A lawsuit filed Monday in state court in Georgia charges Argo Group with first undermining and then competing with its former construction program manager, leaving it “dead in the water.”

In 2016, Alpharetta Underwriters LLC, which specializes in underwriting complex coverage for the construction industry, entered into a program administrator agreement with an Argo Group US Inc. subsidiary that included a mutual exclusivity provision that could be terminated or materially changed only for certain reasons and with 180 days’ notice, according to the lawsuit filed in Atlanta. The case is Alpharetta Underwriters LLC and Venbrook Group LLC v. Argonaut Management Services Inc. et. al.

In 2012, Alpharetta began to explore the possibility of selling itself.  After Argo opted not to make a bid for Alpharetta, Venbrook Group LLC  said in November 2021 it had purchased the business for an undisclosed amount.

Before purchasing Alpharetta, Venbrook received Argo’s assurance that it did not anticipate any changes that would materially impact Alpharetta’s underwriting results, the lawsuit said.

But in early 2022, Argo “undertook a series of actions that destroyed Alpharetta’s business” when it sought to “unilaterally impose commercially unreasonable changes to Alpharetta’s underwriting guidelines.”

These included moving from having no restriction on writing coverage for tract homes to limiting the total to 25, when Argo knew that most, if not all, new housing projects have more than 25 units, the lawsuit said. 

When Alpharetta protested the changes, stating they would likely destroy its business, Argo “retaliated by sending a letter purporting to terminate” the program administrator agreement.

“Argo’s unlawful and improper actions have left Alpharetta dead in the water, suddenly cut off from its clients because Argo refuses to allow Alpharetta to underwrite the profitable business that it has been producing for years,” the lawsuit says.

Then in mid-June Alpharetta learned Argo was marketing middle-market construction business “on its own, under the guise of “‘Argo Construction,” the lawsuit said.

“Argo deceptively terminated Alpharetta in order to take over the construction underwriting business itself, despite Alpharetta’s exclusive rights, a fact that was never disclosed but instead concealed by Argo from Alpharetta and Venbrook,” the lawsuit states.

It charges the Argo units with breach of contract, indemnification, promissory estoppel, unfair competition and unfair or deceptive acts or practices and negligent misrepresentation.

An Alpharetta attorney and an Argo Group spokesman had no comment.