1


           2      IN THE STARK COUNTY COURT OF COMMON PLEAS

           3          STARK COUNTY, OHIO

           4      ---------------------------------------------- x

           5      DAVID E. JAY,

           6                           Plaintiff,
                                                    Index No.
           7             -against-                  2004-CV-00843

           8      CENTRE LIFE INSURANCE COMPANY, et al.,

           9                           Defendants.

          10      ---------------------------------------------- x

          11

          12      DEPOSITION of the Defendant, CENTRE LIFE

          13      INSURANCE COMPANY, by RICHARD GRILLI, taken by the

          14      Plaintiff pursuant to Notice, held at the offices

          15      of Barrister Reporting Service, Inc., 120

          16      Broadway, New York, New York, on November 3, 2005,

          17      at 10:15 a.m., before a Notary Public of the State

          18      of New York.

          19

          20

          21

          22      *********************************************

          23           BARRISTER REPORTING SERVICE, INC.
                                120 Broadway
          24               New York, New York 10271
                                212-732-8066
          25

                                                            2




           1

           2      A P P E A R A N C E S:

           3              GRAYDON HEAD & RITCHEY, LLP
                                Attorneys for Plaintiffs
           4                    1900 Fifth Third Center
                                511 Walnut Street
           5                    Cincinnati, Ohio  45202

           6              BY:   MICHAEL ROBERTS, ESQ.

           7

           8

           9              WOOD LAMPING, LLP
                                Attorneys for Defendants
          10                    600 Vine Street
                                Cincinnati, Ohio  45802
          11
                          BY:   WILLIAM R. ELLIS, ESQ.
          12

          13

          14      ALSO PRESENT:

          15             ANDREW J. COHEN, ESQ.
                               Disability Management Services
          16                   1350 Main Street
                               Springfield, Massachusetts  01103
          17

          18
                         J.D. MARTINEZ
          19                   Videographer
                               Digital Media Productions
          20

          21
                                      xxxxx
          22

          23

          24

          25


                                                            3




           1

           2                    THE VIDEO OPERATOR:  We are on

           3             the record.

           4                    This is the videotape

           5             deposition of Mr. Richard Grilli taken

           6             in the case of David E. Jay versus

           7             Centre Life Insurance Company, et al.,

           8             filed in the Stark County Court of

           9             Common Pleas, State of Ohio.

          10                    Today's date is November 3,

          11             2005.  The time on the videotape

          12             record is 10:15 a.m.  This deposition

          13             is being held at 120 Broadway, Suite

          14             111, New York, New York City.

          15                    My name is J.D. Martinez

          16             representing Digital Media Productions

          17             of 120 Broadway, New York, New York.

          18                    Would everyone please introduce

          19             yourselves for the record.

          20                    MR. ROBERTS:  On behalf of the

          21             plaintiff, Mr. Jay, this is Mike

          22             Roberts.

          23                    MR. ELLIS:  On behalf of the

          24             defendant, Bill Ellis.

          25                    THE WITNESS:  Richard Grilli,

                                                            4


           1

           2             president of Centre Life Insurance

           3             Company.

           4

           5      R I C H A R D     G R I L L I,

           6            having been first duly sworn before a

           7            Notary Public of the State of New York,

           8            was examined and testified as follows:

           9

          10      EXAMINATION BY

          11      MR. ROBERTS:

          12      Q      Good morning.  I was a little late

          13      getting here this morning, so I appreciate

          14      your patience with me.

          15             I'm Mike Roberts.  I have the

          16      privilege of representing David Jay in this

          17      action, David Jay versus Centre Life

          18      Insurance Company and Disability Management

          19      Services.

          20             Could you introduce yourself, please,

          21      to the jury?

          22      A      Sure.  Richard Grilli, president of

          23      Centre Life Insurance Company.

          24      Q      Mr. Grilli, do you have a business

          25      card on you?






