The Federal Motor Carrier Safety Administration recently warned truckdrivers, carriers and others to be aware of fraudulent insurance schemes.
"There have been situations where motor carriers have been purchasing insurance policies from insurance companies that don't exist," the warning said. "Insurance companies, agents and brokers must be licensed."
The warning appeared on FMCSA's Web site because of concerns that companies in the border states of Texas, California, Arizona and New Mexico will try to operate without licensing authority in the United States.
FMCSA told Land Line the agency is concerned the anticipated influx of Mexican trucks on U.S. highways will in turn lead to "fly-by-night" insurance operations. Under the North American Free Trade Agreement, Mexican carriers must obtain insurance through a U.S.-certified and licensed company.
However, no company to date is certified to offer the insurance, FMCSA said.
Specifically, the agency wants to prevent bogus companies from selling bodily injury, property damage and cargo insurance. While the agency cannot shut down an illegal operation, it can determine if a registered company is licensed and forward the information to the proper authorities.
An example: Texas indicts man for alleged scam of petroleum truckers
Early in December 2002, a Travis County, TX, grand jury indicted John William Tesseyman III of Tyler for unauthorized insurance activities that may have left dozens of petroleum product truckers and fireworks display companies without the automobile, liability and property coverage they paid for.
Many individuals, agents and other entities in Texas and other states sustained financial losses and incurred claims for which they may never be compensated as a result of Tesseyman´s alleged unauthorized conduct, a news release from the Texas Department of Insurance says.
The six-count indictment lists premium payments totaling more than $1.8 million from 35 different customers. Several premium payments were in six figures, including one for $655,858. The premiums were deposited into the bank account of Tesher Corp. of Tyler, owned by Tesseyman.
The Tesher Corp. has been placed in state receivership.
In addition to Tesher´s unauthorized insurance activities, Insurance Department staff believe Tesseyman and the incorporated agency failed to provide actual policies to customers, misrepresented policy terms or failed to secure coverages that policyholders had been promised.
They also allege that Tesseyman and Tesher Corp. collected premiums for policies with companies that Tesseyman no longer represented. Insurance Department staff members further allege that Tesseyman failed to remit premiums to insurers and failed to refund premiums collected for insurance that was not procured.
Unauthorized insurance the sale of insurance without the license or other eligibility required by Texas law is a third-degree felony. The maximum penalty is 10 years in prison and a $10,000 fine.
Travis County District Attorney Ronald Earle´s office obtained the indictment following a joint investigation with the Insurance Fraud Unit of the Texas Department of Insurance. Additional charges are pending. Under Texas law, the Travis County district attorney has statewide jurisdiction in insurance fraud cases.
In a separate administrative action, Texas Department of Insurance attorneys are seeking the revocation of Tesseyman´s individual licenses as an insurance agent.
-By Dick Larsen, senior editor