Texas Workers' Comp Fraud
A Travis County District Court sentenced Liza Fortune on charges of insurance fraud and ordered her to pay $15,013.89 in restitution to Texas Mutual Insurance Company. Fortune's two-year sentence was suspended for four years, and the court fined her $250 and ordered her to seek counseling, as recommended by probation, for violating a state law stipulating that injured workers are entitled to temporary income benefits (TIBs) only if unable to work due to job-related injuries. A Texas Mutual investigation discovered that Fortune was able to work while collecting TIBs, and was in fact working for two temporary service companies. Fortune claimed to have suffered an on-the-job injury at Arlington Jet Center Inc., and her doctor declared her unable to work. The employer contacted Texas Mutual with suspicions because Fortune was difficult to contact during her time off work. Sharmane Bryson, a Texas Mutual workers' comp specialist, asked Fortune on two occasions whether she was working. Fortune replied "no" both times, and Bryson documented the conversation in her file. Another investigator, Michael Bradley, could not amass enough evidence to prove fraud, but reopened the case after six months. At that time, a routine check with the Texas Workforce Commission discovered that Fortune had worked for two temporary services while collecting TIBs.
Agent Told to 'Cease and Desist'
The Louisiana Department of Insurance ordered a former insurance agent to cease and desist any business as an insurance agent as a result of the agent's alleged violations of the Louisiana Insurance Code. Herman Williams III is alleged to have misappropriated funds paid by customers, according to acting insurance Commissioner J. Robert Wooley. Williams was served with a search warrant by the Louisiana State Police Insurance Fraud Unit at the offices of Williams and Williams in Monroe, La. Insurance department records show Williams held a property and casualty insurance license from May 1999 to May 2001 and a property and casualty solicitor's license from Nov. 1996 until May 1999. Department findings resulted in several allegations of misappropriation of premium funds, as well as issuance of bogus insurance cards.
Accused Broker Steps Down
Michael Segal, CEO of Chicago-based Near North Insurance Brokerage Inc., resigned his position after being charged with mail and insurance fraud involving a trust fund from which he allegedly misappropriated funds. According to the Chicago Tribune, Segal was arrested on Jan 26 and charged in a Chicago federal court. The formal complaint alleges that Segal diverted monies that were intended for the payment of customer premiums. The account from which these funds were allegedly diverted is reported to have been short approximately $22 million as of Sept. 30. It is further alleged that Segal tried to cover up the deficit and that the money was used for personal expenses and general operating expenses. Near North is a privately-held company that provides property, life, health and workers' compensation coverages. Segal was arrested at a hotel near the company's offices prior to leaving for London on a routine business trip. He was released later that day on a $750,000 bond. The preliminary hearing date is set for Feb. 15. If convicted, Segal could face up to 25 years in prison for insurance and mail fraud, along with a $250,00 fine for each count. Countering the charges, Segal's lawyer, Harvey Silets, cited an accounting error as the cause of the discrepancy. The Tribune reported that John Harney, a senior vice president, was appointed chief operating officer of Near North.
La. Approves Exclusions
Louisiana acting Commissioner of Insurance J. Robert Wooley announced the approval of terrorism, mold and pollution exclusions for certain lines of insurance. Wooley said approval of specific coverage exclusions is intended to address the concerns of insurance companies so they can provide additional markets to Louisiana policyholders. He issued an announcement of the approvals following a meeting with industry representatives. The approvals will be granted until Congress enacts legislation to provide assistance to the terrorism reinsurance market or until other market conditions warrant a change in the department's position on terrorism exclusions. Wooley noted that Louisiana workers' compensation laws do not permit exclusion of terrorism from workers' comp insurance. He said that terrorism exclusions would be required to "clearly define excluded terrorist acts in such a manner that they do not exclude coverage for other potentially violent acts such as vandalism, malicious mischief, and riot." Spurred by high profile cases in Texas, the department approved exclusions for mold as a covered loss, and exclusions for remediation costs such as testing, monitoring, containment, and treatment. In an advisory letter, the department indicated that insurers should take note that standard homeowners' policies in Louisiana do not provide coverage for seepage of water or for damage arising from wear and tear or the failure to do proper maintenance. Wooley noted that "exclusions should not be used to deny coverage for the costs of repair and restoration of the insured premises for damages arising from a covered cause of loss, even if some mold is present." For several years, the LDI limited the use of pollution exclusions in response to over-utilization by some insurers. This has created a backlog of forms pending approval and caused concerns for some carriers. In response to industry requests, the department approved the current ISO Absolute Pollution exclusion in policies and endorsements, and the current ISO Total Pollution Exclusion Endorsement. The notice regarding the use of terrorism exclusions and the advisory letters on mold and pollution exclusions are available on the department's website at www.ldi.state.la.us.
Clinic Owner, Manager Charged
A Miami clinic owner and his office manager were arrested after allegedly recruiting two undercover Department of Insurance investigators into a scheme to file fraudulent auto accident insurance claims, according to Florida Insurance Commissioner Tom Gallagher. Flagler PolyClinic owner Ercides Iglesias and his office manager Debora Garcia were arrested Jan. 17. Iglesias was charged with three counts each of insurance fraud and third-degree grand theft, and one count each of patient brokering and organized scheme to defraud. Garcia faces identical charges. The investigation is ongoing and more arrests are expected. If convicted on all charges, Iglesias and Garcia face up to 40 years in prison, and fines of up to $5,000 per charge. An informant contacted the insurance department in July 2001, saying he had been solicited to participate in the billing scheme after an auto accident. By September, he and the two undercover investigators had been recruited and were allegedly being offered kickbacks for referring other accident victims to the clinic. Reportedly the three were given no medical treatment beyond physical exams and X-rays, but claims of more than $11,500 were billed to the personal injury protection (PIP) portions of their auto insurance plans. During secretly recorded meetings, Iglesias and Garcia allegedly explained that compensation would be based on a percentage of the amount billed out to the insurance carriers, and Garcia allegedly detailed the types of injuries she would describe on the treatment forms. In all, the investigators and informant signed almost 100 fraudulent medical treatment logs for services never rendered. The insurance company used by the investigators, Onyx Insurance Group, has been billed for more than $3,500. The informant's insurer, Amstar Insurance, has been billed for more than $8,000. The informant was paid $500 for bringing the investigators into the scheme, and for allowing his insurer to be billed.
