CDI Investigating Reports of Bogus Policies

By | December 1, 2003

Allegations that more than 200 bar and restaurant owners in California were sold bogus insurance policies is under investigation by a number of different entities.

A California Department of Insurance (CDI) spokesperson said the department is actively looking into the matter. When asked if this amount (more than 200) of reported bogus policies was an unusually high number to surface for one investigation, the spokesperson declined comment, saying they could not discuss an on-going investigation.

Reportedly, the U.S. attorney’s office in New York and the U.S. Postal Inspection Service have also been conducting an investigation into allegations that wholesalers sold fake Lloyd’s policies. Lloyd’s was asked to comment for the story, but did not respond to Insurance Journal requests for an interview.

In October, Lloyd’s reportedly sent out letters to businesses in the Golden State alerting them that they did not believe Lloyd’s underwriters were responsible for issuing the insurance.

Last month, a pair of bar owners filed a civil suit in the Superior Court in Santa Barbara against eight defendants and alleged breach of contract and negligence regarding insurance policies they purchased. The insurance was reportedly obtained through a number of agents, including Santa Barbara’s Whilt, Fatch & Perry. That company was purchased earlier this year by Brown & Brown Inc. Both companies were targeted as defendants in the civil suit. Agents reportedly obtained the policies through a number of different wholesalers.

“We got a notification from our Las Vegas office that said beware of this program,” said Brown & Brown Executive Vice President Susan Rodriguez. “We didn’t know what that meant at the time. We went and investigated to find out what was happening. Prior to Brown & Brown acquiring Whilt, Fatch & Perry, they had been using this market about a year ago…quotes were coming in, policies were being issued, claims were being handled, so there was nothing to trigger that there was a problem.”

Rodriguez said that once Brown & Brown was notified of the problem, it was immediately able to provide coverage with an alternative carrier and “we’re still trying to unravel this. We weren’t involved in anywhere near the amount (200 or more) of the cases. As I understand it, there were multiple agents at least in the state, and perhaps multiple states that were involved. Still, it is very concerning to us.”

When asked what lessons may come out of an event like this for independent agents, Rodriguez noted, “I think it is important to work with reputable brokers. Looking back, we’re investigating to see if there were any real triggers. It is unfortunate that it happened.”

To comment on this story, e-mail dthomas@insurancejournal.com.

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Insurance Journal West December 1, 2003
December 1, 2003
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2003 Program Directory, Vol. I