NU Online News Service, Dec. 12, 4:23 p.m. — Washington
A venture capital firm has filed a lawsuit seeking up to $100 million against MIB Group Inc., Westwood, Mass., over a dispute over a business deal.
The Dallas-based venture capital firm, called e-Financial Ventures, accuses MIB of fraud, misrepresentation and breach of fiduciary duties involving a joint effort to develop an Internet portal, called e-Nable, that would allow life insurance companies to bind insurance policies at the point-of-sale.
“The lawsuit alleges that MIB failed to deliver on its promise to execute e-Nable’s business strategy,” says William A. Brewer III, of the Dallas law firm of Bickel & Brewer, which is representing e-Financial Ventures.
Brewer says MIB “promised capabilities it never had, support it never provided and loyalty it never intended.”
James Corbett, MIB’s general counsel, says that the lawsuit is currently being evaluated by MIB’s outside counsel, but that he does not believe the complaint has any merit.
He says MIB will address the specific allegations at the appropriate time.
Corbett adds that MIB is still working with e-Nable to ensure its success.
MIB is a nonprofit corporation owned by about 600 life insurance companies that acts as a data clearinghouse focusing on fraud prevention.
According to the complaint, MIB wanted to develop a system to streamline the life insurance underwriting process.
The complaint says life insurers use MIB’s database to help assure that policy applicants are not omitting or concealing vital facts.
However, the complaint says, the process can take up to eight weeks, during which time many policy applicants experience “buyers’ remorse” and cancel their applications before a policy can be issued.
This costs the life insurance industry some $4 billion annually, the complaint says.
MIB, according to the complaint, wanted to create an Internet-based system that would allow agents to have access to MIB’s database and bind policies immediately, thus minimizing attrition rates.
The complaint says e-Financial Ventures agreed to invest in the project, the amount eventually reaching $4.5 million, subject to certain conditions.
E-Financial Ventures believed MIB would remain “fully and completely” committed to e-Nable, not compete with e-Nable, and not take any actions inconsistent or contrary to e-Nable’s best interest, the complaint says.
In addition, the complaint alleges, MIB told the plaintiffs it had revenue sources and signed contracts that did not exist.
The complaint adds that MIB did not disclose that its technology team was not able to establish a functional exchange platform.
Moreover, the complaint says, MIB decided to develop its own real time access technology as a separate platform from e-Nable, thus breaching its duty not to compete with e-Nable.
The complaint says e-Financial Ventures now stands to lose its entire investment. In addition, the complaint says, e-Financial Ventures has suffered tens of millions of dollars in consequential damages because of its link to a “failing company.”
Finally, the complaint says, MIB caused e-Financial Ventures “severe damage” in terms of its image and standing in the capital markets.