-4-
Eberl was the only member of petitioner's board of directors
from June 8, 1988, through the years in issue. Grace Eberl has
been petitioner's corporate secretary and treasurer since it was
incorporated.
2. Petitioner's Business
Petitioner provides the temporary services of independent
catastrophic claims adjusters to client insurance companies.
Petitioner has provided independent claims adjusters for several
major insurance companies, including State Farm Insurance Co.
(State Farm), Safeco, Aetna Travelers, USAA, Nationwide,
Prudential, National Farmers Union, and American Family.
Insurance companies pay independent claims adjusting
companies a negotiated fee for each claim adjusted by the
independent company. Independent companies subcontract the
adjusting work to individual claims adjusters.
Most major insurance companies have in-house claims
adjusters. They use independent adjusters only when major
disasters occur. In 1990, State Farm decided to use only its own
claims adjusters. However, 10 days after Hurricane Andrew struck
in 1992, State Farm decided to use independent adjusters because
its own adjusters could not handle all of the claims. State Farm
accounted for 60-70 percent of petitioner's business in fiscal
years 1992 and 1993. The rest of petitioner's work was
distributed fairly evenly among other companies. Insurance
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