The Bermuda liquidators of Electric Mutual Liability Insurance Co. (EMLICO) yesterday rejected allegations that they gave advice to the company months before it moved to Bermuda and was put into liquidation.

The allegations were made by EMLICO reinsurers, who were again on the attack yesterday over a new settlement agreement announced by a Massachusetts insurance regulator.

Lovell White Durrant Chicago partner, Joe McCullough, who is acting for Kemper Re, stated: "The persons who were subsequently appointed the joint provisional liquidators (later the joint liquidators) of EMLICO, all of whom are insolvency specialists and professional insurance/reinsurance liquidators, were involved in giving advice in relation to the redomestication well before their appointment and nearly eight months before the redomestication and, secondly, that such prior involvement was not disclosed to the Supreme Court of Bermuda''.

When asked about this yesterday, Coopers & Lybrand returned with a terse statement: "We are aware of Kemper Re's allegations. We believe they have absolutely no merit and we will not be commenting further on this matter.'' Reinsurance lawyers, including Mr. McCullough, have taken issue with the Commissioner of the Massachusetts Division of Insurance (DOI), Linda Ruthardt, after she said she reached a comprehensive resolution to the EMLICO dispute.

On Thursday, Ms Ruthardt said she filed with the Supreme Judicial Court for Suffolk County a petition to be heard on April 8 to install herself as a US receiver, pursuant to a receiver agreement with the EMLICO liquidators.

The agreement involving the DOI, EMLICO, related company Electric Insurance Co. (EIC) and EMLICO founder and principal policyholder, General Electric Co., links the commissioner directly with EMLICO's liquidators, as US receiver.

Reliable sources say that the Bermuda Supreme Court had the new settlement agreement pitched their way last week in closed-door hearings.

Kemper Re attorneys called the commissioner's Press account of the settlement agreement "misleading'' and said they strongly disagreed with it.

Lovell White Durrant said in a prepared statement: "...even a cursory review of the documents which the commissioner filed with the Supreme Judicial Court indicates that the Massachusetts commissioner's press release misrepresents the settlement which General Electric/EMLICO and the commissioner are asking the court to approve.'' They questioned Ms Ruthardt's assertion she had reached a comprehensive resolution to the dispute because, they said, it did nothing "to correct the massive fraud targeted against EMLICO's 400 plus reinsurers''.

They said: "...By abandoning her investigation of the fraud issue, aborting law suits against GE/EMLICO and their advisors to compel them to produce evidence of the fraud, and releasing any claims she may have against them, the commissioner does nothing to redress the alleged fraud which General Electric/EMLICO committed, or their violations of Massachusetts law.'' GE and EMLICO have denied any fraud or any other wrongdoing in the redomestication process.

Mr. McCullough said: "The Commissioner is saying in her press release that some parts of this liquidation (the important coverage and reinsurance issues) are being repatriated back to Massachusetts. That is not true. It's a facade.

Just window dressing. When you really look at the terms to see what authority Massachusetts will have, you will notice that they have none.'' The DOI said in a prepared release: "The Bermuda Joint Liquidators may not resolve an environmental claim without submitting it for review in the US (Massachusetts) proceeding. Such compromises will be submitted for review by the Massachusetts court.'' The statement continued: "The law that will be applied in the evaluation of such a compromise will be the US law, which would have applied prior to EMLICO's move to Bermuda.

"If the Bermuda joint liquidators and GE litigate environmental coverage, then that will occur as part of the US proceeding. The US receiver will participate in the court's review of any such compromise and may, at the expense of the EMLICO estate, engage experts to help her in that evaluation.'' The DOI also said the liquidators may not litigate against EMLICO's reinsurers without the approval of the US receiver. They said that through this arrangement, the reinsurers "are placed in a position similar to that if EMLICO had not moved to Bermuda''.

The DOI also said that the commissioner failed to reopen the redomestication hearings that brought EMLICO to Bermuda because: "It is far from clear that a finding that the 1995 redomestication had been improperly obtained would result in the return of EMLICO to Massachusetts from Bermuda. It is a difficult legal question whether an order of the insurance commissioner or even a Massachusetts court would be effective in Bermuda.'' COURTS CTS