XL Specialty Insurance Co. will pay $19 million as part of a settlement agreement to resolve mismanagement claims stemming from the bankruptcy of Dewey & LeBoeuf, according to federal court records.
The settlement agreement was approved May 30 by a New York federal court judge and releases XL and Dewey's excess insurers from "any and all liability" based on, among other things, wrongful acts, court records say.
The law firm had a management liability and company reimbursement policy from XL with a $25 million aggregate limit of liability, inclusive of defense expenses, records say. The policy was in force when the firm filed for bankruptcy last year.
Dewey & LeBoeuf was known for representing some of the nation's largest insurance companies. At its height, Dewey & LeBoeuf employed more than 1,000 lawyers in 26 offices around the world. After the firm went bankrupt, its creditors claimed they are owed hundreds of millions of dollars, with one of the largest being the Pension Benefit Guaranty Corp.
As part of the settlement agreement the firm's former chairman, Steven H. Davis, will pay $511,145 to cover non-covered claims against him, records say. Prior to its bankruptcy filing, the firm removed Davis from his role as chairman amid a Manhattan district attorney criminal probe into his alleged financial improprieties. Davis denies any wrongdoing in the matter, records say.
The trustee handling the firm's liquidation is settling with Davis and XL to avoid the expense and uncertainty of litigation, records say, which would entail millions of pages of documents, and more than 100 depositions. The policy limits of the XL policy would quickly erode with prolonged litigation, records say. An XL spokeswoman said the company had no comments beyond the settlement agreement.
XL Specialty's business stems primarily from aerospace, marine, surety and professional liability divisions, according to BestLink, A.M. Best Co.'s online financial system. The company in 2012 had direct written premiums of $1.1 billion, with net written premiums of $77.6 million. It has a five-year average combined ratio of 104.1. The company currently has a Best's Financial Strength Rating of A (Excellent).