Mexico's Grupo Fertinal will file a new $900 million suit against the local unit of Dutch insurer ING Groep N.V. (ING), as the dispute over a $300 insurance claim between the two companies continues to escalate.
Fabio Covarrubias, chairman of the fertilizer producer, said the new suit against ING Comercial America seeks to force Mexico's top casualty insurer to cover damages related to unpaid insurance claims that would have prevented Fertinal from falling into bankruptcy.
Fertinal has conducted extensive litigation against the ING unit over the past 12 months in an effort to collect up to $300 million in disputed claims after a hurricane destroyed Fertinal's phosphate mine in September 2001, just as ING completed its takeover of the Mexican insurer.
The dispute intensified last month after a state judge froze all of the accounts of ING Comercial America and issued warrants against several company executives on grounds that they falsified policies to limit the company's liability and enhance its own claim with reinsurers.
Although the account freeze has been lifted, ING Comercial America still has $300 million trapped as part of the fraud suit filed by Covarrubias, who owns 53% of Fertinal.
“ING can complain about Mexico's legal and investment risks, but the evidence shows that they committed fraud by forging policies,” he added.
The new suit could trap more funds of ING's Mexican operation, which is among its top five worldwide. ING has invested close to $3 billion in the country since its arrival in 1995.
Yves Brouillette, ING's head of Latin American operations, told reporters last week that a mercantile issue over disputed amounts was being wrongly pursued in criminal courts.
ING Comercial America said damage at the phosphate mine destroyed by hurricane Juliette was assessed at $13 million and that it attempted to deposit a $10 million advance. But since Fertinal had already signed the policy over to Bank of America Corp. (BAC), one of its creditors, the bank prevented the deposit from being made.
Fertinal initially requested $84 million from its $300 million policy, according to Covarrubias. It then raised its claim up to nearly $300 million as the company lacked funds to restart the operation and the equipment became useless.
Fertinal has been insured by the company since 1998. Covarrubias provided copies of e-mails and letters written by ING Comercial America officials on which Fertinal is basing additional charges that insurance officials modified policies.
With its phosphate mine and docks in Baja California Sur state destroyed by hurricane Juliette, Fertinal defaulted and fired most of its 4,000 workers. Its top creditors include Bank of America, state-owned export development bank Bancomext and Japan's Nissho Iwai Corp. (J.NIW).
Federal deposit insurance agency and bank bailout agency IPAB owns 47% of Fertinal. The minority stake was assumed after past-due loans from seized bank Banco Union were converted into company shares in 1996.