Farmers agent bilked clients out of thousands in windstorm premiums

Farmers agent bilked clients out of thousands in windstorm premiums

A former Beaumont insurance agent being investigated by the Texas Department of Insurance is facing at least six complaints ranging from not returning customers their premium refunds to pocketing windstorm premiums that were supposed to go toward providing windstorm coverage, an Examiner investigation has revealed.

Brad Burkhalter, a former insurance agent with Farmers, bilked at least three of his former clients for windstorm premiums intended for the Texas Windstorm Insurance Association, only to pay them back the money so as long as they wouldn’t report him to the Texas Department of Insurance, or TDI as it’s commonly referred to.

Burkhalter was terminated from Farmers Insurance in December 2011.

For homeowners along the Gulf Coast, specifically in 14 coastal counties and parts of Harris County on Galveston Bay, insurance providers exclude windstorm and hail coverage from policies in those areas. Therefore, according to the TDI Web site, the Texas Windstorm Insurance Association, or TWIA, is the state’s insurer of last resort for windstorm and hail coverage. TWIA coverage can be purchased through a local agent, like Burkhalter.

Brad Holtz is one of those customers Burkhalter ripped off – for $1,699.  He found out earlier this month that his windstorm coverage had lapsed, meaning Burkhalter, his former agent, had not paid the premium as he was supposed to.

Holtz, 41, who works as a financial advisor and has been a Farmers policyholder for nearly a decade, had Burkhalter as his agent for almost three years after Burkhalter took over for Thomas Barras, who Holtz said was a great agent. In fact, he didn’t have any issue with Burkhalter either until he learned that a friend of his who also had Burkhalter as an agent had been duped when Burkhalter accepted money for windstorm coverage but then didn’t pay TWIA.

“I had a homeowner’s policy with (Burkhalter),” said Holtz, “and my Texas windstorm comes out of my escrow. So for the last year, from May to May, my home was not covered under Texas windstorm. If we’d been hit by a hurricane, tornado or windstorm, I would’ve been S.O.L.”

Holtz said, “My lender, Bank of America, would send him a check, made out to Brad Burkhalter’s insurance. Then he’d just – it’s called ‘conversion of premium,’ which is the offense he was committing, because I did talk to the Texas Department of Insurance – skip out on the money.”

A voice mail requesting comment left on Burkhalter’s cell phone was not returned. A family member of Burkhalter’s who spoke with him said he would be available to speak with The Examiner on Friday, a day after this newspaper’s publication date. That family member contacted him again about the deadline, but calls still went unreturned.

The family member indicated she had no idea Burkhalter was under investigation by the TDI. She did say he is now selling auto parts and “happier than ever.”

According to Holtz, it was a chance discussion at the gym that tipped him off that something was awry with Burkhalter after he was ousted by Farmers last December.

“Farmers evidently caught wind of this because they cut the guy loose,” Holtz said. “I would say sometime at the end of last year, I’m at the gym and a buddy of mine says, ‘Hey, I got a new insurance agent.’ I told him I had a new one too, and asked him who his old one was. He said Brad Burkhalter. I said, wow, mine was too; he must’ve quit or got fired.”

And as Holtz and his friend would soon find out from another person within the Farmers network, Burkhalter did indeed get fired, and it wasn’t from poor performance, which is the explanation he gave to a family member for his dismissal.

“My buddy asked the guy (a Farmers agent) why Burkhalter was fired, and he said Burkhalter was fired for stealing clients’ money,” Holtz said. That prompted Holtz and his buddy to find out if they were getting stolen from, and in fact, both men were.

Unfortunately, insurance fraud continues to be a problem throughout the country, and the state of Texas is no different. Last year, 11,000 fraud reports were filed in Texas, costing insurance companies some $23.8 million, according to the TDI. As a result, now all three major metropolitan areas in the state of Texas – Dallas, Houston and San Antonio – have a special position and team set up in each area to combat insurance fraud.

“This is a pervasive crime,” TDI Commissioner Eleanor Kitzman told the San Antonio Express-News after the agency announced the creation of its insurance fraud prevention team. “It costs everyone several hundred dollars a year in increased premiums. There are many faces to insurance fraud, but they all have one thing in common — they’re all criminals. These people need to be rooted out.”

Perhaps even more troubling when it comes to Burkhalter is how far he went to covering up the fact he was taking his clients’ money considering that while their TWIA policies lapsed, none of them received documents indicating a lapse.

Jerry Hagins, assistant director of the public information office at the TDI, said as per TWIA guidelines, the policyholder is supposed to receive a letter from TWIA “approximately five days” after the expiration of a policy if it is not renewed. Thus, Holtz’s policy technically expired last May; however, he never received any letter from TWIA indicating his policy was void.

According to a statute under the Texas Penal Code, a type of insurance fraud is committed when a person has the “intent to defraud or deceive an insurer and in support of an application for an insurance policy.”

Since the claim was more than $1,500 but less than $20,000, the charge for insurance fraud results in a state jail felony, according to the Texas Penal Code. A state jail felony is punishable by 180 days to two years in a state jail, as well as a fine of up to $10,000.

Holtz remained with Farmers Insurance after the debacle and said, for the most part, he’s been treated well as a customer. However, he didn’t appreciate the laissez-faire, almost dismissive attitude the company took with him in regards to his complaint about Burkhalter, who was technically not a direct employee of the company, but rather an independent agent contracted with Farmers.“This two-step, pass the buck blame game is what upsets me,” said Holtz, who was also dismayed by his interaction with Tim Thompson, area district manager for Farmers. “They basically said, ‘When Brad sold you your Texas Windstorm policy, he did that as an independent agent because Farmers doesn’t sell that, so you need to go to Brad Burkhalter and get your money.’”

Holtz’s contention is that it wasn’t the name of the agent that attracted him; it was the name Farmers and the security that goes with one of the largest insurers in the world that encouraged him to do business with them.

“I’m there on the good name of Farmers, not the name of Brad Burkhalter,” said Holtz. “I told them, ‘I’m here because of the credibility of your company and you’re not going to do anything about it?’ And basically they said, ‘Yeah.’”

Mutlitple messages seeking comment were left on both Thompson’s cell phone and with the Farmers corporate office – none were returned. It remains unclear if Farmers, which is alleged to have fired Burkhalter for stealing clients’ money, reported him to the TDI. As per the Texas Insurance Code, Sec. 701.051, the agency has no more than 30 days to report an agent’s fraudulent action to the state and is required to do so.

Holtz, who was also asked by Burkhalter to not report him to TDI as long as he paid Holtz back the premiums that never went to TWIA, did receive his money back in the form of a check last week – after the first check bounced. And Holtz did file a complaint with the TDI.A TDI employee with knowledge of the TDI fraud unit said Wednesday that technically Burkhalter can still sell insurance while under investigation and that his still-valid insurance license can’t be revoked until the investigation is complete. Burkhalter’s license doesn’t expire until April 2013.

Fred Davis can be reached at (409) 832-1400, ext. 227, or by e-mail at fred [at] theexaminer [dot] com