Creditors Say Florida Insurance Company Fraudulently Dumped Assets

Creditors Say Florida Insurance Company Fraudulently Dumped Assets

Law360 (October 17, 2018, 8:25 PM EDT) — A trustee for creditors of ATIF Inc. filed suit Tuesday in Florida bankruptcy court alleging the bankrupt title insurance underwriter’s 2015 transfer of assets worth millions of dollars to Old Republic National Title Insurance Co. was a fraudulent attempt to avoid paying creditors.

Daniel J. Stermer, the trustee for the ATIF creditors overseeing the company’s liquidation proceeding, said the 2015 deal sent two pieces of real estate along with intellectual property assets to Old Republic, which paid nothing for them.

Stermer’s attorney, Jon Polenberg of Becker & Poliakoff PA, said the two properties are estimated to be worth more than $10 million. He added that he believes the intellectual property assets are quite valuable, though he declined to estimate exactly how much they might be worth.

Stermer argues that ATIF transferred the property “with actual intent to hinder, delay or defraud ATIF’s creditors,” and did so at a time when it was a defendant in several cases involving millions of dollars in potential liability.

Orlando-based ATIF ran into trouble during the 2008 recession and lost its license to sell title insurance in 2009, prompting it to set up a joint venture with Old Republic through which Old Republic would perform underwriting services and bear the risk of loss, according to the complaint.

The joint venture, called Attorneys’ Title Fund Services LLC, performed ancillary services like title information services, education and underwriting assistance, according to the suit.

In December 2015, after Florida’s Office of Insurance Regulation threatened to put ATIF into receivership, the parties entered into an agreement under which Old Republic received title to all intellectual property held by ATIF, as well as a vacant lot and the ATIF offices that were being used for the joint venture.

When ATIF filed for bankruptcy less than two years later, creditors wrested control of the proceeding, got a plan confirmed and set up a liquidating trust. This lawsuit is the first filed by the liquidating trustee, according to Polenberg.

He said the creditors’ claims total about $55 million.

An attorney for Old Republic declined to comment.

The trustee is represented by Jon Polenberg of Becker &; Poliakoff PA.

ATIF is represented by Michael C. Markham and Angelina E. Lim of Johnson Pope Bokor Ruppel & Burns LLP, Raymond T. Elligett Jr. of Buell &; Elligett PA, and Martin S. Awerbach of Awerbach &; Cohn PA.

Old Republic is represented by Lara Roeske Fernandez of Trenam Kemker Scharf Barkin Frye O’Neill & Mullis PA.

The adversary case is Stermer v. Old Republic National Title Insurance Co. et al., case number 9:18-ap-00531, in the U.S. Bankruptcy Court for the Middle District of Florida.

The bankruptcy case is In re: ATIF Inc., case number 9:17-bk-01712, in the U.S. Bankruptcy Court for the Middle District of Florida.

 

–By Carolina Bolado.

–Editing by Adam LoBelia.

Update: This story has been updated to include comment from counsel.