Department of Insurance

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06/24/11 - Sentencing the President of NBC Contractor to 4 years in prison and 12 millions in restitution.

Insurance Commissioner Dave Jones today announced that Monica Mui Ung, 51, owner and president of NBC General Contractor Corporation (NBC), has entered guilty pleas in Alameda Superior Court for violating Section 11880 of the Insurance Code, Section 1778 of the Labor Code, and admitted an enhancement of Section 186.11 of the Penal Code. Ung was sentenced to four years in state prison and to repay $350,000 in restitution pro rata for the individual workers and $850,000 to the State Compensation Insurance Fund (SCIF).

A joint investigation conducted by the California Department of Insurance (CDI) Fraud Division, Employment Development Department (EDD), the U.S. Department of Labor, and SCIF revealed that Ung, along with her office manager and payroll specialist, made intentional misrepresentations to SCIF regarding their payroll and job classifications of 70 employees illegally saving NBC a significant amount in workers' compensation premiums owed to its carrier, SCIF. The majority of the work NBC performed involved public works projects, such as the Moscone Club House, El Cerrito City Hall, Fox Court Apartments and Piedmont Elementary School. Such projects mandate compliance with state law, specifically the state prevailing wage law, and union requirements. Ung's office manager and payroll specialist have previously entered guilty pleas in this case and have been sentenced.

04/15/11 - Arrest of bay area Business Owner for Insurance Fraud in under-reported payroll.

Insurance Commissioner Dave Jones today announced that Teresa Reif, 31, was arrested in San Mateo County after surrendering to the Redwood City Police Department on multiple counts of suspected workers’ compensation insurance premium fraud. Reif was booked into the San Mateo County Jail and was subsequently released during arraignment on supervised O.R. (own recognizance). If convicted, she could face up to five years in prison and/or a $50,000.00 fine. The case is being prosecuted by the San Mateo County District Attorney’s Office.

“Business owners should be on notice, egregiously under-reporting wages to avoid premium payments will not go unpunished,” said Commissioner Jones. “These violations will be fully investigated by my Department.”

Genesis Building Services, Inc. (Genesis) operates a janitorial & pest control company in the Bay Area. Between 2005 and 2009, Genesis purchased workers’ compensation insurance through Redwood Fire & Casualty Insurance Company (Redwood) and the State Compensation Insurance Fund (SCIF). In 2008, Redwood suspected Genesis of under-reporting its payroll. Redwood first became aware of the suspected fraudulent activity when it received conflicting statements from Genesis staff regarding the number of employees working for the company. Redwood suspected Genesis of misrepresenting approximately $544,440.00 in employee payroll. Based on this suspicion, Redwood referred the suspected fraudulent activity to the California Department of Insurance (CDI).

The CDI Fraud Division conducted an investigation and determined that Genesis owner and president, Teresa Reif, had misrepresented both the number of employees working at the company and its payroll when they applied for their workers’ compensation insurance, while they were insured, and during the annual audits that were conducted by the insurance carriers. Genesis allegedly employed in excess of 140 employees, yet reported less than half of the employees’ payroll to its insurance carriers. Monthly reports submitted by Genesis to its insurance carriers were subject to verification through annual payroll audits. Teresa Reif allegedly provided auditors with fraudulent paperwork in order to support the fraudulent monthly reports. While insured by SCIF and Redwood (March 8, 2005 through March 8, 2009), Genesis allegedly under-reported $10,567,776.69 in payroll. It is alleged that Teresa Reif avoided paying a total of $2,957,089.20 in insurance premium through fraudulent activity.

If you have any questions, please contact Sergeant Kathleen Harris at the California Department of Insurance, Fraud Division, Silicon Valley Regional Office, (408) 201-8800

04/11/11 - Insurance Agent Arrest for Grand Theft, Forgery Charges include 9 felonies, 3 misdemeanors

Insurance Commissioner Dave Jones today announced that Paul Daniel Cornejo, 29, a licensed insurance broker, was arrested at his home in Adelanto, CA on four felony counts of Grand Theft, three felony counts of Forgery, two felony counts of Theft by False Pretense and three misdemeanor counts of Theft. Cornejo was booked into the San Bernardino County Jail, and his bail is set at $400,000, meanwhile, his arraignment is pending. The Investigation Division, Criminal Operations - Point of Sale [C.O.P.S.] Unit investigated this case. The San Bernardino County District Attorney's Office is prosecuting Cornejo.

