Public Policy is Vague and Uncertain

Courts Should Not Counter the Work of the Legislature by Use of “Public Policy”

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See the full video at https://rumble.com/v4wcs4w-public-policy-is-vague-and-uncertain.html   and at https://youtu.be/yXtkwGkdtDg

Artemiz Freeman sought to collect uninsured/underinsured motorist benefits under her policy with appellant Progressive County Mutual Insurance Co. (“Progressive”). Progressive denied coverage under the policy’s regular-use exclusion and Freeman sued. Resolving the parties’ cross-motions for summary judgment, the trial court concluded that the regular-use exclusion violated public policy and Progressive appealed the trial court’s determination.

In Progressive County Mutual Insurance Company v. Artemiz Freeman, No. 14-22-00450-CV, Court of Appeals of Texas, Fourteenth District (May 14, 2024) the Court of Appeals explained the importance of protecting legislative actions.

BACKGROUND

Freeman is a police officer with the City of Houston. On February 13, 2018, Freeman was in her police vehicle when she was rear-ended by another car. The driver of that car had an insurance policy that provided $50,000 in liability coverage.

Freeman’s expenses from the accident exceeded $50,000. Freeman filed for uninsured/underinsured motorist (“UM/UIM”) and personal injury protection benefits under her personal automobile insurance policy issued by Progressive. The policy provides UM/UIM motorist benefits and states that Progressive “will pay for damages that an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury” that is sustained by an insured person in an accident arising out of the use of an uninsured motor vehicle.

The policy also includes a regular-use exclusion applicable to this coverage which states, in relevant part, as follows:

EXCLUSIONSREAD THE FOLLOWING EXCLUSIONS CAREFULLY. IF AN EXCLUSION APPLIES, COVERAGE WILL NOT BE AFFORDED UNDER THIS PART III.

Coverage under this Part III [regarding UI/UIM benefits] will not apply:

  1. to bodily injury sustained by any person using or occupying:

* * *

a motor vehicle that is owned by or available for the regular use of you or a relative. (emphasis added).

Progressive denied Freeman’s claim for UM/UIM benefits on the grounds that her policy excluded bodily injury sustained while a person was using or occupying a motor vehicle “owned by or available for the regular use” of the insured. Progressive concluded that Freeman’s police vehicle fell within the exclusion’s definition of a vehicle “available for [her] regular use.”

Progressive paid Freeman personal injury protection benefits pursuant to her policy. Freeman also received workers’ compensation benefits from the City of Houston.

Freeman sued Progressive in June 2019, asserting claims for breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code. Freeman also requested a declaratory judgment stating that she is entitled to an award of UM/UIM benefits.

ANALYSIS

The trial court determined that although the patrol vehicle was available for Ms. Freeman’s regular use, that the “regular use” exclusion as applied in this case violates public policy since it operates to deprive an insured of the protection required by the Texas Uninsured Motorists Statute. As a result, the trial court granted Artemiz Freeman’s motion for summary judgment and motion for declaratory relief and denied Progressive’s motion for summary judgment.

GOVERNING LAW

To protect motorists from financial loss when they are involved in car accidents with uninsured or underinsured motorists, Texas law requires automobile insurers to include UM/UIM coverage in their policies unless the insureds reject that coverage in writing. The underlying policy behind this statute is the state’s interest in protecting conscientious and thoughtful motorists from financial loss.

The trial court concluded that, although the patrol vehicle involved in the accident was available for Freeman’s regular use, the “regular use” exclusion as applied in this case violates public policy. Public policy can be a vague and uncertain term. Courts are apt to encroach upon the domain of that branch of the government if they characterize a transaction as invalid because it is contrary to public policy, unless the transaction contravenes some positive statute or some well-established law.

Based on this record, the Court of Appeals could not conclude that Freeman has met her burden that she has suffered any financial loss, or that Progressive’s policy violates the state’s interest in protecting conscientious and thoughtful motorists from financial loss. The trial court erred when it held that the regular use exclusion as applied in this case violates public policy.

The judgment was reversed and Freeman will take nothing on her claims for UM/UIM benefits and attorney’s fees.

ZALMA OPINION

Insurance policies are contracts that must be interpreted as written. The trial court felt sorry for Ms. Freeman’s injuries and decided that the public policy of the state of Texas was that the regular use exclusion violated the policy for which the Legislature enacted UM/UIM laws. The Court of Appeals, found that the use of the concept of public policy to reverse a clear and unambiguous statute and policy wording. The Court of Appeals intelligently supported the separation of powers between the Legislative and Judicial parts of the state government.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Unique Insurance Fraud In Louisiana

Three Cases Dismissed Because of Suit Against an Insurer who Did Not Insure the Plaintiff

See the full video at https://rumble.com/v4vta7i-unique-insurance-fraud-in-louisiana.html   and at https://youtu.be/sGjvCtM2ReE

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Texas Law Firm McClenny, Moseley & Associates (MMA) has had serious problems with the US District Courts in Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana. In April and May several cases have been the subject of motions for Summary Judgment from insurers who were sued by MMA who was sanctioned by the District Courts and new lawyers took over the cases only to find the plaintiffs had no right to sue since they were not insured by the insurer defendants. For a representative sample note the information from the following three cases:

  1. In Ave Duruisseau v.  Farmers Property & Casualty Insurance Co, No. 6:22-CV-03860, United States District Court, W.D. Louisiana, Lafayette Division (April 26, 2024) Summary Judgment was granted because there was no genuine issue of material fact for trial because Farmers did not insure Plaintiff’s property.
  2. In Hester Cole v.  Foremost Insurance Company Grand Rapids Michigan, No. 2:22-CV-03514 United States District Court, W.D. Louisiana, Lake Charles Division (April 26, 2024) the court granted Summary Judgment because there was no genuine issue of material fact for trial because Foremost did not insure Plaintiff’s property on August 27, 2020.
  3. In Terry Ramirez v. Atlantic Casualty Insurance Co, No. 2:22-CV-04797, United States District Court, W.D. Louisiana, Lake Charles Division (May 7, 2024), James D. Cain, Jr. United States District Judge, dealt with a Motion for Summary Judgment filed by defendant Atlantic Casualty Insurance Company (“Atlantic Casualty”). The motion was unopposed. The details were a little different.

The suit dealt with alleged damage to a residence located at 2026 7th Avenue, Lake Charles, Louisiana, in Hurricane Laura, which made landfall in Southwest Louisiana on August 27, 2020, and Hurricane Delta, which impacted the same area on October 9, 2020. Plaintiff, who was then represented by counsel from the law firm of McClenny Moseley & Associates, filed suit in this court against Atlantic Casualty on August 25, 2022, raising claims of breach of insurance contract and bad faith. Therein he represented that he was the owner of the property represented at 2026 7th Avenue and that the property was insured under a policy issued by Atlantic Casualty. All cases filed by plaintiff’s counsel were suspended due to concerns about misconduct committed by that firm. New counsel enrolled for plaintiff on July 11, 2023, and the stay was lifted.

Atlantic Casualty moved for summary judgment, showing that plaintiff is not the owner of the insured property and is not listed as a named insured under the policy and requested that the court dismiss plaintiff’s claims with prejudice.

Louisiana law provides that an insurance policy is a contract and that its provisions are construed using the general rules of contract interpretation in the Louisiana Civil Code. The policy at issue is a commercial lines policy that provides lessor’s risk coverage to several dwellings, including the one at 2026 7th Avenue. Doc. 20, att. 3, pp. 5-6. Darrell and Shirley Crochet are listed as the named insureds. According to Atlantic Casualty’s records, they are also the owners of 2026 7th Avenue and plaintiff was a tenant at that address. The policy provides that certain individuals, such as employees, may be considered insureds in connection with the business run from that property. However, there is no basis under the policy to consider that the tenant has an insurable interest in the immovable property. Accordingly, plaintiff cannot maintain a claim for breach of contract against Atlantic Casualty. In the absence of a valid contractual claim, plaintiff’s bad faith claims must also fail. The Motion for Summary Judgment was granted and all claims in this matter were dismissed with prejudice.

The result of these three cases indicates that the MMA firm had a problem with the truth and filed suits on behalf of people who were not insured by the insurer defendant and was, as a result, a suit based on fraudulent allegations.

ZALMA OPINION

The last 28 issues of Zalma’s Insurance Fraud Letter has described the problems faced by MMA and insurers in the state of Louisiana who were required to defend false and fraudulent lawsuits.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Officer Immune from Suit

Insurance for State of Delaware Waives Sovereign Immunity

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See the full video at https://rumble.com/v4vkjlo-officer-immune-from-suit.html  and at https://youtu.be/rosS0El3PQo

On February 15, 2023, Kimberly Letke (“Plaintiff”) filed a pro se Complaint against Defendant Matthew Sprinkle (“Sprenkle”) for defamation and malicious prosecution.  On October 3, 2023, Plaintiff filed another Complaint added Defendants Cpl. Tyler Beulter of the DNREC police (“Beulter”) and the Attorney General of Delaware, Kathleen Jennings (“Jennings”), in which she added three additional claims: false arrest and violations of public trust, unlawful detention, and violations of her rights under the Fourth Amendment to the United States Constitution.

In Kimberly Letke v. Matthew Sprenkle, CPL. Tyler Beulter, and Attorney General Kathleen Jennings, C.A. Nos. S23C-10-019 CAK, S23C-10-002 CAK, Superior Court of Delaware (May 6, 2024) the court was faced with a Motion to Dismiss based upon sovereign immunity.

FACTS

Sprenkle hunted and harvested a deer in Cape Henlopen State Park, allegedly trespassing on Plaintiff’s neighbor’s property to reach the Park. Plaintiff shouted at Sprenkle and called the police. The police spoke with Sprenkle and ultimately arrested Plaintiff for a violation of the Delaware statute prohibiting impeding lawful hunting. The charge was ultimately dropped. Plaintiff’s claims, including those for defamation and malicious prosecution spring from that incident and the statements that Sprenkle allegedly made to Beulter about Plaintiff.

Absolute Immunity

The doctrine of sovereign immunity provides that the State of Delaware, including its agencies, can only be sued by consent, or by an express act of the General Assembly. When the State has not waived sovereign immunity, the Court does not have to consider whether the State Tort Claims Act is applicable. The Court has dismissed in the past claims against Delaware state agency defendants where the state agency defendants submitted an affidavit from the Insurance Coverage Administrator of the State of Delaware affirming that the State had not purchased any insurance coverage for such claims. Without a waiver of sovereign immunity, the Court held that plaintiffs’ claims were barred, and therefore, the Court was not required to consider whether the State Tort Claims Act was applicable.

Qualified Immunity

Assuming arguendo that there is not absolute sovereign immunity for Beulter, or that the State has waived sovereign immunity with respect to him or his agency, the doctrine of qualified immunity bars Plaintiff’s claims against Beulter. When properly applied, qualified immunity protects all but the plainly incompetent or those who knowingly violate the law.

ANALYSIS

Plaintiff’s claims against Beulter are founded upon an alleged act or omission arising out of the performance of his official duty, and, therefore, is barred by the qualified immunity statute.

First, all actions surrounding Plaintiff’s arrest were in the performance of an official duty.

Second, there is nothing in the Complaint, other than what may be fairly read as mere accusations, that indicates Beulter was not acting in good faith.

Third, there is nothing in the Complaint that indicates that Beulter acted with gross or wanton negligence.

For the reasons discussed above, Defendant Beulter’s Motion to Dismiss was GRANTED.

ZALMA OPINION

No one likes being arrested. Regardless you cannot sue a police officer or a prosecutor for defamation if everything they did was part of their official duties. The state of Delaware allows the state to waive sovereign immunity only if the state has bought insurance to protect it against such claims. Since there was no insurance protecting the officer he was immune from the suit.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Go to the Insurance Claims Library – https://lnkd.in/gwEYk.

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Overcharge of Force Placed Insurance Defense to Foreclosure

Force Placed Insurance Charges Allow Special Defense to Foreclosure

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See the full video at https://rumble.com/v4vcpnq-overcharge-of-force-placed-insurance-defense-to-foreclosure.html  and at https://youtu.be/iTueweyOWIw

In an action to foreclose a mortgage the trial court granted in part the plaintiff’s motion to strike the defendant’s special defenses and counterclaim; subsequently, the court, Cirello, J., granted the plaintiff’s motion for summary judgment as to liability only; thereafter, the court, Spader, J., rendered judgment of foreclosure by sale, and the defendant appealed.

In M&T Bank v. Robert R. Lewis, No. SC 20817, Supreme Court of Connecticut (April 30, 2024) the appeal of a foreclosure judgment presented one question important to insurance professionals: Whether allegations of impropriety in a mortgagee’s force placement of property insurance arise from the making, validity or enforcement of the mortgage for purposes of a special defense to a foreclosure action.

FACTS

Robert R. Lewis claimed that the trial court improperly granted the plaintiff’s motion to strike two of the defendant’s special defenses arising from the plaintiff’s conduct in its force placement of flood insurance on the property at issue, alleging that the plaintiff had unclean hands and breached the implied covenant of good faith and fair dealing on the ground that those defenses do not arise from the making, validity or enforcement of the mortgage.

After the defendant failed to make his monthly payment on August 1, 2017, the plaintiff notified him in writing of his default. The plaintiff subsequently elected to accelerate the note and foreclose on the mortgage. The parties participated in the state’s court-supervised foreclosure mediation program but were unable to reach an agreement to modify the loan.

The trial court granted the plaintiff’s motion for summary judgment as to liability only.

DISCUSSION

Defendant’s claim that the trial court improperly granted in part the plaintiff’s motion to strike the defendant’s special defenses of unclean hands and breach of the implied covenant of good faith and fair dealing predicated on the plaintiff’s improprieties in the force placement of the flood insurance, do not ”arise from the making, validity or enforcement” of the mortgage.

In the present case, the trial court struck the special defenses of unclean hands and breach of the implied covenant of good faith and fair dealing on the ground that the defendant’s allegations did not relate to ”the specific mortgage at issue in this case.” (Emphasis added.)

The question remains whether those allegations are sufficiently related to the making, validity or enforcement of the mortgage. The Supreme Court concluded that they are. The defendant alleges, the plaintiff charged the defendant an amount greater than the ”cost” of the insurance, in violation of section 5 of the mortgage agreement, concealed a ”kickback” agreement that it had with ASIC. All of this alleged conduct is directly related to the plaintiff’s reliance on and enforcement of section 5 of the mortgage agreement.

The Supreme Court noted that the alleged effect of the plaintiff’s conduct in enforcing section 5 of the mortgage agreement-that it wrongfully increased the defendant’s overall debt-provides a sufficient nexus to the foreclosure action. Defendant’s allegations in support of the special defenses are sufficiently connected to the enforcement of the mortgage.

