James River accused of misleading investors over Uber exposure
Law firm Saxena White P.A. has filed a securities fraud class action lawsuit against James River Group Holdings and a number of its executives in the US District Court for the Eastern District of Virginia.
The suit was made on behalf of shareholders that purchased James River common stock between August 1, 2019 and May 5, 2021. It alleges that defendants made materially false and misleading statements during this period and failed to disclose material adverse facts about James River’s business, operations, and prospects, in violation of securities laws.
In 2014, James River had expanded its commercial auto division by underwriting a new type of insurance policy that covered Rasier, a subsidiary of the ride-sharing company Uber Technologies.
The lawsuit alleges that James River failed to disclose that it had not adequately reserved for certain policies sold to Uber. James River is also accused of using an incorrect methodology for setting reserves that materially understated its exposure to Uber claims.
On October 8, 2019, James River announced that it had delivered a notice of early cancellation, effective December 31, 2019, for all insurance policies issued to Uber and its subsidiary. However, it remained contracted to provide coverage for future claims related to the period its Uber policies were in effect.
James River also advised of an adverse development between $55 million and $60 million, primarily related to Uber policies for the 2016 and 2017 underwriting years. The suit alleges these disclosures caused James River’s stock price to fall more than 22 percent.
Despite the runoff coverage commitment, the suit alleges that defendants assured investors throughout the period in question that James River had resolved its issues with Uber and that its exposure was adequately reserved.
On May 5, 2021, despite repeated assurances to investors that the legacy contract posed no challenges, James River disclosed an additional $170 million of unfavorable reserves related to the Uber policies. Its stock price then fell by more than 26 percent.
