Premium Problem

[December 12th, 2007]

A 78-year-old westside insurance agency and its president have until today, Dec. 12 to tell regulators why their license should not be revoked, because of an unusual scheme—that could cost its victims more than their original investments.

On Nov. 21, the Oregon Department of Consumer and Business Services Insurance Division notified Trautman Perrin&Hale and its president, Darlene Rethwill, that it planned license revocations because of at least 10 cases in which Rethwill, 46, “misappropriated or withheld money or property,” or “used a fraudulent, coercive or dishonest practice in business; or demonstrated incompetence, untrustworthiness or financial irresponsibility.”

Of the 8,400 agencies and 80,000 agents overseen by the department, only a couple of agencies and a dozen or so agents get their licenses revoked annually.

“What she did could have been devastating for me,” says one of Rethwill’s former clients, Lake Oswego investor Greg Hayden. “It could have cost me thousands of times the relatively small amount of money she stole from me.”

Founded in 1929, according to its website, Trautman offers a full range of property, casualty, life and health insurance, representing some of the insurance industry’s biggest names.

When Hayden, 57, sought insurance a couple of years ago on one of his 10 apartment buildings, he gave Trautman a try. Although Hayden’s 16-unit Capitol Hill complex is worth about $1.4 million, he knew he could get annual insurance coverage for about $4,000 to $5,000.

Hayden financed the apartment building through Washington Mutual Bank. The bank in turn controlled “impound accounts” through which it used part of Hayden’s monthly payments to cover both property taxes and insurance premiums.

After a year with Trautman, Hayden says he was unhappy with its service and decided last summer to switch to another insurance agency. He notified Rethwill, who has been a licensed agent in Oregon since 1990, of that decision.

That’s when things began to go wrong. According to an August fax Hayden later obtained from the bank, Rethwill or one of her employees immediately asked Washington Mutual to pay Hayden’s 2007-2008 premium of $4,129 in full to Trautman, even though Hayden had just ended his relationship with Trautman.

Hayden got a shock when he called Oregon Mutual, the company Trautman told him provided the policy for his apartment building. When he asked Oregon Mutual for information about his policy in order to transfer it to another agency, “they told me, ‘You never had a policy here. Call the police,’” Hayden recalls.

Instead, Hayden says he pushed Rethwill for an explanation. Finally, on Oct. 24, she gave him a refund check for his 2007-2008 premium. The $4,129 check bounced.

Of greater concern to Hayden was the realization that his building had been uninsured for more than a year. If the building had caught fire or one of his tenants had fallen down stairs and filed a claim—both of which have happened in other buildings he owns—he could have been out of pocket hundreds of thousands of dollars because Trautman and

Rethwill never bought the insurance for which he paid.

For his other apartment buildings, Hayden says, he pays premiums directly, rather than through an impound account. Because Washington Mutual was paying the premiums—albeit with his money—Hayden never asked to see his policy.

“That’s why it’s a perfect crime,” Hayden says. “Nobody knows the policy doesn’t exist.”

Hayden isn’t alone. The state’s proposed license revocations stem from 10 specified instances dating from Nov. 13, 2004, to Oct. 30, 2006, when “Rethwill or one or more employees of TPH…misappropriated insurance premiums totaling $33,714.07 and withheld insurance premiums totaling $397 from four persons .”

In addition to the proposed revocations, the Insurance Division is seeking repayment of the money and a $10,000 penalty against Rethwill.

Damage may be far greater than the state alleges. Steve Patterson, general counsel for Oregon Mutual Insurance, says the Trautman firm misled dozens into believing they’d bought Oregon Mutual policies. Patterson says what Rethwill did is “highly unusual and outrageous.”

Rethwill’s attorney, Don Roach, says his client denies the allegations and will fight to keep her license.