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CFO JEFF ATWATER ANNOUNCES THE ARREST OF ‘MOST WANTED’ INSURANCE FRAUD SUSPECT, PONZI SCHEME OPERATOR

ALLAHASSEE—Florida CFO Jeﬀ Atwater today announced the arrest of one of Florida’s “most wanted” insurance fraud criminals, defendant Erline Telfort, of Broward County. The arrest came last week as new information was provided through the CFO’s Public Assistance Fraud Unit after the launch of his “Most Wanted” insurance fraud website, www.MyFloridaCFO.com/ PressOﬃce/MostWanted, which engages Floridians in the search for scammers who have eluded law enforcement. A fraud investigation by the Department of Financial Services’ Division of Insurance Fraud determined that

Telfort, along with the principal operator of E&M Insurance Services and Santa Maria’s Insurance Services, conducted a “Ponzi” scheme to steal approximately $500,000 from a finance company. Telfort, 29, is charged with organized fraud and criminal conspiracy. “This arrest is a direct reflection of the hard work and dedication of our fraud investigators,” said CFO Atwater. “For too long scam artists like these have been allowed to steal hard earned money from honest Floridians. I can assure you my office is up to the challenge of

uncovering these schemes and continuing to bring the perpetrators to justice.” From January to December 2009, Telfort and Maralene Raymondville, who was arrested in November 2010 on similar charges, acted as agents for the Santa Maria Insurance Company and E&M Insurance, preparing over 200 fraudulent insurance policies and depositing over $600,000 into their business account. Anyone with information regarding suspected insurance fraud is asked to call 1-800-378-0455. Individuals who provide tips can remain anonymous and are eligible for a reward of up to $25,000 for information that directly leads to an arrest and conviction in an insurance fraud scheme. The Department of Financial Services to date has awarded almost $250,000 to approximately 40 citizens as part of its Anti-Fraud Reward Program.

GEORGIA INSURANCE COMMISSIONER RALPH HUDGENS REQUESTS WAIVER FROM KEY ELEMENT OF OBAMA CARE

tlanta - Georgia Insurance Commissioner Ralph Hudgens announced today his plan to request a waiver from the federally imposed Medical Loss Ratio (MLR) standard for 2011, 2012 and 2013 found in the Patient Protection and Aﬀordable Care Act (ACA) or what is commonly known as Obama Care. In his letter of transmittal requesting the waiver to Kathleen Sebelius, Secretary of the U.S. Department of Health and Human Services, Hudgens said, “Although I believe that ACA is unconstitutional and fully support the various legal challenges to its constitutionality, it is my duty as Commissioner to do everything possible to protect the interests of Georgia citizens and the viability of the Georgia insurance market.” www.underwritersinsider.com

According to Hudgens the purpose of Georgia’s request for an MLR waiver is three-fold. First, we should do no harm to Georgians with health issues who are currently insured in the individual market. For these individuals it is imperative that their current insurer remain in the Georgia individual health market. Second, the phase-in period will give insurers time to adjust business models to compete in the proposed federal system should it be deemed constitutional. Third, the waiver will help preserve consumer access to agents or brokers who explain and facilitate the purchase of individual health policies. In announcing his plan to seek the waiver, Ralph Hudgens said, “I am concerned that the Obama Administration has a fundamental distrust of the role that brokers and agents play in the orderly delivery of health insurance. It appears to

me that the current law is engineered to eliminate the agent from the marketplace by reducing the commissions that can be paid on the sale of a health insurance policy. I believe that agents are vital in assisting Georgians in making sound health insurance choices.” Commissioner Ralph Hudgens also states in his letter, “Madam Secretary, unless the MLR waiver is granted it is my opinion that Georgia’s individual health market will become less competitive. Moreover, many thousands of Georgians will lose their current insurance coverage as smaller insurers make diﬃcult decisions to exit the individual market rather than to continue in it at a loss.” Hudgens says that a waiver to the MLR standard is necessary to avoid destabilizing the individual market in Georgia. 3

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FOUR SALES OPPORTUNITIES YOU DON’T WANT TO MISS by Matthew A. Treskovich, MBA, CMA, CLU, ChFC, FLMI

ales opportunities are everywhere! As the economy continues to recover, new opportunities will present themselves to agents and advisors who are attentive. The key to success is being properly positioned to take advantage of these opportunities when they present themselves.

Sales Opportunity #1 – Divorce Planning While financial difficulties are often cited as a factor in divorce, the recent recession led to significantly lower divorce rates. As the economy improves, the divorce rate www.underwritersinsider.com

will likely rebound and provide several types of planning opportunities for agents and advisors. Life insurance on one or both spouses may be required as part of a divorce agreement. Also, the ownership and beneficiary designations on existing insurance policies and retirement plans need to be carefully examined. Certain products can help overcome the emotional difficulties inherent in a divorce agreement. For example, one spouse may not want to buy a term insurance policy, pay the premiums, and name the other spouse as beneficiary. The objection is that the insured and premium paying spouse won’t “get anything out of it”. Return of premium term provides a convenient workaround for this objection. Success in this market

Matthew A. Treskovich depends on referrals from divorce attorneys, and the key is to start building that referral network as soon as possible.

Sales Opportunity #2 – Special Needs Planning A family with a special needs child has unique planning problems. A properly drafted Special Needs Trust can help ensure that a child is taken care of, without See Four Sales Opportunities Pg 20 5

CONTENTS 2011 • Issue 3

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YOUR PHONE IS SPYING ON YOU! By Kim Komando

t knows where you live and where you go. It knows who your associates are. It knows your interests and intimate details about your life. And it shares this information with countless others without permission. I’m talking about your smartphone. Earlier this month, online music provider Pandora Radio announced that it received a federal grand jury subpoena. Prosecutors are investigating how Pandora’s smartphone app collects and uses data. They want to know if the app properly discloses that it gathers and distributes users’ data. Several other app developers have received similar subpoenas. Application security company Veracode analyzed Pandora’s app. It says the app collects the user’s birthday, gender and ZIP code. It also allegedly collects GPS coordinates of the phone’s whereabouts a l o n g

with the phone’s unique device ID. While names are not collected, the device ID ties the data together to reveal a user’s identity.

Why would an app collect this data? Targeted advertising. Many app developers use ad kits provided by advertising partners. These kits serve in-app ads. They can also collect data and send it back to the advertisers. To make matters worse, one app may use several ad kits. The Wall Street Journal studied more than one hundred apps. It found that some apps use as many as eight ad kits.

Why you should worry It is disturbing when a company collects your information w i t h o u t permission. It is also creepy when you are targeted by ads and you’re not s u r e w h y o r

how. There are greater dangers than targeted advertising, however. You’re losing control of your information. You don’t know it’s being collected, and you can’t opt-out. You don’t know how the companies are protecting your information. It also puts you at greater risk for identity theft. A security breach can expose your information. Of course, the data oﬀers a lot of insight into your life. It reveals where you work and where you go. It can reveal your child’s school and your political views. In short, it provides a complete dossier on you.

