View this article online: https://www.claimsjournal.com/news/midwest/2007/06/25/81066.htm
Policyholders defrauded by an insurance agent who killed herself in late March will be getting their premiums back in full, in a settlement of the largest insurance premium fraud cause in North Dakota history.
Insurance Commissioner Jim Poolman on Friday, June 22 ordered full restitution for 10 policyholders of the Cottingham Agency. The amounts range from about $338 to nearly $326,000. The total is about $675,000.
The money will be repaid by the family of Diane Cottingham, which runs the Cottingham Agency, Poolman said.
“The (Cottingham) family wanted to make this right,” he said.
Poolman said nearly a dozen staff members spent hundreds of hours working on the case.
“This is the largest investigation, the largest fraudulent activity with the taking of premium dollars in state history,” he said.
Poolman declined to say if the Cottingham family asked for less than full restitution during negotiations with the department. Diane Cottingham’s husband, Dean, and her daughters, Amanda and Jessica, make up the agency’s remaining board of directors.
“They wanted to make sure the policyholders remained whole,” Poolman said.
Morris Tschider, the attorney for the Cottingham Agency, which has offices in Bismarck, Underwood and Washburn, declined comment on the restitution order other than to say the Cottingham family is satisfied and will pay the money.
Poolman would not say if the Cottingham Agency has enough money to cover the restitution, though he said, “there’s going to be some personal liability (for the Cottingham family) in paying back those dollars.”
Poolman said the state could have shut down the agency but wanted to avoid that because it has about a dozen employees and hundreds of policyholders.
Diane Cottingham, of Underwood, who was the Cottingham Agency’s president and secretary-treasurer, killed herself when state regulators became aware of the fraud. Her body was found March 24, near her car in a pasture near Max. She had been scheduled to meet that day with Poolman, who planned to order her to stop selling insurance policies.
Poolman said Friday that Diane Cottingham was the only one in the agency involved in the fraud and did not personally benefit from it, though “it is not a leap of faith” to assume some of the premium money might have gone to pay salaries or business expenses.
Laurie Wolf, the insurance department’s director of licensing and enforcement, said Diane Cottingham was paying herself “less than six figures,” and Poolman said “she was not bleeding the agency of cash.”
Authorities are still not sure of Cottingham’s motive. Poolman said the main theory is that she was trying not to lose hard-to-insure accounts, by self-insuring them. It was a scheme that would have crumbled had a large claim come in that Diane Cottingham could not cover, he said.
Diane Cottingham did pay about $39,000 in claims on the fraudulent accounts, Poolman said. That amount was deducted from the $715,000 in fraudulent premiums when the restitution was calculated, he said.
Policyholders were being sent a letter Friday about the restitution agreement. To get their premium repaid, they must sign a release agreeing not to sue the Cottingham Agency, Poolman said.
“We think this is a fair option for the policyholders,” he said.
Poolman’s order sets a deadline of June 30 for the Cottinghams to repay the fraudulent premiums.