A month later Safeco began sending cancellation notices to R & C's clients. With cancellation notices in hand, worried clients began calling R & C. Renzi dictated a letter sent to clients later that month. The letter stated that, because "spiritual counseling was no longer covered" under Safeco's policy, R & C had "replaced" Safeco with the "Jimcor Insurance Co." The letter promised that clients would experience "no lapse in coverage." Jimcor is not an insurance company (While Jimcor Agency was a broker for some of R & C's policies, Jimcor was not a broker for these particular ones. And although Jimcor Agency was a broker, it was not an insurer.) The new certificates Renzi sent were entirely fabricated. Renzi caused at least 74 letters and phony insurance certificates to be delivered, but only to clients who had called R & C to voice concern.

On November 5, 2002, Renzi was elected to the House of Representatives. A few weeks later, Renzi received a $230,000 gift from his father. That same day, R & C paid the full amount due and Safeco decided to retroactively reinstate all of R & C's policies.

Next page: The trial

Testimony at trial established that there was no "inadvertent computer slip" as Renzi claimed. Rather, Renzi had instructed an employee to create the fake certificates, insert the false coverage information and send the certificates to complaining clients.

 In his appeal, Renzi contended that his insurance fraud conviction cannot stand because R & C was not "engaged in the business of insurance" as required by statute. However, actions speak otherwise. R & C went so far as to issue fake insurance certificates to clients, which listed Renzi as Jimcor Insurance Co.'s "authorized representative." And during the period of time when clients were not covered by any policy, R & C paid clients directly after purportedly adjusting any outstanding claims. The Ninth Circuit Court of Appeal concluded that if it looks like an insurance agency and acts like an insurance agency, it's probably engaged in the business of insurance.

The Constitution and our citizenry entrust Congressmen with immense power. Former Congressman Renzi abused the trust of this nation, and for doing so, he was convicted by a jury of his peers. After careful consideration of the evidence and legal arguments, the Ninth Circuit affirmed the conviction and sentence imposed on Renzi.

Insurance is a business of the utmost good faith. Members of Congress must be honorable and serve their constituents—not their personal gain. The jury found that Renzi used the business of insurance with utmost bad faith, stole funds entrusted to him by his clients to fund his run for Congress, lied to his clients when their policies were cancelled for non-payment of premium that had been stolen by Renzi, created false and fraudulent insurance policies to stop complaints from his customers, and then lied to the regulators investigating his acts.

The insurance conduct proved against Renzi—ignoring the other charges for the purpose of this article—is the ultimate expression of bad faith. His punishment—only three years in prison—was merciful.

Barry Zalma, Esq., CFE, is a California attorney, insurance consultant and expert witness specializing in insurance coverage, claims handling, bad faith and fraud. Contact him at [email protected].