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BOCA RATON, Fla.-In a surprise move, William D. Hager announced last week that he will leave his post as president of the National Council on Compensation Insurance in February 1998.

His resignation from the NCCI after more than seven years apparently stems from the NCCI board's decision this spring to sidestep a vote on converting to a for-profit entity from a not-for-profit organization (BI, April 14).

Mr. Hager, who strongly supported the conversion proposal, could not be reached for comment Friday.

The NCCI board unanimously accepted his resignation at the start of its quarterly meeting last Thursday in St. Louis. The board also appointed David Kocher, the NCCI's chief operating officer, interim president and made him immediately responsible for day-to-day operations.

Mr. Hager will serve as a consultant both before and after his resignation becomes effective, the NCCI said.

Secondhand smoke suit settled

MIAMI-Tobacco companies may yet face secondhand smoke claims by flight attendants even though the industry is paying more than $300 million to settle a class-action lawsuit related to such charges.

Last week's settlement of Broin vs. The Philip Morris Cos. et al. calls for tobacco companies to make three annual payments of $100 million to establish a research foundation to study diseases associated with cigarette smoking. The defendants also agreed to pay attorneys' fees and court costs.

The settlement, reached in Miami Circuit Court as the trial was in its fourth month, permits class members to file personal injury claims on a case-by-case basis. However, those claims cannot seek punitive damages, according to the settlement terms.

In a statement, the tobacco companies said flight attendants who pursue individual claims "must prove that they were directly harmed by environmental tobacco smoke. On that basis, the companies remain confident of their respective positions on this issue and intend to present compelling evidence to juries in any individual cases that may be filed."

The defendants called the settlement "a common-sense approach to resolving the class-action aspects of the case in a way that is consistent with the much broader legislative resolution now pending before Congress."

That $368.5 billion settlement between state attorneys general and the tobacco industry is pending.

Suit filed in insurer collapse

ORLANDO, Fla.-The Delaware Insurance Department has filed a massive civil racketeering complaint against 60 individuals and corporations allegedly responsible for the collapse of National Heritage Life Insurance Co.

The complaint, filed in U.S. District Court in Orlando, charges that several of the defendants gained control of National Heritage in 1990 through a check-kiting scheme in which they used $3 million of the insurer's own money to acquire the company.

The dozens of defendants then played roles in an alleged conspiracy to siphon away tens of millions of dollars of National Heritage assets while producing a blizzard of bogus paperwork to conceal the fraudulent transactions from regulators, the complaint charges.

Named in the lawsuit are Patrick Smythe, former president of National Heritage parent Lifeco Investment Group Inc.; David L. Davies, the insurer's former treasurer; Michael Blutrich, a New York attorney and National Heritage adviser; Joseph Rouadi, a former Lifeco director; Lyle Pfeffer and Sholam Weiss, New York businessmen involved in several deals with National Heritage; and Keith Pound, former president of a Lifeco mortgage unit.

In total, the suit names 22 individuals and 38 corporations they formed or operated.

National Heritage was ordered into rehabilitation in May 1994 and into liquidation in November 1995 after Delaware regulators found more than $200 million of its assets were missing (BI, March 11, 1996).

The collapse already has produced criminal charges: Messrs. Smythe, Blutrich, Pfeffer and Weiss were indicted on federal fraud and money-laundering charges in July (BI, Aug. 4). Separately, Mr. Davies and three other men have pleaded guilty to federal charges stemming from the collapse (BI, April 15, 1996).

High court declines two cases

WASHINGTON-The Supreme Court has declined to take up an age discrimination case involving broker Johnson & Higgins.

The 2nd U.S. Circuit Court of Appeals ruled last year that J&H, now part of J&H Marsh & McLennan Inc., violated the Age Discrimination in Employment Act with its policy requiring employees who also served as directors to retire at age 62-or 60 if they had been directors for more than 15 years (BI, Aug. 26, 1996).

Although no J&H director was involved in the lawsuit, the Equal Employment Opportunity Commission argued that it had the power to bring action on its own, an argument the divided appellate court panel found persuasive. J&H appealed, but the Supreme Court declined to review Johnson & Higgins vs. EEOC as the court opened its 1997-1998 session last week.

The high court also declined to get involved in a case involving the fungicide Benlate when it refused to review the 11th U.S. Circuit Court of Appeals' decision in DuPont vs. Bush Ranch. The appeals court had overturned a $115 million fine imposed on Wilmington, Del.-based E.I. du Pont de Nemours & Co. by a U.S. District Court judge who held that DuPont had violated his orders to turn over to plaintiffs testing data for Benlate (BI, Oct. 28, 1996).