                                                            5




           1                         GRILLI

           2      A      Yes.

           3      Q      Do you hold any other positions -- the

           4      business card says, "Centre," at the top and

           5      it has you as president of Centre Life

           6      Insurance Company with an e-mail address at

           7      CentreSolutions.com.  At the bottom it says,

           8      "A member of the Zurich Financial Services

           9      Group."  Did I read that correctly?

          10      A      Yes.

          11      Q      Do you have any other positions that

          12      you hold within the Zurich Financial Services

          13      Group?

          14      A      Yes, I am a senior vice president of

          15      the Centre Group of companies, and here is a

          16      business card as well of that.

          17      Q      Anything else?

          18      A      No.  That's it.

          19      Q      Do you coach a children's basketball

          20      team or anything?

          21      A      No.

          22      Q      What is the Centre Group?

          23      A      The Centre Group is a group of

          24      companies that were organized in the late

          25      1980's to conduct insurance and reinsurance



                                                            6




           1                         GRILLI

           2      transactions.  It is a subsidiary -- our

           3      parent is the Zurich Financial Services

           4      Group, the Zurich Company.

           5      Q      I suspect that you and I are probably

           6      peers, so I'm hoping I'm guessing correctly

           7      that you weren't affiliated with Centre back

           8      in the late '80s, were you?

           9      A      No.

          10      Q      I asked a negative question.  I want

          11      to make sure we're communicating well.  I

          12      sometimes do that and it's not meant to trick

          13      you.  It's just when you get a negative

          14      response to your negative question, if you

          15      were down on the street I would know what

          16      you're talking about.

          17             Were you affiliated with the Centre

          18      Group companies back in the late '80s?

          19      A      No, I was not.  I joined Centre in

          20      2003.

          21      Q      Being the president of Centre Life

          22      Insurance Company, I suspect that you've done

          23      some institutional research to bring yourself

          24      up to speed with what the history of the

          25      company has been; is that accurate?


                                                            7


           1                         GRILLI

           2      A      No, not really.  I've been in the

           3      insurance industry for many years and I have

           4      been -- my prior job at Centre was -- we did

           5      a few transactions with Centre, so I was on

           6      the other side of transactions with Centre,

           7      the recipient.

           8      Q      So Centre Life Insurance Company is a

           9      corporation; is that right?

          10      A      Yes.

          11      Q      It's not a company that the Centre

          12      Group formed back in the late '80s, right?

          13      A      That is correct, yes.  It's a company

          14      that they bought in 1996, 1997.

          15      Q      The company that "they" -- who is

          16      "they"?

          17      A      Centre Solutions U.S., Limited, a

          18      company within the Centre Group bought Mass

          19      Casualty Insurance Company and has

          20      subsequently renamed it Centre Life Insurance

          21      Company.

          22      Q      You may or may not know; this is six

          23      years, five years predating you.  Why did

          24      Centre Solutions U.S. Limited, why didn't

          25      they just take, purchase the assets of Mass



                                                            8


           1                         GRILLI

           2      Casualty and bring them in-house?  Why was

           3      there a distinct Centre Life Insurance

           4      Company entity?

           5      A      Well, this was before my time.  As I

           6      said, I joined in 2003.  Mass Casualty

           7      Insurance Company had various state licenses,

           8      and that is generally the reason an entity

           9      buys an insurance company is to obtain their

          10      licenses.  Otherwise you need to apply to the

          11      various state insurance departments.  It

          12      takes a lot of time and effort.

          13      Q      How many Centre companies are in this

          14      Centre Group?  Do you know?

          15      A      No, I don't really know that answer.

          16      There is a number of them.

          17      Q      More than a dozen?

          18      A      Yes.

          19      Q      Do you hold any officer or director

          20      positions with any other Centre Group

          21      companies or subsidiaries other than Centre

          22      Life Insurance Company?

          23      A      Can you repeat the question?

          24      Q      Do you hold any other officer or

          25      director positions with any of the other






                                                            9




           1                         GRILLI

           2      entities, however many there are, that are

           3      within this thing called Centre Group?

           4      A      Yes, I believe I'm a senior vice

           5      president of Centre Insurance Company.  I am

           6      also on the board of directors of an

           7      affiliate of Centre Disability Management

           8      Services.

           9      Q      You said you think you're a senior

          10      vice president of Centre Insurance Company.