What you can do It is safe to assume that apps on your phone are quietly collecting data. Figuring out what is collected and how it is used isn’t so easy. Likewise, preventing apps from collecting data may be impossible. Apple’s privacy policy states that it may collect a host of information to improve user experience. However, it bars app developers from collecting information without consent. Developers must also disclose how they use the data. Unfortunately, Apple has not said how it enforces these rules. Besides, developers can and have skirted them. Some apps collect data without consent. Many developers don’t have privacy policies regarding data collection. Things are slightly diﬀerent with Android apps. Developers must notify users what data an app will access. The app does this before users install it. Users can’t block apps from accessing data. Rather, they can simply choose not to install the app. There are problems with this setup. For example, one of my national radio show listeners wrote me recently about an app I recommended. He complained that it accessed the phone’s location data. He believed that the app was a security risk. The app in question uses location data to direct users to local businesses. Users may not understand why certain data is accessed. They also See Kim Komando PG 14

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PUNITIVE DAMAGES AND TAXES A Surprising Review... to avoid tax on the award. As a result the recipient of the award of punitive damages for the bad faith conduct of their insurer, resulted in a major tax consequence and not the windfall the plaintiffs thought they received. Because the Greenbergs could not convince the Tax Court of their position the Court not only slapped the Greenbergs down in affirming a tax deficiency of over $1 million, but further sanctioned them with an accuracy-related penalty, because the taxpayers had neither substantial authority, nor reasonable cause underlying their posture on the damage award.

uch is said about punitive damages and how they are used to punish wrongdoers. Plaintiffs dream of large punitive damage awards. Plaintiffs’ lawyers who obtain large punitive damage awards use them to brag about their ability as tort lawyers and a bludgeon on other defendants to convince them to settle for more than they owe. What the litigants and litigators seldom consider carefully is the tax consequences of a large punitive damage award. Failure to properly advise a plaintiff seeking punitive damages about the tax consequences of success can result in claims of legal malpractice. Join Barry Zalma’s new Blog:

http://www.zalma.com/blog

What is the Purpose of Punitive Damages? Punitive damages are intended to punish the wrongdoer. They do not compensate the plaintiff for lost wages, pain, suffering, property damage or any other damages designed to place the plaintiff back the way he was before the tort caused damage. Punitive damages are considered, therefore, a windfall to the taxpayer and must be be included in taxable income. Section 104 of the Internal Revenue Code deals with the treatment of punitive damages. Section 104(a)(2) excludes from income only “damages (other than punitive damages) received . . . on account of personal physical injuries or physical sickness.” Therefore, punitive damages, even in connection with personal injuries, may not be excluded from income. 8

Barry Zalma, Esq., CFE is a California attorney specializing in insurance coverage, insurance claims handling and fraud who serves as a consultant and expert for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He recently published an e-book, “Insurance Fraud,” which is available at his Web site, www.zalma.com. Contact the author or access his free insurance fraud letter at zalma@zalma.com.

What Happens When the Recipient of Punitive Damages Fails to Pay Income Tax on the Recovery? In Gary L. Greenberg and Irene Greenberg v. Commissioner of Internal Revenue, No. 25420-07. (U.S.T.C. 01/24/2011) the United States Tax Court dealt with a recipient of insurance bad faith punitive damages who tried

The Tax Court noted that the definition of gross income broadly encompasses any addition to a taxpayer’s wealth. Therefore, absent an exception by another statutory provision, damage awards from a lawsuit must be included in gross income. In general, exclusions from income are narrowly construed by the tax court. The Greenbergs argued that the punitive damages they received in their insurance bad faith case may be excluded from income under section 104(a)(3) primarily because punitive damages could not have been awarded without the insurance policy. The Tax Court discounted the “but for” argument, and found it was discredited by the Supreme Court’s analysis of section 104(a)(2) in O’Gilvie v. United States, 519 U.S. 79 (1996). In that case the Supreme Court considered an earlier version of section 104(a)(2) that excluded from income “the amount of any damages received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or sickness”. The Court reasoned See Punitive Damages & Taxes - Pg 31 The Underwriter’s Insider

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FLORIDA OFFICE OF INSURANCE REGULATION ANNOUNCES STAFF CHANGES

ALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty today announced the following staff changes at the Florida Office of Insurance Regulation (Office). Al Willis has been appointed acting Deputy Commissioner for Property & Casualty. Willis was the Director of Life & Health Financial Oversight

and has been with the Office since 1987. He earned a bachelor’s degree in accounting from The Florida State University, and has been a Certified Public Accountant (CPA) since 1981. Willis will be replacing acting Deputy Commissioner Robin Westcott who was tapped by CFO Jeff Atwater to be Executive Director of the newly formed Medicaid and Public Assistance Fraud Strike Force. Steve Szypula has been appointed acting Director of Property & Casualty Financial Oversight. Szypula was the Chief Analyst in the Property & Casualty Financial Oversight unit, and has been with the Office since 1989. He received his bachelor’s degree in accounting from Syracuse University, is a Certified Financial Examiner (CFE), Certified Public Manager (CPM), and was the first in the nation to achieve the National Association of Insurance Commissioners (NAIC) designation – Senior Professional in Insurance Regulation (SPIR). Toma Wilkerson has been appointed

acting Director of Life & Health Financial Oversight. Wilkerson was the Financial Administrator in the Life & Health Financial Oversight unit. She graduated from the University of West Florida with a bachelor’s degree in business, and is a Certified Public Manager (CPM). Wilkerson has primarily worked at the Office since 1996, although she did work for a brief period at the Agency for Healthcare Administration (AHCA). Belinda Miller will continue in her role as the acting General Counsel. She assumed this role in February following the retirement of Steve Parton. Miller had been the Deputy Commissioner for Property & Casualty, and has more than 20 years of experience in insurance regulation and receiverships. Miller received her bachelor’s of international studies from Emory University, and has a Juris Doctor from The Florida State University. All staff changes will take effect immediately.

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Stop! Look! Listen! FAIA’s 107th Anniversary Convention & Education Symposium, June 9–11, at the Rosen Shingle Creek Resort is the intersection where we all need to meet. On this highway, you will find the industry’s best speakers, the largest Exhibit Hall, more networking opportunities, and great entertainment. As a business leader, your mission is to keep your organization focused. FAIA’s Convention can help you meet that challenge in today’s competitive and ever-changing environment. When our times are difficult and perplexing, so are they challenging and filled with opportunity. NO DETOURS…register with FAIA and reserve your room at the Rosen Shingle Creek Resort.

DON’T MISS OUR GENERAL SESSION SPEAKER!!! We’ve got the green light to let you know that our closing speaker for Friday’s General Session is Warrick Dunn! Dunn’s career highlights are many (and we’ll tell you about them), but it’s his own personal Road To Recovery message that will give you the best understanding of the man that Warrick Dunn is. When Dunn was 18 years old, his mother, an off-duty police ofﬁcer, was murdered during a robbery, leaving Dunn and his grandmother to raise his ﬁve younger siblings. After signing an NFL contract, Dunn moved his siblings from Louisiana to Tampa where he could come home after practice to make sure they had done their homework, cleaned their rooms, and were fed well. This was hardly the ritzy lifestyle most NFL rookies experienced. To help struggling single mothers, Dunn established the Warrick Dunn Foundation and the Homes for the Holidays program, which helps single mothers purchase homes. The program buys homes through a down payment provided by Dunn. Dunn’s goal is to help these mothers realize the dream that his mother was not able to give to him and his siblings…to own their own home. Dunn’s career highlights include: ��

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FLORIDA LEGISLATURE PASSES OMNIBUS PROPERTY INSURANCE PACKAGE

ASHINGTON, DC, May 6, 2011 – Ray Farmer, Southeast region vice president of the American Insurance Association (AIA) today issued the following statement upon passage of omnibus property insurance legislation by the Florida Legislature. The package includes several reforms aimed at improving Florida’s property insurance market. www.underwritersinsider.com

Mr. Farmer’s statement follows: “Consumers and insurers have been anxiously awaiting comprehensive property insurance reform in Florida. The reforms contained in this package will help to promote a competitive and vibrant insurance market in the Sunshine State.

