UPDATE 1-White Mountains sues Allstate over Esurance price
* Alleges Allstate made improper adjustment
* Dispute centers on lawsuit settled after closing
Sept 18 (Reuters) - White Mountains Insurance Group Ltd has filed a federal lawsuit against peer Allstate Corp over the 2011 sale of the online auto insurer Esurance, alleging that Allstate inappropriately lowered the final purchase price.
The suit, dated Sept. 17 and made public on Tuesday, relates to a purchase price adjustment clause that was a part of the May 2011 transaction. The roughly $1 billion sale to Allstate closed in early October of last year.
Under the terms of the clause, Allstate was to make an estimated payment at closing related to Esurance's tangible book value, with an adjustment after the fact to reconcile the actual book value to the estimate.
But according to White Mountains, Allstate missed by five months a firm deadline to have a post-closing balance sheet audited. In the meantime, Esurance spent $5.2 million to settle unrelated litigation.
White Mountains alleges that Allstate did not have the right to lower the purchase price by that settlement amount because it happened after the missed deadline for the audit.
"The Agreement contains a separate set of contractual provisions for indemnification that are designed to allocate the financial burden of such subsequent events," White Mountains said in the lawsuit.
The insurer is asking the court to find that Allstate breached its obligations regarding the timing of the audit and by adjusting the purchase price to include the litigation.
An attorney for Allstate declined to comment on the suit, citing a company policy on pending litigation.
The case is White Mountains Holdings (Luxembourg) S.a.r.l. vs. The Allstate Corp, U.S. District Court, Southern District of New York, No. 12-7015.