Victims of unlicensed travel insurance strike back in class action suit

Looks as if the unlicensed insurance scandal — that’s right, the one that got me sued for defamation earlier this year — isn’t over yet.

As I reported earlier this week, Florida appeared to conclude its investigation with a surprise consent order against Revelex, an online booking company.

But now Revelex, as well as several individuals and travel agencies who are alleged to have been involved in the sale of these unlicensed insurance products are on the receiving end of a class action lawsuit (PDF) filed yesterday in Los Angeles Superior Court (case number BC447277).

The list of defendants is long, but it includes some names that will be familiar to readers of this site, including Prime Travel Protection, Smart Travel Group and Vacation Superstore Network, as well as their principals.

The case, which has been filed by Edwin Stewart Trebbe and seeks class action status, alleges certain companies named in his suit knowingly sold a “phony travel insurance policy”. Trebbe, a California resident, bought a Prime Travel Protection policy and claims that he suffered a loss covered under the terms of the plan “and has made a claim for benefits thereunder which has not been paid in full,” according to the complaint. Others are alleged to have been negligent in selling what they should have known was a phony product, the suit also says.
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Palm Coast Travel sues a customer — and me

Here we go again.

Last March, I reported that the Florida regulators had warned three travel agencies that sold insurance policies offered by bankrupt Prime Travel Protection Services of Arvada, Colo., that its activities may have run afoul of state insurance statues.

I quoted Nina Banister, a spokeswoman for Florida’s Department of Financial Services, as saying the state had ordered the agencies to “stop transacting business” and that “they’re on notice that further activity is pending [by the state].”

Soon after that, Florida issued a press release stating, “As a result of ongoing investigations into complaints about the sale of unauthorized travel insurance in Florida, Chief Financial Officer Alex Sink has notified three travel agencies that she intends to order them to stop selling insurance.”

The legal notice to one of the agencies, Palm Coast Travel, alleges that the company “directly or indirectly acted as agent for or otherwise represented or aided one or more unauthorized insurers…” The matter is still pending.

Now Palm Coast Travel has sued one of its customers, Peter Lay, and me, alleging among other things that I defamed the company when I reported the story. Here’s the full text of the complaint (PDF).
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Colorado issues cease and desist order against Prime Travel Protection

Colorado has issued a cease and desist order (PDF) again Prime Travel Protection, the bankrupt travel insurance company based in Arvada, Colo.

The move caps an lengthy investigation by the state and comes on the heels of a similar action by Florida.

The order, signed by Colorado’s insurance commissioner, Marcy Morrison, is likely to put more pressure on the travel agents who have sold Prime Travel Protection policies and other insurance-like products offered by companies owned by Prime Travel Protection’s president, Jerry Watson. It is also likely to give some momentum to Florida investigators, who are said to be pursuing a criminal investigation related to Prime Travel Protection.

Here’s a summary of the order:

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This is a developing story. Look for an update soon.

“This is just the beginning of a much larger investigation”

What do the recent intents to file cease and desist orders by Florida against three travel agencies — Vacation Superstore, Legendary Journeys and Palm Coast Travel — mean for travelers?

I asked Barry Resnick, who has become something of an expert on the sale of unauthorized travel protection insurance plans. Resnick’s mother held a policy with Trip Assured, a Tennessee company that sold unauthorized trip protection plans. (I featured his comments in my MSNBC column last week.) Florida and five other states issued cease and desist orders against Trip Assured between 2005 and 2006. Jerry Watson began working at Trip assured in 2002 and left in early 2004 to start his own company, Vacation Protection Services, the predecessor to Traveler Protection Services and Prime Travel Protection.

Since the time his mother made a claim against Trip Assured that was eventually denied, Resnick has tracked these unauthorized companies and the agents selling the policies, working closely with the various state and federal investigators. But as a professor of counseling, Resnick also has an academic interest in recent events — as a case study in human behavior. I asked him for his perspective on the recent Florida rulings. Here’s our interview:

Q: What do the recent rulings mean for travelers?

Resnick: Simply put, it means buyer beware — not only for the product, but the seller of the product. It’s disappointing because many of these travelers relied on their travel agent for appropriate recommendations.

Q: What about travel agencies?

Resnick: Based on the intent to order a cease and desist, it’s rather confusing. The orders obviously put a stop to the sale of unauthorized insurance and insurance-like products. However, there seems to be issues with licensing that will need to be clarified. In speaking to the department’s legal counsel, it appears that this is just the beginning of a much larger investigation that entails several governmental agencies within the state of Florida and possibly the federal government.