Plaintiffs claimed Benlate had contained a toxic substance that killed plants, and DuPont paid out hundreds of millions of dollars to settle product liability claims. The appeals court ruled that DuPont had been deprived of constitutional protections by the district court.

CHARLESTON, S.C.-Chrysler Corp. will appeal a U.S. District Court jury's verdict and subsequent $262.5 million award to the family of a 6-year-old boy killed when he was thrown from a 1985 Dodge Caravan.

The federal court jury in South Carolina held that a defect in the minivan's rear gate latch allowed the boy to be ejected from the vehicle as it rolled over after a collision in 1994.

Chrysler contends the boy was thrown through a side window of the vehicle rather than the lift gate and was not restrained by a safety belt or a child safety seat when the accident occurred.

The award, which includes $12.5 million in actual damages and $250 million in punitive damages, is the largest to date against an automaker.

Auburn Hills, Mich.-based Chrysler contends the "outrageously large" punitive damage award "shows that the jury was unduly influenced by the highly emotional nature of the circumstances of the accident."

Hurricane Pauline kills scores

ACAPULCO, Mexico-Hurricane Pauline, which struck Mexico's Pacific coast near Acapulco last Thursday, caused severe damage to poor residential areas and killed scores of people

but did little damage to hotels and commercial structures in the area.

"There was a lot of rain, which caused mudslides, but we should be able to clear that up within one week, and none of the hotels will have to close even for one day," according to Eduardo Marron, president of the Acapulco Assn. of Hotels and Tourist Business.

Initial reports from Mexico indicate that Hurricane Pauline did not inflict substantial damage on insured commercial buildings in Acapulco, said Philip E.W. Munday, chief underwriting officer-international at Cat Ltd. in Bermuda.

If the hotels will be able to operate with the minimal damage, business interruption losses will be limited, he said.

"The big question is business interruption," Mr. Munday said.

Cat Ltd. only has a $10 million exposure in Mexico, Mr. Munday said.

Large business interruption claims are unlikely, said Richard Atherton, international business director for Mexico in Mexico City for Aon Group Inc.

California building bill vetoed

SACRAMENTO, Calif.-Gov. Pete Wilson vetoed the building defect bill that supporters had rushed to passage in the last days of the California legislative session.

A.B. 594 would have made changes to the alternative dispute resolution process relating to construction defect disputes between builders and common interest developments.

In particular, it would have provided that subcontractors receive early notice of potential claims and require that their insurers participate in pretrial mediation (BI, Sept. 15).

The California Building Industry Assn., the group that had

lobbied hardest for the passage of A.B. 594, hasn't given up the fight.

"I don't think we're going to go back to square one" when the Legislature reconvenes in January, predicted George Dale, a partner at Dale, Braden & Hinchcliffe in Los Angeles and a CBIA member.

Briefly noted

A bipartisan group of senators introduced legislation last week that would establish a set of uniform standards for private class-action suits involving nationally traded securities, assuring that such cases would be heard only in federal, rather than state, courts. . . .The Massachusetts Supreme Judicial Court last week heard oral arguments on a proposed settlement among the Massachusetts Insurance Division, Electric Mutual Liability Insurance Co. and EMLICO policyholder General Electric Co. over the terms of EMLICO's liquidation. The settlement is opposed by EMLICO reinsurers Kemper Reinsurance Co. and Lloyd's of London underwriters. . . .Frontier Insurance Group Inc. of Rock Hill, N.Y., is buying medical malpractice insurer Western Indemnity Corp. in Houston for $48.5 million from Galtney Group Inc. Frontier Group's stock declined 8.56% last week, following an announcement that Chairman CEO Walter A. Rhulen is being treated for leukemia. . . .The National Transportation Safety Board has blamed Amtrak management for the 1996 derailment of a train in Secaucus, N.J., that caused $3.6 million in damage. The accident occurred last November when an Amtrak train derailed while crossing a movable bridge and sideswiped another train. Forty-two people were injured (BI, Dec. 9, 1996). . . .Florida Insurance Commissioner Bill Nelson cited mandatory managed care and lower claims costs as reasons he ordered a 3.2% cut in workers compensation insurance rates in the state. The National Council on Compensation Insurance had requested an 8% increase. . . .Mark T. Hvidsten, former chairman and chief executive officer of Minet Reinsurance International Ltd. and president and CEO of Minet Re North America Inc., was named executive vp of Willis Faber North America Inc. in New York. . . .The California Supreme Court will not review an appellate court decision in an environmental case that says a self-insurer cannot be treated as an insurer when it comes to contributing to defense costs. The state appellate court in San Diego had ruled in July in Pacific Indemnity Co. vs. County of San Bernardino that while the county was self-insured for much of the relevant period, it was "not an insurer for purposes of allocation of costs of defense of the underlying actions" (BI, Aug. 4)