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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 regard.”

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 billing practices.”

“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 immediately.

“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.

AGRR
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