Company facing $625 million in judgments sues insurers for defenseReprints
The receiver for a Chinese company established by a reverse merger has sued several insurers, alleging they refused to help pay nearly $625 million in court judgments and arbitration awards against the company.
In the suit, China MediaExpress Holdings Inc., by Karl P. Barth as Receiver, vs. Nexus Executive Risks Ltd. et al., Fuzhou, China-based China MediaExpress accuses units of StarStone Insurance Holdings Ltd. and other insurers of breach of contract and breach of duty of good faith and fair dealing.
The company which provides television advertising on buses in China was formed in October 2009 through a reverse merger when publicly held TM Entertainment & Media Inc. acquired China-based Hong Kong Manedefu, according to the complaint filed Tuesday in New York federal court.
Among investors was a unit of New York-based Starr Insurance Holdings Inc., which invested about $53.5 million in the company.
According to the complaint, China MediaExpress purchased a total of $20 million in directors and officers insurance:
• a primary $5 million policy from a unit of Torus Insurance Holdings Ltd., which has since been renamed StarStone, and Starr.
• an excess $5 million policy from a unit of New York-based American International Group Inc.; and
• a second $10 million excess layer from China Pacific Insurance Co. (H.K.) Ltd. and China Ping An Insurance (Hong Kong) Ltd., both based in Hong Kong.
Following media reports criticizing the company for multiple aspects of its business operations and accounting, and alleging accounting fraud in January and February 2011, the company's auditor resigned and trading of its over-the-counter stock was suspended in March that year.
Shareholders and others filed numerous lawsuits against China MediaExpress. Those suits have resulted in nearly $625 million in judgments and arbitration awards.
In the recent suit, the receiver for the company alleges Torus and Starr refused to advance defense costs to the Chinese company.
“The insurers concocted various excuses, requested irrelevant information from (China MediaExpress) and asserted unfounded positions regarding the satisfaction of the primary policy's retention to justify their refusal to pay every single dime of the defense costs that were submitted to them for reimbursement,” according to the complaint.
Starr has settled the claims on its primary policy for an undisclosed amount, according to a footnote in the complaint, and is not named as a defendant.
Insurers accused in the suit either had no comment or could not be reached for comment.