Trump Accused of Lying to Insurers. But What Does That Even Mean?

Michael Cohen’s testimony before Congress included an accusation that Trump inflated assets to insurers. But it’s unclear whether such misstatements constitute insurance fraud.
By: | March 4, 2019 • 4 min read

In three days of “bombshell testimony” before Congress, former lawyer Michael Cohen responded to expected lines of questioning about Russia, hush money and more. But he also appears to have sown the seeds of doubt across other areas, including suggestions that the president and the Trump Organization may have engaged in bank and tax fraud, as well as insurance fraud.

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Rep. William Lacy Clay (D-Mo.) asked Cohen about the president’s personal financial statements from 2011, 2012 and 2013, which Cohen had submitted to the committee for review. Cohen had originally given the documents to Deutsche Bank while Trump was considering taking a loan to buy the Buffalo Bills.

Clay: Can you explain why you had financial statements and what you used them for?

Cohen: These statements were used by me for two purposes. One was discussing with media, whether it was “Forbes” or other magazines, to demonstrate Mr. Trump’s significant net worth.

That was one function. Another was, when we were dealing later on with insurance companies, we would provide them with these copies, so that they would understand that the premium, which is based sometimes upon the individual’s capabilities to pay, would be reduced.

Rep. Alexandria Ocasio-Cortez (D-N.Y.) picked up where Clay left off, leaving the door open for further questioning and investigation of the Trump Organization’s insurance contracts and financial documents.

Ocasio-Cortez: I want to ask a little bit about your conversation with my colleague from Missouri about asset inflation. To your knowledge, did the president ever provide inflated assets to an insurance company?

Cohen: Yes.

Ocasio-Cortez: Who else knows that the president did this?

Cohen: [Trump Organization’s CFO] Allen Weisselberg, [Trump Organization executives] Ron Lieberman, and Matthew Calamari.

Insurance Fraud? Too Soon to Speculate

No telling how long these lines of questioning will remain open, and what they will reveal. At this point, no details are available on which line of business might have been under discussion, or even whether it was a commercial line or a personal line. Cohen’s rationale for why Trump allegedly misled insurers is in need of further clarification, and plenty of it.

“I think by and large, policyholders don’t misrepresent their values – these things are sometimes hard to ascertain with any certainty,” said attorney Dennis Artese, shareholder with Anderson Kill P.C. in New York. “Some of these companies can have very large portfolios of hundreds of properties.”

One obvious question is why a policyholder would inflate assets for insurance purposes, when deflation of assets is a far more common scenario for insurance buyers attempting to lower liability insurance premiums, and property insurance generally will not pay more than is actually required to rebuild or replace the damaged property with like kind and quality.

VIDEO: Rep. Alexandria Ocasio-Cortez (D-N.Y.) questions Michael Cohen about irregularities in President Trump’s bank, tax and insurance transactions. Source: Washington Post

“I just don’t see how that would really help you. If it was an agreed-value property policy, it could potentially incentivize the policyholder to overstate the value, but … they’re paying a premium on that overstated value. So unless the policyholder was intent on committing insurance fraud – say sinking his/her own boat that is insured for an inflated, agreed value –it generally would not behoove the policyholder to intentionally misrepresent the value.”

But of course, Trump has also been accused of devaluing assets, such as a golf course in New York,  in order to duck property taxes.

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Insurers have safeguards in place to control their exposure. And obviously they’re not prone to simply taking policyholders’ statements at face value. Noted Artese: “Let’s say I want to insure a 30-year-old, 17 ft. boat for an agreed value of a million dollars – they’re not going to do that. There is a market for that item they can use to verify the value.”

While he has never seen it in his own practice, Artese suggested that business interruption claims could potentially be subject to issues of inflated value.

“If the policyholder was to provide false financial statements and other information inflating the historical performance of the business, that could have the effect of inflating its projected lost profits during the period of recovery.”

For now, it seems likely that the misrepresentation under discussion is limited to false statements about Trump’s creditworthiness, rather than about the value of a specific insured asset. Further congressional investigation may unearth clearer answers.

Of course, willful misrepresentation to an insurance company is a practice fraught with risk. In addition to potential criminal penalties for insurance fraud, Artese points out that, “subject to certain limitations and exceptions, misrepresentation  or concealment of material facts in the process of applying for insurance could lead to rescission of the policy. The insurance company would have to refund the premium but wouldn’t have to cover the loss.” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]