A team of Lloyd's syndicates is involved in a bitter legal wrangle with Spanish football giant Atlético Madrid after its relegation last season.

The insurers, led by Goshawk, have refused to pay out a £4m claim for loss of revenues following Atlético's drop from Spain's top division, the Primera Liga.

The Lloyd's group's concerns centre on the fact that Atlético sold key players before the end of last season, which it says massively reduced the club's chances of staying up.

Among the players Atlético sold are the gifted Argentine pair Jose Maria Romero and Jose Antonio Chamot who were sold in January to AC Milan for £12.7m and £2.7m respectively.

Atlético Madrid came second last in the league with 38 points, seven points adrift from Numancia which avoided relegation.

A source at Lloyd's who has underwritten part of the risk said: "There are serious doubts about Atlético's claim because they sold some of their best players before they got relegated."

Prior to the 1999/2000 season, Atlético took out a total of £15m of insurance at Lloyd's, a large part of which was to protect the club against dropping down a league.

But after relegation, Atlético made a claim of around £4m for loss of revenues.

For a large part of last season, Atlético was precariously positioned in the Primera Liga, constantly facing the threat of relegation. Syndicates claim the loss of star players cut the club's chances of beating the drop.

Goshawk underwriter Danny Kelly, who often leads the Lloyd's market on contingency risks, refused to enter into details of the Spanish club's claim.

"I can't talk about this because it is very, very sensitive and under fairly deep investigation," he told Insurance Times.

Since June last year, Atlético sold a number of its star players and loaned out others.

These include Brazilian ace Juninho who was at Middlesbrough from September 1999 until the end of the season.

Most recently, Atlético sold Dutch international Jimmy Floyd Hasselbaink to Chelsea in a £15m deal, although he played for Atlético until the end of the 1999/2000 season.

Goshawk is said to have exposure of £650,000 with the rest of the risk shared throughout Lloyd's and across the continent.

The brokers for the risk are Aon and Tyser Special Risks, but it is not known which law firm Goshawk has appointed to fight the claim.

The insurance market for football clubs is currently booming. Last year, it emerged that Barcelona was insured against failure to qualify for the Champions league.