Insurers that provided $130 million in directors' and officers' coverage to Patriot National Inc. could see total losses on the policies, The Insurance Insider reported.
That outcome could be avoided if a U.S. bankruptcy court orders mediation of covered legal claims and shelves the related litigation, but even if pending claims are settled without using up the policies, what remains could be pooled together and made available to creditors, according to recent court filings.
Units of American International Group Inc., Everest Re Group Ltd., Chubb Ltd. and XL Group Ltd were included in a notice concerning mandatory mediation, but exposure levels were not disclosed, according to the report. Sompo International, Argo Group International Holdings Ltd., RLI Insurance Co. and RSUI Group Inc. have also been notified.
None of the carriers or their representatives disclosed their exposure, the publication reported.
Lawyers for Patriot National and creditor Cerberus Business Finance LLC, which seeks to acquire the bankrupt insurance services provider as part of a pre-packaged bankruptcy, have said that a 90-day cooling-off period is needed to preserve much of the $130 million in D&O coverage amid "relatively chaotic" D&O litigation.
They added that D&O insurers support mandatory mediation.
The bankruptcy court in Wilmington, Del., is expected to take up the mediation request on Feb. 28.