Suncorp’s Vero found liable under Marac policy covering misdeeds by employees
Suncorp Group's Vero unit has been found liable under a historic insurance policy for Marac Finance that covered dishonest acts by employees.
Marac had sued Vero for $1 million, the maximum under its crime insurance policy, after the insurer refused to pay out for losses caused by unauthorised lending by one of its senior managers. In the High Court in Auckland, Justice Patricia Courtney ruled in favour of Marac though stopped short of quantifying the costs to Marac, pending further evidence of agreement from lawyers for both sides.
Marac, now part of Heartland New Zealand, was owned by Pyne Gould Corp between 2003 and 2008 when a senior manager, Grant Atkinson, lent substantial sums to Rapson Holdings, a motor vehicle dealer put into liquidation in 2010 owing the finance company about $4.4 million.
After an internal investigation, Marac made a claim under its crime insurance policy with Vero Liability Insurance which covered direct financial loss stemming from dishonest acts of employees "committed with the clear intent of causing loss" to the company. Vero refused to indemnify Marac, arguing it was bad judgement by Atkinson, not dishonesty, that he didn't mean to cause a loss and that Marac couldn't prove losses were caused within the timeframe of the policy.
However, Justice Courtney said in her Sept. 26 judgement that from 2005 at the latest Atkinson would have realised he had exceeded his lending authority and known he would be in serious trouble and likely to lose his job, if Marac's credit committee found out about the firm's increased exposure to Rapson.
He took steps to conceal the real situation, lied to Marac's internal auditor, colleagues and superiors and was only caught when the auditor became suspicious and investigated, the judgment says.
Rapson had been the New Zealand distributor of Daewoo and Ssangyong cars and was funded via what is known as a dealer floorplan facility of $7.5 million set up by Pyne Gould's Allied Finance unit in 2000. Pyne Gould acquired Marac that year and merged it with Allied.
Also that year, Daewoo failed, leaving Marac significantly exposed to the unpaid balance of Rapson's facility and eventually wrote off more than $5.5 million. Ultimately though, Marac chose to accept a plan where Rapson could work off its debt.