Fraud of the Month: Agents steal premiums

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The list of insurance agent Kevin Donnellan’s potential victim clients runs for 70 pages, with about 650 names. They think they have insurance for their homes and cars. They may not, and could be financially wiped out in a heartbeat.

Officials are trying to contact the St. Joseph, Miss. man’s clients to warn them. Donnellan stole client premiums without buying them coverage he promised. They’re dangerously uninsured in case of a life-altering catastrophe such as a crash or fire. 

The vast majority insurance agents and brokers are ethical and honest. Yet a disturbingly large number of dishonest agents ply their trade around the U.S. They exploit their position of trust to defraud clients who come to them for the safety and security of insurance. 

Perhaps most often, unethical agents steal client premiums, send them fake policies, then spend the premiums on luxuries such as vacations and cars. Consumers should watch for warning signs and make sure they receive the coverage they pay for. Here’s why:

Policy was cancelled
Donnellan’s scam came to light when a client was involved in a car collision. The other driver’s auto insurer and her own insurer sued her. When she looked into the allegations, she found that her own auto policy was canceled earlier. Donnellan hadn’t bought the policy after handing him her auto premiums. 

The woman called police, who investigated. Donnellan gave the insurers false addresses and phone numbers for clients when setting up policies. Thus the clients didn’t receive any notice from insurers that their premiums were unpaid and policies cancelled. 

They only learned they were duped after making claims that were denied after their policies were cancelled. Donnellan pled guilty and awaits sentencing. He also must repay all victims. Officials are still working to identify them, potentially hundreds just as vulnerable as the woman in the collision.

Then there’s Cody Damron. He owned Cowboy Capital Insurance in Stephenville, Tex. Storms brought hail and high winds to the area. Homes and businesses were damaged across Erath County. Damron’s clients started filing damage claims. Anxious for repairs, the clients discovered they were unprotected when their insurance companies stunned them with the news that they had no policies. One of Damron’s own employees blew the whistle, leading to his conviction.

Jeremy Lee Olson stole premiums from clients in the Clarkfield, Minn. area. A client suffered a house fire yet couldn’t collect the full amount for fire-damaged vehicles because the policy was cancelled. The client suffered A $5,864 uninsured loss.

Truckers without coverage
Truckers trusted John Paul Kill to buy insurance that protected their livelihoods — their cargo and trailers.

More than 800 trucking firms in nearly a dozen states paid the Atlanta-area broker $3.7 million of premiums for coverage. Except Kill never bought them insurance — they were driving the crowded highways totally unprotected. In other cases, Kill bought the truckers far smaller policies with less protection than he promise yet charted them higher premiums for larger policies.

Kill placed their premium money in his personal bank account and sent out fake policies. He paid some claims from his own pocket to hide the thefts. 

Many agents also act as financial advisors and handle client investments. These clients place their savings and financial security in their agent’s hands. 

Clients considered amiable agent Joseph Ramiro Garcia their friend. He repaid their friendship by stealing nearly $587,000 from his clients’ IRAs and 401(k) accounts. Clients had placed their money in a bank account the Brea, Calif. man controlled. He promised their retirement funds would be rolled into better-paying plans. One victim was a 91-year-old woman.

Shawn Heffernan spent client $1.5 million of client investments on jewelry, a Maserati, wedding and other luxuries. The San Diego agent’s victims included seniors and a dependent adult. He was handed nine years in state prison. 

Agents are largely an ethical bunch, the bulwark of the insurance system. Yet there are enough swindlers that consumers should follow an old adage when buying insurance: Trust, but verify.

Jim Quiggle is director of communications for the Coalition Against Insurance Fraud