Tennessee Shuts Down Often-Cited Unlicensed Insurer

The Tennessee Department of Commerce and Insurance took control of American Trade Association and a group of affiliated supposed insurance companies. The action followed an array of complaints against the companies from regulators across the United States.

The Davidson County Chancery Court of Nashville granted the state's petition for liquidation of American Trade Association Inc., American Trade Association LLC, Smart Data Solutions LLC and Serve America Assurance and found the companies to be insolvent, according to court records. The court's final order of liquidation came May 20, when it designated Tennessee Insurance Commissioner Leslie A. Newman as liquidator.

Tennessee regulators alleged the companies, which were physically located in Springfield, Tenn., and their executives were improperly selling unlicensed health insurance policies. In a ruling granting summary relief to the Division of Insurance, the court decision stated, "If an insurer does not have adequate reserves to cover its liabilities, many policyholders may be effectively without insurance coverage. These drastic contingencies necessitate the division's petition for summary relief in this case."

States nationwide have taken action against ATA and related entities, as well as their executives (BestWire, March 22, 2010). In November 2009, Oklahoma issued a raft of cease and desist orders that carry civil penalties of $25,000 for each violation. Florida took similar action against American Trade Association Inc., Beema-Pakistan Co. Ltd., Serve America Assurance Ltd., Real Benefits Association, Affinity Group Benefits Association Inc., Smart Data Solutions LLC., SDS Management Group (BestWire, Feb. 19, 2010). Kansas and Ohio cited many of the same companies.

Regulators said the companies were delivering unsolicited blast faxes, e-mails and other communications that advertised inexpensive health insurance coverage. However, they said, the issued policies were for unauthorized limited benefit plans.

The insurance division is reaching out to consumers who find themselves holding fraudulent policies, spokesman Christopher Garrett said. "In terms of the company, we've taken as many actions as we could," he said.

Garrett declined to comment on whether the division has referred the matter to law enforcement for criminal investigation.

Regulators should not consider their job done, said James Quiggle, communications director for the Coalition Against Insurance Fraud. Often, companies engaged in this type of insurance fraud seek to continue their operations under new names in different locations, he said.

"Fake health plans tend to be very agile," Quiggle said.

Oklahoma Insurance Commissioner Kim Holland said ATA has received at least $14 million in policies from 12,000 members. Four days after Holland issued her order, ATA President Obed Kirkpatrick announced new health insurance products, including a "mini-medical plan" (BestWire, March 22, 2010).

Ohio Insurance Director Mary Jo Hudson said in a statement that the liquidation affects more than 1,000 state residents who had policies with one or more of the companies.

Attempts to reach Newman for comment were unsuccessful.

(By Sean P. Carr, Washington Correspondent: [email protected])