          11      You don't know one way or the other?

          12      A      No.  I am a senior vice president and

          13      I believe I'm an officer of Centre Insurance

          14      Company.

          15             Centre Insurance Company is our main

          16      insurance company that has a service

          17      agreement with other various Centre entities

          18      to provide services to them.  Those services

          19      are accounting, actuarial, tax, legal,

          20      treasury.

          21            
I'm an employee of Centre Insurance

          22     
Company as well.  My paycheck comes from

          23     
Centre Insurance CompanyAll the Centre

          24     
employees in New York are employed by Centre

          25     
Insurance Company, and then we are time -- we


                                                            10




           1                         GRILLI

           2     
do work on behalf of other Centre companies,

           3     
and there is a service agreement between

           4     
Centre Insurance Company, CICO, as it's

           5     
called, and the other Centre companies that

           6     
when we do work for them, our time and our

           7     
costs are allocated to them.

           8      Q     
So Centre Life Insurance Company, the

           9      defendant in this case, are there any

          10      employees that get paid checks from that

          11      entity?

          12      A      No, there are no employees that get

          13      paid, but that is consistent with all the

          14      other Centre companies within the Centre

          15      Group.

         
16             As I said, Centre Insurance Company is

          17      the employer of everybody and then various

          18      individuals, a substantial amount of people

          19      work on behalf of Centre Life Insurance

          20      Company.  We have many accountants, the tax

          21      people who file tax returns, our treasury

          22      people who invest Centre Life's money, who

          23      handle the banking relations on behalf of

          24      Centre Life.  The actuarial department at

          25      Centre does work on behalf of Centre Life.


                                                            11


           1                         GRILLI

           2      So there's many people who are involved on a

           3      day-to-day basis with the operations of

           4      Centre Life Insurance Company.

           5      Q      Does Centre Life Insurance Company

           6      file its own independent tax returns with the

           7      Internal Revenue Service or is its tax return

           8      consolidated with other Centre Group

           9      companies?

          10      A      Prior to 2004 I believe it filed its

          11      own tax return because it was considered a

          12      live company for tax purposes.  After 2004 I

          13      believe it is now filing a consolidated

          14      return with other Centre companies.

          15      Q      Can you explain to the jury what that

          16      means, to go from filing our own tax return

          17      to filing a consolidated tax return with

          18      other corporations?

          19             I haven't gone into educational

          20      background, but you look like a guy that is

          21      smart enough to tell the jury what that

          22      means.

          23      A      When a corporation files its own

          24      individual tax return, its results and only

          25      its results -- when I say "results," its


                                                            12




           1                         GRILLI

           2      income statement, its revenues, expenses --

           3      that gets reflected on a 1120 form for the

           4      IRS for corporations.

           5             When a corporation is part of a

           6      consolidated group, all the entities within

           7      that consolidated group are added together to

           8      one tax return, and then those compiled

           9      numbers are then filed as one tax return.

          10      Usually there is an agreement amongst the

          11      parties when they file a consolidated tax

          12      return to share in the tax benefits within

          13      the whole group.

          14      Q      So if you have three entities that

          15      decide we're going to go in and file

          16      consolidated tax returns together and one of

          17      the entities has net taxable income -- I'm

          18      not a tax lawyer; I might be using the wrong

          19      word -- one entity would have net taxable

          20      income of $120 million but the other two have

          21      business losses that equal that exact same

          22      amount, does that mean that none of the

          23      entities end up paying tax?  That's really

          24      simplistic, right?

          25      A      Right.  The consolidated tax return


                                                            13




           1                         GRILLI

           2      would show pretax income or taxable income of

           3      zero under your example.  However, yes, that

           4      is correct.

           5      Q      What was the reason that the company,

           6      Centre Life Insurance Company, has changed

           7      the way it's going to report its earnings or

           8      income to the government?

           9      A      It hasn't changed its reporting of its

          10      income.  It changed its classification from a

          11      live company to a general insurance company.

          12             The specific rules by the IRS that

          13      allow a company to file as an insurance

          14      company, those rules trigger off of loss

          15      reserves held by a life insurance company,

          16      and in the case of Centre Life Insurance

          17      Company, since all the business -- since all

          18      of its health business has been ceded to

          19      another Centre company, they do not have any

          20      life reserves and, therefore, they could not

          21      continue to file as a life insurance company

          22      for tax purposes.

