U.S. Court Rules Against Bear Stearns in Insurance Case
The ruling, which was made last Thursday, came before the troubled bank agreed over the weekend to be bought for $2-a- share by JPMorgan Chase & Co and is unrelated to that deal.
New York Court of Appeals said Bear Stearns’ insurers are not liable for $45 million worth of settlement costs the firm had sought to have covered. The settlement was reached with various regulators to end a probe into its stock research practices.
Bear Stearns was one of a group of investment banks accused of issuing biased stock ratings that were designed to help the firms win lucrative investment banking business. A wide-ranging settlement was struck between the Wall Street firms and regulators.
The court said in its ruling that Bear had agreed its insurers would not be liable for any settlement of more than $5 million entered into without their consent and that the firm therefore could not force the insurers to pay.
“Bear Stearns therefore may not recover the settlement proceeds from the insurers,” said Judge Victoria Graffeo in a written decision.
A Bear Stearns representative was not immediately available for comment Monday.
The ruling has implications for the role of insurers in a wide range of corporate settlements, said Joseph Finnerty III, a partner at law firm DLA Piper who represents two of the insurers in the case, both subsidiaries of Chubb Corp
“There is now, unquestionably, a place at the settlement table for insurers in any case where an insured contemplates using insurance money to pay any part of a settlement,” he said.
Bear Stearns agreed late Sunday to the buyout by JP Morgan for about $236 million, which said that total costs of the deal will be about $6 billion, including litigation and severance costs. (Reporting by Martha Graybow; Editing by Andre Grenon)