The Argus Group is being sued in a class-action lawsuit in the US brought by a life insurance client whose policy's cash value plunged because of exposure to funds operated by disgraced financier Bernard Madoff.

The lawsuit, filed in New York on Tuesday by plaintiff Chateau Fiduciaire, as trustee of The Map Trust, accuses Argus and other defendants including investment company Tremont (Bermuda) Ltd., of negligent misrepresentation, unjust enrichment and breaches of fiduciary duty.

Argus chief executive officer Gerald Simons said last night that the company "vehemently denies the allegations against it".

The suit says that some of the Argus policyholders who had bought variable universal life insurance policies were informed last week that the cash surrender value – the amount of cash available on cancellation of the policy – was negative.

The defendants failed to perform due diligence, the lawsuit claimed, in that they did not see a number of "red flags" against funds operated by Madoff, who allegedly ran a $50 billion Ponzi scheme.

An attorney from the law firm that filed the case said yesterday that more potential plaintiffs, all of whom were based in the US, had expressed interest in joining the lawsuit.

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