Swiss insurer faces major claims in the US

Zurich is appealing against the court ruling Keystone

Zurich Financial Services has confirmed that it is facing claims for more than $500 million (SFr618.2 million) from creditors after the bankruptcy of 87 nursing homes in two American states.

A Zurich subsidiary, ZC Specialty Insurance, had issued a bond in favour of a creditor of Senior Living Properties (SLP), which went bust in 2002.

The insurer confirmed a report published in Thursday’s “Financial Times”.

SLP creditors are seeking damages of $528 million plus costs and legal fees.

After the failure of the venture, Zurich denied responsibility for the firm’s debts, arguing it had merely provided a surety.

Ruling of responsibility

But a bankruptcy court in the Texas state capital, Dallas, ruled in April that Zurich was a partner in the operation of SLP’s nursing homes and therefore responsible for its debts.

The court also found that Zurich’s witnesses and their explanations of the company’s involvement in the venture were not credible.

In a statement, Zurich said it had given notice of appeal against the court decision at the end of May and was “vigorously” denying it was a partner in the SLP business and liable for its debts.

Zurich said that by the end of the third quarter last year, it had set aside $146 million to reserve fully against the liability to the creditor under its surety bond.

It also said the judge had granted it authority to set off certain payments made to the creditor under the surety bond against any overall liabilities it faced.

Before Thursday, Zurich had not made any public statement about the case, although it had notified the Luxembourg stock exchange in June last year as part of its annual disclosure to euro-note bondholders.

swissinfo with agencies

Key facts

Zurich, an insurance-based financial services provider, reported a net profit of $2.1 billion last year after a loss of $3.4 billion in 2002.
Founded in 1872, Zurich has offices in more than 50 countries and employs about 62,000 people.

In brief

Zurich Financial Services may have to pay more than $500 million (SFr618.2 million) in claims from the United States.

They concern the bankruptcy of a nursing home business to which Zurich had issued a surety bond.

Zurich says it is “vigorously” appealing against the court decision.