N.C. Cracks Down on Unlicensed Workers’ Comp Co.

June 21, 2004

North Carolina Insurance Commissioner Jim Long announced that a cease and desist order—levying two fines worth $390,000—was issued against American Benefits and Insurance Services Inc. of Salt Lake City.

According to the order, American Benefits provided workers’ compensation coverage for at least 39 North Carolina employers without being properly licensed by the Department of Insurance (DOI). American Benefits and its president, Talmage Pond, were both fined $195,000 each and ordered to cease doing any insurance business in the state without first complying with North Carolina’s licensure laws.

At a hearing held by the DOI on May 26, evidence revealed that American Benefits began offering workers’ comp coverage in 2002. Some claims generated through this phony coverage were paid, but two of the 39 employers have already reported approximately $70,000 in unpaid claims. More unpaid claims are expected.

“North Carolina is considered to have one of the most rigorous company-licensing procedures in the country,” Commissioner Long said. “That’s for good reason—we want to make sure that any company doing business in our state has the financial wherewithal to stand behind its business. We require companies to have a hefty deposit and we monitor a company’s financial status to make sure it is stable.

“American Benefits simply did not have the funds to cover claims, and this left many North Carolinians out in the cold. This would never have happened if the company had been properly licensed. At least we caught on to Mr. Pond’s misdeeds and were able to stop him from cheating any more innocent consumers.”

Unfortunately, American Benefits’ is not an isolated case. The problem of unlicensed, fake insurance companies—or unauthorized entities, as they are called by the DOI—is widespread and growing. Today’s cease and desist order is the eleventh since September 2002, with millions in unpaid claims in North Carolina from several lines of business. The health insurance sector has been particularly hard hit. In February, a company called American Heartland was ordered to cease doing business in North Carolina after leaving more than $1 million in unpaid health claims.

The problem is so bad that Commissioner Long created a special unit to address unauthorized entities just last spring. After a year in operation, the Unauthorized Entities Unit is going strong.

“I’m proud to say it looks like we’ve addressed this problem while it is on the upswing,” Long said. “Hopefully, we are getting out in front of these unlicensed companies and will be able to stop them before they can do too much more harm. Plus, we are sending a message to anyone thinking of doing business in North Carolina—get licensed, or get out.”

Long urged insurance consumers to check a company’s licensure status before signing up with them by calling (800) 546-5664 and asking a DOI specialist.

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