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Unlicensed Insurer Loses Challenge to Shut-down Order

7/31/2003


TALLAHASSEE -- A South Florida-based unlicensed insurance company that sought to hide behind a federal protection for Native American tribes has lost its challenge to use the protection to avoid an order from state regulators to stop selling its products in Florida.

United States District Judge Kenneth A. Marra issued a ruling for the Southern District of Florida on Tuesday granting the Office of Insurance Regulation's motion to dismiss Native Assurance Company, Inc.'s emergency motion for a temporary restraining order against OIR's action.


"Native Assurance sought to exploit a legitimate protection to help finance an illegitimate operation," said Florida's Chief Financial Officer Tom Gallagher, who oversees the Department of Financial Services. "This ruling affirms the state's right to protect its citizens."

In the past two years, 16 unauthorized entities selling insurance in Florida have been shut down and dozens of agents are facing disciplinary action, including suspension and revocation of their licenses. Under Florida law, agents can be held responsible for unpaid claims resulting from products they sold for unauthorized entities and can face felony charges. A new law passed this year also makes unauthorized entities subject to lawsuits and various felony charges depending on the amount of premiums collected.

"The Florida Office of Insurance Regulation has the utmost respect for the rights of the Seminole Tribe of Florida, which is why we coordinated our efforts with the tribe," said Michelle Newell, assistant director of the OIR. "In this case, however, we believe these operators were abusing the good name of the Seminole Nation for private gain."

The OIR issued an Immediate Final Order against Native Assurance in late June. Native Assurance was offering health, life and workers compensation insurance, soliciting customers and sales agents via an interactive website and several affiliates.


The department found out about Native Assurance when an agent called to ask about the company.

Native Assurance had never sought state authority to transact insurance in Florida, and claimed to be exempt from state regulation because its president is a member of the Seminole Indian Tribe. The company argued that only the federal government could regulate businesses owned by Native Americans. The Seminole Tribe of Florida has said it has no connection with Native Assurance.


In his four-page opinion, Judge Marra states that, "[W]hatever the current state of the law regarding tribal immunity from state regulation, there is no authority for a legal challenge by a Native American (let alone from a corporation and a non-Native American) against a state for prohibiting unlicensed, off-reservation selling of insurance."


"The issue of balancing the sovereign rights of Native American tribes against those who would seek to profit by abusing those rights has become an important issue nationally," said the OIR's Assistant General Counsel Susan Dawson. "I'm certainly pleased that Judge Marra ruled in favor of our motion."

The department has conducted a statewide media campaign for more than a year urging Floridians to "Verify Before You Buy." Consumers can verify a company's licensure at www.fldfs.com or by calling the department's consumer helpline at 1-800-342-2762.

Employers and consumers considering doing business with an unlicensed insurance entity are urged to consider that there is no oversight of the company's ability to pay claims and that there is no guarantee fund to cover outstanding claims should the company become insolvent. Consumers who have been victimized by unauthorized entities have reported damage to their credit and difficulty finding replacement coverage.

Gallagher said consumers who believe they have bought coverage from an unlicensed insurance operation should take the following steps:


·Replace the unlicensed coverage with coverage from a licensed insurer.

·Check the department's website to see if any prior action has been taken against the unlicensed entity and/or the agent who sold the plan. If so, download a copy of this information for your records.

·Send the agent a letter via certified mail stating that he/she sold you an unlicensed plan and by law (F.S. 626.901), the agent is responsible for any unpaid bills. Include a copy of the bills with a total amount of the unpaid bills in the text of the letter. Give the agent a deadline to contact you to discuss payment of the claims or to promptly send a check.

·Notify the Department of Financial Services that this agent sold you an unlicensed health plan so our office can take appropriate action.

·If coverage was obtained through an employer or professional employee organization (PEO), contact the employer or PEO for assistance. You may want to suggest that they may be liable for payment of the claims if the unauthorized entity or agent does not make prompt payment.