CLAIMS COMMANDMENTS I & II

CLAIMS COMMANDMENTS I & II

A Video Series for Insurance Claims Professionals

https://www.youtube.com/watch?v=_Y5xA2Zn7Nc

This series of fifteen claims commandments is an effort to provide direction to every person involved in claims handling for insurers and the public whose duty it is to fulfill the promises made by an insurance policy.

Claims Commandment I — Thou Shall Confirm Coverage

When a loss or claim is reported to an insurance company the first task required of the insurer and its claim personnel is to confirm the existence of a policy. The task today is much simpler than it was when I was an adjuster where we had to pull out the actual underwriting file and review the daily report. Now, coverage can be confirmed by computer.

Claims Commandment II — Thou Shall Always Conduct A Thorough Investigation

Investigation is a search for truth. It is an art form where facts are established.

The investigative interview is a structured conversation between a trained and experienced interviewer and an person who has no training in the interview. It is not an interrogation. It is not the stuff of spy films, police investigations, or prisoner of war camps. Interviews happen everywhere. Interviewing is performed by almost everyone. Since interviewing is an art the most effective interview is one performed by someone with knowledge of the art.

Failure to conduct a thorough investigation is a breach of the promises made by the policy of insurance to provide defense and/or indemnity to the person insured. Failure can also result in the insurer being sued for the tort of bad faith.

The thorough investigation requirement first enunciated by the California Supreme Court in Egan v. Mutual of Omaha Insurance Co., 24 Cal. 3d 809, 620 P.2d 141, 169 Cal. Rptr. 691 (Cal. 08/14/1979) is essential when attempting to interpret a disputed policy of insurance.

In Egan, the Supreme Court concluded that “an insurer cannot reasonably and in good faith deny payments to its insured without thoroughly investigating the foundation for its denial.”

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Don’t Let the Corona Plague Stop Passover

“The Passover Seder For Americans”

American Jews Can Deal with the Corona Sequestration

Because of the Pandemic the standard gathering of family to hear the story of the Exodus will be impossible to be performed because of the governmental sequestration caused by the Corona Virus. We should not allow the virus, a plague equal to those sent against the Egyptian slave holders, stop the need to retell the story.

For only $4.95 you can send a Kindle version of the Seder to members of your family to tell the story in their own home and for those families technologically wise can use computers to bring you together. Allow the English only version to tell the story and defeat the Plague of Corona brought on the earth by explaining the importance of the need to remember the Exodus. Available as a Kindle Book  Available as a Paperback 

Thea and Barry Zalma have created an English only Seder that works for our family and will allow you and your families to tell the story of the Exodus painlessly and with the joy and celebration it deserves so that no member of our family forgets what G_d did for us when He took us out of slavery in Egypt and led us to a promised land.

The Reason for the Seder

For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.

Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being.

Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand that when G_d began to create the world there was nothing and that time, as we know it, had no meaning. G_d created all.

Because of the creation we are able to track time and celebrate Passover every year at the same time. We do so based on the lunar calendar used by our ancestors not the Julian calendar modern people use. As a result, Passover se

We feel G_d gave people a conscience hoping it would help us decide right from wrong, to do our best to make good choices, to try to help others, not hurt others and to try to make right the wrongs we have done to others.

The rituals that make up the Jewish holidays help remind us how thankful we are for how much we have accomplished with G_d ’s help and how grateful we are to G_d for everything we have and everything we are.

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Punished by Insured Even After Good Faith by Insurer

Jury’s Verdict Awarding Damages to Plaintiffs Still Appealed

Some people cannot even accept the fact that they won their case against an insurance company but were awarded less than they wanted. Believing they had a case worth $5 million in damages the Plaintiffs were offended when the jury only awarded $37,000 in damages.

FACTS

Rose Mary Smith and Rodney Smith appealed a jury’s verdict on their insurance claim against Defendant Starr Indemnity & Liability Co. After Mrs. Smith was struck by an uninsured driver, she filed a claim with her insurer, Starr. Starr did not dispute liability under the policy but instead disputed the extent of Mrs. Smith’s injuries caused by the accident.

In Rose Mary Smith; Rodney G. Smith v. Starr Indemnity & Liability Company, No. 19-60581, United States Court Of Appeals For The Fifth Circuit (March 24, 2020) the appeal resulted after the Smiths sued  Starr and the case proceeded to a three-day jury trial. Plaintiffs sought $5,000,000 in damages for Mrs. Smith’s physical injuries and medical bills, economic losses from her business, and Mr. Smith’s loss of consortium.

The jury agreed the Smiths were entitled to damages but, contrary to the requested damages, the jury awarded $37,000 in damages — $12,000 for Mrs. Smith’s past medical bills and $25,000 for her non-economic damages.

Plaintiffs appealed arguing that the district court (1) committed plain error in instructing the jury, (2) abused its discretion by failing to exclude the testimony of Starr’s medical expert, and (3) abused its discretion by failing to grant Plaintiff’s motion for a new trial because the jury verdict was against the great weight of the evidence.

ANALYSIS

To set aside a jury verdict the plaintiffs needed to establish plain error concerning a judge’s instruction, and show that: (1) the district court erred, (2) the error was clear or obvious, (3) the error affected the party’s substantial rights, and (4) the error, if left uncorrected, would seriously affect the fairness integrity, or public reputation of judicial proceedings.

When reviewing a jury instruction, the appellate court must “consider the jury charge as a whole” and reverse only if the entire charge leaves this court “with the substantial and ineradicable doubt whether the jury has been properly guided in its deliberations.”

Plaintiffs challenged two instances where the district court, following the Mississippi Model Jury Instructions, charged the jury to confine its “verdict to reasonable compensation for injuries actually sustained, if any.” Plaintiffs argued that the phrase “if any” misled the jury, allowing them to find that Mrs. Smith did not suffer any injuries despite the parties’ stipulations that she sustained “personal injuries” from the accident. Even if including “if any” in the instruction was erroneous, Plaintiffs failed to demonstrate that the error substantially affected their rights. The jury clearly believed she was injured since the jury awarded $37,000 in damages, concluding that Plaintiff suffered at least some injuries from the accident.

Plaintiffs also challenged the district court’s jury charge on proximate cause, which instructed the jury that the “accident must be a substantial factor in producing plaintiff’s injury,” arguing that Mississippi only uses the “substantial factor” test for causes of action involving multiple tortfeasors. But Plaintiffs fail to point to any Mississippi case holding that instructing the jury to use the “substantial factor” test to determine proximate cause is erroneous when there is only one tortfeasor. The Fifth Circuit concluded that the district court did not err by using this test in its instruction. Considering the jury instructions as a whole Plaintiffs failed to show that the district court plainly erred.

Next, Plaintiffs argued that the district court erred by not excluding the testimony of Starr’s medical expert, Dr. David Gandy, who testified that Mrs. Smith’s continuing medical issues were caused by unrelated progressive degeneration, not the accident. After hearing Dr. Gandy’s opinion, the jury was free to consider Dr. Gandy’s sources and make its own credibility determination. The Fifth Circuit noted that the district court did not abuse its discretion by including Dr. Gandy’s testimony who was clearly qualified to provide the testimony as an expert.

Finally, Plaintiffs argued that they are entitled to a new trial because the jury’s verdict was against the overwhelming weight of the evidence. Since the decision to grant a new trial is within the sound discretion of the trial judge an appellate court must decide whether the district court abused that discretion, the appellate court views the evidence in the light most favorable to the verdict. The party moving for a new trial must show an absolute absence of evidence to support the jury’s verdict.

The Fifth Circuit found that Plaintiffs failed to meet this burden. Starr provided causation evidence in the form of testimony from Dr. Gandy. Although Plaintiffs provided witnesses to testify regarding the extent of the damages Mrs. Smith incurred from the accident, their credibility is ultimately left up to the jury. Plaintiffs failed to show an absence of evidence supporting the jury’s verdict and thus, according to the Fifth Circuit, failed to demonstrate that the district court abused its discretion.

ZALMA OPINION

Starr did not argue liability under its policy. It only argued that the plaintiffs overvalued their claim and, with the assistance of an expert, convinced the jury that most of Ms. Smith’s injuries were not caused by the accident. The jury agreed and limited its verdict. Unhappy with the result the Smiths appealed the verdict, establishing that no good deed goes unpunished, and forced Starr to deal with an appeal that was really the result of a failure of proof by the Plaintiffs, not misconduct by the insurer.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

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The Need to Understand the Mutability of Memory

The Need to Understand the Mutability of Memory

A Video for the Interviewer who Seeks the Truth

The Video is available at Zalma on Insurance on YouTube at https://youtu.be/T3hIbdiCY3Y

It is important to spend time examining how memory influences the information you obtain. Very few people have a perfect eidetic (photographic) memory. Memory is a fluid and often unreliable human function.

During my time as a trainee investigator at the Army Intelligence School at Fort Holabird, Maryland, a classroom lecture on interviewing was interrupted by a man dressed in a clown mask, a tuxedo, swim fins, a cowboy hat, and a purple cummerbund. He ran into the room, screamed epithets, fired a weapon into the ceiling, and ran out. The teacher instructed each member of the class to write down a description of the intruder. None of our descriptions were accurate, and we were all shocked when the shooter was brought back into the class. The noise he made, the firing of a weapon, and the fear the incident engendered made it almost impossible to recall him accurately. Some even described him as having been female.

The professional recognizes that some EUO techniques can cause honest subjects — those who are innocent but “just trying to be helpful” — to “misremember” and provide unreliable, even false, information.

In fact, it has long been known that false memories can be implanted by a process of suggestion, especially when used by skillful but unscrupulous attorneys or interviewers.

Leading questions—where a desired answer is suggested by the way the question is phrased—are a dangerous impediment to fact finding. The true professional, impartial and seeking only the truth, must guard against even inadvertently leading a subject to creating false memories.

Lies and Memory

Evidence shows that the use of a suggestive interrogation  technique can be material to the preparation of defense, and the courts have recognized that suggestive interrogation techniques are material to the credibility of prosecution witnesses in United States v. Noel, 581 F.3d 490 (7th Circuit, 09/04/2009), to name one example.

False Memory Syndrome

In Milton’s Paradise Lost, Satan takes on the appearance of an angel and convinces an archangel entrusted with guarding creation to guide him to the Garden of Eden. There, Satan further deceives Adam and Eve and causes the fall of humanity. John Milton used this biblical example of deceit to illuminate the human condition.

The professional interviewer, no matter how experienced, should resist the temptation to believe he or she is a human lie detector. False memories are all too easy to implant, and in their vivid imagery and wealth of detail, they can be indistinguishable from true recollections. Indeed, these memories are experienced as entirely real by those who possess them, and even after their unreliability has been exposed, they function to mask (or have perhaps entirely replaced) any original or true memory.

The professional recognizes that any method of lie detection, including his or her own techniques, requires complete corroboration. Sincerity is what makes the self-deceived deceiver so convincing.

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New Books from Full Court Press

Insurance Law Books from Barry Zalma

The Insurance Law Deskbook

9781949884296The Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. The book, published for the first time under Full Court Press, includes the full texts and digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, state appellate courts, and foreign courts that have molded the American insurance law, as well as vital explanatory chapters, historical context, form letters, and more.

Paperback, only $95.00 available at https://www.fastcase.com/store/fcp/insurance-law-deskbook-2/

California Insurance Law Deskbook

9781949884289

ISBN: 978-1-949884-28-9 (Print) 978-1-949884-30-2(Ebook)
Format: Digital(Epub,Mobi,PDF), Print

California has long led the way when it comes to insurance jurisprudence in the United States, and few know more about California insurance law than Barry Zalma.

Available at https://www.fastcase.com/store/fcp/california-insurance-law-deskbook/ a paperback for only $95.00.

Zalma on Property and Casualty Insurance

The earnings of almost every civil lawyer in the United States are funded by the insurance industry. Insurance can best be described as the mother’s milk of the law profession. The civil defense lawyer is paid by an insurer for each hour he or she works. The civil plaintiffs’ lawyer is usually paid by taking a percentage of any judgment entered in favor of the plaintiff, which judgment is usually paid by the defendant’s insurer.

In almost every situation in which a civil lawyer practices law the funds for that work come, either directly or indirectly, from insurance. Consequently, lawyers must use their wits and energies to avoid or to pursue litigation to the benefit of the client. Both sides understand that an insurer will eventually pay one or both sides in the dispute. Insurance is important to every civil dispute and even some that fall within the criminal courts.

Every lawyer retained to prosecute or defend a civil suit should begin the representation with a serious effort to find insurance coverage for the benefit of the client or the defendant the client is suing. Without that knowledge, the lawyer will find he or she is litigating with duct tape firmly self-placed across his or her mouth.

Insurance Law DeskbookZalma

Learn the insurance basics that are essential to every civil practitioner. Available at Fastcase.com bookstore.

California Insurance Law Deskbook

California has long led the way when it comes to insurance jurisprudence in the United States, and few know more about California insurance law than Barry Cal LawZalma.  Available at Fastcase.com bookstore.

Insurance Bad Faith and Punitive Damages Deskbook

Understand the relationship between insurance, the tort of bad faith, and why punitive damages are awarded to punish insurers.

An annual subscription to secondary content on the Fastcase BadFaithplatform includes new editions and updates published by the author as they are rolled out, so you can rest assured that your research is up to date. Go to fastcase.com for more detail and how to use the material on-line as part of your legal or insurance research or as stand-alone e-books.

All available at fastcase.com bookstore.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | Leave a comment

Heads I Win, Tails You Lose

The Case of the Art Flambe’

A “Heads I Win, Tails You Lose” story.

See the full video at https://youtu.be/UKdxoI5aPC4

The title, “Heads I Win, Tails You Lose” is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser. If the fraud succeeds the insurer must charge more premium to cover the expense of defending the fraud and payment of funds to the fraud perpetrator. If the fraud fails the insurer must charge more premium to cover the expense of defending the fraud. Everyone, except the lawyers, lose.

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Claiming Injury Because Father Smoked was Meritless

Intentional Conduct Can Never be an “Occurrence”

Because lay people and their lawyers believe insurance is a bottomless pit of money that only needs to be tapped by alleging a facially possible cause for coverage, many meritless lawsuits are filed against insurers and taken to the courts of appeal. The Sixth Circuit, in a wonderfully brief and succinct opinion resolved such a dispute in Liberty Mutual Insurance Company, et al. v.  Estate Of Hugo Bobzien, Jr., et al., No. 19-5457, United States Court Of Appeals For The Sixth Circuit (March 27, 2020).

FACTS

Michael Bobzien sued his father’s estate, the Estate of Hugo J. Bobzien, in Kentucky state court, alleging that childhood exposure to his father’s cigarette smoke caused the development of lung disease and other illnesses. The plaintiffs, various Liberty Mutual insurance entities, sought a declaration in federal court that they had neither the duty to indemnify nor defend the Estate under any of the policies issued to Hugo Bobzien.

The district court granted Liberty’s motion for summary judgment and the Estate appealed.

THE POLICIES

The various insurance policies, in the aggregate, provided coverage from 2011 to 2017 for suits brought against an insured because of “bodily injury” caused by an “occurrence.” The policies define an occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in . . . bodily injury.” Each policy contained a household exclusion for personal injury to any insured and a condition limiting the coverage to personal injury “which occurs during the policy period.”

The Estate, creatively, argued that Michael Bobzien’s childhood exposure to secondhand smoke caused the development of disease and illness during the policy period. The Estate contended that the disease and illness is an unintended result of the father’s smoking habit and therefore an “accident” covered by the policies. The Estate’s argument then is that, despite the exposure’s having occurred decades before any policy period, the claim is covered because the result of the exposure (i.e., the illness and disease) developed within the policy period.

ANALYSIS

The Sixth Circuit reviewed what it called a thorough and careful analysis by the district court, that held that:

  1. the Estate faile to allege an “occurrence” because the exposure to secondhand smoke occurred outside the policy period;
  2. no event alleged in Michael Bobzien’s complaint constitutes an “accident” resulting in “bodily injury” under the policies’ terms; and
  3. coverage for the claim was precluded under the policies’ household exclusion.

After carefully reviewing the record, the law, and the arguments on appeal, the Sixth Circuit concluded that the district court’s careful and well-reasoned opinion correctly set out the applicable law and correctly applied that law to the undisputed facts before it.

