Erie, PA: (Apr-21-08) A class action lawsuit was brought against Erie Insurance Exchange, by its former shareholders, who alleged that the company and Erie Indemnity Co. did not offer a fair price when they bought the outstanding shares of Erie Family Life Insurance Co. in May 2006. The class action suit was brought by plaintiffs, Lin Lan and J. William Morris, in May 2006 against Erie Insurance Exchange, Erie Indemnity and Erie Family Life. Court records reveal that they also named as defendants the directors of Erie Family Life, all of whom were also directors for Erie Indemnity or Erie Insurance Exchange, or both.
Lan and Morris stated that the defendants breached their fiduciary duties to the shareholders by using unfair procedures to arrive at an unfair and inadequate price of $32 per share. The plaintiffs accused the defendants of failing to provide minority shareholders with enough information to make an informed decision about the price offered for their stock.
As part of a settlement reached in the case, officials on both sides of the dispute stated that Erie Insurance Exchange has agreed to pay $5.2 million to resolve the class action suit. Under the terms of the settlement agreement, shareholders were slated to get $2.45 per share prior to the removal of money for attorneys' fees. The deal stipulated that about 25% of the settlement, $1.3 million will go toward legal fees and $66,080 toward expenses. Lan and Morris, the two shareholders who initiated the lawsuit, will receive incentive awards of $5,000 and $2,000 respectively. [