Since an action to foreclose a mortgage is an equitable proceeding it is a fundamental principle of equity jurisprudence that for a plaintiff to show that he is entitled to the benefit of equity he must establish that he comes into court with clean hands. The clean hands doctrine is applied not for the protection of the parties but for the protection of the court. It is applied not by way of punishment but on the basis of considerations that make for the advancement of right and justice.  A mortgagor who has defaulted on a mortgage is not precluded from asserting the special defense of unclean hands. Therefore, the Supreme Court took the Defendants allegations as true it concluded that the defendant alleged willful conduct that is not equitable, fair or honest.

The defendant sufficiently pleaded that the plaintiff’s alleged misrepresentations interfered with his right to receive the benefits of the agreement. This Defendant did by alleging that the plaintiff’s kickback scheme wrongfully resulted in the defendant’s payment of more than he was obligated to pay and more than the plaintiff was entitled to charge him, pursuant to the mortgage agreement.

By alleging that Plaintiff’s conduct with force placed insurance increased his overall debt the trial court improperly struck the special defenses.

ZALMA OPINION

Insurance is important to every mortgagee needing it to protect the security for the loan. Mortgages require insureds to obtain insurance and allow, if they fail, to obtain force placed insurance that only protects the mortgagee at the expense of the insured. However, the mortgagee should never charge the insured more than it pays since that would be fraudulent and, as in this case, a defense to the foreclosure.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Go to the Insurance Claims Library – https://lnkd.in/gwEYk.

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Zalma’s Insurance Fraud Letter – May 15, 2024

ZIFL-05-15-2024

Subscribe to ZIFL Here 

Post 4801

Read the full 23 page issue here in Adobe pdf format.

See the full video at  https://rumble.com/v4v566z-zalmas-insurance-fraud-letter-may-15-2024.html  and at https://youtu.be/r7TbELn-Si0

The Source for the Insurance Fraud Professional

Zalma’s Insurance Fraud Letter (ZIFL) continues its 28th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ This issue contains the following articles:

Incompetent Insurance Fraud Claim Results in Conviction

Fraudster Pawns Jewelry & Then Claims it Stolen

The defendant, Vincent Chaney, appealed two orders from Superior Court denying his motions to suppress and for a new trial. In State of New Hampshire v. Vincent Chaney, No. 2022-0718, Supreme Court of New Hampshire (May 3, 2024) resolved the dispute over Chaney’s conviction.

Read the full 23 page issue here in Adobe pdf format.

More McClenny Moseley & Associates Issues

This is ZIFL’s twentyeigth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public.

On April 23, 2023, MMA filed its Statement of Financial Affairs.  MMA Reported Gross Income as follows:  2024 – $803,956.63,  2023 – $12,247,362.23, 2022 – $22,596,895.00.

Read the full 23 page issue here in Adobe pdf format.

Now Available New Book

The Compact Book of Adjusting Property Claims – Fourth Edition

On January 2, 2024, in Kindle, paperback and hardback formats, The Compact Book of Adjusting Property Claims, Fourth Edition is now available for purchase here and here. The Fourth Edition contains updates and clarifications from the first three editions plus additional material for the working adjuster and the insurance coverage lawyer.

Help, My House Is Falling Into The Sea

Normally Honest People Will Try Insurance Fraud

“I present blogs and videos so you can learn how insurance fraud is perpetrated and what is necessary to deter or defeat insurance fraud. This Video Blog of True Crime Stories of Insurance Fraud, with the names and places changed to protect the guilty, are all based upon investigations conducted by me and fictionalized to create a learning environment for claims personnel, SIU investigators, insurers, police, and lawyers to better understand insurance fraud and weapons that can be used to deter or defeat a fraudulent insurance claim.”

The Honest Real Estate Lawyer Tempted to Commit Fraud

Read the full 23 page issue here in Adobe pdf format.

Lies on Insurance Application Expensive

False Statement on Application Requires Rescission

Kimberli Orr obtained no-fault automobile insurance from defendant USA Underwriters and was involved in an automobile collision. Defendant denied plaintiff’s claim for benefits because it discovered that plaintiff made material misrepresentations on her application for insurance. Defendant argued that it was entitled to rescind and void plaintiff’s insurance policy, and the trial court granted defendant summary disposition.

In Kimberli Orr v. USA Underwriters, No. 363452, Court of Appeals of Michigan (April 25, 2024) the Court of Appeals resolved the dispute.

Read the full 23 page issue here in Adobe pdf format.

Health Insurance Fraud Convictions

NBA STAR ‘BIG BABY’ IS GOING TO JAIL FOR INSURANCE FRAUD

Ex-Boston Celtics player Glen ‘Big Baby’ Davis has been sentenced to 40 months in prison for defrauding the NBA healthcare plan. Davis, alongside several others, participated in a scheme that involved submitting false or inflated claims for medical and dental services that were never provided. Davis personally submitted $132,000 in fraudulent claims, which were uncovered through geolocation data and travel records. Overall, the group defrauded the plan of over $5 million. Davis will also be on supervised release for 3 years and must pay $80,000 in restitution. Nevada Attorney

General Ford Announces Conviction Of Health Care Company And Its Owner

Ashley Bunton-Dodson, 36, of Las Vegas, and Remedy Wellness and Resource Center, LLC (“Remedy Wellness”), were sentenced May 7, 2024 in a Medicaid fraud case involving billing for services that were not provided to Medicaid recipients.

http://Read the full 23 page issue here in Adobe pdf format.

How to Avoid Insurance Fraud from the Louisiana Department of Insurance

LDI and St. Tammany Parish Sheriff’s Office to Help Consumers Avoid Storm-Related Insurance Fraud

I usually write everything in ZIFL, but this notice is useful wherever you work or live and as you read just change “Louisiana” to your state’s name.

Read the full 23 page issue here in Adobe pdf format.

New Book Now Available from Barry Zalma

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims. The book also examines recent developments in areas such as arson investigation procedures, bad faith, extracontractual damages, The fake burglary, and Lawyers Deceiving Insurers, Courts & Their Clients During, Catastrophes—A New Type Of Fraud and the appendices includes the NAIC Insurance Information and Privacy Protection Model Act and usable forms for everyone involved in claims and will provide necessary information to the claims adjuster, SIU fraud investigator, claims manager, or coverage lawyer so he or she can be capable of excellence.

The newest book joins other insurance, insurance claims, insurance fraud, and insurance law books by Barry Zalma all available at the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Other Insurance Fraud Convictions

Former Desert Sun VP Sentenced For Ordering His Son To Shoot Him In Legs To Delay Prison

Shannon Egeland’s insurance scheme and concocted shooting, which led to the amputation of his left leg, “an unthinkable kind of situation,” and tacked on three years and 10 months to his 10-year sentence for mortgage fraud. He was sentenced in U.S. District Court in Portland.

Read the full 23 page issue here in Adobe pdf format.

The Tort of Bad Faith

Read the full article at https://www.linkedin.com/pulse/new-book-from-barry-zalma-tort-bad-faith-barry-zalma-esq-cfe and at https://zalma.com/blog plus more than 4300 posts.

What Every Insurance Professional, Every Insurance Coverage Lawyer, Every Plaintiffs Bad Faith Lawyer, and Every Insurance Claims Person Must know About the Tort of Bad Faith

A Book Needed by Every Insurance Claims Professional

Read the full 23 page issue here in Adobe pdf format.

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   for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Over the last 55 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.

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455

Read the full 23 page issue here in Adobe pdf format

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Insureds Must Negotiate Terms of Coverage Before Inception

Litigation is an Improper Method to Negotiate Insurance Coverage

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Plaintiffs’ attempted to secure insurance coverage for an action currently pending in federal court (the “Underlying Litigation”). Plaintiffs looked to two towers of D&O insurance to provide that coverage, naming a dozen individual insurers in the process. The problems faced by the insurers were:

  1. A provision in the earlier tower of insurance, dubbed the “No Action” clause, commands that no actions may be filed against the insurer until the insured’s payment obligations are finally determined.
  2. Plaintiffs attempted to convince the Court that the need to enable swift litigation against insurers outweighed the need to enforce contracts as written.
  3. The prior acts exclusions found in the latter tower’s policies.
  4. The Underlying Litigation centers on alleged wrongs that occurred too early to be eligible for coverage under the latter tower.

In Origis USA LLC and Guy Vanderhaegen v. Great American Insurance Company, et al, C. A. No. N23C-07-102 SKR CCLD, Superior Court of Delaware (May 9, 2024) explained the way Delaware interprets insurance contracts.

FACTUAL BACKGROUND

The insurers are two towers of multiple insurers who are named as defendants.

The Underlying Litigation

The Underlying Litigation are only tangentially relevant to this coverage dispute. It was brought by Pentacon BV and Baltisse NV (together, the “Investors”) to recover sums that Plaintiffs and Plaintiffs’ affiliates-who are not insured under the two towers at issue here-allegedly stole through fraud. The heart of the allegations are that Plaintiffs and their affiliates undersold the Investors on the value of the Investors’ shares in Origis and Origis’s parent company, Origis Energy NV.

Plaintiffs and their affiliates bought out the Investors’ interest in Origis and Origis Energy for $105 million. Just a few months later, Plaintiffs sold Origis to a third party for $1.4 billion. The investors complain that they did not get their fair share of that payday.

The 2021-22 Tower

As relevant here, Great American’s policy, which was followed by the other 2021-22 Insurers’ policies, states: “With respect to any Liability Coverage Part, no action shall be taken against the Insurer unless, as a condition precedent thereto, there has been full compliance with all the terms of this Policy, and until the Insured’s obligation to pay has been finally determined by an adjudication against the Insured or by written agreement of the Insured, claimant and the Insurer.

The 2023-24 Tower

The second relevant tower of D&O insurance (the “2023-24 Tower”) had a policy period of February 4, 2023 to February 4, 2024. In this timeframe, Bridgeway issued the primary policy, and several other insurers (together, the “2023-24 Excess Insurers” and, together with Bridgeway, the “2023-24 Insurers”) each issued excess policies in that ascending order. After the applicable retention, each of the 2023-24 Insurers had a $2.5 million limit.

Each of the 2023-24 Tower’s policies had a provision excluding coverage for claims arising out of wrongful acts that first occurred before November 18, 2021. RSUI’s first-layer excess policy reflects a fairly representative example, stating:  “The Insurer shall not be liable to make any payment for Loss in connection with any Claim made against any Insured that alleges, arises out of, is based upon or attributable to, directly or indirectly, in whole or in part, any actual or alleged Wrongful Acts which first occurred prior to November 18, 2021.

DISCUSSION

Delaware courts review insurance contracts to assess the parties’ intent “as expressed through their contractual language.” Like any contract, when an insurance contract’s terms are reasonably susceptible of but one meaning, and are thus unambiguous, Delaware courts will apply that meaning.

The No Action Clause Precludes This Litigation Against the 2021-22 Tower and Plaintiffs Cannot use this Litigation to Reopen Negotiations.

Great American, joined by Markel, argued that the plain language of the No Action clause blocks Plaintiffs’ ability to bring this coverage dispute before the Underlying Litigation concludes.

Delaware courts are exceptionally inclined to hold sophisticated parties to their bargains. For that reason, the Court refused to disregard the No Action clause.

The Court was fully confident that the representatives of this billion dollar company were well-equipped to understand the policy language and negotiate necessary changes.

The Court enforced the No Action clause as it is written. That prohibition will be lifted when Plaintiffs satisfy the two conditions contained in the No Action clause. Until then, the 2021-2022 Insurers’ motions to dismiss must be granted.

The Prior Acts Exclusion Precludes Coverage under the 2023-24 Tower.

The analysis is even clearer with respect to the unavailability of coverage for the Underlying Litigation under the 2023-24 Tower. Even if the Court were to accept that Plaintiffs met their burden to establish coverage, the 2023-24 Insurers successfully refute that coverage with the prior acts exclusion.

The 2023-24 Insurers’ motions to dismiss must be granted.

CONCLUSION

Plaintiffs’ policies do not support Plaintiffs’ current suit. In one set of policies, Plaintiffs agreed not to sue their insurers until the occurrence of a particular event that is yet to occur. In the other set of policies, Plaintiffs waived coverage for pre-existing wrongs such as the Underlying Litigation. Accordingly, the motions to dismiss must be GRANTED.

ZALMA OPINION

Insurance contracts with multiple towers of insurance coverage with multiple insurers taking on the risk of loss in excess of the underlying insurance coverages where, in this case the layers contained multiple insurance policies waiting for each lawyer to pay out its limit before the next in the tower has to pay. Here, the contract language limited the coverages in ways that upset the insureds who tried to rewrite the policies to provide coverage they did not buy. The court refused to change the conditions of the policy.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Lender Must Elect To Take Insurance Proceeds 

If Lender Approves Use of Insurance Funds to Repair It Cannot Claim it was Damaged

Post 4799

See the Full Video at https://rumble.com/v4ucu3o-lender-must-elect-to-take-insurance-proceeds.html  and at https://youtu.be/hajSOS3GVK8

CG Tides LLC, et al. (the “Borrowers”) appealed a final summary judgment of foreclosure. Among other things, the judgment at issue allows over $20,000,000 in retroactively calculated default interest on a loan with a principal balance of $41,793,694. The retroactive default interest is based on the finding that the Borrowers’ use of hurricane insurance proceeds to repair hurricane damage to the mortgaged property violated the Note and therefore constituted a default.

In CG Tides LLC, et al. v. SHEDDF3 VNB, LLC, No. 3D23-0071, Florida Court of Appeals, Third District, (May 8, 2024) the Court of Appeals found issues of fact.

BACKGROUND

This foreclosure case involves three main actors:

  1. CG Tides LLC, et al., which are the mortgagors that borrowed the money and granted the Mortgage at issue.
  2. The original lender, Ocean Bank.
  3. SHEDDF3 VNB, LLC (the “Note Holder”), which purchased the Note from Ocean Bank and brought the foreclosure action.

The trial court granted summary judgment and entered a total foreclosure judgment of $82,169,522, which included principal of $41,793,694, miscellaneous costs, and prejudgment default interest of $40,167,725. No surprise, the borrower appealed.

THE LOAN

In October 2014, the Borrowers obtained a $45,000,000 loan from Ocean Bank and granted a mortgage in the Tides Hotel on Miami Beach. To simplify greatly, the Note provided for the payment of interest only during the term of the loan and the payment of the entire principal on a set date, unless the parties exercised an option to convert the loan to a more traditional 25-year loan.  The parties extended the due date for payment of the principal several times.