N.C. DOI INVESTIGATION LEADS TO MAN’S ARREST

“Common sense measures ending abuses by some insureds and their public adjusters in the filing of fraudulent sinkhole and hurricane claims will reduce insurance costs. The bill quite reasonably requires that sinkhole claims be made within two-years, hurricane claims be made within three-years, and that claims payments be used to repair damaged homes.

ALEIGH, N. Carolina -Insurance Commissioner Wayne Goodwin today announced the arrest of Keith Arthur Vinson, 52, of 208 Folkestone Lane, Arden; he is charged with three counts of insurance fraud in violation of North Carolina General Statutes, section 5850-40, and one count of obtaining property by false pretenses.

“These timeframes provide for more than enough time to assess damage and file claims. The deadlines will prevent unscrupulous public adjusters from filing questionable claims several years after the alleged date of loss.”

Department of Insurance criminal investigators allege that on three

See NC Investigation Pg 33 13

chance to come together in a working environment to discuss matters that aﬀect the insurance industry and consumers in the state of North Carolina. Commissioner Goodwin ﬁrst established the committee in 2009. “This committee gives agents a voice in the regulatory process surrounding the business of insurance in North Carolina,” Commissioner Goodwin said.

N. CAROLINA KIM INSURANCE “It’s important for me to come face-towith representatives from the agent KOMANDO COMMISSIONER face community so that we can have an open dialogue about the insurance-related don’t know what happens once the data is issues affecting those who live and work in collected. This confusion makes Android’s GOODWIN our state.” permissions system ineffectual. MEETS WITH “This committee gives agents There is currently no solution to the problem other than to avoid apps. I expect this to change soon, however. We’ll have a voice in the regulatory AGENT increased scrutiny of smartphone apps. process surrounding the Also look for new legislation. It will likely ADVISORY require more transparency when it comes business of insurance in to data collections. It should also finally North Carolina...” give us consumers the ability to opt-out. COMMITTEE Committee members are independent Continued from Page 7

Kim Komando hosts the nation’s largest talk radio show about consumer electronics, computers and the Internet. To get the podcast or ﬁnd the station nearest you, visit: http://www.komando. com/listen. To subscribe to Kim’s free e-mail newsletters, sign-up at: http:// www.komando.com/newsletters.

ALEIGH -Insurance Commissioner Wayne Goodwin announced today the newly appointed members of the Agent Advisory Committee.

and captive agents selected from three regions-East, Piedmont and West-who are appointed by the Commissioner of Insurance. The group had its ﬁrst meeting on March 18 and is scheduled to meet four times a year.

“I thank each of the members for The purpose of the Agent Advisory participating on this committee and look Committee is to give the Commissioner forward to working closely with them over of Insurance and the agent community a the coming year,” said Goodwin. The Underwriter’s Insider

FLORIDA CFO ATWATER’S DEPARTMENT WINS $76 MILLION JUDGMENT AGAINST FORMER ARIES INSURANCE COMPANY OWNERS - THE FRAYND FAMILY

ALLAHASSEE—Florida CFO Jeﬀ Atwater announced today that a judgment has been entered against the former owners of Aries Insurance Company, Inc. for more than $76 million. The insolvency of Aries Insurance Company left approximately 58,000 policyholders and creditors with unpaid claims when it was ordered into receivership in 2002 and two state guaranty funds were triggered to pay those claims.

The Florida Insurance Guaranty Association and the Florida Workers’ Compensation Insurance Guaranty Association have paid more than $165 million to Aries claimants so far – and that ﬁgure is expected to top more than $170 million when all claims are resolved. The judgment, handed down last week by the Complex Litigation Division of the

Miami-Dade Circuit Court, follows an extensive investigation by the Department of Financial Services (Department) that determined that Marcos Fraynd and his children, Paul Fraynd, Saul Fraynd and Fanny Fraynd, diverted company funds for personal use. “This order affirms that financial crimes against our hard-working Florida citizens will not be tolerated,” said CFO Atwater. “My Department will aggressively pursue anyone who schemes to line their own pockets through fraud and deception.” In 2006, the Department sued the former owners and directors of Aries for diverting policyholder premium money and making illegal distributions of Aries’ assets for their personal benefit. The Department has already recovered over $20 million from other involved parties through previous lawsuits and intends to pursue the most recent judgment until the full amount is paid. Money collected from this judgment will help offset possible assessments of Florida policyholders for future insurance company insolvencies. On May 21, 2007, the Fraynds pleaded guilty to diversion of premiums and received various sentences, including restitution, for their roles. The April 13, 2011, judgment of $76 million is just another result of steps by the Department to recover enormous losses caused by the diversion of premium and other illegal acts by the former owners and directors of Aries.

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About U.S. Insurance Services U.S. Insurance Services is a part of American Reliable Insurance Company, an Assurant Specialty Property company. American Reliable Insurance has a Best’s Rating of “A” (Excellent) by A.M. Best Company,* an organization that rates insurance �� performance. This rating is 3rd highest out of 16 categories. *A.M. Best Company ratings range from A++ to F. The A.M. �� Reliable Insurance Company. 16

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olivchak & Self Insurance Services, LLC, a Sarasota, Florida based insurance agency operating as one of the Great Florida Insurance franchise, announced its acquisition of two insurance agencies in Tampa, and is now open for business under the Great Florida name at 3928 W Hillsborough Ave, Tampa. Alex Chavez, a veteran Florida insurance agent, and former agency principal, has been hired as the Tampa Office Manager and Senior Commercial Account Executive. Chavez brings 30 years of insurance experience to the firm, and will be in charge of the agency’s day to day operations and its Commercial Insurance Division. Chavez is a past president of the Latin American Association of Insurance Agencies (LAAIA), and the founder and first president of the Specialty Agents of Dade County. A former City Councilman in the City of West Miami, Chavez has also served as vice president of PIA of Dade County and in various State Blue Ribbon Commissions in the past. He served six years on the Board of the US Hispanic Chamber of Commerce based in Washington, DC. Prior to his new position in Tampa, Chavez worked as the Insurance District Manager for AAA Insurance Agency in Dade County. Chavez can be reached at: 813-870-23337 - alexchavez1@comcast. net

limits eased: Drivers now need just five years of licensed driving experience, compared with higher previous requirements.

ary Henning, Northeast region vice president of the American Insurance Association (AIA), today testified before the New York Senate Insurance Committee regarding ongoing fraud problems with the Empire State’s no-fault auto insurance system. The hearing was held in New York City, where no-fault fraud is particularly prevalent. In his testimony, Henning stated that payments under New York’s no-fault system having risen dramatically in recent years due in large part to fraudulent claims. Average personal injury protection or PIP costs have increased nearly fifty percent since 2004 and 200,000 new nofault lawsuits were filed in 2009 alone.

