Legal Law

Omega ‘PregnancyCare’ surrogacy insurance coverage scandal is off the coast and the outlook for victims is bleak

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Last week a professional liquidator held an insightful – and depressing – meeting in the Cayman Islands about the train wreck, which is the Omega PregnancyCare case. In essence, an insurer specifically targeting women carrying pregnancies as pregnancy substitutes for others was a total scam. At the hearing, the court-appointed liquidator delivered bad news after bad news to a Zoom audience overflowing with victims of the Ponzi-planned insurance product.

Review of the drama

To sum up, hundreds of hopeful parents who turned to surrogacy to have a child in the United States – many after years of heartbreaking infertility battles – fell victim to Omega’s product, PregnancyCare. These hopeful parents-to-be needed insurance coverage for their surrogate mothers’ maternity and delivery costs. Omega Family Services, under other aliases such as Prime Insurance Solutions and Lyfgro, convinced intended parents, pregnancy carriers, and surrogacy matching agencies that it had the answer about its PregnacyCare insurance policy. Omega Family Services (OFS), the advertising and distribution arm of Omega, sold the product aggressively and successfully, assuring buyers that the policy was backed by trusted insurance heavyweights such as AXA and State National.

Just … it wasn’t. The program crashed last October when the OFS received a cease and desist letter demanding that the national’s name no longer be used. As it turned out, State National had no relationship with the product. The national state name was used fraudulently. So, it probably came as no surprise to find that AXA and Lloyds of London (another big name that appears on Omega’s org charts) either had no relationship or knowledge of the PregnancyCare product required to endorse it.

OFS soon filed for bankruptcy in California. There we learned that they had no money in their accounts to pay the now rising medical bills of those who had relied on the insurance policy. Of course, OFS director Robert Park reiterated during the hearings in California that OFS was only the seller of the policies and not the actual company that cut off the checks to the policyholders. Worse still, even though the principles were the same between the various Omega companies, the OFS director refused to answer questions about Omega Insurance Company SP, the Cayman Islands company that allegedly had lost all insurance policy premiums.

Liquidation proceedings in the Cayman Islands

Eventually, Omega Insurance Company SP was voluntarily liquidated on February 26, 2021 – the equivalent of the Cayman Islands bankruptcy. The insured hoped desperately for answers.

Kenneth M. Krys, a professional liquidator in the Cayman Islands who previously worked for the Cayman Islands Monetary Authority, described the situation to creditors during the March 25 Zoom appeal. He stated that he and his co-liquidator are acting as officials of the court and not as agents of the company.

Krys painted a somber picture for the intended parents holding the bag on heavy medical bills. The chances of recovery are very slim. First, he noted that the company only had around $ 200,000 in cash and a relatively small claim. Wow. This is a shockingly low level of capitalization for a company that is believed to have “insured” up to 700 policies at a cost of over a thousand per month per policy. Robert Park had previously testified that the policyholders paid more than $ 700,000 in premiums to Omega for November – but PregnancyCare stopped paying claims in mid-October!

Where did all the money go? This is being investigated. However, the Cayman Island liquidators have fewer and fewer effective legal instruments to prevent and reclaim remittances than in the US.

Krys reported that Omega’s books had liabilities of $ 1.9 million. However, I spoke to Justin Leonard, a U.S. bankruptcy attorney who is very familiar with the case, who said he was expecting much higher claims – probably $ 5 million and possibly more.

The liquidator informed the group that it was very likely that there would be no distribution to creditors and, at best, estimated a distribution of less than 10% of the claims. The liquidators themselves and their lawyers are paid first, and there may not be enough money to pay them. Krys implied that since the case was complicated and there were two law firms working on it, all of the $ 200,000 cash could be required to manage liquidation proceedings.

