Legal action facing troubled Bermuda insurance services firm Mutual Risk Management has resulted in a $3 million asset freeze.

The freeze on company assets resulted from legal action reported on by The Royal Gazette last month when two of Mutual Risk's (MRM) Bermuda-based subsidiaries - IPC Mutual Holdings Ltd. and Mutual Indemnity Ltd. - faced legal proceedings by Franklin Logistics Inc.

At that time, little was known about the action or the plaintiff and legal firm Wakefield Quin declined to speak further on the case but did indicate that the matter was filed before the Bermuda court in April.

More information on the action came to light after a report in the latest issue of InsideBermuda, a monthly web-based newsletter, which reported that Franklin "resorted to legal proceedings after spending approximately six months unsuccessfully trying to novate (or transfer) its workers' compensation programme with the MRM group," it said.

Franklin, which was said to be the driver leasing arm of Pennsylvania-based Smith Transport, reportedly wishes to transfer its programme to a Marsh-managed captive facility, according to Mark Gordon, the plaintiff's US lawyer, who was quoted by InsideBermuda.

Meanwhile, ailing MRM may also be faced with other legal action in the US.

Inside Bermuda reported: "Another disgruntled client of MRM's rent-a-captive program claims to have been been duped in to paying $1 million for a 'phantom liability'."

In that case, the plaintiffs - which are reportedly American Patriot Insurance Agency and Diane and Kenneth Hendricks - are seeking treble and punitive damages, an accounting of funds relating to their account and an order setting aside "fraudulently induced contracts", according to InsideBermuda.

The legal actions follow a string of hits to the long-time Bermuda company, including numerous rating downgrades on the parent company and its subsidiaries after it posted losses nearing $100 million in 2001, its US insurance arms being put in to state-regulated run-off, the appointment of an ongoing review by the Bermuda Monetary Authority, several resignations from board directors and management and its delisting from the New York Stock Exchange after more than a decade of trading.

Although MRM CEO Robert Mulderig, earlier in the year, said he would not rule out being taken over by a "more stable" company, the fate of the firm still hangs in the balance.

The company has a reported $2.6 billion in reinsurance recoverables on its books but has faced difficulties in securing payment. Industry experts have said the situation with reinsurance recoverables could be attributing in large part to the company's woes.

The company, after its delisting from the NYSE, moved to trading on the Over-the-counter (OTC) bulletin board, where its stock has traded in recent weeks at below ten cents per share.