Reinsurer Harco National Ins Co entered into a “fronting” agreement with Capital Bonding Corporation, a now-defunct bail and immigration bond issuer, relying in part on an audit performed by the defendant accounting firm, Grant Thornton, LLP. When Capital Bonding ceased making payments and became insolvent, the North Carolina Department of Insurance seized assets from Harco, which ultimately paid $15 million for the forfeited bonds. Harco sued Grant Thornton in North Carolina state court alleging its audit was negligently performed and misled Harco into entering into the agreement with Capital Bonding. Grant Thornton asserted it was entitled to summary judgment under Illinois law, which it claimed was controlling. The trial court disagreed, holding that – based on a choice of law rule it devised itself – Pennsylvania law controlled, and denied summary judgment. On appeal, the Appellate Court reversed in part, noting that the lex loci deliciti rule governed, but nonetheless affirmed the denial of summary judgment, as it held that North Carolina, and not Illinois, law controlled. Harco National Ins. Co. v. Grant Thornton, LLP, No. 05-CVS-2500 (N.C. App. Ct. September 7, 2010).
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North Carolina appellate court: lex loci delicti controls on choice of law for negligent audit claims
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Senior Patent Counsel
Royal DSM NV