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Former Orange County resident arraigned in $1.4 million workers’ compensation insurance fraud scheme that preyed on local businesses

News: 2021 Press Release

For Release: October 27, 2021
Media Calls Only: 916-492-3566
Email Inquiries: cdipress@insurance.ca.gov
Former Orange County resident arraigned in $1.4 million workers’ compensation insurance fraud scheme that preyed on local businesses
Unlicensed insurance agent arrested in Texas and extradited to Orange County to face multiple felony counts

ORANGE, Calif. — Unlicensed insurance agent Karyl Lynn Reed, 57, formerly of Cosa Mesa, was arraigned today on multiple felony counts of grand theft, forgery, embezzlement, and aggravated white-collar crime after allegedly defrauding three victims of over $1.4 million. Earlier this month, Reed was arrested in Seabrook, Texas, and extradited to Orange County.

An investigation by the Department of Insurance found that between 2012 and 2019, Reed acted as an insurance agent without a license and collected premiums for workers’ compensation insurance through her businesses, Envoy Business Partners and Allenn Specialty Group. She would provide her victims with fraudulent Certificates of Insurance, causing her victims to believe they had valid coverage when there was actually none.

“Local businesses are the lifeblood of our recovering economy. Ms. Reed’s alleged actions put these businesses owners’ livelihoods at risk by stealing their money and leaving them uninsured,” said Insurance Commissioner Ricardo Lara. “My department is dedicated to investigating and stopping unlicensed agents to protect California’s consumers and businesses who help keep our economy strong.”

The investigation discovered Reed also operated a staffing company without valid workers’ compensation coverage and personally adjusted and administered employee injury claims. She collected workers’ compensation premiums and payroll, employer and employee taxes from victims, and provided them with falsified Certificates of Insurance as well leading them to believe they were covered when they were not.

The Department’s investigation revealed that one victim did not have workers’ compensation coverage for an employee who became injured. Another victim had requested an updated Certificate of Insurance from their insurance company and were told no policy or coverage was in place and found out the policy number Reed had provided them belonged to a policy for another business. The investigation further revealed another victim who discovered the money they were paying Reed to her staffing service was not being remitted to the insurance company.

Consumers can check the license status of their agent or contact the Department of Insurance at 800-927-4357 if they suspect they are victims of insurance fraud.

This case is being prosecuted by the Major Fraud Unit of the Orange County District Attorney’s Office.

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The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $371 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

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