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Insurance claims adjuster sentenced to prison time
He worked as a claims adjuster for Allstate between 2015 and 2019
Insurance claims adjuster sentenced to prison time
Insurance News
By Jonalyn Cueto

Oct 23, 2023

A Raleigh man has been sentenced to more than one year of prison time after pleading guilty to accusations of wire fraud and money laundering. Apart from prison time, Massey was also ordered to complete three years of supervised release and to pay over $860,000 in restitution.

According to federal prosecutors, Paul Richard Massey, 51 years of age and a resident of Shady Spring, admitted to issuing fraudulent payments as an insurance claims adjuster and using the money to fund a powersports business he owns.

Fraudulent transactions and activities admitted
Massey worked as a claims adjuster for Allstate Insurance Company between 2015 and June 2019, and during his employment was routinely assigned claim files to investigate when Allstate customers filed claims under their insurance policies.

Allstate had provided Massey with the authority to investigate assigned claims as well as determine coverage and work with insured customers and other stakeholders to resolve the disputed claims. Among other things he was entrusted was issuing settlement check payments to policyholders and businesses.

The federal prosecutors said Massey admitted to authorizing and issuing a check on Dec. 26, 2018 amounting to more than $15,000 on behalf of Allstate to a business called American Mitigation Services LLC, also known as AMS Cleaning. The check issued for AMS Cleaning was allegedly for work performed and thus deposited into AMS Cleaning’s bank account. Massey admitted it was fraudulent as AMC Cleaning completed no work to justify the payment.

Massey also admitted that he had a business relationship with AMS Cleaning and was an authorized signer on the business’ bank account.

Among the things Massey admitted was authorizing and issuing 68 fraudulent claim payment checks on behalf of Allstate amounting up to over $850,000 to AMS Cleaning between January 2018 and June 2019, federal prosecutors said.

Massey had attempted to cover the fraudulent nature of some of the checks by creating fraudulent receipts and documents. He also used the fraudulent claims payments deposited in AMS Cleaning’s bank account to fund Massey Powersports LLC, which he owned and operated.

The investigations revealed Massey routinely wrote checks from AMS Cleaning’s bank account to fund Massey Powersports, including payments for employees and purchasing inventory as well as paying for recurring bills.

Massey also admitted that in December 2018, he wired more than $100,000 from AMS Cleaning’s bank account to a North Carolina business in a fraudulent transaction to prepay for tractors intended for Massey Powersports, federal prosecutors said.

They also Massey attempted to conceal his scheme from investigators by falsely stating that he had no financial interest in AMS Cleaning. They said he had also provided the FBI special agents with a detailed, false story about this fraudulent story.

In response to a federal grand jury subpoena, Massey created and submitted a fictitious $1 million contract to supposedly show AMS Cleaning was sold to a fictitious company prior to his scheme.

Head Scratcher? Claims Litigation Not Named as Major Factor in Florida Insolvencies

July 26, 2023 by William Rabb

Despite years of complaints from Florida property insurers and some lawmakers that out-of-control claims litigation was destroying the industry, recent regulators’ reports about the reasons for insolvencies make no mention of the “L-word.”

The omission has prompted some head scratching and new questions by policyholder representatives.

“That’s ridiculous,” said Gina Clausen Lozier, a south Florida plaintiffs’ attorney. “You’d think with all the concerns about litigation in the last few years that would be number one on the list.”

The Florida Department of Financial Services’ Division of Rehabilitation and Liquidation posted its 2022 Annual Report in April. It recently caught the eye of advocates for homeowners, policyholders that have seen premiums spike in Florida while at least 10 insurers have become insolvent since early 2021. The R&L report’s page 7 lists “factors contributing to insolvency,” including:

Inadequate capitalization or asset deteriorationImproper managementInsufficient claim reservesRapid premium growthInappropriate transactions with affiliates or subsidiariesInadequate premium ratesNatural disasters or catastrophic lossesChange in business conditionsReinsurance market issues.

Claims litigation, which industry supporters have often called the number-one reason for insurers’ financial troubles in Florida, and which led to major legislative reforms in the last five years, is not mentioned directly in the report. That suggests that insurance leadership and corporate structure, not trial lawyers, are more to blame for mismanaging operations and failing to maintain adequate reserves, said Doug Quinn, executive director of the American Policyholder Association, a national, non-profit group that advocates for investigations into insurers’ claims practices.

“All of the finger-pointing and scapegoating at consumer fraud, excess litigation, and roofing scams are just to divert attention away from what’s really going on behind the scenes,” Quinn said. “There’s a lot of finger-pointing at outside parties, but failing at business is an inside job.”

