A Sparks-based insurance company that was seized by Delaware regulators faces possible liquidation in a wild case — one with dueling allegations of fraud, forgery and a vendetta, plus a sanction involving an Aston Martin sports car.
Delaware's Department of Insurance said Monday that Indemnity Insurance Corp. is in bad financial shape, and efforts to rehabilitate the company to avoid liquidation "have not been successful." Indemnity's founder — who contends the company is financially solid — said the regulator has indicated in court that it wants to move this week to liquidate the firm.
Indemnity is a significant player in the insurance niche for bars, taverns and nightclubs. The months-long situation has left some local businesses in the lurch.
Ron Furman, owner of Max's Taphouse in Fells Point, said the closest he could come to replacing $1 million in assault-and-battery coverage from Indemnity was a $100,000 policy. Since the seizure last year, he said, he's been left without legal help in a pending lawsuit and hasn't been able to reach anyone at Indemnity.
"It's just so frustrating," said Furman, who was happy with the insurer before the seizure. "One of the biggest things that I've lost is the peace of mind."
Antonis Karagounis, who owns a nightclub, a concert venue, and a restaurant and lounge in Washington, said he recently had to find other insurance for the two locations up for renewal. He said he paid about 50 percent more for coverage.
"They had a lot of business in D.C.," he said of Indemnity. "People have been affected, and a lot of people will get affected as this goes on."
It has dragged on for months already. Delaware regulators asked for court approval May 30 to step in, but the case initially was sealed and Indemnity was referred to by a pseudonym.
Since then, accusations in the case have piled up on both sides.
Delaware's insurance department said in court documents there that Indemnity "is in such condition as to render its further transaction of insurance presently and prospectively hazardous to its policyholders." Regulators said they became concerned about the company during a 2012 examination.
They accused Indemnity founder Jeff Cohen of "multiple acts of fraud," according to court documents, including faking paperwork to make it appear that the company had millions of dollars more than it really did, forging an endorsement from a reinsurance firm and interfering with the company's computer system after he was forced out.
Cohen, a Reisterstown resident, denied the fraud allegations and said in a short-lived Maryland lawsuit that the case is a "vindictive attempt at retribution" for supporting one of the Delaware insurance commissioner's primary opponents in 2012.
As part of the Delaware seizure case, he submitted an August report by accounting firm Grant Thornton that concluded the company was "currently profitable and providing much needed insurance coverage."
Grant Thornton said as a matter of policy that it never confirms or denies its authorship of confidential reports for clients.
Cohen said he has been blocked from effectively fighting the seizure, despite owning 99 percent of the company.
"I had three offers to sell the company," he said. "Delaware absolutely refused to entertain those."
Cohen freely admits to one allegation: When ordered to return three company-owned vehicles provided to him, he parked the 2011 Aston Martin in front of Indemnity's main entrance and another sports car in the way of one of the parking lot entrances.
"It was a stupid, childish move," he said. "That was the one thing I've done wrong in this whole thing."
The Delaware Chancery Court sanctioned him this month as a result, ordering him to pay Indemnity $33,331 because he returned a third vehicle late and the two sports cars without keys, forcing the company to tow them. Cohen said he couldn't get into the building to drop the keys off and returned them the next day.
After Delaware seized Indemnity, Maryland's insurance regulators revoked Cohen's license. In documents related to the license revocation, they allege that he misappropriated money, including spending $83,000 over a two-month period "primarily at adult entertainment venues in Las Vegas."