Judge liquidates two medical insurance companies

Wednesday, April 28, 2010 | 3:49 p.m. CDT

NASHVILLE, Tenn. — A judge has ordered the permanent shutdown and liquidation of two Tennessee companies accused of selling phony medical insurance policies.

According to reports from The Tennessean, state insurance officials say Springfield-based American Trade Association and Smart Data Solutions LLC collected almost $22 million in premiums and left customers with nearly 24,000 unpaid claims.

Court documents state some of the premium money was used to buy automobiles and real estate and to make donations to the University of Alabama Tide Pride booster club.

Davidson County Chancellor Ellen Hobbs Lyle ordered the liquidation on Tuesday after it was determined the companies were insolvent. Neither company was licensed to sell or administer health insurance policies. The state seized control of the companies in March after a lengthy investigation and complaints from several states.

Springfield resident Bart Posey, who owns the companies, said he plans to appeal the liquidation order.

He has contended the trade association was simply a private organization that helped members purchase group discounts, including health insurance, and that he was victimized by Service America Assurance, a health insurance carrier that did not pay claims.

Nader Baydoun, attorney for Posey, his wife and his companies, has emphatically denied allegations that Service America Assurance was a shell company set up by his clients to collect premiums.

Arkansas, Connecticut, Florida, Indiana, Illinois, Kansas, Michigan, Missouri, Montana, North Carolina, Oklahoma and Washington have all issued cease-and-desist orders against ATA and SDS.

The state says there are policyholders in all 50 states and District of Columbia, with the greatest concentrations in Florida, Texas, New York, New Jersey and California.

Former employees of SDS and ATA told The Tennessean newspaper they lied to sick people and constantly denied them benefits while claims languished for years.

"People would call in crying, but we were instructed to tell them that their claims were 'in process' and to call back in 30 days," Lisa Hernandez, who worked for SDS, told the paper. "We were told to flat-out lie to people just to get them off the phone."

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