THE HURRICANE

In September 2017, the Hotel was seriously damaged by Hurricane Irma and was closed for over a year. The Mortgage authorized Ocean Bank to direct the Hotel’s insurance company to pay any insurance proceeds directly to Ocean Bank and provided that Ocean Bank could sign any draft as the Borrowers’ attorney. However, under the Note and Mortgage, Ocean Bank had the “sole but reasonable discretion not to use the proceeds to repair.” Except in certain, limited circumstances when the proceeds had to be used to repair the Hotel. The Borrowers, on the other hand, were obliged to repair the Hotel even if the proceeds were not available for that purpose.

Despite the Mortgage’s terms, and although aware of the insurance claim, Ocean Bank never exercised the option to have the insurance proceeds sent directly to it. In November 2017, the Borrowers received $2,000,000 in insurance proceeds. The Borrowers spent at least $7,728,367 ($5.5 million more than the insurance proceeds to repair and renovate the Hotel after the hurricane).

Among other things, the Note Holder relied on the affidavit of an Ocean Bank vice president so testifying and on Ocean Bank emails inquiring about the insurance proceeds.

On the other hand, the Borrowers maintained the opposite.  Ocean Bank “approved” a document from the Borrowers. A related memorandum in the file regarding construction at the Hotel also stated the Borrowers intended to use the insurance proceeds “to perform renovations” in light of “damage during Hurricane Irma.”

Ocean Bank sold the loan to the Note Holder. The Note was sold at par for the principal owed, $41,793,694. According to the managing director of the Note Holder, its business model is to acquire pre-existing, non-performing loans so that it can “mine the loan histories” to “exploit” opportunities to obtain “retroactive default interest.”

Ultimately, the Note Holder filed the underlying foreclosure action. The Borrowers counterclaimed for breach of contract and various other remedies. The Note Holder obtained summary judgment.

DISCUSSION

The Borrowers argued an issue of fact existed whether the Borrowers’ use of the insurance proceeds to repair the hurricane damage breached the loan contract and triggered a default. The borrower claimed Ocean Bank knew and approved of the Borrowers’ use of the insurance proceeds to repair the hurricane damage to the Hotel. On one hand, a vice president of Ocean Bank denied this fact under oath.

When interpreted in a light most favorable to the non-moving party, other evidence in the summary judgment indicates that Ocean Bank knew of the hurricane damage, knew of the insurance claim, did not exercise its right under the Mortgage to direct the insurance company to pay the proceeds solely to itself, received a copy of the Borrowers’ tax return reflecting receipt of the insurance proceeds at issue, verbally approved the use of the proceeds for repair and renovation, and approved this use in writing in its own internal records.

The Court of Appeals concluded that the point was that the evidence and inferences therefrom conflict. A factfinder could reach different results depending on what evidence it credited and what reasonable inferences it draws from the evidence credited. Given the state of the record, summary judgment should not have been entered on this issue and the judgment was reversed and remanded to the trial court.

ZALMA OPINION

Summary judgment is not appropriate when there are disputed issues of fact. In most property insurance policies, when there is a mortgage, an insurance policy naming a mortgagee requires payment to both the named insured and the mortgagee. In common practice the borrower could only use the insurance funds to repair if the mortgagee agreed. There was conflicting evidence because it appears the lender agreed and the new note holder, created conflicting evidence and attempted to profit from the hurricane and the monies paid by the hotel owners to repair the building while foreclosing. The court of appeals refused to allow the summary judgment to stand because there were issues of fact remaining to be established by the trier of fact.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Blank Space on Contingency Fee Agreement Makes it Unenforceable

No Meeting of Minds No Contract

See the full video at https://rumble.com/v4u5jm2-blank-space-on-contingency-fee-agreement-makes-it-unenforceable.html and at https://youtu.be/b_Tje0MVSgs

Post 4798

Attorney Richard Schicker sued a former client, Brandi Cady, seeking payment for attorney fees under a contingency fee agreement. The district court dismissed Schicker’s complaint, finding that there had been no meeting of the minds during the formation of the agreement and thus there was no valid, enforceable contract.

In Richard Schicker v. Brandi Cady, No. A-23-455, Court of Appeals of Nebraska (May 7, 2024) the Nebraska Court of Appeals explained what is needed to form a viable and enforceable contract.

STATEMENT OF FACTS

Attorney Schicker sued Cady alleging that he had entered into a written contract with Cady whereby Schicker was to represent Cady in a claim against Lincoln Financial Group (LFG) for life insurance benefits owing to Cady due to the death of Cady’s husband. LFG later agreed to pay Cady the full policy amount and the complaint sought judgment against Cady for 40 percent of that amount, plus any costs incurred by Schicker.

Cady testified that at the time of her husband’s death, the couple had three young children, and that she immediately attempted to collect his life insurance benefits.

Cady called Schicker’s law office and testified that she called to inquire about a personal injury claim, as she had heard from community members that the highway where her husband was killed had been deemed dangerous and was soon to be under construction.

A contingency fee agreement between Cady and Schicker was executed. The agreement was entered into evidence and state that Schicker was to be paid 40 percent of the amount recovered or settled on behalf of Cady. In the first paragraph of the fee agreement is the statement, “[c]lient may have a claim against ___” and the section is filled in with “Lincoln Financial[.]” She did not recall “Lincoln Financial” appearing anywhere in the fee agreement at the time she signed it.

On October 2, 2017, at 10:36 a.m., Cady sent Schicker an email with the subject line “Cancellation of Services.” The email states: “At this time, I have a family member who is going to handle insurance claims for Lincoln Financial. … I do still want to retain you for possible case regarding the accident itself.”

On October 2, 2017 the parties canceled their fee agreement. Another copy of the fee agreement was entered into evidence, which includes the additional notation “Agreement cancelled as of 10-2-2017” at the bottom of the form and Schicker’s signature below the notation.

Cady testified that she had done all of the work to collect the insurance claim herself. Klenda (a representative of LFG) testified that the only phone call she had with Schicker occurred after the claim was paid and he was attempting to collect attorney fees from LFG. The district court dismissed Schicker’s complaint. The blank space in the fee agreement as established that the actual fee agreement was not completed.

In addition the district court found that Schicker lacked credibility. Schicker’s itemized bill stated that he spent 58.6 hours of billable time over the course of 12 days working toward the collection of the insurance benefit.

The district court concluded that no agreement had been formed between Schicker and Cady because there was no meeting of the minds as elicited by the testimony at trial.

ANALYSIS

Meeting of the Minds.

A party seeking to enforce a contract has the burden of establishing the existence of a valid, legally enforceable contract. To create a contract, there must be both an offer and an acceptance; there must also be a meeting of the minds or a binding mutual understanding between the parties to the contract. It is a fundamental rule that in order to be binding, an agreement must be definite and certain as to the terms and requirements. It must identify the subject matter and spell out the essential commitments and agreements with respect thereto.

Because a meeting of the minds had not occurred, there existed no valid, enforceable contract between the parties. The district court did not err in so finding.

Since there was never a meeting of the parties’ minds concerning the claim at issue in the contingency fee agreement there was no valid and enforceable contract.

ZALMA OPINION

Signing a contract where the subject of the contract is left blank is an error a law student would never make nor should any licensed attorney like attorney Schicker. He had the unmitigated gall to sue a client for fees he claimed he earned to gain the benefits of a life insurance policy claiming to spend more than 4 hours a day for 12 straight days on the subject although he never contacted the insurer before they had already paid. He never obtained a valid contingency fee agreement because the key element was left blank when the client signed it. Amateurish actions by a lawyer should never be enforced.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Insurer Spent Millions to Defend Fraudulent Claim

The Poet Enters the World of Insurance Fraud

Post 4797

See the full video at https://rumble.com/v4ty3t9-insurer-spent-millions-to-defend-fraudulent-claim.html  and at https://youtu.be/iKowkzrNl8Q

I present blogs and videos so you can learn how insurance fraud is perpetrated and what is necessary to deter or defeat insurance fraud. This Video Blog of True Crime Stories of Insurance Fraud, with the names and places changed to protect the guilty, are all based upon investigations conducted by me and fictionalized to create a learning environment for claims personnel, SIU investigators, insurers, police, and lawyers to better understand insurance fraud and weapons that can be used to deter or defeat a fraudulent insurance claim.

The insured was a poet. Before immigrating from Soviet Armenia, he was a member in good standing at the Armenian Poets Union. They paid him for his work five hundred rubles a month.

He lived in the capital city of Yerevan in the shadow of Mount Ararat. Like all Soviet citizens, before the fall of the Soviet Union, he supplemented his income by buying and selling in the black market. He specialized in jewelry and diamonds.

By 1977 he had amassed, off the pain and suffering of others, over 300 carats of diamonds and diamond jewelry. Most of the diamonds were old mine cut, popular in Russia in the 1890’s, but now out of date. The wealth he had amassed frightened him. He knew that eventually the Soviet Police would catch him and send him to a Gulag. He was committing the most heinous of Soviet crimes. He was a successful entrepreneur.

He went to the American Consulate and got a visa as a refugee. He had convinced the American Consulate the Soviet Government was censoring his poetry. He wanted freedom to write.

Poetry is not an essential industry. The Soviet Government agreed to his immigration. He came directly to Los Angeles and settled in the Armenian community in the hills of Glendale, California. He brought with him all but twenty carats of the diamonds. He needed to use some of his 300 carats to bribe Soviet Customs Officials.

For many years he and his family lived by selling the diamonds at auctions. He continued to write poetry but there was no market for Armenian poetry in the United States. The few Armenian language newspapers would publish his poems but could not pay him.

At a social gathering at the Armenian church he expressed his concerns to an acquaintance who ran an art gallery. The gallery owner had been in the United States longer than the poet. He knew how trusting Americans were. He knew that Americans believed what they were told until proved otherwise. He understood that Americans took seriously their belief that everyone was innocent until proven guilty. He explained to his friend how he could easily make enough money to support his family comfortably for the rest of his life. The gallery owner told the poet he would rent him a portion of his art gallery to open a jewelry store. The poet only needed to buy an insurance policy insuring against loss of an inventory of jewelry. The insurer would not ask him before issuing a policy to prove he had any jewelry but would take his word. The poet was incredulous.

“Won’t they want to see the jewelry?”

“No. They insured my art gallery without ever sending anyone to look at the paintings. If they do send someone out just tell them the jewelry is in your safety deposit box. Tell them you feared bringing it out until you had insurance. You can put in showcases the jewelry you do have to make it look like a legitimate jewelry store.”

The next day Poetry Jewelry was born. The insurer took the risk without any questions. The security and safes were proper. The premium would be paid in full since the poet had obtained independent premium financing through his broker.

The insurer issued a policy that requested an immediately inspection of the premises. The inspector visited the premises, saw immediately that it was not as represented and advised the company to cancel. They did.

The insured went to a new broker. The new insurer did not require an inspection of the premises by anyone other than the broker. It issued a million dollar policy. Two weeks later, before the insurer could change its mind, the poet’s oldest son locked the poet and his mother, the poet’s wife, and the gallery owner in the small four by four bathroom. The son then took home all the inventory of Poetry Jewelers.

The three people locked in the bathroom waited ten minutes to make sure the oldest son had driven away and then pushed the holdup button secreted in the bathroom because it is common for thieves to lock jewelry store owners in the bathroom. The three captives also pounded on the wall to gain the attention of the restaurant owner next door. The police were called and broke the door down to free the poet, his wife and the gallery owner.

The loss exceeded a million dollars. The poet thanked God that they were insured.

Their million dollar fraud would have been successful but for an unusual coincidence. The insurer hired as its adjuster the same firm that had inspected the store for the first insurer. They remembered the insured. They knew that the prior insurer had canceled. The adjusters knew when the poet told them that the policy was his first ever that he was lying. The adjuster knew when the insured told him that his inventory was a million dollars he was lying.

The adjuster gathered the evidence together and presented it to the insurer. They rescinded the policy and denied the claim.

The insured retained a lawyer. The lawyer immediately filed suit in U.S. District Court for breach of the covenant of good faith and fair dealing and made claim for fifty million dollars over the one million dollar claim.

The insurance company spared nothing. Its lawyers deposed every person who had any connection with the poet. The deposition of the poet lasted for three days. Each member of the family was deposed. Paralegals poured over every word of the transcripts and found conflicting testimony. The insurer obtained documentary evidence from every possible location except Yerevan, Soviet Armenia. The lawyers spent weeks preparing for trial. The poet was unprepared. His family was unprepared. They expected, regardless of the evidence they presented, that the jury would hate the insurance company and punish it.

At trial, although well-rehearsed, the poet’s lies began to compound. The testimony of the inspector established the inventory was not there at the time of the inspection. The insured did not have a safety deposit box and therefore could not even prove the existence of a box to hold the jewelry he claimed he had. Under cross-examination the poet’s son’s testimony became confused. The judge took over the cross- examination and, unable to answer confidently, the poet’s son broke down and cried on the stand. Lies were admitted.

After five days of trial with testimony from nine in the morning until six every night, the jury went off to deliberate. The jury returned with its verdict in forty-five minutes. The verdict was for the defense. The jury was convinced that the poet had presented a fraudulent claim and that the insurance company had properly rescinded the policy.

The result was unusual. The cost was enormous. The investigation cost, court costs, expert witness fees and attorneys’ fees exceeded $500,000. The insurer defeated the claim for one million dollars in lost jewelry and fifty million dollars in punitive damages.

The word went out. This insurance company fights. Do not insure with them.

The insurer saved more than the payment of the poet’s claim. It saved all the other fraudulent claims that would have been presented had they not fought. The poet paid nothing to his lawyer who took the case on a contingency basis.  He continued living off the jewelry he brought from Soviet Armenia.

Adapted from my book, Insurance Fraud Costs Everyone, available from Amazon.com here and here

(c) 2024 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Incompetent Insurance Fraud Claim Results in Conviction

Fraudster Pawns Jewelry & Then Claims it Stolen

Post 4796

See the full video at https://rumble.com/v4tr408-incompetent-insurance-fraud-claim-results-in-conviction.html   and at https://youtu.be/paWS-ppzcLA

The defendant, Vincent Chaney, appealed two orders from Superior Court denying his motions to suppress and for a new trial. In State of New Hampshire v. Vincent Chaney, No. 2022-0718, Supreme Court of New Hampshire (May 3, 2024) resolved the dispute over Chaney’s conviction.

FACTS

In 2018, the defendant traveled to Florida and purchased three pieces of jewelry: (1) a necklace worth $63,138 (hereinafter, the large necklace); (2) a necklace worth $4,500 (hereinafter, the small necklace); and (3) a bracelet worth $16,050. Following the purchases, the defendant took out an insurance policy with Phoenix Insurance Company, also known as Travelers Insurance, on all three pieces of jewelry.

Chaney filed an insurance claim with Travelers Insurance for the small necklace and bracelet. Travelers Insurance paid the claim in March. In May, the defendant filed a second claim with Travelers Insurance alleging that the large necklace had been stolen during an armed robbery in Boston.