ork At Home Vintage Employees LLC (WAHVE), a company that provides domestic remote staffing servicesfor insurance firms, announced that Bill Hunt joined the company as chief sales and marketing officer. Hunt, an insurance sales veteran, will lead WAHVE’s business development efforts. Since its launch in April 2010, WAHVE has placed insurance operations professionals on more than 20 assignments with insurance firms around the country on a domestic, remote

outsourced basis. Hunt, who is a consultant for the LexisNexis Insurance Exchange and other insurance technology firms, previously was senior vice president of strategic accounts with Artizan Internet Services, vice president of sales at SAP, executive vice president of sales and marketing at XDimensional Technologies and sales executive at AMS. “In less than a year since our launch, WAHVE is proving to work effectively for insurance firms that need reliable, quality workers who perform,” explained Hunt. “WAHVE’s concept of using ‘phased-retirees’ for outsourcing assignments also is working for the cadre of insurance industry retirees who want to work remotely rather than in a traditional office setting.”

he American Insurance Association (AIA) was the only insurance trade to testify yesterday before the North Carolina House Select Committee on Tort Reform in support of HB 709, legislation that would impact important aspects of the Workers’ Compensation Act. The bill, introduced earlier this month by North Carolina’s business community, would provide much needed reform to the workers’ compensation system in the Tar Heel State. “AIA strongly supports HB 709, which we believe is necessary, reasonable and modest in scope,” said AIA senior counsel, Kenneth Stoller. “Recent studies have suggested that, of a group of benchmark states, North Carolina had the highest overall per-claim costs as well as the highest rate of surgery. AIA’s own research of the region (Georgia, South Carolina, Virginia, Tennessee, and Kentucky) has shown that North Carolina has the highest total indemnity costs per claim and the highest incidence of permanent and total disability (PTD) cases.”

merican Collectors Insurance has broadened the availability of specialty collector vehicle insurance to vehicles of any year, make, and model, and also introduced several innovations for collector vehicle insurance. “It’s no longer true to say that ‘All collector-vehicle insurance is the same,’” commented Laura Bergan, vice president of marketing of American Collectors Insurance. “American Collectors excels at insuring classic cars, but we’ve thrown old ‘rules of thumb’ for collector-vehicle coverage out the proverbial window.” Any year/make/model of vehicle: Collector cars of any model year now can be insured on a specialty collector policy. No longer do cars need to be 25 years or older to be insured as a collector vehicle. This innovation affects a large number of late-model collector autos, including exotics, modern classics, kits and replicas. American Collectors now accepts additional garaging options, meaning that collector cars no longer need to be in a closed, locked garage. Examples of acceptable alternate garaging are carports within gated communities, communal garages, and more. Driving experience

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THE FEDERAL RESERVE - IMPORTANT MONETARY SAFEGUARD OR AN UNACCOUNTABLE POLITICAL TOOL? by Guest Columnist Greg Bergman

Keeping interest rates low for extended periods has a profound impact on the value of the dollar. Long term low rates decrease the exchange value of the dollar through lower demand due to lower returns.

he Federal Reserve System (the Fed) is the central banking system of the United States. It was created in 1913 with the enactment of the Federal Reserve Act, in response to a series of financial panics, particularly a severe panic in 1907, and created as a backstop for fragile financial institutions that were vulnerable to runs on deposits. It is an “independent” central bank and does not require ratification of any of its decisions by the U.S. President or anyone else in the executive branch of government.

Since August, the dollar index -which measures the dollar against a basket of other currencies -- has fallen 9%. Against the euro alone, the dollar has tumbled 15%. This is also due to the Fed’s quantitative easing policies of printing money (see below) and a weak dollar leads to higher import costs and a decline in export costs.

In The Beginning... Specifically, the Fed’s original objectives were to promote maximum employment, stabilize prices, and to moderate long-term interest rates. Yet this power has expanded over the years and their decisions affect all aspects of our life. The policy makers at the Fed and their monetary policy have immense (and almost unfettered) power over the performance of many facets of our economy. Three of the areas that the Fed has direct influence over are interest rates, inflation, and the value of the dollar. The Fed sets the federal funds rate that makes the market for balances held at its member Federal Reserve Banks. Depository institutions have accounts at their Federal Reserve Banks and actively trade those balances at this rate. Holding this rate low decreases the cost of borrowing for consumers and businesses through auto loans, mortgages, and other corporate bonds. By holding this rate low, the Fed is hoping to spur borrowing in order to encourage economic growth. This process is evident in our current (and historically low) interest rates, yet the economy has dragged and demand and prices in the housing market www.underwritersinsider.com

Greg Bergman has 22 years experience in the banking, ﬁnancial, and mortgage industry. He has spent the last 10 years as CIO/COO for a mortgage services company providing due diligence and origination services for Wall Street investment ﬁrms securitizing mortgage loan pools. remain one of the weakest areas of the economy. Banks are not lending and borrowing guidelines have tightened. The reward of a strengthening economy that the Fed keeps waiting on as a result of this policy has not occurred, nor has it stimulated any economic growth by keeping a tight lid on interest rates.

Quantitave Easing and Artificially Low Interest Rates = Declining Dollar = Increased Cost of Oil & Other Commodities While a weaker dollar has some benefits - it makes U.S. exports more competitive on the world stage, for example - it can also fuel inflation, limit the purchasing power of Americans and drive up the price of dollar-priced commodities that we import in large amounts, like oil. Commodity prices continue to climb as a result of inflationary tendencies caused by a weak dollar and quantitive easing. For this reason, many critics blame higher gas prices on the Fed’s quantitative easing program - and when an oil-producing country like Mexico purchases over $4 billion in gold in the first quarter of 2011 to protect itself from a falling dollar, it’s worth a second look. The weaker dollar is clearly a predictable outcome of our low interest policy, so why are we doing it? One of the reasons we may be keeping See FEDERAL RESERVE Pg 32 19

Continued from Pg 5

FOUR SALES OPPORTUNITIES YOU DON’T WANT TO MISS causing the child to be disqualiﬁed from government beneﬁts and assistance. Life insurance is an excellent way for parents to provide funding for a special needs trust without having to set aside large amounts of assets at the present time. As with divorce planning, the client will need assistance from an attorney specializing in these types of situations. The opportunity for agents and advisors is to both build a referral network among such attorneys, and to become involved in community organizations that help these types of individuals.

Sales Opportunity #3 – Employee Retention for Businesses According to an annual survey conducted by Right Management, 84% of employees polled say they plan to look for new jobs in 2011. This is up from 60% in the previous year, and only 5% plan to stay in their current job once the economy improves. Business owners who are unaware of this need to pay attention! During the recession, employees where happy to simply have a job, but as the economy improves they will demand more and leave if they don’t receive it. Businesses that managed to survive the recession should not risk taking a hit when top talent heads for the door. Executive compensation, supplemental retirement plans, and “golden handcuﬀ” arrangements are some of the potential solutions for the employee retention problem.

