The Lloyd's American Trust Fund is actually something of a misnomer, since it applies to all business in which the liability is expressed in U.S. dollars, and for which the premium is paid in U.S. dollars. Indeed, recent authorities have estimated that some 48 percent of this "American" business relates to non-U.S. insurance risks, such as policies insuring a Russian airliner or a Japanese ship. See In Re Lloyd's American Trust Fund

1 [end of page 1 of Brief as filed]

Litigation, 1996 WL 312134 at *4 (S.D.N.Y. June 7, 1996) (copy attached). Thus, the entirety of the LATF is not available to satisfy claims of U.S. policyholders.

2) Funds Are Not Segregated for the Account of Individual Names

The accounts maintained at Citibank for the LATF are opened by the agents of syndicates or groups of syndicates. Since most Names participate in a number of different syndicates, premiums relating to their liabilities may be deposited in a variety of accounts within the LATF. Thus, none of these accounts is maintained in the name of any individual Name. . See generally In Re Lloyd's American Trust Fund Litigation, 1996 WL 312134 at *5.

3) Policyholders Have No Right to Demand an Accounting from the Trustee.

Of particular importance to a creditor like Transit are the provisions of the

LATF trust deed which specifically absolve the Trustee (Citibank) from any responsibility to verify the correctness of any account submitted to it, or to ensure that the premiums have actually been collected (see Amendment and Restatement Lloyd's American Trust Deed (Deed), Art. 2, ¶ 2.2(A) and (B), p.3). Even more troubling is the provision which denies a policyholder like Transit the right to require an accounting from the Trustee, or to question any of its actions (Deed), Art. 5, ¶ 5.1(A), p. 9). Much of the litigation pending against Lloyd's relating to the LATF has alleged various acts of mismanagement by

Citibank, including improper commingling of trust funds. See People of the State of California v. Lloyd's of London, No. BC 144 175 (Sup. Ct. Cal.). Thus Transit must depend entirely on the syndicates' own determination of the proper amount to be deposited with the LATF; by the terms of the Deed the only right a policyholder has with respect to the LATF is "to receive the amount of his claim after it has become enforceable", as defined by the Deed (Art. 5, ¶ 5.1(A), p. 9).

4) Only Claims Reduced to Judgment-After Exhaustion of All Appeals-

The Deed defines an "enforceable claim" as one which meets all four of the following conditions:

(Deed), Art. 5, ¶ 5.2(a) – (D), p. 9-10.) Once these requirements have been met, the judgment will be satisfied out of the LATF:

(Deed), Art. 5, ¶ 5.3, p. 10.) Thus, there is no protection for a policyholder whose claim has not yet been paid from the LATF, if other claimants manage to get their judgments paid first, and the amount in the particular account proves insufficient to satisfy all claims against it.

In summary, the LATF provides little or potentially no protection for policyholders like Transit for claims due from Lloyd's Syndicate 553. The adequacy of the amount deposited for the account of any given Name is totally dependent on the judgment of the agent or syndicate establishing the account, as is responsibility for actually collecting the funds, and accounts are not segregated by individual Names. Since policyholders have no express right to demand an accounting from the Trustee, they must rely on information provided by the syndicates. The barriers to collection from the LATF are such that Transit could have a judgment, yet still be unable to collect until all appeals have been finally determined, even though Lloyd's has posted no security to obtain a stay of execution pending final appeal. In the meantime, the amount held for the benefit of the Names against whom the judgment has been entered could be depleted by other claimants, thus leaving Transit in the position of having to initiate proceedings to levy execution against individual Names in separate actions in a variety of locations, most of whom are outside the U.S. In light of all these limitations, it is not surprising that some courts have refused to recognize the existence of the LATF,

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for example, as a reason not to require Lloyd's to post pre-answer security under state insurance statutes. See Argonaut Ins. Co. v. Certain Underwriters at Lloyd's of London, Case No. CV 94-6359 RAP (GHKx) (C. D. Ca. March 1, 1995); Int'l Surplus Lines Ins. Co. v. Certain Underwriters and Underwriting Syndicates at Lloyd's of London, 868 F.Supp. 923 (S.D. Ohio 1994); Curiale v. Ardra Ins. Co., Ltd., 1996 WL 248743 (N.Y. App. 1996).

WHEREFORE for the foregoing reasons, Transit requests this Court to require Defendants to post pre-answer security and to comply with Article IX of the Reinsurance Agreements between the parties.

McCARTHY, LEONARD, KAEMMERER,

OWEN, LAMKIN & McGOVERN

(signed)

By ________________________________

James C. Owen #29604

Walter R. Lamkin #27284

Paula M. Young #38475

16141 North Outer Forty Dr., #300

Chesterfield, MO 63017

(314) 532-7100

Counsel to the Receiver for Transit

Casualty Company

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