From Common to Convoluted, Cases Demonstrate Range of FraudSeptember 6, 2012 | |
This column typically focuses on insurance fraud trends, developments, and cases from New York. Insurance fraud, however, goes well beyond this geographical area, and sometimes involves unusual, even bizarre, facts. Locally, Nassau County District Attorney Kathleen Rice recently brought charges against Raymond Rother for allegedly conspiring with his son to fake his own drowning death in the ocean off Jones Beach in a bid to secure hundreds of thousands of dollars in life insurance benefits for family members.  In another local matter, the U.S. Attorney for the Southern District of New York announced charges against three insurance agents who allegedly orchestrated a $100 million insurance fraud scheme involving stranger-owned life insurance policies. The comments in that matter by Janice Fedarcyk, who then was FBI assistant director-in-charge of the New York office, apply to all insurance fraud matters, whether big or small, unique or common: “…the insurers were not the only victi Inevitably, insurance fraud results in higher costs to consumers.”
Slip and Fall
Consider, for example, the charges brought recently by Massachusetts Attorney General Martha Coakley against Jeffery Bannon, a former employee of Magna Carta Companies, also known as Public Service Mutual Insurance Company, and Steven Cournoyer. In a statement, Coakley stated that her office alleged “that these defendants conspired to defraud an insurance company of thousands of dollars for their own personal benefit.”
Prosecutors contended that the defendants conspired in a scheme to defraud the insurance company out of a closed unpaid claim. The claim was related to a slip and fall that occurred in March 2007 at a restaurant in Wellesley, MA, that was insured through Magna Carta.
According to the charges, in February 2008, Bannon, acting in his capacity as Magna Carta’s regional claims manager, reopened the property liability claim to authorize a payment of $23,500 to Cournoyer. As part of the alleged scheme, Cournoyer deposited the insurance proceeds into his bank account and wrote a series of checks to Bannon totaling $6,240.
The Cat Case
In another case, a felony insurance fraud charge was filed against Yevgeniy M. Samsonov, a man from Tacoma, WA. The state’s insurance commissioner contended that Samsonov had filed a $20,000 claim for a fictitious dead cat, using pet photos he lifted off the Internet.
According to the authorities, Samsonov was involved in a minor traffic accident involving another vehicle on March 27, 2009. He filed a claim that included chiropractic treatment of soft tissue injuries, and the other driver’s insurer paid him $3,452.
Two and a half years later, Samsonov allegedly sought additional payment from that insurer. According to the charges, he said that in addition to the vehicle damage and medical claim, his beloved cat Tom had been in the car and had been killed in the accident. The company issued him a check for $50 to compensate him for the cat.
Samsonov then allegedly told the insurer that he had paid $1,000 for the cat, who had been like a son to him, and that he wanted to be paid $20,000. He sent the company two photos he said he had taken of his cat.
One of the insurer’s claims representatives did a Google Images search and discovered identical cat images appearing on websites, blogs and Facebook pages, according to the charges. Moreover, the government asserted, the two images Samsonov submitted actually were of two different cats, one of whom was named Lacy, and neither of which belonged to him.
The insurer canceled its $50 check and forwarded the case to the Washington Insurance Commissioner’s anti-fraud unit. The criminal charges followed.
“We’ve handled some pretty unusual fraud cases, but this is one of the stranger ones,” said Washington Insurance Commissioner Mike Kreidler in a news release issued by Washington State Office of the Insurance Commissioner.
The Hole-in-Won Case
Kreidler recently brought charges in another interesting case. Here, he charged Kevin Kolenda, a businessman specializing in insurance for golf tournament hole-in-one prizes, with multiple felonies after “repeatedly failing to pay up.” In some cases, Kreidler says, charities had to come up with the prize money, and in others the prize winners agreed to forego a prize.
According to the charges, Kolenda started a business called Golf Marketing in 1995, currently Hole-in-Won.com Worldwide. Kreidler alleges that Kolenda repeatedly has failed to pay winning golfers in the State of Washington. Among them:
- In 2003, Kolenda sold insurance for a tournament in Bremerton. But when a golfer got a hole in one and tried to claim the $10,000 prize, Kolenda wouldn’t pay.
- In 2004, Kolenda sold insurance for a Vancouver tournament. Again, a golfer got a hole in one. Kolenda refused to pay the $50,000 prize. After a hearing at which Kolenda failed to appear, he was ordered in 2008 to pay a $125,000 fine. He never did.
- In 2010, Kolenda sold coverage to pay $25,000 for a hole in one during a golf tournament in Snohomish. A player got a hole in one. His golf partners signed notarized forms attesting to the hole in one. The prize remains unpaid, despite numerous calls and emails from the partners and tournament officials.
The Washington Insurance Commissioner asserts that similar allegations have been made against Kolenda and/or his business in other states, including Montana, Ohio, Georgia, California, New York, Hawaii, Alabama, Massachusetts, Florida, Connecticut and North Carolina.
The Chain Saw Case
The title of the press release announcing the next case, from South Carolina, is quite understated: “Cayce Man Arrested in Insurance Fraud Case.” In May 2008, according to the U.S. Attorney for the District of South Carolina, Gerald B. Hardin, of Cayce, South Carolina, and another person used a pole saw – a small chain saw that is attached to the end of a pole and that is used to trim tree branches – to intentionally cut off the hand of a third person. Prosecutors contended that the three men then submitted claims against a homeowner’s insurance policy and three accidental death and dismemberment policies and received over $671,000.
