount charged for attorneys fees on loan documents, but instead add the sum to the charge shown for “title examination fee.”

Bibby and Donnelly said they started noticing in 2005 that lenders were charging veterans hidden fees on mortgage refinancing — a violation of the government’s Interest Rate Reduction Refinancing Loans program.

Victor Bibby and Brian Donnelly, two Georgia mortgage brokers, are among the handful of whistleblowers whose stories are coming into focus.

Whistleblowers who were instrumental in revealing epidemic mortgage abuses, some of whom risked their careers to do so, are getting multi-million-dollar payouts, court documents show.

Troubled homeowners are not the only ones set to get a financial lift from the U.S. government’s $25 billion landmark mortgage settlement.

Posted by insurance - October 9, 2018 at 10:16 am

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Cost of Obama Healthcare Law Lowered Under Latest Congressional Analysis

The CBO will release an analysis of Obama’s proposed fiscal 2013 budget plan later this week.

Under the CBO’s alternative fiscal scenario, which assumes that the Bush-era tax cuts and some other policies are left in place, the 10-year cumulative budget deficits would shrink by $250 billion from the January estimate, to a cumulative $7.845 trillion.

That is partly attributed to the revised revenue estimates from the healthcare law, lower projected Social Security outlays, and a reduction in net interest costs due to a shift in assumptions that the Treasury Department will sell more short-term securities.

The baseline projections – which assume that the Bush tax cuts will expire on Dec. 31 – show a reduction of $186 billion in the cumulative deficits for the subsequent 10 years compared with the January estimate.

“How much and how quickly it declines will depend in part on how well the economy performs over the next few years. Probably more critical, though, will be the fiscal policy choices made by lawmakers as they face the substantial changes to tax and spending policies that are slated to take effect within the next year under current law.”

“The fundamental story about the federal budget has not changed: Although the deficit is starting to shrink, it remains very large by historical standards,” the CBO said in the report.

The new estimates will be used by U.S. House of Representatives Budget Committee Chairman Paul Ryan in drafting a Republican budget plan due to be unveiled next week. It is expected to show deeper spending cuts than proposed by Obama.

The increase is in line with the $100 billion cost of the tax cut extension passed in February, and leaves both Democrats and Republicans with a deeper near-term fiscal hole as they consider how to deal with the expiration at the end of December of tax cuts begun under former President George W. Bush.


In updating its budget estimates, the CBO said it now expects a $1.171 trillion deficit for the 2012 fiscal year, in the wake of Congress’ extension of a payroll tax cut without finding savings elsewhere. In January, the CBO forecast a $1.079 trillion deficit for the fiscal year ended Sept. 30.

Many of the healthcare law’s coverage provisions do not go into effect until 2014.

“The fact that the outlook for the new law continues to worsen so rapidly, even before it’s implemented, is ominous,” said Senator Jeff Sessions, the top Republican on the Senate Budget Committee.

Before the revenue and tax effects, the gross cost for that period hits a new high: $1.762 trillion, and Republicans wasted little time in pouncing on it and the lower coverage estimate.

The CBO also added another year to its overall cost estimate for the insurance provisions, extending it out to 2022, for an 11-year net cost of $1.252 billion.

Many of those people will need to be covered by government-run Medicaid program for the poor, causing higher Medicaid costs to eat into savings elsewhere.

But the analysis also projected that some 4 million fewer people will obtain insurance through employers or through the insurance exchanges promoted by the healthcare law by 2016 than estimated a year ago.

They also include higher revenues from penalties and the tax effects of higher taxable income, as private employers drop health insurance plans in favor of extra compensation for employees to buy insurance via the exchanges.

These cost reductions are largely due to lower estimates for subsidies and tax credits associated with the law’s planned insurance exchanges for individual coverage.

By reducing the estimated net 2012-2021 costs to $1.083 trillion from $1.131 trillion a year ago, the CBO report could help Democrats blunt some of the criticism over the high costs of extending coverage to some 47 million uninsured Americans, as they try to tout savings elsewhere in the law.

