Brokers defrauded insures over the true risk of financing five films that flopped at the box office according to a case at the High Court, revealed a report.
Three insurers, Axa, Sphere Drake and Copenhagen Re, are suing investment bank JP Morgan Chase and its broker Heath Lambert.
The bank, then Chase Manhattan, loaned money to fund the production of the films, but took out insurance policies to cover the risk that revenues from the films would not, within a certain amount of time, cover the outstanding amount lent.
According to the report, the insurers are claiming they should be able to avoid or rescind those policies on the grounds of fraudulent non-disclosure and misrepresentation by Heath Lambert when the insurance was placed.
Nicholas Hamblen QC said the alleged fraud had resulted from pressure on Roger Bassett, senior broker at Heath Lambert, to get the risks accepted. Hamblen said this was a case where Bassett had crossed the line between spin and telling a lie, revealed the report.
In their written submissions, the insurers maintain that Bassett placed the risks without revealing that the transactions had been the subject of heavy and sustained criticism from a number of experts. They also claim when Lloyd's heard of these criticisms it withdrew its lines entirely, according to the report.
A spokesman for Heath Lambert said the total amount in dispute had originally been $71m, but that settlements with other insurers had substantially reduced this. The three insurers still pursuing the action represent 10% of the original market, he added.
The films at the centre of the dispute are "The People v Larry Flint", "The Mirror Has Two Faces", "Amy Foster", "Apt Pupil" and "U-Turn".
The case continues at the High Court.
