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$19 million verdict in case involving Bellevue insurer

A federal jury in Seattle has issued a $19.3 million verdict against three people and a company for wrongfully siphoning off millions of dollars owed to a Bellevue insurance company.

“You cannot do this in Washington state and get away with it,” said Insurance Commissioner Mike Kreidler. “This was the worst sort of predatory behavior by people who clearly had no qualms about misrepresenting the facts to get what they wanted.”

Jurors rendered a verdict against Danny Pixler, Anthony and Sheri Huff, and Midwest Merger Management LLC. for a combined $19.3 million to Cascade National Insurance Company. A written ruling from the court is expected soon on remaining claims.

Pixler is in federal prison serving a 5-year sentence for conspiracy to commit wire fraud; the Huffs and Midwest are both based in Kentucky.

Kreidler assumed control of Cascade National in 2004 when the company was placed in receivership by Thurston County Superior Court after failing to meet financial requirements under state law. State officials decided that the company’s deteriorating financial condition meant that it couldn’t be saved or sold. In 2005, at Kreidler’s request, a judge declared Cascade National insolvent and ordered it liquidated.

Kreidler has been overseeing the company’s liquidation since then, ensuring that the company makes good on claims. He filed the lawsuit in 2006, charging that Pixler, the Huffs and their company had defrauded Cascade National.

Money recovered as a result of the lawsuit will be used to reimburse the insurance guaranty fund that has paid the company’s workers’ compensation claims.

“When insurers collapse, the ripple effects can hurt policyholders, other insurers and taxpayers. Recovering this money helps protect them,” said Kreidler.

Cascade National focused principally on auto and commercial trucking coverage in Washington, Oregon, Alaska, California, Mississippi and Louisiana. In 2004, it provided coverage for approximately 4,600 auto and commercial trucking policyholders.

Its demise followed within a year after it began providing workers’ compensation coverage to nearly 15,000 workers in California.

In 2003, due to its financial woes, Cascade National became a target for takeover and control by Pixler and the Huffs, who were longtime business associates. The defendants were seeking a workers’ compensation insurer licensed in California – which Cascade was – in order to provide coverage for the defendants’ business clients.

Among other manipulations, however, the defendants positioned themselves so that they would collect all the workers’ compensation premiums from their approximately 140 business clients, covering nearly 15,000 California workers. That both concealed the payments and put them out of reach of the workers’ compensation insurer, Cascade National.

Despite not getting those premiums or other payments due from the defendants, Cascade was and is obligated to pay all covered claims to injured workers.

In short, through an elaborate network of companies, Pixler and the Huffs used Cascade as their vehicle to tap into the California workers’ compensation market and siphon off premiums and fees due to Cascade.

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