Sales Opportunity #4 – Enabling Mobility for Employees 20

The 84% of employees who plan to look for new jobs are an opportunity in and of themselves! Many will find that available new jobs don’t offer the same benefits packages as their old jobs. Agents and advisors can help solve these problems by providing individual insurance and retirement products that fill the gap. Many employees are not aware that if they are in good health, they can buy better individual life insurance coverage on the open market than they could get through an employer-sponsored group plan. Prospective job-changers should evaluate their benefits and make these kinds of changes before moving to a new job, since their ability to buy individual products might significantly influence their career decisions. These opportunities reflect changing trends and potential new growth industries. In all of them, success will be determined by an agent or advisor’s ability to build a professional network. The key is recognizing the potential market early on and building relationships with centers of influence who can provide referrals. –––––– Creekmore Insurance Group is a full-service life insurance brokerage specializing in complex life cases and impaired risks. Creekmore serves independent agents and financial advisors across the country. Matt is the CFO and oversees advanced case design and underwriting. He can be reached via email Matt@LifeAgents.com or at 800-936-0339. For more information, visit www.LifeAgents.com

PEW Research Reports Muslim Population Growth

ew Research recently reported that, “the world’s Muslim population will grow by roughly 35% by 2030, resulting in a global Muslim population of 2.2 billion. Over the next two decades, the Muslim population will grow at about twice the rate of the non-Muslim population. Therefore, if current trends continue, Muslims will make up 26.4% of the world’s total projected population of 8.3 billion in 2030, up from 23.4% of the estimated 2010 world population of 6.9 billion. While the Muslim population will grow faster than the non-Muslim population over the next 20 years, the population’s rate of growth will be slower over that time period that it was during the previous 20 years.” The Underwriter’s Insider

FIVE FORMER BROOKE CORP OFFICERS SETTLE FRAUD CHARGES WITH SEC

ive of six former Brooke Corp executives have settled fraud charges brought against them by the Securities and Exchange Commission. Brooke Corp, a Kansas-based insurance franchiser began it’s fall in 2008, filed for bankruptcy but failed in a reorganization attempt. The now-defunct company left an unhappy wake of investors, banks and agent/franchisees as it spiraled down. According to Robert Khuzami, director of the SEC’s Division of Enforcement, “The unscrupulous senior executives at Brooke Corp. orchestrated a massive scheme to conceal the company’s deteriorating financial condition through virtually any means necessary, including reporting inflated asset values, double-pledging collateral, and diverting funds for improper uses. The fallout from their fraud had a devastating impact on the livelihood of www.underwritersinsider.com

hundreds of insurance franchisees that depended on Brooke and on the balance sheets of regional banks and other lenders, all of whom mistakenly relied on the good faith and honesty of these executives.” The following former Brooke Corp executives were charged: Robert D. Orr, founder and chairman, Leland G. Orr, CEO, Kyle L. Garst, chief executive, Michael W. Hess, chief executive of Aleritas, Michael S. Lwery, chief executive and board member of Aleritas and Travis W. Brbas, CFO of Brooke. All of those charged settled by agreeing to pay a combination of ﬁnes and restitution - with the exception of Garst. Garst’s case is still being actively pursued by the SEC and it is unknown why he choose not to settle - or why the SEC refused to settle.

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The INSIDER’S

“The Final Authority on Everything!”

To B or to B-12?

ettle an argument. My husband insists that he can get all the vitamins he needs from eating a proper diet. I say you can beneﬁt greatly from supplements. We are both in our thirties. Who’s right? — B.J.A., Altamonte Springs, FL

Doesn’t anybody ask about insurance anymore? You’re both right, but you are righter than your husband, because nobody other than Jack Le Lanne consistently ate a “proper diet.” The rest of us can benefit from supplements. Here’s the short-course, now that you’ve outgrown your Gummy Bear chewables, based on the latest scientific evidence: Supplement your B-12. What does B-12 do for you? Some important stuff; like slowing the decline of your memory and cognitive function. If you don’t get enough of it, you may be drooling on your New York Times rather than reading it when you hit 80. Supplement your calcium and vitamin D. It’s all about osteoporosis. Bone thinning. The vitamin D is absolutely necessary to the absorption of calcium and has shown to be preventative to certain cancers and gastrointestinal conditions - so don’t skip it. Supplement your folate (folic acid). No longer recommended just for pregnant women, sufficient folate has been shown to slow mental decline (dementia), reduce the risk of heart decease and stroke and perhaps even prevent certain cancers. Supplement your C. The jury is still out on the exact benefit of these powerful antioxidant (scavengers of free-radicals), but there is enough hard evidence to suggest a benefit to conditions from heart decease to cancer to cataracts. Just don’t overdo it on the amount. Watch out for Vitamin E. Some studies show that as little as 800iu of E can actually increase the risk of certain cardio conditions. We’d stay away from vitamin A (betacarotene) supplements. One recent study of high-risk individuals taking vitamin A actually showed a 46% increased risk of dying of lung cancer over a control group. Of course we recommend you check with your medical professional before taking any supplements, especially if you are taking other medications.

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ADVISOR

Give Me a Vector, Victor

y husband is driving me nuts. No matter where we go, no matter how complicated the drive, he refuses to ask directions! What possible reason could a man have for not asking directions? - B.L. Jacksonville, FL

We don’t need them.

A Clear Conflict

y brother-in-law is a lawyer and a good one. I’ve gotten into the habit of giving his name and business card to any of my insureds who have had a loss – just in case they need some help figuring out the fine print or get jerked around by the other company. Yesterday I was visited by the field rep of my largest auto carrier who told me my contract was under review since one of their customers had mentioned in a deposition that I had sent them to the lawyer who ended up suing my company. That’s unfair. Doesn’t the company want to make sure their own customers get all the benefits they are entitled to? D.K. Macon, GA

Have a question for The Advisor?

Click HERE! My sweet little country mouse... I thought such innocence had left with the transition from the horse and buggy. First, you are a paid representative of the company — their legal agent. Your referral generates a clear conflict of interest. The last thing they want or need is you sending their insureds to a lawyer who, often as not, will find some reason to be adverse to their interests. Second, lawyers are never welcomed into the claims process by the carrier and it can often slow the claim — since a communication from a lawyer will often bump the claim from the claims department to the legal department where it can be stalled. This is not to say, from an insured’s standpoint, they may not ever require or benefit from the services of a lawyer after a claim. They may often. But it is not your place to encourage that relationship when the possibility exists that your own carrier may end up being the defendant.

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Insurance Agency 4-Sale Miami-Dade County area

Miami Agency For Sale Well established agency for sale. Owner is retiring. Positive cash ﬂow/ $1,200,000 sales, prime location, over 20 years in business/ representing eight companies, turn-key operation, priced for a quick cash sale 50% commercial/50%personal lines industry special/ commercial auto. Contact: Medero@bellsouth.net 8-3

Personal Lines Acct Manager or Claims Full-time employment in the Tampa, Florida area. Must have 2-20, 2-15 or 5-20 license. Contact: janice50grifﬁn@yahoo.com. 8-3

CSR Wanted Memphis, TN area P&C CSR to produce quotes for progressive agency. Need commercial P&C experience.

