Volkswagen, which the US Environmental Protection Agency said installed illegal devices in diesel vehicles to fool emissions tests, has at least 450 million euros (US$503.5 million) of directors and officers coverage, according to insurance industry sources.
The D&O insurance tower for the German car manufacturer consists of bottom layers of 25 million euros (US$28 million) each from Zurich Insurance Group, AXA, Arch and XL. On top of this are layers of 50 million euros each with American International Group (AIG) and Liberty International, plus another layer 50 million euros split between HCC Insurance Holdings and CNA Financial, Advisen hears from sources.
Then there is 150 million euros in excess of 300 million euros placed in London, sources said.
There are 50 million euros unaccounted for in this scenario. Advisen sources have yet to identify the insurer or insurers involved in this layer or whether there is a self-insured retention component to the coverage—though sources said that is very seldom done on management liability programs. The broker, or brokers, has yet to be identified.
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Carriers involved can expect Volkswagen (VW) and others potentially wrapped up in this scandal (manufacturers and/or installers of the so-called “defeat device,” for instance) to receive broad notifications. It could be years before the insurance industry realizes the true impact of this event. Meanwhile, insurers will likely “keep their fingers crossed that this is not a systemic issue across the whole automobile industry, as we have seen from scandals in the banking sector in recent times,” said a brief from London-based law firm RPC.
Lawsuits against VW have already been rolling in and logged in Advisen’s MSCAd (related case #28362) as company president Mike Horn conceded that the carmaker deceived regulators and consumers. VW’s share price has dropped more than 30 percent. Since the EPA’s Notice of Violation to VW on September 19, VW has said 11 million diesel vehicles were fitted with a defeat device and the company has set aside $7 billion to cover costs related to the scandal.
Advisen has entered 56 cases into MSCAd and will continue to do so to sort and track developments from lawsuits or regulatory actions alleging fraudulent trade practices having to do with the marketing or selling of the vehicles in question; lawsuits from VW vehicle owners alleging “diminution of value” since the scandal surfaced; shareholder lawsuits or related regulatory actions alleging reduction in stock prices based on the fraudulent emissions tests, and concealment; investigations and lawsuits or actions dealing with the falsification of the environmental impact of the cars involved; and any cases involving the recall of the vehicles involved.
Chad Hemenway is Managing Editor of Advisen News. He has more than 15 years of journalist experience at a variety of online, daily, and weekly publications. He has covered P&C insurance news since 2007, and he has experience writing about all P&C lines as well as regulation and litigation. Chad won a Jesse H. Neal Award for Best Single Article in 2014 for his coverage of the insurance implications of traumatic brain injuries and Best News Coverage in 2013 for coverage of Superstorm Sandy. Contact Chad at 212.897.4824 or [email protected].
