The liquidators of stockbroking firm Bloxham have agreed to mediation with the firm’s former insurance broker, Robertson Low, of their claim for more than €15m damages arising from Bloxham allegedly being “chronically underinsured”.
Although the firm paid €16m in the settlement of claims by clients related to certain Saturn Dresdner investment bonds, the total sum recovered from its insurers was a 10th of that, the High Court heard.
The liquidators claim Bloxham believed that, in 2007, it had insurance cover on the basis of up to €3m a claim but that belief turned out to be “cruelly mistaken” when the total cover for all claims was actually €1.275m.
This was in a context where the firm’s business was expanding and it had more than €1bn under discretionary management by 2008 for fees of €35m, the court was told.
Robertson Low denies the claims and contends Bloxham understood the cover it had and its concern at all times regarding insurance was price.
President of the High Court, Mr Justice Nicholas Kearns, was told on the second day of the case yesterday that the sides had agreed to enter mediation.
When the case was being opened, the judge noted it was listed for three weeks and said it was likely to be “a very costly exercise”. He was “somewhat surprised” mediation with a suitably qualified expert had not been considered and suggested they consider the option.
In his opening, Brian O’Moore SC, for the liquidators, said Bloxham was placed in liquidation in 2012 on foot of a petition by the firm’s partners. One reason for that was because the firm was subject to claims by former clients arising from the sale of investments known as the Saturn Dresdner bonds, counsel said.
Bloxham sold up to €30m of those bonds and later agreed to pay almost €16m in settlement of those claims or legal fees but received just €1.6m from its insurers, Novae. The liquidators were seeking damages for the remainder.
Bloxham’s civil liability cover was on a claims- made basis, meaning the cover available was that existing when the claim was notified to the insurers and the Saturn bonds claims were notified in June 2009, counsel said.
Because the insurance periods ran from June to June, the relevant year in relation to the claims made was June 2008 to June 2009. During that period, Bloxham had €3m civil liability cover but, because the events giving rise to the Saturn bonds claim arose in 2005, Bloxham was caught by a retroactive condition in the insurance policy specifying any claim arising from an event before June 2007 was subject to a lower level of cover — €1.275m.
Until 2005, Bloxham had cover of up to €1.275m for each claim but in 2005 that €1.275m became on the basis “of each and every claim and in the aggregate”. That meant, no matter how many claims were made in one year against Bloxham, its total cover was limited to €1.275m.
Bloxham was never told this “radical transformation”, counsel said.
The liquidators also alleged under-insurance of Bloxham’s civil liability interests.
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