Contact: jake1934@msn.com 8-3 24

Sale price $110,000. in Hialeah Area. Established 1979. Call me at (305)322-9039. 7-5

- POSITION WANTED COMMERCIAL PRODUCER 2-20 TRAINEE I have graduated FSU in this April with a BS in Marketing and a focus on insurance. Looking for full time career-level opportunity in commercial P&C Insurance. Will consider anywhere in FL. Request resume: zmanera@gmail.com 8-2

P & C PRODUCER WANTED - SARASOTA

2-20 Licensed Outside producer for Sarasota Agency. Have multiple markets. Send resume to northwick@mindspring.com 8-1

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HERE FL Licensed P&C Agent Wanted Sarasota FL P & C agency looking for licensed 220 agent with proven track record, salary + commission. Golden opportunity! Contact: northwick@mindspring. com 7-8 Part Time CSR Wanted in Lakeland, Florida - Need Part Time Personal Lines CSR, must have min. a 4-40 license (required)Mornings or afternoons - bozsail@aol.com 7-6

POSITION WANTED TAMPA AREA Senior CSR Comm’l P&C Experienced Senior CSR Commercial P&C seeking position in the St.Pete / Tampa/ Clearwater area. Has AAI designation and 220 license. 20+ years experience and stable employment background.email for resume & letters of recommendation. Contact: caroljkaley@yahoo.com 7-6 The Underwriter’s Insider

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CLICK HERE! P & C AGENCY 4-SALE SOUTH GEORGIA AREA OPENED IN 1933. SOLD TO MY PREDESSORS IN 1970 AND I AQUIRED IN JUNE OF 1995. WE BOUGHT TWO AGENCIES AND OPENED THE PRESENT AGENCY IN 1995 AND IN 1998 MERGED THEM AT OUR PRESENT LOCATION. OWNER PLANNING TO EITHER RETIRE OR TAKE A LESS ACTIVE ROLL AND WOULD HELP DURING THE TRANSITION. FOR MORE DETAILS AND PARTICULARS, PLEASE EMAIL wayne6238johnson@yahoo.com 7-7

SECURE JOB POSITION NEEDED

Looking for a full time position with a reliable company/agency in the Treasure Coast area. I have my 4-40 and 14 years of experience in personal lines sales and customer service. I am great at sales! pslgirl37@aol.com 7-8

Suppose you were an idiot. And suppose your were a member of Congress... But then I repeat myself. - Mark Twain

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Part time/Full Time Insurance Agents – P&C

Expanding agency looking for full and part time licensed 220 agents, who will operate out of their home or home office in Central and North Florida. 1. Commission based remuneration – 50% for new and renewal policies, paid monthly; vesting plan. 2. Leads provided 3. Training provided 4. Office support provided 5. Markets to meet a variety of client needs: virtually all industries and risk profiles. Call Bob at 850-894-4709, or email a resume to me at bob. hartsell@comcast.net 7-8

FEDUSA Insurance Agency 4-Sale Ft Myers area

Established in 2007. Growing business opportunity. Good mix of HO, auto & Commercial business. Owner motivated to sell for less than $100k. Close to 400 customers and $60000 in commissions. Call Raj Singh at 239-699-7047 7-6

Property And Casualty Insurance Agency 4-sale Kissimmee, FL Active property and casualty insurance agency located in kissimmee FL,representing multiple carriers.busy street front store extremely organized smooth operating and clean. over 500 policies in force with great retention income tax services also offered at this location buyer must provide personal ﬁnancial statement. asking $240,000 price is negotiable.for more info agencyforsale1@yahoo.com 8-1

2-20 Agent Wanted Lakeland, FL Need 2-20 Commercial Agent for Lakeland, FL ofﬁce. Contact Teresa Bailey. Phone: 863-686-3100 Email: teresa@baileyharris. com 8-1

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2-20 Commercial Agent need for Plant City, FL ofﬁce. Commission based. Contact Deb Newman Phone: 813-752-5200 Fax: 813-752-2011 Email: dnewmaninsurance@yahoo.com 8-1

2-20 Agent Wanted Margate, FL Great Opportunity,for a self motivated individual. Busy P&C agency looking for an experienced agent-csr. Must be organized, great work ethics. Good growth potential, competitive salary plus commissions. drivera@atlantica insuranceagency.com 8-1 25

“ The

unscrupulous senior executives at Brooke Corp. orchestrated a massive scheme to conceal the company’s deteriorating financial condition through virtually any means necessary, including reporting inflated asset values, doublepledging collateral, and diverting funds for improper uses. The fallout from their fraud had a devastating impact on the livelihood of hundreds of insurance franchisees that depended on Brooke and on the balance sheets of regional banks and other lenders, all of whom mistakenly relied on the good faith and honesty of these executives.” Robert Khuzami, director of the SEC’s Division of Enforcement, in a news release announcing that five of the six former Brooke Corp executives charged with fraud by the SEC had settled by agreeing to pay a combination of fines and restitution.

“ The size is quite notable. It’s the largest

cache of intelligence information from a senior terrorist that we know of. Usama bin Laden was not just a symbolic leader of Al Qaeda. In fact, he had operational and strategic roles that he was playing,” National Security Adviser Tom Donilon commenting on the “treasure trove” of data collected from the Bin Laden compound after the raid.

“ The

more information that goes out about intelligence, the greater the risks to our people and the less likelihood we’re going to be able to capture and/or kill some of the people who would result from the intelligence take here. I would have preferred a lot less discussion out of the White House about intelligence.” - Former Defense Secretary Donald Rumsfeld commenting on the White House’s bungled, confused and often contradictory release of information - including sensitive intelligence information that the Pentagon did not wish to share with the media - after the Bin Laden compound raid.

“ Heads

will roll once the investigation has been completed. Now, if those heads are rolled on account of incompetence, we will share that information with you. And if, God forbid, somebody’s complicity is discovered, there will be zero tolerance for that, as well. Pakistan wants to put to rest any, any misgivings the world has about our role.” - Husain Haqqani, Pakistan’s ambassador to the U.S., in an interview with ABC regarding the widely held perception that Pakistan

was aware of and complicit in Osama bin Laden’s residence in their country.

“ It’s

kind of weird, stuffing money into a stripper’s g-string at your bachelor party when every bill has a picture of your grandmother printed on it.” - Allegedly spoken by England’s Prince William just prior to his marriage to Princess Kate.

“ This

fights fraud. It will attract new insurance companies here and lower rates will allow us to save more for hurricane claims.” - Sam Miller, executive vice president of the Florida Insurance Council, an industry group, commenting on bill requiring windstorm and hurricane property claims be presented within three years and sinkhole loss claims within two years.

