NEW YORK—The New York State Workers' Compensation Board on Thursday filed a lawsuit against CRM Holdings Ltd., accusing the workers compensation insurer and some of its directors and officers of fraud, while another suit by the state's attorney general could be filed shortly.

The WCB alleges in its lawsuit that certain directors and officers breached fiduciary duties owed to the trusts operated by CRM, which caused damages to the trusts exceeding $405 million.

The WCB's lawsuit against CRM may not be the only one the company faces. New York Attorney General Andrew Cuomo said Thursday that he intends to file civil claims against CRM and some of its subsidiaries and directors and officers to address alleged fraudulent practices. Mr. Cuomo told CRM in a “notice of imminent enforcement action” that he will file the lawsuit unless a settlement could be reached in five days.

The WCB and Mr. Cuomo allege that CRM underestimated workers compensation liabilities of the companies it represented, which allowed them to charge lower premiums and left the companies with insufficient reserves to cover liabilities.

Hamilton, Bermuda-based CRM has been embattled with the State of New York and the WCB since it was revealed in June 2008 that several workers compensation trusts in New York totaled $363 million in unpaid liabilities. The WCB said a majority of those trusts were managed by CRM.

Mr. Cuomo began his investigation into CRM 19 months ago. During that time, CRM settled charges of mismanagement made by the WCB and surrendered its license to manage self-insured trusts. The WCB claimed the trusts were underfunded, which led to several lawsuits.

In November 2008, of the 65 self-insured workers compensation trusts authorized by the WCB, 32 were insolvent or underfunded, while 13 had been voluntarily terminated. About 20 of the trusts were operating with no financial issues or regulatory restriction.

CRM said it was managing eight of the 65 trusts.

In a statement, CRM said it denied “each and every one” of the WCB’s allegations and said the company managed the trusts in compliance with its contractual obligations and in a manner consistent with applicable law and the rules and regulations of the WCB.

Amid the turmoil, Daniel G. Hickey Jr. stepped down as CRM’s chairman and chief executive officer in March 2009. His resignation came shortly after CRM reported its nine-month profits for 2008 were down nearly 72% compared with its results in 2007. James J. Scardino, CRM's chief financial officer, was appointed interim CEO in March.

In a statement, CRM said it was “disappointed” by Mr. Cuomo’s decision to file a lawsuit and “dismayed” that he chose to disclose the notice before the company’s window for discussion expired. CRM said it denies Mr. Cuomo’s allegations “and believes that its business and management practices in connection with the New York trusts were proper and that all material information was disclosed during its initial public offering.”