The owners of three area funeral homes have been accused of bilking an insurance company out of more than $900,000 after selling and cashing in on pre-need funeral arrangements to more than 100 people who weren't actually dead, according to a lawsuit filed in federal court.
Last week, Iowa-based Homesteaders Life Co. filed a complaint in the Southern District of West Virginia against Chad and Billie Harding, of Poca, and their business, Gatens-Harding Funeral Home.
In the 45-page complaint, the insurance company says the Hardings sold and cashed in on pre-need funeral contracts to 111 people from 2005 to 2013 as part of a group life insurance plan.
The problem, however, was that the individuals the funeral home said were dead were still alive, according to the complaint.
Only about 12 percent of the 111 people who signed a pre-need funeral arrangement contract with Gatens-Harding were actually dead as of last week's filing.
Fourteen people died after the funeral home initially said they did. One customer, who died in May, was reported deceased by the funeral home in November 2012.
For the sale of all the pre-need contracts, agents and employees of Gatens-Harding Funeral Home received $136,719 in commissions, with Chad Harding receiving $7,242, from Homesteaders Life.
Pre-need funeral arrangements are sold by funeral homes as part of group life insurance plans, which are designed to fund the funeral services for those enrolled. In the event of the consumers' death, the insurance company distributes money to the funeral home to cover the costs of services and arrangements.
"Prearranged contracts can guarantee the family will not have any costs beyond the what they paid for [in the contract]," said Gerry Kraus, vice president and compliance officer at Homesteaders Life.
The company is one of about a dozen around the country that offer pre-need contracts, he said.
Prearranged plans are generally viewed by consumers as beneficial because they free families from financial and other burdens that arise upon the passing of a loved one.
For a funeral home to receive payment, it is required to submit a death claim to the insurance company for the amount of death benefits available on a consumer's policy.
Once a claim is submitted, the funeral home certifies the date of death and that the funeral services have been provided. Once the insurance company receives the funeral home's certification, it can release the funds.
Beginning in September 2012 - and up until as recently as March of this year - Gatens-Harding submitted claims to Homesteaders Life, saying that a member of the insurance plan had died and the funeral home had rendered services.
For each submitted death claim, Gatens-Harding received payments ranging from $1,448 to $14,565.
The average funeral with a casket and visitation costs about $7,000, Kraus said, noting that the majority of people entering pre-need contracts pay for their entire plan with one payment.
In total, Gatens-Harding reportedly received about $919,000 from the insurance company for all 111 people it had claimed were deceased who actually weren't.
According to the complaint, Chad Harding signed his name on every one of the claims.
While not able to discuss the particulars of the lawsuit, Kraus said the insurance company is working with state and local regulatory officials to ensure that the policies of consumers are secure. Anyone who has questions about their policy, he said, is encouraged to contact Homesteaders Life's customer service department.
Homesteader's Life, which is being represented by attorneys from Charleston law firm Spilman Thomas & Battle, alleges that the funeral home violated federal racketeering laws and is seeking at least $900,000 in damages and a jury trial.
The case has been assigned to U.S. District Court Judge Robert C. Chambers.
In 2004, Chad Harding and his wife, Billie, became the sole owners of Gatens Funeral Home, which was started by Joseph Gatens Sr. and his wife, Norma Lee Gatens, in 1940, according to the company's website.
Today, the Hardings have expanded their presence to three locations - one each in Charleston, Poca and Red House.
Neither one of the Hardings responded to multiple requests for comment from the Gazette-Mail.
The Hardings' funeral homes haven't had any complaints in front of the West Virginia Board of Funeral Service Examiners filed against them, said Constance Sloan, the office manager for the board. "If we had anything, it had to be before I came," said Sloan, who joined the board in 2005.
A violation of pre-need contracts would fall under the state attorney general's Consumer Protection Division.
On Monday, Jared Hunt, a spokesman for the Attorney General's Office, said he could neither confirm nor deny an investigation into the matter.
In 2014, Attorney General Patrick Morrisey filed a complaint against a Monroe County funeral home and its owner for allegedly violating the state's Pre-need Act and Consumer Protection Act.
Joel L. McGuire and his company, Broyles-McGuire Funeral Home, faced several allegations, including making at least eight fraudulent death claims, totaling $60,512, for funeral services rendered for people before their actual deaths.
The case was settled in June when Morrisey sought a summary judgment, which resulted in McGuire and his funeral home paying $17,261 in restitution to consumers and $160,000 in civil penalties. McGuire also was permanently prohibited from selling and providing pre-need funeral services in West Virginia.
Reach Joel Ebert at joel.ebert@dailymailwv.com, 304-348-4843 or follow @joelebert29 on Twitter.