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Beazley sues Ace over Facebook IPO

Beazley is suing rival Ace in a bid to force the carrier to pay for a portion of a $26.5mn settlement reached after the botched Facebook IPO in 2012.

Investors lost an estimated $500mn after Nasdaq systems struggled under the weight of unprecedentedly high volumes of pre- and after-market trading.

This led smaller investors to launch two class action suits accusing Nasdaq of fraud and negligence, among other things.

The exchange had two policies in place to cover such a claim. One was an errors and omissions policy led by American International Group (Chartis), which had a $15mn primary layer in excess of a deductible. Beazley had a $15mn secondary layer in excess of AIG.

The other policy was a directors' and officers' cover led by Ace. In excess of a $2mn deductible, Ace provided a $15mn primary layer, while Illinois National Insurance Company wrote a $15mn layer that sat in excess of Ace's portion of the risk.

Nasdaq notified its insurers of a potential claim after the class action suit was filed in 2012. It was subsequently settled in April this year.

In a complaint filed with a New York District Court on 30 June, Beazley said it had given Nasdaq authority to settle the claim and exhaust the $15mn policy limit.

"It did this even though it believed that most, if not all, of the claims against the Nasdaq parties in the underlying class action were not covered by its policy," court documents said.

"Conversely, Ace denied coverage for the Nasdaq parties despite the fact that all or most of the claims in the underlying class action fall squarely within the insuring agreements of its policy and are not subject to any exclusion," according to Beazley's complaint.

The Lloyd's carrier is now asking the court to rule that Ace and Illinois National were liable and has requested repayment of its portion of the settlement.

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