          23      Q      Was it beneficial to be able to file

          24      as a life insurance company or is it just a

          25      category?

                                                            14



           1                         GRILLI

           2      A      I don't think it makes a difference;

           3      however, I'm not a tax expert.

           4      Q      Fair enough.  I'm not going to say

           5      anything about tax, either, because neither

           6      am I.

           7             I didn't ask you to do this, but do

           8      you have before you the 2004 annual statement

           9      for the company?

          10      A      Yes, I do.

          11      Q      That actually is marked as plaintiff's

          12      Exhibit 35 in the case, and since you brought

          13      it with you and it sits in front of you, I

          14      didn't intend to start there but why don't

          15      we.

          16             There is a schedule in here that names

          17      all the companies that are affiliated with

          18      Centre Life Insurance Company.  Are you

          19      familiar with that schedule?

          20                    MR. ELLIS:  Do you have a copy

          21             I can work with?

          22                    MR. ROBERTS:  It may be

          23             Schedule Y.

          24      A      Yes, I'm somewhat familiar with

          25      Schedule Y
                                                            15


           1                         GRILLI

           2      Q      Schedule Y for the Centre Life

           3      Insurance Company 2004 annual statement,

           4      Exhibit 35, is titled, "Information

           5      Concerning The Activities of Insurer Members

           6      of A Holding Company Group," "Information

           7      Concerning Activities of Insurer Members of

           8      The Holding Company Group."

           9             What is a holding company group?

          10      A      Let me first explain who is on this

          11      list, if I could.  There are companies on

          12      this list that have nothing to do with

          13      Centre.

          14             What is on this list are companies

          15      that are subsidiaries of Zurich America which

          16      is a subsidiary of the Zurich Financial

          17      Group.  These are all U.S. companies.  They

          18      are mainly brother/sister company,

          19      brother/sister being third brother, sister of

          20      Centre Group.

          21             For instance, there is the Farmers

          22      Group here, and that is a California company.

          23      That is related to the Zurich.  It has

          24      nothing to do with Centre.

          25             So a holding company group -- going



 

                                                            16




           1                         GRILLI

           2      back to your question, holding company group

           3      is a group of companies all under the

           4      ownership, either direct or indirect, of one

           5      holding company being the Zurich Holding

           6      Company in the U.S., and I believe that

           7      Zurich Holding Company in the U.S. is like

           8      Zurich North America is probably what it's

           9      titled.

          10      Q      Sir, was I mistaken?  This is the

          11      Centre Life Insurance Company 2004 annual

          12      statement, right?

          13      A      Yes.

          14      Q      And this schedule appears in the

          15      Centre Life Insurance Company annual

          16      statement, right?

          17      A      Yes, it does.

          18      Q      There must be some law or regulation

          19      that requires Centre to include its

          20      affiliated entities in its annual statement;

          21      is that correct?

          22      A      From my understanding, yes.

          23      Q      I counted while you were testifying

          24      there, sir, page 63, 63.1, 63.2, 63.3 and

          25      63.4 contain the schedule, right?


                                                            17




           1                         GRILLI

           2      A      Yes.

           3      Q      Your copy doesn't have these numbers,

           4      but they were Bates numbered by someone

           5      working on behalf of your company for

           6      production in this case as AS00527 through

           7      AS00531.  I'll let you count them, but while

           8      you were testifying I counted how many

           9      entities are on the first three pages of this

          10      schedule and there is a hundred.  In the

          11      second two pages has 62.

          12             Do you trust by looking at it that

          13      those are the right numbers?

          14      A      It seems reasonable.

          15      Q      It's broken into two parts because I

          16      guess one is Farmers Insurance Company

          17      affiliates.  Is that a different arm of the

          18      Zurich entity?  You see there are two

          19      alphabetical listings; why would there be two

          20      different alphabetical listings?

          21      A      I don't know for sure.  I can

          22      conjecture, but I don't know.

