Ohio Director Sues New York-Based Company

Ohio Director of Insurance Lee Covington, acting in his capacity as liquidator of property and casualty insurer Credit General Insurance Company (CGIC), sued New York-based AmTrust Financial Group and its subsidiaries AmTrust Financial Services Inc., and Technology Insurance Company Inc.

Filed in Franklin County Common Pleas Court, the suit centers on disputes between Covington and AmTrust Financial Group arising out of contracts in which AmTrust agreed to reinsure policies written by Credit General and to provide management services for CGIC prior to it being placed in liquidation.

In the fall of 2000, AmTrust entered into management and reinsurance agreements with Beechwood-based CGIC, which was operating under a supervision order at the time. Under the terms of the management agreement, AmTrust agreed to conduct the property and casualty insurance business of CGIC. In the reinsurance agreements, AmTrust agreed to assume full responsibility for all of CGIC’s obligations to its policyholders, including financial responsibility for all loss and loss adjustment expenses on reinsured policies that were issued, renewed or originated by CGIC during the term of the agreements.

The Department of Insurance (DOI) alleges that AmTrust has subsequently argued that it is not obligated on certain of the reinsured policies.

According to the complaint, Covington claims that AmTrust remains obligated to administer and to pay all claims and loss adjustment expenses on those policies and disagrees with AmTrust’s claims that CGIC owes them in excess of $200,000 in additional premiums.

Covington asked the court to issue a judgment declaring that under the reinsurance agreements, AmTrust is obligated to administer and pay all losses and loss adjustments expenses incurred, and to declare that the liquidator has made all premium payments in accordance with the agreements.

AmTrust has also asserted that CGIC owes it more than $300,000 for management fees. The filed complaint asks the court to declare that AmTrust is not entitled to be paid anything on this claim.

In the complaint, Covington also claims AmTrust has caused monetary damage to CGIC by:

1. Failing to reimburse the liquidator for the salaries of employees AmTrust specifically retained.

2. Removing and failing to return all property of CGIC.

3. Failing to assume full responsibilities not only for the liabilities of the eligible policies but for the administrative costs of processing premiums and claims related to those policies.

Covington also demanded judgment against AmTrust awarding the liquidator an amount to be determined at trial, but in excess of $25,000.

Topics Lawsuits New York Claims Ohio Reinsurance