Industry Sees Several Insurance Fraud Cases Arise
In recent months the
auto glass industry has seen several insurance fraud cases arise, resulting
in both guilty pleas and even prison sentences for some.
In March, Glass Emporium owner Mehrdad Hakimian was found guilty of wire
fraud, conspiracy to commit wire fraud and obstruction of justice. In
July, he was sentenced to serve 3 ½ years in prison, along with
the payment of a $150,000 fine (see related story in May/June AGRR, page
10). At press time, Hakimian was scheduled to begin serving his prison
sentence on September 3.
The day before the sentencing, Hakimian also stepped down as president
of his Oakland, Calif.-based company.
Hakimian’s attorney, William Osterhoudt, issued the following statement
to AGRR magazine regarding the sentencing and the future of the company.
“We’re disappointed that he sustained these convictions because he maintains
a company that employs very many people and has served his customers well
for many years,” says Osterhoudt. “The problems that gave rise to the
trial happened years ago and they ended in 2006. Since then he’s done
everything he can to make sure that money was restored to anyone who was
undercharged whether intentionally or fraudulently or intentionally or
innocently and he’s instituted real reforms at his company to make sure
those things don’t happen in the future and he’s been successful in that
The Latest Cases
In May, Cascade Auto Glass, based in Vancouver, Wash., pleaded guilty
to attempted insurance fraud for attempting to bill Farmers Insurance
from a non-existent office that actually was just a storage unit located
in a rural area, according to the Washington State Insurance Commissioner’s
office. The commissioner’s office had filed a complaint against Cascade
in King County (Wash.) Superior Court, leading to the guilty plea.
According to Rich Roesler, a spokesperson for the Washington State Insurance
Commissioner, Safelite Solutions, in its role as glass claims administrator
for Farmers, discovered the irregularity.
“Safelite is the one who contacted the insurer to raise the issue,” Roesler
told AGRR magazine.
Roesler said the state reviewed 3,031 claims filed between June 1, 2000,
and November 17, 2008; however, he said he didn’t have a breakdown of
how many of those were fraudulent.
Roesler said the corporation itself pled guilty to the attempted fraud
charge as part of a plea bargain—and therefore weren’t charged with actual
fraud. The company will pay a $1,000 fine, $500 victim penalty assessment
and $200 in court costs.
Officials from Cascade Auto Glass advised that the charges were the result
of “a long-running dispute with an insurance carrier over pricing and
“Cascade originally filed a claim against the carrier for the underpayment
of invoices,” writes the company in a statement provided to AGRR magazine.
“For quite some time, Cascade and this carrier disagreed with one another
about the amounts that should be billed and paid for automobile glass
replacement. After many years of litigation, Cascade and the carrier were
able to amicably resolve their dispute and conclude the lawsuit that was
pending in Clark County Superior Court.”
However, company officials say during the course of the suit, the complaint
from the insurance commissioner’s office arose.
“Although Cascade and the carrier settled the dispute outside of court,
the insurance commissioner charged Cascade with a misdemeanor relating
to the billing dispute,” writes the company. “While we at Cascade firmly
believe that we did nothing illegal, we have chosen to plead guilty to
the charge in order to put this matter behind us. There is no
need for either company to undergo that expense nor is there a need for
the taxpayers of Washington to have their financial resources expended
in a trial over these issues.”
In late-July, Michael Alan Perkins, who owns Autoglass Express Inc. and
Premier Auto Glass, both of which are based in his home in Burien, Wash.,
also was charged with three counts of first-degree theft for allegedly
billing State Farm Insurance, MetLife and Allstate a total of approximately
$1.5 million between September 2005 and December 2009, according to Roesler.
Prosecutors allege that he installed non-OE glass in approximately 4,800
cases, but charged the insurers for OEM product.
“We’ve been investigating them for months and from what we could tell
from going through the records is that they overbilled State Farm, Metlife
and Allstate collectively in literally thousands of cases,” Roesler told
AGRR magazine. “We found more than 4,800 cases [in which] we believe they
installed aftermarket glass or generic glass but charged for OEM glass,
and the price can be dramatically different.”
Through its investigation of Perkins’ business, which he co-owns with
his wife, Trena, Roesler says the insurance commissioner’s office found
numerous cases of overbilling. For example, investigators say they found
a record of a 1991 Subaru Legacy in which an insurer was billed $191.95
for a front sidelite, “and [the business] had installed glass from a wrecking
yard for $65,” Roesler says.
Roesler also cited a case related to a 1999 Lexus R200. “[The business]
replaced the windshield and billed $1,167 for it but actually paid—this
is a real number—$56 for the glass, a huge markup,” he says.
Roesler says a third-party administrator brought concerns about the company’s
billing practices to the insurance commissioner’s office, which announced
earlier this year that an investigation had been launched. The TPA involved
in this case has not been named.
Is Fraud Up?
Amidst these recent industry fraud cases, the National Insurance Crime
Bureau (NICB) recently reported that it has found that “questionable”
auto glass claims are up 527 percent for the first half of 2010, compared
with the same period last year. The finding was released as part of NICB’S
annual questionable referral reason analysis, which looks at a variety
of types of claims from its insurance company members.
During the first half of 2009, NICB had 239 questionable auto glass claims
referred to it, compared with 1,498 for the first half of 2010—up 527
percent by 1,259 claims. Last year, the insurance group had reported that
“suspicious” auto glass claims were up 76 percent over the previous year.
“We’re seeing concern from our members about criminal rings that are deliberately
damaging vehicle windshields in order to file an insurance claim, and
in some cases are not doing satisfactory repairs or replacements,” says
Joe Wehrle, NICB president and chief executive officer.
Though questionable auto glass claims may be up, NICB spokesperson Frank
Scifaldi says fraudulent claims may not necessarily be. According to information
from NICB, these are claims that NICB member insurance companies refer
to NICB for closer review and investigation based on one or more indicators
of possible fraud.
“These are not definitive fraud cases at all,” Scifaldi told AGRR magazine.
“These are cases that the member companies—of which there are more than
1,000—have the option of referring … as questionable to us.”
Ameriprise Fined $71,100 for Offering Deductible Discounts as Incentive
to Use DRP Shops
The Colorado Division of Insurance (CDI) has levied a fine of $71,100
against Ameriprise Auto & Home Insurance Co. for steering by offering
discounts on deductibles for utilizing direct-repair program (DRP) auto
repair shops, according to a report from the CDI.
According to the report, Ameriprise offered an incentive program between
September 2006 and January 2010 in which customers received a $100 discount
off their collision deductibles for using one of the insurer’s DRP facilities.
A total of 711 consumers participated in the program during that period,
and Ameriprise’s $71,100 fine is comprised of $100 for every consumer
that received the discount in return for using one of its shops. In addition,
the company has been ordered to pay a 10 percent surcharge of $7,100 directly
to the CDI.
CDI initially received a complaint in January 2010 from an Ameriprise
customer who said that he/she was offered the $100 discount for selecting
a repair facility on the insurer’s Direct-Repair Program (DRP), and an
investigation was launched shortly after, according to the final order.
“The Division alleges that … the deductible reduction is considered an
inducement by incentive to utilize a repair facility participating in
the DRP,” writes CDI in its official report.
In addition to the fine, Ameriprise was ordered to cease use of the incentive
“While the repair shops contracted with Ameriprise may have done good
work, the anti-steering law ensures that consumers, not insurance carriers,
are in the driver’s seat to decide where they want repairs done,” says
Marcy Morrison, Colorado insurance commissioner.
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