California DOI Disciplines Agent for Insurance Fraud

December 9, 2004

On Nov. 29, Insurance Commissioner John Garamendi revoked the insurance licenses of Daniel Matthew DeBeikes, of Agoura Hills, for defrauding his clients and selling tribal workers' compensation insurance, which the California Department of Insurance (CDI) alleges is illegal. DeBeikes did business as AdvantEdge Staffing California, LLC, a staffing company formed in June 2002 as a vehicle to lower workers' compensation premiums for its clients.

DeBeikes' settlement stipulated that CDI could establish a factual basis for imposing discipline. Correspondingly, his life agent, fire and casualty broker-agent licenses and licensing rights were revoked, and DeBeikes was re-issued a five-year restricted license. In addition, DeBeikes was ordered to pay $50,000 restitution to client-employers, reimburse the California Department of Insurance $30,000 in costs, and fined $20,000.

Agreeing to provide staffing services to several California employers, DeBeikes claimed he could lower their workers' compensation costs by endorsing those companies' workers onto AdvantEdge's own workers' compensation policy with the State Compensation Insurance Fund (SCIF). CDI alleged that DeBeikes not only failed to endorse those various employers' workers onto AdvantEdge's SCIF policy, but that he collected workers' compensation premiums from those companies and failed to pay those premiums to SCIF.

CDI further alleged that DeBeikes failed to file company payroll reports with SCIF, report injury claims to SCIF, or provide staffing services to those California employers pursuant to the terms and conditions of the staffing company agreement.

In addition, DeBeikes allegedly notified his client companies in late May 2003 that he was unilaterally switching each of their workers' compensation policies to Mainstay Business Solutions (Mainstay) effective June 1, 2003. He reportedly represented that the Mainstay policy was underwritten by Northern United Captive. In fact, Mainstay coverage was underwritten by Blue Lake Rancheria, an American Indian tribe.

CDI maintains that Mainstay workers' compensation coverage is not valid because it violates California Labor Code sections 3600 and 3700. Section 3700, in particular, requires that employers obtain workers' compensation coverage through an insurer duly authorized to write compensation insurance in the state of California, or provide proof satisfactory to the state Department of Industrial Relations of the employer's ability to self-insure.