The U.S. Court of Appeals for the Third Circuit has upheld the judgment of $182.9 million returned in a malpractice case against the accounting firm PriceWaterhouseCoopers. The case filed by the State of Vermont arose out of the firm’s dealings with the failed Ambassador Insurance Co. The company, a Vermont domiciled surplus lines insurance company with headquarters in New Jersey, was seized in 1983 and placed into court-supervised rehabilitation and subsequent liquidation as a result of its insolvency. Since that time, the state’s insurance commissioner has been trying to collect and distribute assets under court supervision in order to pay the claims of persons insured and owed money by Ambassador.

An accounting malpractice lawsuit, filed in 1985 by the Vermont insurance commissioners against PriceWaterhouseCoopers, charged Ambassador’s outside accountants with negligence in connection with audits of Ambassador’s financial statements that served to conceal from regulators the insurance company’s financial weakness and near insolvency. A trial in federal court in Newark, New Jersey, resulted in a jury verdict against PriceWaterhouseCoopers and the estate of Arnold Chait, Ambassador’s former president.

The U.S. Court of Appeals for the Third Circuit upheld the 2005 verdict and PriceWaterhouseCooper’s obligation to pay all of the resultant damages, and confirmed judgment for the full $182.9 million. Paulette J. Thabault, commissioner of the Vermont Department of Banking, Insurance, Securities and Health Care Administration said she considers the outcome another success for state-based regulation of insurance companies, noting that Ambassador policyholders and claimants will finally have the opportunity to receive the insurance proceeds they were due under Ambassador insurance policies as a result of these proceedings. Commissioner Thabault had this to say:

As a department, we’re committed to protecting the interests of policyholders, and pleased that the years of work in connection with these receivership proceedings should allow us to make full payment to all policyholders.

With all the turmoil in the insurance industry, it’s good to see a State Insurance Commissioner being aggressive in the regulatory field.

Source: Insurance Journal

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