following a decision by a US federal appeals court.

The court ordered American International Group to reimburse that amount to now-defunct Mentor for a claim that was paid in connection with the 1980 sinking of an oil drilling vessel owned by the Bermuda captive's parent, Ocean Drilling & Exploration Co. (ODECO) A three-judge panel found that AIG reinsurers, together with American Re-Insurance, were wrong to deny coverage to Mentor simply because the oil rig, Ocean Champion, was salvaged and returned to service.

It is only the second time that a federal appeals court has enforced the common law practice of "following the fortunes'' in reinsurance contracts, according to a report in the insurance industry's leading publication, Business Insurance.

Following the fortunes, in essence, means that a reinsurer assumes the same liability as the ceding company, so, if the ceding company pays a claim, then the reinsurer is expected to do the same.

The $1 million award will barely make a dent in the more than $310 million worth of debts that Mentor still owes to 277 creditors.

Earlier this year, a scheme of arrangement was approved under which the bulk of Mentor's remaining $175 million of assets are to be distributed to creditors by year-end 1994 at a worth of approximately 15 cents on the dollar.

Almost $78 million was paid to Mentor's 700 UK and US creditors in an initial dividend last year.