Published reports indicate that Hardin has pleaded guilty and that he will testify against the other person allegedly involved in the scheme; the victim, whom prosecutors described as a “mentally disabled adult male,” is not going to be charged.
An interesting insurance fraud case was resolved recently in a federal district court in Minneapolis when Jason William Sheedy, a 39-year-old St. Paul man,pleaded guilty to filing a false insurance claim for $250,000.
In his plea agreement, Sheedy admitted that between September 2007 and December 2011, he devised a scheme to fraudulently obtain money from the AXA Art Insurance Corporation, which insures artwork and items of historical value. In September 2007, Sheedy insured several items, including artwork, with the insurer. Then, on September 27, 2007, he filed an insurance claim for $274,905, reporting that some of the insured pieces, including several works of art, had been stolen from a moving van. On January 28, 2008, pursuant to that claim, AXA mailed Sheedy a check for $254,832.
However, Sheedy admitted in his plea agreement, on May 24, 2011, he listed six of the reportedly stolen paintings on Artbrokerage.com, an Internet website for a Nevada auction house. Prosecutors say that a December 2011 search of Sheedy’s residence yielded all but one of the art pieces reported stolen.
By the way, Sheedy also admitted filing a false claim with the Farmer’s Insurance Company in September 2007. That claim, purportedly for stolen household items valued at $93,302, was paid on February 12, 2008.
Fire and Arson
Let’s end with a discussion of a decision by a federal district court in Kentucky in a case brought pro se by a married couple against their homeowner’s insurer.
As the court explained, the insurance carrier issued a homeowner’s policy to the couple that insured their home in Leitchfield, KY. On or about July 25, 2006, a fire occurred at the home that either damaged or destroyed the dwelling and its contents. In accordance with the terms of the policy, the couple timely filed a claim with the insurer by providing notice of the fire and the damage. The insurer, however, refused to pay a portion of the claim on the grounds that the homeowners were complicit in causing the fire.
It should be emphasized that both the husband and wife were convicted in Kentucky state court of second degree arson, second degree wanton endangerment, and insurance fraud in relation to the destruction of their home – and that these convictions were affirmed on appeal.
Nonetheless, the couple filed a lawsuit against their insurer seeking coverage under the terms of the policy and alleging that the insurer had engaged in bad faith when it denied their insurance claim. The insurer filed a counterclaim against the homeowners alleging that the fire was intentionally caused or brought about by them. As a result, the insurer maintained that it was not liable under the policy and sought reimbursement for the “Additional Living Expenses” it had paid to the plaintiffs in the amount of $13,236.40, for reimbursement of the advanced “Content Loss” payment in the amount of $1,000, and for subrogation/indemnification for payment to the plaintiffs’ mortgage company, Option One Mortgage Company, in the amount of $102,763.36.
In its decision, the court ruled that because the homeowners had been convicted of arson and insurance fraud associated with underlying insurance claims and because the policy excluded coverage where a loss was caused by the insured’s own intentional or criminal acts, the insurance carrier’s decision to deny coverage “was proper” and summary judgment in favor of the insurer on the couple’s coverage claim was warranted.
The court also found that the insurer was entitled to assert a subrogation claim against the couple for the amounts that it paid to Option One, “placing ultimate responsibility for the loss upon the intentional wrongdoer.” Thus, it granted summary judgment in favor of the insurer in the amount of $102,763.36 against the homeowners, including prejudgment interest.
Moreover, the court found that the insurer was entitled to reimbursement for the “Additional Living Expenses” and “Advanced Content Loss,” plus prejudgment interest, as well as compensatory damages, attorneys’ fees, and “all other reasonable expenses incurred during the investigation and litigation” of the couple’s lawsuit.
 Roth was charged with Insurance Fraud in the Second Degree, among other things. See “Raymond Roth Charged After Faking His Own Death,” available at http://www.nassaucountyny.gov/agencies/DA/NewsReleases/2012/081512roth.html.
 See, e.g., “Manhattan U.S. Attorney and FBI Assistant Director-in-Charge Announce Charges Against Three Insurance Agents Who Orchestrated $100 Million Insurance Fraud Scheme,” available at http://www.justice.gov/usao/nys/pressreleases/February12/bindayetalindictmentpr.pdf.
 See “Two Men Indicted in Connection with Insurance Fraud Scheme,” available at http://www.mass.gov/ago/news-and-updates/press-releases/2012/2-men-indicted-connection-with-insurance-fraud-scheme.html.
 See “Man faces charges after claiming $20,000 for fake dead cat,” available at http://www.insurance.wa.gov/news/2012/7-05-2012.shtml.
 See “‘Hole-in-Won’ Golf tournament insurer charged with felonies for not paying up,” available at http://www.insurance.wa.gov/news/2012/8-23-2012.shtml.
 See “Cayce Man Arrested in Insurance Fraud Case,” available at http://www.justice.gov/usao/sc/LivePressReleases/2.23.12%20Hardin.pdf.
 John Monk, “Man Pleads Guilty To Cutting Off Acquaintance’s Hand For Insurance Money,” available at http://www.mcclatchydc.com/2012/08/21/163024/man-pleads-guilty-to-cutting-off.html.
 Houchin v. Allstate Indemnity Ins. Co., No. 4:07-CV-00071-M (W.D. Ky., June 26, 2012).
Reprinted with permission from the September 6, 2012 issue of the New York Law Journal. All rights reserved.