SPARTA Insurance is chasing more than $12.7 million from Pennsylvania General in a fresh fight over who pays old American Employers’ Insurance claims.
On December 4, 2025, SPARTA Insurance Company filed a new case in the US District Court for the District of Massachusetts against Pennsylvania General Insurance Company, now known as Pennsylvania Insurance Company. In court papers, SPARTA says Pennsylvania General is refusing to honor agreements that were supposed to shift liabilities on legacy American Employers’ Insurance Company (AEIC) policies to Pennsylvania General, not SPARTA.
According to the filing, the dispute grows out of a March 12, 2007 stock purchase deal in which SPARTA’s predecessor, SPARTA Insurance Holdings, Inc., bought AEIC, a Massachusetts insurance company, from Pennsylvania General. The transaction was structured so that, once the deal closed, SPARTA’s side would receive AEIC as a “clean shell,” with no liabilities remaining in AEIC after consummation of the transaction.
To make that possible, the filing says, Pennsylvania General and AEIC entered into a transfer and assumption agreement dated June 15, 2005. In that 2005 T&A Agreement, Pennsylvania General allegedly agreed to assume “all of [AEIC’s] liabilities or contractual commitments of every nature and description, whether absolute, accrued, contingent or otherwise or whether due now or in the future.” The agreement further provides that “all liabilities of every nature and description of American [AEIC] at the time of the Transfer and Assumption shall attach to and be assumed by Pennsylvania General and may be enforced against Pennsylvania General to the same extent as if such liabilities had been originally incurred or contracted by Pennsylvania General.”
The 2007 Stock Purchase Agreement attached this 2005 deal as an exhibit and defined it as the “Reinsurance Agreement.” SPARTA says Pennsylvania General also gave broad indemnity promises in Section 8.1 of the 2007 SPA, agreeing to indemnify and hold SPARTA’s predecessor harmless from any “loss, cost, expense, claim, interest, fine, penalty, deficiency, obligation, liability or damage, including, without limitation, reasonable attorneys’ fees, accountants’ fees and other investigatory fees and out-of-pocket expenses” arising out of, among other things, the failure by Pennsylvania General to perform any of its obligations under the 2005 T&A Agreement and any Loss arising out of or resulting from AEIC’s pre‑closing existence and business.
For more than a decade after the transaction, SPARTA alleges, claims under historical AEIC policies were not administered or paid by SPARTA. Instead, those claims were tendered for administration and payment pursuant to the 2007 SPA and/or the 2005 T&A Agreement. As of May 2021, the filing states, AEIC claims were being administered by Armour Risk Management, Inc., later known as A.G. Risk Management, Inc.
SPARTA says that in May 2021 it learned those legacy AEIC claims were no longer being administered or paid. It alleges that it then sent multiple notices to Pennsylvania General under Section 8.1 of the SPA, seeking to tender the AEIC claims being handled by A.G. Risk Management, but Pennsylvania General refused to accept the tenders or indemnify SPARTA. According to the complaint, Pennsylvania General agreed to assume control of the defense of only three claims arising under AEIC policies and “otherwise has flatly refused to assume the defense, management, or payment of the AEIC claims,” leaving SPARTA to protect its own interests and the interests of AEIC policyholders.
Beginning November 7, 2022, SPARTA says it periodically notified Pennsylvania General under Section 8.3 of the SPA of the amounts it was spending on AEIC claims. The new case zeroes in on the period from December 1, 2024 through September 30, 2025, during which SPARTA claims to have paid $12,736,703.08 in payments and expenses in respect of historical AEIC claims and related administrator costs. That figure, according to the filing, includes $11,986,703.08 in additional claim payments and expenses and $750,000 in additional A.G. Risk Management service fees.
SPARTA alleges it formally notified Pennsylvania General of these additional amounts on November 4, 2025, and requested prompt payment. Pennsylvania General, through outside litigation counsel, responded on November 12, 2025, but continued to dispute liability, according to the filing. To date, SPARTA alleges, Pennsylvania General has paid “zero dollars” to SPARTA for any of the claims made in respect of the historical AEIC policies that are the subject of this action and has not paid the amounts sought in the November 4 letter.
The filing describes this case as an extension of an earlier federal lawsuit SPARTA brought on July 26, 2021. In that prior action, SPARTA says, the court on September 30, 2025 granted summary judgment on SPARTA’s declaratory judgment claims, ruling that Pennsylvania General’s obligations under the 2005 T&A Agreement and the 2007 SPA have not been novated, waived, modified, or otherwise extinguished and that those contracts remain enforceable against Pennsylvania General. SPARTA’s breach of contract claims in that earlier case, covering damages through November 30, 2024, remain pending and are expected, according to the filing, to proceed to trial in 2026.
In the new suit, SPARTA asserts two breach of contract claims under the 2007 SPA and the 2005 T&A Agreement. It seeks, among other relief, at least $12,736,703.08 in damages, plus pre‑ and post‑judgment interest, and attorneys’ fees, expenses, and costs. These are SPARTA’s allegations at the filing stage, and no final determination has been made on the claims.
