Class Action Alleges Companies Defrauded Youth Sports Teams, Leagues with Counterfeit Insurance Policies

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An Orange County, California youth baseball league alleges in a proposed class action that Ambassador Captive Solutions and a number of related entities have for years conspired to sell counterfeit and non-existent insurance policies, including to youth sports teams, leagues and athletes nationwide. 

The 22-page lawsuit alleges The Ambassador Group LLC; Performance Insurance Company SPC; Goldenstar Specialty Insurance, LLC; and Ambassador’s founder have violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO) by defrauding over at least the last decade hundreds, and possibly thousands, of youth sports teams, leagues and athletes with insurance policies purporting to provide accident, health and other coverages. 

“Some of the Counterfeited Policies are for combat sports and football and have million-dollar limits for certain brain injuries,” the case, filed in California federal court claims. 

Per the suit, the alleged counterfeit insurance scheme also involved Gagliardi Insurance Services, who the plaintiff claims served as the broker who sold the policies to proposed class members. The plaintiff claims to have not discovered that it was defrauded until after it had already paid substantial premiums. 

“Plaintiff approximates that it paid more than $64,000 to Gagliardi over the course of ten years for non-existent and forged ‘insurance coverage,” the lawsuit alleges. “Plaintiff’s most recent premium payment to Gagliardi was approximately $8,000.” 

At the center of the lawsuit is a type of alleged fraud related to what’s known as “captive reinsurance,” the programs for which are “complex, multi-party arrangements” that call for specialized expertise and significant underwriting capacity, the suit says:

“In short, in a captive reinsurance relationship, a broker (who is not licensed to issue insurance policies) uses several intermediaries to form an indirect relationship with an insurance company (an ‘Issuing Carrier’). This relationship allows the broker to indirectly issue policies to its customers, act as its own ‘insurance company,’ assume part of the risks, and retain additional profits.” 

In the type of captive reinsurance program alleged by the plaintiff, an insurance broker or other company, the broker/owner, forms and owns a captive reinsurance company, who’s ultimately responsible for paying some or all of the losses on policies sold by the broker/owner, the lawsuit says. Because captive reinsurance companies are not licensed direct insurers, a broker/owner will seek to engage an issuing carrier, or an insurance company, to issue the policies the aforementioned companies will resell, the suit relays. 

The complex transactions between a captive reinsurance company and issuing insurance carrier are often facilitated by a “captive intermediary,” or an entity, such as Ambassador, that assists a broker/owner in developing an actuarial model and business plan, forming the captive reinsurance company and identifying an issuing carrier to actually issue the policies that are to be sold by the broker/owner and reinsured to the captive company, the lawsuit says.  

According to the case, the defendants sold insurance policies to proposed class members under supposed captive reinsurance programs. The problem, the suit says, is that no issuing carrier—that is, no actual insurance company—was engaged by the defendants with respect to the policies sold to proposed class members, and no actual insurance policies were issued for what was sold to entities such as the plaintiff.

“Instead, Defendants forged documents that misled Plaintiff and class members into believing that Issuing Carriers had issued actual policies in connection with the Counterfeited Policies sold to Plaintiff and class members,” the case claims.

Premium payments issued by proposed class members to the defendants were never in turn paid to any issuing insurance carrier, the plaintiff alleges. 

“Instead, Defendants stole all such premium payments from Plaintiff and class members,” according to the lawsuit. 

Gagliardi, who is not named as a defendant in the case, is alleged to have “knowingly or negligently” made misrepresentations with regard to its ability to provide clients, including Protect Our Nation’s Youth (PONY) Baseball and Softball, with a “complete insurance package,” consisting of medical and liability insurance.

“It was through Gagliardi’s relationship with PONY National that Plaintiff became aware of Gagliardi, and eventually purchased the Counterfeit Policies,” the suit says.

The alleged scheme was uncovered when Gagliardi, in late October 2020, informed the plaintiff that the policies the league purchased were the subject of a federal lawsuit brought by several issuing insurance carriers over the defendants’ apparently unauthorized use of their mark, the lawsuit states. 

The suit looks to cover all purchasers of an insurance policy bounded by Gagliardi Insurance Services, Inc. who made such a purchase in the United States on or after January 1, 2011. 

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