A $10 million clash over captive insurance management and regulatory compliance has erupted in federal court, pitting major insurers against a Massachusetts-based captive manager.
Coaction Specialty Management Company, Inc., along with New York Marine and General Insurance Company, Gotham Insurance Company, and Southwest Marine and General Insurance Company, filed a complaint on September 19, 2025, in the United States District Court for the Southern District of New York. The lawsuit targets eMaxx Insurance Services, LLC, eCaptiv PC3-IC, Inc., and John Ferrante, eMaxx’s general counsel, and centers on a failed insurance program designed for preferred vendors of the American Automobile Association.
The complaint tells a story of partnership gone wrong. Coaction and its affiliates say they agreed to serve as “fronting companies,” issuing insurance policies to members of PC3, a captive insurer marketed by eMaxx to AAA’s preferred vendors. PC3, in turn, was supposed to reinsure those policies and secure its obligations by funding a Regulation 114 trust account for Coaction’s benefit. eMaxx Insurance Services was to manage PC3, ensuring its solvency and collecting additional collateral from members when needed.
But according to Coaction, eMaxx failed at every turn. The complaint alleges eMaxx did not attract enough members to PC3, missed premium targets, and failed to take reasonable steps to collect additional collateral when PC3’s funds ran low. When Coaction tried to access funds in the trust account to cover obligations, eMaxx and Ferrante allegedly interfered, making threats of legal and regulatory consequences against both Coaction and the trustee. Coaction claims these actions forced it to take a “Schedule F penalty” on its statutory annual statement, reducing its surplus and leading to further regulatory impacts.
The complaint describes a series of escalating disputes. In December 2023, as Coaction sought to withdraw funds from the trust account, eMaxx and Ferrante allegedly interfered with the parties’ trust agreement—breaching that contract and violating New York’s insurance regulations. The trust agreement, according to the complaint, gave Coaction the right to withdraw assets without notice to PC3, and Regulation 114 required the trust arrangement to be “clean and unconditional.”
By mid-2024, the relationship had further deteriorated. Coaction says eMaxx refused to provide documentation needed to collect collateral from program members and continued to withhold funds. The complaint alleges eMaxx held tens of thousands of dollars owed to Coaction and threatened to transfer those funds to a law firm rather than pay them as required. Coaction also claims eMaxx failed to provide audited financial statements and other records, hampering efforts to recover losses.
Central to the dispute are the contractual obligations set out in the Niche Management Agreement and the Reinsurance Agreement. The agreements required eMaxx to maintain accurate records, provide access to those records, and ensure the trust account was properly funded. PC3 was obligated to reimburse Coaction for losses and expenses and to post collateral equal to 170 percent of expected losses. Coaction alleges that eMaxx’s repeated failures and interference left it unable to recover more than $10 million in losses, including $4,040,500.90 in unreimbursed indemnity payments and defense costs.
The complaint seeks actual and compensatory damages of at least $10,047,219.98, as well as punitive and treble damages under Massachusetts law, and injunctive relief requiring eMaxx to comply with its contractual duties.
This case shines a spotlight on the risks and responsibilities facing captive managers and fronting insurers in the commercial insurance sector. The outcome could have broad implications for how insurers structure and manage captive programs, particularly regarding regulatory compliance and the handling of trust accounts. For insurance professionals and executives, the dispute is a stark reminder of the financial and reputational stakes involved when industry partnerships unravel.
This case is at the complaint stage and all claims remain undecided.
