Ruling Advances Insurers' Lawsuit in Alleged Scam

A federal judge’s ruling has boosted efforts by an insurance company and two state automobile assigned risk plans to recover millions of dollars in lost premiums from an allegedly fraudulent truck insurance scheme.

U.S. District Judge Joseph H. Rodriguez, presiding in Camden, N.J., dismissed counterclaims filed on behalf of Justin M. Sciarra and Paul W. Hopkins, who allegedly masterminded the insurance scam from 1987 to 1992. The decision clears the way for the plaintiffs to pursue a lawsuit originally filed in March 1992 under the federal Racketeer Influenced and Corrupt Organizations Act.

The original lawsuit named as defendants the two men, their insurance agencies — Sciarra Insurance Agency and Hopkins and Associates, both based in Audubon, N.J. — and the Philadelphia Insurance Exchange. In it, the Indemnity Insurance Co. of North America, the Pennsylvania Assigned Risk Plan and the New Jersey Automobile Insurance Plan accused Mr. Sciarra and Mr. Hopkins of obtaining low-cost insurance for scores of trucking companies by hiding the true number of trucks covered under policies.

The insurance companies charge that the two businessmen, in effect, advised trucking clients to set up another company to serve as the owner of its fleet of trucks. The carrier would then acquire the vehicles back under short-term leases and not list them on its insurance policy.

The lawsuit also alleges that the plan offered a method of calculating operating costs that greatly reduced the amount reported to insurers as “cost of hire,” which is used to determine premiums. Furthermore, it claimed that Mr. Sciarra and Mr. Hopkins promoted the plan by charging clients a fee based on the savings they produced rather than a percentage of the insurance premium.

Bill Hannay, a Chicago attorney representing the Automobile Insurance Plan Service Office and the two state assigned risk plans, said the ruling sends a message that the industry “will not roll over and lay down when someone brings these kinds of claims against them.”

AIPSO of Providence, R.I., provides services for a majority of state assigned plans. It has led the effort to stamp out truck insurance fraud by using the RICO statutes to sue individuals and companies suspected of engaging in fraudulent activity. Under the anti-racketeering law, plaintiffs can get triple damages from defendants.

Insurance companies have also joined the fight. In a recent case, Progressive Casualty Insurance Co., four other insurers and five state assigned risk plans filed a RICO lawsuit against individuals based in the Fort Myers, Fla., area (3-7-94, p. 31).

For the full story, see the Jan. 25 print edition of Transport Topics. Subscribe today.