The CBO revisions gave ammunition to both Democrats, who largely support Obama’s controversial 2010 healthcare law, and to Republicans, who staunchly oppose it. The law will take center stage later this month when the U.S. Supreme Court hears oral arguments in a challenge of its constitutionality.

The CBO also revised its overall federal budget deficit estimates to show a $92 billion increase in the projected fiscal gap for 2012, confirming a fourth straight year of $1 trillion-plus deficits.

The estimated net costs of expanding healthcare coverage under President Barack Obama’s landmark restructuring have been reduced by $48 billion through 2021, though fewer people would be covered under private insurance plans, a new analysis from the nonpartisan Congressional Budget Office showed on Tuesday.

Posted by insurance - October 9, 2018 at 10:16 am

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CRC’s CEO Hopes to Create ‘Best of the Best’ With Crump Merger

CRC and Crump P&C combined will operate 55 offices nationwide with 1,700 employees and will write more than $3.5 billion in property and casualty premium.

“CRC is a buyer and so is BB&T,” Curtin said. “We will continue to grow our business both organically and by acquisition, and if there is one out there that makes good sense and is a good fit geographically or by product line, certainly, we are a buyer,” Curtin said.

He also sees growth through more acquisitions.

“In 2012, we are seeing a move to more conservative underwriting, higher pricing, and the carriers are not offering high limits at low dollars anymore,” Curtin said. As a result, “our sales for the first quarter were up rather significantly,” he said.

Curtin anticipates more growth to come for CRC thanks to a firmer insurance market.

In the combined Southern Cross/Crump Programs operation, Preston Gough will continue in his role as president.

John Howard and Dave Obenauer will join the BB&T organization from Crump and have the responsibility for the BB&T wholesale distribution channel, which includes wholesale P/C, life and other specialties.

In the combined CRC/Crump Brokerage operation, Curtin will continue his role as CEO and co-chairman and Ron Helveston will serve as president.

“We’ve got a great partner in the bank,” Curtin says. “It’s one of the largest financial services company in America. It’s very conservatively run and so we are going to look forward to them having a home here at CRC for a long time.”

“We are telling all the Crump folks, welcome home. This is where you are going to be from now on,” he says.

Curtin says while Crump has had several owners in the past — including Sedgwick, Marsh, Tri-City Brokerage, BISYS Group, and J.C. Flowers & Co. — BB&T will be a long term owner.

“We will not be competing with Crump. We will be cross clearing names and accounts within the organization. So Crump won’t compete with CRC and CRC will not compete with Crump because we are all part of the same family now.”

Curtin says the message to agents and employees is that it’s business as usual.

CRC will stay branded as CRC. Southern Cross and Tapco will also keep their names. However, Crump P&C will now be named CRC Crump.

“We are going to go very slow,” he said. “We believe that Crump has a very good business model and we believe in CRC’s business model, and so we are going to take the best of CRC and the best of Crump and create the best of the best.”

Curtin said several offices of both Crump and CRC will combine in time, but each consolidation will be evaluated on a case-by-case basis.

“Nothing is going to happen tomorrow,” said Tom Curtin, CEO, co-chairman and founder of CRC Insurance.

While the $570 million cash deal closed last week, the merging of BB&T’s wholesale insurance operations, which include property/casualty broker CRC Insurance Services, managing general agent Southern Cross, TAPCO Underwriters and managing general underwriter AmRisc LLP, will move forward slowly, says one executive.
The recent acquisition of Roseland, N.J.-based insurance wholesaler Crump Group by BB&T Corp., a major regional bank and insurance broker based in Winston-Salem, N.C., created one of the largest providers of wholesale commercial insurance brokerage and specialty programs in the country.

Posted by insurance - October 7, 2018 at 10:17 am

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Cruise Ship Industry Leaves Crash Victims Little Hope for Recovery

But he’s not optimistic. “It’s been slow going,” he said.

Walter Henry Alderfer, whose wife was injured in the sinking of the Sea Diamond in 2007, is pinning his family’s hopes on a lawsuit filed against the government of Greece over allegedly faulty nautical charts that the ship owner blames for the wreck.

