NEW YORK -- Great American Insurance Co. (GAIC) has sued Bally Total Fitness, Chicago, over more than $10 million advanced to Bally for directors and officers coverage in financial restatement litigation, claiming the funds rightfully belong to GAIC, according to the Internet publication Law360.
The lawsuit was filed Jan. 27 in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan. GAIC contends it has never ceded ownership of the funds to Bally and is attempting to rescind the payment through an action in the U.S. District Court for the Northern District of Illinois, according to Law360.
The complaint filed in the New York bankruptcy court added that GAIC “only agreed to advance the funds to Bally on an interim basis, under express protest, and without in any way conceding that such payments were in fact due and owing to Bally.”
GAIC’s lawsuit filed in New York relates to Bally’s “massively restated” financial results for fiscal years ending Dec. 31, 2000 and Dec. 31, 2001, according to Law360. GAIC seeks rescission of the more than $10 million payout under the assumption that Bally and its directors and officers misrepresented the nature of the company’s financials when they sought directors and officers coverage.
“GAIC would never have issued the policies to Bally and its directors and officers had it known the truth about Bally’s financial position at Dec. 31, 2000 and Dec. 31, 2001,” according to the complaint filed in bankruptcy court, as reported by Law360.
Bally spokesperson Larry Larsen says the company does not comment on pending litigation matters.
In December, Bally filed for bankruptcy for the second time in 17 months, listing assets of nearly $1.4 billion and liabilities of more than $1.5 billion. Since the filing, Bally has closed at least 20 clubs, including one that is scheduled to close Sunday in Manchester, CT.