Hanover Group Holdings has lost its High Court fight with
insurance giant AIG over a policy worth up to $20 million.
The insurance wrangle centred on a directors and officers
liability (D&O) policy Hanover took out in November 2007
with AIG and whether cover is provided for claims associated
with certain Hanover prospectuses.
The cover would be used for legal costs associated with the
upcoming civil stoush between former Hanover directors and
the Financial Markets Authority (FMA) or any damages that may
be payable in that case.
AIG (at time of the case legally known as Chartis Insurance
New Zealand) did not accept that two prospectuses released by
Hanover Finance Limited and United Finance Limited were
covered by the policy.
The actual policy issued by the insurance giant fell far
short of complete prospectus cover but Hanover's lawyer,
Nathan Gedye, argued that its broker and AIG had agreed in
2007 there would be D&O cover for all prospectuses issued
by the finance firm during the policy period.
During civil proceedings in the High Court at Auckland in
October, Gedye pushed for the policy to be rectified to
reflect what he said was an "oral agreement" between
Hanover's broker, Grant Dawson, and AIG.
However, Justice Christopher Allan declined Hanover's bid in
his judgement released this morning.
Gedye also submitted that if the court decided there was no
agreement to provide the prospectus cover his client believed
it had obtained, then AIG underwriter Vince Barker had
mislead Dawson as to the insurer's position.
However, Justice Allan did not agree.
"In my view, Hanover has not established that the terms of
any promise or representation by Mr Barker were as Hanover
now asserts...Mr Dawson had an opportunity to raise his
on-going concerns with Mr Barker, but he did not do so. In
those circumstances, I do not see how AIG can be rendered
legally responsible for what occurred," the judge said.
The FMA is suing six former Hanover directors and promoters
over allegedly misleading or untrue statements made in
The market watchdog is seeking compensation for investors who
put $35m into Hanover Finance, Hanover Capital and United
Finance between December 2007 and July 22, 2008.
It is also seeking penalty orders against the defendants, and
if the claim is successful, the former directors and
promoters could each face fines of up to $5m.