Evaluation of Materiality of Actions Constituting Default by an Insurer
Analysis Group worked with a group of developers in a dispute with an insurer, in which the developers purchased a surety bond from the insurer to fund millions of dollars' worth of loans to satisfy a financial reserve. When the insurer's credit rating declined, the insurer claimed that the surety bond was no longer valid and required the developers to cash fund the reserve. The developers claimed, however, that the insurer itself was in default under the relevant legal provisions as a result of rehabilitation.
An Analysis Group team analyzed the insurer's financial deterioration, the establishment and subsequent rehabilitation of a segregated account, and the capitalization and flow of funds between the insurer and the segregated account. Our in-house expert opined in written declarations and at depositions that the actions were consistent with an economic interpretation of a default by the insurer as defined in the loan documents.