Q: I read an interesting story in the Sun-Sentinel about one of the agencies, and it certainly seems like this is an innocent mistake. Do you think it is?

Resnick: I would hope a travel agent who sells insurance would be able to differentiate between legitimate insurance and non-insurance. However, based on the many sophisticated investors who were scammed by Bernard Madoff, I can condone an honest mistake.

When the Trip Assured investigation was being conducted, our lawyers received dozens of phone calls from both consumers and travel agents who purchased the unauthorized plan. The lawyers asked me to handle several of the calls as the volume was tremendous. I spoke to many people, including some very large producing travel agents. I certainly hope that those who were involved with Trip Assured did not sell Prime Travel Protection. I have been told that this issue is the focus of the state’s investigation to determine if any of the travel agents are repeat offenders.

Q: The press release issued by Florida makes this look like a minor infraction. No actual cease and desist orders have been filed. Isn’t this an almost victimless crime, in which only a handful of travelers lost their vacations?

Resnick: The state regulators usually act on complaints that are filed. I found in my personal investigation that many individuals do not even file with the state regulators. Therefore, the exact number of individuals who lost their vacations cannot really be determined. However, because it has been determined that these “policies” were unauthorized, even those individuals who did not file a claim may be entitled to a refund of their premium.

Q: Describe what’s at stake for the travel agencies selling these policies.

Resnick: The best word to describe what’s at stake for these travel agents is simply, “trouble”. The state has a lot of leeway in regards to how they may proceed. Civil and criminal penalties are possible. Individuals can also file civil lawsuits against their travel agent. Of course, it’s up to the courts to determine an agency’s liability. I would think a judge would be fairly sympathetic to a senior citizen who claims he or she relied on the travel agent’s advice in purchasing insurance. This will especially hold true if the individual bringing the lawsuit can prove that their travel agent has a track record of selling unauthorized travel protection plans. I know of a few such cases that were filed against the travel agency. Each was settled prior to trial.

Q: What’s the extent of the damage for travelers?

Resnick: I would hope at a minimum the cost of the trip and refund of the premium for those who filed a claim and those who did not. I know one traveler who passed away while battling for his claim. His family told me they were going to sue for damages against the travel agency. I do not know if the lawsuit was ever filed. In our litigious society it wouldn’t surprise me to see multiple lawsuits filed for damages above the cost of the trip. Whether the plaintiffs would prevail is another question.

Q: Do you think state and federal investigators are aware of the magnitude of this problem? And if not, why not?

Resnick: I know federal investigators have been made aware because I have been told by some individuals they have already contacted the Federal Trade Commission and the Department of Justice. Within the DOJ, the investigation would be assigned to an Assistant U.S. Attorney in the geographical region of the complainant. The Assistant U.S. Attorney would ask the FBI to conduct an investigation. These investigations can take a very long time and quite often those under investigation are unaware until an indictment is made. The state of Florida is very aware of the magnitude of this problem and they have been in communication with their counterparts in other states. It’s also possible the respective state investigators will share their information with the federal authorities.

Q: Are there any other travel agencies involved in this?

Resnick: As I mentioned, I spoke to many travel agencies a few years ago. I cannot recall offhand who I spoke to. I made copious notes that I plan to locate. I hope that none of the travel agencies I spoke to are involved with PTP. The Florida authorities did indicate that they are still looking at other travel agencies. I am personally not aware of any other agencies, but I am certain there must be more than the three who were issued the orders.

Q: In an interview with Al Ferguson of Legendary Journeys, he says only a a very small number of his clients are affected by the Prime Travel Protection and Vacation Protection Services bankruptcy. What’s your sense of how many travelers are currently affected by this scandal?

Resnick: That’s great, then Mr. Ferguson should pay them off right away. Everyone who purchased one of these plans has been affected. The plans are illegal. When asked about how claims will be honored, Mr. Ferguson responded that insurance products have a “mediation remedy”. He is absolutely correct, but what he does not seem to understand is the products he sold were illegal and are not insurance products. There is only one remedy in such cases and that is full reimbursement for the cost of the premium and claim, if filed.

Q: Legendary Journeys apologized for selling Prime Travel Protection and Vacation Protection Services. It’s so rare to find an executive apologizing for anything, and I have to be honest — I’m impressed. How about you?

Resnick: It’s admirable Mr. Ferguson has apologized, but he has to stop pointing fingers. He continues to put the blame on Prime Travel Protection and Vacation Protection Services and feels because other travel agencies have engaged in these activities it is somehow OK and he is not at fault.

Q: When I asked Ferguson how long his agency had been working with Jerry Watson, he answered by saying his agency was going to sue Watson. What do you think of that answer?

