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April 2006

State: New York

Area of Interest Zurich Settles Bid Rigging Probe

Attorney General Eliot Spitzer and State Insurance Department Superintendent Howard Mills announced an agreement with one of the world’s largest insurance companies to resolve allegations of bid-rigging and improper "finite reinsurance" transactions.

Under the agreement, certain subsidiaries of Zurich Financial Services ("Zurich") will pay $153 million in restitution and penalties and adopt a series of sweeping reforms. In addition, Zurich has issued an apology acknowledging its improper conduct.

An Assurance of Discontinuance filed with the agreement alleges that Zurich was a full participant in a scheme to fix insurance prices in the excess casualty area.

For example, the assurance cites an e-mail from a Marsh & McLennan Company broker to a Zurich underwriter seeking a phony bid for an insurance contract that was being steered to one of Zurich’s competitors, AIG: "Can you give me a protective indication on this. It is an AIG renewal and AIG already quoted it so just give me a bad price with higher per occ. attachment and then we can be done with this."

Zurich complied with the request and sent Marsh a non-competitive bid to be used to deceive Marsh’s client

Source: State of New York

State: Ohio

Area of Interest: Greene County Women Indicted for Alleged $200,000 Insurance Fraud, Theft and Money Laundering. Two former dentistry employees face a combined 193 years in prison

Ohio Department of Insurance Director Ann Womer Benjamin announced that a Department investigation has led to the indictment of Xenia residents Alberta Faye Clark and Tammie Creamer for alleged insurance fraud, theft and money laundering totaling approximately $200,000. Clark was indicted on a total of 22 counts and faces 111 years in prison. Creamer was indicted on a total of 20 counts and faces 82 years in prison.

The Department opened its investigation in 2005 after receiving a complaint about Creamer from an insurance company, later learning of Clark's involvement. Both Clark and Creamer are former longtime employees of the dental practice of Clarence Lincoln Thomas III, DDS, located in Xenia, Ohio.

Creamer received free dental work from her employer, but from 2002 to 2005 submitted numerous false claims to her insurer totaling more than $30,000. Clark submitted a $3,000 fraudulent claim in 2002, also for free work performed by the dental office.

The investigation also determined that from 2002 to 2005 Creamer and Clark used various methods to allegedly embezzle nearly $170,000 from the practice. Creamer would purchase business supplies from Wal-Mart but she also made personal purchases, writing checks from the business account to Wal-Mart. Clark prepared numerous “extra” paychecks for herself and Creamer from 2002 to 2005. Due to statute of limitations issues, investigators began reviewing financial records from January 1, 2001 onward.

Source: State of Ohio

State: New York

Area of Interest: Psychotherapists Plead Guilty in No Fault Billing Scam

Attorney General Eliot Spitzer and State Insurance Superintendent Howard Mills today announced that two psychotherapists pleaded guilty last week in Brooklyn to submitting fraudulent bills to insurance carriers.

The defendants, Gabriel Feldmar, of Bayside, and Brian McCarthy, of Massapequa, provided medically unnecessary counseling to motor vehicle accident victims and then billed no-fault carriers for the unnecessary treatment and for counseling sessions which never took place or lasted no more than a few minutes.

Pursuant to a negotiated plea, Feldmar, a licensed psychologist, is expected to be sentenced later this year to one year in jail and a fine of $300,000. McCarthy, a psychotherapist employed by Feldmar, is expected to be sentenced later this year to five years probation and pay a fine to be determined.

Source: State of New York

State: Ohio

Area of Interest: Funeral Home Director Misappropriates $180,000 in Burial Insurance Premiums, Criminal Charges Possible

Ohio Department of Insurance Director Ann Womer Benjamin announced today that the Department has revoked the “pre-need“ limited lines insurance license of Mark Van Horn, owner of Van Horn Funeral Home, located in Shelby and Logan counties. The investigation has recovered more than $180,000 in burial insurance premiums that he allegedly misappropriated, which is a violation of Ohio insurance law.

Van Horn, who signed a consent agreement on March 10, 2006, has admitted nor denied to misappropriating premium dollars from 33 customers and two insurance companies from 2002 to 2005. He failed to submit the money to insurers from whom he secured “pre-need“ funeral coverage.

Source: State of Ohio

State: Kansas

Area of Interest: OSHA Cites W.S.I. Industrial Services, Inc. and Homrich Incorporated for Lead Exposure Hazards; Fines Total $381,700

W.S.I. Industrial Services Inc. and Homrich Inc. have been cited for alleged failure to protect workers from lead exposure on a demolition project in Olathe. The U.S. Department of Labor has proposed penalties of $212,500 against W.S.I. and $169,200 against Homrich.