The final cost of the personal liability claims in the Costa Concordia case won’t be known for years. But the ship’s owner is covered by insurance with about a $10 million deductible, according to Carnival Corp.’s recent financial filings.

The United States is not a party to an international maritime treaty – known as the Athens Convention – that establishes liability for loss of life, personal injury or loss of luggage at sea. Nor is Italy.

“It was horrible because what it basically told my family was that my father’s life was worth zero,” said Hudson, an insurance-claims adjuster from Delaware, who was not on the cruise. Carnival declined to comment on this or any other legal cases.

Miriam Lebental, the California attorney who represented Hudson, said that because Liffridge was retired, there was no loss of potential earnings, and he did not provide financial support to Hudson or her siblings.

That law – the 1920 Death on the High Seas Act – allows families of those killed due to the negligence of a ship owner to collect for lost financial support.

An autopsy showed Liffridge died from smoke inhalation. The family sued Princess Cruise Lines Ltd. – part of Carnival Corp. – for wrongful death. The case was settled, but one of his daughters, Lynnette Hudson, said her family only received money for funeral expenses. According to their attorney, that’s all they were entitled to under U.S. law.

According to a lawsuit brought by Liffridge’s family, the last words his wife heard him say were, “Don’t let me die.”

Four days into the cruise, a fire broke out in the middle of the night. Liffridge and his wife tried to escape by crawling out through a wall of black smoke, according to an investigation by the government of Bermuda, where the ship was registered. The emergency hallway lights were dim, staff didn’t man emergency phone stations, there were no balcony sprinklers to contain the fire, and the fire door the Liffridges were instructed to use was closed, the investigation found.

Richard Liffridge set sail with his wife on the Star Princess cruise ship from Fort Lauderdale, Florida, to the western Caribbean in March 2006 to celebrate his 72nd birthday.

Even in cases of deaths aboard cruise ships due to negligence, surviving family members may receive little compensation. That’s because of a 92-year-old U.S. law that deals with redress for families of people who die at sea.

The Hendersons couldn’t be reached for comment.

The catamaran struck a reef, and the couple suffered multiple injuries. In federal court in Miami, they alleged they ended up spending most of their honeymoon in pain and seeking medical attention, and sought at least $100,000 in damages. The court dismissed the case because their ticket stated that independent contractors operate shore excursions and Carnival assumed no responsibility for any injuries.

Jennifer and Joseph Henderson discovered the limits of a cruise company’s liability following an ill-fated honeymoon on a Carnival cruise in the Caribbean in 1998, according to federal court records. They booked a catamaran excursion to the island of St. Lucia. Although the catamaran was not operated by Carnival, it bore the Carnival logo, and the boat’s crew wore Carnival shirts, according to court records.

Gabrielle D’Alemberte, an attorney with Robert L. Parks, P.L., in Coral Gables, Florida, said in recent years cruise lines have also tightened the rules regarding legal actions involving shore excursions. Increasingly, passengers are required to sue the excursion company, not the cruise company, in the event of injury, she said, adding that the chances of recovering any damages are very unlikely. D’Alemberte is representing three Costa Concordia passengers.

A Florida appeals court upheld the federal court requirement in 2008.

Carnival Cruise Lines, headquartered in Miami, later narrowed the forum clause on its ticket contracts. By around 2000, passengers were required to file suits in Florida’s Miami-Dade County, rather than anywhere in the state. About two years later, Carnival tickets stated that claims could only be filed in federal court in Miami, provided it had jurisdiction.

Shute-Wood said requiring her to file her suit in Florida represented a hardship. She said she didn’t know any attorneys there and feared the costs would be far more than what she had hoped to recover. “We didn’t even consider it,” she said. After the Supreme Court sided with Carnival, the case was quickly resolved for what her attorney said was a small sum.

Andre Picciurro, a San Diego, California, attorney with Kaye Rose & Partners LLP, which serves as general counsel to the Cruise Lines International Association, said the so-called forum clause helps to “eliminate wasteful litigation” and “provides predictability for the passengers and the cruise lines.”

