Refusal to Provide Workers’ Compensation is Expensive
Post 5240
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In Illinois Department of Insurance, Insurance Compliance Department v.USA Water And Fire Restoration, Inc., And Nicholas Pacella, Individually And As Officer, Nos. 23WC021808, 18INC00228, No. 25IWCC0467, the Illinois Department of Insurance (Petitioner) initiated an investigation after the Injured Workers’ Benefit Fund (IWBF) was added to a pending workers’ compensation claim. The claim alleged a work-related injury during employment with the Respondents who failed to maintain workers’ compensation Insurance.
Company Overview:
USA Water & Fire Restoration, Inc. was incorporated on January 17, 2014, and dissolved on June 14, 2019, for failure to file annual reports and pay franchise taxes. It then operated under assumed names including USA Board Up & Glass Co. and USA Plumbing and Sewer. The business involved rehabilitating structures damaged by fire or water (e.g., remodeling, repairs), subjecting it to automatic coverage under the Illinois Workers’ Compensation Act (Act).
Officers/Agents:
Tad Christensen (who was later identified as the true officer) had a history of fraud (e.g., 2005 insurance fraud charges under Action Fire Restoration; prior imprisonment). The Commission took judicial notice of Christensen’s criminal history.
Employee Evidence:
Illinois Department of Employment Security (IDES) quarterly wage reports showed employees (up to 6) from Feb. 2016–Aug. 2017 and Oct. 2017–Apr. 2018; zero reported in Sep. 2017. Illinois Department of Revenue records confirmed business activity (e.g., 2017 tax return signed by Christensen) but incomplete filings.
Violation Periods:
145 total days without coverage while doing business and employing workers.
Key Testimonies
Antonio Smith (Petitioner Investigator, 8 years experience) confirmed company’s subjection to Act; that there was no insurance during violation periods.
Summary of Law - Jurisdiction and Coverage
Section 3(1) of the Act (820 ILCS 305/3):
Automatically subjects employers to the Act if engaged in “erection, maintaining, removing, remodeling, altering or demolishing of any structure.” The company’s fire/water restoration (remodeling damaged structures) qualified.
Section 4(a) of the Act (820 ILCS 305/4(a)):
Requires all covered employers to secure workers’ compensation coverage via insurance or Commission-approved self-insurance.
Penalties and Culpability
Section 4(d) of the Act (820 ILCS 305/4(d)): For knowing/willful failure to comply with §4(a):
1. Civil penalty up to $500 per day per violation (post-1989 amendments).
2. Minimum $10,000.
3. Each day is a separate offense.
4. Personal liability for corporate officers/directors (e.g., Christensen) if they knowingly/willfully failed; primary liability on employer, secondary on officers if unpaid after 30 days.
Penalty Factors
1. Duration of violation (here: 145 days—significant but not continuous).
2. Number of claims (1 pending).
3. Prior awareness.
4. Number of employees (up to 6).
5. Ability to secure/pay coverage (no evidence of inability).
6. Mitigating circumstances (none alleged; intermittent prior coverage noted in mitigation).
7. Ability to pay penalty (no evidence presented).
Decision and Rationale
Findings:
The Company and Christensen knowingly/willfully violated §4(a) and Rule 9100.90 during 145 days (employees present, business active, no coverage/self-insurance). Violation was “knowing/willful” by inference from ignored notices, history of lapses, and non-appearance.
Penalty Assessed:
Maximum $500/day × 145 days = $72,500 against USA Water & Fire Restoration, Inc., and Tad Christensen (personally as officer). Exceeds minimum $10,000; justified by duration, claim, and awareness, tempered slightly by non-continuous lapses.
Enforcement:
Payable within 30 days by certified check/money order to Commission. Enforceable as circuit court judgment; judicial review per §19(f) of Act (bond fixed at $75,000). Debt owed to State.
ZALMA OPINION
Workers’ Compensation systems allow injured workers to obtain compensation for work related injuries without needing to prove anyone was responsible for the injury. It is a crime in almost every state to fail to report accurately employees for workers’ compensation insurance and a failure to provide any coverage requires punishment.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
Read the full article at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2026-barry-zalma-esq-cfe-2tywc, see the video at at and at https://zalma.com/blog plus more than 5300 posts.
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.
DOJ Creates National Fraud Enforcement Division
Will the Feds Take on Insurance Fraud? Possibly as Part of a National Anti-Fraud Effort
On April 7, 2026, the Acting Attorney General, Todd Blanche, issued a memorandum establishing the Department of Justice National Fraud Enforcement Division (NFED). The memo describes an ambitious, but perhaps redundant, vision for this ...
When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment
Post number 5345
Read the full article at https://www.linkedin.com/pulse/efficient-proximate-cause-doctrine-saves-claim-barry-zalma-esq-cfe-yndlc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.
FACTS
American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...
Breach of a Specific Condition Precedent Is a Complete Defense
See the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.
Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).
After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
What Must be Done after Notice of a Claim is Received by the Insurer
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A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...