Travelers ultimately denied the second claim due to the defendant’s non-cooperation and referred the case to the New Hampshire Insurance Department (Department), indicating that it believed the insurance claim to be suspicious.  During the state’s investigation, the investigator learned that Castro had twice pawned a bracelet identical to the one reported missing in the first insurance claim. At the time of the investigation, the bracelet remained at the pawn shop.

In December 2019, the investigator interviewed Ms. Castro who lived with Chaney after he obtained approval for a one-party intercept in order to record the interview. Castro described the three pieces of jewelry and alleged that they were all either missing or stolen. She stated that she had an older bracelet at her house similar to the one that went missing but that she had never insured the older bracelet due to its age. She also stated that she had never pawned the older bracelet.

Castro changed her story and stated that the bracelet at the pawn shop was the older bracelet that she previously claimed was at her house.  The interview ended soon thereafter.

After obtaining a warrant the state’s search discovered drugs, drug paraphernalia, multiple firearms, and one of the missing necklaces. The defendant was subsequently charged with possession of a controlled substance with intent to sell and numerous counts of being a felon in possession of a deadly weapon. The defendant was separately charged with three counts of insurance fraud in connection with the claims he made to Travelers Insurance.

ANALYSIS

To suppress evidence seized under a search warrant, the defendant must show that the misrepresentations in the supporting affidavit were material and were made intentionally or recklessly. Materiality is determined by whether, if the omitted statements were included, there would still be probable cause.

In its order on the defendant’s motion to suppress, the trial court concluded that the affidavit supporting the search warrant did not contain any material misrepresentations or omissions that rendered the warrant invalid. Regarding the investigator’s failure to mention the friend’s corroboration, the court ruled any such omission was immaterial to a finding of probable cause.

Finally, the court found that, although the defendant’s assertion that the investigator, rather than Castro, initiated the termination of the interview was “mostly accurate,” The Supreme Court agreed with the trial court’s well-reasoned and thorough order that the affidavit supporting the search warrant did not contain any material omissions or misrepresentations that rendered the warrant invalid.

The task of the issuing court is to make a practical, common-sense decision whether given all the circumstances set forth in the affidavit before it, including “veracity” and basis of knowledge of persons supplying hearsay information, there is a fair probability that contraband or evidence of a crime will be found in a particular place.

The reviewing court may consider only the information that the police brought to the issuing court’s attention. Neither the issuing court nor the reviewing court could have considered the 2005 receipt when determining probable cause, and any alleged error in not attempting to introduce it at the suppression hearing did not prejudice the defendant’s case. The order was affirmed and Mr. Chaney’s conviction stood affirmed.

ZALMA OPINION

Mr. Chaney was involved in an amateurish attempt at insurance fraud by reporting the theft of jewelry that he had pawned, a fact easy for a police agency to establish but difficult for an insurer to determine. Chaney was caught when the pawned jewelry was found, a search warrant was obtained and the police not only found in his residence one of the “stolen” items, plus drugs sufficient to arrest him as a drug dealer as well as a perpetrator of insurance fraud. He tried to claim the warrants were improper and the Supreme Court refused his claims.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Settlement Unenforceable Because Insurer Lied to Plaintiff

Plaintiff Entitled to Know All Insurance Available to Defendants

Post 4795

See the full video at https://rumble.com/v4tjwzw-settlement-unenforceable-because-insurer-lied-to-plaintiff.html  and at https://youtu.be/1zbO_ZShhUc

Pedro Fundora filed suit against Robert Dangond and Maria Guevara after sustaining injuries when Dangond struck Fundora with a vehicle owned by Guevara. On appeal, Fundora argued that the trial court erred by granting Robert Dangond and Maria Guevara’s Motion to Enforce a Settlement Agreement.

In Pedro Fundora, etc. v. Roberto Dangond, No. 3D22-1749, Florida Court of Appeals, Third District (May 1, 2024) the plaintiffs sought to rescind a settlement agreement because the defendant’s insurer did not tell Plaintiff’s counsel about all insurance available to the Defendants.

FACTS

During litigation, Fundora sent Dangond and Guevara’s insurer, Progressive Insurance Company, a demand letter pursuant to section 627.4137(1), Florida Statutes (2011), which provides that:

an ‘insurer which does or may provide liability insurance coverage to pay all or a portion of a claim which might be made shall provide . . . a statement . . . setting forth [the information specified in this statute] with regard to each known policy of insurance ….’ (Emphasis supplied).

In response, Progressive sent Fundora a letter disclosing only one policy, held by Dangond. Included in the disclosure was a statement “certify[ing] . . . that the contents of this disclosure made pursuant to Florida Statute 627.4137 are true and correct.” Progressive did not disclose any other policies.

When Fundora later offered to settle with Dangond and Guevara, for limits based on the disclosures from Progressive,  Fundora sent Progressive a demand letter, again requesting disclosure of information on additional known policies, and making the settlement offer contingent on verification that Progressive knew of no other policies. Two weeks later, Progressive sent Fundora’s counsel a letter accepting the settlement offer. Progressive responded to the disclosure demand by attaching affidavits from Dangond and Guevara stating that there was no additional coverage.

On the same day that Progressive sent the letter accepting Fundora’s settlement offer, it also sent a separate letter to Fundora disclosing an additional insurance policy held by Dangond and Guevara’s codefendant, Dangond Construction, that potentially could provide coverage for the accident. Because Progressive disclosed this policy after accepting the settlement offer, Fundora did not have the benefit of reviewing the additional policy prior to offering to settle.

ANALYSIS

Fundora’s request to Progressive for information on any known policies pursuant to section 627.4137(1) was an essential term of Fundora’s offer to settle with which Progressive failed to comply. The Court of Appeals concluded that a settlement offer is unenforceable because, despite multiple demands pursuant to section 627.4137 and clearly establishing that compliance was a necessary and essential element of any settlement acceptance, Fundora was deceived.

Since the defendant’s insurer  did not provide the information until after one response and the acceptance of the settlement offer, the insurer’s failure to provide the disclosure in accordance with section 627.4137 rendered the settlement unenforceable because the plaintiff made it clear that the insurance disclosure was an essential term and because the insurance disclosure is an essential term under case law.

The Court of Appeals agreed with Fundora that the settlement was unenforceable it reversed.

ZALMA OPINION

One of the greatest incentive for a plaintiff to accept a settlement offer from a defendant is the amount of insurance available when the defendant seems to be judgment proof. When an insurer violates the statute and fails to disclose that there is more insurance, the settlement agreement was made based on false information and it was unconscionable to accept a settlement offer based on a fraudulent statement of available insurance.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Building That Could Collapse is Not a Covered Collapse

Fairly Debatable Claim Defeats Charge of Bad Faith

Post 4794

See the full video at  https://rumble.com/v4t1bj0-building-that-could-collapse-is-not-a-covered-collapse.html  and at https://youtu.be/G0INY7Yka_k

On May 7, 2019, Saddletree Holding, LLC (Saddletree) filed an insurance claim for damages sustained to its building located in Upton, Wyoming (the Building). The Building was used as a community events center. Following a winter of heavy snowfall, Saddletree discovered that the Building’s steel support columns had buckled two or more inches and the roof had deflected downward approximately six inches. The Building was insured by Evanston; Markel was the claims processor.

In Saddletree Holding, LLC v. Evanston Insurance Company; Markel Service, Inc., No. 23-8024, United States Court of Appeals, Tenth Circuit (April 30, 2024) the Tenth Circuit ruled on the breach of contract and bad faith suit filed by Saddletree.

The claims were denied for damages Saddletree claimed to its building in eastern Wyoming. Saddletree sued seeking damages for (1) breach of contract, (2) substantive bad faith, and (3) procedural bad faith.

The district court entered judgment in favor of Evanston and Markel and dismissed the case with prejudice. Saddletree appealed.

BACKGROUND

During claims processing, Defendants retained an engineer who inspected the Building. Defendants’ engineer determined that the damage was the result of the Building’s inadequate “design[] and/or construct[ion].” Evanston disclaimed coverage pursuant to a Policy exclusion precluding damage caused by “hidden or latent defect[s]” or “any quality in property that causes it to damage or destroy itself.”

Saddletree did not contemporaneously contest the denial. Instead, it sued its builder, Dreams Carports &Buildings, Inc. To support that suit, Saddletree requested Defendants turn over their engineering report. They declined. So, Saddletree retained its own engineer, who “determined that the original design is deficient[.]” Saddletree’s engineer also noted “[i]t is very fortunate the structure has not collapsed based on the levels of deficiencies determined.” (emphasis added). On March 23, 2021, the district court entered default judgment against Dreams and awarded Saddletree over $2.2 million in damages, a judgment that Saddletree is still attempting to collect.

The district court entered summary judgment for Defendants on all of Saddletree’s asserted claims.

ANALYSIS

Saddletree does not dispute that its claim of breach fell outside the Policy’s two- year limitations period. Instead, it argued Defendants were either estopped from raising the limitations defense or waived it. The argument failed for several reasons:

  1.  It is directly contradicted by the record: Saddletree testified it had “no idea” what it would have done differently had it received Defendants’ engineering report sooner. That makes sense, since its own report provided all the information it needed to pursue its collapse theory against Defendants within the limitations period.
  2. Saddletree did not identify any authority indicating Defendants had a duty to provide their engineering report. Absent an affirmative duty to provide the report, Defendants did not act inappropriately in refusing to provide it, and that refusal did not lead to estoppel.

Defendants are entitled to rely on the Policy’s two-year limitations period. The district court correctly entered summary judgment for Defendants.

SUBSTANTIVE BAD FAITH

The test used in determining whether a claim was denied in bad faith is an objective one which questions whether the validity of the denied claim was not fairly debatable. A claim is fairly debatable when a reasonable insurer would have denied or delayed payment of benefits under the facts and circumstances. If a realistic question of liability does exist, the insurance carrier is entitled to reasonably pursue that debate without exposure to a claim of violation of its duty of good faith and fair dealing. In pursing that debate, an insurer is entitled to rely on the conclusion of independent experts unless there is a showing that there was collusion between the experts and the insurer or that the experts knowingly made false reports.

By the Policy’s terms, coverage does not apply to a building that is standing even if it is “cracking, bulging, sagging, bending, [or] leaning ….”

Defendants’ expert provided a supplemental report on March 17, 2022, which opined “the yielding and buckling . . . occurred gradually as snow accumulated on the roof and was not an instantaneous or abrupt failure.”

Both because it is “fairly debatable” whether the Building “collapsed” for purposes of coverage, and because Defendants were entitled to rely on their expert engineering report in making their coverage determination, the insurer acted properly and not in bad faith.

Defendants’ conduct did not constitute procedural bad faith as a matter of law and because Saddletree failed to identify recoverable damages necessary to sustain its claim. Therefore, the Tenth Circuit concluded, as a matter of law that the insurer’s conduct failed to exhibit the egregious level of misconduct typifying bad faith.

ZALMA OPINION

The Tenth Circuit could have rejected the appeal on the failure to file suit before the expiration of the private limitation of action provision, alone. Regardless, it also dealt with the claims of bad faith and breach of contract to eliminate all of Saddletree’s claims. Saddletree has a judgment against the builders of the structure and only sued when it found it could not collect the default judgment.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Help, My House Is Falling Into The Sea

Normally Honest People Will Try Insurance Fraud

I present blogs and videos so you can learn how insurance fraud is perpetrated and what is necessary to deter or defeat insurance fraud. This Video Blog of True Crime Stories of Insurance Fraud, with the names and places changed to protect the guilty, are all based upon investigations conducted by me and fictionalized to create a learning environment for claims personnel, SIU investigators, insurers, police, and lawyers to better understand insurance fraud and weapons that can be used to deter or defeat a fraudulent insurance claim.

Post 4793

See the full video at https://rumble.com/v4sugm3-help-my-house-is-falling-into-the-sea.html  and at https://youtu.be/ZFSXlqgdcQA

The Honest Real Estate Lawyer Tempted to Commit Fraud

Career criminals are not the only people who perpetrate insurance fraud. The temptation has become so great that almost anyone who is given the opportunity, will try. Those who do not premeditate insurance fraud are called perpetrators of soft frauds. Most are small. Some are not. The story that follows is a not a soft fraud but one that was premeditated for a great deal of money by a person who should have known better.

Some years ago, residents of a hillside community of multi-million dollar homes received a letter from the county engineer informing them that their houses sat on an active landslide. The engineers concluded that an unusual amount of irrigation water, water from septic systems, and rainfall lubricated an ancient landslide under their homes and that the slide was moving. The engineers were concerned because it was moving at the rate of three inches a year. The houses sitting on the landslide were also moving a few inches a month. Within ten years the houses would be torn apart by the movement if nothing was done to stabilize the hillside.

Homeowners, living on the hill, noticed cracks in the plaster walls. Concrete block walls split at the mortar seams. Cracks formed in the foundation systems. Since the homes on the hill were all valued from $1,500,000 and $8,500,000, the monetary value of the potential loss of 300 homes on the landslide was enormous. Many of the homeowners gathered and hired counsel to pursue persons responsible for their damage.

On advice of counsel, the homeowners reported claims to their insurers. Most of the insurers denied the claims because of clear and unambiguous exclusions for earth movement or subsidence. The insurers concluded that the predominant cause of the damage was the excluded peril of earth movement. The claims were fairly and reasonably rejected. Some of the homeowners accepted the decision of their insurers. Some of the homeowners sued their insurers. The imaginative homeowners, like the insured, found a better way.

The insured was a real estate lawyer. He had experience in dealing with insurers for commercial developers he represented. He knew that, in addition to the basic retail insurance market, there was a surplus and excess lines insurance market that would insure almost anything.

ASK ME NO QUESTIONS I’LL TELL YOU NO LIES

Without informing his broker of the landslide situation on the hillside he asked the broker to seek a specialty insurance policy for his home. He wanted insurance that covered him for both earthquake and earth movement, landslide, mudslide or other types of earth movement normally excluded by homeowner’s policies. He explained to the broker a concern that the wild fires that often devastate hillside communities remove vegetation from the hillsides and increase the hazard of mudflow and landslide. He had invested a great deal of money in his home and wanted to protect against that risk.

The broker found a policy offered by a surplus line insurer. The policy insured dwellings only for the perils of earthquake and earth movement. The premium was a reasonable 3.75 percent of the value of the dwelling with a deductible equal to only 5 percent of the total amount at risk. To obtain the policy all the insurer required, by way of application, was the name of the insured, the address of the property to be insured, and the amount of insurance requested. It asked no questions about the potential risks of loss and the insured – since he was not asked – provided no information nor did he advise the insurer of the report from the county engineer.