Resnick: I think Mr. Ferguson is evading the real issue here. First of all, he should immediately put his resources into reimbursing his clients. Many of these consumers are senior citizens and waiting years and even months is simply not acceptable. Last summer you posted information about Paul Donohue, a PTP claimant who purchased his trip protection plan from Legendary Journeys and was fighting for his claim refund. Unfortunately, Paul passed away this past week. He was a man of modest means and his wife is now left in a financial bind. How many other Paul Donohue’s will pass away before these travel agencies do the correct and moral thing and reimburse their clients?

I find it curious why Mr. Ferguson failed to answer the simple question of how long he has been working with Mr. Watson.

An Internet archive search shows that Legendary Journeys was selling “trip protection” plans as far back as 2003 and calling it “insurance”. This coincides with the time Mr. Watson was employed by Trip Assured and perhaps is the reason Mr. Ferguson failed to respond to your question regarding the longevity of his relationship with Mr. Watson. In my review of the archived Web sites, I found that the contract terms of these plans looked similar to the types of plans that are considered unauthorized by state insurance regulators. If Mr. Ferguson was indeed selling the same type of illegal trip protection as far back as 2003, this could be a very serious issue.

Q: Is that your only concern?

Resnick: No. Mr. Ferguson repeatedly refers to Vacation Protection Services. This company was issued a cease and desist order over two years ago by the state of Tennessee. I find it incomprehensible that Legendary Journeys would be selling a product from this company under the circumstances, especially after the date of the cease and desist.

Mr. Ferguson continues to use the excuse that Legendary Journeys was actually the victim and they were defrauded by Mr. Watson’s companies. As one of the largest travel agencies in Florida, if not the country, this is simply not an acceptable excuse.

The sale of unauthorized insurance by travel agents was widely publicized when Trip Assured was issued a cease and desist order in September 2006. Every trade publication covered the issue multiple times. A travel agency as large as Legendary Journeys certainly should have been aware of this matter considering the action was taken by the very state Legendary Journey conducts the majority of its business – Florida.

For a travel agency to engage in the sale of the same type of illegal product after the September 2006 Trip Assured cease and desist is incomprehensible in my opinion. More shocking, however would be to learn that an agency sold illegal trip protection through another unauthorized company and then later sold again through Prime Travel Protection.

As I write this, an investigation is underway to determine which Florida travel agents were involved in these illegal sales prior to Prime Travel Protection. It is my understanding the findings will be made public this week.

Q: I’ve received no fewer than three cease and desist letters from agencies and their lawyers, trying to stop me from publishing blog posts about them. Is this a tactic commonly used by agencies that sold Watson’s policies?

Resnick: This is typical behavior. I was threatened in a similar manner as was my mother and several others who pursued their claims. Threatening letters from lawyers, intimidating correspondence to the employers of those seeking claim reimbursement were common tactics. It’s just a way to move the focus away from the actual issues. My guess is whoever sent you the letters are possibly the individuals who have the most to hide – perhaps they are the agencies who have sold these unauthorized products over and over again. It would be very beneficial to your readers, Chris is you would share the name of the travel agencies who have threatened you.

Q: What should travelers do to make sure they don’t get caught with a worthless policy?

Resnick: Travelers need to be smart consumers and should thoroughly investigate their travel agent. The BBB provides a rating for many travel agents and that is a good indication of their reliability.

Q: Do you think it’s still safe to do business with these three agencies, and any other agencies named in a future complaint?

Resnick: I would hope they have learned from this unfortunate experience and make good on all claims. There is a saying that lightening doesn’t strike twice, so one would assume these agencies would certainly not sell unauthorized products again. The question that remains: Is this the first time that these travel agencies were involved in such sales? We’ll leave that question to the state regulators or perhaps an investigative reporter. I do believe if any of these agencies are found to have sold such unauthorized plans in the past, criminal charges will be filed.

Q: What do you expect next?

Resnick: I expect the state of Florida is going to take a serious look into who has engaged in the sale of these types of products in the past and who currently sold through PTP. I also believe the results of Florida’s actions will dictate the role of any federal investigation.

Q: As a psychology professor, what has this experience taught you about human behavior?

Resnick: Just like those who invested with Bernard Madoff – greed can be a powerful aphrodisiac. Prior to 2006, with the companies that preceded Prime Travel Protection and currently, travel agents were provided huge incentives for selling these unauthorized plans. They were given overrides and signing bonuses and may have made more money selling unauthorized insurance than cruises and tours. I honestly believe that greed overruled common sense.

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