Chase Settles Suit Over Failed Offshore Insurer

Chase Bank of Texas N.A. has agreed to pay $3 million to settle charges that it failed to warn regulators about a worthless policyholder trust account it set up for an allegedly fraudulent offshore insurer that collapsed in the 1990s.

The joint liquidator of Alpine Insurance Co. Ltd., formerly of the Turks & Caicos Islands, sued Chase in Dallas federal court last year, charging that the bank damaged Alpine policyholders by allowing the insurer to fund its trust account with valueless stock and a worthless letter of credit from a purported offshore bank.

Alpine’s assets did not meet the requirements of the National Assn. of Insurance Commissioners standard trust agreement that Chase signed with Alpine, according to the suit filed by Robert Craig, joint liquidator of Alpine and a partner with Lamson, Dugan & Murray in Omaha, Neb. Chase also improperly deleted a trust provision requiring it to certify the value of the assets to the NAIC, the suit alleged.

Alpine wrote more than $14 million in premiums between 1993 and 1995, about $6 million of which was transferred to offshore accounts, Craig said. The insurer left more than $10 million in unpaid claims.

The Chase settlement is contingent on the certification of the joint liquidator’s lawsuit as a class action on behalf of Alpine policyholders.

Meanwhile, Craig is pursuing separate claims against PaineWebber Inc., which acted as custodian for some of the Alpine assets, and Bank of New York, which acted as trustee for Alpine before the Chase agreement was executed.