After receiving a signed application from the insured the insurer agreed to insure any property because it did not fall within certain specified earthquake fault areas. The insured obtained a $2,500,000 policy for a premium of only $9,375.00.

Before the insured bought the policy, he had received and read the letter from the County. He knew there was a landslide actively affecting his house. At the time he bought the policy the insured had already seen cracks in his plaster walls. When he bought the policy, the insured applied the old maxim “ask me no questions – I’ll tell you no lies.”

His experience as a real estate attorney convinced the insured that if he told his prospective insurer his house was sitting on an active landslide it would not insure him. The insurer did not ask. The insured did not offer the information.

After the policy had been in effect for three months and the cracks in the plaster had grown to a size that he could place his index finger inside the crack he reported a loss to the earth movement insurer. He presented a claim for the total loss of the house. He demanded payment of policy limits less the deductible.

The insurer sent its adjuster to meet with the insured. They retained a geologist to inspect the property and determine the cause of the damage. The geologist learned of the active landslide from the public records kept by the city and County. He informed the insurer that thirteen months before it issued the policy the county had sent notice to all homeowners, including the insured, advising the homeowners of the active landslide.

After completing its investigation, with the advice of counsel, the insurer did the following:

  1. It advised the insured that the policy was rescinded from its inception because of the concealment of a material fact.
  2. The insured had concealed the fact of the landslide.
  3. With the notice the insurer returned the $9,375.00 premium.
  4. It advised the insured that even if it had not rescinded the policy it would have denied his claim as one that was not fortuitous.
  5. The investigation showed that the landslide had started before the inception of the policy.
  6. The insurer further advised the insured that the loss in progress rule barred any recovery.
  7. The insurer recommended that the insured present his claim, if he still wished to pursue it, to the insurer who insured him against earth movement at the time of the loss.

The insurer, reasonably concluded that although the loss was progressive and continuous it was fairly certain that a loss had occurred on or before the insured learned of the landslide.

Of course, the insured did not have earth movement insurance at the time of the notice and bought the insurance from the surplus line insurer in an attempt to recover for the loss that had already occurred.

The insured, if asked, would testify that he had no intent to defraud his insurer. He would testify that the insurer, if it had asked him, would have been told the truth. All he was doing was taking an economic advantage over a lazy insurer who did not bother to ask.

What the lawyer/insured would have said, on its face, sounded reasonable. It wasn’t true. He knew of a material fact that would affect the decision of his insurer to insure him. He concealed that fact from the insurer. He intended to conceal the fact from the insurer. Had the insurer known the truth it would not have issued a policy for a loss that was in progress since, by definition, insurance only reacts to a contingent or unknown event.

The insured, in fact, attempted a fraud. His action in fraudulently getting an earth movement policy was reprehensible. His actions in buying the earth movement policy were no less a fraud than if he set the house aflame and made claim on his fire insurance.

Insurance is, as the lawyer should have known at the time, a contract where one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.

As a lawyer the intentional concealment of a material fact with the intent to deceive an insurer to its detriment is fraud, a criminal act, and if convicted, grounds for disbarment. For that reason, the insured accepted the denial and did nothing further about the claim.

Had the insurer not done the minimum investigation and retained the services of a competent engineer it would have paid the $2,500,000.00 claim. Had the insured’s fraud been presented to a prosecutor he could have been arrested, tried and convicted of attempted insurance fraud and would have been disbarred.

He was lucky that the insurer agreed to a mutual rescission of the policy, a return of the premium, and to forget what was attempted.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Go to the Insurance Claims Library – https://lnkd.in/gwEYk.

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Lies on Insurance Application Expensive

False Statement on Application Requires Rescission

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See the full video at https://rumble.com/v4so850-lies-on-insurance-application-expensive.html  and at https://youtu.be/gkVUNGWdGig

Plaintiff Kimberli Orr obtained no-fault automobile insurance from defendant USA Underwriters and was involved in an automobile collision. Defendant denied plaintiff’s claim for benefits because it discovered that plaintiff made material misrepresentations on her application for insurance. Defendant argued that it was entitled to rescind and void plaintiff’s insurance policy, and the trial court granted defendant summary disposition

In Kimberli Orr v. USA Underwriters, No. 363452, Court of Appeals of Michigan (April 25, 2024) the Court of Appeals resolved the dispute.

THE APPLICATION

In plaintiff’s application for no-fault insurance from defendant, plaintiff Misrepresented that all drivers who might operate her vehicle, including residents of her household, were listed on the application, and that her driver’s license had been suspended or revoked anytime in the three-year period before she applied for the insurance. Defendant issued the policy and, unfortunately, on the next day, plaintiff was involved in an automobile collision.

THE INVESTIGATION

Plaintiff made a claim for insurance benefits for the damages she sustained in the collision. During defendant’s investigation of plaintiff’s claim, defendant discovered that plaintiff’s grandmother lived with her, but she was not listed on the insurance application. Thus, defendant refused to pay plaintiff any benefits, voided plaintiff’s policy, and sent her a check for the premiums she had paid. Plaintiff cashed the check essentially accepting the insurer’s rescission then changed her mind and sued defendant. During discovery, defendant learned that plaintiff’s license had been suspended for three-days within the three years before plaintiff sought insurance from defendant.

THE MOTION FOR SUMMARY JUDGMENT

Defendant moved for summary disposition because, it argued, plaintiff made material misrepresentations on her insurance application that entitled defendant to rescind and void her insurance policy. In addition to evidence of the grandmother’s residence, defendant also submitted plaintiff’s driving record confirming that her license had been suspended for three-days within the three-year period before she applied for the insurance. Defendant further submitted affidavits from its underwriters that confirmed that it would not have issued plaintiff an insurance policy if it had known of the misrepresentations.

The trial court found that plaintiff made a reckless and material misrepresentation on her insurance application regarding her license, and that defendant relied upon that misrepresentation when it issued plaintiff the insurance policy. The trial court granted defendant summary disposition.

ANALYSIS

Summary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. The trial court focused on plaintiff’s driving record, rather than the grandmother’s residence, and the Court of Appeals did the same. As a result, an insurance policy is subject to common law contract defenses, including fraud, because the no-fault act does not prohibit an insurer from such defenses. Generally, fraud in the inducement to enter a contract renders the contract voidable at the option of the insurer. To establish fraudulent action, an insurer showed:

  1. that plaintiff made a material representation;
  2. that it was false;
  3. that when plaintiff made it, she knew it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion;
  4. that she made it with the intention that it should be acted on by defendant;
  5. that defendant acted in reliance upon it; and
  6. that defendant thereby suffered injury.

A misrepresentation is material when an insurer would not have issued a policy if the misrepresentation had been known to the insurer. Plaintiff argued that her misrepresentation with regard to her driving record was not made knowingly or recklessly because she did not receive notice of the license suspension. Plaintiff’s argument is misplaced, however, because the law requires her to know her driving status, i.e., whether or not she is a licensed driver, because only a licensed driver may drive.

Rescission is justified without regard to the intentional nature of the misrepresentation, as long as it is relied upon by the insurer. In this case, defendant provided affidavits that demonstrated that it relied on plaintiff’s misrepresentations because it would have offered plaintiff’s policy at a different price, or not at all, if it had known that plaintiff’s license had recently been suspended.

Rescission is an equitable remedy. An insurer is not precluded from availing itself of traditional legal and equitable remedies to avoid liability under an insurance policy on the ground of fraud in the application for insurance, even when the fraud was easily ascertainable and the claimant is a third party.

Fraud in the procurement of an insurance policy essentially taints the entire policy and all claims submitted under it, thereby invalidating the policy in a manner that suggests no policy ever existed.

ZALMA OPINION

Although an accident the day after a policy comes into effect is a classic red flag of fraud there was no need to prove the accident was less than honest since it was easily established the insured lied on her application for insurance. A material misrepresentation on an application even if unintentional is a basis for rescission in most states and specifically in Michigan. Whatever Ms. Orr would have collected from her no-fault insurer was lost because she lied.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Go to the Insurance Claims Library – https://lnkd.in/gwEYk.

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Zalma’s Insurance Fraud Letter – May 1, 2024

ZIFL Volume 28, Issue 9

Happy Law Day

Subscribe to ZIFL Here 

Post 4791

See the full video at https://rumble.com/v4sh6jf-zalmas-insurance-fraud-letter-may-1-2024.html and at https://youtu.be/fa4vlHi7FjE

The Source for the Insurance Fraud Professional

Zalma’s Insurance Fraud Letter (ZIFL) continues its 28th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ This issue contains the following articles:

What is Insurance Fraud?

Next to tax fraud, insurance fraud is the most practiced crime in the world. It is perpetrated by members of every race, religion, and nationality. It is found in every profession. The possibility of a tax-free profit when coupled with the commonly held belief that criminal prosecution will probably not occur, is sometimes too difficult for normally honest people to resist.

Adapted from my book  Insurance Fraud Volume I Second Edition Available as a Kindle book; Available as a Hardcover;  Available as a Paperback

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

Man Bites Dog & Dog Bites Back

Third Circuit Compels Arbitration of IFPA Qui Tam Claims

The Insurance Fraud Prevention Act (IFPA) allows insurers to sue health care providers pursuing insurers with assignments of benefits from personal injury protection (PIP) claims (no fault insurance) on behalf of the state. GEICO did so against multiple health care providers who asked the court to compel GEICO to arbitrate each potential fraud claim.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

More McClenny Moseley & Associates Issues

This is ZIFL’s twenty seventh installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana.

April 3, 2024 – Monson v. MMA, et al files a First Amended Complaint for Class Action and Damages in the USCA for the Southern District of Texas, Houston Division, Civil Action No. 4:23-cv-00928.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

Now Available New Book

 The Compact Book of Adjusting Property Claims – Fourth Edition

On January 2, 2024, in Kindle, paperback and hardback formats, The Compact Book of Adjusting Property Claims, Fourth Edition is now available for purchase here and here. The Fourth Edition contains updates and clarifications from the first three editions plus additional material for the working adjuster and the insurance coverage lawyer.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

Criminal Tries to Get Out of Sentence

Fraudster Fails to Obtain Post Conviction Relief

Robert Sitler appealed from the order that dismissed his petition filed pursuant to the Post Conviction Relief Act (“PCRA”). A jury found him guilty of homicide by vehicle and the trial court, sitting without a jury.

In Commonwealth Of Pennsylvania v. Robert Sitler, No. 2946 EDA 2022, J-S20044-23, Superior Court of Pennsylvania (April 11, 2024) the appellate court refused to provide relief for Sitler.

From the

Tyburious M. Heyward, an insurance fraud ringleader who specializes in staged automobile accidents, has pleaded guilty in Sumter, South Carolina.

Heyward recruited dozens of individuals to participate as drivers and passengers in intentional automobile collisions to collect insurance payouts for nonexistent injuries from multiple insurance companies. Heyward directed his co-conspirators to seek unnecessary medical treatment for specific, subjective injuries and symptoms. Heyward also provided and directed the use of false medical, residency, identity, and lost wages documents throughout the claims processes. Heyward previously served time in prison for similar conduct. In fact, while incarcerated in the South Carolina Department of Corrections, Heyward used a contraband cell phone to recruit others to conduct staged accidents at his direction in this recent case. This case was prosecuted by Special Assistant Attorney General Joshua Underwood, the Director of SCDOI’s Insurance Fraud Division and investigated by agents of the South Carolina Law Enforcement Division (SLED) Insurance Fraud Unit.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

Health Insurance Fraud Convictions

Doctor Convicted for $5.4M Medicare Fraud Scheme

Adarsh Gupta, M.D., 51, of Sewell, New Jersey, a federal jury convicted a New Jersey doctor today for causing the submission of over $5.4 million in fraudulent claims to Medicare for orthotic braces ordered through a telemarketing scheme.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

Insurer Immune from Malicious Prosecution Suit

SIU Report to State Made in Good Faith Makes it Immune from Suit for Malicious Prosecution

In The Hanover Insurance Group, Inc; and Michael Arline, Jr., v. Luke Frazier, No. 2D22-1689, Florida Court of Appeals, Second District (April 3, 2024) Luke Frazier sued The Hanover Insurance Group, Inc., and Michael Arline, Jr., an employee in Hanover’s Special Investigations Unit, for malicious prosecution.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

New Book Now Available from Barry Zalma

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims. The book also examines recent developments in areas such as arson investigation procedures, bad faith, extracontractual damages, The fake burglary, and Lawyers Deceiving Insurers, Courts & Their Clients During, Catastrophes—A New Type Of Fraud and the appendices includes the NAIC Insurance Information and Privacy Protection Model Act and usable forms for everyone involved in claims and will provide necessary information to the claims adjuster, SIU fraud investigator, claims manager, or coverage lawyer so he or she can be capable of excellence.

The newest book joins other insurance, insurance claims, insurance fraud, and insurance law books by Barry Zalma all available at the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Other Insurance Fraud Convictions

Self Proclaimed ‘Godfather’ Gets 54 Years In Prison About a $150M Southern California Workers’ Comp Scheme

Peyman Heidary, 53, a man, who Riverside County Superior Court records say called himself “The Godfather,” was ordered to serve 54 years in state prison and pay $23 million in fines for masterminding a criminal organization that attempted to bilk the state out of $150 million in a workers’ compensation fraud the District Attorney’s Office said on Monday, April 15.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

Criminal’s Money Stays With State

Assets Forfeited to State are not Subject to Attachment

In B.D. v. Sussex County Prosecutor’s Office, No. A-1781-22, Superior Court of New Jersey, Appellate Division (April 19, 2024) the court dealt with the claims of a victim of a sex offender who attempted to get assets of offender that was forfeited to the state.

In this declaratory judgment action, plaintiff, B.D., appealed from the Law Division’s order dismissing his complaint, in which he sought to obtain proceeds forfeited to the Sussex County Prosecutor’s Office (SCPO) in a related health care insurance fraud case.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

Houston Attorney Eric B. Dick Faces Sanction Again

Eric B. Dick, a well-known plaintiffs’ attorney in Houston, faces significant legal repercussions for the second time in recent months due to his litigation practices. Galveston County District Court Judge Kerry L. Neves recently ruled that Dick filed a groundless lawsuit against Standard Casualty Co. in bad faith, resulting in a summary judgment ordering Dick and the Dick Law Firm to reimburse the insurer over $100,000. This judgment follows a similar sanction of $137,000 in Harris County Civil Court against Dick for frivolous litigation against the same insurer.

Read the complete article and the full issue of ZIFL in Adobe .pdf format here.

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   for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Over the last 55 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.

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455

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Criminal’s Money Stays With State

Assets Forfeited to State are not Subject to Attachment

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See the full video at  https://youtu.be/lRkLuhZqa8M  and at https://rumble.com/v4s9np9-criminals-money-stays-with-state.html

In B.D. v. Sussex County Prosecutor’s Office, No. A-1781-22, Superior Court of New Jersey, Appellate Division (April 19, 2024) the court dealt with the claims of a victim of a sex offender  who attempted to get assets of  offender that was forfeited to the state.

