Insurers will foot the majority of the bill for a settlement reached between law firm Slater and Gordon and its shareholders.
The settlement, which totals $36.5 million, will see $32.5 million drawn from directors and senior officers’ liability cover held by the firm and will virtually wipe out the law firm’s indemnity insurance policy, ABC reports.
The settlement, which recoups only a fraction of shareholder losses, comes as the law firm faces two class actions with a third still pending following its foray into the third party insurance market in the UK with the purchase of Quindell. The market capitalisation of the firm tumbled from $2.7 billion to $25 million in the wake of the billion dollar deal.
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The remaining $4 million of the settlement will be paid by a group of hedge funds who bought the company debt.
The bulk of proceeds will head to legal rivals Maurice Blackburn, which initiated the first class action.
Andrew Watson, head of class actions at Maurice Blackburn, said that the firm does not have any assets that would fund a settlement as insurance was called upon.
“The policy limit on the insurance coverage is unexpectedly low, and the policy limits represent, on any measure, only a small fraction of the class members’ losses,” Watson said, according to ABC.
“Given the insurance policy limits, and the fact that Slater and Gordon’s defence costs for all actions also come out of the insurance, the proposed settlement will avoid further erosion of the available funds and return to class members as much of what remains under the policies as possible.”
The settlement still requires final approval from the Federal Court and will be made without an admission of liability from the firm.
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