Novus ordered to stop selling surplus lines insurance in Michigan

LANSING, Mich.—The Michigan Office of Financial and Insurance Regulation has ordered surplus lines insurer Novus Centuriae Inc. and its managing general agency Core States Management Inc. to cease and desist selling insurance in the state.

Neither Novus, which is incorporated in the Caribbean island of Nevis, nor Core States, which is based in Hillsboro, Wis., are licensed to conduct business in Michigan, the OFIR said Tuesday.

In April, the OFIR similarly sent a cease-and-desist order to Hillsboro, Wis.-based Vanguard Insurance Placement Inc., a surplus lines broker that placed business with Novus. The OFIR said Vanguard also was not properly licensed.

Robert J. Feala, the principal shareholder of Novus, Core States and Vanguard, said he never intended to violate Michigan’s insurance laws.

In Wisconsin, an agency usually is not licensed, only individual agents are licensed, Mr. Feala said. While Vanguard agents had nonresident licenses, “no one in Michigan ever said that we had to license the agency over there. We’ve operated that way for five years.”

Mr. Feala said Core States and Novus began writing general liability business in the surplus lines market in Michigan in 2002. While he admits the companies are not licensed in Michigan, he said he thought he was following the law.

“We’ve written thousands of policies, paid every claim and never had a complaint by a policyholder in seven and a half years,” Mr. Feala said. “We’ve always paid our surplus lines taxes and always sent paperwork to the state. They make us sound like were (sneaking) around in the dark,” he said of the OFIR.

Mr. Feala said Novus ceased underwriting new business in June when Core States filed for Chapter 11 bankruptcy protection. The filing was tied to an unrelated legal dispute over a claim Novus did not cover, he said.

Although the company is on the verge of emerging from bankruptcy, Mr. Feala said it is not his intention to begin underwriting again. He said the company has enough assets to pay claims.

In a release, OFIR Commissioner Ken Ross said, “Any Michigan consumer or company that purchased insurance policies from Novus needs to get proper coverage immediately.”

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