In addition, a concurring opinion found that Michael Bobzien failed to allege an accident because his father intended to smoke in front of him, and smoking was not a chance event beyond his father’s control. That is enough to find no duty to defend or indemnify.

ZALMA OPINION

The suit and appeal were meritless for many, varied, and conclusive reasons including the fact that Michael Bobzien was an insured of each of the policies and therefore excluded from coverage, that there was no “occurrence” since father intended to smoke and could have, if he wanted to protect Michael, not smoked in his presence, and since Michael did not become sick during the policy period of the various policies. I can only wonder why the trial court and the Sixth Circuit did not sanction the plaintiff and his counsel for bringing a meritless suit and even more meritless appeal.

 


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

 

Posted in Zalma on Insurance | Leave a comment

Fictionalized Insurance Fraud Stories of True Crimes

Fictionalized True Insurance Crime Books

HEADS I WIN, TAILS YOU LOSE

Product DetailsA collection of columns originally published in the magazines “Insurance Journal,” “Insurance Week,” and “The John Cooke Insurance Fraud Report” insurance trade publications serving the insurance community in the United States that have been updated and revised.

The title, “Heads I Win, Tails You Lose” is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser.

Available as a Kindle Book.

Available as a paperback.

Candy and Abel: Murder for Insurance MoneyProduct Details

How a young lawyer and wise old investigator defeated an attempt at life insurance fraud.

Available as a Kindle Book.

Available as a paperback.

Murder And Insurance Fraud Don’t Mix

My name is Marion Orpheus Montague. My friends, and some enemies, call me “MOM.” It is not a designation of my ability to nurture my clients. I have never been, nor will I Product Detailsever be, maternal. I accept the play on my initials because it causes adversaries to underestimate me.

I am 66-years-old. My grayish blond hair is thin and my full beard is a bit scraggly. My face is round and often tinged with red. My nose is full, my eyes green and my cheeks bulge out to the sides trying to emulate the belly that precedes every other part of my body as I walk. People see me and do not believe that I am a private investigator. Seeing me they often think that I am on leave from my winter work as a Macy’s Santa Claus.

I like being underestimated. It makes my job as an investigator easier.

See how a fake robbery at a jewelry store led to murder and prison.

Available as a Kindle book.

Available as a paperback

Murder & Old Lace: Solving Murders Performed for Insurance Money

Product Details

When the women first met – 20 years ago at a Santa Monica health spa – Magogassasanian appeared taken with Gogolivesky. The women moved Alvarado into an apartment, then started applying for life insurance policies on him. They jointly took out four policies, each as 50% beneficiaries in addition to the individual policies they bought from my client. Gogolivesky also took out three more policies on her own while Magogassasanian only took out a single individual policy on Earnest. The two women pocketed nearly $6,000,000 in insurance benefits on Alvarado alone and $4,000,000 in insurance benefits on Earnest. They also recovered a total of $5,000,000 on the other six old men they killed.

Available as a Kindle book.

Available as a paperback.

Arson for Terrorism and Profit

Arson for Terrorism and Profit: How an Insurance Investigator and Insurance Lawyer Defeated a Plot to use a Fire to Fund Terrorism by [Zalma, Barry]How an Insurance Investigator and Insurance Lawyer Defeated a Plot to use a Fire to Fund Terrorism (c) 2020 by Barry Zalma & ClaimSchool, Inc.

There are many excuses for the inability of the criminal justice system to effectively handle arson cases and eventually, almost universally, the prosecutor will find an excuse not to prosecute an arson case regardless of the amount of evidence produced. As a result, with regard to an arson-for-profit scheme, the time, investigative work, and litigation is left to the insurer to refuse to pay a claim based on fraud, pay the investigators and lawyers needed to prosecute a civil fraud defense to a fraudulent claim created with an arson-for-profit scheme.

The following story is based upon an attempted arson-for-profit that took up a large portion of my professional career. Although fiction, the story is based on a true crime that involved the efforts of the intended victims – an English insurer and an American insurer – the work of professional fire cause and origin investigators, private investigators, insurance claims handlers, insurance coverage lawyers and insurers who refused to pay tribute to a criminal. After five years of investigation and litigation the defendants established that the arson-for-profit scheme was designed for more than cash but was intended to obtain funds to support a terrorist organization whose purpose was to kill or maim anyone connected to the government of Germany.The names, places, professions, organizations, fire departments, police, prosecutorial agencies and of the individuals involved have been changed to protect the innocent, criminal, and professional.

Available as a Paperback

Available as a Kindle book

M.O.M. & The Taipei Fraud

How an Experienced Adjuster Defeated a $7 Million Fake Burglary Claim

The problem is that each option the insurers have available have a down side and Feng is represented by a lawyer who has proved highly successful in suing insurers and collecting large compensatory and punitive damage awards. Since the claims exceed $6 million dollars, he can expect, applying the law set out by the U.S. Supreme Court in State Farm Mut. Automobile Ins. Co. v. Campbell and BMW of North America, Inc. v. Gore as much as $60 million in punitive damages. So I need to explain to the insurers that they face an exposure anywhere from their policy limits to ten times the policy limit. They need the courage of their convictions to reject this major claim.

Available as a paperback.

Available as a Kindle book.

Arson-For-Profit Fire at the Cowboy Bar & Grill

A true crime novel based on the experience of the author, Barry Zalma, who for more than 51 years has acted for insurers who were faced with arson-for-profit, one of the most dangerous insurance fraud schemes. The book explains how an insurance claims adjuster, working with a fire cause and origin expert, a forensic accountant and insurance coverage lawyer, were able to defeat an arson-for-profit scheme and obtain a judgment requiring the perpetrator to take nothing and repay the insurer all of its expenses in defeating the claim.

Available as a paperback.

Available as a Kindle book.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | Leave a comment

Zalma’s Insurance Fraud Letter – April 1, 2020

ZALMA’S INSURANCE FRAUD LETTER – April 1, 2020

Zalma’s Insurance Fraud Letter, Volume 24, No. 7 now available with summary by video at https://youtu.be/fe8RoEE8K6M

Some of the articles you can read in this issue of ZIFL follow:

Fraudster Need Only Pay What He Owes

Fraudster Must Go to Jail but Not Pay All Restitution Ordered

Fraud perpetrators are usually not willing to accept their punishment on the small chance that they are caught, arrested, tried and convicted. They appeal everything including their punishment.

In United States of America v. Hamza Dridi, a/k/a Alex, No. 18-3334, United States Court of Appeals for the Seventh Circuit (March 13, 2020) a convicted fraud perpetrator appealed his conviction, sentence and restitution order to the Seventh Circuit.

FACTS

From 2012 to 2015, employees of Elite Imports, a car dealership, engaged in a variety of fraudulent activities. For his involvement in these illegal schemes, one employee, Hamza Dridi, was charged with conspiring to violate the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(d) (RICO), and interstate transportation of stolen property, 18 U.S.C. § 2314. A jury found him guilty of both crimes. The district court sentenced him to 72 months in prison and ordered $1,811,679.25 in restitution.

Dridi challenged his sentence and the restitution order, arguing that the district court-before sentencing Dridi and ordering restitution-should have made specific factual findings about Dridi’s participation in the conspiracy.

ZIFL OPINION

While Dridi serves his 72 months in prison it is doubtful he will earn anything to pay the restitution order. However, the length and effectiveness of his crime probably caused him to acquire assets and cash from his criminal conduct. Once the restitution award is properly demarcated the government should do everything possible to collect the restitution awarded against Dridi as well as from his co-conspirators.

Read the full article https://zalma.com/zalmas-insurance-fraud-letter-2/

Chinese Virus and the California Department of Insurance

The California Department of Insurance issued the following at the same time the Governor ordered everyone to stay home. Although it will give insurers some protection against governmental punishment it may make insurance fraud and arson-for-profit a temptation for those who are having their businesses shut down by governmental fiat.

Insurers and other licensees of the California Department of Insurance (Department) are subject to numerous legal and commercial obligations and time frames.

Please be informed that the Department of Insurance intends to consider the extraordinary circumstances relating to the COVID-19 outbreak and the resulting disruptions to normal business operations when evaluating whether insurers and other Department licensees have complied with their respective legal and commercial obligations during the COVID-19 pandemic.

Regardless of this change in methodology insurers need to investigate each claim and do not allow the Pandemic to allow fraud perpetrators an opportunity to profit from the shut down of businesses across the country. Insurers, SIU staffs and claim staffs should be extra-vigilant since the shut down of California and other states will be a temptation to commit insurance fraud and may result in multiple arson-for-profit attempts.

Read the full article at https://zalma.com/zalmas-insurance-fraud-letter-2/

Policy Obtained by Fraud Requires Insured to Reimburse Insurer for Defense and Indemnity

Threat of A Bad Faith Suit Adds Proof of Fraud

An insurer asserts claims against its insured for fraud and unjust enrichment. The Tenth Circuit was asked to determine if Colorado law permits an insurer to recover a settlement payment made on behalf of its insured for fraud. The insured fraudulently obtained an insurance policy for its inpatient-drug-treatment center, and when the insured was sued by a former patient, the insurer assumed the insured’s defense, subject to a reservation of rights. Even after learning that the insured had fraudulently obtained the policy, the insurer settled with the former patient under pressure from the insured. The insurer seeks to recover the settlement payment from its insured.

In Evanston Insurance Company v. Aminokit Laboratories, Inc., No. 19-1065, D.C. No. 1:15-CV-02665-RM-NYW, United States Court of Appeals for The Tenth Circuit (March 18, 2020) the Tenth Circuit decided whether the insurer could recover from its insured for defense and indemnity payments made under a reservation of rights.

ZIFL OPINION

Insurance fraud perpetrators should never be allowed to profit from the fraud. Since the policy was subject to rescission or voidance as a result of a blatant and admitted fraud, the insured had no right to defense or indemnity. However, since the fraud was not detected until after the insurer agreed to defend subject to a reservation of rights, it had no good way to escape the obligation without facing a bad faith lawsuit seeking both contract and tort damages. The insured’s threat forced the insurer to fund the settlement and seek reimbursement. The Tenth Circuit enforced the right to reimbursement and, hopefully, the defendants have sufficient funds to pay the judgment. If not, even with the judgment the fraud succeeded.

Read the full article at https://zalma.com/zalmas-insurance-fraud-letter-2/

Health Insurance Fraud Convictions

Medicare & Medicaid Fraud Fugitives

Read the full article here.

Other Insurance Fraud Convictions

Videos on YouTube From Barry Zalma

Videos describing important insurance issues described by Barry Zalma and available to anyone who views or subscribes to the YouTube account. Issues include insurance fraud, definition of insurance, insurance as a contract of personal indemnity, millions for defense and not a dime for tribute and the tort of bad faith.

© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | Leave a comment

Three Squares & a Cot

Insurance Fraud Should not be a Retirement Plan

Every insurer is required by its shareholders, members, state statutes and state regulations to do everything possible to deter and defeat attempts at insurance fraud. Most insurers, therefore, have a staff of fraud investigators working under their Special Investigation Unit (SIU) and the SIU works to train the claims handlers to recognize the indicators or red flags of fraud.

Much to the surprise of the public, lawyers, and even some judges, defrauding an insurance company is a crime. In most states, insurance fraud is a felony that could subject the perpetrator to as much as five years in state prison plus serious fines. If the fraud is attempted by use of the mail or telephone, internet, e-mail or against a federal insurance program like Medicare, Medicaid and the National Flood Insurance Program (NFPA) it can also be a federal felony.

Insurance fraud is a crime that should be easy for a prosecutor to prove since all that is required is to prove the insurance criminal knowingly presented a claim for the payment of insurance contract benefits to which the perpetrator is not entitled or the submission of a single false document or oral statement in support of the crime. However, state prosecutors are reluctant to prosecute the crime, regardless of the state where it is committed, because they believe it is their duty to prosecute violent crimes. Financial crimes, like insurance fraud, they believe only hurts rich insurance companies and are not worthy of their efforts.

Because of the lack of aggressive prosecution insurance fraud attempts often succeed. No one knows how much money insurance fraud takes from the insurance industry because not all fraud attempts are discovered. The best estimates of insurance fraud professionals about the cost of insurance fraud conclude that fraud takes between $80 billion and $300 billion every year. Even those who are convicted are ordered to make restitution of less than the amount they probably stole, are given probation or a short time in jail. Those who are imprisoned will still have part of their ill-gotten gains left to live well. Many, after arrest or conviction work to run more fraudulent claims to pay the ordered restitution.

A Change in those Who Commit Fraud

In my 52 years in the insurance claims business most insurance fraud perpetrators were young and some were middle-aged. It seemed that none were of retirement age or elderly. Claims presented by the elderly were paid with little or no investigation.

Today, as people in the pre-Baby Boom generation and the Baby Boom generation (those born after the end of World War II in 1945) move toward retirement they find that they have spent everything they earned in their youth to support their children and elderly parents and a comfortable life style. When they decide it is time to stop working, they are shocked to find that they have nothing left to support them. Since they are quickly becoming physically unable to continue to work their moral compass spins out of control.

A person 65-years-old and older can’t afford to live on Social Security benefits. Because the felony of insurance fraud is seldom prosecuted – prosecutors claim they are compelled to deal with injury causing violent crimes – before a crime against an insurer for nothing more than money. I have been writing Zalma’s Insurance Fraud Letter (ZIFL) twice a month for more than 23 years and have seen that more and more people who are convicted of insurance fraud are above the age where they can collect Social Security. Many are professionals: Doctors, Chiropractors, Nurse Practitioners, and lawyers.

Those who determine the only way they can gather sufficient funds to support a comfortable retirement is to engage in insurance fraud have not read the criminal statutes making insurance fraud a crime or the federal statutes making it a crime to take advantage of government created quasi-insurers like Medicaid and Medicare. As a result, some are caught, prosecuted and convicted of insurance fraud, wire fraud, or health care fraud. Most are not.

Posted in Zalma on Insurance | Leave a comment

Rescission and Random Thoughts on Insurance

Everything Needed by the Insurance Claims Professional from Barry Zalma

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.

Rescission of Insurance – 2nd Edition

Newly updated and expanded, “Rescission of Insurance – 2nd Edition” provides the insurance coverage lawyer, policyholder lawyer and claims professionals with everything needed to understand and enforce the equitable remedy of rescission. Everyone involved in or with the business of insurance must understand that rescission is an equitable remedy as ancient as the common law of Britain. When the United States was conceived in 1776 the founders were concerned with protecting their rights under British common law. They adopted it as the law of the new United States of America modified only by the limitations placed on the central government by the U.S. Constitution approved in 1789.

The viability and ability to enforce contracts was recognized as essential to commerce. Courts of law were charged with enforcing legitimate contracts. Courts of equity were charged with protecting contracting parties from mistake, fraud, misrepresentation and concealment since enforcing a contract based on mistake, fraud, misrepresentation or concealment would not be fair. The common law developed rules that courts could follow to refuse to enforce the terms of a contract that was entered into because of mutual mistake of material fact, a unilateral mistake of material fact, the breach of warranty (a presumptively material promise to do or not do something), a material concealment, or a material misrepresentation. The remedy – called rescission – created a method to apply fairness to the insurance contract and allow an insurer to void a contract and allowed courts to refuse to enforce such a contract entered into by misrepresentation or concealment of material facts.

Available as a paperback.

Available as a Kindle book.

Random Thoughts on Insurance

Product DetailsAfter more than 50 years acting as a claims person and insurance coverage lawyer I enjoy reading court decisions concerning insurance. The idea of this blog is to find new cases that are interesting to me and then write a summary. Some of the cases reviewed will be important. Some may be of first impression. Others will be totally unimportant. All will be interesting.

The case digests and articles from 2010 to the present, in the six volumes summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | Leave a comment

Employee Exclusion Enforced in Montana

Clear & Unambiguous Exclusions Defeat Plaintiffs Claims

Taking an assignment of a claim against an insurer for a defendant can be the only way to collect a judgment when then insurer refuses to pay for defense or indemnity. However, if the denial of coverage is fair and reasonable giving up the chance to collect from the tortfeasor is a waste of time and money.

In Nautilus Insurance Company v. Chad Michael Roan and Brittany Nichole Roan, CV 19-7-BLG-TJC, United States District Court For The District Of Montana Billings Division (March 26, 2020) Chad Michael Roan and Brittany Nichole Roan (collectively, “Roans”) learned that their chance of being paid was non-existent.

