By Angela Dorizas
The administrators of Lehman Brothers Australia will be required to hand over details of the bank’s insurance policies, including personal indemnity insurance, to a former council client.
Wingecarribee Shire Council in New South Wales has won Federal Court approval to uncover the insurance policies of Lehman’s in its bid to recoup funds lost through investing in collaterised debt obligations.
The council has been involved in a $4 million lawsuit against Lehman Brothers Australia since 2007 over advice it received from Lehman’s subsidiary, Grange Securities. Complications arose in September 2008, when the company went into voluntary administration.
In March 2009, Lehman’s administrators reported to creditors that there were three different insurers providing professional indemnity cover, which had the potential to provide a return to the Lehman Brother’s estate where claims of breach of professional duty fell within the terms of the cover.
The administrators did not provide detailed advice about which claims would be covered, prompting Wingecarribee to pursue the matter through the courts.
In his judgement Justice Rares said that as a litigant in the court, the council was entitled to know whether there was an insurance policy “to know in the interests of justice before it has to determine what it will do in Lehman Brothers’ second creditors meeting”.
“It is not the council’s fault that the accident of insolvency and administration has overtaken Lehman Brothers in the course of this litigation,” Justice Rares added.
With access to the insurance policies, Wingecarribee will soon know whether legal action against Lehman Brother’s is worth pursuing.
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