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Continued from Page 8

PUNITIVE DAMAGES & TAXES that both the statute and the intention of Congress to exclude only those damages that compensate for personal injuries or sickness indicated that the exclusion does not include punitive damages. The Tax Court noted the clear intent of the law as follows:

substantial understatement of income tax exists if the understatement exceeds the greater of 10 percent of the tax required to be shown on the return or $5,000. Example Consider an insurance bad faith judgment where the jury awards the plaintiffs $1,000,000 in compensatory damages and $9,000,000 in punitive damages. The Plaintiffs’ lawyer, in a standard contingency fee agreement, takes 40% of the gross award or $4,000,000 and expenses of $500,000 for experts and other litigation expenses. The plaintiffs’ share of the

Any punitive damages award arguably is made because of some injury and thus would not be awarded “but for” the injury. Punitive damages are for the purposes of punishment, not compensation for “personal injuries or sickness” and therefore do not meet the requirements of the statute. The Greenbergs claimed to the Tax Court that the punitive damages they received were not punitive, but “bad faith damages”. They contended, without citation to any relevant authority, that “damage awards that serve both to compensate and punish are excludable”. The tax court did not buy the argument because “bad faith damages” are, by definition, “punitive damages” and that the punitive damages they received were ineligible to be excluded because they are not compensating “for personal injuries or sickness.” The Tax Court also noted that the legal fees and costs received in a judgment that correspond to taxable damages are also taxable.

Penalty Assessment Section 6662(a) and (b)(1) and (2) imposes a 20-percent accuracyrelated penalty on any underpayment of Federal income tax attributable to a taxpayer’s negligence or disregard of rules or regulations or substantial understatement of income tax. A www.underwritersinsider.com

about tax consequences. Counsel for plaintiffs who are seeking punitive damages should carefully advise their clients of the tax consequences of the recovery of punitive damages if they know enough or should require that each plaintiff seek the advice of a tax professional before agreeing to proceed with a suit or trial seeking punitive damages. If the Greenbergs had consulted with tax lawyers and been advised that they would be required to pay the top tax rate on the full amount of punitive damages awarded to them (even though 40% to 50% of those damages were paid as part of the contingency fee agreement with their lawyers, they might have agreed to the defendants’ settlement offers that did not include punitive damages.

Is this The End of the Tort of Bad Faith? In 2008 I wrote an article titled: “Time to Put A Stake Through the Heart of the Tort of Bad Faith”. In that article I noted: recovery is $5,500,000. If the Plaintiffs live in California or New York they will pay approximately 39% federal income tax and approximately 10% state income tax on their gross earnings in that year. Assuming the Plaintiffs earned nothing in the year of the judgment they are responsible to pay taxes on the $9,000,000 punitive damage award or slightly less than $4,500,000. In essence they receive none of the punitive damage award and the lawyer only pays taxes on his $4,000,000 recovery of legal fees. Also, if they attempt to avoid paying tax on the punitive damage award they may be assessed a 20% penalty.

The law of unintended consequences came into play and instead of protecting the consumer imprecise language, an attempt to force insurers to deal “fairly” with the insureds, resulted in thousands of lawsuits determined to impose penalties on insurers for attempting to enforce ambiguous “easy to read” language. The multiple lawsuits cost insurers and their insureds millions (if not billions) of dollars to get court opinions that interpret the language and reword their “easy to read” policies to comply with the court decisions. For more than thirty years the unintended consequence of a law designed to avoid litigation has done exactly the opposite.

The Need for Tax Advice Before Suit or Trial

***

Most tort lawyers – both plaintiff and defendant – are not knowledgeable

In more than 60 years of application See Punitive Damages & Taxes Pg 33 31

Continued from Pg 19

THE FEDERAL RESERVE rates low is to protect the stock market, a highly visible market used to tout (artificially) economic progress – possibly for political gain. Equity prices are lifted by lower interest rates as inventors are encouraged to purchase stocks as an alternative to low returns on interest-based investments. In August of last year, Fed Chairman Ben Bernanke signaled the Fed’s intent to stimulate the economy by buying an additional $600 billion in Treasury bonds. This was a follow-up to the initial round of quantitative easing of $1.7 trillion spread among Treasuries, mortgage backed securities purchases, and agency bonds. Investors cheered the controversial plan and all three major indexes rallied 1.7% that day. Since then, the S&P 500 has since risen 25%. Okay, great for stocks, but what is quantitative easing? The process of Quantitative easing (QE) is simple: It’s printing money. It is a monetization of our debt. When the government runs persistent deficits, it must pay the bills somehow. So it finances that debt by issuing bonds that are sold by conducting an open market purchase. The government sells newly issued bonds to the Fed and is flush with newly minted cash. This open market purchase is also available to large holders of government bonds, like banks. With quantitative easing, the Fed comes along, offers a higher price than the banks holding the bonds can get for them elsewhere and the banks receive newly printed cash.

The Stimulus Failed To Work We are creating currency out of thin air, sending it around to institutions, and saying “now go circulate it”. This is typically used as a last resort to get money circulating. The stimulus failed to work, low interest rates haven’t worked, so now we have tried this. QE1 and QE2 managed to pump an additional $2 32

trillion of newly printed money into the economy. Bond sellers received new cash, purchased Treasuries to finance President Obama’s debt resulting in their price to go up, yields to go down, and “regular” investors turning to equities in search of higher returns. Magic! The Fed printed money, spread it around, and the stock market went up. This artificial process has distorted the stock market. We will find out this summer the affect of quantitative easing (printing more money) when this cash transfusion ends. If stocks retreat, expect to hear about QE3, and expect to hear it described to be “critical to our continued economic recovery.”

Fed May Not Be Independent Of Politics As an “independent” institution, the Fed wields tremendous power over the wealth and welfare of the common man (that would be you and I) through its monetary policies. It can be speculated that Bernanke, as an appointment of President Obama, is pressured to implement policies that are politically beneficial. It has also been speculated that QE3 will be implemented to prop up the economy even further to assist in his bid for re-election in 2012. All this from an institution that is not subject to an independent audit.

Democrats Thwart Audits The Fed has turned into a secret banking cartel and is facing increasing calls for auditing. Ron Paul has fought to subject them to auditing, while Chris Dodd’s Financial Reform Bill completely eliminated legislation to audit the Fed. Knowing the lengths to which some are going to protect the Fed, public trust in this institution has to be seriously questioned. After printing over $2 trillion in the last year to bolster the stock market and attempt to pump up economic activity, the Fed has clearly failed to fix what it insists it has.

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Trust the Fed? I think I trust the words of G. Gordon Liddy when he says “buy gold.” The Underwriter’s Insider

Continued from Page 33

PUNITIVE DAMAGES & TAXES across the U.S. the tort of bad faith has not had a salutary effect on the insurance business. Insurance costs more than is reasonable or necessary so that sufficient funds exist to pay claims and tort damages from those insureds who believed they were done wrong. Suits relating to claims presented for the 1994 Northridge earthquake in California are still pending seeking tort and punitive damages for failure to pay what the insureds’ believed they were owed. In Louisiana and Mississippi multiple millions were paid to settle claims that flood damage was covered as a result of hurricane Katrina although the policies excluded flood and the plaintiff insureds failed to buy flood insurance. Abuse of insurers is so rampant and so successful that lawyers argue of multimillion dollar fees and have even attempted to (or successfully) bribed judges to increase their recovery. The tort of bad faith is like the mythical Vampire. It hides in the dark. The truth about the tort of bad faith will die only if it is put into the light of day. It does not solve the problem anticipated. Rather it makes a few lawyers very rich, a few insureds receive indemnity for which they did not bargain and makes the cost of insurance to those who wish only to receive the benefits of the contract prohibitive. The tax consequences on the plaintiff merely adds to the application of the law of unintended consequences. If only lawyers obtain the benefit of punitive damages and what the Greenbergs claimed to be “bad faith” damages much effort is being incurred to make some lawyers rich and the litigant in worse shape than they would have been had no punitive or bad faith damages been awarded. www.underwritersinsider.com