Because of the claim made by the Roans, Nautilus Insurance Company (“Nautilus”) sued the Roans seeking a declaratory judgment relating to insurance coverage obligations to the Roans and non-parties Dale Rambur and Rambur Construction (collectively, “Rambur”).

FACTUAL BACKGROUND

Dale Rambur and/or Rambur Construction hired employees through an employment agency, Advanced Employment Services, to work for Rambur Construction to reroof Rambur’s house. Defendant Chad Roan and three other workers from Advanced Employment began work on the project on June 9, 2016. Chad and the other workers took direction directly from Rambur’s foreman, Kurt Schultz. While rolling out roofing material, Chad stepped backward off the roof, fell approximately 15 feet to the ground, and sustained bodily injuries.

The Roans subsequently sued Rambur in Montana District Court alleging negligence, inherently dangerous activity, and loss of consortium. At the time of Chad’s accident, Nautilus insured Rambur Construction under a Commercial General Liability Policy, policy number NN679954 (“Policy”).  Nautilus issued a denial of coverage to Rambur and informed Rambur that the Exclusion – Injury to Employees, Contractors, Volunteers and Other Workers endorsement eliminated a Rambur’s right to defense or indemnity.

The Roans and Rambur subsequently reached a settlement agreement on August 27, 2018, which allowed for entry of a stipulated judgment in the amount of $300,000 against Rambur. Essential to the stipulated judgment, however, was the agreement “that such judgment shall specifically provide it shall be collected only from the proceeds of insurance policies and insurance coverages applicable to Nautilus Insurance Company.” Judge Donald L. Harris held a reasonableness hearing on the stipulated judgment on February 13, 2019, and ordered the judgment be entered in favor of the Roans for the stipulated amount on May 7, 2019.

APPLICABLE LAW

The U.S. District Court concluded that it is well-settled in Montana that an insurer’s duty to defend arises when a complaint against an insured alleges facts, which if proved, would result in coverage. The fundamental protective purpose of an insurance policy, paired with the insurer’s obligation to provide a defense, require coverage exclusions to be narrowly construed. Therefore, the insurer must construe the factual assertions from the perspective of the insured. The insurer, however, has no obligation to look beyond the complaint in determining whether a claim is covered by a policy.

The duty to defend arises from the language of the policy. Without coverage under the policy terms, no duty exists. In Montana, the interpretation of an insurance contract is a question of law. A court interpreting an insurance policy is to read the policy as a whole and, to the extent possible, reconcile the policy’s various parts to give each meaning and effect. The terms and words used in an insurance policy are to be given their usual meaning and construed using common sense. Moreover, a court may not create an ambiguity where none exists, nor may a court rewrite an insurance policy by ignoring clear and unambiguous language to accomplish a good purpose.

DISCUSSION

The Policy contains an exclusion for injuries to employees, contractors, volunteers and other workers. This exclusion applies regardless of where the services are performed; or Bodily injury occurs; and whether any insured may be liable as an employer in any other capacity; and to any obligation to share damages with or repay someone else who must pay damages because of the injury.

Nautilus argued that the Roans’ claim unequivocally fell within this policy exclusion. Nautilus emphasized the Roans’ allegation that:

[Rambur] hired employees to work for [Rambur] construction company through an employment agency, Advanced Employment Services. Plaintiff Chad Roan was working as an employee for Advanced Employment Services. Defendant Dale Rambur retained the construction crew with employees hired through Advanced Employment. Nautilus also emphasized the Roans’ allegations that during this job all of the employees worked at the direction of Defendant Dale Rambur or his foreman Kurt Schultz, who told the employees from Advanced Employment how to do the job, provided all the equipment for the job, and directed all activities at the work site.

The Roans’ claim clearly falls with the exclusion for injuries to employees and other workers. The exclusion includes “leased workers,” which are defined under the Policy to mean “a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm to perform duties related to the conduct of your business.” The allegations of the underlying complaint falls squarely within that definition.

Even construing the Policy’s exclusions narrowly and strictly, as Montana law requires, the Roans’ claims fall within the Policy’s employee exclusion. The Policy was not issued to cover Rambur’s employees, contractors, or others working on Rambur’s behalf. It does, however, cover other third-party personal injury or property damage claims which do not fall within the employee exclusion. Therefore, the Court found that the Policy exclusion of bodily injury for varying types of workers does not render it illusory as the Roans’ claimed.

Plaintiff’s Motion for Summary Judgment was granted as to its claim for declaratory relief.

ZALMA OPINION

Rambur made a great deal with the Roans. The $300,000 judgment could only be paid from Rambur’s insurer who owed neither defense nor indemnity. The judgment, therefore, is nothing more than a piece of paper that has no value. If Rambur had no assets to execute upon, the deal made sense. If it had any assets, the deal was not logical. It is essential that parties, before entering into such a deal, where the plaintiffs promise not to execute against the tortfeasor, should never be entered into without first thoroughly investigating the assets of the defendant and its ability to collect on the judgment and if not, then carefully review the available insurance coverages.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

Posted in Zalma on Insurance | Leave a comment

A YouTube Video on How to Acquire a Policy of Insurance

Acquisition of the Policy

See the video from Zalma on Insurance at YouTube at Video link

https://youtu.be/j7VdAqKyKLM

The person buying insurance may only acquire insurance from an insurer by one of three methods:

1. By meeting with an agent of the insurer.

The agent is a person appointed by the insurer to transact insurance business with and on behalf of the insurer. The agent usually has the right to bind insurance in the name of the insurer without first obtaining permission from the insurer. The prospective insured presents his or her needs to the agent who will either accept or reject the proposed insurance. If accepted, the prospective insured is immediately an insured of the insurer.

California Insurance Code Section 31 defines insurance agent as “Insurance agent” means a person authorized, by and on behalf of an insurer, to transact all classes of insurance other than life, disability, or health insurance, on behalf of an admitted insurance company.”

2. By dealing with a broker.

An insurance broker is a person who transacts insurance with, but not on behalf of, an insurer. The broker’s only duty is to the prospective insured, so he or she shops for the broadest coverage available at the lowest possible price. The broker cannot bind an insurer without first obtaining a commitment in writing to insure the potential insured.

California Insurance Code Section 33 defines the term as follows: “’Insurance broker’ means a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health with, but not on behalf of, an insurer.”

3. Through a direct writer.

Some insurers, known as direct writers, refuse to deal with agents or brokers. They will accept proposals for insurance directly from a prospective insured who will speak—usually by telephone—with an employee of the insurer who has the authority to accept a particular risk.

The agent is compensated solely by a commission from the insurer. The broker is usually compensated by a commission from the insurer plus a fee charged to the client policyholder, insurance applicant or insured.

The direct writer pays a salary to the person who meets (usually by telephone) with a prospective insured and can accept certain risks directly or with the permission of the insurer’s underwriting department.

In Superior Dispatch, Inc. v. Insurance Corp. of New York, 181 Cal. App. 4th 175 (2010), the California Court of Appeal concluded that: “Representations in an insurance application prepared by an insurance broker on behalf of an insured are attributed to the insured as a matter of law.” (LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1268.)

Insureds are accountable for all statements made on their behalf by brokers who are their agents as opposed to agents of insurers. When a broker prepares an application for insurance, therefore, it is imperative for the prospective insured to carefully review the application to verify the accuracy of the statements made in it. Otherwise insureds face the possibility that insurers may attempt to void coverage if there is a misrepresentation or concealment of a material fact.

The books are available at https://zalma.com/blog/insurance-claims-library/

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Ethics for Lawyers and Insurance Professionals

Everything Needed by the Insurance Claims Professional from Barry Zalma

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals and deal with insureds, insurers, and clients ethically and in good faith..

The Little Book on Ethics for the American Lawyer

The practice of law demands more than knowledge of statutory and case law. It requires more than technical proficiency in the nuts and bolts of legal practice. A lawyer is an officer of the legal system whose conduct should conform to the requirements of the law, both in professional service to clients and in the lawyer’s business and personal affairs.

The practice of law requires that every lawyer treat each client, each adversary, and the court ethically and in good faith.

The practice of law is different from other professions because it requires that the lawyer act for his or her client, not him or herself, only if the actions for the client are ethical and in good faith.

What is Ethical Behavior?

The concept of ethical behavior refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues, all of which are essential to the lawyer.

Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from murder, rape, theft, assault, slander, and fraud. Ethical standards also include those that imply virtues of honesty, compassion, and loyalty.

There are rights presumed to exist such as those described in the Declaration of Independence submitted to King George of England in 1776 that held: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of happiness.” The unalienable rights also include the right to life, the right to freedom from injury, and the right to liberty. Such standards are adequate standards of ethics because they are supported by consistent and well-founded reasons.

Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from murder, rape, theft, assault, slander, and fraud. Ethical standards also include those that imply virtues of honesty, compassion, and loyalty.

There are rights presumed to exist such as those described in the Declaration of Independence submitted to King George of England in 1776 that held: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of happiness.” The unalienable rights also include the right to life, the right to freedom from injury, and the right to liberty. Such standards are adequate standards of ethics because they are supported by consistent and well-founded reasons.
Ethics also refers to the study and development of one’s standards of conduct.

Feelings, laws, and social norms can deviate from what is ethical. It is necessary, especially to people involved in the practice of law, to constantly examine one’s standards to ensure that they are reasonable and well-founded conduct that ethically treats a client, an adversary, and the court with the utmost good faith.

There is no single answer to the question of what is ethical behavior by a lawyer. Ethical behavior is subjective and fact dependent.

Available as a Kindle book here.

Available as a paperback here.

Ethics for the Insurance Professional

Methods for Insurers and their Personnel to Act with the Utmost Good FaithProduct Details

Ethics is a process of systematically applying, using, defending and recommending concepts of right and wrong behavior. Ethical behavior is required of both parties to a contract of insurance for the system to work. Ethics is the essence of insurance. Ethical behavior is required of both parties to a contract of insurance for the system to work. If any party to the insurance contract acts unethically the ability of insurance to work effectively and profitably will fail. Ethics is the essence of insurance. Since insurance was first created it has been a business of utmost good faith. As a result, the insured and the insurer are expected to treat each other ethically.

Available as a paperback.

Posted in Zalma on Insurance | Leave a comment

Failure to Give Notice on a Claims Made & Reported Policy Defeats Coverage

Judgment Creditor who did not Comply with Policy Condition Had no Coverage

A person holding a judgment against a bankrupt can sue the bankrupt’s insurer to recover a judgment if the policy issued to the bankrupt provided coverage for the tort sued upon with the permission of the bankruptcy court. However, the person holding the judgment must first prove that the facts that resulted in the judgment was covered by the policy.

In Junious R. Valentine v. Federal Insurance Company, NO. 14-18-00438-CV, State of Texas in the Fourteenth Court of Appeals (March 26, 2020) Junious R. Valentine obtained a default judgment in federal court against his former employer (the Hospital) for employment discrimination. In this case, Valentine sued the Hospital’s insurer, Federal Insurance Company, for breach of contract, Insurance Code violations, and conspiracy. The Harris County district court (the trial court) granted Federal’s motion for summary judgment on all of Valentine’s claims.

BACKGROUND

The parties agree that the Hospital held an insurance policy with Federal that covered employment discrimination claims against the Hospital. The policy was a claims-made-and-reported policy that covered loss from a claim “first made against such Insured during the Policy Period . . . but only if such Employment Claim [was] reported to the Company [i.e., Federal] in writing in the manner and within the time provided in Subsection 12 of this coverage section.” Subsection 12, as amended, provided that as a condition precedent to coverage, the Hospital had to give written notice of an employment claim to Federal “during the Policy Period, or, if applicable, in no event later than . . . 180 days after the end of the Policy Period.” The Policy Period was from November 3, 2013, to November 3, 2014.

During the Policy Period, Valentine filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) and then sued the Hospital in a federal district court. On October 5, 2015, the bankruptcy court signed an agreed order lifting the automatic stay to permit Valentine to prosecute his case in the federal district court. The federal district court reinstated Valentine’s case, but less than a month later the Hospital filed a “notice of denial of insurance coverage and reinstatement of stay,” contending that the Hospital had been notified by Federal that insurance coverage for Valentine’s claim had been denied.

The federal district court ultimately rendered a default judgment awarding Valentine damages, attorney’s fees, and costs totaling $87,598. Valentine then sued Federal in a Harris County district court, asserting claims for breach of contract as a third-party beneficiary, violation of the Insurance Code, and conspiracy. Federal moved for summary judgment. Federal’s adjuster filed a declaration on the Valentine matter and testified that Federal’s “claim file” included Valentine’s charge of discrimination, the EEOC’s notice of charge, and Valentine’s complaint from the federal district court. She testified, “Federal did not receive notice of Valentine’s claim from anyone before October 9, 2015” well after the policy expired.

The trial court granted Federal’s motion for summary judgment.

BREACH OF CONTRACT

None of the evidence provided by Valentine, considered individually or in total, gives rise to a reasonable inference that Federal had been notified of Valentine’s claim before October 9, 2015, let alone within 180 days of the Policy Period. Because Federal presented undisputed evidence that Valentine’s claim was not a covered loss, Federal did not breach the policy by denying coverage.

Federal and the Hospital were not in privity. Even if an insurer’s denial of coverage does not necessarily create a conflict for purposes of collateral estoppel the Hospital’s notice of denial of insurance coverage and reinstatement of stay informed the federal district court that coverage had been denied, not that the Hospital agreed with Federal’s decision to deny coverage.

Contrary to Valentine’s allegations nothing in the policy suggests that the notice period should be tolled during bankruptcy.

Because the requirement that a claim be reported to the insurer during the policy period or within a specific number of days thereafter is considered essential to coverage under a claims-made-and-reported policy, most courts have found that an insurer need not demonstrate prejudice to deny coverage when an insured does not give notice of a claim within the policy’s specified time frame.

Federal adduced undisputed evidence that Federal did not receive notice of Valentine’s claim within the Policy Period or the additional 180-day reporting period. Timely notice under this policy is essential to coverage. Because there was no timely notice, there is no coverage, regardless of any showing of prejudice.

Valentine also contended that the trial court erred by granting summary judgment on his Insurance Code claim. Although an insured’s judgment-creditor may be considered a third-party beneficiary sufficient to bring suit against an insurer for policy benefits, there is no evidence that a third-party’s claim based on violations of the Insurance Code, gives standing to a third-party claimant for violation of unfair settlement practice under Section 541.060 of the Insurance Code.

Even assuming Valentine could bring a claim under the Insurance Code as a third-party beneficiary, an insured cannot recover any damages based on an insurer’s statutory violation unless the insured establishes a right to the policy benefits. Because the trial court did not err in granting summary judgment on Valentine’s breach of contract claim, and Valentine alleges no injury independent of a right to policy benefits, the trial court did not err by granting summary judgment on the Insurance Code claim.

ZALMA OPINION

Although Valentine had a judgment against the hospital he could only collect that judgment as part of the distribution from the bankruptcy court. He had the right to sue the insurer as the insurer of the bankrupt for up to the limit of the policy, but only if the bankrupt could have received defense or indemnity from the insurer. Since the hospital breached a material condition precedent to coverage by not reporting Valentine’s claim promptly it had no rights and neither did Valentine.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | Leave a comment

Adjusting Liability Claims

How to Adjust Liability Insurance Claims

“Adjusting Liability Claims” a YouTube video Available at Video link https://youtu.be/eBX6IQl8KEc

Adjusting liability insurance claims requires skill, patience, knowledge of insurance, basic knowledge of tort and contract law, and knowledge and experience as an investigator. The liability claims adjuster is faced with the following basic obligations:

1. To understand the law of torts as applied in the state where the adjuster works.

2. To understand the law of contracts as applied in the state where the adjuster works.

3. To understand sufficient

medical terminology to be able to evaluate claims of injury.

4. To understand the costs to repair or replace damaged real or personal property.

5. To understand how to read and apply the terms and conditions of a liability insurance policy.

Much to the chagrin of insurance claims professionals, some modern insurance companies simply hire a person to be an adjuster, provide no training, and send them out to deal with the public with only the assistance of a claims supervisor who may only have two years-experience.

This Compact Book of Adjusting Liability Claims-Second Edition is designed to provide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster.

It also works as a refresher for the experienced adjuster.