In this declaratory judgment action, plaintiff, B.D., appealed from the Law Division’s order dismissing his complaint, in which he sought to obtain proceeds forfeited to the Sussex County Prosecutor’s Office (SCPO) in a related health care insurance fraud case.

FACTS

Troy Leonard, an in-home therapist who treated multiple minors, including plaintiff, who had attention-deficit/hyperactivity disorder, autism, and other undiagnosed learning disabilities. Between September 2015 and November 2015, while the SCPO investigated Leonard for allegations of sexual assault of minors, it discovered Leonard committed health care insurance fraud between 2014 and 2015. SCPO investigators uncovered multiple bank accounts containing the proceeds of that fraud and determined Leonard purchased four vehicles between 2014-2015, when the suspected health care fraud claims occurred.

In 2015, the SCPO obtained an order to seize and restrain those bank accounts, which the court granted. Leonard was arrested and charged with multiple counts of sexual abuse of minors, including plaintiff, and thirty-eight counts of second-degree health care claims fraud for allegedly billing insurance companies for services he did not render. Altogether the SCPO seized $610,228.15 and four vehicles.

The court entered a final judgment by default in favor of the State, with title vesting in Sussex County for the property on April 18, 2016.

Leonard pleaded guilty in the criminal matter in May 2016 and entered into a stipulation of settlement pursuant to a plea agreement, agreeing to forfeit the seized property. In 2016 plaintiff’s legal guardians initiated a separate civil action against Leonard seeking civil zdamages stemming from the sexual abuse.

On September 16, 2016, Leonard was convicted of multiple counts of second-degree sexual assault and second-degree health care fraud by a practitioner. Later a final judgment was issued in plaintiff’s favor against Leonard. Plaintiff was awarded $700,000 in compensatory damages and $100,000 in punitive damages.

Plaintiff sued the SCPO for declaratory judgment seeking to satisfy his award from the forfeited proceeds in the amount of the judgment. The trial court concluded plaintiff did not have standing to bring a claim against SCPO for the forfeited proceeds.

DISCUSSION

Plaintiff argued he had standing to bring his declaratory judgment claim against defendant because he had a personal interest in the matter, there is a significant public interest, and there is an actual controversy between the parties.

The appellate division concluded that Plaintiff lacked standing to assert an entitlement to the forfeited proceeds. A plaintiff must have a sufficient stake in the outcome of the litigation, a real adverseness with respect to the subject matter, and there must be a substantial likelihood that the plaintiff will suffer harm in the event of an unfavorable decision. The pivotal question before the Appellate Division was whether plaintiff had an interest sufficient to support this declaratory judgment action.

Since the final judgment of forfeiture severed all property interests Leonard had in the funds held in the bank accounts and cars months before plaintiff obtained a writ of attachment to Leonard’s property on August 5, 2016, and nearly a year before plaintiff obtained the final judgment in the civil action, Leonard had no funds to attach.

A writ reaches only ascertainable property of the defendant in attachment. Here, the proceeds were no longer Leonard’s property when the writ of attachment issued, and later when final judgment was entered. The final judgment of forfeiture eliminated Leonard’s ownership of the money and vehicles

Plaintiff had no right to notice of the forfeiture because the final judgment for forfeiture was issued on April 18, 2016, and plaintiff did not file his complaint until July 7, 2016.

ZALMA OPINION

The plaintiff is clearly a victim of Mr. Leonard. He obtained a judgment against Leonard. He could attach any property belonging to Leonard. However, Leonard had no property worth attaching since the state took his property – obtained by fraud – by forfeiture.  There is no question that a fraud perpetrator cannot be allowed to profit from his fraud, even if his victims were harmed and should be able to collect a judgment, it can only collect from honestly obtained assets.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg.

Go to the Insurance Claims Library – https://lnkd.in/gwEYk.

and at https://youtu.be/lRkLuhZqa8M

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Telling the Truth Can’t Be Defamatory

After Health Provider Entity’s Management is Arrested for Fraud Reporting Suspicion to Beneficiaries is not Defamation

Post 4789

See the full video at  https://rumble.com/v4rreyk-telling-the-truth-cant-be-defamatory.html and at https://youtu.be/LvvId3sEt_w

It is Chutzpah to Charge Defamation About a True Statement

BrainBuilders, LLC appealed from an order granting summary judgment in favor of defendants Optum, Inc., et al (collectively, defendants) in Brainbuilders, LLC v. Optum, Inc., Optum Services, Inc., et al, No. A-0621-22, Superior Court of New Jersey, Appellate Division (April 19, 2024) resolved claims of defamation.

FACTS

Letters dated July 25, 2017 and August 2017 sent by the Optum entities to BrainBuilders’ patients following an investigation into purported fraud by individuals associated with BrainBuilders.

BrainBuilders provides healthcare services to children on the autism spectrum. As an out-of-network or non-participating healthcare provider, BrainBuilders receives reimbursement for claims only if a patient’s health insurance plan allowed “out-of-network benefits” or the insurer made a “single case agreement” for the patient’s care.

The Optum entities are the health claims administrator for health plans issued or administered by the Oxford entities and UHC entities. The Optum entities do not sell or issue health insurance policies. Rather, they provide support for defendants who issued health insurance policies to individual insureds. The Optum entities also evaluate insurance claims submitted by providers to its affiliated insurers, including BrainBuilders. The Optum entities often investigate whether a provider has requested reimbursement beyond the provider’s entitlement, such as by misrepresenting or inflating the services provided.

In June 2017, four individuals related to the management of BrainBuilders were arrested and charged with conspiracy to defraud Medicaid. A criminal complaint, alleging misappropriation of funds, was filed against several individuals affiliated with BrainBuilders. The arrests were reported in the news media and the Optum entities learned of the arrests on July 14, 2017.

Subsequently the Optum entities sent letters to BrainBuilders’ patients insured by the Oxford and UHC entities (July 2017 letters). The July 2017 letters explained the Optum entities were suspending payment for services provided by BrainBuilders due to potential insurance fraud and other violations of state and federal law.

BrainBuilders sued defendants asserting the following causes of action:

  1. conspiracy;
  2. tortious interference with business relations;
  3. tortious interference with prospective economic advantage;
  4. negligence trade libel;
  5. defamation, libel, and slander; and
  6. unjust enrichment and
  7. quantum meruit.

BrainBuilders alleged the statements in the July and August 2017 letters were false and defamatory. Defendants moved for summary judgment and the motion judge granted defendants’ motion and dismissed BrainBuilders’ claims with prejudice. Further, around the same time period, the judge noted the Optum entities “separately uncovered evidence suggesting BrainBuilders was engaged in fraud, waste, or abuse.” Thus, the judge concluded, “[w]hen read with context, no reasonable person” could interpret the July or August 2017 letters “as fallacious or injurious.

The law of defamation is grounded on the principle that people should be free to enjoy their reputations unimpaired by false and defamatory attacks. To prevail on a defamation claim, a party must demonstrate: (1) the assertion of a false and defamatory statement concerning another; (2) the unprivileged publication of that statement to a third party; and (3) fault amounting at least to negligence by the publisher.

True Statements are not Actionable as Defamation.

Our courts have stated that true statements are absolutely protected under the First Amendment from liability for defamation. The allegedly defamatory statements in the July and August 2017 letters related to BrainBuilders’ “potential fraud,” potential “violations of state and federal law,” and concerns for “quality of care or member safety.” It is uncontroverted that several of BrainBuilders’ officers were arrested for conspiracy to defraud Medicaid in association with “income they received from BrainBuilders.” These individuals were arrested because they potentially committed fraud. Additionally, the arrests raised legitimate concerns regarding the quality of care rendered by BrainBuilders.

Moreover, BrainBuilders claimed it conferred only benefits to the insured members and not defendants. Under these circumstances, the Appellate Division was satisfied BrainBuilders failed to proffer any support for its unjust enrichment and quantum meruit claims.

ZALMA OPINION

It takes a certain amount of unmitigated gall to sue for defamation an entity that reported that the plaintiffs officers were arrested for Medicaid fraud, a major felony. Their officers were arrested – albeit I could find no report on the result of the charges – for insurance fraud, telling their customers about the arrests in good faith is not defamation since the statements were true.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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It is Nuts to Assume You are Covered

Driver Must Request UIM Coverage

Post 4748

See the full video at https://rumble.com/v4rk386-it-is-nuts-to-assume-you-are-covered.html and at https://youtu.be/NLNDduuiaxI

Kimberly Rogers appealed from a judgment of the Fayette Circuit Court granting Lyft, Inc.’s motion for summary judgment, Allstate Insurance Company’s motion for summary judgment, and Erie Insurance Exchange’s motion for judgment on the pleadings. In Kimberly Rogers v. Erie Insurance Exchange; Allstate Insurance Company; and LYFT, Inc., No. 2023-CA-0447-MR, Court of Appeals of Kentucky (April 19, 2024) the Court of Appeals resolved the dispute.

FACTS

Kimberly Rogers was a driver for Lyft, Inc. (Lyft) and was involved in an automobile accident with another motor vehicle. Rogers apparently suffered substantial physical injuries. The driver of the other motor vehicle negligently caused the accident and was insured by State Farm Automobile Insurance Company (State Farm). State Farm paid Rogers the policy’s liability coverage limits. At the time of the accident, Rogers’ vehicle was insured by Erie Insurance Exchange (Erie), and Lyft carried motor vehicle insurance with Allstate Insurance Company (Allstate). Both Erie and Allstate denied Rogers’ claims for underinsured motorist (UIM) benefits.

Rogers sued Erie, Allstate, and Lyft hoping one would provide UIM coverage.

STATUTORY REQUIREMENTS

Lyft is required by 601 KAR [Kentucky Administrative Regulations] 1:113 § 3(1) to maintain primary automobile insurance that provides coverage both for a driver who is logged into the Lyft application and for drivers engaged in a prearranged ride. Lyft is also required by 601 KAR 1:113 § 3(2) to maintain liability insurance, PIP [Personal Injury Protection] coverage, UM [Uninsured Motorist] coverage and UIM coverage for drivers who are logged into the Lyft application, who are not engaged in a prearranged ride.

Allstate insures Lyft under a policy of insurance that Defendant Allstate represents only provides the coverage required by KRS § 281.655(12) as a prearranged ride liability policy, which Allstate contends applies only when Plaintiff was carrying persons for Defendant Lyft.

Defendant Erie insures Plaintiff under a policy which it contends excludes UIM coverage for all transportation network company activities, whether as part of a pre-trip liability policy or prearranged ride liability policy.

To the extent that Defendant Allstate is contractually obligated to provide UIM coverage to Lyft drivers engaged in Lyft operations in the Commonwealth of Kentucky, and to the extent that Plaintiff was engaged in Lyft operations in the Commonwealth of Kentucky, Defendant Allstate is required to provide UIM coverage to the Plaintiff in an amount of at least $50,000. To the extent that it is determined that Plaintiff was not engaged in Defendant Lyft’s operations at the time of the collision Erie is required to provide UIM coverage to Plaintiff, not to exceed the limits of Plaintiff’s policy with Defendant Erie.

ANALYSIS

The Court of Appeals rejected Rogers’ contention that an ambiguity exists as to the exception to the UIM exclusion contained in the policy. Under its plain terms, the exception is triggered only if the automobile was “identified for Business use as indicated on the ‘Declarations.'” Rogers seizes upon the language on the declaration page that identified the use of her vehicle as “To work 10-14.” However, “To work” is commonly utilized to indicate that the insured drives the motor vehicle to and from work. Rogers admitted that her vehicle was not rated for business use as required under the exception to the UIM exclusion. Accordingly, the Court of Appeals concluded that Rogers was not entitled to UIM coverage under her policy of insurance.

Rogers additionally asserted that public policy requires Lyft and/or Erie to provide UIM coverage. Generally, UIM exclusions in motor vehicle insurance policies do not offend the public policy of the Commonwealth of Kentucky. UIM coverage is only required insurance coverage when the insured requests such coverage. The insured simply may disclose the business use of her motor vehicle and request UIM coverage rated for such use. She did not.

In sum, the Court of Appeals concluded that the circuit court properly rendered summary judgment in favor of Lyft, Allstate, and Erie and the judgment of the Fayette Circuit Court was affirmed.

ZALMA OPINION

Insurance, much to the surprise of some, is just a contract. It must be interpreted as written. UM and UIM coverage is available in the State of Kentucky if the insured requests the coverage and provides the insurer with information concerning the risk taken. Using a vehicle for Lyft is akin to the operation of a taxi cab and is not akin to a person who drives to and from work. By not properly asking for the coverage and advising the insurer of the risk, Ms. Rogers had no UM/UIM coverage.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Choking a Friend to Death Not a Covered Loss

Coverage Limited to Conduct of Business of Insured

Post 4787

See the full video at https://rumble.com/v4rb9tb-choking-a-friend-to-death-not-a-covered-loss.html  and at https://youtu.be/ywvsC-SIgrk

Jodi Greenlaw,  as personal representative of the estate of her late husband Philip J. Greenlaw (collectively, the Estate), appealed from a judgment of the Superior Court granting a motion for summary judgment filed by MMG Insurance Company (MMG) on MMG’s complaint seeking a declaratory judgment that it had no duty to indemnify Joseph McNeely, a close friend of Greenlaw, in a separate wrongful death action that the Estate filed against McNeely after Greenlaw’s death.

In MMG Insurance Company v. Estate Of Philip J. Greenlaw et al., 2024 ME 28, No. Cum-23-228, Supreme Court of Maine (April 18, 2024) the Supreme Court interpreted the policy as written.

BACKGROUND

In 2019, McNeely operated, as sole owner, a landscaping business called Cutter’s Edge Lawn Maintenance. MMG issued a businessowners insurance policy providing both property and liability coverage to McNeely (the MMG Policy).

McNeely had discussed with Greenlaw, his close friend, measuring and providing a proposal to hydroseed Greenlaw’s backyard. On May 20, 2019, Greenlaw hosted “an informal social group” of men at his house. The group “met year-round on Monday evenings to share their enthusiasm for motorcycles by eating, drinking, telling stories, and taking a ride together if the weather permitted.” The group also “discussed business-related topics” and “engaged in frequent business dealings.” McNeely attended these meetings when he could.

