GenRe CEO sentenced, fined

Posted on January 22, 2009 by Jody Nathan

A Connecticut federal judge today sentenced former General Re Corp. chief executive officer Ronald E. Ferguson to two years in prison and fined him $200,000 for his participation in a fraudulent scheme involving General Re Corp. and American International Group Inc. United States of America v. Ronald E. Ferguson, et al., No. 06-137 (D. Conn.).

The court ruled that the loss portfolio transfer (LPT) transaction between AIG and Gen Re caused more than 250 AIG investors to sustain between $544 million and $597 million in losses.

 

Ferguson, along with Christopher P. Garand, Robert D. Graham, Elizabeth A. Monrad and Christian M. Milton, were accused of engineering a LPT  transaction that helped AIG inflate its loss reserves by $500 million in 2000 and 2001. Prosecutors alleged that the deal transferred no risk of loss to AIG and included a secret side agreement that AIG would refund Gen Re’s $10 million premium and pay it a $5 million fee.

 

All five defendants were charged with securities fraud, conspiring to commit securities fraud, making false and misleading statements in reports filed with the SEC, falsifying the books and records of a public company, and mail fraud.

 

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Agent may be liable for inadequate insurance

Posted on January 16, 2009 by Jody Nathan

In an unpublished case, the Oklahoma Court of Civil appeals reversed summary judgment in favor of an insurance agent who allegedly failed to properly estimate replacement cost coverage.  The insureds had purchased replacement cost coverage, but the coverage was limited to a certain dollar amount.  That limit turned out to be about half the actual replacement cost required after a tornado destroyed farm buildings.  The insureds claimed that the agent was negligent in failing to follow replacement cost estimating standards.  The Court of Civil Appeals said that generally, the insurance agency and the insurer do not have a duty to advise an insured with respect to insurance needs, but on the other hand, an insurance agency has a duty to exercise reasonable care and skill in performing its tasks. The breach of this duty with accompanying injury establishes a claim for negligence.

Since there was a fact question as to whether the acts were negligent and caused damage, summary judgment was not proper, and summary judgment for the agent and insurer was reversed. 

Rehearing has been sought on this ruling.

Runyon v. Goetz Insurors, Case No. 106013

 

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