A New York-based insurance agency is alleged to have issued more than 40 unauthorized insurance policies providing more than $250 million in coverage to clients while the company’s equity was less than $600,000, according to Manhattan District Attorney Alvin Bragg Jr.

Inter-Insurance Agency Services Ltd., chairman and owner Timothy Barry Derham, and his nephew, chief technology officer Donald A. Derham III were indicted for allegedly defrauding clients, including companies operating at Port Authority of New York and New Jersey (PANYNJ) airports, construction firms and homeowners, by issuing unauthorized and fraudulent insurance policies from Barbados-based International Underwriting Insurance Company (International Underwriting), a company owned by Timothy Derham.

The defendants have been charged in a New York State Supreme Court indictment with various counts of grand larceny in the second and fourth degrees, scheme to defraud in the first degree, and offering a false instrument for filing in the first degree.

“As alleged, these defendants flagrantly lied and issued worthless insurance policies from their off-shore company while pocketing thousands in premiums and fees,” District Attorney Bragg said.

According to court documents and statements made on the record in court, between March 2014 through April 2022, International Underwriting was not authorized to conduct business in New York State. During that period, International Underwriting had a net worth of less than $600,000, far less than the $45 million equity required for an insurance company based outside of the United States to be approved to conduct business in the United States, the Manhattan District Attorney’s Office noted.

Despite the company’s limited assets and equity, a majority of the unauthorized International Underwriting insurance policies were for coverage that ranged between $1 million and $25 million. The defendants also failed to report the insurance policies to the Excess Line Association of New York.

The defendants allegedly did not disclose to clients that International Underwriting was not an admitted insurer in New York, nor that it was unauthorized as an excess line insurance company in New York.

The defendants allegedly stole from three Manhattan-based clients by selling them unauthorized, fraudulent International Underwriting insurance policies. One individual paid the defendants more than $110,000 in premiums and fees for policies that purportedly provided $15 million in coverage, a second company paid $51,000 in premiums and fees for policies that purportedly provided $15 million in coverage, and a third company paid $2,375 in premiums and fees for an insurance policy that purportedly provided $5 million in coverage.

Two clients operated on the “Aircraft Operation Area” of JFK Airport, which requires companies to have specialized license plates issued by the PANYNJ Police Department and have commercial general liability insurance with $25 million in coverage per occurrence. This coverage is reported on Certificate of Liability Insurance (COI) forms submitted to the PANYNJ.

From April 25, 2019, to April 22, 2020, the defendants allegedly created and distributed fraudulent COIs on at least four occasions that were filed with the PANYNJ’s Risking Financing Unit.

Three COIs were submitted in connection with applications for specialized plates, and one in connection to a tenant alteration project, the District Attorney’s Office reported.

It is alleged that the defendants falsely identified International Underwriting’s status on the COIs to conceal that the company was not authorized to issue insurance policies in the United States, and falsely represented that it could provide coverage amounts of $22 million and $25 million.

The scheme was uncovered when the agency failed to provide basic information about International Underwriting to a third party verifying insurance requirements for a contract on PANYNJ property.

Assistant D.A. Jaime Hickey-Mendoza is handling the prosecution of this case under the supervision of Assistant D.A. Christopher Beard (Deputy Bureau Chief of the Rackets Bureau), Assistant D.A. Judy Salwen (Principal Deputy Chief of the Rackets Bureau) and Executive Assistant D.A. Jodie Kane (Chief of the Investigation Division).

The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty. All factual recitations are derived from documents filed in court and statements made on the record in court.