© 2020 –

Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Fr

ee!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | Leave a comment

Claims and SIU Regulations

How to Comply with State Claims Handling Regulations

California Fair Claims Settlement Practices Regulations

A Guide to Insureds, Public Insurance Adjusters, and Lawyers to Properly Investigate and Adjust Insurance Claims

This book was designed to assist insurance personnel who do business in the state of California. It will assist all insurance claims personnel, claims professionals, independent insurance adjusters, special fraud investigators, private investigators who work for the insurance industry, the management in the industry, the attorneys who serve the industry, public insurance adjusters, policyholders and counsel for policyholders working with insurers doing business in California. All insurers doing business in California must comply with the requirements of the Regulations or face the ire of, and attempts at financial punishment from, the CDOI. That punishment is now questionable and limited because some courageous insurers fought the CDOI and succeeded before an administrative law judge who limited the right to punish. Regardless of difficulties in assessing punishment the state of California requires all who are involved in the claims process — even if only tangentially — to be trained with regard claims handling in compliance with the Regulations and attest to completion of such training under oath. To avoid the annual training the claims person can submit a sworn document that avers that he or she has read and understood the Regulations. Reviewing this book and the Regulations set forth below should be sufficient to comply with the training requirements of the Regulations. It is necessary that insurance personnel who are engaged in any way in the presentation, processing, or negotiation of insurance claims in California be familiar with the Regulations. Counsel for insurers and policyholders should also be familiar with the Regulations since they set a minimum standard for claims handling in the state.

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

The State of California Imposes Control on the Investigation of Insurance Fraud

California SIU Regulations: The State of California Imposes Control on the Investigation of Insurance FraudCalifornia SIU Regulations is designed to assist California insurance claims personnel, claims professionals, independent insurance adjusters, special fraud investigators, private investigators who work for the insurance industry, the management in the industry, the attorneys who serve the industry, and all integral anti-fraud personnel working with California admitted insurers to comply with the requirements of California SIU Claims Regulations.

The state of California, by statute, requires all admitted insurers to maintain a Special Investigative Unit (an “SIU”) that complies with the requirements set forth in the Special Investigative Unit Regulations (the “SIU Regulations”) and train all integral anti-fraud personnel to recognize indicators of insurance fraud.

Available as a Kindle Book.

Available as a paperback.

© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | Leave a comment

Excellence in Claims Handling

In search of profit, insurers have decimated their professional claims staff. They laid off experienced personnel and replaced them with young, untrained, unprepared people. A virtual clerk replaced the old professional claims handler. Process and computers replaced hands-on human skill and judgment. Money was saved by paying lower salaries. Within three months of firing the experienced claims people gross profit increased.

The promises made by an insurance policy are kept by the professional claims person. Keeping a professional claims staff dedicated to excellence in claims handling is cost-effective over long periods of time. A professional and experienced adjuster will save the insurer millions by resolving disputes, paying claims owed promptly and fairly, and by so doing avoiding litigation.

The professional claims person is an important part of the insurer’s defense against litigation by insureds against insurers for breach of contract and the tort of bad faith. Claims professionals resolve more claims for less money without the need for either party to involve counsel. A happy claimant satisfied with the results of his or her claim will never sue the insurer.

Incompetent or inadequate claims personnel force insureds and claimants to public insurance adjusters and lawyers. Every study performed on claims establishes that claims with an insured or claimant represented by counsel cost more to resolve than those where counsel is not involved. Prompt, effective, professional claims handling saves money for both the insured and the insurer and fulfills the promises made when the insurer sold the policy.

Insurers who believe they can handle first or third party claims with young, inexpensive, inexperienced and untrained claims handlers should be accosted by angry stockholders whose dividends have plummeted or will plummet as a result. When an insurer compromises on staff, profits, thin as they may have been previously, will move rapidly into negative territory. Tort and punitive damages will deplete reserves. Insurers will quickly question why they are writing insurance. Those who stay in the business of insurance will either adopt a program requiring excellence in claims handling from every member of their claims staff, or they will fail.

Insurance is a business. It must change—this time for the better—if it is to survive. It must rethink the firing of experienced claims staff and reductions in training to save “expense.” Insurers should, if they wish to succeed, adopt a program to promote excellence in claims handling that can help insurers keep the promises made by the insurance policy and avoid charges of breach of contract and the tort  bad faith in both first and third party claims.

Insurers must understand that they cannot adequately fulfill the promises they make to their insureds and their obligations under fair claims practices acts without a professional, well trained and experienced claims staff. An insurer must work vigorously and intelligently to create a professional claims department or recognize it will  lose its market and any hope of profit.

Claims handling without excellence is both dangerous and expensive. Insurers should develop a professional claims staff and provide excellence in claims handling because by so doing they will profit more than if they keep an inadequate and unprofessional claims staff.

© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | 2 Comments

Insured Must Prove Loss was Fortuitous

“All-Risk” is not Synonymous with “All Loss.”

The District Court granted summary judgment in favor of the insurance company after a yacht sunk in calm waters at its dock because the yacht’s owners, Mr. and Mrs. Inganamort, did not carry their burden of proving that the loss was a matter of chance, “fortuitous,” in the argot of insurance, which is a requirement for coverage under the all-risk insurance policy the Inganamorts had.

In Chartis Property Casualty Company v.  John Inganamort; Joan Inganamort, No. 19-1903, United States Court Of Appeals For The Third Circuit (March 24, 2020) the Third Circuit was asked to reverse because the yacht sank because of heavy rain.

BACKGROUND

John and Joan Inganamort left their 65-foot fishing vessel, Three Times a Lady, docked behind their part-time residence in Boca Raton, Florida. In September 2011, when they were at their home in New Jersey, the Inganamorts received the sad news that Three Times a Lady had sunk enough to sustain serious damage.

They reported the loss to their insurance company, Chartis Property Casualty Company, with whom they had an all-risk policy.  Chartis sent a claims specialist to conduct a preliminary survey of the vessel. The specialist reported three inches of standing water in the starboard forward cabin bilge and multiple potential sources of water ingress, including a hole in the hull the size of a screw. He also found that the electrical breakers were “severely rust-stained and blackened from an electrical failure[,]” and subsequent testing “revealed obvious water intrusion[.]” The final review of the vessel confirmed the claim specialist’s initial findings and also identified that the ship’s battery charger was not working, and without a source of power, the ship’s bilge pumps had ceased functioning.

Chartis filed a complaint in the United States District Court seeking a declaratory judgment that Chartis was not liable for the damage to Three Times a Lady. No one disputed that an insurance policy was in place at the time of the loss, so the question was whether the vessel’s partial submersion was a loss of the kind covered by an all-risk policy, specifically, whether it was a fortuitous loss.

The Inganamorts neither filed a statement of undisputed facts nor opposed Chartis’s statement of undisputed facts. In further consequence, the District Court granted summary judgment for Chartis because the Inganamorts “ha[d] no evidence to demonstrate a fortuitous loss[.]”

DISCUSSION

Every circuit who was asked to decide the issue has determined that the insured bears that burden to prove a loss was fortuitous and the Third Circuit concluded that the Inganamorts did not carry it. When Three Times a Lady sank, it was covered by an all-risk insurance policy, which protects against fortuitous losses, meaning losses that are unexplainable or “dependent on chance.” Just because an insured need not show the precise cause of loss to demonstrate fortuity, that does not mean an all-risk policy covers all damage. “All-risk” is not synonymous with “all loss.”

Despite the Inganamorts’ argument, an insured must do more than prove that there was a loss. To enjoy coverage, the insured must prove that the loss was indeed fortuitous.

The Third Circuit joined its sister circuits in saying that, under a maritime all-risk policy, the insured bears the burden of proving that a loss was fortuitous. That burden is not heavy nor is it onerous. When a vessel sinks in calm waters, however, an insured may create a presumption of fortuitous loss by establishing that the vessel was seaworthy before sinking.

While the Inganamorts had initially claimed that the ship was seaworthy prior to the discovery of the loss nor did they press this argument before the District Court or on appeal. Because there is nothing in the record to support the argument that the loss was due to heavy rainfall and there is no other indication of fortuity, the Inganamorts did not carry their burden of proving a fortuitous loss.

The Third Circuit, feeling creative, noted that “Poems and books get written, songs sung, and movies made about sinking ships. But there’s nothing stirring or awe-inspiring about a yacht that partially sinks in calm waters while docked. That, sadly, is the event at the center of this case.”

Since Mr. and Mrs. Inganamort did not carry their burden of proving that the loss was a matter of chance the Third Circuit affirmed the judgment of the District Court

ZALMA OPINION

Yachts, like the Three Times a Lady are abused by their owners who fail to keep them seaworthy. The work of the claims expert’s survey revealed that the yacht did not sink as a matter of chance but was in such bad condition before the sinking that there bilges did not work, the electricity was not available, and the parts of the Three Times a Lady that protected it against water intrusion and sinking while docked in good weather, were not available. The loss, therefore, was not fortuitous. Rather, it was certain, since it was not even seaworthy enough to stay safe while docked in good weather.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

 

 

 

 

 

Posted in Zalma on Insurance | Leave a comment

Basic Training for Every Insurance Adjuster

Tools for Every Person Interested in Insurance Claims Adjusting

Every promise made by an insurance policy can only be kept by claims adjusters and claims investigators working for insurers. Insureds are unable, in almost every situation, to prove a claim to an insurance company without the assistance of an insurance professional. In two volumes Barry Zalma has created a comprehensive guide to insurance claims adjusting of both property claims and liability claims in a compact format.    Available with all of Barry Zalma’s insurance books at http://zalma.com/blog/insurance-claims-library/

The Compact Book of Adjusting Property Insurance Claims – Second Edition

A Manual for the First Party Property Insurance Adjuster

The insurance adjuster is not mentioned in a policy of insurance. The obligation to investigate and prove a claim falls on the insured. Standard first party property insurance policies, based upon the New York Standard Fire Insurance policy, contain conditions that require the insured to, within sixty days of the loss, submit a sworn proof of loss to prove to the insurer the facts and amount of loss.

The policy allows the insurer to then, and only then, respond to the insured’s proof of loss. The insurer can then either accept or reject the proof submitted by the insured.

The Compact Book of Adjusting Property Claims -- Second Edition: A Primer For The First Party Property Claims Adjuster.Technically, if the wording of the policy was followed literally the insurer could sit back, do nothing, and wait for the proof. If the insured was late in submitting the proof the insurer could reject the claim. If the insured submits a timely proof of loss the insurer could either accept or reject the proof of loss. If the insurer rejected the proof of loss the insured could either send a new one or give up and gain nothing from the claim. Suit on the policy would be difficult because the policy contract limited the right to sue to times when the proof of loss condition had been met.

Insureds and insurers were not happy with that system. It made it too difficult for a lay person to successfully present a claim. The system, as written into the standard fire policy seemed to run counter to the covenant of good faith and fair dealing that had been the basis of the insurance contract for centuries. Most insurers understood that their insureds were mostly incapable of complying with the strict enforcement of the policy conditions. To fulfill the covenant of good faith and fair dealing insurers created the insurance adjuster to fulfill its obligation to deal fairly and in good faith with the insured.

The Second edition adds new material from 2018 and 2019, is easier to use and more compact than the original.

Available as a Kindle book.

Available as a paperback.

The Compact Book on Adjusting Liability Claims, Second Edition

A Handbook for the Liability Claims Adjuster

This Compact Book of Adjusting Liability Claims is designed to The Compact Book Of Adjusting Liability Claims Second Edition: A Handbook for the Liability Claims Adjusterprovide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster.

The liability claims adjuster quickly learns that there is little difficulty with a claimant (the person alleging bodily injury or property damage against a person insured) if the claim is paid as demanded. The insured may be unhappy if the claimant’s claim is paid as presented since most do not believe they did anything wrong or fear an increase in premiums charged for subsequent policies.

The adjuster must be prepared to salve the insured’s emotions, explain why in the law and the policy it was appropriate to pay the claimant and that the settlement is in the best interest of both the insured and the insurer the adjuster represents.
The adjuster knows, and must be prepared to explain to an insured, that if a claim is resisted or denied the claimant will be unhappy, will probably file suit. If not promptly settled the claimant’s lawyers will rake the insured over the coals to prove that the insured is liable for the claimant’s injuries. The litigation will take time, effort, and money to establish the extent of the injuries and who is responsible for the injuries. Failure to settle promptly can cost the insured his or her reputation and will certainly cost the insurer much more than the claim could have been resolved for had it been resolved before the claimant retained a lawyer.

Available as a Kindle book

Available as a paperback.


© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

Policy Obtained by Fraud Requires Insured to Reimburse Insurer for Defense and Indemnity Costs

Threat of a Bad Faith Suit Adds Proof of Fraud

An insurer asserts claims against its insured for fraud and unjust enrichment. The Tenth Circuit was asked to determine if Colorado law permits an insurer to recover a settlement payment made on behalf of its insured for fraud. The insured fraudulently obtained an insurance policy for its inpatient-drug-treatment center, and when the insured was sued by a former patient, the insurer assumed the insured’s defense, subject to a reservation of rights. Even after learning that the insured had fraudulently obtained the policy, the insurer settled with the former patient under pressure from the insured. The insurer seeks to recover the settlement payment from its insured.

In Evanston Insurance Company v. Aminokit Laboratories, Inc., No. 19-1065, D.C. No. 1:15-CV-02665-RM-NYW, United States Court Of Appeals For The Tenth Circuit (March 18, 2020) the Tenth Circuit decided whether the insurer could recover from its insured for defense and indemnity payments made under a reservation of rights.

BACKGROUND

Aminokit Laboratories, Inc., a Colorado Corporation, owned and operated an addiction-treatment center in Lone Tree, Colorado. On October 19, 2014, Aminokit procured an insurance policy for this treatment center from Evanston Insurance Company. The policy covered “outpatient drug/alcohol rehab services[.]” To secure the policy, Aminokit made several material misrepresentations and omissions. For example, Aminokit failed to disclose that it maintained overnight beds for its patients, instead claiming that it operated its business solely between 10:00 a.m. and 5:00 p.m. Aminokit also falsely denied that any of its employees had ever been evaluated or treated for alcoholism or drug addiction and misrepresented the circumstances by which its CEO had lost her chiropractic license.

Brandon Lassley, a former Aminokit patient, sued Aminokit, Dr. Jonathan Lee (Aminokit’s Medical Director), and Tamea Rae Sisco (Aminokit’s CEO) in the District of Colorado. Evanston initially declined to “provide a defense to Aminokit,” concluding that the claims were outside the scope of coverage, because they alleged intentional and fraudulent conduct. Lassley amended his complaint, adding state claims against Aminokit and Dr. Lee for negligence and breach of fiduciary duty. Evanston, which again concluded that “no coverage [was] afforded” for the Lassley suit but, because of the amendment, Evanston accepted Aminokit’s defense “subject to a full reservation of rights—including the right to withdraw the defense and the right to pursue reimbursement from Aminokit . . . while it s[ought] a declaration of its rights and duties under the policy.”

At a mediation Aminokit’s attorney, Jerad West, pressured Evanston to pay the full $260,000 settlement amount by threatening to bring a bad-faith claim against Evanston. In the communications that followed, Evanston made clear to West that if it settled the case, it would “seek reimbursement for the entire cost of defense and indemnity.”  Faced with the deadline and threat of bad faith litigation Evanston agreed to fund the $260,000 settlement, while reserving the right to seek full reimbursement from Aminokit.

In a declaratory relief action filed before the payment Evanston sought “a declaration that no defense or immunity coverage is owed pursuant to [Aminokit’s insurance policy] for the Lassley Suit[.]” and asserted unjust enrichment and sought recovery of “Litigation Expenses and Settlement Payment in the Lassley Case” from Aminokit, Dr. Lee, and Sisco, because the “claims and damages were not covered or cannot be covered pursuant to Colorado law and public policy.”

The final two claims alleged that Aminokit and Sisco had made fraudulent misrepresentations and concealments in Aminokit’s insurance-policy application and sought damages for this fraud, including the settlement payment.

Aminokit’s lawyers withdrew and Aminokit failed to gain new counsel that, in due course, resulted in a default against Aminokit and the district court entered judgment that held Aminokit liable to reimburse Evanston for the settlement payment as damages for both fraud and unjust enrichment for $427,280.30 ($286,407.36 for the settlement payment, $63,304.07 for defense costs, and $77,568.87 for prejudgment interest).

