Nations Hazard Leaves Nationwide Trail

Even though his files have been stored in the department’s archives since the case was transferred to federal investigators more than a year ago, Ted Bader, chief investigator in the state of Washington’s insurance bureau, still keeps tabs on Michael Napadow and Nations Hazard Insurance.

By virtue of his own curiosity in a case where he was the first to act, Bader is the unofficial clearinghouse for information on Nations Hazard and its principal, Napadow, who has been accused of selling bogus errors and omissions policies to home inspectors and other professionals in various states.

Bader remembers how he first got “tipped off” about Napadow. It originated with an agent who was excited when he heard about the prospect of a new company, since the market for home inspectors’ liability coverage was so tight. The agent called the Washington department to check out the new market; neither the company nor Napadow were licensed to conduct business in the state.

On July 22, 2003, Bader’s office issued a cease and desist order against Michael Napadow, Stephen Napadow, Jeffery Napadow and Nations Hazard Insurance Co. alleging they were running an unauthorized insurance business.

He immediately placed the information into the National Association of Insurance Commissioners’ database to alert other states.

Since then, reports of Napadow-related activities have sprung up from California to Maine, sometimes under aliases. In addition to Nations Hazard Insurance, Napadow has allegedly used another name, Michael Holland, as well as other insurance companies’ names, including Liberty Mutual, Hartford Casualty and Lloyd’s.

In February of last year, Illinois cited Washington’s report in revoking the licenses of Napadow and Nations Hazard for violating its state insurance laws and for misrepresenting itself in other states.

Maine Superintendent of Insurance Alessandro A. Iuppa reported in August that his bureau learned the name and logo of a legitimate well-known insurer, The Hartford, were being used illegally to solicit buyers in Maine through a fraudulent company called Hartford Casualty Insurance. (The Hartford does have a licensed and registered underwriting subsidiary with a similar name.)

In December, Pennsylvania officials ordered Michael Francis Napadow to halt sales using Hartford Casualty Insurance and Nations Hazard Insurance Agency, as well.

A total of 22 states have issued warnings, including Arkansas. In December, then Commissioner of Insurance Mike Pickens warned of the possibility of fraudulent insurance policies being sold in Arkansas by Nations Hazard and Napadow/Holland.

“We are especially concerned about this operation and the sale of these policies since a telephone number listed for the company is reported to contain a 501 area code,” Commissioner Pickens said. “We believe the company is actively soliciting business in the State of Arkansas.”

The 501 area code serves central Arkansas and includes the cities of Little Rock, Hot Springs and Conway.

Bader said Napadow started out selling the inspectors’ liability coverage as an add-on to legal defense coverage under a “pay-as-you-go” plan. Napadow’s operations appear to target agents, professionals, home inspectors, and people in the real estate industry by offering quotes on E&O, general liability and legal defense liability insurance coverage. Offers are reportedly sent by both e-mail and fax, directing people to the unlicensed company’s Web sites.

The forum on the Web site for the National Association of Certified Home Inspectors (www.nachi.org) contains a steady stream of complaints and reports from home inspectors about Napadow. These e-mails, along with reports from investigators, have tracked Napadow’s whereabouts in various locations including Illinois, the Virgin Islands and Florida.

The NACHI site even includes e-mails apparently from Napadow himself in defense of his operations. In one he describes a meeting he had with a U.S Postal Service inspector, during which he claims he turned over all his documents. He said he was “retired from the insurance business voluntarily.”

The November e-mail to the NACHI purportedly sent by Napadow reads in part:

“Whether you or any of your members are interested; this did start with very good intentions of starting an insurance company and helping the home inspector industry which I think are being taken advantage of by insurance companies. I also know that the program that I came up with called “Pay-As-You-Go” is viable and would have helped many inspectors start in the business or the part-timers stay in the business.

“Other items of interest are that I did cut-off-at-the-pass a few potential suits with negotiation and explanation of the industry. I have also refunded certain premiums to clients that were having a hard time.”

Napadow’s “retirement” was short-lived as there have been reports of activity since then. In December, Bader passed along another incident report to U.S. Postal fraud inspector Scott Sullivan, in Chicago, who is handling the Nations Hazard case.

When a case involves the mail system or even fax lines it can be properly and better pursued by federal authorities instead of the states, according to Bader. “Most states do not have the authority to prosecute civil offenses beyond their own borders,” he noted. Other states may have the authority but not the funds of federal investigators and prosecutors.

Postal Inspector Sullivan told Insurance Journal he could not comment on the status of Napadow’s operation, and could neither confirm nor deny reports on his whereabouts because of the ongoing federal investigation.

Bader is frustrated that Napadow is still on the loose, but insists he has full confidence in the U.S. Postal inspector and federal prosecutor to eventually catch and stop Napadow. Still, he’s keeping tabs as well.