A Bermuda company at the heart of a $29 million reinsurance court case is set to be wound up by the Bermuda Supreme Court.

Ardra Insurance Company Ltd. was called a "corporate veil" behind which its owners, Richard and Jean DiLoreto, were hiding to avoid paying reinsurance treaties, a US court heard.

But now the Supervisor of Insurance has posted a petition to wind the company up in the Press, and this will go before the Supreme Court on August 22 in Bermuda.

The company has left a huge paper trail of litigation through the US courts, and the most recent court case in April 8 this year was the final nail in the reinsurer's coffin. The company was set up to reinsure taxis and has been battling to have a US case against it thrown out since the mid-1980s. But the New York State Appeal Court upheld a ruling earlier this year that it was a front behind which its owners, the DiLoretos, were hiding to avoid having to pay out millions of dollars in treaties.

The $29 million judgment was against the former directors of the insolvent Nassau Insurance Co's parent company Tiber Holdings Co. under the Gregory V. Serio v. Ardra Insurance Company Ltd.

The panel found that the evidence supported the April 2002 judgment rendered by the New York Supreme Court in favour of $20,507,456 against the DiLoretos and an $8,293,008 award against Richard DiLoreto. The DiLoretos controlled Tiber.

Ardra Insurance Company Ltd., a Bermuda company that was exempt from doing business with Bermuda residents or businesses, reinsured Nassau. Jeanne DiLoreto owned Ardra, which later was transferred to Tiber.

In 1994, the liquidator sued Ardra, alleging breach of the reinsurance treaties. The liquidator won a $20 million default judgment against Ardra, but the Bermuda Supreme Court refused to enforce the judgment.

The liquidator sought to pierce Ardra's corporate veil and enforce the judgment against the DiLoretos. The liquidator alleged that the DiLoretos failed to maintain Ardra's capital and surplus accounts when they sold the carrier to Corporate Holding Corp. in 1990. The liquidator also alleged that asset transfers from Ardra to Tiber were fraudulent conveyances.

The Supreme Court held that New York law governs the issue of whether Ardra's corporate veil should be pierced to hold the DiLoretos liable for the corporate debt, the First Department Supreme Court Appellate Division held.

"Although incorporated in Bermuda, Ardra's contacts with that jurisdiction were minimal," the panel said. "It was not authorised to sell insurance in Bermuda or to do business with Bermuda residents. It was controlled by defendant Richard DiLoreto from New York and all the transactions complained of occurred in New York."

The panel rejected the DiLoretos' claim that the liquidator was equitably estopped from asserting that Ardra was a controlled person under New York insurance law. It said that equitable estoppel does not bar a governmental agency from changing its position in the exercise of a governmental function.

The evidence "provided ample support" for the jury's finding that the reinsurance transactions between Ardra and Nassau were unfair and inequitable to Nassau within the meaning of the insurance law, the panel held.

"In this connection, the proof showed that the DiLoretos, through their control of Ardra, deprived it of the funds needed to meet its reinsurance obligations, and that that circumstance rendered the agreements at issue inequitable," the panel said. "Given the sequence of the transactions, in which premiums paid by Nassau were immediately transferred to other DiLoreto-owned entities, the jury was entitled to consider the sequential transfers as part of an integrated transaction designed to benefit DiLoreto entities by effectively denying Ardra's insured the coverage for which it had contracted and paid."

William F. Costigan of Costigan & Co. in New York represented the liquidator. Albert H. Manwaring IV of Pepper Hamilton in Wilmington, Del., represented the DiLoretos.