COVID unemployment fraud cost RI $121M. Why won't the state's insurance company pay up?
PROVIDENCE — Unemployment insurance programs managed by the state have suffered $121 million in fraud since the start of the COVID-19 pandemic, according to a recent court filing.
That's far above the $40 million in insurance the state carried to protect against such criminal activity. But, when the state filed an insurance claim, officials were in for a big surprise:
The insurance company said that state wasn't covered for any of it.
Now, the state is suing the insurance company, Fidelity & Deposit Company of Maryland, trying to force the company to pay out under two insurance policies, one for $15 million and one for $25 million.
A Superior Court decision last week sided with the state in blocking the insurance company's bid to dismiss the suit, but granted the company's request to divide the suit into two parts.
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What is the lawsuit about?
At the heart of the suit is whether the state is covered when fraudsters log in to the state's unemployment benefit system and submit bogus claims using a real person's identifying information.
The insurance company points to language in the policy that bars claims that result from "the disclosure or use of another person’s ... confidential or personal information."
The state argues that it didn't disclose the personal information in its systems, that it was stolen through other means and then used to obtain fraudulent benefits.
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What's next in the case
In a ruling filed May 3, Judge Brian P. Stern didn't decide which side is right. He said that more information is needed about what the policy language means to dismiss the case.
"The Court finds that the language is ambiguous as to whether the exclusion applies," Stern wrote in his decision.
The state is being represented in the case by lawyer John A. Tarantino, rather than by state Attorney General Peter F. Neronha.
Edwine Paul, a spokeswoman for the state Department of Labor and Training, which administers unemployment benefits, explained, "DLT sought guidance from the AG’s office about this matter and was advised to seek outside counsel that specializes in insurance litigation."
Paul said that the state had maintained "crime" insurance coverage from 2004 to 2021.
She said that the $121 million in fraudulent claims paid broke down to $61.9 million in state money and $59.1 million in federal money.
Future action in the case, which was filed Nov. 14, has not been scheduled.
This article originally appeared on The Providence Journal: RI lost millions in COVID unemployment fraud, but insurance won't pay
