Bermuda-based Mutual Risk Management has been hit with further legal action against its rent-a-captive subsidiaries.

The Royal Gazette has learned that the action was launched by Stephen Friedberg and is against MRM companies Mutual Indemnity Ltd., IPC Mutual Holding Ltd. and Mutual Indemnity (BDA) Ltd.

Yesterday Mutual Risk's CEO Robert Mulderig said the action from Mr. Friedberg - a rent-a-captive client - resulted from a dispute between the two parties.

The discrepancy, he said, was over the amount of a dividend payment, or the balance remaining in the rent-a-captive account from income including investment returns less claims and reserves.

Mr. Mulderig said the dispute was "straightforward" and at this point, it appeared it would go forward to the courts.

Several calls were made this week by The Royal Gazette to law firm Milligan, Whyte & Smith, which is representing Mr. Friedberg in the action but calls had not been returned by Press time yesterday.

This latest legal action followed a suit earlier in the year against the IPC companies from US truck leasing company Franklin Logistics Inc. which resulted in a $3 million asset freeze.

The Franklin group is understood to have resorted to legal action after it was unable to transfer its workers' compensation programme with the MRM group.

Although the financially troubled firm - MRM posted close to $100 million in losses for 2001 which has ultimately resulted in rating downgrades and loss of business, its US insurance arm being put into state-regulated run-off, its delisting from the New York Stock Exchange and being put under review by the Bermuda Monetary Authority - announced a restructuring earlier this month, some of its insurance units may still face an uncertain future.

The plan to restructure Mutual Risk Management in effect wiped out debt at the parent company level in exchange for securities to senior debt holders - which are a group of banks and MRM debenture holders, including XL Capital after it led a $112.5 million investment in the company last year. The plan also broke off the company's fee-based service units into MRM Services which included the company's Global Captive Group, comprised of International Advisory Services (IAS), Shoreline Mutual Management, and MRM Speciality Brokers Ltd.

In addition, the restructuring gave senior debt holders preferred shares, 80 percent of the common stock in MRM Services and management say in the company and warrants for 15 percent of MRM's common shares.

But other company units - including its US insurance companies the Legion Group - remain in troubled financial waters despite a reported $2.6 billion in reinsurance recoverables.

Mr. Mulderig said earlier this month that there was value in the companies and it was hoped that the US insurance companies would come out of state-regulated rehabilitation, but they may not.

Meanwhile, the Wall Street Journal has tied the medical communities' difficulty in finding medical-malpractice coverage to financially troubled insurers such as the Legion Group.