A Stamford insurance company that helped defend three former executives of Polar Air Cargo Worldwide Inc. against criminal charges is demanding $3.7 million from the White Plains airline.
XL Specialty Insurance Co. accused Polar Air of breach of contract, in a complaint filed on June 2 in Westchester Supreme Court.
“Polar Air has refused to reimburse XL Specialty for the advanced defense expenses,” the complaint states, and contends that the reimbursement “can only be had from the Polar Air executives directly.”
Polar Air’s parent company, Atlas Air Worldwide Holdings Inc., of White Plains, had taken out an executive liability insurance policy with XL.
The insurer was required to cover the costs of defending executives accused of criminal conduct while acting on behalf of the airline, according to the lawsuit. But if executives were ultimately found guilty, XL was entitled to reimbursement.
Polar Air fired the executives and invoked the insurance policy in July 2021, after an internal investigation revealed millions of dollars in irregular payments.
In April 2023, the U.S. Attorney’s Office in Manhattan accused former Polar Air executives of running a $23 million kickback scheme. They had bypassed competitive bidding procedures, according to the charging papers, to ensure that vendors they secretly owned or controlled would receive favorable shipping rates and that they would get kickbacks or portions of vendor profits.
XL advanced funds for legal fees for former executives Lars Winkelbauer, chief operating officer, of Bangkok, Thailand; Abilash Kurien, vice president of marketing, Wilton, Connecticut; and Carlton Llewellyn, vice president of operations, of Highland Mills in Orange County.
Last year, all three men pleaded guilty to fraud charges.
Winkelbauer was sentenced to prison for 48 months and ordered to pay $32.9 million in restitution and forfeit $6.8 million in ill-gotten gains. Kurien was sentenced to 32 months and ordered to pay $22.9 million in restitution and forfeit $7.2 million. Llewellyn was sentenced to six months and ordered to pay $305,800 in restitution and forfeit $347,879.
In 2023, XL had asked Polar Air to formally agree to repay the defense expenses if the executives were ultimately found guilty, according to the lawsuit. There was no need to do so, Polar Air replied, because the insurance policy itself provides for repayment and the former executives had agreed to repay XL if necessary.
“Given the judgments against the Polar Air executives in the criminal action, they are likely unable to repay the advanced defense expenses,” the lawsuit states. And, “at no point prior to XL Specialty’s repayment demand did Polar Air ever express its view that XL Specialty could not seek repayment from Polar Air.”
Polar Air did not immediately reply to a request for its side of the story.
