The failure of New Zealand financier Bridgecorp continues to cost insurers, although a group of Lloyd’s underwriters has won a rare legal victory by arguing their dispute with the receiver must be heard in England.

Receiver PricewaterhouseCoopers (PWC) has negotiated a $NZ4 million ($3.62 million) settlement with one unnamed insurer after talks with insurers that covered 19 loans issued by Bridgecorp.

PWC’s latest report to creditors says a further $NZ1.3 million ($1.17 million) will be paid out following the settlement with Bridgecorp’s former directors and their insurers.

Earlier this year the receiver negotiated an $NZ18.9 million ($17.09 million) payment with the directors’ and officers’ (D&O) insurers over a potential $NZ20 million ($18.09 million) available from insurance.

The Bridgecorp case caused upheaval in the D&O market when the receiver claimed a charge over D&O policy proceeds, meaning the company’s directors could not access the policy to defend legal actions.

The decision flowed to Australia because some states have similar laws to the New Zealand one on which the Bridgecorp action was argued. This led to policies being redrafted to ensure insureds have access to defence costs.

PWC was appointed receiver to Bridgecorp in July 2007 and has so far paid creditors NZ12 cents (10 cents) in the dollar.

While PWC has had some success getting insurance money, it has failed in its argument that New Zealand courts have jurisdiction in a dispute with a group of Lloyd’s underwriters over lenders’ mortgage insurance (LMI), which was arranged for Bridgecorp by broker Herbert Insurance Group.

Herbert Insurance went into liquidation in 2011 and its founder, Grant Herbert, will be sentenced on October 16 after being found guilty earlier this month of corruption and theft, for not forwarding premiums to insurers.

The Lloyd’s syndicates that underwrote the LMI refused the receiver’s claim on the basis that Bridgecorp had breached policy conditions, so the receiver went after Herbert’s $NZ20 million professional indemnity policy, saying Herbert was negligent.

The receiver’s argument used the same section 9 of the Law Reform Act that proved successful over the directors’ D&O policies.

The High Court says any dispute between Herbert and its insurer can be heard in New Zealand but if the decision goes in Herbert’s favour, any debt payable by the London underwriters is located in England and must be pursued there.