insurance market were deliberately ignored by the former directors of Bermuda Fire, it was claimed yesterday. Ahmed ElAmin reports Bermuda Fire former directors and accountants deliberately chose to ignore escalating potential pollution losses, allowing them to claim the company was solvent even though they knew or suspected it was facing liquidation when the company was split into two in 1991, a court heard yesterday.

The claim goes to the heart of the Bermuda Fire liquidator's suit against the five former directors who sat on the company's finance committee, accountancy Coopers & Lines, and legal advisor Conyers Dill & Pearman.

Gabriel Moss, lawyer for the liquidators, yesterday claimed the documentary evidence he was presenting showed the directors and the accountancy firm had to be aware of the huge pollution claims from US companies being forecast by the London insurance market.

Bermuda Fire's 1991 directors, Coopers & Lines, and Conyers Dill & Pearman have denied the liquidators' claims. The defendants have said they acted in the best interests of the shareholders and policyholders, who include the creditors.

Mr. Moss was in the sixth day of his opening argument before Puisne Judge Vincent Meerabux. He said reports and letters he cited were evidence Bermuda Fire deliberately asked actuarial firm Tillinghast to exclude pollution estimates in their advice for liability reserves the company needed.

He claimed the directors, and the accountants were made aware of the potential billions of dollars in claims about to hit the world insurance market by reports from actuarial firm Tillinghast, from newspaper reports and from other sources.

Bermuda Fire wrote policies covering US companies up until 1985 when the company's board of directors became alarmed by mounting losses and exited the international business. Those policies only had partial exclusion for pollution in the later years Bermuda Fire was underwriting international business, Mr. Moss said.

As part of his presentation he outlined a 1989 Tillinghast report sent to then-chief executive officer Cyril Rance. In the report Tillinghast recommended that Bermuda Fire increase by 400 percent current estimates of future liabilities on the books to include pollution claims.

Directors `chose to ignore possible pollution claims' Mr. Moss alleged the company's management and directors instead chose to ignore the problem, hoping to hide Bermuda Fire's looming problems from pollution claims.

"They might have been able to manage in 1988 and 1987 accounts to put in a notional $500,000 and a notional $800,000 but as the problem spirals out of control over the successive years I suppose it becomes more and more important for them not to put in any sort of realistic figure because it would have been shown that they were heading for disaster and insolvency and they chose an ostrich approach -- simply to refuse to acknowledge as far as the accounts are concerned that the problem was there,'' Mr. Moss said.

He said the company's directors and management were kept aware of the coming claims from pollution as they were sent regular reports and newspaper clippings by Tillinghast and others. He also claimed then-company chairman Charles Collis -- now deceased -- had been kept aware of the pollution liabilities as he was an investor at Lloyd's of London in 1988, 1989 and 1990.

The other four directors and the company's accountants were also present at meetings where management and Tillinghast reports were discussed, he said. He claimed Coopers & Lines partner David Lines in 1990 observed in handwritten notes on the 1989 Bermuda Fire accounts that the company "appears to have exhausted their excess of loss cover'' with Sun Alliance. The policy, taken out in 1988, covered Bermuda Fire from losses on its book between $32 to $50 million.

Cooper & Lines also received advice in June 1991 from an actuary in the Toronto office of Coopers & Lybrand that the Tillinghast estimate of 400 percent in relation to pollution would be considered a "significant and material'' impact on the Bermuda Fire accounts, according to Mr. Moss. Cooper & Lybrand was the firm's international partnership affiliate at the time. Mr.

Moss continues his opening presentation today.

Interjection: Geoffrey Vos, lawyer for Conyers, Dill & Pearman. See story on right about role of John Collis questioned.

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