          23      Q      I don't desire for you to conjecture.

          24      Let's take a look at this first Schedule Y.

          25             First page, AS00527, which is also






                                                            18




           1                         GRILLI

           2      just plain 63 without any decimal, about

           3      twelve companies down in the list, first one

           4      I can't even pronounce.  How do you pronounce

           5      that first company name?

           6      A      I don't speak German.

           7      Q      Something domiciled in Switzerland.

           8      About twelve down it says, "Centre Life

           9      Insurance Company."  Do you see that?

          10      A      Yes.

          11      Q      It shows that Centre Life Insurance

          12      Company is domiciled in Massachusetts?

          13      A      Yes.

          14      Q      Then it shows what the ownership is.

          15      Do you see that?

          16      A     
Well, ownership means its parent.

          17      Q      I understand.

          18             According to this schedule, Centre

          19      Solutions U.S. Limited, is that an American

          20      company or a Bermuda company?

          21      A      That is a U.S. company.

          22      Q      You figured that out because you went

          23      to Centre Solutions on this form and found

          24      out where it's domiciled?  Strike that

          25      question.






                                                            19




           1                         GRILLI

           2             I can take this form and I see Centre

           3      Life Insurance Company, and then I go to the

           4      fifth column and I see who its owners is.  I

           5      can then look that entity up and I will -- it

           6      says, "Centre Solutions U.S. Limited," a

           7      little ways down.  Then it says that entity

           8      is owned by Centre Group Holdings U.S.

           9      Limited, right?

          10      A      I've lost you.  Where are you now?

          11      Q      I took the owner of Centre Life

          12      Insurance Company, Centre Solutions U.S.

          13      Limited.

          14      A      Right.

          15      Q      I went to Centre Solutions U.S.

          16      Limited on this schedule, and I went across

          17      the column and I find that it's owned by

          18      Centre Group Holdings U.S. Limited, right?

          19      A      Yes.

          20      Q      I can look that entity up on the list,

          21      and I find Centre Group Holdings U.S. Limited

          22      is owned by Centre Reinsurance Limited,

          23      right?

          24      A      Yes.

          25      Q      Is that the entity that owns






                                                            20




           1                         GRILLI

           2      40 percent of DMS?

           3      A      I believe it is, yes.

           4      Q      So Centre Reinsurance Limited is then

           5      owned by Centre Solutions Bermuda Limited?

           6      A      Yes.

           7      Q      Centre Solutions Bermuda Limited is

           8      owned by Centre Group Holdings Limited?

           9      A      Yes.

          10      Q      And Centre Group Holdings Limited is

          11      owned by CMSH Limited?

          12      A      Yes.

          13      Q      And CMSH Limited is owned 64 percent

          14      by Zurich Insurance Company and a decimal and

          15      36 percent by Zurich International Bermuda

          16      Limited, right?

          17      A      That is correct.

          18      Q      If you try to continue to follow this

          19      tree, Zurich Insurance Company is owned by

          20      Zurich Group Holding, right?

          21      A      Correct.

          22      Q      And Zurich Group Holding is owned

          23      by -- 57 percent by Zurich Financial Services

          24      domiciled in Switzerland.  Is that the mother

          25      ship?






                                                            21




           1                         GRILLI

           2   
  A      I believe it is, yes.

           3      Q      And the other part of Zurich Group

           4      Holding is owned by Allied Zurich, PLC?

           5      A      That is correct.

           6      Q      We look at Allied Zurich, PLC.  It's

           7      owned by Zurich Financial Services?

           8      A      Correct.

           9     
Q      And Zurich Financial Services isn't

 
        10      owned by anybody.

          11     
A      That's the parent company.

          12      Q      We've run out of names.

          13             Is that what you refer to as the

          14      Centre Group, those companies?

          15      A      No.

          16      Q      Some of those companies we talked

          17      about are in the Centre Group?

          18      A      Yes.

          19      Q      There is a whole bunch of other

          20      companies we didn't talk about that are in

          21      the Centre Group?

          22      A      Generally, no.  Most of the companies

          23      on this list are part of the Zurich group,

          24      not the Centre Group.

          25      Q      When I said -- went through this tree,






                                                            22




           1                         GRILLI

           2      when I gave the name of a corporation that

           3      had Centre in it, does that signify that it's

           4      part of the Centre Group?