W.S.I.'s serious citation was issued for failure to post warning signs about lead exposures. The willful citations allege workers were exposed to lead in excess of the permissible exposure level; initial lead exposure assessments were not conducted; respirators were not worn in lead-contaminated areas; protective work clothing was not provided; employees were allowed to drink water and smoke in lead-contaminated areas; neither shower facilities nor a clean change area were provided; and biological monitoring was not repeated, as required, two months after initial monitoring.

According to the serious citation for Homrich, the company failed to provide blood lead test results in writing to each employee. The willful violations included the employer's failure to perform an initial lead exposure assessment and provide appropriate respiratory protection and to ensure a clean change area for employees.

According to Adkins, W.S.I., which is headquartered in Romulus, Mich., has no previous OSHA inspection history. The company has 40 employees. Homrich, based in Carleton, Mich., has had 25 previous federal and state OSHA inspections from 1983 to the present. Sixteen of the inspections resulted in citations. Homich has 85 employees.

Both W.S.I. and Homrich have 15 working days from receipt of the citations to comply with them, request and participate in an informal conference with the OSHA area director or contest them before the independent Occupational Safety and Health Review Commission.

Source: Occupational Safety and Health Administration

Area of Interest: OSHA Issues Final Rule on Roll-Over Protective Structures Standards

The Occupational Safety and Health Administration (OSHA) has issued a direct final rule that regulates the testing of roll-over protective structures (ROPS) used to protect employees who operate wheel-type tractors.

The rule restores impact testing for protective frames on wheel-type tractors and an additional cold-temperature testing option under the construction standard. It also reinstates the exemption from field-upset testing option and an additional cold-temperature testing option in the agriculture standard. The final rule also contains minor plain language revisions that will improve comprehension and compliance with the standards.

The agency has since conducted a thorough evaluation of the original ROPS standards and those implemented under the 1996 technical amendment. OSHA reinstated the original ROPS standards forS construction and agriculture after identifying several substantive differences between the national consensus standards and the original standards.

Source: Occupational Safety and Health Administration

Area of Interest: S. Appeals Court Upholds Labor Department Decision Ordering Puerto Rico-based Airline to Reinstate and Pay Pilot Who Raised Safety Concerns

The U. S. Court of Appeals, First Circuit, Boston, has denied a petition by Vieques Air Link Inc. (VAL) to review a U.S. Department of Labor order mandating reinstatement and back pay for a pilot who was terminated from the Puerto Rico-based airline after he raised safety concerns.

The pilot filed a complaint with the U.S. Labor Department's Occupational Safety and Health Administration (OSHA) which investigates whistleblower complaints under AIR 21. OSHA's investigation found reasonable cause that the complaint had merit.

An Administrative Law Judge (ALJ) subsequently issued a concurring decision ordering the airline to reinstate the pilot and pay him a total of $72,315, plus interest, in back wages, compensatory damages and medical and legal fees. The department's Administrative Review Board upheld the ALJ decision, after which VAL petitioned the court of appeals.

OSHA administers the whistleblowing provisions of 14 statutes, including AIR 21, designed to protect employees who report violations of various trucking, airline, nuclear power, pipeline, environmental and securities laws.

Source: Occupational Safety and Health Administration

State: Florida

Area of Interest: Senate Committee Passes “Freedom to Travel” Bill

The Florida Senate Banking and Insurance Committee Tuesday passed the “Freedom to Travel” Bill that, if signed into law, will prohibit unfair discrimination based on a consumer’s past or future lawful travel plans in the purchase of life insurance.

Legislation was prompted after unfair discrimination in purchasing life insurance policies was spotlighted when a member of the U.S. Congress was denied life insurance because she answered questions on her application for a life insurance policy saying she might travel to Israel in the future.

The Senate bill would eliminate questions about lawful travel but would also provide a process to make exceptions to the bill using the rulemaking authority of the Florida Cabinet and allows companies to base coverage on questions about travel if the distinctions can be actuarially justified.

The rule would prohibit insurance companies from refusing coverage or charging different rates to consumers without actuarial justification.

Insurers whose applications include questions about past or intended travel have been directed to withdraw those forms unless or until the insurer provides the Office with actuarial justification for use of travel related questions. The Office identified about 50 life insurance companies licensed in Florida that use forms that ask unfairly discriminatory questions about lawful travel.

Source: State of Florida

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