James River Group Holdings, Ltd.

Case Details

Class Period: August 1, 2019 - May 5, 2021
Date Filed: July 09, 2021
Case Number: 3:21-cv-0444
Jurisdiction: Eastern District of Virginia
icon-casetype Case Type: Securities Case

Case Summary

The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against James River Group Holdings, Ltd. (“James River” or the “Company”) and certain of its senior executives. The Complaint alleges that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased James River common stock between August 1, 2019 and May 5, 2021, inclusive (the “Class Period”).

James River is a Bermuda-based holding company that owns and operates a group of specialty insurance and reinsurance companies.  In 2014, James River ramped up its Commercial Auto Division by underwriting a new type of insurance policy that covered Rasier LLC (“Rasier”), a subsidiary of the ride-sharing company Uber Technologies, Inc. (together with Rasier, “Uber”).

The Complaint alleges that, during the Class Period, Defendants made materially false and misleading statements and failed to disclose material adverse facts about the Company’s business, operations, and prospects in violation of the Exchange Act and SEC Rule 10b-5.  Specifically, Defendants failed to disclose that: (1) James River had not adequately reserved for its Uber policies; (2) James River was using an incorrect methodology for setting reserves that materially understated the Company’s true exposure to Uber claims; (3) as a result, James River was forced to increase its unfavorable reserves in subsequent quarters even after cancelling the Uber policies; and (4) as a result of the foregoing, Defendants’ statements about James River’s business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis.

The truth emerged through two disclosures that caused James River’s stock price to fall and investors to suffer substantial losses.  First, 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, though the Company remained contracted to provide coverage for future claims related to the period the Company’s Uber policies were in effect (known as “runoff”).  The Company also advised of an adverse development between $55 and $60 million—primarily related to Uber policies for the 2016 and 2017 underwriting years.  In response to this news, James River’s stock price fell $11.06 per share, or more than 22 percent.  Significantly, despite the runoff coverage commitment, Defendants assured investors throughout the Class Period that James River’s issues with Uber were behind it and the Company had adequately reserved.  These misrepresentations and omissions caused the Company’s stock to continue trading at artificially inflated prices.

Then, on May 5, 2021, eighteen months after the Company announced its cancellation of the Uber contract, and after repeated assurances to investors that the legacy contract posed no challenges, James River surprised the market by disclosing an additional $170 million of unfavorable reserves related to the Uber policies.  In response to this news, James River’s stock price dropped $12.27 per share, or more than 26 percent.

On September 22, 2021, the Court appointed Employees’ Retirement Fund of the City of Fort Worth and the City of Miami General Employees’ and Sanitation Employees’ Retirement Trust to serve as Lead Plaintiff and Saxena White P.A. to serve as Co-Lead Counsel.

On November 19, 2021, Lead Plaintiff filed an amended complaint, extending the Class Period, and identifying ways in which Defendants violated Generally Accepted Accounting Principles (GAAP), laws and regulations governing internal controls, and to make additional scienter allegations.

On September 9, 2022, the Court granted Lead Plaintiff’s motion to file a second amended complaint, alleging that new evidence came to light in an unrelated bad-faith action against Defendant James River’s specialty insurance operating subsidiary, James River Insurance Company (“JRIC”), further supporting Plaintiffs’ claims.  The briefing for Defendants’ motion to dismiss the second amended complaint concluded on November 14, 2022, and an order on the motion to dismiss is expected in early-2023.