Carnival fought to dismiss her case because it was not filed in the state of Florida, as the ticket contract then stipulated. In 1991, the Supreme Court, in a 7-2 decision, sided with Carnival, ruling that the clause helped to avoid confusion over where to sue when an incident occurred in international waters. The case, Carnival Cruise Lines Inc. v. Shute, also affirmed the legality of such clauses, which are now common in cruise tickets and many other commercial contracts.

In an interview, Shute-Wood, now 75 and retired, said she received no medical attention until disembarking in Puerto Vallarta, Mexico. The experience, she said, ruined the trip for her and her husband and she sued in her home state of Washington to get a refund.

The Supreme Court case began with a cruise that real-estate broker Eulala Shute-Wood took on a Carnival ship bound for Mexico from Los Angeles in 1988. During a cake-decorating demonstration in the ship’s kitchen, she fell on a freshly washed tile floor and hurt her back.

One concerns where passengers must file lawsuits. That issue has been contested all the way to the U.S. Supreme Court.

Over the years, Carnival and its competitors have changed their ticket contracts in ways that make it tougher for passengers to bring injury claims to court or collect large settlements.

A spokesman for Carnival Corp. declined to respond to questions for this article. A Costa Crociere spokesman in Florida said the company does not comment on litigation.

The Costa Concordia is owned by Genoa-based Costa Crociere S.p.A., whose parent company is Carnival Corp., the world’s largest cruise company with a market share of nearly 50 percent. Carnival’s other cruise lines include Princess Cruises, Holland America Line and Cunard.

Marc Bern, the lead plaintiffs’ attorney, said he believes the contract terms that require lawsuits to be filed in Italy are “null and void by virtue of the extreme nature of the conduct” of the captain. But U.S. courts have held that such clauses are valid.

Some U.S. plaintiff lawyers are attempting to test the Costa Concordia’s contract terms by bringing action in Florida, home base of Carnival Corp. In one case, 39 survivors are seeking at least $528 million in damages in a lawsuit alleging negligence that was filed in a state circuit court.

“I’ve done cases that took seven years and are not nearly as complicated” as the Costa Concordia case, he said.

Italian lawyers rarely accept cases on a contingency basis, so clients may have to pay them up front to take a case. And personal-injury cases can drag on for years, especially if there is a parallel criminal investigation. The Costa Concordia’s captain is under investigation for allegedly abandoning ship. That probe must be completed before evidence will be made available to plaintiff attorneys in civil cases, said Alexander Guttieres, a Rome lawyer who has litigated major personal-injury cases.

Many survivors are now discovering the challenges of the Italian court system.

In the case of the Costa Concordia wreck, the ticket contract stated that “all claims, controversies, disputes, suits and matters of any kind whatsoever … shall be instituted only in the courts of Genoa, Italy.”

Cruise industry officials say their contracts streamline the litigation process, prevent frivolous claims and lower cruise costs for passengers.

Thomas Dickerson, a New York state judge who has written extensively on travel law, says the legal hurdles resulting from the industry’s victories over the years give operators the upper hand in litigation and make the business highly profitable. The industry faces “fewer payouts because of all the roadblocks,” he said.

The rules for seeking redress are spelled out in complex, multi-page ticket contracts that passengers may not receive until right before boarding. Victims are often required to file suits in remote jurisdictions. The wording has been the subject of decades of court battles.

The cruise business – led by industry giant Carnival Corp. & PLC, whose Italian subsidiary owned and operated the doomed Costa Concordia – has put in place over the years a legal structure that ring-fences operators from big-money lawsuits.

Most cruises proceed without mishap. But in the rare cases when passengers do suffer serious injury – at least 17 died in the wreck of the Costa Concordia on Jan. 13 – they can face formidable obstacles in recovering significant damages, an examination by Reuters shows.

An attorney for Louis Cruises said many passengers were satisfied with the compensation offer, and Louis reached “fair and reasonable” settlements with some U.S. passengers who sought additional awards. She also said the evacuation was swift and orderly.

They turned down an offer of compensation by the owner – Cyprus-based Louis Cruises, a unit of Louis PLC – that included a free voyage. They filed a federal lawsuit in New York but settled for $2,500 – less than his wife’s medical expenses and the family’s lost belongings, he says – because the tickets required them to sue in Greece. An additional suit in Greece is still dragging on.