DISCUSSION

When challenging a default judgment, a defendant admits to a complaint’s well-pleaded facts and forfeits his or her ability to contest those facts. But even in default, a defendant is not prohibited from challenging the legal sufficiency.

Under Colorado law, the defrauded party may recover such damages as are a natural and proximate consequence of the fraud. The damages must stem from the plaintiff’s reliance on the fraud. To claim damages from allegedly fraudulent statements, the plaintiff must establish detrimental reliance on the statements.

Evidence established that Evanston would not have issued the policy had Aminokit disclosed or communicated the true facts of its operation. Aminokit argued that because Evanston knew of the fraud when it settled, it could not have relied on the fraud when it agreed to fund the settlement. Generally, a defrauded party cannot recover damages for the period after the victim discovers the fraud, because he no longer has any basis for relying on the misrepresentations. But where the defrauded party discovers the fraud after substantial performance or where it would be economically unreasonable to terminate the relationship, he may affirm or continue the contract and then bring suit for his entire damages.

The Tenth Circuit concluded that it would have been “economically unreasonable” for Evanston to refuse to pay the settlement because doing so would have placed Evanston at risk of a bad-faith lawsuit. An insurer owes its insured a duty of good faith and fair dealing. Violation of this duty can result in a “bad faith” claim against the insurer, judged by a reasonableness standard. In this case, Evanston was rightfully concerned about a potential bad-faith suit by Aminokit given the threats made by its attorney after Evanston originally balked at paying the settlement. After learning of the fraud, Evanston was in no position to abandon its defense without risking substantial liability, or at least incurring substantial litigation costs from defending a bad-faith lawsuit. Given these considerations, the Tenth Circuit concluded that the settlement payment was a natural and proximate consequence of Aminokit’s fraud.

Colorado has adopted a general policy against insurance fraud. Allowing insureds to receive the benefit of insurance coverage, even when they have fraudulently obtained it, would foster—not deter—insurance fraud. It would signal to potential fraudsters that if they can convince their insurance company to settle via the threat of bad-faith litigation, they will benefit from their fraud. Such a result would not comport with Colorado public policy. Therefore, the Tenth Circuit concluded that Evanston can recover the settlement payment made on behalf of Aminokit as fraud damages.

ZALMA OPINION

Insurance fraud perpetrators should never be allowed to profit from the fraud. Since the policy was subject to rescission or voidance as a result of a blatant and admitted fraud, the insured had no right to defense or indemnity. However, since the fraud was not detected until after the insurer agreed to defend subject to a reservation of rights, it had no good way to escape the obligation without facing a bad faith lawsuit seeking both contract and tort damages. The insured’s threat forced the insurer to fund the settlement and seek reimbursement. The Tenth Circuit enforced the right to reimbursement and, hopefully, the defendants have sufficient funds to pay the judgment. If not, even with the judgment the fraud succeeded.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

 

 

 

Posted in Zalma on Insurance | Leave a comment

A YouTube Video from Zalma on Insurance on YouTubeX

Threat of A Bad Faith Suit Adds Proof of Fraud

Policy Obtained by Fraud Requires Insured to Reimburse Insurer for Defense and Indemnity

View entire video at https://youtu.be/680jE78g0L4

An insurer asserts claims against its insured for fraud and unjust enrichment. The Tenth Circuit was asked to determine if Colorado law permits an insurer to recover a settlement payment made on behalf of its insured for fraud. The insured fraudulently obtained an insurance policy for its inpatient-drug-treatment center, and when the insured was sued by a former patient, the insurer assumed the insured’s defense, subject to a reservation of rights. Even after learning that the insured had fraudulently obtained the policy, the insurer settled with the former patient under pressure from the insured. The insurer seeks to recover the settlement payment from its insured.

In Evanston Insurance Company v. Aminokit Laboratories, Inc., No. 19-1065, D.C. No. 1:15-CV-02665-RM-NYW, United States Court Of Appeals For The Tenth Circuit (March 18, 2020) the Tenth Circuit decided whether the insurer could recover from its insured for defense and indemnity payments made under a reservation of rights.

ZALMA OPINION

Insurance fraud perpetrators should never be allowed to profit from the fraud. Since the policy was subject to rescission or voidance as a result of a blatant and admitted fraud, the insured had no right to defense or indemnity. However, since the fraud was not detected until after the insurer agreed to defend subject to a reservation of rights, it had no good way to escape the obligation without facing a bad faith lawsuit seeking both contract and tort damages. The insured’s threat forced the insurer to fund the settlement and seek reimbursement. The Tenth Circuit enforced the right to reimbursement and, hopefully, the defendants have sufficient funds to pay the judgment. If not, even with the judgment the fraud succeeded.

 


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

Posted in Zalma on Insurance | Leave a comment

Books About Insurance Problems and How to Cure Them

The Unintended Consequences of Bad Faith – and Insurance Fraud

Every promise made by an insurance policy can only be kept by claims adjusters and claims investigators working for insurers. Insureds are unable, in almost every situation, to prove a claim to an insurance company without the assistance of an insurance professional. In two volumes Barry Zalma has created a comprehensive guide to insurance fraud and weapons to defeat fraud and an explanation of the unintended consequences that resulted from the creation of the tort of bad faith.   Available with all of Barry Zalma’s insurance books at http://zalma.com/blog/insurance-claims-library/

The Law of Unintended Consequences and the Tort of Bad Faith

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill desi

gned to cut the maximum permissible rate of interest from 6 percent to 4 percent. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive.

The business of insurance is, unfortunately, subject to the law of unintended consequences as if it were on steroids.

Available as a paperback  

Available as a Kindle book

Insurance Fraud – Volume I & Volume II

In Two Volumes

Insurance fraud continually takes more money each year than it did the last from the insurance buying public. No one knows the actual amount with any certainty because most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States range from $87 billion to more than $300 billion every year.

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do

so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.

No one will ever be able to place an exact number on the amount lost to insurance fraud. Everyone who has looked at the issue knows – whether based on their heart, their gut or empirical fact determined from convictions for the crime of insurance fraud – that the number is enormous.

When insurers and governments put on a serious effort to reduce the amount of insurance fraud the number of claims presented to insurers and the pseudo-government-based or funded insurers drops logarithmically. Since the appointment of Attorney General Sessions, the effort to stop insurance fraud against Medicare and Medicaid has increased.

This book contains appellate decisions regarding insurance fraud from federal and state appellate courts across the country and full text of many insurance fraud statutes.

It is available as both a legal research tool and a product to assist insurers, insurance company personnel, independent insurance adjusters, special investigation unit investigators, state fraud investigators and insurance lawyers to become effective persons involved in the attempt to defeat or reduce the effect of insurance fraud.

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback


© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

“Murder Pays” A Story From “Heads I Win, Tails You Lose”

A True Crime Story About Insurance Fraud

Aa video recitation at https://youtu.be/BsUHQmyBYp0

In the last 52 years I have run across many attempts to commit insurance fraud. Some were caught and many more succeeded.

In my book “Heads I Win, Tails You Lose” I have collected more than 80 stories that fictionalized true crime stories from my experience.

The book started as a collection of columns I wrote and published in the magazines “Insurance Journal,” “Insurance Week,” and “The John Cooke Insurance Fraud Report” insurance trade publications serving the insurance community in the United States. Since the last edition I have added more stories that were published in my twice monthly newsletter, Zalma’s Insurance Fraud Letter which is available free to anyone who clicks the link https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

The title, “Heads I Win, Tails You Lose” is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser.

Posted in Zalma on Insurance | Leave a comment

Collection Agent Enjoined by South Carolina to Stop the Unauthorized Practice of Law

Pretending to be a Lawyer or Acting Like You are One is Wrongful

In April 2017, the Wando River Grill (Restaurant) became dissatisfied with the service of its linen supplier (Cintas) and Cintas’ ability to supply the type of linens Restaurant needed. Restaurant contacted another supplier to secure some or all of its required linens and notified Cintas of its need to suspend at least a portion of Cintas’ services. Cintas claimed Restaurant’s suspension of service constituted a breach of the parties’ contract, invoked a liquidated damages provision in the contract, sought more than $8,000 in damages, and hired Murkin to collect the outstanding debt. Petitioner, a South Carolina attorney, represented Restaurant in the resulting dispute.

In Ex Parte: Edward J. Westbrook, Petitioner: In Re: The Murkin Group, LLC, Appellate Case No. 2018-002263, Opinion No. 27957, State Of South Carolina In The Supreme Court (March 18, 2020) the Supreme Court of South Carolina exercised its original jurisdiction to determine whether the Murkin Group, LLC (Murkin) a collection agency, engaged in the unauthorized practice of law (UPL).

UNDERLYING FACTS

In April 2018, Murkin sent a demand-for-payment letter to Restaurant demanding $8,106.43. Email communications followed between Murkin and Restaurant regarding Restaurant’s issues with Cintas’ past performance of the parties’ contract and possible reinstatement of the contract, and Cintas’ provision of linens. Murkin claimed Cintas would waive its damages claim if Restaurant paid a “one-time processing fee for the reinstatement” of services and signed certain “documentation that [Restaurant] need[ed]” to sign to reinstate Cintas’ service. Murkin prepared and sent a reinstatement agreement to Restaurant with signature lines for Restaurant and “The Murkin Group, on behalf of Cintas Corporation – Charleston, SC.”

Because the Murkin-prepared reinstatement agreement materially altered the terms of the parties’ original contract and imposed new obligations on Restaurant and because the agreement’s terms were contrary to discussions Cintas personnel had directly with Restaurant, Restaurant sent the proposed reinstatement agreement to Petitioner, its lawyer. Restaurant’s manager also informed Murkin he was attempting to continue a dialogue with Cintas to resume Cintas’ linen service, but Cintas personnel refused to respond. Murkin informed Restaurant’s manager all communications were to be handled through Murkin.

After learning of Murkin’s response Petitioner requested Murkin have its South Carolina counsel contact him directly. Restaurant did not sign the reinstatement agreement, and no South Carolina counsel for Murkin or Cintas contacted Petitioner.

In response to Restaurant’s refusal to sign, a Murkin representative stated that, if Murkin did not hear back from Petitioner, Murkin would assume Restaurant was not willing to resolve the balance, and the representative would “make . . . specific recommendations on how I feel Cintas should proceed.”

In November 2018, Petitioner emailed Murkin asking for the South Carolina Bar numbers of several Murkin employees “if they are members of the Bar.” The Murkin representative responded stating Petitioner’s desire to deal with Murkin’s local counsel “means nothing, since that is a decision made between our client and our office.” The representative further claimed authority to bind any attorney to whom Murkin referred the matter.

Petitioner filed a petition seeking the Supreme Court’s review because Petitioner became aware of conduct that might constitute UPL. The Supreme Court referred the matter to the Honorable Kristi F. Curtis as special referee to take evidence and issue a report containing proposed findings of fact and recommendations of law. After careful consideration of the briefs and oral argument in this case, the Supreme Court adopted Judge Curtis’ recommendations and findings.

Judge Curtis found Murkin went beyond the mere collection of a debt and crossed into UPL by:

  1. becoming involved in negotiating a contract dispute between Cintas and Restaurant and interposing itself between the parties for the purpose of negotiating a settlement on behalf of Cintas;
  2. purporting to advise Cintas as to what legal action it should take;
  3. indicating to Restaurant that it would advise Cintas as to whether to accept a settlement offer;
  4. purporting to control whether and when the case would be referred to an attorney;
  5. purporting to control the actions of the attorney and claiming it could direct the attorney not to settle the claim or make payment arrangements with Restaurant;
  6. threatening to file suit and making specific claims about what types of damages would be recoverable in the lawsuit; and
  7. giving legal opinions and interpreting the terms of the contract between Restaurant and Cintas.

LAW

Pursuant to the South Carolina Constitution, the Supreme Court has the duty to regulate the practice of law in South Carolina. S.C. Const. art. V, § 4; In re Unauthorized Practice of Law Rules, 309 S.C. at 305, 422 S.E.2d at 124; see also S.C. Code Ann. § 40-5-10 (2011) (stating the Supreme Court has inherent power with respect to regulating the practice of law). The Court’s duty to regulate the practice of law and the legal profession is to protect the public from the potentially severe economic and emotional consequences which may flow from the erroneous preparation of legal documents or the inaccurate legal advice given by persons untrained in the law.

Thie practice of law is not confined to litigation, but encompasses activities and actions in other areas that entail specialized legal knowledge and ability. It is neither practicable nor wise to attempt a comprehensive definition of what constitutes the practice of law but, instead, to decide what is and what is not the unauthorized practice of law in the context of an actual case or controversy.

DISCUSSION

In the instant case, Murkin engaged in UPL when it interpreted Cintas’ service contract with Restaurant, gave legal opinions as to what damages were recoverable under the Cintas-Restaurant contract, sought to negotiate the contract dispute between Cintas and Restaurant, and purported to advise Cintas on whether to accept a settlement offer and to negotiate the amount of settlement.

Murkin engaged in UPL when it purported to advise Cintas when to file suit, gave legal opinions on what types of damages would be sought, and purported to control the actions of the attorney and to direct the attorney not to settle the case or accept payment arrangements.

Finally, while Murkin characterizes its action as “debt collection,” the Supreme Court agreed with Judge Curtis’ conclusion that the true nature of the underlying matter is a contract dispute.

Restaurant terminated the service contract with Cintas prior to its expiration and, while the contract contained a liquidated damages clause, these alleged damages were not an admitted debt but a contract dispute. All of the actions constituted the unauthorized practice of law.

Murkin’s actions constituted UPL and the court enjoined Murkin from engaging in any further such conduct.

ZALMA OPINION

It took me a long time, much study, working full time and going to law school at night to become a lawyer licensed to represent parties. When a person, claiming to be a collection agency, acts as if its employees are giving legal advice it defeats the purpose of licensing lawyers. The injunction was appropriate and the Restaurant may have a case against Murkin for damages and the expenses incurred to retain a lawyer and bring a declaratory relief action in the Supreme Court.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

 

 

Posted in Zalma on Insurance | Leave a comment

UNINTENDED CONSEQUENCES & THE TORT OF BAD FAITH

Posted in Zalma on Insurance | Leave a comment

Construction Defects and Insurance & Mold Claims

Everything Needed by the Insurance Claims Professional from Barry Zalma

Every promise made by an insurance policy can only be kept by claims adjusters and claims investigators working for insurers. Insureds are unable, in almost every situation, to prove a claim to an insurance company without the assistance of an insurance professional. In eight volumes Barry Zalma has created a comprehensive guide to construction defects and insurance and mold insurance claims handling so that an insurer can keep all of the promises made by the insurance policy with regard to construction defects and mold claims.  Available with all of Barry Zalma’s insurance books at http://zalma.com/blog/insurance-claims-library/


Construction Defects and Insurance

Construction Defects and Insurance Volume One: The Structure, The Construction Contract, and Construction Defect InsuranceBarry Zalma has updated and re-edited his seminal work Construction Defects Coverage Guide into is the latest addition to Barry Zalma’s insurance claims series of books and articles that will form the most thorough, up-to-date, expert-authored insurance claims guide available today eight Kindle or Paperback Volumes at reasonable prices.

Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry.

Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the ten volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law.

The Eight volumes include:


Mold Claims

This series of books is the latest addition to Barry Zalma’s insurance claims series of books and articles that will form the most thorough, up-to-date, expert-authored insurance claims guide available today.Mold Claims Volume One: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.

Written by nationally-renowned insurance coverage expert Barry Zalma, a semi-retired insurance coverage attorney, consultant, expert witness and blogger, Mold Claims provides in-depth explanations, analysis, examples, and detailed discussion of:

•Mold; •FungMold Claims Volume Two: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.i; •Bacteria; •Mold, fungi and bacteria claims; and
•Mold, Fungi, Bacteria litigation.

Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry or is involved in litigation. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit Mold Claims Volume Three: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.greatly from the mold volumes. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law as it relates to mold, fungi and bacterial infestations.

The author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative Mold Claims Volume Four: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.regulations, and requirements of insurance departments nationwide.

 

 


© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

Actual Cash Value in Texas is Fair Market Value

Taxes are not Part of the Actual Cash Value of an Automobile

In an attempt to create a class action two plaintiffs whose vehicles were total losses in an insured against accident claimed that the insurer should pay for the taxes and fees associated with replacing their totaled vehicles, thus making them whole. The appeal, Jessica Singleton, individually and on behalf of all others similarly situated; Tony Cooper, individually and on behalf of all others similarly situated v. Elephant Insurance Company, a foreign insurance company, No. 19-50470, United States Court Of Appeals For The Fifth Circuit (March 18, 2020) resolved the claim.

