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Insurance Company Sues Body Shops

    LOS ANGELES--Dec. 10, 2002--Farmers Insurance Exchange and Mid-Century Insurance Company have begun serving civil summons and complaints upon an Oakland body shop and a Ventura County body shop, their owners, former Farmers employees and other co-conspirators, accusing them of taking part in a large scale scheme designed to defraud the company's policyholders. Using California's novel anti-fraud statute, Farmers has sued these individuals, seeking over $12 million in damages and for injunctions, preventing the defendants from victimizing others in the future.
    The two separate suits detail how these unscrupulous individuals allegedly committed aggressive and prolific fraud. The schemes included claiming damage and repairs to cars, when none existed; billing Farmers for services that were never rendered; inflating repair costs; and submitting phony repair invoices.
    "This coordinated Statewide effort has not only resulted in the civil lawsuits, which hit these people in their pocketbook, but our cooperative efforts with law enforcement have helped lead to the arrests of certain ring leaders," noted Doug Ashbridge, Director of Special Investigations. "We are proud of our Special Investigative Unit which is designed to detect precisely this type of fraudulent activity. Their efforts uncovered these fraud rings that were victimizing Farmers and its insureds."
    In Oakland, Farmers' employees noticed a pattern of suspect claims coming from Phil-Am Complete Auto Services. Their investigation discovered a pattern of vehicles first involved with vandalism claims, followed by a claim where the vehicle swerved to miss a hazard, striking two parked cars. In all, Farmers uncovered 82 claims where a vehicle swerved, striking parked cars. The investigation included vehicle inspections and a confession from a co-conspirator, confirming the nature of the fraud. The suits allege that the defendants were involved in "paper losses," where bills were submitted for nonexistent damage and repairs; damage inflation, where they represented that the vehicles sustained more damage than was the case; and VIN and license plate switches to conceal past claims using the same cars.
    According to the California Department of Insurance, service of arrest and search warrants have now taken place. Arrested were body shop owners Art Mercado and Eduardo Enerio, as well as former Farmers' employees Scott Carey and Martin Randisi.
    The Ventura County action against the owners of Five Points Paint And Body seeks $1.5 million for their submission of false claims. Farmers began this investigation in June, 2000 and also inspected vehicles, demonstrating that the shop billed to replace parts that were only repaired, billed for services that were never rendered, exaggerated and inflated invoices. Law enforcement has now conducted search warrants upon the owners.
    Mr. Ashbridge went on to state that "Farmers will continue to sue those who try to defraud Farmers and its insureds. Insurance fraud unnecessarily increases the cost of insurance. As part of our commitment to deliver the lowest rates possible to our policyholders, we are committed to take the profit out of fraud. We will continue to seek damages from the defrauders and a court order preventing them from engaging in this type of behavior in the future. Farmers wants a clear message to those thinking about attempting this type of crime: Fraud doesn't pay!"
    Farmers is represented by Dennis B. Kass, Manning & Marder, Kass, Ellrod, Ramirez, LLP.
    Farmers Insurance Group of Companies(R) is the nation's third-largest Personal Lines Property & Casualty insurance group. Headquartered in Los Angeles and doing business in 41 states, the insurers comprising the Farmers Insurance Group of Companies provide Home, Auto, Business, Life insurance and financial services to more than 10 million households through 17,000 exclusive and independent agents and district managers. For more information about Farmers, visit our Web site at www.farmers.com.