Insurer sues Memphis recording studio for $2.8 million

An insurance company that paid more than $2.8 million in claims after an arson fire damaged a historic music recording studio in Midtown now wants its money back.

Hanover American Insurance Co. in a federal lawsuit accuses Tattooed Millionaire Entertainment LLC, its owner and two others of insurance fraud in connection with the Nov. 5 fire in Memphis.

Law enforcement and fire investigators determined that someone poured and ignited gasoline on the first floor of the former House of Blues recording studio at 898-904 Rayner, near Lamar and Willett, according to the insurer’s lawsuit.

After its own investigation, Hanover is demanding in court that Tattooed Millionaire owner Christopher C. Brown return $2.3 million while Daniel R. Mott and John Falls, who leased recording studios in the building, each pay back $250,000.

Falls said that he Brown and Mott would seek legal advice before making any comment on the lawsuit, which was filed Oct. 14 in federal district court. Their attorney, Larry Montgomery of the Memphis law firm Glankler Brown, said he could not comment.

"There are two sides to every story and as much as I would love to tell you the other side of this one, I am ethically constrained not to comment on pending litigation, so I will have to respectfully decline the opportunity to do so," Montgomery said.

Hanover, based in Massachusetts, contends that $10.5 million worth of recording equipment that it had insured didn’t exist.

“In connection with the defendants presenting their claims to Hanover, the defendants advised Hanover that they believed local street gang members to have been responsible for the arson fire and further, that upon entering the insured premises following the fire, the defendants claimed they discovered that these gang members had removed and stolen most of the over $10 million in recording equipment before setting fire to the insured premises,” the lawsuit maintains.

Brown, Falls and Mott all were on vacation at the time of the fire, the lawsuit says. Law enforcement and fire investigators told the company they found no evidence any of them were responsible for the fire. It remains under investigation, Memphis Fire Department officials said.

Brown gave the insurer bank documentation, credit card receipts and three invoices for equipment purchased for a total of more than $3.7 million in 2013 and 2014, Hanover contends.

Hanover “surprisingly” was unable to find any of the equipment listed by the documents in the fire-damaged recording studios, according to its lawsuit.

The insurer contends that the three outlets identified as selling the equipment – New York Liquidation Bureau, Canada Liquidation Sales and the state of Oregon surplus property program – didn’t recognize the documents as their own or have records of the transactions.

Brown purchased the property, including some equipment, in November 2014 for $250,000, the insurer found. The following February, Brown obtained a total of $10.75 million coverage from Hanover including building, equipment and loss of business income insurance.

The following April, Hanover issued policies to Mott and Falls for a total of $3 million in coverage for the equipment they leased from Brown and loss of business income.

Hanover is asking a federal judge in Memphis to revoke its coverage, recover its costs, have Mott and Falls return advances on claims and Brown return more than $1.2 million in claims on the building and nearly $1.1 million advanced for claims on equipment losses.

Tattooed Millionaire, a rock music label, had been located at Young Avenue Sound before building its state-of-the-art space in the former  home Sounds of Memphis, Kiva,  and House of Blues recording studios that had been dormant for years.