Nev. Unlicensed Insurer Shut Down and Ordered to Pay Fines

November 26, 2003

Nevada Insurance Commissioner Alice A. Molasky-Arman ordered TRG Marketing, L.L.C., TRG Administration L.L.C., (TRG) and its principals, William Paul Crouse and Carmello Zanfei, to pay administrative fines of $180,000, collectively, for reported violations of unfair trades practices by acting as an unauthorized insurer in the state of Nevada. Additionally, USA Services, who was acting as a third party administrator without a license for TRG, was ordered to pay an administrative fine of $10,000. The order was a result of a hearing held on July 15, 2003 at the office of the Division of Insurance.

In an agreement reached prior to the hearing, licenses of the managing general agents, agents and brokers (i.e., producers) who marketed or sold this unauthorized health insurance to Nevada consumers were suspended for 30 days. These individuals were also each fined individually $5,000.

Molasky-Arman stated, “Unauthorized insurers are notorious for a take-the-money-and-run approach to business ethics. They prey on consumers trying to find affordable coverage for their families, and they need to be stopped.”

In Feb. 2002 TRG was ordered to cease and desist operating in Nevada. The company marketed its health plan as a federal ERISA plan, alleging it was exempt from state regulation, and that employers could offer the plan to employees at greatly discounted premiums. TRG sold this unauthorized health insurance in numerous states and left consumers nationwide with unpaid claims.

On Oct. 28, 2003, the U.S. Department of Labor filed a suit in the federal district court in Indianapolis, Indiana against executives of TRG. The suit seeks to require Crouse and Zanfei to pay all health claims filed by participants, currently estimated up to $17.5 million in unpaid TRG health claims nationwide.

A new law enacted in Nevada earlier this year places more responsibility on agents (producers) and other persons to ensure the products they are selling are legitimate. AB 453 states that any person or entity who knowingly represents or aids an unauthorized insurer is guilty of a category C felony. Persons committing subsequent violations are subject to a category B felony. According to Nevada law, those individuals and entities could also be held personally liable.

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