Rhode Island Takes Insurance Company To Court Over $121M Loss

Unemployment insurance programs managed by Rhode Island have been plagued by an astonishing $121 million in fraudulent activity since the onset of the COVID-19 pandemic, according to recent court documents.

This sum far exceeds the state’s insurance coverage of $40 million specifically designed to safeguard against such criminal acts. However, when the state filed an insurance claim seeking reimbursement, officials were met with a startling revelation: the insurance company declared that none of the losses were covered.

Subsequently, the state has initiated legal proceedings against Fidelity & Deposit Company of Maryland, the insurance provider, in an attempt to compel them to honor two insurance policies: one for $15 million and another for $25 million. A recent decision by the Superior Court ruled in favor of the state, rejecting the insurance company’s attempt to dismiss the lawsuit.

At the core of the dispute lies the question of whether the state is protected when fraudsters exploit the state’s unemployment benefit system and submit fraudulent claims using stolen personal information.

The insurance company points to policy language that excludes claims arising from "the disclosure or use of another person’s... confidential or personal information."

On the other hand, the state argues that it did not disclose the personal information within its systems, but rather, it was illicitly obtained through alternative means and subsequently exploited to acquire fraudulent benefits. Attorney John A. Tarantino is representing the state in this case, rather than State Attorney General Peter F. Neronha.

The state seeks compensation for the substantial losses incurred due to rampant unemployment insurance fraud. The outcome of this lawsuit will likely have far-reaching implications for future insurance coverage and the responsibility of insurance companies in safeguarding against such fraudulent activities.