A Department of Financial Services official, responding to questions from Insurance Journal, said claims litigation is a factor behind the factors listed in the report. The R&L annual report examined insolvencies from 2017 through 2022, including the liquidations of St. Johns Insurance Co., Avatar Property and Casualty Insurance, and Southern Fidelity Insurance, said Devin Galetta, communications director for Florida’s chief financial officer, Jimmy Patronis.

“While the words ‘claims litigation’ do not appear on that particular page, the reality is that during the period covered by these reports, 79% of the nation’s homeowners insurance lawsuits were filed in Florida while the state only accounted for 9% of the nation’s homeowner’s insurance claims,” he said in an email, citing an oft-quoted statistic compiled by the Florida Office of Insurance Regulation, based on data from the National Association of Insurance Commissioners.

“‘Claims litigation’ is a driving factor for many of the listed insolvency factors, including asset deterioration, insufficient claims reserves, inadequate premium rates, reinsurance market issues and changing business conditions,” Galetta said.

He added that litigation is not the only force behind recent insolvencies. “But it is a throughput that causes a wide variety of disruptions to the insurance market as initial estimates of a storm’s cost continue to increase for months or years after a storm makes landfall, due to litigation costs.”

Other factors include sharply rising reinsurance prices and inadequate premium levels, which are included in the report.

The spike in reinsurance rates in the last three years reflects excessive claims litigation as much as anything, said Kevin Comerer, a consultant and registered lobbyist with Rubin, Turnbull & Associates, in Tallahassee. He was previously legislative director for a major Florida property insurer. Comerer noted that reinsurers have pulled back from the Florida market and have raised prices in large part because litigation soared between 2018 and 2023.

“You were seeing losses in year two and three that were equal to or greater than year one after a hurricane, and that was all because of an explosion of roof claims and lawsuits,” he said.

The R&L annual report isn’t the only regulatory document that doesn’t emphasize litigation as a driving force.

The division is required by state law to produce port-mortem reports each time an insurer is deemed insolvent. The division’s website lists insolvency reports only through 2019, but Galetta provided initial reports for four insurers that went out of business in 2022 and 2023: United Property and Casualty Insurance Co.; FedNat Insurance; Weston P&C; and Southern Fidelity.

In two of those reports, for FedNat and for Weston, claims lawsuits, litigation and attorneys fees were not listed.

“Despite significant capital infusions in 2020 and 2021, FNIC’s surplus as regarding to policyholders continued to decline,” the 7-page FedNat report notes. “Additional factors included poor operational results, limited access to additional capital, and a jeopardized financial stability rating.”

For Weston, the division said weather events played a significant role.

“The company had insufficient assets or reinsurance to pay potential claims to policyholders during the 2022-2023 Atlantic Hurricane season,” the report said. “Despite actions taken by Weston to improve its financial condition, including a Capital Management Plan and Risk Based Capital Plan, Weston’s surplus as regards policyholders continued to deteriorate and ultimately led to the company’s referral for delinquency proceedings.”

For United and Southern Fidelity’s delinquency proceedings, lawsuits were named as one contributor.

“UPCIC’s losses over multiple years affected its surplus,” the United report noted. “The large percentage of litigated claims drove up its costs. The $140 million reserve deficiency related to Hurricane Ian in September 2022 resulted in the company’s referral to the Department for delinquency proceedings.”

Florida insurance defense attorneys, carrier executives, industry lobbyists and prominent legislators in recent years have also pointed to assignment-of-benefits agreements as a major problem, leading to widly inflated roof and water-damage claims and unnecessary litigation. The Florida Legislature in 2019 approved measures to limit AOBs. In 2022, lawmakers barred one-way attorney fees in AOB litigation, then outlawed AOBs altogether.

Only the Southern Fidelity insolvency report lists AOBs as a factor.

“Litigated claims related to Assignment of Benefits claims drove up costs in 2014-2015,” the report reads. “Losses from Hurricane Ida in 2021 are projected to exceed the top of the company’s catastrophe reinsurance tower. Ultimately, Southern Fidelity’s failure to secure a reinsurance program for the 2022 hurricane season and the late development of reserves for Louisiana claims exhausted the remaining surplus which resulted in the company’s referral for delinquency proceedings.”

Quinn and others have maintained that litigation has played a smaller role in financial losses than industry leaders have said, and intricate corporate structure and “profit shifting” are more to blame. At the May 2022 Florida special session on insurance reform, several Democratic lawmakers, including then-state Sen. Gary Farmer, D-Broward County, said that a number of companies had diverted profits to managing general agencies, leaving the actual insurance companies with inadequate reserves.

Quinn suggested the DFS reports bear that out with their references to “inappropriate transactions with affiliates or subsidiaries.”

“Properly managed and reserved companies do not go under,” Quinn said.

