According to the Complaint, Hallmark Financial Services, Inc. is a diversified property/casualty insurance group.
On March 2, 2020, Hallmark Financial announced that it had decided to exit from its Binding Primary Commercial Auto business and reported a $63.8 million loss development for prior underwriting years.
On March 11, 2020, Hallmark Financial disclosed that it had dismissed its independent auditor, BDO USA, LLP, due to a disagreement regarding estimates for reserves for unpaid losses, among other things.
The Complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, the Complaint alleges Defendants failed to disclose to investors: (1) that the Company lacked effective internal controls over accounting and financial reporting related to reserves for unpaid losses; (2) that the Company improperly accounted for reserve for unpaid losses and loss adjustment expenses related to its Binding Primary Commercial Auto business; (3) that, as a result, Hallmark Financial would be forced to report a $63.8 million loss development for prior underwriting years; (4) that, as a result, Hallmark Financial would exit from its Binding Primary Commercial Auto business; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.