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Fed Ex insured for jet crash
on last day of policy period
NEWARK, N.J.-The fiery crash of a Federal Express Corp. jet last week occurred on the final day of the freight carrier's 1996-1997 aviation insurance coverage, but the crash will not alter the company's renewal program, a Fed Ex risk management official said.
Fed Ex locked in its renewal about a month ago, said Phil Williams, a senior risk analyst with Fed Ex in Memphis, Tenn.
Fed Ex has about $1 billion of liability insurance to cover the value of cargo that was destroyed, Mr. Williams confirmed.
The flight originated in Singapore and stopped in Malaysia, Taiwan and Anchorage, Alaska, before continuing on to Newark International Airport. Immediately after landing there about 1:30 a.m. local time on July 31, the jet flipped and burned. Two crew members and three passengers escaped with only minor injuries.
The jet was carrying 145,000 pounds of cargo, a Fed Ex spokesman said. About 400 pounds of cargo was "routine hazardous materials," like perfume and pressurized household cleaners, which are flammable or potentially explosive, he said. Fed Ex was unsure whether any cargo could be salvaged.
The MD-11 jet, manufactured by McDonnell Douglas Corp., was destroyed. Aviation sources estimated its value at about $115 million.
The National Transportation Safety Board last week could not say with certainty why the plane crashed. However, the agency's early investigation was focusing at least in part on the jet's fuel balancing system, an agency spokesman confirmed.
The jet was damaged three years ago during a hard landing in Anchorage, but it was repaired and returned to service within 48 hours, the Fed Ex spokesman said. A different flight crew was involved in the earlier incident, he said.
U.S. Department of Transportation documents and sources indicate that London insurance markets lead Fed Ex's coverage. Underwriters at Lloyd's of London and members of the Institute of London Underwriters participate on the risk.
Other insurers involved in the placement include La Concorde Group, through La Reunion Aerienne; Skandia International Insurance Group; CIGNA Corp. subsidiary Insurance Co. of North America; Assurance France Aviation Group; New York Marine & General Insurance Co.; members of Somerset Aviation Inc.; American Home Assurance Co.; and AXA Marine & Aviation (U.K.) Ltd. Aon Alexander & Alexander of Texas Inc. in Dallas placed the coverage.
Acordia MBO investors named
INDIANAPOLIS-Knightsbridge Capital L.L.C. and Wand Partners Inc. are the lead investors backing Acordia Inc. management's buyout of the broker from Anthem Insurance Cos. Inc.
The definitive agreement, signed early last Friday, calls for the equity group, which includes two other smaller investors and Acordia's management, to pay Anthem $320 million, including the assumption of about $40 million of debt and a $10 million contingent payment based on future operating earnings.
The transaction is expected to close at the end of August.
Acordia's management last month announced its plans to buy out the property/casualty brokerage operations from Anthem, after months of speculation over its future (BI, July 21). Anthem, which in February announced its plans to focus exclusively on health and managed care, had retained Credit Suisse First Boston to explore the possible sale of Acordia's property/casualty brokerage business.
The $320 million purchase price is less than the buyer's original indication of interest of $335 million, but Anthem had expected the price to be lower (BI, July 7). In 1996, Acordia reported $343.9 million in gross revenues.
New York-based Knightsbridge Capital is the general partner of Knightsbridge Capital Fund 1 L.P., an investment fund affiliated with PennCorp Financial Group Inc., which makes equity or equity-linked investments in the insurance industry.
Wand Partners is a private equity investment firm that is an active investor in such industry areas as insurance and information software.
In addition to Acordia's management, the other investors are High Ridge Capital Partners L.P., a private equity fund that invests exclusively in the property/casualty industry, and NationsBank Capital Investors, the direct investing group of NationsBank Corp.
The senior debt facility will be underwritten and arranged by NationsBank Capital Markets Inc. and The Chase Manhattan Bank.
Bruce W. Schnitzer, chairman of Wand Partners, is the new non-executive chairman of Acordia, and Frank C. Witthun is president and chief executive officer.
Firing not age bias: Court
SANTA ANA, Calif.-California employers can fire and replace higher-paid older employers with younger employees without violating age discrimination laws if it is done for economic reasons, says a ruling by the California Court of Appeal, 4th Appellate District.
The appellate court ruled in Michael J. Marks vs. Loral Corp. that "price-based business decisions should not be held to constitute illegal age discrimination." The focus of the 42-page decision was jury instructions in the case of Mr. Marks, who lost an age discrimination and retaliation lawsuit against his former employer, New York-based Loral Corp.
Mr. Marks' attorney, James J. Guziak, an Orange, Calif.-based sole practitioner, said that while federal courts have split on this particular issue, this is the first California case to his knowledge to deal with it.
He said the ruling will be appealed, though a decision has not yet been made whether to ask for a rehearing before the appellate court or to petition the California Supreme Court for review.