           5      A      Yes.

           6      Q      But we didn't name every entity that

           7      has the name Centre in it, did we?

           8      A      No, we did not, but we named most of

           9      them.

          10      Q      But there's others?

          11      A      There are a few others.

          12      Q      So that first three pages list a

          13      hundred companies that I guess fall under

          14      this large Zurich Financial Services

          15      umbrella, and that is what your business card

          16      says?  It says the company that you're the

          17      president of is a member of the Zurich

          18      Financial Services group, right?

          19      A      Yes.

          20      Q      I think I already asked you this

          21      question.  You said you would have to

          22      conjecture or speculate as to why they're

          23      listed separately in alphabetical order.  Did

          24      I recall that correctly?

          25      A      Yes.






                                                            23




           1                         GRILLI

           2      Q      But in its annual statement there must

           3      be some law or some regulation that requires

           4      Centre Life Insurance Company to disclose its

           5      affiliations some way, somehow, maybe third

           6      cousins to 160 different other corporations;

           7      is that right?

           8      A      I don't know.  It would appear that

           9      the second page of Schedule Y deals with the

          10      Farmers Insurance Group structure, but I'm

          11      not an expert here so we have to ask somebody

          12      who knows.

          13      Q      Farmers I've heard of before.  It must

          14      be related somehow or else it wouldn't be

          15      contemplated within whatever law requires its

          16      disclosure, right?

          17      A      I don't know.

          18      Q      Is Disability Management Services on

          19      this affiliation list?

          20      A      Yes, it is.

          21      Q      Who owns Disability Management

          22      Services?

          23      A      Centre Reinsurance Limited owns

          24      40 percent of DMS.  I believe the balance is

          25      owned -- 60 percent of the balance is owned






                                                            24




           1                         GRILLI

           2      by management.

           3      Q      That 40 percent ownership --

           4                    MR. ROBERTS:  I'd like to make

           5             a comment on the record.

           6                    Mr. Ellis is filming me without

           7             telling me, without disclosing it to

           8             me, which I think might be some

           9             violation of an ethical code or code

          10             of professional responsibility to

          11             record a lawyer without telling him,

          12             but there is the videotape of the

          13             witness going on and there is also a

          14             separate videotape of Mr. Ellis of me.

          15                    Mr. Ellis, why is this?

          16                    MR. ELLIS:  I'm trying to avoid

          17             the antics that you exposed during

          18             Mr. Bonsall's deposition or at least

          19             record them if they reoccur.

          20                    MR. ROBERTS:  Would you mind

          21             turning that off, sir?

          22                    MR. ELLIS:  Yes, I would.

          23                    MR. ROBERTS:  Very well.

          24                    Mr. Grilli, did you know I was

          25             being recorded by Mr. Ellis?






                                                            25




           1                         GRILLI

           2                    THE WITNESS:  Well, when I sat

           3             down here, I noticed the camera was on

           4             and it was pointed to you so, yes, I

           5             happened to notice it.

           6                    MR. ROBERTS:  I just noticed

           7             it.  I'm quite shocked that a lawyer

           8             would do that, but -- let's get back

           9             to your testimony.

          10                    I should have worn a tie.

          11      Q      I have attempted to graph out the

          12      corporate structure which I believe is

          13      represented in that 2004 annual statement.

          14      Could you take a look at this?

          15                    MR. ROBERTS:  And we'll mark

          16             this as Plaintiff's Exhibit 37.

          17             Actually, Plaintiff's Exhibit 37 will

          18             be that page -- we'll just make it

          19             that page.

          20                    MR. ELLIS:  Do you have a copy

          21             for me?

          22                    Thank you.

          23      Q      Does that look like the right

          24      corporate structure?

          25      A      I would have to spend some time going






                                                            26




           1                         GRILLI

           2      back.

           3                    (Whereupon a chart was marked

           4             as Plaintiff's Exhibit 37 for

           5             identification, as of this date.)

           6                    MR. ROBERTS:  Why don't we go

           7             off the record and allow the witness

           8             to do that.  I don't want you to

           9             guess.

          10                    THE VIDEO OPERATOR:  Going off

          11             the record, 10:47.

