CFI says firm can handle $7M bill

| 29/03/2011

(CNS): In the wake of the largest award following a civil trial in the history of the Cayman Islands, the insurance company holding the $7 million tab says it may be appealing the judgment but if it has to pay it will not impact the firm’s ability to do business. Hurlstone Ltd and others were awarded the whopping sum following a lengthy legal battle in which the contractors had counter-sued Sagicor General Insurance, now Cayman First, for abuse of process and malicious prosecution, and won. The case was related to the reconstruction of Windsor Village after Hurricane Ivan in 2004. The insurance firm had originally filed suit against the contractors, accusing them of fraud and conspiracy over the cost of the work, but withdrew the suit before the trial at the end of 2008.

Cayman First Insurance (CFI), which is now left holding the bill for the historic award handed down by Justice Alex Henderson of $6,938,064 plus interest and some $85,000for reputation, said that the company is considering an appeal so it could not go into detail about the judgment.

However, it was quick to try and reassure customers that the parent company of CFI has taken action to ensure thatthe firm’s capital base is maintained at a level to meet the requirements mandated by CIMA.

“CFI has determined that, based on existing information, the company’s capital and ability to operate will not be impaired by the developments associated with the Judgment,” the firm said in a statement in the wake of the award. It also said steps had been taken to ensure that policyholder and other stakeholder interests were adequately protected.

CFI is now under the controlling interest of an entirely new organisation but it said the directors were committed to meeting any legal obligations related to the legal proceedings, once finalised, despite the fact that the matters pre-date the involvement of the new owners.

With an AM Best rating of A-(Excellent), along with significant enhancements to the company’s reinsurance program, the company said it was a strong and viable entity. Speaking to the press in the Bahamas this week, Ian Fair, chairman of Bahamas First, said the group would suffer "absolutely zero" financial impact by the award as the case had come up as a potential liability during due diligence before last year’s sale. He explained that the potential financial ramifications were "ring fenced" and excluded from the transaction.

The award against the firm follows from the Hurlstone family and others counter-suing Sagicor General Insurance (Cayman) for abuse of process and malicious prosecution, and after the insurance firm’s original suit was abandoned the insurer’s allegations could not be sustained. The Hurlstone plaintiffs said their characters and business affairs had suffered greatly as a result of the allegations made by the insurance firm in 2006. They also suffered as a result of having their assets frozen during the process of the insurance firm’s suit, which the attorneys said was extremely detrimental to their clients.

Henderson described the unproven allegations as of a serious nature: that the work undertaken by Hurlstone had been inflated and the contractors had conspired to commit fraud against the insurance firm. The judge said that Sagicor never possessed a body of evidence capable of proving it was defrauded or was the victim of a conspiracy. The allegations against Hurlstone and the others were based on a report produced by Alan Purbrick of Capital Consulting, which turned out to be wrong.

When Hurricane Ivan ripped through Grand Cayman in September 2004, Cayman General was a wholly owned subsidiary of Cayman National Corporation. Following the problems the insurance firm faced with the significant claims after the storm, the government accepted a 24% share of the company as part of its settlement for damages sustained in the hurricane to public property.

Cayman General then sold its shares to Sagicor, who in turn sold all of its shares to the Bahamas First Group, which has since renamed the firm as Cayman First Insurance. 

Category: Headline News

Comments (2)

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  1. Eddie Lloyd says:

    Can we see some financials to back this up?

    $7m is a great deal of money and, given the circumstances, I would assume that it is not covered by any reinsurance.  Is someone else contributing to the payment of these debts?

    I always starting worrying when someone in the industry tells us not to worry.

    • Anonymous says:

      Yes, you are correct, remember when BAFI, Sagicor, Cayman General Insurance, Cayman National Corporation, all the same basic insurance company after Ivan said "Do not worrry, the rating agency is wrong we are strong" then they could not pay Governments claim. We must still worry because many people will lose if BAFI goes the way of Cayman General Insurance. XXXX