McNeely and Greenlaw went to the backyard, where McNeely measured and provided pricing for the project. Greenlaw said he planned to think about the project and would get back to McNeely about it. At around 8:00 p.m., Jodi returned home, and the men, including McNeely and Greenlaw, “wereinebriated.” After 10:00 p.m., Jodi asked how the measuring for the hydroseeding went, and either McNeely or Greenlaw told her about the project’s progress. “Late in the evening,” while “sitting and gabbing,” Greenlaw initiated a wrestling match with McNeely. During the wrestling bout, McNeely put Greenlaw in a chokehold, and Greenlaw lost consciousness and died soon after, despite McNeely’s efforts to revive him.

The MMG Policy, stated that MMG will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury to which this insurance applies. The MMG Policy defines an “insured” as anyone “designated in the Declarations” as an “individual . . . but only with respect to the conduct of a business of which [the named insured is] the sole owner.” (Emphasis added.)

DISCUSSION

The Estate contends that “whether Greenlaw’s death occurred with respect to the conduct of McNeely’s business” is a triable issue of fact and that the court “erred by discounting the ‘earlier business dealings’ and the litany of other facts . . . when summarily finding that the ‘wrestling itself was not business-related.'”

Unambiguous contract language, however, must be interpreted according to its plain meaning. The Supreme Court concluded that MMG Policy provision was unambiguous. The MMG Policy designated McNeely as an individual, and McNeely was thus covered as an insured, only with respect to the conduct of a business of which he was the sole owner.

The Supreme Court found that the trial court did not err in determining that there was no genuine issue of material fact and that McNeely’s actions while he was wrestling with Greenlaw were not with respect to the conduct of McNeely’s landscaping business.

Although it is undisputed that earlier in the evening McNeely had measured Greenlaw’s backyard and discussed his landscaping business with several individuals, there is no contention, that McNeely’s actions while wrestling with Greenlaw were to further McNeely’s business. In the opinion of the Supreme Corut an ordinary person would not think that the policy’s language would cover McNeely’s actions while wrestling with Greenlaw.

ZALMA OPINION

Getting drunk with a friend, entering into a wrestling match at the home of the friend, and choking his friend to death, could not be part of the landscaping business of the insured even though the two discussed business before the drinking and wrestling began. Wrestling and a fatal choke hold have nothing to do with landscaping.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Agent Binds Principal

Rejection of UIM Cover by Agent Valid

Post 4786

See the full video at https://rumble.com/v4r4aq5-agent-binds-principal.html  and at https://youtu.be/c5qaoVv0Pik

Brandon Lawrence appealed the trial court’s order finding Progressive Northern Insurance Co. (Progressive) made a valid, meaningful offer of underinsured motorist (UIM) coverage to his agent, Ashley Outlaw.

In Progressive Northern Insurance Co. v. Brandon Lawrence and Ashley Outlaw, No. 2024-UP-127, Appellate Case No. 2020-001245, Court of Appeals of South Carolina (April 17, 2024) the Court of Appeals explained the law of agency and its relationship to insurance.

FACTS

From 2008 to 2013, Lawrence and Outlaw lived together in the same house with their son; they never married. They split the household expenses, but Outlaw paid the bills and took care of any insurance needs. On August 19, 2009, Outlaw purchased an insurance policy from Progressive to cover Lawrence’s motorcycle; however, Lawrence did not discuss obtaining UIM coverage with Outlaw, nor did he read the policy, did not have any involvement in obtaining the policy, and did not have any contact with Progressive.

The application for the insurance policy was mailed to Lawrence and Outlaw. It listed Outlaw as “Married” and as an “Insured” and Lawrence as “Married” and as Outlaw’s “Spouse.” On September 5, 2009, Outlaw signed the application form and rejected Progressive’s offer of UIM coverage. Outlaw paid the premium for the policy, and Lawrence reimbursed her.

In May 2013, Lawrence was involved in a motorcycle accident. On August 12, 2016, Progressive filed a declaratory judgment action and sought a determination that UIM coverage was offered to Lawrence through his agent, Outlaw, and that Lawrence was bound by Outlaw’s rejection of UIM coverage. The trial court found Lawrence was bound by Outlaw’s rejection of UIM coverage because Lawrence appointed Outlaw as his agent to obtain the policy. Lawrence testified in his deposition and at trial that he knew Outlaw was getting insurance; that he asked her to do so; and that she had his permission to do so.

LAW, ANALYSIS, AGENCY

The Court of Appeals noted that it is well-settled that the relationship of agency between a husband and wife is governed by the same rules which apply to other agencies, and no presumption arises from the mere fact of the marital relationship that one spouse is acting as agent for the other. An agency relationship may be, and frequently is, implied or inferred from the words and conduct of the parties and the circumstances of the particular case.

Therefore, the Court of Appeals held that an agency relationship existed between Lawrence and Outlaw and that Outlaw’s rejection of UIM coverage bound Lawrence. Lawrence stated he assumed Outlaw would purchase UIM coverage, he did not discuss such optional coverage with her, read the policy, check to see if the policy included UIM coverage, or have any contact with Progressive himself. Lawrence gave Outlaw the authority to obtain the insurance policy, and he is bound by Outlaw’s rejection of UIM coverage. To hold otherwise would allow Lawrence to benefit from Outlaw’s procurement of the policy but not be bound by her rejection of UIM coverage.

MEANINGFUL OFFER OF UIM COVERAGE

Automobile insurance carriers must, by statute, “offer, at the option of the insured, underinsured motorist coverage up to the limits of the insured liability coverage . . . .” S.C. Code Ann. § 38-77-160 (2015).

Progressive’s application included the words “Underinsured Motorist Coverage” and several paragraphs that explained what such coverage entailed. Additionally, the information about UIM coverage offered by Progressive was not found in a separate form, the UIM information and rejection form was included within the main application that Outlaw received and signed.

Progressive made a meaningful offer of UIM coverage to Lawrence’s agent, Outlaw.

Progressive’s offer of UIM coverage was made through a form it sent to Lawrence by mail. Progressive’s offer of UIM coverage specifically outlined the limits. Progressive intelligibly advised Outlaw, who acted as Lawrence’s agent, of the UIM coverage.

Outlaw had experience purchasing insurance in the past by regularly handling the insurance needs of the household.

ZALMA OPINION

It’s sad that Lawrence was injured by an underinsured motorist and could not recover from his motorcycle policy because his “wife” rejected Progressive’s offer of UIM coverage as his agent for the motorcycle policy and other insurance policies for their “family.” The case ignored the fact that she lied on the application about a material fact claiming that Outlaw and Lawrence were married, when they were not. If that was a fact material to the decision of Progressive to issue the insurance it could have declared the policy void for material misrepresentation of fact or rescind the policy. Not necessary because there was no UIM cover.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Assets Forfeited as Restitution for Murder for Profit

Insurance Companies are Victims When Wife Killed for Insurance Money

See the full video at https://rumble.com/v4qwsv3-assets-forfeited-as-restitution-for-murder-for-profit.html and at https://youtu.be/0zcpwPVIJ6M

Post 4785

Secondary Beneficiaries Have No Right to Insurance Proceeds Obtained by Father as a Result of Murder of Mother

Julian and AnaBianca Rudolph (jointly, “Petitioners”) sued by a Verified Petition for Adjudication of Interests in Property Ordered Forfeited (“Petition”) and a memorandum of law in support. In United States Of America v. Lawrence Rudolph, and Lori Milliron, CRIMINAL No. 22-cr-012-WJM, United States District Court, D. Colorado (April 12, 2024) the USDC resolved the dispute finding the insurers, not the secondary beneficiaries were the victims of the fraud.

BACKGROUND

On August 1, 2022, Defendant Lawrence Rudolph (“Defendant”) was convicted by a jury of committing foreign murder. The jury also convicted him of committing mail fraud. With respect to Count 2, nine insurance policies paid claims out due to the mail fraud.

On May 17, 2023, the Court entered its Preliminary Order of Forfeiture, which determined which specific assets are forfeitable by Defendant. On August 21, 2023, the Court conducted the sentencing hearing as to Defendant, at which it also addressed restitution and forfeiture. The Court ordered that Defendant must pay $4,877,744.93 in restitution to the insurance company victims as set forth in the life insurance payments.

FACTUAL ALLEGATIONS

Petitioners are the daughter and son of the deceased, Bianca Rudolph, and Defendant. They petitioned the USDC for an ancillary hearing based on their legal interest, both personally and on behalf of their deceased mother’s estate, in certain assets this Court has ordered forfeited to the United States.

Prior to her death, Bianca Rudolph obtained nine life insurance policies from seven different insurance carriers Petitioners are specifically listed as contingent beneficiaries on three of the insurance policies, meaning they would receive the proceeds if the primary beneficiary (namely, Defendant or the Rudolph Trust) is disqualified in any way.

Defendant began collecting on the life insurance policies almost immediately after Bianca Rudolph’s death in October 2016, receiving $4,877,744.93 in insurance proceeds between January and March 2017. In doing so, he hid the fact that he murdered Bianca Rudolph.   He was tried and convicted of murder and fraud in August 2022.

After the conclusion of the trial, the Government moved for an order that Defendant: (1) forfeit property identified as proceeds of his insurance fraud offense; and (2) pay mandatory restitution to the victims of his crimes.

ANALYSIS

To establish that they have statutory standing Petitioners must first demonstrate that they have a legal interest in the property to contest the forfeiture. Petitioners have the burden to prove a legal interest in the property exists.

Petitioners argued that they were the beneficiaries of a constructive trust over the assets subject to forfeiture. The Court concluded that Petitioners have not met their burden to establish that they are entitled to a constructive trust under Arizona law. As a result, they cannot establish that they have standing to contest the forfeited property.

Elements of Equitable Constructive Trust

In Arizona, a court may impose a constructive trust when title to property has been obtained through actual fraud, misrepresentation, concealment, undue influence, duress, or similar means, or if there has been a breach of fiduciary duty. The Arizona cases do say a constructive trust can be imposed in situations where it is necessary to compel one who unfairly holds a property interest to convey that interest to another to whom it justly belongs.

Party to Whom the Insurance Proceeds “Justly Belong”

The Court found that Petitioners are not entitled to a constructive trust. To establish standing for a constructive trust, Petitioners must establish that they are asserting their own rights and not those of third parties.

Petitioners reiterate that they, or trusts that ultimately benefit them, are the contingent beneficiaries of the life insurance policies, and with limited exceptions, the insurance companies agree that they are the proper beneficiaries of those policies.

Whether an Adequate Remedy at Law Exists

The Court agreed with the Government’s position because the insurance companies, not Petitioners, are the victims of Defendant’s fraud and have selected an adequate remedy at law: restitution. This element of the constructive trust analysis is designed for the defrauded party-here, the insurance companies.

The Court concluded that Petitioners lack standing to continue with the ancillary proceeding under Federal Rule of Criminal Procedure 32.2(c) and dismisses their Petition.

ZALMA OPINION

The fact that the Petitioners – the children of the murdered woman who was murdered by their father – sought the proceeds of his crime, the insurance proceeds was understandable. However they would not have received the money if she died of natural causes. They were not the victim of the insurance fraud, they were victims of their father’s criminal conduct who killed their mother but that did not give them a right to the insurance proceeds.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Insurer Immune from Malicious Prosecution Suit

SIU Report to State Made in Good Faith Makes it Immune from Suit for Malicious Prosecution

Post 4784

See the full video at https://rumble.com/v4qea4l-insurer-immune-from-malicious-prosecution-suit.html  and at https://youtu.be/_3Hc8MniqRE

In The Hanover Insurance Group, Inc; and Michael Arline, Jr., v.  Luke Frazier, No. 2D22-1689, Florida Court of Appeals, Second District (April 3, 2024) Luke Frazier sued The Hanover Insurance Group, Inc., and Michael Arline, Jr., an employee in Hanover’s Special Investigations Unit, for malicious prosecution after Frazier was acquitted of charges of making a false statement in support of an insurance claim and grand theft arising from statements Frazier made to Hanover in connection with an insurance claim.

Hanover and Arline defended claiming immunity from suit under section 626.989(4)(c), Florida Statutes (2011). The trial court rejected the claims of immunity and ultimately entered judgment in favor of Frazier. Hanover and Arline appealed.

THE IMMUNITY STATUTE

Every insurer admitted to do business in Florida is statutorily required to establish and maintain an “anti-fraud investigative unit” or division, commonly called a special investigations unit (SIU), to investigate and report possible fraudulent insurance acts by insureds or by persons making claims against policies held by insureds. If an insurer has knowledge or believes that a fraudulent insurance act has been committed, it must send a report to the Division of Investigative and Forensic Services (“DIFS”) detailing the information it has giving rise to its suspicion. This reporting is mandatory. Upon receiving a report, DIFS conducts an independent investigation. Should DIFS’s investigation lead it to conclude that there has been a violation of law, it is required by statute to report it to the state attorney.

As part of this legislatively mandated anti-fraud program, section 626.989(4)(c) provides insurers and their employees immunity from civil actions, absent fraud or bad faith, arising out of the furnishing of the information required by the statute.

FACTS

Arline, as an SIU investigator, investigated a dispute that arose after Frazier was involved in a minor collision while driving a car owned by a Hanover insured, Marvic Grant. The driver of the other car involved in the collision, Wendy Williams, filed a claim with Hanover.

Williams’ claim went unresolved for almost a month while Hanover tried unsuccessfully to get a statement from Grant and Frazier. When the adjuster finally spoke to Frazier, his description of the collision and the resulting damage was different than the account Williams had provided. Frazier told Hanover that as the cars approached the toll plaza, Williams accelerated to get in front of him and the rear passenger side of her car hit the front driver’s side of his car which then pushed his car into yellow posts near the toll booth causing damage to the passenger side of his car, not just the driver’s side. Relying on Frazier’s statement, Hanover’s adjuster told Williams that he was holding her fifty percent responsible for the accident and that Hanover would compensate her accordingly. Williams told the adjuster this was unacceptable and that she intended to contact her carrier and retain an attorney.

Unbeknownst to Williams, at the time this took place Grant had filed a claim with Hanover for damage to her car, which included damage to the passenger side of the car. Williams first learned of Grant’s claim when she got a subrogation letter from Hanover stating it was holding her responsible for nearly $5,000 in damages to Grant’s car. Williams was stunned at the amount because the damage to Grant’s car, as well as hers, had been minor.

Williams advised Hanover her belief that Frazier and Grant were acting fraudulently because they were claiming that both sides of Grant’s car were damaged in the collision with her car. Hanover assigned Arline to investigate the conflicting accounts given by Frazier and Williams. Williams filed a fraud report with DIFS alleging that Frazier and Grant were claiming damage to Grant’s car that was not related to the accident in which she was involved. Based on Williams’ allegations, DIFS opened an investigation.

Arline, completed his investigation and concluded Grant should have filed two claims with Hanover, not one, and been subject to two deductibles. DIFS determined that there was probable cause to believe that Grant and Frazier “made material misrepresentations of fact in their claim” with Hanover in that they claimed Grant’s car was damaged on the passenger side during the accident when it was not.  Frazier and Grant were charged with making a false statement to an insurance company and grand theft. After a jury found Frazier not guilty, he sued for malicious prosecution against Hanover and Arline.

