Meadowbrook Insurance says class-action litigation filed against it is without merit.

“While we understand that it is not unusual for this type of complaint to be filed when a company experiences a material drop in the trading price of its shares, we believe that the complaint is inaccurate and the claims are entirely without merit,” says Mike Costello, senior vice president, general counsel and secretary at Meadowbrook, in a statement. “We emphatically reject any suggestion that the Company or any of its officers violated the federal securities laws. Accordingly, we will vigorously defend ourselves and will pursue all remedies available to us in connection with this matter.”

A federal class-action complaint alleging securities fraud has been filed in U.S. District Court for the Southern District of New York by the law firm Pomerantz Grossman Hufford Dahlstrom & Gross. The suit seeks to recover damages against the company and certain of its officers and directors as a result of alleged violations of the federal securities laws. The insurer misled investors of its financial stability and inflated its goodwill, the suit alleges.

Many other law firms have announced class-actions against Meadowbrook, which could not file its second-quarter report on time and announced a non-cash impairment of goodwill of $115.4 million in the quarter.

In early August insurance industry rating agency A.M. Best Co. downgraded the Meadowbrook's financial strength rating from “A-minus” (Excellent) to “B-plus-plus” (Good) after putting the insurer on watch with “negative implication” in October 2012. Following this news, shares of Meadowbrook have fallen.

TOWER IN CROSSHAIRS TOO

Also to hit the wire are multiple law firms announcing litigation or investigations against Tower Group.

Tower recently received $5 million to step away from a previously announced deal to buy American Safety Reinsurance from Fairfax Financial Holdings.

Fairfax bought American Safety and was going to sell the reinsurance subsidiary to Tower. But Catalina Holdings stepped in to reach a deal with Fairfax for the reinsurer.

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Meadowbrook Says Securities Class-Action 'Without Merit'

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