SEDGWICK SAYS IT'S COVERED POLICY WILL PAY JUDGMENT

SEDGWICK SAYS IT'S COVERED POLICY WILL PAY JUDGMENT

Sedgwick Group PLC said Tuesday that its errors and omissions insurance will cover the cost of a $43 million negligence judgment brought against the broker this week.

The ruling by London's High Court referred to a $300 million insurance claim made in 1979 by Avondale Shipyards of New Orleans after the insured incurred penalty charges for its late delivery of four ships built to carry liquefied natural gas.Sedgwick was ordered to pay the $43 million to certain underwriters on the Avondale risk, on the grounds that the broker acted negligently in placing their reinsurance.

Although the $300 million claim has already been paid, six Lloyd's of London managing agents and two insurance companies sued Bland Welch, a Sedgwick broking subsidiary, for negligence in arranging the reinsurance on their share of the risk.

They were left bearing an unexpectedly high proportion of the claim

because their reinsurance had a 48-month limitation clause that the agents and underwriters were unaware of.

The judge said that while Sedgwick was mainly responsible, underwriters had to accept a 20 percent share in the liability for failing to notice the terms of their reinsurance.

Sedgwick's spokesperson said Tuesday that the long and detailed court judgment was still being analyzed, and a decision whether to appeal was unlikely to be reached before the end of the month.

Sedgwick is covered against the costs of judgment under its errors and omissions insurance, she added.

It is not Sedgwick's policy to name its insurers, however.

An insurance analyst said the London market is sufficiently used to litigation to be able to "shrug off" the London High Court's $43 million negligence award.

Kevin Phillips, broking analyst with Kleinwort Benson Securities of London, said Tuesday, "At the end of the day the impact will be minuscule."

Mr. Phillips said that even if the judgment is enforced, the impact on the London insurance market will be small.

Mr. Phillips added that over the years Sedgwick has built up a 30 million ($49 million) errors and omissions contingency fund, which would be more than sufficient to pay the current award.