The epic case against Bermuda Fire & Marine Insurance Company Ltd., which has rocked the insurance world on the Island, was settled out of court for at least $35 million yesterday.

In a surprise announcement yesterday afternoon, BF&M agreed to pay the liquidators of Bermuda Fire $35 million, but accepted no liability for wrongdoing.

BF&M said they had agreed to the out-of-court settlement because of the soaring legal costs, estimated at $35 million to date.

The case was predicted to drag on for another year in Bermuda, with the prospect of years of further appeals in London. More than 1,000 shareholders in BF&M will heave a sigh of relief because the settlement means they will keep their investment, which they were in danger of losing if the liquidators won the case.

The liquidators, Ernst and Young, were suing Bermuda Fire's five former directors who sat on the finance committee, accountants Cooper & Lines and legal advisors Conyers Dill & Pearman for damages over the company's collapse.

The action, which started in May this year, saw pillars of Bermuda's business world take the stand over the splitting of Bermuda Fire into two separate businesses in 1991.

BF&M was created for the profitable domestic business, while the less attractive international business was left with Bermuda Fire.

By 1993 Bermuda Fire went bust, owing huge debts internationally of about $50 million. The liquidators claim was that the directors, accountants and legal advisors knew or suspected that Bermuda Fire was insolvent when the businesses were separated, taking the cream of the business for themselves.

Therefore they argued that they were negligent in their duties in creating BF&M, the profitable local insurer.

The other defendants in the case are believed to be negotiating their own settlements with the liquidators. The defendants in the case include the 1,000 shareholders, two insurance companies, a reinsurance company, five individuals who were former board members and the accountants and legal advisors to the former directors.

Yesterday the court case, which was held in a specially-designed court room in the old Salvation Army Citadel, was adjourned with no announcement about the settlement.

An hour later BF&M released a statement announcing the deal.

Glenn Titterton, BF&M president and Chief Executive Officer, said little on the deal.

"We're all very happy,'' he said. "Our next step will be to put this matter before the shareholders.'' Mr. Titterton added that at the moment it would be inappropriate for him to comment further.

However, lawyer Tim Marshall, representing the BF&M Shareholders Association, said: "All claims made against the shareholders -- if the settlement is approved -- will be dismissed, with no cost to the shareholders.'' He added that members will also be discharged from any future claims against them.

The deal will be put to shareholders at a special meeting to be held on December 14. If it goes ahead, BF&M is expected to resume trading on the Bermuda Stock Exchange on December 17.

Trading was suspended in 1995 because of shareholders involvement. Shares were last traded at $6.50.

`We're all very happy': BF&M CEO Glen Titterton