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Manhattan District Attorney Alvin Bragg, Jr. announced the indictment of officers of Inter-Insurance Agency Services Ltd. and the firm for their roles in an eight-year scheme in which they allegedly provided more than $250 million in coverage to clients while the equity of their insurer backing the policies was less than $600,000.

Timothy Barry Derham, chairman and owner of Inter-Insurance, and his nephew, Donald “Trip” A. Derham III, chief technology officer, have been accused of issuing more than 40 unauthorized insurance policies from Barbados-based International Underwriting Insurance Co., which was owned by Tim Derham.

As alleged, from March 2014 through April 2022, Inter-Insurance, which has offices in Manhattan and on Long Island, defrauded clients by issuing the unauthorized and fraudulent insurance policies to clients that included companies operating at Port Authority of New York and New Jersey airports, construction firms, and homeowners, prosecutors said.

According to court documents and statements, from March 2014 through April 2022, International Underwriting was not authorized to conduct business in New York State. During that period, International Underwriting had a net-worth of less than $600,000, far less than the $45 million equity required for an insurance company based outside of the country to be approved to conduct business in the U.S. Despite the company’s limited assets and equity, prosecutors say a majority of the unauthorized International Underwriting insurance policies were for coverage that ranged between $1 million and $25 million. The defendants also allegedly failed to report the insurance policies to the Excess Line Association of New York.

Prosecutors contend that Tim Derham determined which International Underwriting policies were issued and the prices of those policies while managing the company’s affairs. Trip Derham assisted with operational and management decisions of International Underwriting, while also creating business records – including policy documents and company invoices – that frequently contained information prosecutors say he knew to be false.

The indictment claims that the Derhams did not disclose to clients that International Underwriting was not an admitted insurer in New York, nor that it was unauthorized as an excess line insurance company in New York.

In one email exchange cited by prosecutors, an Inter-Insurance employee forwarded to Trip Derham a third party’s request for confirmation that International Underwriting was authorized to conduct business in New York State, noting, “Also do we have anything that states we do business in NY? Authorization – thanks!” Trip Derham replied to the employee, “I don’t have any documentation showing that [International Underwriting] is authorized to do business in NY.”

In another email exchange, when an inquiry arose regarding a $25 million aviation commercial general liability policy, Inter-Insurance’s chief financial officer wrote to other employees, “Well this could go horribly wrong. I’m pretty sure [International Underwriting] doesn’t have $25,000,000 in reserves to cover a loss if one occurred.”

The indictment asserts that the Derhams stole from three Manhattan-based clients by selling them unauthorized, fraudulent policies. One individual paid the defendants more than $110,000 for policies that purportedly provided $15 million in coverage, a second company paid $51,000 for policies that purportedly provided $15 million in coverage, and a third company paid $2,375 for an insurance policy that purportedly provided $5 million in coverage.

Two agency clients operated on the aircraft operation area of JFK Airport, which requires companies to have specialized license plates issued by the Port Authority police and have commercial general liability insurance with $25 million in coverage per occurrence; this coverage is reported on certificate of liability insurance forms submitted to the Port Authority.

According to court documents, from April 25, 2019, to April 22, 2020, the Derhams distributed fraudulent certificates of insurance on at least four occasions that were filed with the Port Authority’s risking financing unit located in Manhattan. The agency is alleged to have falsely identified International Underwriting’s status on the insurance certificates to conceal that the company was not authorized in the U.S., and falsely represented that it could provide coverage amounts of $22 million and $25 million.

Prosecutors said the scheme was uncovered when Inter-Insurance failed to provide basic information about International Underwriting to a third-party verifying insurance requirements for a contract on Port Authority property.

The Derhams were charged in a New York State Supreme Court indictment with various counts of grand larceny, scheme to defraud, and offering a false instrument for filing.

The charges contained in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty.

District Attorney Bragg thanked the Port Authority’s inspector general, the New York State Department of Financial Services, the Excess Line Association of New York, and the National Association of Insurance Commissioners for assistance with the investigation.

Source: Manhattan District Attorney

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