Court nixes Dow Corning plans
BAY CITY, Mich.-A federal bankruptcy judge hearing the Dow Corning Corp. case last week rejected competing reorganization plans submitted by the company and by a group of women plaintiffs with silicone breast implants.
Instead, Judge Arthur J. Spector suggested the two parties work together to develop a consensual plan.
The judge also rejected Dow Corning's request to convene a "science panel," a group of experts who would evaluate the plaintiffs' claims of immune system impairment. U.S. District Judge Sam C. Pointer Jr. already has appointed such a panel, which conducted hearings last month on the safety of silicone implants (BI, July 28). Judge Pointer was assigned by U.S. Supreme Court Chief Justice William Rehnquist to supervise the Michigan federal proceedings.
However, the bankruptcy court judge's opinion supported one element of Dow Corning's proposed reorganization plan: common issue causation trials, in which a single proceeding may be used to determine a causal link to claimants' injuries (BI, Dec. 9, 1996).
Judge Spector said he will recommend common issue causation
trials if that issue is not resolved up front, either through a consensual plan or through rulings on other pending motions now before the court.
Tenet settles liability claims
SANTA MONICA, Calif.-Tenet Healthcare Corp. has agreed to pay about $80 million to settle 700 suits brought by former patients in the company's psychiatric hospitals.
The suits, pending in two Texas state courts, allege that the former patients were held in the hospitals against their will in order to obtain larger payments from their insurance policies. The hospitals were operated by National Medical Enterprises, which merged with American Medical International in March 1995 to form Santa Monica, Calif.-based Tenet.
Besides Tenet, the physicians involved have agreed to pay the former patients $20 million.
Coverage information was not made available.
Tenet has made other settlements related to NME's activities. Previously, NME paid $125 million to six insurers to settle charges it submitted fraudulent psychiatric claims and $379 million to settle a Justice Department investigation over its practices (BI, July 11, 1994; Oct. 4, 1993).
About 300 more suits by former patients are pending against Tenet.
CIGNA sells off life, annuities
FORT WAYNE, Ind.-Lincoln National Corp. said it will purchase CIGNA Corp.'s individual life insurance and annuity business for about $1.4 billion in cash in a transaction expected to close at year end.
The deal includes $37 billion of individual life insurance in force; CIGNA Financial Advisors, which has 600 agents; a life brokerage operation; and an annuity distribution system. Not included is CIGNA's corporate-owned life insurance; group life insurance; and life, health and accident reinsurance businesses.
CIGNA, which announced its acquisition of Healthsource Inc. earlier this year, now is focusing on commercial business, including employee benefits and risk management, said a CIGNA spokesman (BI, March 10).
He said proceeds of the deal will primarily be used to buy back its stock.
In June, Lincoln National said it would sell its 83.3% stake in property/casualty insurer American States Financial Corp. to Seattle-based SAFECO Corp., which, with repayment of intercompany debt, will yield aftertax proceeds of $2.15 billion (BI, June 16).
Fugitive insurance executive Martin Bramson has been extradited to the United States to face charges of defrauding medical malpractice and liability policyholders with a string of bogus offshore insurance companies. Mr. Bramson, who fled house arrest while awaiting trial in 1991, was arrested in Liechtenstein in 1995 as he tried to cross the border from Austria carrying several million dollars of Swiss currency and gold (BI, Jan. 30, 1995). . . .Dominic Frederico has been named president of ACE Insurance Co. Ltd., the Bermuda insurance operating unit of ACE Ltd., in a series of appointments aimed at delineating the insurance company and the holding company. Mr. Frederico was previously executive vp, underwriting for ACE's Bermuda operations
. . . .The New York-based Risk & Insurance Management Society Inc. has named Amy Geffen director of professional development. Ms. Geffen, who holds a Ph.D., will assume the position today that has been vacant for a year. . . .The House of Representatives followed the lead of the Senate last week and overwhelmingly rejected a measure that would have cut the Overseas Private Investment Corp.'s administrative budget by one-third. OPIC, which writes political risk insurance for U.S. companies doing business in selected developing countries, has come under fire from both ends of the political spectrum as an example of "corporate welfare". . . .Richard L. Huber has been named president and chief executive officer of Aetna Inc. Mr. Huber, formerly the vice chairman of strategy and finance, takes over from Joseph Sebastianelli, who resigned the post in May. . . .Maine Insurance Superintendent Brian K. Atchinson will resign Aug. 29 to become second vp-government relations for UNUM Corp. in Portland, Maine, though a state law prevents him from representing the company before Maine regulators. Deputy Superintendent Alessandro Iuppathen will serve as acting superintendent until a successor is named. . . .A Massachusetts federal judge dismissed a sexual harassment and retaliation lawsuit brought against Astra USA, ruling the six former employees had reached previous settlement agreements with the Westborough, Mass.-based pharmaceutical company and therefore had no right to sue.