MANHATTAN (CN) - The Federal Insurance Co. says it need not cover defense costs in a lawsuit against former Secretary of State Alexander Haig Jr. and other executives of Commodore International, a onetime computer giant that went bankrupt in 1994.
When it filed for bankruptcy, Commodore had a $51 million liability insurance tower for its directors, according to the insurer's federal complaint.
Six insurance companies insured Commodore through nine policies, and Federal Insurance underwrote two of the excess policies, according to the complaint.
Indiana-based Federal Insurance claims Haig and other officers used the policies, including a $10 million policy from its primary insurer, to resolve "numerous lawsuits that had been filed around the world against Commodore."
Commodore had four other policies worth $20 million in excess coverage from companies that are now insolvent and in liquidation, according to the complaint.
Since the other insurers could not pay because of insolvency, Federal Insurance says it should not have to cover defense costs for the last remaining lawsuit against Commodore, filed in the Bahamas, where Commodore was incorporated.
"Each of the Federal excess policies expressly provides that it is triggered only if the underlying policies have been exhausted by the payment of claims," according to the complaint.
Federal Insurance says the $5 million limit of liability under one of the excess policies is nearly exhausted, and the other policy is triggered "only after the full amount of $30 million in underlying insurance has been 'exhausted by payment of claim(s).'"
Haig, who was secretary of state under President Ronald Reagan, was a nonexecutive director at Commodore and a member of its audit committee. Federal Insurance also sued the estates of director Ralph Seligman, Irving Gould, who was CEO of Commodore, and Mehdi Ali, Burton Winberg and J. Edward Goff. Federal is represented by Joseph Finnerty with DLA Piper.
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