Volume 3 Number 12
March 20, 2006

Department of Financial Services button
Consumer Services HelpLine Number 800-342-2762
e-mail CFO Tom Gallagher
Press Releases button
Previous Issues button
CFO location button
Subscribe to Eviews button
Unsubscribe to eViews button
Text Version button
 Florida Department of Financial Services logo

If you have recently bought a used vehicle, take a moment to read the following story and then check your vehicle identification number (VIN) on our VIN Check web page. Some 120 wrecked rental fleet vehicles were fraudulently resold in Florida, unknown to both dealers and buyers.

Part of a double-sided scam, the perpetrators defrauded insurance companies by declaring the cars as total losses, and then sold the cars to dealers who repaired them and sold them to unsuspecting consumers. The titles do not reflect that the vehicles were reported to insurance companies as totaled or salvage status.

The damage to the vehicles may not have been as bad as originally reported on the insurance claims, but the cars may be less valuable because records show the cars were totaled.   

To check your vehicle’s VIN number to see if it matches any of the 120 resold vehicles, go to www.MyFloridaCFO.com and click on “Fleet vehicle resell scheme VIN check” at the top of the page. Enter your VIN number and follow the instructions if the entry matches a number and description in our database.

Read on for more information on this resell scheme. For your and your family’s safety, please make sure you are not inadvertently driving a dangerous vehicle.

If you have information about this scheme, please call our Fraud Fighters’ Hotline at 1-800-378-0445.


Legislative Initiatives for 2006 button

 

CFO Gallagher and Senator Rudy Garcia support legislation in Congress to create a national catastrophe insurance plan.
 

 

 

Senator Garcia, CFO Gallagher, Rep. Dick Kravitz, Rep. Ralph Arza  and Rep. Dennis Ross call for the creation of a federal risk-financing fund.

GALLAGHER, HOUSE AND SENATE INSURANCE CHAIRS TELL CONGRESS: PASS NATIONAL CATASTROPHE PLAN

GALLAGHER SAYS NATIONAL PLAN WOULD STRENGTHEN FLORIDA’S INSURANCE MARKET AND IMPROVE AVAILABILITY OF COVERAGE

Tom Gallagher, Florida’s chief financial officer, joined Sen. Rudy Garcia and Rep. Dennis Ross to renew calls on Congress to support legislation to create a national catastrophe insurance plan. Garcia and Ross are sponsoring a legislative memorial which outlines the need for action by Congress to establish the plan. The call for such a program represents one of numerous reforms Gallagher has proposed to stabilize Florida’s property insurance market.

“Just this past week we have seen tornadoes in the Midwest, wildfires in Texas and the plains, and levees and dam breaks caused by heavy rains in California and Hawaii,” said Gallagher. “With 115 major disaster declarations in more than 30 different states over the past two years, we - as a nation - need to share the cost of preparedness for catastrophes.”

“Floridians are bearing the burden of paying higher insurance premiums, and too often they are not able to find insurance coverage at all,” said Garcia, chairman of the Senate Banking and Insurance Committee. “A national catastrophe plan is a long-term solution for improving our insurance market and would back up our state’s catastrophe fund.”



“Floridians have been through eight hurricanes and over $30 billion in losses over two years, and we have seen other states suffer severe losses as well,” said Ross, chairman of the House Insurance Committee. “Experts predict that it is a question of when, not if, one of the state insurance markets eventually fails. I don’t want Florida to be one of those states.”
CONTINUED


 

 

GALLAGHER TAKES ACTION AGAINST NATION’S LARGEST BROKER FOR BID RIGGING AND PAY-TO-PLAY SCHEMES

Tom Gallagher, Florida’s chief financial officer, filed suit against the nation’s largest insurance broker, Marsh & McLennan, and its affiliates for bid rigging and illegally steering their clients to certain insurers in exchange for improper commissions. Today’s action is based on a joint investigation by the Department of Financial Services, Office of Insurance Regulation and the Attorney General’s Office.

“Marsh and its affiliates were more interested in getting kickbacks than getting the best deals for their clients,” said Gallagher, who initiated an investigation into broker practices in November 2004. “My goal is to ensure that Floridians are refunded for the millions of dollars in fees or commissions they were improperly charged.”