Industry advocates have strongly disagreed, noting that most insurers would not deliberately bleed themselves dry. Instead, they have argued, under the perfect storm of Florida statutes and court decisions that evolved over the last two decades, claims lawsuits and fraudulent roof claims became a cottage industry that exploded as some plaintiffs’ attorneys took advantage of prevailing-attorney fees and fee multipliers.

Farmers Insurance continues to cancel policies due to wildfire risk
by Lyle Adriano 16 Feb 2023
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Farmers Insurance continues to cancel policies due to wildfire risk
Amid spiking insurance rates, Farmers Insurance has been canceling property insurance policies in San Diego, CA communities due to wildfire risk.

The insurer recently dropped renewal for 115 condominiums in Scripps Ranch, citing their heightened wildfire risk. Over the past few weeks, Farmers had also canceled or dropped the renewal of policies for 338 condo units in Rancho Bernardo, 320 units in Tierrasanta, and 240 units in Mira Mesa, all for similar reasons. Altogether, the insurer canceled over 1,000 insurance policies in the region.

CBS 8 reported that if the Village Woods condo complex in Scripps Ranch were to look for a replacement policy on the secondary market, it would cost condo owners an additional $500 a month. By comparison, the condominium owners’ association in Tierrasanta is looking at potentially $7,000 annually per condo owner for insurance after Farmers had dropped coverage.

“While we decline to comment on underwriting decisions related to individual customers, similar to other insurers in the state, we regularly review our market exposure and make adjustments, as necessary, to appropriately manage risk,” Farmers said in a statement to CBS 8.

Farmers’ claims of increased wildfire risk in the region are not unfounded, as some experts have explained.

“Since 2017, the insurance carriers have paid out, like, two times what the Northridge earthquake cost,” insurance agent and Community Associations Institute member Kimberly Lilley told CBS 8.

Lilley also explained that major insurers such as Farmers had recently updated their modeling programs for determining wildfire risk, and thus have been retreating from the market.

“It's heightened risks. There's no doubt, based on the catastrophe modeling, that wildfires cost more every time they happen now,” the agent said.

Insurers are not the only ones shirking away from America’s disaster hotspots. A report from Moody’s Investors Service found that even reinsurers have either raised their prices or distanced themselves from markets like California and Florida due to their worsening disaster losses.

FLORIDA LEGISLATIVE CHANGE LETS INSURANCE COMPANIES OFF THE HOOK FOR ATTORNEY FEES
February 8, 2023

Florida Senate Bill 2-A pertaining to property insurance claims in Florida has made a major change to the way attorney fees are covered. Previously, the insurance company would be held responsible for paying attorney fees if the company wrongfully denied your claim. Under this new law, enacted on December 16, 2022, insurance companies will no longer be ordered to pay attorney fees even if they improperly denied the claim.

The logic behind the former law was that the attorney fees are only necessary because litigation was forced by the insurer’s failure to properly rule in a claim. Now, insurers can rely on SB 2-A to save money in litigation – only holding them responsible for the sum of the claim rewarded.

What This Means for You

SB 2-A went into effect on December 16, 2022, meaning all policies issued or renewed after that date in Florida will be impacted. Any policies started or renewed prior to that date will be governed by the previous law. This means any Hurricane Ian-related claims will be governed by the previous law, not these new changes.

If you need to file a Florida property insurance claim and hold a policy effective after that date, you will be on the hook for your own attorney fees regardless of the result of your case. Your attorney will have to take a percentage of any recovery you are awarded through property insurance litigation or you will need to pay out of pocket.

Unfortunately, this may impact your ability to recover from the incident in question whether you win or lose. Even if you win your case, you will get a lesser sum than you would have prior to this new law. If you lose your case, you will still be responsible for any attorney fees associated with the case which could make it harder to repair the damages you suffered, to begin with.

NEW LAW FOR 2023

MIAMI (AP) — A new Florida law is forcing some public officials to choose between their day jobs or holding office.
The measure, which took effect over the weekend, prohibits public officials from working as lobbyists while holding public office. It also bars state and local elected officials from lobbying their state agencies or offices for six years after leaving office, up from a previous two-year ban.
The new law already has forced some public officials to resign. Among them are a Miami Shores council member and a board member of Miami-Dade County Public Schools, according to the Miami Herald.
The law implemented a state constitutional amendment that was approved by Florida voters in 2018.
Five elected officials in Miami-Dade, Palm Beach and Leon counties have challenged the new law in a federal lawsuit, but the judge in the case last week denied a request to temporarily block the law from going into effect until the court could rule on its legality.
In their lawsuit, the public officials said that lobbying is part of the democratic process and facilitates the exchange of information between public officials and the people they represent.
“It is for this very reason that the First Amendment of the United States Constitution expressly protects the right to petition the government for a redress of grievances, along with the rights to freedom of speech and freedom of assembly,” the lawsuit said.

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