Five years later, the family is still seeking redress – and its experience may be instructive for survivors of the Concordia disaster.

In April 2007, he, his wife and his daughter were aboard the Sea Diamond cruise ship when it struck a reef off Greece and sank into the Aegean Sea. Screaming passengers fought over life preservers, Alderfer says, and his wife hurt her neck and later needed surgery.

When Walter Henry Alderfer learned last month about the Costa Concordia shipwreck off Italy, it brought back bad memories.

Posted by insurance - October 7, 2018 at 10:16 am

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MF Global Executives Win Access to Insurance Monies for Defense

The cases are In re: MF Global Holdings Ltd. et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059; and In re: MF Global Inc. in the same court, No. 11-02790.

Corzine, who had previously served as a governor and senator from New Jersey, testified before the U.S. Congress in December that he did not know where the missing money is.

Current and former MF Global executives and directors face more than 20 lawsuits over the collapse and the whereabouts of the missing money.

MF Global filed for Chapter 11 amid a liquidity crunch prompted by investor, client and credit-rating agency worries over its $6.3 billion bet on European sovereign debt.

Insurance funds come from policies issued by MFG Assurance Co., which is MF Global’s insurance unit, and policies issued by U.S. Specialty Insurance Co.

About $375 million of insurance proceeds are available, and officers have submitted more than $8 million of claims, Freeh’s lawyer Lorenzo Marinuzzi said at an April 2 hearing.

Glenn said his decision does not address whether the insurance proceeds actually belong to former customers. He also said commodity customers of the brokerage unit are legally entitled to object to the insurers’ payment of defense costs.

Andrew Entwistle and John Witmeyer, who respectively represent two customer groups, also did not immediately respond to requests for comment.

Lawyers for James Giddens, who is the MF Global Inc. trustee, and Louis Freeh, the trustee for the New York-based parent company, did not immediately respond to requests for comment.

The decision lifts a so-called automatic stay from enforcing a variety of claims against a bankrupt estate.

“A ‘soft cap’ of $30 million for defense costs of the individual insureds is appropriate at this time,” he added.

“Without underestimating that hardships that many of (MF Global’s) commodity customers have faced, the individual insureds would suffer significant hardships if the policies were disabled,” Glenn wrote in a 32-page decision.

About $1.6 billion of customer money remains missing, the trustee for the MF Global Inc. brokerage has estimated.

Tuesday’s decision by U.S. Bankruptcy Judge Martin Glenn in Manhattan is a defeat for former MF Global customers, who said the funds should be set aside for them, and not go to people they hold responsible for the company’s bankruptcy.

Former MF Global Holdings Ltd. Chief Executive Jon Corzine and other company officials won court permission to tap as much as $30 million of insurance money to defend lawsuits over the futures brokerage’s collapse.

Posted by insurance - October 5, 2018 at 10:17 am

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Judge Weighs Release of Insurance Monies for MF Global Defense

Reuters in February reported that authorities have struggled to find clear criminal intent in MF Global’s implosion.

Representatives for Freeh and Giddens could not immediately be reached for comment on the customer memo.

Since checks can take days to clear while wire transfers clear immediately, the group suggested MF Global made the change to purposely slow redemptions. The time lag would artificially reduce the assets MF Global was required to keep segregated while not reducing the actual assets the firm had in the customer bank account, the group said.

Those checks later bounced, but as MF Global overrode customer requests for wire transfers, it was also wiring money out of its customer segregated funds account to cover an overdraft at an MF Global account at JPMorgan in the UK, the customer group said.

As customers sought to withdraw funds through wire transfers in the final days of the firm, the Commodity Customer Coalition said, MF Global did not wire the funds but instead issued checks to the customers.


A group of former MF Global customers, meanwhile, told federal investigators in a memo dated Monday they believed they had found evidence of criminal fraud at the company.

Giddens may also argue that customers have a right to the funds, his lawyer said. “We may have an interest in these policies and insurance proceeds someday,” attorney James Kobak said. “We’re anxious that as much as possible be preserved and not be spent.”

