The article refers to Texas but the lesson can be applied
to most places.
Insurance fraud schemes often target businesses and professional people
because the victims need insurance to stay in business and large commercial
policies generate large premiums. Historically, these schemes have
concentrated on types of business insurance that are particularly
expensive or hard to find in legitimate insurance markets. These include:
medical malpractice insurance
commercial general liability
performance bonds for contractors
automobile liability insurance for truckers.
By far the most common schemes involve unauthorized insurance
the sale of policies by companies not licensed in Texas. These often
are offshore companies, chartered by Caribbean or Pacific island
nations that cannot regulate them effectively. The companies may
have impressive sounding names and authentic-looking policy forms.
about lacking a Texas license, unauthorized insurers might claim
to be surplus lines companies. Call TDI´s Consumer Help Line
to verify whether a company is an eligible surplus lines carrier
and the agent is licensed to sell surplus lines policies.
without standard workers´ compensation insurance forfeit almost
all their defenses against lawsuits and may face unlimited liability
if sued by injured employees. Only the following are part of the
workers´ compensation system:
with standard workers´ compensation policies issued by insurance
companies licensed to write this type of coverage in Texas.
Large employers certified by the Texas Workers´ Compensation
Commission to self-insure workers´ compensation benefits.
Political subdivisions - These may self-insure, buy their
coverage from insurance companies licensed to write workers´
compensation or enter into interlocal agreements with other political
subdivisions providing self-insurance for workers´ compensation.
sold by unauthorized insurers and surplus lines companies are not
workers´ compensation under Texas law. Some promoters have
offered ERISA plans as cheap alternatives to workers´ compensation.
Federal courts have held, however, that even valid, single-employer
ERISA plans don´t qualify as workers´ compensation in
businesses use employee leasing companies to handle their payroll,
paperwork, and insurance. If an employee leasing company does not
have workers´ compensation coverage with an insurer licensed
to write workers´ compensation in Texas, the company its clients
can be sued by injured employees.
property and casualty lines - Fictitious or unlicensed offshore
companies sometimes try to sell bogus medical malpractice, commercial
general liability, contractors´ performance bonds, and trucker´s
liability insurance. The big selling points are cheap premiums and
lax underwriting standards. Policyholders run a tremendous risk
that their claims or liability claims against them
will not be paid.
Against Fraudulent Business Insurance
with agents who have proven their reliability and honesty in the
Shop carefully for the insurance you need. If you belong to a trade
association, seek its advice on insurance carriers.
Study the legitimate market´s normal price range for the coverage
you want. If a quote is well below this range, be skeptical.
Ask questions about the company and the policy. Go elsewhere if
the agent is evasive.
Verify that coverage actually exists. Don´t let the agent
keep your premium while shopping around for a carrier.
Verify that an unfamiliar company or agent is licensed by calling
TDI´s Consumer Help Line.
Consult your attorney and accountant before signing a business insurance