Fla. Bill Tightening Penalties for Selling Unlicensed Ins. Clears Committee

March 27, 2003

Florida’s Chief Financial Officer Tom Gallagher praised the Senate Banking and Finance Committee’s passage of a bill that would provide stronger criminal penalties for operators of unlicensed insurance entities who sell their bogus products to Floridians.

According to the Department of Financial Services, those who sell unlicensed insurance in the state will face felony charges under the bill.

Senate Bill 1680, sponsored by Committee Chairman Sen. Bill Posey, R-Rockledge, was dubbed the “Pete Orr Bill” for the late NASCAR-circuit driver from Montverde, Fla., who died last year while unpaid bills piled up after TRG Marketing Group, an unlicensed entity based in Indiana, refused to pay his cancer-treatment claims.

“This is a giant step toward greater protections for Florida insurance consumers,” Gallagher commented. As the state’s CFO, Gallagher heads the Department of Financial Services. “Thousands of our citizens have been financially devastated by rogue unlicensed entities who sell coverage with no intent or no ability to pay claims. I applaud Senator Posey’s efforts in pursuing these penalties and solutions to this problem. “

The bill that passed through the Senate committee would allow individuals who operate an unlicensed insurance entity and peddle their products in Florida to be charged with a first-, second-, or third-degree felony charge of insurance fraud based on the dollar value of premiums collected. The bill also would provide a procedure for policyholders to civilly sue these operators and their unlicensed entities.

Gallagher, as the state’s former Insurance Commissioner, has ordered nine unlicensed entities, included TRG, to cease operations in Florida. Gallagher has also taken action against several agents as he continues to identify all agents who knowingly sold unlicensed policies.

Administrative orders against unlicensed insurance entities will now be signed by Kevin McCarty, director of the Office of Insurance Regulation, housed within the Department of Financial Services. Gallagher will continue to sign orders against agents.

“Unlicensed insurance entities not only pose a financial threat to consumers but also leave them vulnerable to becoming uninsurable because of the gap in continuous coverage,” McCarty said.

More than 30,000 Floridians have reported being left with millions of dollars in unpaid claims as a result of being duped, many by their agents, into buying coverage from unlicensed entities. Gallagher said this deception is being carried out by a very small percentage of Florida’s licensed agents.

Because these entities are not licensed in Florida, they are not regulated and therefore there are no assurances of their ability to pay claims. Further, unlicensed insurance entities are not protected by any state guaranty fund that is available to licensed insurance companies that may find themselves unable to pay claims.

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