“If the commodity customers, for example, have tort claims against the parent company, the pot is reduced if you pay out on the insurance policies,” Glenn said. “Every dollar paid under the policies is one dollar less that’s available for them.”

Judge Martin Glenn did not rule on the matter, but pressed Marinuzzi on whether customers may have a right to it.

About $150 million of the insurance money is from policies issued by MFG Assurance Co., MF Global’s insurance unit. The rest is from policies issued by U.S. Specialty Insurance Co. Officers have submitted insurance claims for more than $8 million so far, Marinuzzi said.

“We like to pick on Jon Corzine, who has a lot of money and can probably pay his own defense costs, but if you’re a mid-level individual who was named in the suit because you happened to be at the company, you don’t have the money and you have to get it,” he said.

Defendants in the lawsuits must be afforded legal costs under the policies or they could sue MF Global for more money later, Marinuzzi said.

According to a February report from James Giddens, the trustee in charge of trying to recover customer money, MF Global staff misused customer cash to cover corporate transactions.

Corzine, who resigned on Nov. 4, and other past and present MF Global officials face more than 20 lawsuits over the handling of customer funds ahead of the firm’s Oct. 31 collapse.

The insurance policies cover liability stemming from wrongful acts of employees, directors and officers, and in some cases the company itself.

The money is currently frozen because the company is bankrupt. The debate over the funds raises questions over whether insurance policies are considered part of a bankruptcy estate and who may be able to claim a right to insurance money.

Customers of MF Global’s broker-dealer have argued they are entitled to the funds to help fill an estimated $1.6 billion hole in their trading accounts.

If paid out now, the money — part of $375 million in total insurance funds from multiple policies — could save the broker from facing larger claims later, Lorenzo Marinuzzi, an attorney for trustee Louis Freeh, said in U.S. Bankruptcy Court in Manhattan. Freeh is managing the company’s assets in bankruptcy.

An MF Global bankruptcy trustee asked a judge on Monday to release $25 million in insurance money to pay defense costs for Jon Corzine and other former MF Global officers facing civil lawsuits over the broker’s October collapse.

Posted by insurance - October 5, 2018 at 10:16 am

Categories: accidentinsurance   Tags: , , , ,

Liberty Mutual Acquires KIT Finance, Enters Russian Auto Insurance Market

KIT Finance has a small piece of that market, with about $50 million in written premiums last year, though Liberty said on Thursday it has been growing at a 27 percent annual rate.

U.S.-based insurers have lately been pushing for international growth after years of weakness in domestic rates. Most have focused on Asia or Latin America, though, rather than the $21 billion Russian market.

Boston-based Liberty Mutual, the world’s ninth-largest property and casualty insurer by revenue, gets just over a quarter of its net written premiums from international markets. Passenger auto is the largest line within that segment.

Terms of the deal were not disclosed. Liberty Mutual is buying KIT from a holding company controlled by the state transport monopoly Russian Railways and its pension fund.

Liberty Mutual, one of the largest insurance companies in the world, said it would enter the Russian market with a deal to acquire KIT Finance Insurance, which primarily writes auto coverage in St. Petersburg and Moscow.

Posted by insurance - October 5, 2018 at 10:16 am

Categories: accidentinsurance   Tags: , , , ,

Special Report: Top 10 Innovative P/C Insurance Products

Editor’s Note: This special report originally appeared on on April 1, 2011. This article also appeared in Insurance Journal’s Satire Issue, August 15, 2011. The content is not real and is not to be taken seriously. It’s supposed to be humorous. Seriously.

Cell Phone Anguish: Coverage for loss of use coverage for cell phones. The policy indemnifies the named insured for losses due to a cell phone running out of battery. The insured must prove the loss occurred because they were unable to use the phone. Coverage includes reimbursement for gas or taxi when family members cannot contact insured for pickups of dinner or grocery items. Coverage is broad enough to include mental anguish due to drop calls and no coverage areas.

