Law firm alleges Oxford Insurance obstructed over $116 million in funding claims to aid sale of Accession

By Isha Marathe

Aug 15 - (The Insurer) - Personal injury law firm Watts Guerra LLC (Watts), domiciled in Puerto Rico, has sued Series 1 of Oxford Insurance Company for allegedly obstructing over $116 million in payments owed under its policies to minimize its liabilities, improve its AM Best rating and maximize the acquisition prospects of its parent company, Accession, since bought by Brown & Brown.

Watts' complaint was transferred from Wake County Superior Court to the Eastern District of North Carolina on August 11.

An Oxford spokesperson called the lawsuit "a baseless attempt by Watts to avoid [its] own obligations under the policy."

"Oxford strongly denies these allegations and has acted appropriately and in accordance with its policy terms at all times [and] looks forward to vigorously defending itself against these claims in court."

Oxford did not disclose which policy obligations it believes were avoided by Watts.

Watts did not respond to a request for comment. Watts is a limited liability company whose sole member, Mikal Watts, is domiciled in Puerto Rico.

According to the complaint, captive insurance manager Oxford in 2021 issued Watts 12 policies with a total coverage amount of $120 million for over $7 million in premiums, insuring Watts' investment in the docket of the New York law firm Gacovino Lake & Associates. Teton Risk Mitigation Solutions, whose program administrator and captive partner is Oxford, reinsured the policies.

The policies allegedly guaranteed that if Watts did not receive $120 million in proceeds from the Gacovino investment by September 15, 2024, then Oxford was obligated to pay Watts the full amount minus fees.

When Watts received $2 million from the Gacovino docket by the deadline, it filed a claim with Oxford for the remaining $118 million.

"Oxford, however, refused to pay," Watts said in the lawsuit filed Monday in the Eastern District of North Carolina.

In the complaint, Watts said that Oxford postponed negotiations for payment, and in spring 2024, executives from Accession and Oxford told Watts that the insurer had no obligation to pay and that its parent company, Accession, was pursuing a potential sale.

Accession was bought by Brown & Brown in a $9.83 billion cash-and-stock deal announced in June and was declared as completed at the start of August.

Brown & Brown did not respond to a request for comment.

Watts has filed two claims under its Oxford policies and said it has received no payments to date of the $116.32 million allegedly owed as of June 16. The amount is less than the $118 million of the first claim, as the Gacovino investment yielded further returns since filing.

Watts is suing Oxford for six counts, including declaratory judgment, breach of contract, bad faith and unfair and deceptive trade practices.

The complaint claims that Watts was pressured to extend its policies by another four years, and that it was told Oxford would not pay the claim, was not cooperating in the diligence process and was not responsive to Watts' data requests.

"Oxford took these actions to minimize its liabilities, improve its AM Best rating, and maximize the acquisition prospects of its parent company, Accession," Watts said in its complaint.

Watts suggested that Oxford was experiencing financial difficulties because of an AM Best announcement in March 2024. The rating agency said at the time that it had placed Oxford under review with negative implications, highlighting a transition in business mix to become an insurer of “large, financial guarantee/judgment preservation policies".

"Oxford’s plan worked. On January 24, 2025, AM Best removed its 'negative implication' review of Oxford’s rating," the complaint said.

BERMUDA TRANSACTION BEING UNWOUND

The AM Best revision followed the transfer of all existing financial guarantee business from the unified pool to a new Bermuda insurer formed by Oxford. AM Best said in January that this enabled Oxford to move about 20 policies with approximately $1.3 billion limits out of the unified pool while retaining only $170 million as a reinsurance policy.

However, AM Best in July downgraded the financial strength rating of Oxford and its members from A to A-minus and its long-term issuer credit ratings from "a" to "a-minus" after the company unwound the disputed Bermuda transaction after the onshore application to approve it was rejected by the North Carolina Department of Insurance.

The Bermuda transaction had been the subject of a $1.2 billion legal action brought by Dorset Peak Solutions along with clients it had introduced to become captive members.

AM Best in a July release noted that Oxford had "uncharacteristically added large limit, multi-year policies covering loans related to judgment preservation in the form of financial guarantees" but the line has since been discontinued and exposure to potential losses continues to be lessened via collateral and voluntary paydowns.

It added: "Management's sub-optimal level of transparency to its stakeholders was also a factor in that the policies introduced were significantly out-sized relative to the business taken on by the unified pool, leaving the pool potentially exposed to approximately $1.2 billion in aggregate exposure. However, Oxford’s management is in process of unwinding the policies previously ceded to a newly formed Bermuda cell company after the North Carolina regulator did not permit the transaction."

AM Best said that, as part of the sale to Brown & Brown, an escrow fund was expected to be established covering up to $750 million of losses and expenses related to this business with only $15 million ceded to the unified pool in each of the next five years.

The rating agency also noted that Oxford has an infrastructure of approximately 500 active cells integrated via a unified pool.

AM Best declined to comment.