The New York-based company is the nation’s largest broker of commercial and liability coverage used to insure electric utilities, government buildings, low-income housing, municipal utilities and private businesses. Brokers advise their clients on insurance needs and options, and represent their clients in negotiating the price and terms of coverage with insurance companies. According to Gallagher, Marsh and its affiliates brokered approximately 15,000 insurance contracts in Florida between 1998 and 2004 for public entities and private businesses in Florida.
CONTINUED


 

 

 

GALLAGHER ANNOUNCES $8 MILLION IN RESTITUTION

Zurich American Insurance Co. agrees to refund customers in Florida

Tom Gallagher, Florida’s chief financial officer, announced that his department, as part of a multi-state coalition, has entered into a settlement with Zurich American Insurance Company in response to bid-rigging and price-fixing allegations. Florida victims – businesses, non-profit organizations and governmental entities – will receive nearly $8 million under the settlement.

"Bid-rigging and ‘pay-to-play’ schemes will not be tolerated in Florida,” said Gallagher, who oversees the Florida Department of Financial Services.  “Insurance companies and brokers will not get away with deceiving their customers, inflating prices and corrupting the insurance marketplace."  

Zurich allegedly paid undisclosed contingent commissions to insurance brokers and conspired with certain insurance brokers in a "pay-to-play" scheme to overcharge customers for commercial insurance policies.  In addition, Zurich allegedly submitted fake bids in order to create the illusion of a competitive bidding process, when in fact the broker had pre-designated another insurer as the winner at an inflated price.  Zurich was allegedly rewarded for submitting fake quotes by receiving protection from competition on other lucrative accounts.

The multi-state coalition did an extensive investigation of Zurich's conduct.  Zurich is one of the first insurance companies to agree to reimburse customers, disclose future contingent commission payments, and implement conduct reforms that change the way the company does business. The multi-state settlement provides $171.7 million in restitution to nine participating states, including Florida.

Gallagher launched an investigation into insurance broker activities in November 2004.  His office is still investigating the conduct of other insurance brokers and insurance companies.  “Insurers and brokers that engage in unacceptable conduct will be held accountable," Gallagher said. 

The settlement will be enforced through a judgment in state court, as well as through a multidistrict federal action in New Jersey.  It is still subject to court approval.

Read the settlement agreements at
http://www.MyFloridaCFO.com/PressOffice/pdfs/ZurichMultiStateAGAgreement.pdf and
http://www.MyFloridaCFO.com/PressOffice/pdfs/NAICSettlementAgreement.pdf.


 

FRAUD DIVISION’S AGGRESSIVE PURSUIT OF WORKERS’ COMP FRAUD LEADS TO REDUCTION IN PREMIUMS

Tougher Laws Lead to More Fraud Arrests, Lowered Cost for Business Owners

Tom Gallagher, Florida’s chief financial officer, announced that the Department of Financial Services, Division of Insurance Fraud’s aggressive pursuit of workers’ compensation fraud is leading to increased arrests and lower costs for Florida’s small businesses.

In fact, the Division is on target to surpass last year’s record of 213 workers’ compensation fraud arrests. In February 2006 alone, the division made 25 workers’ compensation fraud arrests – almost one a day – and since July 1, 2005, has arrested more than 153 individuals on charges of workers’ compensation fraud.

Arrests, along with laws passed in 2003 that created tougher penalties for workers’ compensation fraud, have pushed workers’ compensation premiums down for three consecutive years. Gallagher spearheaded the passage of Senate Bill 50A in 2003 that reformed the state's workers’ compensation system, including tougher penalties for workers’ compensation fraud and premium evasion. Workers’ compensation rates have dropped by more than 30 percent in the last two years, generating nearly $1 billion in savings.

“Meaningful reforms, more aggressive investigation of workers’ compensation fraud and compliance efforts have led to dramatic savings for Florida’s businesses,” Gallagher said. “We will continue to aggressively investigate cases of suspected fraud to continue to improve the system for our small businesses and our workers.”
CONTINUED


 

CHECKLIST OF COVERAGE

CFO GALLAGHER ANNOUNCES CONSUMER CHECKLIST

Pro-consumer measure will empower homeowners

Thanks to changes to Florida law pushed by Tom Gallagher, Florida’s chief financial officer, homeowners now have another resource they can rely on to prepare for future hurricanes. Insurance companies in Florida will now be required to include a simple checklist on the front of all homeowners policies delivered in Florida.  The checklist will make it easier for policyholders to discuss their coverage with their insurance agent and will clearly show if they have enough coverage to rebuild after a catastrophe.

Gallagher along with Governor Bush and the other members of the Financial Services Commission approved the final checklist for use.   All insurance companies will have to have their agents include a completed checklist on the front of every homeowners, mobile homeowners, or condominium insurance policy.

 “This checklist is another important step toward continuing to create a culture of preparedness in Florida,” said Gallagher.  “By arming Floridians with the tools and information they need to prepare their finances, their homes, and their families, we can help reduce the toll future storms may take on our state.”
CONTINUED