Friday, May 8, 2015

Road Haulage Firms Swindled in Goods in Transit Freight Insurance Fraud

Cargo Policies Never Taken Out as Fraudster Pocketed Premiums
Shipping News Feature

US – A former Insurance Broker has pleaded guilty to a conspiracy to defraud nearly 800 road haulage operators. John Paul Kill, who owned the insurance brokerage firm, Appeal Insurance Agency of Norcross, Georgia, collected over $3.7 million from freight trucking companies nationwide, as a result of fraudulent goods in transit cargo insurance policies which left the businesses legally and financially vulnerable. Acting US Attorney John Horn said:

“This defendant swindled hundreds of trucking companies into purchasing phantom cargo insurance policies. Kill abused his clients’ trust and led many small businesses to operate on our roads unwittingly without proper insurance and put them at risk for catastrophic losses.”

According to court document and statements made in court, Kill began offering cargo insurance policies to trucking companies in 2013, falsely representing to clients that he would bind cargo insurance policies through Lloyd’s of London. In the insurance industry, binding coverage serves as an agreement between the insurance provider and insured parties to provide insurance coverage. In reality, Kill did not bind any policies with Lloyd’s and instead pocketed the premium payments.

For a small portion of victims, Kill bound cargo insurance policies through a different company that offered less extensive coverage than that which the hauliers thought they had purchased through Kill’s services. Most of the victims received no insurance policies at all, and Kill instead attempted to pay any claims for losses out of the premium payments he collected for new policies. J. Britt Johnson, Special Agent in Charge, FBI Atlanta Field Office, commented:

“This case was about theft and greed on a large scale. Kill displayed a complete disregard for his client companies, leaving them legally and fiscally vulnerable while allowing them to believe that they had appropriate insurance coverage. The FBI is pleased with the role it played in bringing this case forward for prosecution and holding Kill accountable for his criminal actions.”

In total, nearly 800 trucking companies located in Alabama, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Missouri, Mississippi, New Jersey, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, and Virginia paid approximately $3.75 million in premiums for these fraudulent insurance policies from 2013 through mid-2014. Insurance fraud is a felony with a penalty of 2 to 10 years in prison and/or a fine of up to $10,000.

At the time of his arrest last August Kill was found to have been selling the fake cover from his house and when questioned by local authorities he forfeited the right to trade from his home state. Insurance and Safety Fire Commissioner Ralph Hudgens commented at the time that Kill posed a serious financial threat to consumers as was the case whenever a small operation like this traded without proper regulatory oversight.

Photo: John Paul Kill