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Insurance certificate fraud costs ex-broker $26K


May 5, 2021   by David Gambrill


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Alberta’s broker regulator has issued a civil penalty of $26,000 against a former broker found to have issued false insurance certificates to clients as “placeholders” until coverage was bound — which it never was.

The penalty was based on 52 examples of what council deemed to be fraud committed by the ex-broker, Hakan Bahadir. Council ordered him to pay $500 for each instance, totalling $26,000.

Council’s investigation followed the termination of Bahadir, a Level 1 agent, by his brokerage (cited in the report as A.I. Brokers), which no longer operates. In a comprehensive report to council, the former brokerage’s internal investigation found that 26 insurance clients, both commercial and private, were affected by the broker’s activities.

Council ultimately determined that the broker “issued” 52 insurance certificates for which coverage was not in existence or not in force. They consisted of six certificates of liability, one certificate of tenant’s legal liability, one for commercial general liability, and 44 pink cards (auto insurance certificates).

In the example of the pink slips, the broker’s employer discovered that several instances of rolling, short-term automobile insurance policies were prepared by the broker, none of which were backed up with coverage in place.

In one example, the broker supplied a temporary pink slip in response to an email from a client that stated: “I want to just insurance [sic] but don’t add it to the policy just want a paper thank you bro.”

“The multiple automotive policies issued by the agent as a ‘placeholder’ were not bound and the agent even engaged with law enforcement to attest to the insurance policies were in place when they, in fact, were not,” council found in its written reasons for decision.

“The deficiency was far-reaching in this instance. There could have been real and severe loss. Examples include but are not limited to automobile accidents causing bodily injury or fatalities. In these circumstances, victims and the clients themselves could have had very little recourse to cover any loss. Serious financial damage could have occurred on a commercial basis, as demonstrated by the actual loss of Client #1.”

In the case of “Client #1,” Bahadir explained that a commercial client “approached me for liability insurance for his business. I had his auto insurance for over two years and know him personally too.”

According to Bahadir, the client approached him initially to ask about the premium for $2-million worth of CGL coverage. The broker explained that to get a quote, the client had to fill out an insurance application, which would be sent to the brokerage.

But the client, the broker told council, “needed the certificate right away because [either] his contractor would not pay his earning without the liability certificate or he does not get any work from that employer. I supposed that there would not be a problem to get him a temporary liability certificate and once I get the app [insurance application] I will collect his signature. I just did not want him to wait for any longer and did not want to lose a good client of mine.”

Except that once the broker issued the certificate, he forgot about the client’s request. The client never did get the quote or the coverage, as Bahadir explained it to council.

In another instance, Bhadir issued a certificate of liability and an auto insurance certificate to a company, M.C. Ltd., of which he was listed as an acting director and the primary contact. “The agent signed as a Director on a bid with the Government of Alberta for contracted employment on behalf of [M.C. Ltd.],” council found.

The broker explained that he formed the company to help out his cousin.

“In regards to my position at [M.C. Ltd.],” Bhadir told council, “my cousin…owned a construction company and filed a bankruptcy in March 2018. He needed to open a new company to get contracts as a subcontractor and asked me to open a company on his behalf as he cannot be the director any longer.

“He approached me and we opened a company [M.C. Ltd.]. He is still the shareholder of the company. I have never involved myself into performing this job or whatsoever.”

All in all, the broker agreed in some instances that he had mistakes here and there, but he argued these were more errors in communication or misrepresentation, not fraud, which requires proof of intent to deceive. As he explained to council in one instance, “I would not jeopardize my career and built client base over three years by a small incident such this.”

But council rejected that point of view.

“The council rejects the agent’s position, as his complete utter disregard of his duties as an insurance agent fall far beyond an administrative oversight, and results in willful blindness. Regardless how the agent’s behaviour is categorized, the council is of the view that the agent’s intention [i.e. to commit fraud] has been demonstrated.”

 

Feature photo courtesy of iStock.com/hidesy