State says insurance agents broke law

BY MARGARET ANN MIILLE
SARASOTA HERALD TRIBUNE
06/06/02

SARASOTA -- State officials say three Sarasota insurance agents broke the law when they sold bogus health policies for a New Jersey company.

In a recently filed cease-and-desist order, the Florida Office of Insurance Regulation named three employees at HRH of Southwest Florida among other "affiliates" who were told to stop selling plans offered by Meridian Benefit Inc. HRH is a division of the national insurance brokerage Hilb, Rogal and Hamilton Co. of Virginia.

Meridian is a Wayne, N.J., company that state regulators say operated illegally and under false pretenses in Florida. The company sought bankruptcy protection in its home state last month.

A flood of consumer complaints about Meridian's failure to pay their medical bills prompted state and federal investigations months ago.

The HRH employees named in the order are John B. Cunningham, the president; Bradley Walter Beshore, an accounts executive; and Zenda Alethea Mayer, an employee benefits service representative.

The state hasn't filed administrative complaints against the HRH workers, as it has against some other affiliates of Meridian and two other unlicensed insurance entities it also recently ordered to stop operating in Florida.

Administrative complaints filed against individuals could lead to disciplinary action against their licenses, said Nina Banister, spokeswoman for the state Department of Financial Services. They also could be fined.

"Under Florida law in all of these cases, we are holding their licenses in one hand and the administrative complaints in the other," she said. "We are going to be asking these agents to take care of unpaid claims they are ultimately responsible for."

Banister said she couldn't say whether other administrative complaints are pending against HRH or affiliates of the two other companies named in their own cease-and-desist orders -- Progressive Health Alliance, which has offices in California and Missouri, and Bertany Association for Travel and Leisure, based in Plantation.

But the state has other options in cracking down on unlicensed insurance entities and the people who sell their policies, she said. For example, the Division of Insurance Fraud can also recommend to state attorneys that criminal charges be filed.

HRH sold Meridian policies to about 10 employers in Southwest Florida, including Mote Marine Laboratory, Family Counseling of Sarasota County Inc., and Sarasota Land Services Inc. of Bradenton.

Cunningham said earlier this week that he had no immediate comment because he had seen only a press release about the cease-and-desist order and not the order itself.

The order, dated May 23, was mailed to HRH and must be signed for. As of Thursday, the Office of Insurance Regulation hadn't received confirmation that it was received.

Besides instructing the affiliates to stop selling Meridian policies, the order said they must notify each employer to whom they sold them.

The HRH employees have 15 days from the filing date of the order, or until June 7, to give state officials a list of all Floridians who got Meridian coverage through them.

Earlier in the week, Cunningham said HRH stopped working with Meridian in late April, once it became apparent the company was having financial problems.

All HRH clients affected by the Meridian mess have since acquired other health plans, he said.

Cunningham said he sold the product as it was represented to HRH -- as a single-employer trust.

According to the order, Meridian represented itself as a third-party administrator for a health benefits plan, claiming it provided coverage for health, dental, and pharmaceutical benefits. But Meridian never held a license to sell insurance in Florida or act as an administrator.

This type of plan called for employers to pay a set amount of money into a dedicated trust account administered by Meridian. Claims and losses were to be paid from that account. If they exceeded the amount in the trust, they were supposed to be covered by Meridian's stop-loss insurance.

But Meridian didn't have that kind of insurance, the order said.

In a letter dated last month to the Florida Department of Financial Services, a senior vice president of the American National Insurance Co. said HRH was instructed a year ago not to use the ANICO name in relation to Meridian, because Meridian had no reinsurance coverage through the company.

Still unknown is the total claims unpaid by Meridian.

Documents made public by Florida officials show that in February Meridian told Family Counseling that its trust was $163,670.75 in the red. A letter addressed to the nonprofit the same month said the employer needed to pay that amount or face a 200 percent premium increase beginning May 1.

Tom Crawford, executive director of Family Counseling, did not return calls for comment.

In October, it became a felony for licensed insurance agents in the state to sell unlicensed products. During the last two years, state officials have shut down 14 companies.