Prime Insurance Solutions Sold Counterfeit, Non-Existent ‘PregnancyCare’ Policies, Class Action Alleges

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A proposed class action alleges Prime Insurance Solutions has engaged in a scheme to sell counterfeit, non-existent “PregnancyCare” insurance policies purporting to provide surrogacy insurance to hopeful parents and their surrogate mothers for gestational surrogacy costs. 

According to the 19-page case, defendant Omega Family Services LLC, who does business as Prime Insurance and is currently in bankruptcy proceedings in the Southern District of California, has defrauded hundreds of individuals nationwide into buying non-existent “PregnancyCare” policies purporting to provide coverage for medical complications and delivery costs for pregnant gestational surrogates. 

The plaintiffs, three married couples, allege more than 700 hopeful parents, surrogate mothers and gestational surrogacy services providers across the United States have bought the allegedly fraudulent PregnancyCare policies from Prime Insurance Solutions. Each set of plaintiffs claims to have spent anywhere from $14,850 to $16,600 for non-existent, forged insurance coverage, and ultimately incurred tens of thousands in unpaid medical bills they believed to be covered under their PregnancyCare policies. 

The individuals allege that they did not discover they had been defrauded by Prime Insurance Solutions until after the birth of their respective children. The case says Prime Insurance Solutions canceled all PregnancyCare policies as of October 31, 2020. Nearly three months later, the defendant informed policyholders that the PregnancyCare policies were the subject of a federal lawsuit filed by several issuing carriers (explained below) for the unauthorized use of their mark by Omega Family Services in carrying out the apparent scheme, the case says. 

Per the suit, the alleged fraud involves an area of insurance known as “captive reinsurance.” According to the case, captive reinsurance programs are complex multi-party arrangements that require specialized expertise and significant underwriting capacity. 

In a captive reinsurance relationship, a broker, who is not licensed to issue insurance policies, uses more than one intermediary to form an indirect relationship with an insurance company, called the issuing carrier, the lawsuit says. The filing relays that this relationship allows the broker to indirectly issue policies to its customers, act as its own “insurance company,” assume some of the risks and retain additional profits. 

The suit goes on to state that because a broker who forms and owns a captive reinsurance company is not licensed to directly issue insurance policies, they need to engage an actual insurance company to serve as the issuing carrier. Typically, the captive reinsurance company will pay an issuing carrier a fee or commission and agree to reimburse the issuing carrier for some or all of the losses incurred under the policies they sell, the case says. 

As the foregoing arrangement can be complex, such transactions are often facilitated by a “captive intermediary,” or entity that assists a broker in forming the reinsurance company, developing a business plan and identifying an issuing carrier to actually carry the policies the broker will sell, according to the case. 

The lawsuit alleges the defendant’s PregnancyCare policies were marketed under apparent captive reinsurance programs, yet no issuing carrier was engaged with respect to the policies, meaning no actual insurance policies were issued to the plaintiffs or proposed class members. Instead, the entities behind Omega Family Services “forged documents that misled plaintiffs and class members into believing that Issuing Carriers had issued actual policies in connection with the Counterfeited Policies,” the suit claims. 

The suit looks to represent all purchasers of a PregnancyCare insurance policy that made such purchase in the United States on or after January 1, 2011.

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