By taking advantage of legal appeals processes, an Illinois managing general agency has been able to continue operations for more than a year despite having its license revoked or non-renewed by two separate state insurance departments.
Northern Illinois Insurance Agency, which is headquartered in Rockford and now operates under the name of Northern Underwriting Managers (NUM), had its licensed revoked twice by the Illinois Department of Insurance, first in 2014 and again in 2015, and non-renewed by the Missouri Department of Insurance in 2015. It appears that appeals of the insurance departments’ orders and other legal motions have allowed NUM’s doors to remain open, however.
According to Anjali Julka, a spokesperson for the Illinois Department of Insurance, while the licenses of NUM and that of its owner Todd Jeremy Fendler were revoked, the revocation orders have been “stayed by operation of law. The revocation hearing is still in discovery.”
Neither Julka nor Yaryna Klimchak, a spokesperson for the Missouri Department of Insurance, gave any indication as to when the administrative appeals might be resolved.
A map on NUM’s website indicates that the company does business in all states except Alaska.
The complaints against NUM largely stem from its method of securing premium payments via Automated Clearing House (ACH), or electronic payment, withdrawals from client accounts.
“We’re an ACH only company,” Fendler said when asked in April 2016 about the billing complaints. “We only bill in two ways. We bill pay in full or via the ACH. So if we allow someone to do monthly payments, we’re going to do it via ACH.”
State regulators in both Illinois and Missouri allege, among other things, that NUM and Fendler habitually defrauded customers by removing money from their accounts ostensibly for payment of premium for the placement of insurance. However, in some cases insurance was never bound or money continued to be removed from clients’ accounts after coverage was canceled, insurance department investigations found.
Insurance Journal became aware of the situation with NUM, which has advertised with Insurance Journal in the past, through mostly anonymous complaints posted on IJ‘s MyNewMarkets.com website. The bulk of the complaints received by IJ mirror those described in two orders of revocation issued by Illinois, which Insurance Journal obtained through a Freedom of Information Act request.
The license non-renewal order issued by the Missouri Department of Insurance, which Fendler has tried but so far failed to have removed from the Missouri DOI website, cites both the Illinois documents and the results of its own investigation.
The order from the Illinois DOI dated July 14, 2014, shows that the department reviewed NUM’s Premium Trust Fund Account (PTFA) from April 3, 2013, through Sept. 22, 2013, and found instances of misappropriation of premiums. During that time the balance in the PTFA was “deficient in respects to those premium monies under examination on 118 days,” the order states. The review covered 42 premiums collected from customers. The deficiency “ranged from $364.55 to $78,067.51 with an average deficiency of $25,559.98.”
The department also sampled 25 commission withdrawals by NUM from Jan. 1, 2012, through July 31, 2012. “Of the 25 commission withdrawals sampled, 16 were not matched and identified with premiums deposited into the PFTA. Additionally, the 16 were not supported by a written record documenting the name of the insured, policy number, gross premium, net commission and check number,” the order states.
In both reviews, regulators found that Fendler and NUM “violated insurance rules and have demonstrated incompetence and financial irresponsibility in the conduct of business.”
The 2014 Illinois order describes instances in which money was taken from client accounts but insurance was not placed or the insurer was not paid, which resulted in the client being unknowingly uninsured. The department also found that in some cases money continued to be withdrawn from client accounts after the customer and/or insurer had cancelled policies.
An amended order of revocation issued by the Illinois DOI dated July 28, 2015, states that Fendler and NUM “processed unauthorized ACH and EFT withdrawals from the accounts of retail agents and customers.” It also states that on “two or more occasions,” NUM billed and collected premiums from consumers for insurance that was placed but “failed to disclose that the billed premium was in excess of the premium owed on the policy.” In addition, some cases “premium monies owed to consumers” was never returned, according to the July 2015 order, which assessed a civil penalty of $100,000 against Fendler.
The Missouri non-renewal order describes various complaints received by the DOI that are similar to those received by the Illinois DOI.
One of Fendler’s attorneys, Jim Allen, with Hinshaw & Culbertson LLC in Rockford, Ill., said he could not comment on administrative matters that are pending with NUM except to say that they are “pending and we’re hoping for good outcomes on those matters. … We’re certain we’ll resolve them.”
Allen added that NUM “is a smaller company that’s had some growing pains over the last number of years and is trying to get all the issues worked out. As you grow sometime companies experience issues. We’re confident we will work these things out.”
Complaints Continue
When asked about the many complaints regarding his company and the actions taken by both the Illinois and Missouri DOIs, Fendler attributed them to customers who just don’t want to pay the premiums they owe.
“There have been some people that are upset when they have a policy that may have canceled a year ago and they’re having funds ACH’d from their account. Well, that’s because they have funds that are due. … Those people filled out EFT or ACH papers with us that we have on file. Our contract states that if you have a balance that is due and you’re on ACH, the balance that’s due will be ACH’d. If you stop payment or you don’t have enough funds in there, we will send it to our collections company. And our collections company will attempt to ACH you,” Fendler said.
He added that in the last six months “through our collection efforts we have filed close to 90 lawsuits for around half a million dollars in very aged receivables. People that haven’t paid or people that owe for endorsements. People that owe for workers’ comp audits and haven’t paid or whatnot.”
Fendler said he set up the ACH system, which he says is unique for a managing general agency, as a courtesy to customers. “Your typical MGA binds a policy and bills the agent 100 percent of the premium right there on the spot. It’s a value-added service that we offer, allowing the agents to be able to sell a policy to their client that allows them to make monthly payments. It’s not something that many MGAs do,” Fendler said.
Despite Fendler’s claim that the bulk of the ACH withdrawals in dispute are in regard to overdue premium payments, the complaints against the company continue.
According to the Better Business Bureau of Rockford, Ill., 14 complaints have been filed against NUM in the last 12 months alleging that the “business made unauthorized drafts from consumers’ bank accounts.”
The Rockford BBB indicated that a June 8, 2016, review of newly closed complaints found that while NUM said it has provided customers with details of the procedures the company will use to address their concerns, “the pattern of allegations has continued. At this time the BBB has found that Northern Underwriting Managers, Inc. has failed to alleviate the pattern of complaints and will continue to monitor complaints against the business.”
Topics Insurance Wholesale Missouri Illinois
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