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British insurance company accused of preventing payments to Baltimore lead poisoning victims

State officials are investigating an allegation that a British insurance company is conspiring to prevent lead-poisoning victims in Baltimore from recovering damages.

The Maryland Insurance Administration said it has launched an "active investigation" into the London-based CX Reinsurance Co. after officials received a complaint from the Law Offices of Peter T. Nicholl.

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Lawyer Scott E. Nevin accused CXRe of pressuring landlords to rescind insurance policies so it doesn't have to pay potential judgments from cases filed by the families of lead-poisoned children in Baltimore.

Nevin and other area lawyers say the company's actions could put the cases of at least 100 families in jeopardy because smaller landlords typically don't have enough cash or assets to cover damages awarded to families in lead-poisoning lawsuits.

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"I am writing this complaint to inform you of facts that support the existence of a conspiracy to commit fraud," Nevin wrote in a complaint to state officials. "The fraudulent activity seeks to prevent my client from recovering personal injury damages in a lead paint poisoning case. It also affects many other victims of lead poisoning in Baltimore City who have similar claims."

CXRe has filed 15 lawsuits in federal court over the past two years seeking to rescind the insurance policies of landlords who are accused of exposing their tenants to poisonous lead chips and dust.

In court documents, the company accuses the landlords of not disclosing lead paint violations in the 1990s. It says it wouldn't have sold them the insurance plans had it known of the lead problems.

Saul Kerpelman, a Baltimore lawyer whose firm has filed lawsuits against landlords on behalf of poisoned children, called the insurance company's actions "ridiculous."

"They took these landlords' premium payments for 25 years," Kerpelman said. "Now the insurance company is going to bail on them?"

Ed Ruberry, an attorney for the company, said the insurance firm "categorically rejects the allegations" in Nevin's complaint. He said the company stands by its belief that Baltimore-area landlords fraudulently failed to disclose lead violations when purchasing insurance policies.

Nevin represents a woman who lived at an East Baltimore property in the late 1990s owned by Stewart J. Levitas, a landlord based in Boca Raton, Fla.

In a 2014 lawsuit, the woman alleges she was "seriously and permanently injured" by exposure to lead while living at the property. She blamed "chipping, peeling, and flaking lead-based paint, powder and dust."

CXRe initially defended Levitas but changed tack this year.

In a lawsuit filed in January, CXRe accused Levitas and his defunct company, State Real Estate Inc., of fraudulently obtaining a policy nearly 20 years ago that covered two dozen properties. The company said State Real Estate had indicated the properties had never been cited for lead violations when in fact they had.

"The policies would not have been issued had State Real Estate disclosed on the application [citations] for any prior lead paint violations in buildings to be scheduled on the policies," wrote Stuart M.G. Seraina, the Baltimore lawyer who represents CXRe.

Levitas denied the allegations in court papers but eventually agreed to void the policy.

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Levitas told The Baltimore Sun he couldn't discuss why he agreed to rescind the policy because he had signed a confidentiality agreement.

Of the complaint filed with the Maryland Insurance Administration, he called the issue "complicated."

"It's a complicated legal issue, but the issue in general has been a nightmare for me for many, many years," he said. He pointed out that he is not the only one whom CX has accused of fraud.

"The initial fraud complaint that CXRe brought against me, they brought it against everybody in my business in Baltimore City," he said. "There's a lot of people being affected by this as we speak."

CXRe said in its filings that Levitas' policy application also was signed by Alfred Murray Slattery, an insurance agent who pleaded guilty to fraud in 2003, admitting he had swindled more than $1.5 million from various companies and created fake insurance policies. He was sentenced to 18 months in prison and ordered to pay almost $1.7 million in restitution

Slattery did not respond to a request for comment.

Nevin said his firm has been pursuing a lawsuit against Levitas for nearly two years, incurring $37,000 in expenses. Nevin said he was surprised when the insurance company informed his firm the landlord had agreed to void the policy.

"It is unconscionable to allow an insurance company to escape the responsibility of paying potential claimants — third party beneficiaries — for injuries sustained under the policy by, years later, coercing the policy holders to come to an agreement that the policies in question are void," he wrote in his complaint to Maryland officials.

"Potentially hundreds more lead poisoned children, will be irreversibly harmed if CXRe and other insurance companies are able to cancel out existing valid policies by entering into illegal agreements with insured landlords who rented houses containing chipping and peeling lead paint."

Lead poisoning, once an epidemic among Baltimore's poor, is much less common now. The number of new cases in the city has dropped 86 percent since 2002.

But it's still claiming young victims, years after authorities vowed to eradicate it.

At least 4,900 Maryland children have been poisoned by lead in the past decade, their brains exposed to a toxin that causes lasting learning and behavioral problems.

Brian Brown, who files lawsuits on behalf of lead-poisoned children, says many in the legal community are watching the case closely. If the insurance company is successful in voiding claims with landlords, he said, lead-poisoned children will have fewer options to obtain damages.

"For years and years and years, insurance companies have been paying claims against these insurance policies," Brown said. "All of a sudden, out of the blue, they've said these landlords misrepresented facts on the insurance applications when they've known about these alleged misrepresentations for years?

"They're using this as a ploy to step away from their obligations to the landlords, and by connection, to the kids who have been lead poisoned."

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