          12                    (Whereupon, a brief recess was

          13             taken.)

          14                    THE VIDEO OPERATOR:  Returning

          15             to the record, 11:01.

          16      Q      Mr. Grilli, I think I frustrated you.

          17      My chart apparently was not a very good

          18      portrayal of the Centre Group line of

          19      companies up from Centre Life Insurance

          20      Company.  You've made some attempts to

          21      correct it, and I think you've thrown your

          22      hands up.

          23      A      No, I haven't thrown my hands up

          24      totally.  There was an error made down below

          25      sort of at the bottom where you put in or






                                                            27




           1                         GRILLI

           2      somebody put in Centre Reinsurance Limited

           3      U.S. when the company is Centre Reinsurance

           4      Limited, so therefore with that error,

           5      everything above it or most of what is above

           6      that, by putting in that U.S. Company and not

           7      the Centre Reinsurance Limited which is a

           8      Bermuda company and above it is wrong.

           9      Q      You made some notes on Exhibit 37.

          10      Can you write your name at the bottom and

          11      date it?

          12                    MR. ELLIS:  Just so the record

          13             is clear, is that intended to be some

          14             accurate depiction or is that just

          15             some notes you made on it?

          16                    THE WITNESS:  It was my notes

          17             of some corrections, but I wouldn't

          18             verify that it's totally accurate.  I

          19             only had a few minutes to do this.  In

          20             my view, it is accurate.

          21                    MR. ROBERTS:  I think the

          22             record will reflect we were off the

          23             record for fifteen minutes while you

          24             worked on it.

          25      Q      There are, I think, in every annual






                                                            28




           1                         GRILLI

           2      statement notes to the financial statements.

           3      Are you mindful of that?

           4      A      Yes.

           5      Q      Can you turn to that section for me?

           6      Page 19.2, which is Bates numbered AS 00481.

           7      Are you there, sir?

           8      A      Yes.

           9      Q      There is some kind of Excel

          10      spreadsheet table at the top.  At the bottom

          11      it's regular text.  It starts with number 10,

          12      or section 10 is entitled, "Information

          13      Concerning Parent Subsidiary and Affiliates."

          14             Do you see that?

          15      A      Yes.

          16      Q      In subsection G there, there is a

          17      narrative description of Centre Life

          18      Insurance Company and who owns it and who

          19      owns that and so on and so on, right?  Is

          20      that description accurate?

          21      A      Well, I would need to go back to an

          22      organizational chart to check it out, but as

          23      far as I know, I would assume it is correct.

          24     
Q      It says all of the issued and

          25      outstanding shares of the company's voting






                                                            29




           1                         GRILLI

           2      common stock are owned by Centre Solutions

           3      U.S. Limited, an insurance and reinsurance

           4      company domiciled in Bermuda.

           5             Centre Solutions U.S. Limited is

           6      controlled by Centre Group Holdings U.S.

           7      Limited, a holding company domiciled in

           8      Delaware which is, in turn, controlled by

           9      Centre Reinsurance Limited, an insurance and

          10      reinsurance company domiciled in Bermuda

          11      which is in turn controlled by Centre

          12      Solutions Bermuda Limited, an insurance and

          13      reinsurance company domiciled in Bermuda,

          14      which is in turn controlled by Centre Group

          15      Holdings Limited, a holding company domiciled

          16      in Bermuda which in turn is controlled by

          17      CMSH Limited, a holding company domiciled in

          18      Bermuda which is ultimately owned by Zurich

          19      Financial Services, a financial services

          20      company domiciled in Switzerland.

          21     
       Did I read that correctly?

          22      A      Yes.

          23      Q      One of those corporations in the

          24      lineage is the 40 percent owner of DMS?

          25      A      That is correct.  It's Centre






                                                            30




           1                         GRILLI

           2      Reinsurance Limited, and that is mentioned

           3      here.

           4      Q      What are the functions of Centre Life

           5      Insurance Company?  Or tell me if I'm right:

           6      The company doesn't sell disability insurance

           7      policies anymore, right?

           8      A      That is correct.

           9      Q      Have you ever seen the disability

          10      insurance policies they used to sell?

