The fallout continues from the liquidation of First Sealord Surety, Inc., which was suddenly shut down last year by Pennsylvania insurance regulators. The shutdown forced small contractors served by First Sealord to scramble for replacement bonds.
Then, last September, Pennsylvania Insurance Commissioner Michael Considine filed a complaint against the Villanova, Pa. company's former directors, accusing them of diverting funds from First Sealord and using fraudulent and reckless reserving practices. The insurance department held the officers responsible for $7.87 million of the company’s losses.
The complaint alleges that First Sealord's former officers diverted millions of dollars to a sister company, Broadlands Financial Group; transferred contractors’ cash collateral into operating expense accounts; misrepresented First Sealord's reserve position to the department of insurance; under-reserved for known claims expense obligations and over-reserved for anticipated salvage and subrogation.
Outttorneys for the state insurance department say that while Broadlands is a creditor in the liquidation, the group is not a party in the case against First Sealord's former officers.
According to the state insurance department’s estimate of First Sealord’s assets and liabilities, the surety owes creditors $75.77 million in priority class E claims.
The record isn't definitive about when First Sealord's financial trouble first came to the attention of state officials.