Between April 2008 and March 2010, the C.O.P.S. Unit received multiple complaints from victims alleging that Cornejo, doing business in the Inland Empire (San Bernardino and Riverside Counties) as TATEMAS Truck Insurance Services and Royal Insurance Group Services, Inc. collected premium payments from long-distance trucking businesses. Instead of remitting the funds to any insurance company, Cornejo issued fraudulent Certificates of Insurance without placing actual insurance coverage. Victim losses to date are approximately $38,000. The fraudulent certificates of insurance that Cornejo issued exposed the victims, trucking firms, and the public to potentially uncovered losses.

04/06/11 - Insurance Agent Pleas Guilty for Grand Theft totaled $74,238.00

Insurance Commissioner Dave Jones today announced that Christopher Luna, 23, a licensed insurance broker, pled guilty at the West Covina Courthouse to two felony counts of Grand Theft 487(a) PC. Luna was ordered to serve three years of formal probation, perform 90 days of Caltrans service, pay restitution of $74,238.00 and pay fines and penalties in excess of $280.00. This case was investigated by the California Department of Insurance (CDI) Los Angeles Investigation Division and Los Angeles County Sheriff Department. It was prosecuted by the Los Angeles County District Attorney's Office.

According to CDI investigators between March 2009 and February 2010 Luna, dba Chris Luna Insurance Agency in Hacienda Heights, received payments of $31,650.00 and $42,888.00 from a Property Management Company to pay for earthquake policies for two different homeowner associations (HOA). After receiving the payments Luna placed coverage for both HOA's with different insurance companies. However, Luna only submitted a portion of premiums to one insurance company and submitted no premium payments to the other insurance company. Both policies canceled for non-payment of premium.

03/30/11 - Insurance Agent Pleas Guilty for Grand Theft, 18 Felony counts originally charged

Insurance Commissioner Dave Jones today announced that Terri Anne Sammons, 41, has plead guilty to one count of Grand Theft in a scheme that included bilking the Insurance Agency where she was employed and unsuspecting policyholders out of their premium payments. Sammons was sentenced to 90-days in the custody of Riverside Sheriff and was ordered to pay $6,118.00 in restitution to the victims and surrender her insurance license to the Department of Insurance.

“Any Licensed Insurance Agent that steals from policyholders will be fully investigated, prosecuted and kept from selling insurance ever again,” said Insurance Commissioner Dave Jones. “Bilking Californian’s out of their premium payments leaves consumers extremely vulnerable and potentially without coverage should they get into an accident, have a health issue or suffer damage to their home and it will not be tolerated.”

A CDI investigation determined Sammons, who was employed by the Beissel Insurance Agency in 2005 and 2006, stole auto and homeowner’s insurance cash premium payments made by Beissel Insurance customers at the agency’s former Temecula office. (Tustin-based Beissel Insurance has since sold the Temecula office.) Sammons then diverted refunded insurance premiums and premiums received by the agency from escrow accounts that were intended for homeowners’ policies and used these funds to replace the cash payments stolen from walk-in customers. Sammons also altered agency premium checks by changing the intended insured and policy number listed on the check and applying the checks to a different insured’s policy to conceal the theft. In one instance, Sammons altered a premium check and diverted the monies to make a payment on her personal credit card.

The amount of theft is estimated at approximately $12,780. The scheme was discovered when a homeowner received a cancellation notice for her policy when funds were already paid to Beissel Insurance from an escrow account. A review of the records showed that Sammons had actually diverted these funds to different customer’s policy which caused the cancellation.

After reviewing their records, the Beissels discovered numerous altered premium checks and diverted monies related to customer accounts handled by Sammons. The Beissels contacted affected customers and issued refunds to them. Sammons was charged with 18 felony counts in September 2010. Her insurance license was suspended by CDI in December 2010 pending the outcome of this case. Although she stipulated to the surrender of her license as part of this plea agreement, the Department of Insurance will pursue summary revocation of the insurance license as well.

