Novae Group has become entangled in a legal argument between three underwriters over its plans to develop a new international liability account, Insurance Times has learned.

Novae is facing a potential legal action from former international liability director of Limit Syndicate 386, Jeremy Fage, which could hinder its future expansion.

It is understood that Fage, who left the Limit syndicate, part of QBE Group, in November 2005, is considering pursuing Novae over allegations that it plagiarised a business plan.

According to sources, Fage is claiming that fellow international liability underwriters, Mark Davies and Rupert Taylor, formerly of Limit and Ace respectively, used ideas from a business plan that he created.

It is thought that the three underwriters had planned on working together before Davies and Taylor joined Novae earlier this year.

Their appointment was part of the Lloyd's insurer's drive to develop an international liability account to supplement its non-marine business in the UK.

It is due to begin writing business from next month. Sources said that the company was confident it could fight any potential legal action.

Novae declined to comment.

Fage was unavailable for comment.

Meanwhile, Novae Group has announced a significant rise in profit before tax for the year ended 31 December 2006.

The company turned around losses of £17.9m in 2005, following hurricanes Katrina, Rita and Wilma, to post profits of £32.8m. Its combined ratio also improved falling from 104.6% in 2005 to 81.4% last year.

Mathew Fosh, group chief executive, said: "2006 was a defining year for Novae."