SACRAMENTO ¯ Insurance Commissioner Steve Poizner today announced a quarter-million dollar settlement with Mercury Insurance Group for alleged claims handling violations. 

"It is vital that insurance companies put their customers first," said Commissioner Poizner.  "I'm pleased that Mercury has agreed to this settlement, which demonstrates that claims handling violations will not be tolerated in California.  Mercury recently announced that it is reducing rates for policyholders, and I am hopeful that the company will continue to put its customers first.  The Department of Insurance continues to make sure that all insurance companies are obeying the laws in place to protect consumers. "

The California Department of Insurance (CDI) conducted a review of consumer complaints filed with the Department against Mercury Insurance, Mercury Casualty, and California Automobile Insurance Companies, collectively known as Mercury Insurance Group.  Of the 121 files reviewed, a total of 258 violations were discovered to have occurred from January 2004 through December 2005.  These violations involved several of the company's claims-handling practices, including unreasonable delays in affirming or denying coverage and issuing claim payments.

Mercury Insurance Group will pay the Department of Insurance $250,000 in monetary penalties, as well as $50,000 for CDI's legal fees and enforcement costs associated with the case.  Additionally, if Mercury Insurance does not improve its performance standards - as evidenced by a 15% reduction in justified complaints - by December 31, 2008, it may be ordered to pay an additional $200,000.

Newsletter posted on 08-30-06 by stevekim@koraminsurance.com

Insurance Commissioner John Garamendi Announces Arrest of San Francisco Corporate Officer for 49 Felony Counts of Alleged Workers' Comp and Employment Tax Fraud

SAN FRANCISCO - Insurance Commissioner John Garamendi today announced the arraignment of Martha P. O'Neill, 40, of San Francisco, on 49 felony counts of alleged workers' compensation insurance premium fraud and employment tax fraud. O'Neill was arrested on August 2, 2006 in Atlanta, Georgia and remained in custody with a $1 million bail until she was arraigned at the San Francisco Hall of Justice. O'Neill is the corporate officer of Avoca Trucking and Excavating (AT&E) company.

The investigation was lead by the California Department of Insurance's (CDI), Fraud Division, with assistance from the Employment Development Department (EDD), the State Compensation Insurance Fund's (SCIF) Special Investigative Unit and the Franchise Tax Board (FTB).

"The type of crime alleged in this case is a tremendous added cost that hurts all of the employers and workers in California," said Commissioner Garamendi. "My Department is committed to rooting out fraud and preventing financial losses to consumers and insurance carriers."

According to investigators, O'Neill owned and operated AT&E since 1996 as a general engineering and building contractor. O'Neill worked primarily for the City and County of San Francisco and other Bay Area cities and counties. To do so she was required to comply with state laws, wage and union requirements. She employed over 100 employees from January 1, 2001 through June 9, 2005.

On June 9, 2005, with assistance from the EDD and the Franchise Tax Board, search warrants were served at five locations, including O'Neill's residence, her AT&E business, her bank institution and storage locations.

O'Neill allegedly underreported her employee payroll to State Compensation Insurance Fund (SCIF) by $2,255.172.66 and to EDD by $3,160,319. As a result, SCIF was defrauded out of $283,528.44 in premiums and EDD was defrauded out of $629,235.18 in payroll taxes (including penalties and interest).

O'Neill was charged with five felony counts of premium fraud; five felony counts of preparing false documents; three felony counts of knowingly providing a forged or fraudulent document; 30 felony counts of employment tax fraud; and four felony counts of taking a portion of workers' wages in connection with a public works project.

In addition, the San Francisco District Attorney's office has filed an enhancement charge as the taking of funds allegation exceeds $150,000. Upon conviction, an additional term of two years may be imposed. An additional enhancement charge of aggravated white collar crime was also filed as the loss exceeds $500,000. Upon conviction, an additional sentence of two, three, or five years may be imposed.

The cost of AT&E's workers' comp insurance is determined by the rate of pay for their employees, the total amount of earnings their employees receive and their job classifications. O'Neill is alleged to have underreported AT&E's payroll and workers' comp payroll reports to SCIF while intentionally making material misrepresentation to the insurance carrier for the purpose of paying a lower premium from January 1, 2001 through August 31, 2004.

Additionally, two employees were injured on the job while working for AT&E, and AT&E reportedly failed to report those injuries to the insurance companies, thus affecting the risk to the insurance company and its exposure to loss. AT&E is also accused of denying proper benefits to these two employees after they were injured on the job.

O'Neill also allegedly fraudulently misrepresented the AT&E payroll to San Francisco City and County Office of Labor Standards, the Operators Engineers Union, the Laborers Union and the San Francisco Tax Assessor's office. Her next court date is scheduled for September 27 in San Francisco.