CANTON, Ga. (CN) – A bank claims Auto-Owners Insurance, a Fortune 500 company with $15 billion in assets, “sat quietly, watching” while Auto-Owners’ agent defrauded the bank by charging finance payments on phony insurance policies.
American Bank sued Auto-Owners in Cherokee County Court. They are the only parties to the case.
The bank claims the fraud began when Auto-Owners sold auto insurance with a premium financing option through its agent, Dean & Moore Insurance Agency.
“At all relevant times, Dean & Moore were agents of Auto-Owners, or in the alternative, had apparent, if not actual authority to act on behalf of Auto-Owners in all of the matters herein alleged,” according to the complaint.
When buyers wanted to finance the premiums on an Auto-Owners policy, the bank says, Dean & Moore sent the premium finance agreement (PFA) to American Bank.
If American Bank accepted the PFA, it would fund the loan and send the proceeds of the financing back to Dean & Moore.
American then sent Auto-Owners the executed PFA, including the name of the insured and the amount to be financed. At all times, the bank says, it believed that Dean & Moore were agents doing business for Auto-Owners.
But the bank says Auto-Owners and Dean & Moore sent it fake PFAs for nonexistent policies, with phony signatures, and in cases where there was a policy, with a “grossly overstated … amount of premium financed.”
“On many of these fictitious PFAs, there were never any policies issued to the insureds named therein. In those situations, the names and/or addresses of the insureds, as well as the schedule policies of insurance listed in those PFAs, along with the signatures of the purported named insured were fraudulent and fictitious. On others, a policy existed along with an actual insured, but Auto-Owners’ agent had grossly overstated the amount of premium financed,” according to the complaint.
American Bank also claims that Dean & Moore had been “financing premiums with more than one premium finance company, thus committing fraud.”
When questions arose, Auto-Owners referred the bank to Dean & Moore, which bounced the complaint back to Auto-Owners, blaming it with “poor record keeping … things crossing in the mail or Auto-Owners simply not knowing what they were doing,” according to the complaint.
But the bank say that “Dean & Moore’s scheme had been going on for some time and Auto-Owners either knew or should have known of the improper activities of its agent, Dean & Moore, and yet Auto-Owners failed to disclose what it knew or suspected Dean & Moore of engaging in.”
The bank says all the excuses “tended to make sense, since loan payments on premium finance loans continued to be made, at least until July 2009, when cancellations started happening due to nonpayment.”
“In reality, Auto-Owners had known since early 2009 and probably prior to that that Dean & Moore, was playing the ‘premium finance game,’ to quote Auto-Owners Vice President, Scott Michael, who actively became involved in an investigation of Dean & Moore, after improprieties were reported to him in late January 2009, yet neither he nor anybody else at Auto-Owners made full disclosure to American or any other premium finance company as to the ‘game’ that they could obviously see that Dean & Moore was engaged in,” according to the complaint.
“Auto-Owners never notified American that purported insureds and/or policies were nonexistent in an effort to cure the fraud of its agent, Dean & Moore, when Auto-Owners was in the best position to know of its agent’s misdeeds and to take steps to correct same or mitigate the damage being caused by its agent,” the complaint states. “Moreover, Auto-Owners never clearly notified American that the premium amounts financed were significantly in excess of the total premium for the subject policies involved. Instead, Auto-Owners sat quietly, watching its agent play the ‘premium finance game’ and by doing so, furthered the fraud perpetrated on American by Auto-Owners and its agent, Dean & Moore.”
American Bank seeks punitive damages for breach of warranty, negligence, gross negligence, negligent misrepresentation and fraud, in an amount “sufficient to punish and deter Auto Owners, a Fortune 500 Company, with more than $15 billion in assets.”
It is represented by Paul Fields Jr. with Fields Howell of Atlanta.