D&O hopes. So the company has no money. Are there other ways in which victims can hope to find relief from overwhelming medical bills? A popular idea is to consider the Directors & Officers (D&O) insurance for the company and its directors. In good news, there appears to be such a policy with a reported cap of $ 5 million. There’s a catch. Well, a couple of catches actually. Krys stated that proving claims against directors is challenging given the business-friendly standards in the Cayman Islands. Krys stated that it would take costly investigation and legal work to make a claim. In this case, there does not seem to be enough funds. When Krys was pressured to estimate the cost, he predicted it could be a quarter to a half a million. Expect GoFundMe to show up every minute.

Meanwhile, both California and Oregon have opened open investigations into Omega. While none of the investigators shared information about the states’ pending investigations, those investigations may lead to criminal prosecution.

As Leonard explains, there are several levels of apparent fraud in the Omega case. First, the fraudulent use of the names and logos of reputable insurance companies and the falsification of contracts with them, allegedly by Brandon White and his companies. Such State National claims are currently playing in federal court in Kentucky (WD Ky. Case 3: 20-cv-00330-BJB-LLK). Will the D&O cover the directors from such fees?

It is unclear how much the directors of the Omega units in the United States (Robert Park and Frederick Gaston) knew about Omega’s bogus contracts and lack of any real connection with AXA, State National, etc., in fact surprised should they be outraged that they had been betrayed. Instead, during OFS ‘first bankruptcy hearing, Robert Park testified that the impact of COVID-19 on the surrogacy industry was what caused the business to close. Not exactly convincing. In a later hearing, he admitted that business with PregnancyCare had been good, but the Kentucky litigation Cease and Desist Order (regarding the use of State National’s name) had forced the company to close immediately.

In addition, OFS relied on a California-limited insurance license for the Life Insurance Company of the Southwest. As Leonard explains, this license was very specific and was wrongly characterized by the company. In reality, OFS was not authorized to sell the PregnancyCare product in any of the states indicated on its website.

To further complicate matters, the D&O policy is actually held by Performance Insurance Company SPC, which holds Omega and 11 other separate portfolios (SPs). It’s possible that Performance and its other SPs may have claims against the D&O policy as well, reducing Omega’s stake – and reducing the likelihood of payment to PregnancyCare victims or their medical providers.

Back to the starting line

Krys stated that the Florida liquidators filed for Chapter 15 bankruptcy, essentially seeking recognition of foreign bankruptcy proceedings. A successful Chapter 15 will maintain all pending US litigation against Omega Insurance Company SP or Performance. For those parents who pay legal fees to do business in the United States, that can mean more losses.

Omega had asked all victims to complete and submit detailed proof of claim forms to document their injury, including their outstanding medical bills, which should have been covered by PregnancyCare. This had brought comfort to the victims, suggesting a possible recovery. However, the application process appears to have been another scam.

Krys reported that neither the application forms nor the underlying data had been flipped. Even if they can be located, they will not be honored. Creditors must complete and submit new application forms directly through the liquidators. So sacrifice, time to start over and submit all of those uncovered medical bills for possible reimbursement (less than 10% at best)!

Grace from our medical system?

Meanwhile, the surrogate mothers and intended parents who relied on these guidelines are drowning in medical bills, many of which have been sent in collections. The victims found it difficult to explain the situation to hospitals. When does an insurance company go bankrupt so easily? Leonard stated that the answer is essentially never. The insurance industry is highly regulated and there are Insurance Guarantee Associations (IGAs) in every state where claims are made. Insurance bankruptcies are rare and when they do occur there are usually safeguards in place to pay the insured’s claims. A hospital has probably never seen a situation like this before.

In this case there is no protection for the insured. The victims bought and paid for insurance that they did not get. There are no government funds to protect against fraudulent insurance if an insurance company misrepresents its license.

Given the very low hopes of ever recovering from Omega or any of the victims of the fraud, victims can only hope that medical service providers’ hospital systems and billing departments will realize that the insured are indeed victims of crime – victims of an insurance fraud system. Hopefully, medical providers will work with victims of the fraud to resolve outstanding medical bills as fairly and timely as possible.

Ellen Trachman is the executive attorney for Trachman Law Center, LLC, a Denver-based law firm specializing in assisted reproductive technology law, and co-hosted the podcast I want to put a baby inside you. You can reach them at

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