TORONTO (Bloomberg) ? Ace Ltd. has lost a legal bid to block a payout by-ex-Hollinger International Inc. directors to minority shareholders.

American Home Assurance Co., a unit of American International Group Inc., and Chubb Corp. were told by a Canadian judge that they may pay $50 million to cover a settlement by the ex-International Inc. directors sued by a minority shareholder.

In exchange for the $50 million, Hollinger shareholder Cardinal Capital Management LLC agreed to drop its lawsuit against directors accused of disregarding the alleged looting of the company by ex-chief executive officer Conrad Black.

The proposed payout was opposed by excess insurers Ace, Zurich Insurance Co. and Royal Insurance Plc, which cover losses over $50 million.

Having exhausted the limits of American Home and Chubb coverage for Hollinger directors, the May 23 ruling puts the onus on Ace, Zurich and Royal to cover future settlements in the case.

Ontario Superior Court Judge Colin Campbell?s ruling, ?held, in effect, that they can?t just veto the settlement?, Eric Hoaken, lawyer for Hollinger International, said in a telephone interview. ?I think it?s an important case that clarifies the obligations of insurers.?

Insurance companies generally don?t provide coverage for derivative lawsuits, where a shareholder sues on behalf of the company, Gary Luftspring, a lawyer representing Ace, Zurich and Royal said.

Where coverage is provided, it?s usually limited to derivative suits where a shareholder has a stake of less than ten percent in the company, as in this case.

Chubb, based in Warren, New Jersey, is the second-largest US insurer of corporate boards.

American Home is a subsidiary of New York-based American International Group, Inc., the world?s largest insurance company.

The $50 million payout must still be approved by a judge in Delaware, where the Cardinal suit was initially filed, Hoaken said.

Hollinger International, based in Chicago, publishes the Chicago Sun-Times, among other newspapers.

The company?s board ousted Black as CEO in November 2003, sued him and stripped him of the title of chairman the following January. Hollinger International sued Black to recover more than $425 million that it accused him and his associates of stealing to finance lavish lifestyles.

Black, 61, was also sued by his holding company, Hollinger Inc., and by the US Securities and Exchange Commission. He pleaded not guilty to US criminal charges of racketeering, money laundering, wire fraud and obstruction of justice. His trial is set for March 5, 2007.

The case is Re: Hollinger International Inc. No. 05-CV- 285277PD3, Ontario Superior Court, Toronto.