FACTS

When an insured automobile is so damaged that it would cost more to repair than to replace, it is usually deemed a total loss. The insurance company then reimburses the policyholder for the value of the vehicle, with the expectation that the policyholder will probably use this money to purchase a replacement. Of course, purchasing and registering the replacement vehicle requires the payment of taxes and fees to the state.

Singleton and Cooper were involved in collisions and subsequently filed insurance claims. Elephant determined that their vehicles were total losses and compensated them in amounts corresponding to the estimated “adjusted vehicle value” of their automobiles before the accidents, minus the applicable deductibles. Elephant did not compensate them for the taxes and fees attendant to replacing their vehicles in Texas.

Singleton and Cooper brought a putative class action against Elephant to recover these taxes and fees. They alleged that Elephant was liable for breach of contract and for violating provisions of the Texas Insurance Code that require prompt payment of claims.

The district court dismissed the complaint on Elephant’s motion. It ruled that they had failed to state a claim for breach of contract. And because they had no contract claim, the district court further ruled that they had failed to state a claim under the Texas Insurance Code. This appeal followed.

The Policy

Jessica Singleton and Tony Cooper’s policies provided that, in the event of a total loss, Elephant’s liability would be limited to the “actual cash value of the stolen or damaged property at the time of the loss, reduced by the applicable deductible . . . and by its salvage value if [the policyholder] or the owner retain[ed] the salvage.” The policies also stated that the “actual cash value is determined by the market value, age and condition of the auto . . . at the time the loss occurs.”

ANALYSIS

Under Texas law, if language in an insurance policy is worded so that it can be given a definite or certain legal meaning, it is not ambiguous. The Fifth Circuit noted that a contract is ambiguous is a question of law and ambiguity does not arise simply because the parties offer conflicting interpretations. Rather, ambiguity exists only if the contract language is susceptible to two or more reasonable interpretations.

The Fifth Circuit determined “actual cash value” according to its ordinary and generally accepted meaning noting that the Supreme Court of Texas has stated that, in the case of “marketable chattels, for which market value can be determined,” “[a]ctual cash value . . . is market value.” Mew v. J&C Galleries, Inc., 564 S.W.2d 377, 377 (Tex. 1978).

Used automobiles are indisputably marketable. Fair market value is defined as the price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm’s-length transaction. This definition plainly excludes taxes and fees that are remitted to the state.

That the state collects taxes and fees from the buyer is irrelevant to the question of fair market value because those amounts are not part of the price paid to the seller. Accordingly, the Fifth Circuit concluded that the district court was correct to dismiss the breach-of-contract claim.

Since the basis of the complaint is that Elephant does not compensate its policyholders for the taxes and fees involved in replacing their vehicles the Fifth Circuit decided, as a matter of law, that such compensation was not required, there was no remaining fact issue on the question of the market value of Singleton’s and Cooper’s vehicles.

ZALMA OPINION

Elephant, the insurer wrote a policy that was clear and unambiguous. The state of Texas defines Actual Cash Value as fair market value when dealing with a marketable chattel like a used car. If, before the accident, the plaintiffs offered their vehicles for sale on the open market they would not have been able to recover from a good faith purchaser more than the value of the vehicle. The argument that they were entitled to taxes was, in my opinion, silly and disposed of properly by the Fifth Circuit.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

 

Posted in Zalma on Insurance | Leave a comment

The Examination Under Oath

A False Statement at EUO Voids Coverage

See the entire video at the following Video link at https://youtu.be/tH_TRrpTqlI

Where a plaintiff admits to making false statements with the intent that his insurer rely on those statements, the issue of whether such false statements were made need not be tried. Similarly, whether a false statement was made knowingly and with the intent to deceive the insurer is usually a question of fact but may be decided as a matter of law where the insured admits that he made knowingly false statements with the intent that the insurer rely upon them. [Ram v. Infinity Select Ins., 807 F. Supp. 2d 843 (N.D. Cal. 2011)]

Consider Barry Zalma’s book on The Insurance Examination Under Oath Second Edition at http://zalma.com/blog/insurance-claims-library/

Available as a paperback at https://www.amazon.com/dp/1661727042/ref=sr_1_2?keywords=%22barry+zalma%22+and+examination&qid=1579268973&sr=8-2

Available as a Kindle book here at https://www.amazon.com/Insurance-Examination-Under-Oath-Second-ebook/dp/B083Y7RCJ7/ref=sr_1_1?keywords=%22barry+zalma%22+and+examination&qid=1579273538&sr=8-1

Posted in Zalma on Insurance | Leave a comment

Zalma on Insurance Claims – Ten Volumes for Everyone Interested in Insurance

An Indispensable Tool for Every Claims Office to Keep the Promises Made by the Insurance Policy

Every promise made by an insurance policy can only be kept by claims adjusters and claims investigators working for insurers. Insureds are unable, in almost every situation, to prove a claim to an insurance company without the assistance of an insurance professional. In ten volumes Barry Zalma has created a comprehensive guide to insurance and insurance claims handling so that an insurer can keep all of the promises made by the insurance policy.  Available with all of Barry Zalma’s insurance books at http://zalma.com/blog/insurance-claims-library/

Ten Volumes Comprising A Comprehensive Group of Materials on Property & Casualty Insurance Claims

Insurance claims professional and expert witness Kevin Quinley said about the following ten volumes: “Zalma’s series of books is a terrific blend of both the legal underpinnings and the practical implications for the claim practitioner.

Insurance Maven Bill Willson said: “Zalma On Insurance Claims” is a tour de force, an indispensable tool that should be a part of every claims training program in America and in the library of every claims professional for quick and frequent reference. This comprehensive guide belongs in the library of every insurance defense AND policyholder law firm. It should be a part of every claims training program of carriers, independent adjusting firms, and public adjusters. Many of these parts should be part of the training or reference programs for non-claims personnel, from agents to underwriters to risk managers.”

This series of books is the latest addition to Barry Zalma’s insurance claims series of books and articles that will form the most thorough, up-to-date, expert-authored insurance claims guide available today. Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the ten volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law. A Comprehensive Review of insurance, insurance claims, the law of insurance policy interpretations, the practicalities of Property, Casualty and Liability Insurance Claims.

Zalma on Insurance Claims Volume 101 – Second Edition

A Comprehensive Review of insurance, insurance claims, the law of insurance and policy interpretation Paperback – July 17, 2019

This volume covers

  1. WHAT IS INSURANCE?
  2. THE HISTORY OF INSURANCE,
  3. ACQUISITION OF THE POLICY,
  4. CLAIMS PERSONNEL,
  5. KINDS OF INSURANCE POLICIES,
  6. THE LIABILITY POLICY.

The author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.

Available as a paperback

Available as a Kindle Book

Zalma on Insurance Claims Part 102 – Second Edition

This the second edition of the second volume in the latest addition to Barry Zalma’s insurance claims series of books and articles is part of the most thorough, up-to-date, expert-authored insurance claims guide available today. Zalma on Insurance Claims, part 102 provides in-depth explanations, analysis, examples, and detailed discussion of: •  Other Insurance Clauses; •   Trigger of Coverage; •    Underwriting; •    Conditions, Warranties and Exclusions

The author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 103 Second Edition

A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims. Insured, Insurer, adjusting.

The Implied Covenant of Good Faith and Fair Dealing

The principle on which insurance has existed for the last three to four centuries is that insurance business is conducted with the utmost good faith (uberrima fides). The principle, called a covenant of good faith and fair dealing, must be followed religiously by both the insurer and the insured. This means, simply, that both parties to the insurance contract must treat each other in such a way that neither will deprive the other of the benefits of the contract.

This, the third part of Zalma on Insurance Claims and includes materials concerning:
This is part 103 of Zalma on Insurance Claims and will deal with:

•The Covenant of Good Faith and Fair Dealing
•Duties of the Insured and the Insurer
•Declaring a Policy Void
•Processing a Claim
When read with Part 101 and Part 102, this volume works to take the reader to a complete understanding of insurance and insurance claims.

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 104

This, the fourth volume of Zalma on Insurance Claims and includes materials concerning:

  1. Investigation of First Party Property Claims
  2. Rescission
  3. The Mortgage Clause
  4. Fortuity & Other Issues
  5. Determine the Amount of the Loss
  6. The Claim File

When read with Part 101, Part 102, and Part 103, this volume works to take the reader to a complete understanding of insurance and insurance claims.

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 105

This, the fifth volume of Zalma on Insurance Claims and includes materials concerning:

  1. Investigation – Liability
  2. Claims Made and Reported Policies
  3. The Notice Prejudice Rule.
  4. Types of Torts
  5. The Liability Claims File
  6. Discovery of the Insurance Claims File
  7. Tests for Determining Duty to Defend
  8. Appendices – forms for the claims person

When read with Insurance 101, Insurance 102, Insurance 103 and 104, this volume works to take the reader to a complete understanding of insurance and insurance claims.

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 106 Second Edition

A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims Paperback 

This latest addition to Barry Zalma’s insurance claims series of books and articles is part of the most thorough, up-to-date, expert-authored insurance claims guide available today. Written by nationally-renowned insurance coverage expert Barry Zalma, an insurance coverage attorney, consultant, expert witness and blogger.

Thorough, yet practical, this book is the ideal guide for any professional who works in or frequently interacts with the insurance industry. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from this multiple volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law.

The author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.

This is the sixth part of “Zalma on Insurance Claims” and will deal with:

  1. Property Insurance & the Tort of Bad FaithChapter
  2. Grounds for Finding Bad FaithChapter
  3. Avoiding Charges of Bad FaithChapter
  4. Punitive DamagesChapter
  5. Bad Faith & Liability Insurance.
  6. Defenses to the Tort of Bad Faith

The appendices also include full text of important insurance law cases and statutes

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 107 – Second Edition

This is the seventh part of “Zalma on Insurance Claims” and will deal with:

1.Evaluation and Settlement – Property
2.Evaluation and Settlement – Liability
3.Subrogation
4.Salvage

When read with Part 101, Part 102, Part 103, Part 104, Part 105 and Part 106 this volume works to take the reader to a complete understanding of insurance and insurance claims.

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 108 -Second Edition

This, the eighth part of Zalma on Insurance Claims, includes materials concerning:

1.Preparing a case for trial
2.Interviewing Techniques
3.The art of the Interview
4.Interview General Principles
5.The Interviewer
6.Preparing for the Interview
7.Beginning the Interview
8.Control Of The Interview
9.Dealing with Witness Types
10.Approaches the Work
11.Dealing with the Nervous Person
12.Bluffs
13.The Mutability Of Memory
14.The Examination Under Oath

When read with Part 101, Part 102, Part 103, Part 104, Part 105, Part 106 and Part 107 this volume works to take the reader to a complete understanding of insurance and insurance claims.

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 109 Second Edition

This, the ninth part of Zalma on Insurance Claims, includes materials concerning:

•Identifying Insurance Fraud
•Professional Conspiracies
•Multiple Types of Insurance Fraud
•How to Join the Fraud Fight
•Case Studies of Successful Fraud Investigations
•Checklist 1 – Types of Insurance Fraud
•Checklist 2 – Training Adjusters
•Checklist 3 – Red Flags of Fraud – Property Insurance
•Checklist 4 – Red Flags of Fraud – Liability Insurance
•Appendix A – Commonly Used Medical Acronyms and Abbreviations
•Appendix B – Glossary of Medical Terms

When read with Part 101, Part 102, Part 103, Part 104, Part 105, Part 106, Part 107 and Part 108 this volume works to take the reader to a complete understanding of insurance and insurance claims.

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 110 Second Edition

This, the tenth part of Zalma on Insurance Claims, includes materials concerning:

•Responses to Fraud
•Grounds for Rescission.
•The Fight Against Fraud
•Checklist 1—Responses to Fraud
•Checklist 2 – The Fight Against Fraud

When read with Part 101, Part 102, Part 103, Part 104, Part 105, Part 106, Part 107, Part 108 and Part 109 this volume works to take the reader to a complete understanding of insurance and insurance claims.

Available as a Kindle book

Available as a paperback


© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

No Good Deed Goes Unpunished

The Emergency Medical Treatment and Active Labor Act

Shortly after midnight on May 3, 2014, Terence Williams was seriously injured when his vehicle rolled over in a single-vehicle accident. Williams’ most serious injuries were to his lower body. He was subsequently transported to Prince George’s Hospital Center (the “Hospital”) in Prince George County, Maryland. He arrived at the Hospital at 1:33 A.M., and Hospital staff began screening procedures. Within twenty minutes, he was intubated to protect his airway, and a trauma surgeon performed a right antecubital cutdown to insert a catheter to infuse large volumes of fluid and blood quickly. After the insertion of the catheter, Williams was repeatedly given blood for the next several hours. Between 2:21 A.M. and 2:57 A.M., various CT scans were performed on his head, chest and spine. At 3:23 A.M., Williams was removed off the back board provided by paramedics in the field. At the same time, he was given additional units of blood and plasma. Twenty minutes later, x-rays were performed on his chest, abdomen, pelvis, forearm, femur, spine, tibia and fibula. After the x-rays, Williams was transported to the operating room and began receiving anesthesia. At 5:13 A.M., Williams’ first surgery began and lasted more than six hours. Although the formal documentation is ambiguous, at some point on May 3, Williams concedes he was admitted to the Hospital.

For the next eleven days, Hospital staff performed a variety of surgeries and medical treatments on Williams. On May 13, 2014, he was transferred to the University of Maryland Medical Center. Despite the treatment he received at the Hospital and at the University of Maryland, the injuries to Williams’ lower body required amputating both of Williams’ legs.

In Terence Williams v. Dimensions Health Corporation, trading as Prince George’s Hospital Center, – No. 18-2139, United States Court Of Appeals For The Fourth Circuit (March 13, 2020) Williams sued the Hospital alleging it violated the Emergency Medical Treatment and Active Labor Act (“EMTALA”) by failing to properly screen him and stabilize his condition.

The district court treated the motion as a motion for summary judgment because Williams attached exhibits to his opposition that were not attached or referenced in his complaint. It then held that the Hospital was entitled to judgment as a matter of law on Williams’ failure to screen claim stating:

“[The hospital] followed its own standard screening procedures when it provided an initial screening for Williams. Whatever shortcomings Williams may perceive in the physician assistant’s screening or the physicians’ involvement, those are matters for a medical malpractice action, and outside the scope of an EMTALA action.  The district court denied the Hospital’s motion with respect to Williams’ failure to stabilize claim, holding “until a patient is transferred, discharged, or admitted, ‘the Hospital must provide that treatment necessary to prevent the material deterioration of each patient’s emergency medical condition.'”

Williams was admitted to the hospital at some point. The district court granted the Hospital’s motion for summary judgment noting that the timing of a patient’s admission to the hospital is not essential because the good faith admission of an individual as an inpatient is a complete defense to an EMTALA failure to stabilize claim. The district court found that Williams was in fact admitted and held that Williams failed to present evidence that created a genuine issue of material fact about the Hospital’s good faith in admitting Williams.

The Emergency Medical Treatment and Active Labor Act

Congress enacted EMTALA in 1986 to prevent patient dumping, a practice by which hospitals would either refuse to provide emergency medical treatment to patients unable to pay for treatment or transfer those patients before their emergency medical conditions were stabilized.  In keeping with this purpose, EMTALA imposes two main obligations on hospitals with emergency rooms. First, EMTALA requires a hospital to screen an individual to determine whether he has an emergency medical condition.

EMTALA also requires a hospital to stabilize an individual’s emergency medical condition in certain limited circumstances. Critically, EMTALA defines “to stabilize” as “to provide such medical treatment of the [emergency medical condition] as may be necessary to assure, within reasonable medical probability, that no material deterioration of the condition is likely to result from or occur during the transfer of the individual from a facility . . . .” (emphasis added). EMTALA defines transfer as “the movement (including the discharge) of an individual outside a hospital’s facilities.  Consistent with this definition, EMTALA’s stabilization requirement is defined entirely in connection with a possible transfer and without any reference to the patient’s long-term care within the system.

