Washington State Cracks Down on Insurance Violations,Levying Nearly $840,000 in Fines

Olympia, Wa – Washington State Insurance Commissioner Patty Kuderer’s Office recently announced the imposing of ample fines, totaling over $839,750, against several insurance-related entities for violations of state insurance laws. The penalties, issued during the second half of May and the first half of June, target a range of offenses, including the operation of an illegal healthcare sharing ministry, an unregistered service contract provider, and an unlicensed surplus lines provider. Protecting consumers from unscrupulous insurance practices remains a top priority.

Illegal Health Care Sharing Ministry Shut Down

Commissioner Kuderer issued a cease-and-desist order coupled with a $275,000 fine against ClearShare Health, along with its associated companies Clearwater Benefits Administrators, Clearwater Benefits Holdings, and Clearwater Benefits Aggregator. These entities were found to be unlawfully selling “memberships” that were, in essence, unauthorized insurance plans, according to the Office Of The Insurance Commissioner(OIC).

Between August 1, 2022, and March 1, 2024, ClearShare enrolled 376 Washington consumers, amassing $524,095 in monthly contributions. While they disbursed $54,201 for expenses, they also denied $54,535 in claims and held $26,370 in pending expense requests. Further investigation revealed that the agreements lacked coverage for abortion services and imposed pre-existing condition requirements,failing to meet the criteria for a legitimate health care sharing ministry under the Affordable Care Act.

ClearShare has also been ordered to remit unpaid taxes, penalties, and interest on the collected premiums.

Unregistered Service Contract Provider Fined $300,000

CRAST Inc., operating as America’s First Choice Home Club, received a cease-and-desist order and a hefty $300,000 fine for functioning as a service contract provider in Washington without proper registration with the OIC.

The investigation was triggered by a consumer complaint.The consumer reported paying $1,425 for a three-year membership plan in 2022 promising up to $2,000 coverage per item. When the consumer sought furnace repairs in November 2022,CRAST allegedly failed to dispatch a technician despite repeated calls.

The ensuing investigation uncovered that CRAST sold 2,268 home club memberships to Washington residents between December 26, 2015, and April 28, 2023, totaling $1,494,317 in membership fees. Of this, $321,068 was paid out to members, while 456 benefit requests were denied.

Surplus Lines Broker Penalized for unlicensed Sales

Bc Environmental Insurance Brokers Inc., along with producer Marc Robicheau, faced enforcement action for selling surplus line insurance products without the necessary producer or broker licenses.

Bc Environmental Insurance Brokers was fined $45,000 and committed to applying for a surplus line broker license for both the agency and its employees. Although licensed for property/casualty insurance, the agency lacked surplus lines authorization as of January 2023, yet wrote 31 policies in Washington between 2014 and 2021. They have since obtained the required license in May.

Additional Insurance Companies Face Fines

Several other insurance companies also incurred fines for various violations:

• Amtrust Insurance Company, Milford Casualty Insurance Company, Security national Insurance Company, and Wesco Insurance Company: Fined $30,000 for using Washington Surveying and Rating bureau loss costs to calculate premium rates without proper filing and approval.
• Pennsylvania Lumbermens mutual Insurance Company: Fined $50,000 for failing to apply correct rating factors to commercial policies,resulting in $184,633 in overcharged premiums and $43,964 in undercharged premiums across 53 policies. The company issued refunds to overcharged policyholders.
• Safeco Insurance Company of America: Fined $3,000 for failing to timely refund a canceled home insurance policy and maintain adequate transaction records.
• allstate Fire & Casualty Insurance Company: Fined $1,250 for failing to timely cancel a consumer’s policy.
• UnitedHealthcare of Washington Inc: Fined $40,000 for failing to ensure its Association Health Plans enrolled employer groups on the same effective date as their associated Association Health Plan’s Master Contract, resulting in 83 employer groups being offered rolling renewals.
• Axis Insurance Company: Fined $2,500 for using rates inconsistent with its effective filings.
• Standard Fire Insurance Company: Fined $40,000 for applying a higher uninsured/underinsured property damage deductible than permitted under Washington law in 93 instances. This followed a complaint where a consumer was charged $200 rather of the legally permitted $100 deductible.
• American International Group: Fined $50,000 after American International Group and its subsidiaries used incorrect rates for admiralty coverage, impacting 74 policies. Overcharged premiums totaling $148,039 were credited back to the 55 affected policyholders.
• Brotherhood Mutual Insurance Company: Fined $3,000 for applying incorrect classification codes to commercial package policies.

Since 2001, the OIC has collected over $42 million in fines, which are allocated to the state’s general fund to support various state services.

Understanding Insurance Violations: Key Takeaways

These recent fines underscore the Washington Insurance Commissioner’s commitment to enforcing insurance regulations and protecting consumers from unfair or illegal practices. The violations spanned a range of issues, from selling unauthorized insurance plans to using incorrect rates and failing to provide timely refunds.

Here’s a summary of the penalties levied:

Are you confident that your current insurance policies are compliant with state regulations? What steps can consumers take to protect themselves from similar violations?