Court Orders $76 Million Judgment Against Defunct Florida Insurer Aries

A Florida court entered a $76 million judgment against the former owners of the defunct Aries Insurance Co., who admitted to using premiums for their personal use.

Aries, a property/casualty insurer, was ordered into receivership in 2002. Its insolvency left about 58,000 policyholders and creditors with unpaid claims. The Florida Insurance Guaranty Association and the Florida Workers' Compensation Insurance Guaranty Association have paid more than $165 million to Aries claimants, and that figure is expected to exceed $170 million when all claims are resolved, according to the office of Florida Chief Financial Officer Jeff Atwater.

None of the judgment has yet to be recovered, Nina Ashley, a spokeswoman for Atwater said. Any recovered funds would go to the guaranty associations that paid claims, Ashley said.

The Department of Financial Services already has recovered more than $20 million from other involved parties through previous lawsuits.

The former owners of Aries, Marcos Fraynd and his children, Paul, Saul and Fanny Fraynd, pleaded guilty in May 2007 to diverting millions of dollars in insurance premiums (BestWire, May 22, 2007).

Aries was an insurance company within Onyx Insurance Group. Other subsidiaries included Onyx Underwriters Inc. and Fenix Financial Group Inc.Onyx Insurance Group was the 100% shareholder of Aries. Onyx Underwriters served as the managing general agent for Aries and managed policies and collected premiums, according to the court order.

The $76 million judgment includes $8.2 million for illegal transfers from Aries to Onyx Insurance Group, and $67.9 million for misappropriation and diversion of premiums from Aries, according to court documents.

(By Diana Rosenberg, senior associate editor, BestWeek)