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Hole-in-one insurance company pocketed premiums and didn't pay

Even the entertainment empire of Rupert Murdoch doesn't want to throw away $1 million if it can avoid it.

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"I suspect that Kolenda just planned to pocket the money, betting that no one would win."

So when it came time to launch the newest member of the FOX family, Maximum Golf magazine held a hole-in-one putting contest featuring a $1 million prize on May 23, 2001. News America Magazines Inc., the publishing parent of Maximum Golf, bought an insurance policy on the event in case someone won.

The catch? Someone won, and the insurance policy hasn't paid. According to a lawsuit filed Sept. 1, 2001, in Superior Court in Stamford, Conn., Golf Marketing LLC, the company that insured the event, not only failed to pay the prize but has also allegedly "engaged in a general business practice of unreasonably denying and failing to pay claims."

According to Peter Truebner, one of the attorneys for News America, despite the fact that Golf Marketing President Kevin Kolenda witnessed the winning putt, along with such notables as Donald Trump and New York Mayor Rudolph Giuliani, the publisher has heard nothing but silence from the insurance company.

"I suspect that Kolenda just planned to pocket the money, betting that no one would win," says Truebner.

The lawsuit, which seeks to recover the $1 million prize that News America paid to the winner of the contest, $5,300 in excess premiums paid for the insurance, interest, other costs, and lawyers' fees, also accuses Golf Marketing of "immoral, unethical, unscrupulous, and offensive" behavior that violates the Connecticut Unfair Trade Practices Act.

The Connecticut Insurance Department issued a cease and desist order to Golf Marketing on Sept. 20, 2001, after determining that neither Golf Marketing nor Kolenda "have applied for or received an insurance license."

In addition to the order to stop doing business — which specifically allows Golf Marketing to pay existing claims — the Insurance Department has also subjected the company and Kolenda to fines of "up to $10,000.00 for each and every violation of the Connecticut Insurance Statutes."

The Connecticut Insurance Department has also scheduled a hearing for Oct. 26, 2001, to allow the company to defend against the charges and show cause why fines should not be imposed.

Kolenda, though he declined to comment on the current lawsuit on the advice of his attorneys, says that his company has been in business for 14 years and has more than 10,000 clients. Over that time, Golf Marketing has paid out more than $2 million in prizes to almost a thousand winners, says Kolenda.

"In the 14 years I've been in business, we've only denied five claims," says Kolenda. "And we've had very, very valid reasons, including fraud and noncompliance with contractual terms."

Golf Marketing also faces a lawsuit from the Regents of the University of California for failing pay a claim for a $100,000 prize after a contestant kicked a field goal from the 35-yard line at the Rose Bowl. That lawuit has recently been amended to include charges under the Racketeer Influenced and Corrupt Organizations Act.

According to Tom Waterman, an Iowa attorney who won an earlier case against Golf Marketing, those bringing suit may have a hard time collecting should they win. In Waterman's case, a contestant made a 40-foot prize-winning putt for $10,000, but Golf Marketing didn't pay. Waterman settled the case for $8,000, but reactivated the suit after the insurance company failed to pay the settlement.

At that stage, Waterman won a default judgment of more than $100,000, including punitive damages, because Golf Marketing's Iowa attorney withdrew from the case because his fees hadn't been paid. Waterman's client eventually collected only $15,000 because the company didn't have "sufficient collectible assets."

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