          11     
A      No.

          12      Q      Are you mindful that there is a couple

          13      of different numbers?  There is a NOVUS 3000

          14      and then there was a new generation called

          15      NOVUS 4000 policy?

          16      A      Yes, I am mindful of that.

          17      Q      Are you mindful that the NOVUS 4000

          18      policy kind of tightened up the contract

          19      language and limited the -- you couldn't have

          20      lifetime occupation benefits anymore; it was

          21      limited to a more specific term, in this case

          22      24 months.  Are you mindful of that?

          23      A      No.

          24      Q      Have you seen the NOVUS 4000 policy

          25      before?






                                                            31




           1                         GRILLI

           2      A      No.

           3      Q      You just know that there is one out

           4      there?

           5      A      There is -- those policies that you

           6      mentioned are reflected or some financial

           7      information is reflected on this schedule

           8      here of accident and health policyholder

           9      experience exhibits for year.  Those are

          10      filed every year.

          11      Q      So you're mindful from an accounting

          12      standpoint that there are some people out

          13      there that have a NOVUS 3000 policy because

          14      you quantify how many people in America have

          15      that, and then you're also mindful -- you can

          16      track their premiums, right, the number of

          17      policyholders and how much premium they pay,

          18      right?

          19      A      The information on that schedule, and

          20      maybe we should go look at that schedule, but

          21      it tracks more than just premiums.  It also

          22      tracks losses.

          23      Q      I didn't mean to limit it to that.

          24      You do an accounting function and so you need

          25      to know how many NOVUS 3000's there are out






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           1                         GRILLI

           2      there.  That is the great bulk of the

           3      business, the NOVUS 3000, right?

           4      A      Well, there is other business in

           5      Centre Life Insurance Company besides what we

           6      call the MCIC block of business or close

           7      block of business, so some of the other

           8      business in Centre Life actually dwarfs the

           9      amounts reflected -- that are associated with

          10      the MCIC block.

          11      Q      You're right.  We'll get to that in a

          12      second.

          13             As far as the MCIC and the types of

          14      policies that entity was selling before it

          15      was acquired or it was purchased, you

          16      understand that the great majority of the

          17      policies historically sold by Mass Casualty

          18      was the NOVUS 3000?

          19      A      That was before my time and,

          20      therefore, I'm not familiar with that.

          21      Q      If you look at the accounting records,

          22      these forms we'll get to in a second, that

          23      will reflect?  We'll get there in a second.

          24      A      Not necessarily.  You can have a few

          25      policies that have large premium dollars so






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           1                         GRILLI

           2      the premium dollars can be greater, but in

           3      absolute number of policies it could be less.

           4      Just because the premium dollars are greater,

           5      it doesn't mean the amount of policies are

           6      greater.

           7      Q      But you're mindful, at least, that

           8      there are two different policies of NOVUS

           9      3000 and a NOVUS 4000?

          10      A      Yes.  There is also I think a NOVUS

          11      1000 and 2000.

          12      Q      You're exactly right.

          13             Are you mindful that when they go up

          14      higher, the number, it is a new generation?

          15      A      No.

          16      Q      You're not mindful of that.

          17             Let's talk about what Centre Life

          18      Insurance Company does as it relates to the

          19      Mass Casualty line of business.  First of

          20      all, after the Centre Group, did they

          21      purchase the assets of Mass Casualty from Sun

          22      Life?

          23      A      They purchased the stock.

          24      Q      So it's a stock purchase.  After they

          25      purchased the stock from Sun Life a year or






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           1                         GRILLI

           2      two later, they also entered some business

           3      relationship or some acquisition or some

           4      transaction with some entity related to

           5      Equitable; is that right?

           6      A      I believe they bought MCIC.  Centre

           7      bought MCIC in '96.  There was an Equitable

           8      transaction July 1, 2000.  The Equitable

           9      transaction was an acquisition of a closed

          10      block of individual disability income

          11      policies.

          12      Q      Was it the same kind of transaction

          13      that was entered with the Mass Casualty

          14      block, essentially?

          15      A      No.  The Mass Casualty transaction was

          16      a purchase of stock.  You're acquiring a

          17      corporation, all the assets and liabilities.