Bismarck, ND - Insurance Commissioner Jim Poolman today announced that the investigation of Diane Cottingham and the Cottingham Agency has concluded and an order imposing full restitution for affected parties has been agreed to by the Cottingham Agency and the Department. The investigation stemmed from a cease and desist order that was to be originally served on Cottingham in March 2007 that barred her from selling insurance because of allegations of fraudulent insurance sales.
"It was important that we seek 100 percent restitution for policyholders in this case," Poolman said. "The exposure of these customers to enormous business risk and financial loss was significant."
The Department's investigation at various times utilized as many as ten staff people. Department staff provided independent verification of coverage to hundreds of Cottingham policyholders who called the department. In addition, around 70 suspicious files were initially identified, of which 20 were further investigated. Of the 20, around ten were found to have lapses in coverage or other administrative problems and the remaining ten were found to be either fraudulent policies or policies that had gaps in coverage that represent at least $713,396 in premium.
The investigation found that Cottingham misappropriated and converted insurance clients' premiums to her own personal and business use and that proceeds were deposited into various bank accounts controlled by Cottingham, and various officers of her corporation.
Poolman said, "Basically, our investigation found that Cottingham was selling false policies, mocking up policy papers and was pocketing the premiums." He added, "Cottingham did pay for some claims, but if a significant loss would have occurred, she would not have been able to cover the loss."
The investigation also determined that Cottingham was working alone and no other staff or family member was involved in the fraud.
"I want to express my appreciation to the Cottingham family and agency staff for their cooperation during the investigation and restitution phase. It has enabled us to complete an extensive amount of work in a relatively short amount of time," Poolman said.
Under the terms of the order, the proposed restitution to the policyholders includes a full refund of premiums minus any claims that were paid by Cottingham.