AIG blames Hanover's broker for policy mishap
Insurance giant – and All Blacks jersey sponsor – AIG is blaming an insurance broker's misinterpretation for Hanover's "misconceived" court case.
Hanover Group has taken High Court action against AIG, known as Chartis Insurance New Zealand, over its $20 million policy for directors and officers (D&O).
Hanover claims it was misled by AIG into thinking it had full prospectus liability cover, which is crucial for the directors of three Hanover finance companies – Hanover Finance, United Finance and Hanover Capital – now facing civil claims from the Financial Markets Authority.
However, AIG lawyer Andrea Challis will tell the High Court today Hanover should be suing its broker, Apex Insurance Brokers, not AIG.
Its case is "misconcieved", she says.
In October 2007, she says AIG offered to include the latest Hanover Finance prospectus as an exception to a $400 million upper limit exclusion for prospectus capital raisings.
"Unfortunately, Hanover finds itself in the position it is in as a result of its broker and agent misinterpreting AIG's 25 October email," Ms Challis's submissions say.
"It was not AIG who misrepresented anything to Apex or Hanover. In this instance, Hanover's remedy is against the broker, not AIG."
She says there was no common intention between AIG and Hanover to provide unlimited prospectus cover in the 2007-08 year.
"Two commercially sophisticated parties were involved in arms-length negotiations which addressed the question of the extent of prospectus liability cover and cover generally.
"In the circumstances, it is difficult to see where or how any deception by AIG arises."
AIG plans to call four witnesses: Vince Barker, the underwriter at the time; Mr Barker's assistant, George Springhall; underwriter Ella Langdon; and Judith Schwarz, an expert underwriter/broker.
About 36,500 investors were affected when Hanover Finance froze $550 million of assets in July 2008.