Continued from Pg 13

N. CAROLINA INVESTIGATION occasions in 2009 and 2010, Vinson caused a group health insurance policy to be cancelled by failing to pay premiums to insurance companies Blue Cross Blue Shield of North Carolina and United Healthcare, leaving employees of the property management company Tradition, LLC without coverage. He

allegedly did not give the employees the required 45 days written notice of intent to cancel the policies. Vinson is accused of withdrawing $12,131.22 from employees’ earnings for medical coverage and not providing the coverage to employees. A Tradition LLC self-funded group health plan failed to pay a total of $312,733.06 in medical claims incurred by employees. Vinson was arrested on April 28 and placed under a $320,000 unsecured bond. 33

FLORIDA, ARIZONA AND GEORGIA ARE AMONG THE WORST STATES FOR WEAK AND FAILING BANKS

probably avoid failure,” commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings. “However, we feel that, whether they ultimately fail or not, all harbor weaknesses that imply vulnerability to adverse ﬁnancial or economic conditions.” Only the banks receiving a Weiss rating of “very weak” (E+ or lower) -- 468 or 6.1% of all banks rated -- are considered very likely to fail, based on historical data. Weiss added: “Bank failures in high-risk states is a problem that has been with us since the onset of the real estate bust, and one we feel is likely to continue into the future as well. With few exceptions, we ﬁnd

that states with the highest percentage of banks vulnerable to future diﬃculties are also among the states that have suﬀered the highest percentage of bank failures in the past.” In Florida, the Weiss study found that, on average, 5.1% of the banks and thrifts have failed each year since 2008. While in Arizona and Georgia the average yearly bank failure rates have been even higher -- 6.6% and 5.5%, respectively. “With the exception of Nevada,” Weiss said, “these are the three states with the highest bank failure rates in the nation, and our ratings tell us that their banking problems are far from over.”

UPITER, FL--(Marketwire February 3, 2011) - Florida, Arizona and Georgia are among the worst states for consumers seeking to avoid weak banks and bank failures, while West Virginia, Maine and Iowa are among the best, according to a new study by Weiss Ratings, the nation’s leading independent provider of bank and insurance company ratings. Among the banks and thrifts domiciled in Florida, a very large percentage -- 79.1% -- are considered weak, receiving a Weiss Financial Strength Rating of D+ or lower, based on their capital, earnings, asset quality and liquidity, while in Arizona the percentage is 71.8%. Also among the high-risk states are Georgia (with 67.9% of the banks weak), South Carolina (63.4%) and Washington (61.2%). In contrast, West Virginia, Maine, and Iowa boast the lowest percentage of weak banks -- 10.6%, 13.3%, and 13.8%, respectively. Nationally, Weiss rates 2,673 institutions “weak” or “very weak,” representing 34.4% of the 7,747 receiving a Weiss rating. “Many of the weak banks will 34

The Underwriter’s Insider

AIA PRAISES FLORIDA LEGISLATURE FOR PASSAGE OF COMMERCIAL LINES RATE REGULATION REFORMS

ASHINGTON, DC, May 2, 2011 – The American Insurance Association (AIA) today praised the Florida Legislature for passage of H 99, legislation further excluding certain categories of commercial insurance from the rate ﬁling and approval process. The AIA-supported measure, which passed the Florida House on March 31, passed the Senate today. The legislation expands upon commercial lines insurance reforms adopted during the 2010 Session. “Florida’s lawmakers deserve credit for passing meaningful legislation that will

benefit businesses and insurers alike,” said Ray Farmer, AIA Southeast region vice president. “The legislation will enable insurers to better serve the commercial insurance needs of Florida’s businesses. Reducing regulatory inefficiencies should benefit the marketplace.” The legislation exempts non-residential property, excess property and fiduciary and general liability from current rate filing requirements. In addition, it reduces the commercial auto fleet threshold from 20 vehicles to just one. Under H 99, insurers will still be required to develop rates that are subject to legal standards of not

being excessive, inadequate or unfairly discriminatory. “Passage of commercial lines rate reform legislation was AIA’s top legislative priority in Florida this session,” said Farmer. “AIA worked diligently to educate legislators about the necessity and beneﬁts of the bill for Florida’s businesses. AIA is hopeful that the governor will quickly sign the bill into law when it reaches his desk.” If the bill is approved by the governor, measures contained within H 99 will become eﬀective on October 1, 2011.

CFO ATWATER ANNOUNCES ARRESTS IN ORLANDO PIP FRAUD INVESTIGATION

RLANDO—Florida CFO Jeff Atwater today announced the arrests of a clinic manager and employee on fraud and theft charges as a result of allegations that an Orlando clinic manager coerced employees to fraudulently bill Direct General Insurance Company for more than $60,000 in Personal Injury Protection (PIP) claims. Three others are still being sought. CFO Atwater is supporting legislation that would help fight auto insurance fraud by requiring law enforcement officers to list all passengers in an accident and creating civil penalties for those convicted of auto insurance fraud, the proceeds of which will be used to fund additional anti-fraud efforts. “These arrests represent the kind of manipulation and fraud that take place in accident clinics throughout our state and drive up auto insurance costs for all Floridians,” said CFO Jeff Atwater. “I am committed to cracking down on PIP fraud, putting these thieves behind bars and finding new ways to combat this pervasive crime.”

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The CFO’s Division of Insurance Fraud began its investigation into Bethel Health & Rehab Center Inc., located at 1441 N. Pine Hills Rd. in Orlando, after a consumer reported that the clinic allegedly fabricated documentation related to her treatment to submit to her insurance company.

They all face charges including staging an accident, insurance fraud, grand theft, patient brokering and organized scheme to defraud. Possible sentences, if convicted, range from two years for those charged with staging an accident to up to 30 years in prison for organized scheme to defraud.

Two former clinic employees, licensed massage therapists, later admitted to investigators that the clinic’s manager, Jean Fritz Petoite, and two other employees at the clinic, Oliver Steven Zidor and Myrlene Saint Preux, pressured them to sign and fabricate treatment forms to submit to insurance companies.

According to the National Insurance Crime Bureau, Florida has three of the top ﬁve cities nationally for questionable medical claims associated with staged accidents—Tampa, Miami and Orlando. This case is part of a continuing crackdown by CFO Atwater’s Division of Insurance Fraud and the NICB in the ﬁght against auto insurance fraud in Florida.

Petoite also allegedly recruited staged accident participants with the promise of $1,000 if they visited Bethel Health & Rehab Center. The staged accident participants, Alejandro Estrada and another woman who is cooperating with investigators, were allegedly coached by Patricia Placek on how to defraud the insurance company. Petoite and his brother, Zidor, were arrested Friday and warrants have been issued for the three others—Preux, Placek and Estrada.

Chief Financial Officer Jeff Atwater, a statewide elected official and officer of the Florida Cabinet, oversees the Department of Financial Services including the Division of Insurance Fraud. CFO Atwater’s priorities include fighting financial fraud, abuse and waste in government, reducing government spending and regulatory burdens that chase away businesses, and providing transparency and accountability in spending. 35