Pet Peeve: Homeworkers’ Compensation and Home Business Interruption programs are great additions to a program for Pet Peeve Coverage. Pet Peeve Coverage is a reimbursement product for expenses such as humane society fines for dogs that escape and get caught, obedience training for dogs that refuse to come when called, upholstery charges for when a cat uses a favorite chair as a scratching post and other expenses related to erratic pet behavior.

Since this article first appeared, Insurance Journal readers have alerted us to additional innovative products including:

10. Hoosier Daddy Policy: An Indiana insurance company has launched a policy that protects a family’s income while the breadwinner is imprisoned for financial crimes. Not currently available to Wall Street executives or public officials in New Jersey, Illinois or Louisiana.

9. Homeworkers’ Compensation: The Harmfort’s injured worker coverage is specific to hazards of the home-based workplace. Includes injuries related to solitary worker syndrome, excessive weight gain, unnatural pet attachment, and deterioration of driving skills.

8. Relationship Breakdown: Hartford Stream coverage is triggered after two lovers break up and remain separated for more than three months. Pays 50 percent of the cost of unreturned gifts including rings and other jewelry; moving expenses; temporary housing; damaged or lost goods; up to $50,000 for reputational damage.

7. Global Scoring: Chartus has developed a policy that guarantees to convert its auto and home policyholders’ credit scores to whichever foreign currency presents their financial history in the most favorable terms.

6. No-Show Coverage: There is coverage for shoddy work, but what about when the plumber, electrician, roofer or other contractor doesn’t even show? Handover Insurance now covers damage caused by old pipes, leaky roof or other conditions that did not get fixed on schedule as promised.

5. Home Business Interruption Protection (HBIP): Revelers Insurance has a business interruption policy for any service business conducted from the home, from hackers and day traders to massage therapists and insurance agents. Covers loss of Internet connection, telephone service, daycare, HVAC as well as refrigerator breaks.

4. Vanishing Coverage: A multi-year package policy from Hubb Insurance available only to owners of high-end coastal properties and antique autos. The premium is lowered by the same amount the deductible is raised each year until the deductible reaches the policy limit or the premium hits zero, whichever happens first.

3. Commercial Specific Liability (CSL): A low-cost option to the Commercial General Liability (CGL), the CSL lets business owners specify the exposures they want covered. The final ISO form is not expected until December but some examples of actions expected to be covered include: nailing into a water pipe, electrical wiring or cable; causing a fall due to the failure to warn of water, change in elevation (a step), or intoxication; and releasing a pollutant that the insured did not bring to the job site.

2. GreenMaker: R.W. Barkley is selling a product liability policy for home or garage-based businesses that manufacture cosmetics, clothing, jewelry, toys, computers or other products using primarily recycled, upcycled, natural or organic materials.

1. Pay-As-You-Park: Private passenger auto policy from Progresso. Rates are based on how long the vehicle is not driven. Policyholders are sent a small white box that attaches to the front driver’s side wheel. The box contains a meter that is loaded with an initial estimated premium. The box calculates premium discounts for every 15 minutes the vehicle is parked but adds surcharges for every 15 minutes the vehicle is in motion. Pay-As-You-Dock boat policy also available.

So what are some of these new ideas that have put the industry’s unhip reputation at risk? Insurance Journal searched the database at to find the Top 10 Most Innovative P/C Insurance Products:

“It seems that with every day comes a new idea,” Hurtvig said. “The new products are anchored in traditional insurance principles but they speak to a new generation of risks. It’s very exciting.”

The P/C industry has a reputation of being slow to embrace new ideas but the III’s own measure of innovation — the P/C New Products Index — has been rising steadily for the past year and hit a record high of 75 out of a possible 100 points last month.

“This is a new era in property/casualty insurance. Innovation is breaking out all over,” said Roger Hurtvig, president of the Insurance Innovation Institute (III) in Warwick, Rhode Island.
In the past few years, dozens of property/casualty insurers have announced innovative protections for risks involving new technologies, current economic concerns, personal and family relationships, home-based small businesses, and more.

Posted by insurance - October 3, 2018 at 10:17 am

Categories: accidentinsurance   Tags: , , , ,

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