03/22/11 - A False WC Claim filed. Ten felony charges lead to $120,000 arrest warrant

Insurance Commissioner Dave Jones announced today the surrender of Emily Kathleen Everett, aka: Emily Hegner, age 34, of Daly City, California, on the charges of making a false/misleading statement in support of a claim, perjury, grand theft, knowingly failing to disclose an event, and preparing a false writing related to a workers compensation claim. Everett surrendered herself to San Francisco County Jail on March 9, 2011.

“Workers Compensation Insurance fraud will be fully investigated by my Department,” said Commissioner Dave Jones. “Public employees who feel that they are above the law and who commit perjury and grand theft and then file a false insurance claim will be prosecuted to the fullest extent of the law.”

On or about February 27, 2008, Intercare Insurance Services forwarded this case to the California Department of Insurance, Fraud Division, for investigation. Intercare oversees workers compensation claims for the City and County of San Francisco. Intercare alleged that Everett, a San Francisco Department of Public Health employee, was making material misrepresentations, specifically about her physical limitations in support of her workers compensation claim. Intercare alleged that Everett received disability benefits that she was not entitled to as part of her injury claim.

Everett claimed that on July 19, 2007, during the course of her employment with the City and County of San Francisco, was injured while performing her regular work duties as a Health Worker III for Laguna Hospital in San Francisco. Everett allegedly slipped and fell on a puddle of water, subsequently complaining of right wrist, left knee, and hip area pain and was restricted from returning to work. At this time Everett began receiving total temporary disability benefits. Everett allegedly maintained she was in constant pain as a result of her alleged injuries and she continued to receive workers’ compensation benefits and medical treatment. Everett alleged severe back spasms and was utilizing a right wrist brace and walked with the use of a cane.

Subsequent investigation revealed that Everett had participated in a Muir Woods Marathon racing event on April 12, 2008. Everett participated in a 7 mile race which included 1¼ mile as part of the Dipsea trail. The course included climbing 1800 feet, climbing wooden steps, running through sand and rolling terrain for about 1½ miles, and descending downhill to the finish line for about 2½ miles.

Evidence was also obtained showing Everett her using a cane when arriving at a doctor’s appointment, then following the appointment she was no longer using the cane.

On September 3, 2008, Everett was examined by an orthopedic surgeon. Everett allegedly maintained she used a cane and a right wrist splint and claimed to have pain about 85% of the time. Everett stated that she would have difficulty returning to work due to walking distances. She allegedly denied participating in any sporting events, and also stated that walking and climbing stairs is slow and difficult for her but better with the use of a cane. It is believed that Everett made material misrepresentations to support the severity and extent of her physical disability. Everett is believed to have deceived her treating physician by not reporting her true level of disability or physical activities.

Everett had also requested a handicap placard from her treating physician. Everett was wanted on a $120,000.00 bail arrest warrant that included five felony counts of Insurance Code Section 1871.4(a) 1, one count each of Penal Code Sections 550(a) 5, 550(a) 1, 550(b) 3, one count of Penal Code Section 134, and one count of Penal Code Section 487.

As a result of Everett’s alleged misrepresentations she received approximately $9,529.00 in total temporary disability benefits. The total payments made on this claim were approximately $50,267.00 which included medical benefits, medications, and claim expenses.

02/07/11 - Insurance Commissioner Annouces $63.8 Million in Consumer Dollars Recovered by Department in 2010

California Insurance Commissioner Dave Jones today announced the California Department of Insurance (CDI) has recovered $63.8 million for consumers through consumer complaint investigations and market conduct examinations of insurance companies.

"Our goal at the Department of Insurance is to be the best consumer protection agency in the nation," Commissioner Jones said. "I'm proud to announce that our hard work has led to us recovering more than $63 million for consumers for calendar year 2010. Through our consumer complaint services and our market conduct exams, we will continue to be responsive to the needs of consumers and proactive in looking for any and all activities that hurt policyholders."

The CDI's Consumer Services and Market Conduct Branch has two divisions - one focused on helping consumers directly and the other focused on examinations of insurance company's actions through an examination/audit process. The consumer services division operates the Consumer Communications Bureau, which handles the (800) 927-HELP consumer hotline; the Claims Services and Rating and Underwriting Services bureaus, which investigates and resolves complaints, filed with the Department by consumers and others. The consumer hotline annually receives approximately 200,000 calls. $52,356,121 was recovered from complaint investigations in 2010.

