Bridgecorp insurance bid rejected by court

Insurance broker Grant Herbert organised insurance for finance company Bridgecorp before its collapse. He is now serving a four year jail term for fraud. Photo / Doug Sherring

A multi-million dollar insurance claim by Bridgecorp's receivers against Lloyd's Underwriters in London has been dismissed by the Court of Appeal.

Before the finance company collapsed it took out insurance over loans through its broker, Herbert Insurance Group (HIG).

HIG then itself collapsed in March 2011 and its founder, Grant Herbert, is now serving a four-year jail term for fraud.

The receivers, from PwC, chased its insurers in the High Court to recover losses on the loans and also included the broker in the proceedings.

PwC alleged that if the insurers' defences were upheld, the broker was liable for its breach of its duties to arrange suitable insurance.

HIG itself had its own liability insurance with a syndicate of Lloyd's Underwriters in London, which meant that if it was found to have breached it duties it could call on this policy to make a payout.

Because HIG is now in liquidation, the receivers tried to bring a claim directly against these underwriters.

Even though the receivers settled the action with the insurer, PwC kept its litigation against the underwriters because the amount it got in the settlement was less than the full cover under Bridgecorp's original policy.

The underwriters then challenged this in the High Court, which earlier this year found it had no jurisdiction to order the underwriters to pay the proceeds to the receivers rather than HIG.

Bridgecorp appealed this but it was dismissed yesterday.

Bridgecorp collapsed in 2007 owing almost $500 million to investors, who to date have got 12c in the dollar back.

Read the full Court of Appeal decision here: