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BOSTON-Lloyd's of London underwriters are seeking permission to intervene in court proceedings on a proposed settlement that would make the Massachusetts Insurance Division U.S. receiver for the hugely insolvent Electric Mutual Liability Insurance Co.

Meanwhile, court filings brought to light in the settlement reveal that a lawyer for EMLICO's former president and treasurer identified the two men

as "possible subjects" of a fed-eral grand jury probe of EMLICO's controversial 1995 move to Bermuda.

The two men, who are now top officers of former EMLICO affiliate Electric Insurance Co., refused to be examined under oath last December by Insurance Division officials investigating EMLICO's redomestication.

Lloyd's last week filed a motion to intervene in proceedings to confirm the proposed settlement, charging that it "represents yet another instance of (Insurance Commissioner Linda Ruthardt's) abandonment of her regulatory obligations."

Under the settlement announced earlier this month, EMLICO, a longtime General Electric Co. liability insurer, would continue its liquidation in Bermuda but would send GE environmental claims settlements to Massa-chusetts for review. The reviewwould be conducted by a special master chosen by GE, EMLICO and Commissioner Ruthardt (BI, March 17).

In return, the Insurance Division will drop its investigation into charges that EMLICO concealed its insolvency in a fraudulent scheme with GE to take advantage of Bermuda liquidation laws that would accelerate reinsurance payouts on GE claims.

Only months after getting the green light from Massachusetts regulators to move to Bermuda, EMLICO declared itself hugely underreserved for GE pollution and asbestos claims and insolvent by more than $500 million (BI, Dec. 11, 1995).

After refusing to reopen the EMLICO redomestication last year, Commissioner Ruthardt began her investigation of the fraud charges as part of a examination of EIC, which was spun off from EMLICO in the redomestication. EIC is managed by former EMLICO officers, including David F. St. Laurent, EIC's president, and Laurence J. Cohen, its treasurer.

Only hours before its settlement with GE, EMLICO and EIC was announced, the Insurance Division was still maintaining in court that it would "vigorously pursue" its investigation of the alleged fraud, Lloyd's complains in its filing with the state Supreme Judicial Court.

However, the settlement "utterly fails to.*.*.hold GE or EMLICO accountable for the damage to public confidence in the integrity of the Commonwealth's insurance regulatory process since, despite the evidence and preliminary findings of fraud, GE and EMLICO will continue to reap the benefits of their fraudulent redomestication to Bermuda," Lloyd's charges.

"Throughout the underlying proceedings up to and including the negotiations leading to this 'settlement,' the Commissioner has sought to shield her regulatory actions from judicial and public scrutiny," the filing adds.

The settlement, for example, includes several side agreements between the Insurance Division and GE, EMLICO and EIC that were not included in the settlement documents filed in court, Lloyd's lawyers note.

In one of these side letters, the division agrees that EMLICO's Bermuda liquidators "will be entitled to direct the disposition of all EMLICO documents whether in the form of writings or computer data."

In a separate filing in state Superior Court, Lloyd's argues that this agreement makes it "clear that GE and EMLICO have demanded, and the Commissioner has agreed, that the written proof of the GE/EMLICO fraudulent scheme will be forever concealed, if not actually destroyed." In this filing, Lloyd's is seeking a court order that EMLICO documents not be altered, destroyed or moved out of state.

Lloyd's argues in its Supreme Judicial Court filing that the Insurance Division won't protect reinsurers' interests and that Lloyd's should be allowed to intervene as a party in the settlement case.

Intervention would give the reinsurer broader standing to contest the agreement.

Lloyd's is also asking the court to postpone the scheduled April 8 hearing on the settlement deal.

The Insurance Division plans to ask Supreme Judicial Court Justice John M. Greaney to reject the Lloyd's motion, a spokeswoman confirmed.

Meanwhile, the settlement has highlighted earlier court filings in which a lawyer for EIC's Mr. St. Laurent and Mr. Cohen identified them as "possible subjects" of a federal grand jury investigation of EMLICO.

The Insurance Division filed suit against EIC last December to compel Mr. St. Laurent and Mr. Cohen to testify under oath about the redomestication.

Each man had earlier refused to answer questions at separate Dec. 10 and Dec. 12 hearings after their lawyer had read a prepared statement.

The lawyer, John J. Curtin Jr., with Bingham, Dana & Gould in Boston, cited several reasons for their refusal, including that Insurance Division officials conducting the examination were biased and that GE and EMLICO had instructed the men not to do anything that would "prejudice (the companies') privilege and confidentiality rights."

GE and EMLICO had advised Mr. St. Laurent and Mr. Cohen that "violation of those rights would amount to a breach of (their) fiduciary duties" as former employees of EMLICO, Mr. Curtin said.

In addition, Mr. St. Laurent and Mr. Cohen are "possible subjects" of the probe being conducted by the U.S. Attorney's office in Boston, he said.

"When the potential for criminal accusations has ended, (Mr. St. Laurent) will be happy to answer.*.*.questions and he hopes that the Division of Insurance will give him a fair opportunity to do so then. Now, however, it is not fair to make Mr. St. Laurent run the risk of losing his rights under the Fifth Amendment of the U.S. Constitution," Mr. Curtin said.

His statement for Mr. Cohen was virtually identical.

In an interview, Mr. Curtin denied that either man had actually claimed the constitutional privilege against self-incrimination.

"What I said was they should not be in a position to claim the Fifth Amendment," Mr. Curtin said.

Assistant U.S. Attorney Paul Levensen declined to comment on whether Mr. St. Laurent or Mr. Cohen are targets of the investigation.

An Insurance Division lawyer didn't get very far with either man after their lawyer's statement, transcripts of the hearings show.

In one exchange, Eric Smith, the division's lawyer, asked Mr. St. Laurent, "In June of 1995 (when EMLICO's redomestication was approved), did you believe that EMLICO was insolvent?"

"I have no further statement at this time," Mr. St. Laurent replied.

"At any time prior to July 1, 1995, did you believe that EMLICO was insolvent?"

"I have no further statement at this time."

". . .Did you believe that the 1994 EMLICO financial statements accurately represented EMLICO's financial condition when you signed them?"

"No further statement at this time."

"Are you invoking the Fifth Amendment in response to that question?"

"I object to that question," Mr. Curtin interjected.

"Will you answer the question, please?" Mr. Smith asked.

"I'm relying on the statement of counsel," Mr. St. Laurent said.

The refusal of the two men to answer questions under oath is grounds under Massachusetts law to trigger a receivership filing against EIC, according to the Insurance Division's complaint. Regulators decided instead to file suit for an order compelling testimony, the suit says.

The complaint is still pending but is one of several actions Commissioner Ruthardt has agreed to withdraw as part of the EMLICO settlement.