The Consumer Services Division recovered $89.1 million in 2009. Approximately 20 percent of that came from closing cases started in 2007 and 2008 after the devastating wildfires. Due to the complexity of the issues that must be investigated, it may take a year or more to resolve complaints resulting from wildfire disasters.

The Market Conduct Division consists of the Field Claims Bureau and a Field Rating and Underwriting Bureau. These bureaus are tasked with performing examinations of insurance company claims, underwriting, rating and marketing practices to ensure they are complying with the law and regulations. $565,000 in penalties was recovered in 2010 and those penalties go to the State's General Fund.

02/03/11 - Arresting Husband & Wife failed to report estimated $15 million in payroll

Insurance Commissioner Dave Jones today announced the arrests of Stockton residents Sonia and Alfredo Casas, 48 and 51, on warrants for 13 Felony counts including insurance premium fraud, filing false reports with the Employment Development Department (EDD) and failure to withhold or remit unemployment taxes. If convicted on all charges, each faces a maximum of 22 years in state prison, $910,000 in fines, and restitution. Their bail is set at $1,000,000.00. The case is being prosecuted by the San Joaquin County District Attorney’s Office.

“Business owners who seek to defraud and dodge their legal responsibility put their employees at severe risk,” said Commissioner Dave Jones. “Individuals who perpetrate such acts will be prosecuted to the fullest extent of the law.”

In February 2010, the Department of Insurance, Fraud Division, the Employment Development Department (EDD), and the San Joaquin County District Attorney’s Office began a joint investigation into Cal Poultry Labor, Inc. and California Farm Services, Inc., both owned by the Casas’, regarding allegations of underreported payroll to both their workers’ compensation insurance company and EDD. Cal Poultry Labor, Inc. and California Farm Services, Inc. were insured with Redwood Insurance Company and State Compensation Insurance Fund during the years in question. The case stemmed from a complaint received by EDD. Cal Poultry Labor, Inc. supplies labor to turkey farms and Cal Farm was involved in harvesting and trucking. The Casas’ also own two other businesses, Bella’s Bridal and The Shadow Oaks Steakhouse.

In June and August, 2010, search warrants for bank records were served at several banks related to accounts for the Casas’, Cal Poultry Labor, Inc., California Farm Services, Inc., and other related business accounts. These records revealed a significant amount of underreported payroll to the insurance companies and EDD.

Yesterday, search warrants were served at five locations: the Casas’ residence in Stockton, CA; their accountant’s office; Bella’s Bridal; Shadow Oaks Steakhouse; and the main facility where Cal Poultry contracts to provide labor (this facility is not considered a suspect in this investigation). The Casas’ were also arrested at the time of the search warrants. Based on the initial evidence gathered, it is estimated that the Casas’ have underreported approximately $5.8 million in payroll to the insurance companies. EDD, State Compensation Insurance Fund, and Redwood Insurance Company will conduct full audits for Cal Poultry Labor, Inc., California Farm Services, Inc., and other related businesses based on all of the evidence seized. It is estimated that the total amount of underreported payroll to the insurance companies could exceed $15 million.

01/01/10 - Attorney General Lowers Boom On Alleged Scheme To Violate Workers Comp Laws

The California Attorney General has filed suit against PacifiStaff Inc., a.k.a. Workforce Solutions, for implementing what it calls "an unlawful scheme" to convince employers that they don't need to purchase workers' compensation insurance. The AG's just-filed suit accuses the Anaheim-based company of violations under 17200 of the Business & Professions Code.

The attorney general appears to be cracking down on attempts by employers to avoid paying workers' comp. It also filed suit against Brinas Corp., a Los Angeles dry wall company, last week accusing the company of having employees without workers' compensation protections.

The complaint accuses PacifiStaff of convincing mostly high hazard employers that they could take advantage of a legal exemption in the law that permits owners of small, closed corporations to forego paying workers' compensation for themselves. In a nutshell, the AG alleges, the company simply exploited this loophole by advising its clients to name all their manual laborers as executive officers and give them a nominal share in a separate closed corporation. As the complaint states: "The employer relying on the exemption does not then obtain workers' compensation insurance to cover their new officer/shareholder workers. The scheme leaves the workers without the no-fault protection of the workers' compensation system, and makes it more difficult for legitimate employers that fulfill their workers' compensation obligations to competitively bid..."