Massachusetts Senator Dianne Wilkerson said there is `something very, very fishy going on here. You don't do this if you have nothing to hide. My gut tells me it is so bad they don't want any of these documents to see the light of day.' A Massachusetts judge has delayed the April 8 Supreme Judicial Court (SJC) hearing in which the state's insurance commissioner petitioned for approval of a deal over Bermuda-domiciled Electric Mutual Liability Insurance Co.

(EMLICO).

The postponement comes at the request of EMLICO's reinsurers, who have alleged fraud in the insurer's redomestication from Massachusetts to Bermuda.

State Commissioner of the Division of Insurance (DOI) Linda Ruthardt's petition sought her appointment as US receiver for EMLICO. She is also seeking the endorsement of a settlement agreement involving the DOI, EMLICO, related company Electric Insurance Co. (EIC) and EMLICO's principal policyholder and creditor, General Electric Co. (GE).

GE was the principal owner of the two insurers.

In a decision taken by Justice Greaney of the SJC for Suffolk County, it was ruled that London Reinsurers and General Re, both reinsurers of EMLICO, had satisfied him that they should be able to respond to the Commissioner's petition in writing.

He set a date for a new hearing on May 6, and a filing date with the court of necessary briefs of May 2. The date was set after lawyers for the DOI noted that the settlement agreement would only be activated if court agreement was given by May 12.

It also came after arguments from reinsurers' lawyers that GE decided to move EMLICO offshore in an effort to accelerate the payment of reinsurance, without the need for EMLICO to pay first.

It was claimed that using Bermuda's insolvency laws, they sought to estimate contingent future liabilities before reducing them to present value and force reinsurers to pay for claims, which EMLICO had denied for decades were covered by their policies with GE.

Meanwhile, a top Massachusetts legislator has complained to insurance publication The Standard that Ruthardt's settlement halts her investigation into whether fraud or misrepresentation occurred, and has her assisting the alleged perpetrators in keeping it secret for ever.

State Senator Dianne Wilkerson, chairwoman of the Massachusetts Senate Insurance Committee said the issue of whether the DOI is protecting someone is a very reasonable question.

The commissioner's proposal protects the confidentiality of any materials that are to be submitted to a court-appointed special master who would review proposed claim compromises and make recommendations to the court.

The proposal ensures that the record of the Division's EIC examination would not be made public.

Sen. Wilkerson said there is overwhelming evidence to suggest there is "something very, very fishy going on here. You don't do this if you have nothing to hide. My gut tells me it is so bad they don't want any of these documents to see the light of day.'' But Sen. Wilkerson had also said Ruthardt told her in October that the DOI had been deceived by EMLICO, according to the Massachusetts State House News Service. They reported Sen. Wilkerson made the claim as the Insurance Committee took testimony on a bill that would require a public hearing to be held over the EMLICO issue.

Sen. Wilkerson said the bill calling for a hearing could be voted on by the legislature during the week of April 14. She thinks EMLICO did deceive the DOI and believes the Ruthardt agreement is a bad one. She is pushing for a public hearing into whether EMLICO deceived the division.

Ruthardt has refused to re-examine her decision to allow EMLICO to move to Bermuda, unless the legislature or the courts force her to.

Her settlement agreement would have her drop the probe into the allegations that EMLICO committed fraud against the DOI. She also agreed to deliver key documents to EMLICO's Bermuda liquidators.

The SJC is also being asked to allow reinsurers access to a memo, supposedly written by a London law firm for EMLICO long before it moved to Bermuda, explaining how the company could go into liquidation.

Palmer & Dodge attorney, Scott Lewis, representing reinsurers, said during the hearing that Ruthardt's proposed settlement agreement would make it difficult for reinsurers to figure out whether EMLICO's redomestication to Bermuda was in fact a scam.

He argued that the DOI was "duped'' when GE decided to pull off a billion dollar "fraud'' and insisted that there should be a public inquiry. He said Ruthardt has been "captured by General Electric and its allies''.

A GE representative said the company never misrepresented itself before the DOI, but said the corporation would have no problem with passage of the bill requiring the hearing.

The Standard reported a GE spokesman said the settlement agreement proposal would help expedite settlements with insurance and reinsurance companies, and that by signing the agreement, GE has given up the benefit of having all its claims settled in Bermuda, a jurisdiction with an "expedient and efficient'' process.

Set up in 1927 by GE, EMLICO transferred to Bermuda in 1995 in a controversial move which its reinsurers claim was designed to stick them with GE's bill for hundreds of million dollars worth of environmental claims.

The State House News reported that shortly after EMLICO was allowed to Bermuda, "which has lenient insolvency laws'', the company announced that it had discovered it had to pay out more than $700 million in claims for environmental damage to its own policyholder, GE. And it then declared insolvency.

Reinsurers, including certain Lloyd's Reinsurers and Kemper Re, were left with hundreds of million of dollars in liabilities.

The State House News Service said the US Attorney's office is investigating the EMLICO case. No one from the DOI testified during the hearings.

The news service quoted Lewis as saying that Ruthardt's proposed settlement agreement involving GE and EMLICO was a political deal concocted in a back room with former Weld Administration officials all over the place.

State Governor William F. Weld's press secretary, Rob Gray, said the gubernatorial press office would have no comment.

Two of the governor's former legal counsel are now on the payroll of GE, and a former consumer affairs secretary now works for a GE subsidiary.

COURTS CTS