Posted 9/23/2013 12:00 am
An insurance carrier that did business with disgraced insurance agent Steve Standridge of Mount Ida was recently fined $45,000 by state regulators.
An Arkansas Insurance Department order details how two subsidiaries of State Auto Insurance Group, which had a majority ownership interest in Standridge’s agency, failed to report suspected fraud in numerous transactions.
Standridge surrendered his insurance license in 2010 and is awaiting trial on 12 federal felony counts.
Insurance Commissioner Jay Bradford describes in the eight-page order how State Auto Property & Casualty Insurance Co. and State Automobile Mutual Insurance Co., both of Columbus, Ohio, mishandled several of Standridge’s financial guarantee bonds, which are surety bonds that generally guarantee construction projects.
Insurance carriers typically conduct a thorough due diligence before issuing such bonds, but that didn’t happen in cases involving the agency they owned.
The first instance occurred in late 2004, when Steve Standridge Insurance Inc. sent the State Auto companies bonds that were issued weeks earlier. “State Auto was not aware of theses bonds and was never presented with the application for review prior to issuance as required by State Auto’s underwriting procedures,” Bradford said in the order.
State Auto’s own investigation would find that six bonds for $3.2 million in coverage had been issued between 2004 and September 2005.
To make matters worse, the $46,000 in premium that Standridge collected for the bonds wasn’t sent to State Auto until after it discovered their existence, Bradford said in the order. Yet, State Auto’s management never reported the violations to AID, as required by law.
Years passed, and in 2009 State Auto discovered several instances of alleged fraud in Standridge’s handling of premium financing of insurance policies.
In one case, the order said, $354,400 in premium on a canceled policy was returned to Standridge — but wasn’t forwarded to the finance company.
When the insured defaulted on the premium finance agreement, State Auto had paid nearly $300,000 to the finance company for the premium that Standridge should have returned.
That was in July 2010. By then Standridge’s alleged troubles had become public and his agency was being sold off in pieces.
A spokesman for State Auto declined to comment on the fine.