If a hospital has screened an individual and found the individual to have an emergency medical condition, and admits that individual as an inpatient in good faith in order to stabilize the emergency medical condition, the hospital has satisfied its special responsibilities under this section with respect to that individual. Importantly, the regulations refer to an admission that is “in good faith.”

Analysis

Williams challenges the district court’s conclusion that his admission was in good faith. In arguing his admission was not, Williams asserts that his admission was based on non-medical reasons. More specifically, he argued the Hospital failed to provide the full number of specialized on-call doctors required by law and by its internal procedures; the Hospital’s trauma surgeon, who was available on call, refused to perform surgery; and the Hospital attempted to hoard Williams as a patient to collect his premium insurance benefits.

The good faith admission requirement seems to flow logically from the text and the intent of EMTALA.  EMTALA’s obligations end once a patient is admitted for treatment. The good faith requirement simply clarifies that any admission must be legitimate and not in name only.

Williams faild to point to evidence that creates a genuine issue of material fact. The record reveals no evidence that the Hospital admitted Williams as a subterfuge with no intent to treat him. In fact, the record demonstrates that Hospital staff provided extensive treatment and surgeries to Williams right after his arrival on May 3 and for the next eleven days.

The courts have generally acknowledged that this limitation on the scope of the stabilization requirement does not protect hospitals from challenges to the decisions they make about patient care; only that redress may lie outside EMTALA. Williams does not have EMTALA available but may pursue recovery under state malpractice law.

In conclusion, although Williams has perhaps produced evidence questioning the Hospital’s treatment of him, he has failed to produce evidence creating a genuine issue of material fact that his admission to the Hospital lacked good faith. Consequently, because the Hospital admitted Williams in good faith, it satisfied its obligations under EMTALA.

ZALMA OPINION

Williams is not without a remedy. He was treated with vigor by the Hospital and made stable before he was passed to another hospital. He was stabilized and provided with multiple treatments including multiple, lengthy surgeries. That he lost his legs could be either due to the malpractice of the hospital and its physicians or due to the extent of the injuries caused by the accident. EMTALA did not apply and the case was appropriately dismissed. If he can prove the hospital failed to treat him properly he is not without a remedy. His suit merely misread or misapplied EMTALA. The hospital kept him alive and probably received no payment for their services only to be sued for its good deeds keeping him alive.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

 

 

Posted in Zalma on Insurance | Leave a comment

Health Insurance Fraud Convictions

A YouTube Video Reporting on Recent Health Insurance Fraud Convictions

No one knows how much insurance fraud takes from the public health insurance programs and insurance companies, because most succeed. The best guess is that it is a $80 billion to $300 billion every year. The government is trying to stop the bleed and has arrested and convicted some of the worst providers. This video reports on some recent convictions reported in the April 1, 2020 issue of Zalma’s Insurance Fraud Letter.

See the full Video at https://youtu.be/wPsvms4f4tA

Doctor Who Pleaded Guilty to Health Care Fraud for “Goodie Bags” Agrees to Resolve Civil Fraud and Controlled Substance Liability for $2.8 Million.Andrew M. Berkowitz, M.D., of Huntington Valley, PA, was sued by U.S. Attorney William M. McSwain announced that the United States filed a civil lawsuit against for engaging in healthcare fraud and improperly distributing and dispensing controlled substances. The civil complaint relates to criminal charges that were previously filed against Berkowitz and for which he has pleaded guilty. At the same time the new civil suit was filed, the United States also filed a proposed civil judgment, in which Berkowitz has agreed to pay a total of $2.8 million in civil damages and penalties under the False Claims Act, Controlled Substances Act, and in civil forfeiture, committed to never obtaining another controlled substance registration, and consented to a 20-year exclusion from Medicare and Medicaid. The consent judgment remains subject to court approval.

Villages Dermatologist Agrees To Pay More Than $1.7 Million To Settle False Claims Act Liability For Inflated Medicare Claims

Dr. Thi Thien Nguyen Tran and Village Dermatology and Cosmetic Surgery, L.L.C. have agreed to pay the United States $1.744 million to resolve allegations that they violated the False Claims Act by submitting inflated claims to Medicare for wound repairs related to Mohs surgery. Pittsburgh Resident Pleads Guilty To Conspiracy, Health Care Fraud And Aggravated Identity TheftTamika Adams, 43, pleaded guilty before United States District Judge Cathy Bissoon in federal court to one count each of conspiracy to defraud the Pennsylvania Medicaid program, health care fraud, and aggravated identity theft, United States Attorney Scott W. Brady announced today.

Federal Jury Finds Defendants Guilty Of Submitting False Claims To Medicare Under Civil False Claims ActJury verdict results in recovery of more than $10.85 million to the Medicare program Ted and Julie Cain of Ocean Springs, Mississippi, following a nine week trial, were convicted by a Gulfport jury. Ted Cain’s companies, Stone County Hospital (Wiggins) and Corporate Management, Inc. (Gulfport), and Tommy Kuluz, Chief Financial Officer of Corporate Management, Inc. violated the Civil False Claims Act.

Please, if you find this video interesting, subscribe to Zalma on Insurance on YouTube.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

 

 

Posted in Zalma on Insurance | Leave a comment

The Insurance Claims Library – A Tool to Improve While Sequestered

Everything Needed by the Insurance Claims Professional from Barry Zalma

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.

The Insurance Examination Under Oath Second Edition

A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud

A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud.

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by the agreement of the insurer, when he, she or it acquires a policy of insurance, to submit to a condition of the insurance contract that compels the insured to appear and give sworn testimony at the demand of the insurer. Failure to appear and testify is considered a breach of a material condition.

The EUO is conducted before a notary and a certified shorthand reporter who is present to give the oath to the person interviewed. The reporter will record the entire conversation and prepare a transcript to be read, reviewed, corrected and signed by the witness under penalty of perjury or by an oath taken before a notary or judge.

The EUO is a tool only sparingly used by insurers in the United States. A professional insurer will only require an insured to submit to an EUO when a thorough claims investigation raises questions:.about the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or to assist the insured in the obligation to prove to the insurer the cause and amount of loss.

Although seldom used the EUO is an important tool needed by insurers when there is a question of coverage, destruction of evidence needed to prove a compensable loss or the amount of loss or evidence indicating the potential that a fraud is being attempted.The EUO and Legal Action provisions in an insurance policy are conditions precedent to an insured’s ability to file suit, and that since the insured failed to substantially comply with the terms of those provisions, the appropriate remedy is dismissal without prejudice. The insured’s failure to comply with these conditions does not bar his ability to bring suit to recover, but merely suspends his ability to bring suit until he has fully complied with those conditions.

Available as a paperback here 

Available as a Kindle book here

THE HOMEOWNERS INSURANCE POLICY

HOW TO BUY AN APPROPRIATE HOMEOWNERS POLICY AND SUCCESSFULLY MAKE A CLAIM TO THE INSURER

Insurance is a contract between a person seeking insurance and an insurer. It is obtained by making contact with the insurer as a prospective insured seeking insurance. The homeowners policy is a specialized policy of insurance that protects the homeowner from certain risks of loss to the real and personal property at the home, the exposure the insured faces for injury to a household employee, and the exposure the insured faces to liability for bodily injury or property damage caused to third parties. The book explains how to buy a homeowners policy and how to collect on any claim made to the homeowners insurer.

Paperback Book     Kindle Book


© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

Insurance Policy Interpretation Makes it Essential to Read The Full Policy

Claim Must Establish Fulfillment of the Insuring Agreement

Insurance policies are nothing more than a contract. To interpret the terms of the contract of insurance it is necessary to read, and apply, all of the provisions of the policy.

In Catholic Medical Center v. Fireman’s Fund Insurance Company, United States District Court District Of New Hampshire, Civil No. 14-cv-180-JL, (06-01-2015) the plaintiff claimed coverage from its insurer for the possible contamination of surgical instruments after exposure to a communicable neurological disease. The litigation centered on whether those instruments constitute “premises” under the terms of an insurance policy — led to a coverage dispute that culminated in a suit from Catholic Medical Center (“CMC”) against Fireman’s Fund Insurance Company (Fireman’s Fund).

Factual Background

On May 24, 2013, CMC personnel performed neurosurgery on a patient. Several months after the surgery, CMC learned that the patient was experiencing symptoms consistent with Cruetzfeldt-Jakob Disease (“CJD”), a communicable, incurable and fatal neurological disease. A lab test in mid-August 2013 established that the patient likely had CJD. The patient died soon after and post-mortem analysis confirmed the CJD diagnosis.

Since it could not be determined which of the two surgical kits was used on the original patient, New Hampshire HHS advised CMC that both kits had to be decontaminated, a process that will result in the destruction of the instruments. CMC took the required steps or agreed to do so without need of an order from HHS.

CMC notified Fireman’s Fund of a potential claim as soon as it became aware of the CJD incident, and later filed a formal claim for the loss of the surgical instruments and losses occasioned by the suspension of CMC’s neurosurgery program. Fireman’s Fund denied the claim as a non-covered loss.

The Insurance Policy

During the relevant time period, Fireman’s Fund insured CMC pursuant to a Commercial Property policy. As pertinent to this case, the policy includes two endorsements. The first is a Health Care Extension Endorsement, which, in turn, includes Communicable Disease Coverage, which provides, in relevant part:

As is often the case in insurance policies, the emphasized terms have been assigned particular meanings. “Premises” is defined as “that part of the location you occupy.” The Endorsement defines “communicable disease” as “any disease caused by a biological agent that may be transmitted directly or indirectly from one human or animal to another” and defines “communicable disease event” as an “event in which a public health authority has ordered that the premises described in the Declarations be evacuated, decontaminated, or disinfected due to the outbreak of a communicable disease at such premises.” (emphasis in original). Finally, with respect to the Crisis Management Endorsement, “covered premises” are defined as “that part of the location you occupy which is covered by this policy, including the area within 100 feet thereof.”

ANALYSIS

Policy Interpretation

It was Fireman’s Fund’s burden to prove that CMC’s claim is not covered. The interpretation of insurance policy language is a question of law for the court to determine. Policy terms are construed objectively; where the terms are clear and unambiguous, the court accords the language its natural and ordinary meaning. Where disputed terms are not defined in the policy, the court construes them in context, and in the light of what a more than casual reading of the policy would reveal to an ordinarily intelligent insured. If policy terms are clear and unambiguous, the search for the parties’ intent is limited to the words of the policy

Communicable Disease Coverage

Fireman’s Fund’s overall point is that the CJD incident did not constitute a “communicable disease event,” as that term is defined in the policy.

The policy defines “premises” as “that part of the location you occupy.” Engrafting that definition onto that of a “communicable disease event” yields “an event in which a public health authority has ordered that that part of the location that [CMC] occup[ies] be evacuated, decontaminated or disinfected . . . .” (emphasis added)

CMC did not dispute that the only action taken was with respect to the possibly contaminated surgical instruments and that there was no evacuation, decontamination or disinfection of any other part of the hospital.

Given this policy language, the existence of a “communicable disease event” is an important gateway to coverage. Covered instruments at the premises are indeed covered, but only, insofar as relevant here, if lost or damaged as a result of a “communicable disease event,” which requires not just a disease outbreak at the “premises,” but also that those very same “premises,” i.e., “that part of the location that CMC occupies” be decontaminated. “Premises”  connotes a physical location. The two references to “premises” read consistently and in context refers to the physical structure of the hospital.

It would make little sense to read the policy as covering instruments at the premises and to consider the instruments also to be the premises. Therefore, the court found that the Fireman’s Fund’s Communicable Disease Coverage does not cover CMC’s claim.

Crisis Management Coverage

CMC argued that the Crisis Management Coverage Extension Endorsement covers the losses it sustained when it had to suspend its neurosurgery program in the absence of surgical instruments. While CMC is correct that the policy covers various losses caused by “suspension of operations,” such suspension must be the result of a “covered crisis event,” which requires “closure of the covered premises.”

Eschewing, “linguistic gymnastics,” the court found that, as relevant to CMC’s claims, the Fireman’s Fund policy is not ambiguous and does not cover those claims. Accordingly, Fireman’s Fund’s motion for summary judgment was granted and CMC’s motion for summary judgment was denied.

ZALMA OPINION

Unfortunately, some lawyers who bring suit against insurers attempt to use what the court called “linguistic gymnastics” when trying to obtain the benefits of the policy of insurance. The language of the policy was clear and unambiguous. The court, reading the entire policy proved the importance of RTFP and since the facts did not comport with the wording of the policy, Fireman’s Fund’s conclusion that there was no coverage was upheld and the linguistic gymnastics were eschewed.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

 

Posted in Zalma on Insurance | Leave a comment

The Lawyer Must be Ethical

The Ethical Practice of Law – A YouTube Video

See the video “The Ethical Practice of Law, at the Video link https://youtu.be/bi6Gp9WHA7U

The practice of law demands more than knowledge of statutory and case law. It requires more than technical proficiency in the nuts and bolts of legal practice. A lawyer is an officer of the legal system whose conduct should conform to the requirements of the law, both in professional service to clients and in the lawyer’s business and personal affairs.

The practice of law requires that every lawyer treat each client, each adversary, and the court ethically and in good faith.

The practice of law is different from other professions because it requires that the lawyer act for his or her client, not him or herself, only if the actions for the client are ethical and in good faith.

© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

Everything Needed by the Insurance Claims Professional from Barry Zalma

Barry Zalma’s Books from the ABA and ThomsonReuters

Books from the American Bar Association

The Commercial Property Insurance Policy Deskbook

How to Acquire a Commercial Property Policy and Present and Collect a First-Party Property Insurance Claim

By Barry Zalma

The Commercial Property Insurance Policy Deskbook is a comprehensive resource on acquiring a commercial property policy and presenting and collecting first-party property insurance claims. The book looks at the fundamentals of insurance and a wealth of topics including rules of construction of a policy of commercial property insurance, the commercial first party property insurance policy, different types of property losses, conditions and limitations,specific and blanket coverages, mortgage clauses, the need for a prompt notice of claim, the commercial property claim, adjusting the commercial property loss, the sworn statement in proof of loss, the adjustment of the commercial property loss, subrogation and salvage, and common law bad faith.

Also included are five appendixes of forms, letters, and other documents.

Available from the American Bar Association at: http://shop.americanbar.org/eBus/Default.aspx?TabID=251&productId=214624; or  orders@americanbar.org, or 800-285-2221.

The Insurance Fraud Deskbook

Author: Barry Zalma

Sponsor(s):  Tort Trial and Insurance Practice Section, Publisher(s):   ABA Book Publishing

ISBN: 978-1-62722-676-9
Product Code: 5190506
2014, 638 pages, 7 x 10

Product DetailsThis book is written for individuals who are focused on the effort to reduce expensive and pervasive occurrences of insurance fraud. Lawyers who represent insurers, claims personnel, prosecutors and their investigators can all benefit from this exhaustive resource.

The Insurance Fraud Deskbook is a valuable resource for those who are engaged in the effort to reduce expensive and pervasive occurrences of insurance fraud. It explains the elements of the crime and the tort to claims personnel, and it provides information for lawyers who represent insurers, so they can adequately advise their clients. Prosecutors and their investigators can use this book to determine what is required to prove the crime and win their case.

The full text of decisions from courts of appeal and supreme courts across the country are provided so the reader can understand what happens after the investigation is completed and can apply that information to undertake their own thorough investigations. It allows claims personnel and their lawyers to understand what errors would cause a defeat or a not-guilty verdict.

The effort to reduce insurance fraud requires the assistance of both civil and criminal courts. The Insurance Fraud Deskbook can help the prudent fraud investigator, insurance adjuster, insurance attorney, insurance Special Investigation Unit, and insurance company management to attain the information needed to deal with state investigators and prosecutors.

Available from the American Bar Association at: http://shop.americanbar.org/eBus/Default.aspx?TabID=251&productId=214624; or  orders@americanbar.org, or 800-285-2221.

Diminution in Value Damages

How to Determine the Proper Measure of Damage to Real and Personal Property

ISBN: 978-1-63425-295-8
Product Code: 5190524
2015, 235 pages, 7 x 10, Paperback

This book was written to provide sufficient information to those who became interested in the issue since the Georgia Supreme Court decided State Farm Mutual Automobile Insurance Co. v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (Ga. 11/28/2001) and includes cases dealing with the use of diminution in value as a method of determining the amount of loss incurred by a plaintiff seeking indemnity for damage to real or personal property.

