Consumer eViews

Volume 3, Number 12, March 20, 2006

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 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.

-- Tom Gallagher



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.”

The memorials presented today, SM 1596 and HM 541, both urge Congress to support a bill introduced by Florida representatives Ginny Browne-Waite and Clay Shaw, Jr., which calls for the creation of a fund that would help pay for losses resulting from natural disasters that exceed a state’s financial ability to recover. Events that would be covered include hurricanes, earthquakes, typhoons, volcanic eruptions, blizzards and ice storms. The national fund would be modeled after the Florida Catastrophic Hurricane Fund proposed by Gallagher in the wake of Hurricane Andrew in 1993.

In addition to calling for the creation of a federal risk-financing fund, the memorial promotes personal responsibility by encouraging the use of disaster mitigation tools and the ability to manage tax-free disaster savings accounts. These accounts would be allowed under federal legislation recently introduced by Florida Rep. Tom Feeney.

The memorial also encourages strong building codes and land use management techniques, in addition to improved state emergency management procedures.

To increase the amount of homeowners’ insurance coverage that is available, the memorial calls for allowing insurance companies to accumulate tax-deferred catastrophic reserves that would be used to pay policyholder claims. This would generate an estimated $15 billion worth of additional catastrophic reserves.

At a meeting of the Florida Cabinet today, Gallagher also approved a resolution appealing to Congress to create a national catastrophe plan for property owners.

Gallagher has also proposed Citizens Property Insurance Corporation only insure homes with values under $1 million and easing the financial burden of Citizens’ assessments on Florida homeowners. He also wants to help Floridians hurricane-proof their homes.

HM 541 is scheduled to be heard in the House Insurance Committee.


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.

Gallagher said the Department’s complaint charges Marsh and three of its affiliated companies with numerous violations of Florida’s Racketeer Influenced and Corrupt Organization (RICO) Act. Specifically, the complaint accuses Marsh of engaging in a pattern of racketeering activity, including soliciting hidden payments in the form of contingency commissions, and steering hundreds of millions of dollars in business to insurance carriers willing to “pay-to-play.”

Gallagher said that Florida’s RICO Act provides for restitution of up to three times the amount lost due to the unlawful conduct, as well as injunctive relief, and revocation of authority to conduct business in the state.

The complaint also outlines how Marsh collected undisclosed commissions in its insurance deals on behalf of its clients, even though some of those contracts expressly prohibited such payments. Legal pleadings provided the following examples of misconduct:

•Marsh claimed to accept only a fixed fee starting at $80,000 a year from the Jacksonville Electric Authority to help secure its property and employee health insurance, but did not disclose to the JEA that it had accepted at least another $188,000 from the insurers to whom it gave the JEA’s business.

•Marsh signed a contract with Miami-Dade County agreeing to be paid a flat fee of $100,000 a year to place property insurance for the county’s water and sewer department. However, Marsh received an additional $140,000 from the insurers who got the business – and failed to disclose the additional income to Miami-Dade County.

•Marsh “targeted” a 25-percent premium increase in 2003 for its Miami-based client Burger King, and took steps to make sure that all competing insurers submitted bids with a uniform premium increase.

•Marsh “rigged” a purportedly competitive bid for Plantation-based DHL’s excess auto insurance coverage, in favor of the insurer already providing coverage to DHL, by soliciting a sham “protective quote” from a different insurer that was $200,000 higher than the incumbent insurer’s bid. The “protective quote” was designed to create the appearance of competitive bidding, although Marsh had already arranged to award the business to DHL’s previous insurer. The incumbent insurer paid Marsh a commission in return for keeping DHL’s business. A key Marsh employee involved in this illegal transaction has pled guilty to restraint-of-trade charges in New York.

Gallagher said his department, along with the Office of Insurance Regulation and the Attorney General’s Office, is also investigating allegations of bid-rigging, kickbacks and improper fees between other insurance brokers and insurance companies in Florida.

“If brokers and insurance companies are manipulating the law for personal gain and driving up insurance costs for consumers, then we need to seek restitution where appropriate and take swift action to prevent further abuses,” Gallagher said.

The complaint can be read at


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 and


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.”

Recent arrests include:

The Department of Financial Services, Division of Insurance Fraud, investigates fraud in all types of insurance, including health, life, auto, property and workers’ compensation. To report information about this case or any other possible insurance fraud case, call the department’s Fraud Fighters hotline at 1-800-378-0445. A reward of up to $25,000 is offered for information leading to a conviction.

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.”

The consumer checklist is just one of the pro-consumer reforms that Gallagher successfully fought for in the wake of the 2004 hurricane season. Gallagher has renewed his calls for more pro-consumer measures in the wake of the 2005 hurricane season, and is working with the Florida Legislature to enact comprehensive reforms to Florida’s insurance market.

One provision of the new checklist requires insurance companies to list not only the percentage of a hurricane deductible but also list the actual dollar amount in large type.  Gallagher successfully pushed a law limiting hurricane deductibles to one per season, after some victims of multiple hurricanes discovered they were responsible for up to three deductibles.  Also, the dollar amount of all coverage must be listed in large type, including the coverage limits for the main dwelling, all detached structures, personal property and contents. The checklist must detail the amount of living expenses that will be paid if the policyholder has to leave the home and the amount of time the expense money will be paid.

The checklist also contains a list of perils that could damage a residence and each item must be accompanied by a yes or no on whether it is covered.  Any additional property or liability coverage must also be listed along with the dollar amount of the coverage.  Floridians with insurance questions or concerns can call Gallagher’s consumer helpline at 1-800-342-2762 or go to  The checklist can be found at

Consumer Services HelpLine
(800) 342-2762