Insurance Company Awarded $19.3 Million in Jury Verdict From Money Siphoning Scheme

A federal jury in Seattle has issued a $19.3 million verdict against three people and a company for wrongfully siphoning off millions of dollars owed to a Bellevue insurance company. Money recovered as a result of the lawsuit will be used to reimburse the insurance guaranty fund who are paying the company’s workers’ compensation claims.

Washington Insurance Commissioner Mike Kreidler was overseeing the company’s liquidation since 2005, ensuring the company makes good on claims. He filed the lawsuit in 2006, charging three defendants and their company with defrauding Cascade National of workers’ compensation premiums.

Kreidler assumed control of Cascade National in 2004 when the company was placed in receivership by Thurston County Superior Court after failing to meet financial requirements under state law saying the company’s deteriorating financial condition meant it could not be saved or sold. In 2005, at Kreidler’s request, a judge declared Cascade National insolvent and ordered it liquidated.

Although principally providing approximately 4,600 auto and commercial trucking policyholders insurance in Washington, Oregon, Alaska, California, Mississippi, and Louisiana, Cascade National suffered financial setbacks within a year of providing workers’ comp coverage to nearly 15,000 workers in California.

Due to its financial woes, Cascade National became a target for takeover and control by the three defendants, longtime business associates. The defendants sought a workers’ comp insurer licensed in California – where Cascade was – in order to provide coverage for the defendants’ business clients.

Among other manipulations, however, the defendants positioned themselves so they collected all the workers’ comp premiums from their approximately 140 business clients, covering nearly 15,000 California workers. That both concealed the payments and put them out of reach of the workers’ comp insurer, Cascade National. Despite not getting those premiums or other payments due from the defendants, Cascade was and is obligated to pay all covered claims to injured workers.

In short, through an elaborate network of companies, the trio used Cascade as their vehicle to tap into the California workers’ comp market and siphon off premiums and fees due to Cascade. (workersxzcompxzkit)

Jurors rendered a verdict against one man and a married couple and Midwest Merger Management LLC. for a combined $19.3 million to Cascade National Insurance Company. A written ruling from the court is expected soon on remaining claims.

Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce workers’ compensation costs, including airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. Contact: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.