Indemnity Bond Face-Off: Bank Sues Consolidated Hallmark Insurance

A commercial bank in Lagos, Equitorial Trust Bank, has dragged Consolidated Hallmark Insurance Company before a Federal High Court in Lagos over the failure of the insurance company to honour its contractual obligation.

According to a statement of claim filed in the court by Barrister Jide Shoroye on behalf of Equitorial Trust Bank, what led to the current legal action started sometime in 2008, when a limited liability company, Lopstocks Investment Limited of 28, Barikisu Iyede Street, Akoka, Yaba, Lagos, applied to the bank for a N25 million bank guarantee in favour of Glo Mobile Limited.

The bank guarantee was to serve as security for a credit facility for the supply and sale of Glo Mobile products and services.

The Managing Director of Lopstocks Investment company, Mr. Karen John, issued his personal guarantee in favour of the bank while Consolidated Hallmark Insurance Company by its counter indemnity bond guaranteed and undertook to indemnify the bank of any liabilities or sum outstanding against Lopstocks Company arising from the credit supply of Glo Mobile products to the company.

However, the bank alleged that it received a letter dated 18 March, 2009 from Glo Mobile Limited, demanding the payment of N4,267,500 being the outstanding balance for Glo Mobile products supplied on credit to Lopstocks Company and whose sum had remained unpaid.

In view of this development, the bank wrote several letters to Consolidated Hallmark Insurance Plc, demanding payment but the insurance company refused.

The bank then wrote a petition to the National Insurance Commission for intervention and because of the reaction of the National Insurance Commission, Consolidated Hallmark Insurance was alleged to have scrambled for excuse to justify its failure to honour its contractual obligation.

Since then, the insurance company refused and failed to honour its obligation under the counter indemnity bond by even refusing to pay the debt admitted.

The bank avers that it has since honoured its obligation to Glo Mobile Limited by paying the debt in the sum of N4,267,500 under the bank guarantee.

Therefore, the bank’s claim against the defendants jointly and severally are as follows

Judgment in favour of the bank against the defendants in the sum of N4,267,500.

Interest on the said sum at the rate of 21 per cent from 23 March, 2009 till judgment and thereafter at the rate of 6% per annum until liquidation of the judgment sum.