Because confusion has reigned across the United States concerning the proper measure of damages for property damage to property that has been repaired, Diminution In Value Damages assists the reader in answering the questions concerning the proper measure of damage in each of the fifty United States and federal United States jurisdictions

This edition has been totally rewritten and expanded, providing the most extensive and detailed coverage of the issue and a thorough explanation of how to apply diminution in value damages to losses to property.


Co-Author(s):Property Investigation Checklists: Uncovering Insurance Fraud, 12th Michael H Boyer  &  Barry Zalma

Property Investigation Checklists: Uncovering Insurance Fraud provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims:
• Recognizing suspicious claims
• Proper investigation procedures
• Analysis of laws concerning fraudulent personal and real property claims
• Evaluating and settling claims.
The book also examines recent developments in areas such as arson investigation procedures, bad faith, and extracontractual damages. The appendix includes the NAIC Insurance Information and Privacy Protection Model Act.

© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

Claim Lost Because Insured Failed to Order Insurance

Agent or Broker Not Liable for Failing to Force Insured to Order Workers’ Comp

Assignment of Bad Faith Case to Plaintiff Worthless

Whenever an insurer refuses to defend or indemnify an insured because of clear and unambiguous exclusions – or an agent fails to acquire needed insurance – even if not requested, they will invariably be sued. The insured, without coverage, will deal with the plaintiff and assign its rights against its insurer in exchange for a covenant not to execute on a judgment. The value of such an assignment is often minimal but the only possible means of collecting on the judgment from a judgment proof defendant.

In Jerald Merrick, As Assignee Of Western Hay Services, Inc. v.  Fischer, Rounds & Associates, Inc., Doing Business As Quality Truck Insurance, and Great West Casualty Company, No. S-18-1173, 305 Neb. 230, Supreme Court Of Nebraska (March 13, 2020) Jerald Merrick tried to collect for his injuries against the defendant’s insurers because the possibility of collecting from the defendant was minimal.

Merrick was injured in a truck accident in the course and scope of his employment.

BACKGROUND

Western Hay Services, Inc. (Western Hay), a company located in Morrill, Nebraska, buys and sells hay and alfalfa and delivers the hay and alfalfa to feedlots and dairies in Colorado and Texas. During Western Hay’s first 4 years, owner Johnny Hill drove one truck and did not have employees. Hill subsequently added a second truck and, in 2009, hired Merrick as a truck driver.

Since its inception, Western Hay has purchased insurance through an insurance broker, Fischer, Rounds & Associates, Inc., doing business as Quality Truck Insurance (Fischer). Great West Casualty Company (Great West) issued Western Hay a commercial lines insurance policy which provided three different forms of coverage: commercial auto coverage, commercial inland marine coverage, and commercial general liability coverage. Western Hay did not have workers’ compensation insurance.

The commercial auto policy excluded  “[a]ny obligation for which any ‘insured’ or any ‘insured’s’ insurer may be held liable under any workers compensation . . . law or any similar law.” The policy also excluded “Employee Indemnification and Employer’s Liability.”

Western Hay had elected not to purchase workers’ compensation insurance when it had no employees. In February 2009, Margheim contacted Fischer and requested that workers’ compensation coverage be added to Western Hay’s insurance. Fischer’s agent asked Margheim to provide Western Hay’s payroll records in order to obtain a quote for the new workers’ compensation coverage. Margheim provided Fischer with Western Hay’s payroll information on April 1. The day prior, March 31, 2009, Merrick was injured in a truck accident while in the course and scope of his employment with Western Hay.

Merrick sued Western Hay alleging he was injured in the truck accident and had incurred $309,154.10 in medical expenses as a result of his injuries. Merrick claimed that Western Hay was negligent for requiring him to drive during a high-wind warning and failing to carry workers’ compensation insurance. Merrick alleged that Western Hay was required to carry workers’ compensation insurance and that such insurance would have provided coverage for his injuries.

Eventually, the district court entered a stipulated judgment in favor of Merrick and against Western Hay in the amount of $800,000. As part of the settlement, Western Hay assigned its claims against Fischer and Great West to Merrick.  Thereafter, Merrick, as the assignee of Western Hay, sued Fischer and Great West.

Each defendant moved for summary judgment. Following a hearing, the district court issued an order sustaining both motions and dismissing Merrick’s complaint with prejudice.

ANALYSIS

In considering Merrick’s claim against Fischer, the trial court found the undisputed evidence showed that on February 2, 2009, Western Hay called Fischer to request workers’ compensation insurance, but did not provide the payroll information necessary for Fischer to complete the quote until April 1, the day after Merrick’s accident. The court concluded that Fischer had no duty to secure workers’ compensation insurance for Western Hay until after the payroll records were provided on April 1. The court further concluded that there was no evidence showing that Fischer breached a duty to obtain workers’ compensation insurance for Western Hay, failed to advise Western Hay regarding workers’ compensation insurance prior to its request for a quote, or failed to warn Western Hay that its insurance policy did not cover injuries to employees in the course and scope of their employment. The court concluded that Fischer was entitled to judgment as a matter of law.

As to Merrick’s claim against Great West, the court determined that the policy at issue contained exclusions for claims based on workers’ compensation liability. Great West was not required to defend Western Hay in the underlying lawsuit and Great West was entitled to judgment as a matter of law.

FISCHER NOT NEGLIGENT

To prevail in any negligence action, a plaintiff must show a legal duty owed by the defendant to the plaintiff, a breach of such duty, causation, and resulting damages.  An insurance agent has no duty to anticipate what coverage an insured should have. It is the duty of an insured to advise the agent as to the insurance he wants, including the limits of the policy to be issued.

Fischer had no duty to obtain workers’ compensation insurance for Western Hay and advise Western Hay regarding such insurance until Western Hay’s request. The trial court found that it was the actions of Western Hay which delayed the insurance quote and that Fischer had not provided Western Hay with any false information regarding the commercial line policy’s coverage or the need for workers’ compensation coverage.

The Nebraska Workers’ Compensation Act governs employers, not insurance agents.

An insurance intermediary owes a duty of reasonable care, whether the intermediary is an agent or broker. Absent evidence that an insurance agent or broker has agreed to provide advice or the insured was reasonably led by the agent to believe he would receive advice, the failure to volunteer information does not constitute either negligence or breach of contract for which an insurance agent or broker must answer in damages.

The failure in this case was on the part of the insured for failing to request workers’ compensation insurance and failing to timely provide payroll information. As a result, Fischer had no duty to advise Western Hay of its obligations under the Nebraska Workers’ Compensation Act and Fischer is entitled to judgment as a matter of law.

GREAT WEST OWED NO DUTY TO DEFEND

The commercial lines policy clearly excluded coverage for workers’ compensation liability and that as a result, Great West was not required to defend Western Hay.

The Supreme Court concluded that the language of the employer’s liability exclusion is clear and unambiguous and a reasonable person in the insured’s position would understand that the policy does not cover injuries to employees occurring in the course and scope of their employment.

Based on the employer’s liability exclusion, Great West had no contractual obligation to defend or indemnify Western Hay in the lawsuit brought by Merrick. The decision of the District Court was affirmed.

ZALMA OPINION

Assignments of cases against insurers and insurance brokers should never be attempted without first reading and analyzing the insurance policies. When an insurance policy has a clear and unambiguous exclusion the person seeking an assignment should understand that the potential for success is small and probably will cost more in the attempt than the potential for receiving a favorable judgment. Similarly, when suing an insurance agent or broker it is imperative, before taking an assignment against the agent, to obtain evidence that the agent had a duty, breached that duty and caused the insured damages. In this case the assignee was unable to find evidence sufficient to prove a duty, let alone, a breach of duty.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

Posted in Zalma on Insurance | Leave a comment

Mold Claims a Video by Barry Zalma on YouTube

Mold: The Ubiquitous Problem

What is Mold?

The book, Mold Claims, available at https://www.zalma.com/blog/insurance-claims-library/ and amazon.com.

See the entire video at the Video link https://youtu.be/3Avu5EhVixk

Mold Claims was written to help anyone faced with claims for property damage or bodily injury as a result of exposure to mold, fungi or bacterial infestations.
Although mold and fungi have received bad publicity — which brought about the publication of this book — molds and fungi are not all bad. In fact, most of them are healthy, delicious, and do no damage. Consider, for example, the grilled mushrooms on your steak or the wonderful flavor of blue cheese made with mold.
The Wall Street Journal reported, in July 2014, on an important finding that fungi can help prevent disease and make antibiotics more effective.

© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

Insurance Claims Library

New Books from Full Court Press

The earnings of almost every civil lawyer in the United States are funded by the insurance industry. Insurance can best be described as the mother’s milk of the law profession. The civil defense lawyer is paid by an insurer for each hour he or she works. The civil plaintiffs’ lawyer is usually paid by taking a percentage of any judgment entered in favor of the plaintiff, which judgment is usually paid by the defendant’s insurer.

Everything Needed by the Insurance Claims Professional from Barry Zalma

The Insurance Law Deskbook

9781949884296The Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. The book, published for the first time under Full Court Press, includes the full texts and digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, state appellate courts, and foreign courts that have molded the American insurance law, as well as vital explanatory chapters, historical context, form letters, and more.

Paperback, only $95.00 available at https://www.fastcase.com/store/fcp/insurance-law-deskbook-2/

California Insurance Law Deskbook

9781949884289

ISBN: 978-1-949884-28-9 (Print) 978-1-949884-30-2(Ebook)
Format: Digital(Epub,Mobi,PDF), Print

California has long led the way when it comes to insurance jurisprudence in the United States, and few know more about California insurance law than Barry Zalma.

Available at https://www.fastcase.com/store/fcp/california-insurance-law-deskbook/ a paperback for only $95.00.

Zalma on Property and Casualty Insurance

In almost every situation in which a civil lawyer practices law the funds for that work come, either directly or indirectly, from insurance. Consequently, lawyers must use their wits and energies to avoid or to pursue litigation to the benefit of the client. Both sides understand that an insurer will eventually pay one or both sides in the dispute. Insurance is important to every civil dispute and even some that fall within the criminal courts.

Every lawyer retained to prosecute or defend a civil suit should begin the representation with a serious effort to find insurance coverage for the benefit of the client or the defendant the client is suing. Without that knowledge, the lawyer will find he or she is litigating with duct tape firmly self-placed across his or her mouth.

Insurance Law DeskbookZalma

Learn the insurance basics that are essential to every civil practitioner. Available at Fastcase.com bookstore.

California Insurance Law Deskbook

California has long led the way when it comes to insurance jurisprudence in the United States, and few know more about California insurance law than Barry Cal LawZalma.  Available at Fastcase.com bookstore.

Insurance Bad Faith and Punitive Damages Deskbook

Understand the relationship between insurance, the tort of bad faith, and why punitive damages are awarded to punish insurers.

An annual subscription to secondary content on the Fastcase BadFaithplatform includes new editions and updates published by the author as they are rolled out, so you can rest assured that your research is up to date. Go to fastcase.com for more detail and how to use the material on-line as part of your legal or insurance research or as stand-alone e-books.

All available at fastcase.com bookstore.

© 2020 – Barry Zalma

As the author, Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here.

Posted in Zalma on Insurance | Leave a comment

Fraudster Need Only Pay What he Owes

 Jail for Fraud but Restitution Must be Recalculated

Fraud perpetrators are usually not willing to accept their punishment on the small chance that they are caught, arrested, tried and convicted. They appeal everything including their punishment.

In United States Of America v. Hamza Dridi, a/k/a Alex, No. 18-3334, United States Court of Appeals For the Seventh Circuit (March 13, 2020) a convicted fraud perpetrator appealed his conviction, sentence and restitution order to the Seventh Circuit.

FACTS

From 2012 to 2015, employees of Elite Imports, a car dealership, engaged in a variety of fraudulent activities. For his involvement in these illegal schemes, one employee, Hamza Dridi, was charged with conspiring to violate the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(d) (RICO), and interstate transportation of stolen property, 18 U.S.C. § 2314. A jury found him guilty of both crimes. The district court sentenced him to 72 months in prison and ordered $1,811,679.25 in restitution.

Dridi challenged his sentence and the restitution order, arguing that the district court—before sentencing Dridi and ordering restitution—should have made specific factual findings about Dridi’s participation in the conspiracy.

Fraudulent Schemes

Before acquiring cars for resale, Elite Imports needed to obtain financing from floor-plan lenders. Floor-plan lenders provide loans to dealerships like Elite, enabling them to buy cars in bulk. In exchange for these loans, a dealership agrees that, shortly after a car is sold, the dealership will pay the floor-plan lender the amount borrowed for that car. To ensure payment, floor-plan lenders hold on to the title of each car, and only release the title to a dealership once the floor-plan lender receives payment for the car. Floor-plan lenders also send auditors to a dealership’s car lot to make sure the dealership is not selling cars without repaying the loan after each sale.

Elite Imports’s employees found a way around acquiring a car’s title from floor-plan lenders: lying. Instead of seeking the original title from the floor-plan lender, an Elite Imports employee would obtain a copy of the car’s title from the Indiana Bureau of Motor Vehicles’ online portal. If a copy of the title could not be acquired, employees could still avoid asking floor-plan lenders to release the car’s title—by continually issuing the customer temporary license plates.

If a car could not be returned, employees would simply lie to the auditor, saying that the car was not on the lot due to a test drive or repairs. In the end, this multi-layered scheme allowed Elite Imports to sell cars without repaying floor-plan lenders.

Elite Imports’s employees also defrauded consumer lenders. To sell cars to these customers, employees helped the customer submit fraudulent applications to consumer lenders. Employees would create fake bank statements, driver’s licenses, and social security cards for the customers to send to their lenders. Multiple customers used these fraudulent documents to obtain financing for a car purchase.

In a final scheme, employees used a chop shop located behind the dealership to disassemble their own vehicles. The employees would then report their vehicles as stolen to law enforcement agencies and insurance companies. Employees even directed customers to file similarly fraudulent insurance claims. The employee or the customer would then receive insurance proceeds on the reportedly stolen car.

Dridi’s Involvement

At some point after Dridi began working for Elite Imports, he participated in various aspects of its fraudulent schemes. For example, Dridi opened an insurance policy on a truck in August 2013. A few months later, he reported the truck stolen and collected $1,600.90 in insurance proceeds.

Charges, Trial, and Sentencing

In an eight-count indictment in August 2016, the government charged four Elite Imports employees—Mohamed Mahmoud, Mahdi Khelefi, Issa Kayyali, and Hamza Dridi—for their roles in Elite Imports’s fraudulent schemes. In a nine-day joint jury trial, the government called nearly sixty witnesses, including Dridi’s co-conspirators, representatives from defrauded insurance companies and lenders, and former Elite Imports customers.

After Dridi’s trial he government complied and concluded that Elite Imports’s fraud schemes caused $1,812,788.19 in total loss without distinguishing which employee was responsible for which losses.

ANALYSIS

Dridi argued that the district court erred by not specifically determining which conduct of Dridi’s co-conspirators could be attributed to him for purposes of sentencing.  To show that Dridi is entitled to resentencing based on a different loss amount, Dridi must demonstrate a reasonable probability that relevant conduct findings would reveal loss attributable to Dridi of $1,500,000 or less.

The record does not uncover exactly when Dridi began participating in Elite Imports’ fraudulent schemes. Accordingly, the record does not confirm which of Dridi’s co-conspirators’ actions were “within the scope of,” “in furtherance of,” and “reasonably foreseeable in connection with” the jointly undertaken criminal activity in which Dridi took part.

The lack of factual findings on how Dridi is responsible for this restitution amount is a plain error as it relates to the order of restitution. The error affected Dridi’s substantial rights since he was required to pay more in restitution than he owes. This warrants reconsideration of the entire restitution award. In redetermining the restitution award on remand, the court should demarcate the scheme and establish the actual amount of loss caused by Dridi’s conduct.

The district court’s errors at sentencing, however, affected only Dridi’s restitution amount, not his guideline range. Therefore, his sentence was affirmed and the restitution order was remanded.

ZALMA OPINION

While Dridi serves his 72 months in prison it is doubtful he will earn anything to pay the restitution order. However, the length and effectiveness of his crime probably caused him to acquire assets and cash from his criminal conduct. Once the restitution award is properly demarcated the government should do everything possible to collect the restitution awarded against Dridi as well as from his co-conspirators.


© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the Insurance Claims Library 

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

 

Posted in Zalma on Insurance | Leave a comment