Michigan Halts Novus Surplus Lines Sales; Owner Defends Insurer

August 18, 2009

Michigan regulatory officials have charged an insurer and its managing general agency with fraud in the selling of surplus lines insurance.

But the owner says his company that is in runoff has done nothing wrong.

The Office of Financial and Insurance Regulation (OFIR) has ordered Novus Centuriae, Inc., which was incorporated in the Island of Nevis in the Caribbean in 2002, to immediately cease and desist from the sale of any line of insurance in Michigan.

Its managing general agency, Core States Management Inc., has also been ordered to halt sales.

Officials said Novus has been selling fraudulent certificates of surplus lines of insurance. They said neither Novus nor Core States is licensed or authorized in Michigan or any other state.

They also allege that Novus has no assets yet has continued to accept new and renewal insurance business.

However, Robert Feala, president of Novus, told Insurance Journal that his firm does have assets. Feala said his firm has done nothing wrong and has not written any business in Michigan since June.

Feala said Novus has been writing general liability as a surplus lines provider in Michigan since 2002 and has paid all of its claims. On March 15, the company filed for Chapter 11 protection. The company is in runoff but has enough funds to pay its claims, he said.

He said its regulatory and financial problems are tied to a lawsuit brought by a claimant who was injured in a nightclub. This patron settled with the nightclub owner but has pursued Novus for what Feala says is really a liquor liability claim, which he said the Novus general liability policy does not cover.

“I’ve never seen anything like this in my career,” Feala said.

In April, Michigan officials took action against Feala’s Wisconsin agency, Vanguard Insurance Placement, which they said was selling in Michigan without a license. Feala said the problem was his producers thought their individual non-resident licenses were all they needed in Michigan until officials said they needed an agency license.

Michigan Insurance Commissioner Ken Ross advised that any buyers who purchased insurance policies from Novus might need to get new coverage.

Topics Carriers Legislation Excess Surplus Michigan

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