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Gallagher Applauds Bill Tightening Criminal Penalties for Sale of Unlicensed Insurance in Florida

3/26/2003

CONTACT: Nina Banister
(850) 413-2842

TALLAHASSEE – Florida's Chief Financial Officer Tom Gallagher praised the Senate Banking and Insurance Committee's passage Tuesday of a bill that would provide stronger criminal penalties for operators of unlicensed insurance entities who sell their bogus products to Floridians.

Senate Bill 1680, sponsored by Committee Chairman Sen. Bill Posey, R-Rockledge, has been dubbed the "Pete Orr Bill" for the late NASCAR-circuit driver from Montverde, Fla., who died last year while he helplessly watched unpaid bills pile up after TRG Marketing Group, an unlicensed entity based in Indiana, refused to pay his cancer-treatment claims.

"This is a giant step toward greater protections for Florida insurance consumers," said Gallagher, who as Chief Financial Officer oversees the Department of Financial Services. "Thousands of our citizens have been financially devastated by rogue unlicensed entities who sell coverage with no intent or no ability to pay claims. I applaud Senator Posey's efforts in pursuing these penalties and solutions to this problem. "

"Pete Orr died an unfortunate and untimely death, and his death was even more tragic in that he died worrying about the unpaid bills he was leaving behind," Sen. Posey said. "No one should suffer through that when they have paid premiums in good faith."

The bill that passed through the Senate committee Tuesday afternoon would allow individuals who operate an unlicensed insurance entity and peddle their products in Florida to be charged with a first-, second-, or third-degree felony charge of insurance fraud based on the dollar value of premiums collected. The bill also would provide a procedure for policyholders to civilly sue these operators and their unlicensed entities.

Gallagher, as the state's former Insurance Commissioner, has ordered nine unlicensed entities, including TRG, to cease operations in Florida. Gallagher has also taken action against several agents as he continues to identify all agents who knowingly sold unlicensed policies.

Administrative orders against unlicensed insurance entities will now be signed by Kevin McCarty, who was formally appointed today as director of the Office of Insurance Regulation, housed within the Department of Financial Services. Gallagher will continue to sign orders against agents.

"Unlicensed insurance entities not only pose a financial threat to consumers but also leave them vulnerable to becoming uninsurable because of the gap in continuous coverage," McCarty said.

More than 30,000 Floridians have reported being left with millions of dollars in unpaid claims as a result of being duped, many by their agents, into buying coverage from unlicensed entities. Gallagher said this deception is being carried out by a very small percentage of Florida's licensed agents.

Because these entities are not licensed in Florida, they are not regulated and therefore there are no assurances of their ability to pay claims. Further, unlicensed insurance entities are not protected by any state guaranty fund that is available to licensed insurance companies that may find themselves unable to pay claims.

Employers and individuals shopping for health insurance coverage are urged to check with the Department of Financial Services to be sure they are dealing with a Florida-licensed insurance company and a Florida-licensed insurance agent. Licensed agents must pass a test demonstrating a basic understanding of the business of insurance and state law. Further, licensed insurance companies typically will not work with an unlicensed agent and may not honor a contract signed by one.

To check on the license status of companies and agents, consumers should visit www.fldfs.com or call the Department of Financial Services' Helpline at 1-800-342-2762.