CONCLUSION

Absent fraud or bad faith, section 626.989(4)(c) immunizes insurers and their employees if they have done what is required by the anti-fraud statute. Frazier’s evidence entirely failed to show fraud or bad faith in connection with Arline’s investigation or report to DIFS. Accordingly, Arline and Hanover were statutorily immune from suit, and the judgment in favor of Frazier was reversed.

ZALMA OPINION

States like Florida realize that insurance fraud makes it difficult or impossible for insurers in the state to make a profit and provide affordable insurance to its citizens. By requiring insurers to maintain an SIU and report all suspected insurance fraud to the DIFS, it hopes to reduce the impact of insurance fraud. Acting on the report of Ms. Williams and Hanover’s SIU, Frazier was arrested for fraud, tried, and acquitted. Since Hanover and its SIU reported in good faith it was immune from suit and the judgment in favor of Williams was reversed and the intent of the statute was enforced

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Criminal Tries to Get Out of Sentence

Fraudster Fails to Obtain Post Conviction Relief

Post 4783

See full video at https://rumble.com/v4q6s6x-criminal-tries-to-get-out-of-sentence.html and at https://youtu.be/T8izcEXer9k

Robert Sitler appealed from the order that dismissed his petition filed pursuant to the Post Conviction Relief Act (“PCRA”). A jury found him guilty of homicide by vehicle and the trial court, sitting without a jury.

In Commonwealth Of Pennsylvania v. Robert Sitler, No. 2946 EDA 2022, J-S20044-23, Superior Court of Pennsylvania (April 11, 2024) the appellate court refused to provide relief for Sitler.

BACKGROUND

On November 12, 2012, just before 9 p.m., Sitler was driving his truck along a two-lane road with a center turning lane. His girlfriend, Denise Dinnocenti, and her children were passengers in the truck. Sitler was driving Dinnocenti to a dance rehearsal, which started at 9 p.m.

Regina Qawasmy was driving in front of Sitler, who was following very closely behind her. As she prepared to turn right, she noticed a young man, later identified as 16-year-old Timothy Paciello, standing in the center lane waiting to cross the street. Prior to turning, Qawasmy began to decrease her speed. Suddenly, Qawasmy heard the revving of an engine and then saw a flash, which she later learned was Paciello flying into the air.

According to Dinnocenti, Sitler, while driving behind Qawasmy, sped around Qawasmy on the left and into the center lane, going 50 miles per hour in a 35 mph zone. Sitler did not see Paciello in the lane and as a result, struck him with his truck.

After striking Paciello, Sitler pulled into a nearby parking lot. He handed his keys over to Dinnocenti and instructed her and her children to tell the police that she was driving. When police arrived, Dinnocenti did as Sitler had said and told them that she was driving. At the scene and in a later written statement, Sitler likewise claimed that Dinnocenti was driving. The fraud failed because the police later recovered surveillance footage from the Sunoco gas station across the street from the accident. The footage showed Paciello walking into the center lane and then out of sight of the video. A few moments later, Sitler’s truck is seen speeding down the center lane. Officer Matthew Meitzler informed Dinnocenti that there was footage of the accident. Eventually, both Dinnocenti and Sitler admitted that he was driving the vehicle.

The case then proceeded to a three-day trial, after which Sitler was convicted. He was sentenced to an aggregate term of eight and one-half to seventeen years’ incarceration. In addition, on the first day of trial, Sitler entered an open guilty plea to insurance fraud, conspiracy to commit insurance fraud, false reports to law enforcement and other charges relating to the false statements about who was driving. At trial the court informed the jury about his prior vehicular manslaughter conviction.

ANALYSIS

Sitler claimed that that the lower court erred by denying relief on his claim that his trial counsel provided ineffective assistance by not objecting to the jury instruction offered by the lower court prior to admission of his prior manslaughter conviction. He asserts that trial counsel consulted with an accident reconstruction expert, but he “r[a]n out of funds” by the time of trial and was unable to afford the services of the rebuttal witness.

The PCRA court properly denied Sitler’s claim for lack of prejudice because Sitler failed to demonstrate a reasonable probability that a request for funds to retain an accident reconstruction expert as a rebuttal witness would have changed the result of his trial. That proffer may have been sufficient for proving that trial counsel’s failure to request indigent funding deprived him of a rebuttal witness, but it did nothing to advance Appellant’s burden to demonstrate that he was prejudiced by trial counsel’s failure to pursue funds for an expert rebuttal witness.

The appellate court agreed with the PCRA court that there was overwhelming evidence of Appellant’s guilt and that Appellant was unable to show prejudice by demonstrating that a successful petition for rebuttal expert funds would have resulted in a different trial verdict.

For the foregoing reasons, the appellate court concluded that the PCRA court did not err or abuse its discretion in dismissing Appellant’s post-conviction petition without a hearing.

ZALMA OPINION

Mr. Sitler caused the death of a teenager by driving around a car ahead of him, struck and killed a teenaged pedestrian, caused his girlfriend to lie to the police about who was driving and admitted to insurance fraud and multiple other crimes relating to the manslaughter only to have a jury convict him of the death of the teenager. He tried to reduce his sentence with claims of a poor defense lawyer and lack of funds. The court didn’t buy his arguments and he will, thankfully for pedestrians everywhere, stay in jail.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Unclear Language in Policy Interpreted in Favor of Property Owner

Homeowner Is Found to be a Beneficiary of Forced Placed Insurance

See the full video at https://rumble.com/v4pzy46-unclear-language-in-policy-interpreted-in-favor-of-property-owner.html  and at https://youtu.be/1N3KeQW1ZhQ

Post 4782

Keith Rath was unhappy with Arch Insurance Company over coverage for damage from the Derecho (windstorm) that hit Cedar Rapids in 2020. Rath’s bank holding a security interest in his home contracted with Arch to obtain a force-placed policy after Rath’s homeowners insurance lapsed. When Rath sued Arch for breach of contract and related claims, Arch argued that he had no right to sue because Rath was not an intended third-party beneficiary of the contract between Arch and the bank.

Keith Rath and Dennis Faltis v. Arch Insurance Company, No. 23-0157, Court of Appeals of Iowa (April 10, 2024) read the full policy and found the language of the policy gave Rath an interest in the proceeds of the insurance policy.

FACTS

The bank is Rath’s lender for a loan secured by his home. At some point, Rath let his homeowners insurance lapse in violation of the terms of the loan agreement.

When the bank learned of the lapse, it notified Rath that the insurance it bought might be “significantly more expensive than the insurance” he could obtain himself and might provide less coverage than such a personal policy. Rath then began paying monthly premiums for this insurance to the bank.

THE INSURANCE CONTRACT

The policy stated that Rath, as the “Borrower,” “has no interest in this policy” yet included an endorsement expressly giving Rath a benefit. That endorsement provides that while Rath “is neither a Named Insured nor an additional named insured under the policy,” he “shall be considered an additional loss payee only as respects amounts of insurance over and above the interests of” the bank in his home. The Court of Appeals concluded that there was no possible purpose for this endorsement besides providing a benefit to Rath.

The policy warns in a general statement on its cover pages that it does not “provide coverage for the Interest or equity of the Borrower.” It later defines the “Named Insured” as “the creditor, lending institution, company, or person holding and/or servicing the Mortgagee Interest on the Described Location.” And it expressly confirms that “[t]he Borrower is not a Named Insured under this policy and no coverage is provided, either directly or indirectly, to the Borrower.” The policy’s default text also defines the Borrower and then makes abundantly clear: “The Borrower has no interest in this policy.”

But that last line was stricken and replaced with text from an Amount-of-Insurance endorsement that the parties added to the policy. So rather than having “no interest in this policy,” under the endorsement: “The Borrower is neither a Named Insured nor an additional named insured under this policy; however, the Borrower shall be considered an additional loss payee only as respects amounts of insurance over and above the interests of the Named Insured in the Described Location.”

THE STORM

In August 2020, a Derecho [A widespread, long-lived wind storm that is associated with a band of rapidly moving showers or thunderstorms. Although a derecho can produce destruction similar to the strength of tornadoes, the damage typically is directed in one direction along a relatively straight swath.] swept across Iowa, hitting Cedar Rapids especially hard. A tree fell on the house and it sustained wind damage. Among other damage, Rath believes most of the roof was damaged, along with siding, windows, and electrical systems. And so, Rath reported the damage to the bank, which made a claim to Arch under the policy. After Arch’s adjuster agreed that “the dwelling sustained damage due to wind and tree impact,” Arch decided that there was a covered loss of $1,222.37 and mailed a check for that amount directly to Rath.

THIS PROCEEDING

About a year after the storm, Rath sued Arch over this dispute. Rath claimed that Arch breached the insurance contract by denying proper payment for his losses and refusing to engage in the appraisal process under the policy. He also brought claims of bad faith and unjust enrichment and sought declaratory and injunctive relief related to his rights under the policy and the appraisal process.

Rath appealed the district court’s grant of summary judgment and dismissal of all his claims.

Interpreting an insurance policy is a legal question. Rath’s main argument that he is an intended third-party beneficiary of the insurance policy relies on the Amount-of-Insurance endorsement. The court of appeals agreed with Rath that the endorsement manifests an unambiguous intent to benefit him. Indeed, the Court of Appeals concluded that there is no other possible intent for contract provisions increasing the coverage above the bank’s interest and giving Rath a right to payment.

Saying that Rath is not a “Named Insured nor an additional named insured” is not the same as saying he is not a third-party beneficiary. By deleting that text-while also increasing the coverage above the bank’s interest and giving Rath a right to payment-the endorsement leaves little doubt that indeed Rath does now have an interest in the policy. He is an intended third-party beneficiary.

The parties fought a preliminary legal skirmish on the limited ground chosen by Arch-whether Rath is a third-party beneficiary under the contract. And because Arch lost that battle, the fight must now go on.

ZALMA OPINION

Poor wording in an insurance policy will often result in strange and confusing court decisions. The court found, because a clause allowed Rath to recover for losses over the interest of the bank made him a third party beneficiary. What the Court of Appeal ignored was that his interest was only available after the full interest of the bank were paid. The loss was only $1,222.37, much less than a mortgage loan. Since the loss was less than the amount of the banks interest, Rath had no right to that money as a third party beneficiary since the loss was less than the interest of the bank.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Man Bites Dog & Dog Bites Back

Third Circuit Compels Arbitration of IFPA Qui Tam Claims

Post 4781

See the full video at https://rumble.com/v4psoxu-man-bites-dog-and-dog-bites-back.html  and at https://youtu.be/Lx6_lFigogk

In The Insurance Fraud Prevention Act (IFPA) allows insurers to sue health care providers pursuing insurers with assignments of benefits from personal injury protection (PIP) claims (no fault insurance) on behalf of the state. GEICO did so against multiple health care providers who asked the court to compel GEICO to arbitrate each potential fraud claim.

In Government Employees Insurance Co.; GEICO Indemnity Co.; GEICO General Insurance Company; GEICO Casualty Co. v. Mount Prospect Chiropractic Center, P.A., d/b/a Mount Prospect Health Center; et al, United States Court Of Appeals For The Third Circuit, Nos. 23-1378, 23-2019 & 23-2053, No. 23-1378 April 15, 2024) the Third Circuit required arbitration of GEICO’s claims of fraud by health care providers under the New Jersey Insurance Frauds Prevention Act (IFPA)

BACKGROUND

GEICO sued defendants-appellants (collectively, the “Practices”) in separate actions in the District of New Jersey, alleging they defrauded GEICO of more than $10 million by abusing the personal injury protection (“PIP”) benefits offered by its auto policies. It alleges the Practices filed exaggerated claims for medical services (sometimes for treatments that were never provided), billed medically unnecessary care, and engaged in illegal kickback schemes. GEICO’s suits against the Practices each included a claim under the IFPA, which gives insurers a fraud claim.

The Medical Practices sought arbitration of GEICO’s IFPA claim, arguing both that a valid arbitration agreement covered the claim and that a different New Jersey insurance law allowed them to compel arbitration. But each District Court disagreed, ruling instead that IFPA claims cannot be arbitrated.

IFPA Claims Can Be Arbitrated.

The Practices’ effort to compel arbitration under a different New Jersey law could do the same for the Practices’ FAA-based request. GEICO bears the burden of persuading the Third Circuit that the IFPA prohibits arbitration.  GEICO claims that every known decision has held IFPA claims inarbitrable. The Practices cite no case holding otherwise.

GEICO claims that the IFPA’s antifraud mission bars arbitration. But it does not explain why arbitrating IFPA claims frustrates that goal. The United States Supreme Court has made clear that claims arising from laws empowering private attorneys general can be arbitrated. The American Arbitration Association rules give the arbitrator broad discretion to “grant any remedy or relief[.]” Am. Arb. Ass’n, Commercial Arbitration Rules and Mediation Procedures 28 (2013) (Rule 47), https://perma.cc/4Y74- WZM8.

In addition, New Jersey has a strong policy in favor of arbitration. The Third Circuit, therefore, predicted that the New Jersey Supreme Court would allow arbitration of IFPA claims. Having concluded that IFPA claims are arbitrable, the Third Circuit then considered whether the IFPA claims before it should be compelled to arbitration.

New Jersey Insurance Law Compels Arbitration.

Each Practice sought arbitration of GEICO’s IFPA claim through N.J. Stat. Ann. § 39:6A-5.1(a) (the “Provision”). It allows “any party” to compel arbitration of “[a]ny dispute regarding the recovery of medical expense benefits or other benefits provided under [PIP] coverage . . . arising out of the operation, ownership, maintenance or use of an automobile”.  As these suits are GEICO’s effort to recover medical expense claims paid through auto insurance PIP benefits, they fall under the Provision’s plain text.

GEICO asserts that the Provision does not apply to IFPA claims because they deal with fraud.

First, the Provision does not have an exception for fraud, and the Third Circuit may not carve a broad exclusion from a plain statute on the Third Circuit’s our own initiative.

Second, the list of claims specifically subject to the Provision suggests fraud falls under its umbrella. That group includes whether the disputed medical treatment was actually performed and whether the treatment performed is reasonable or necessary. That is the alleged fraud underpinning GEICO’s IFPA claims: billing for fictitious or unnecessary care. Because the Provision’s plain language is broad and does not carve out fraud, but rather explicitly includes fraud-like claims, GEICO’s argument failed to persuade the Third Circuit.

GEICO’s IFPA Claims Are Subject to an Arbitration Agreement.

In the alternative, the Third Circuit also concluded that GEICO’s IFPA claims must be compelled to arbitration under the FAA. That statute compels claims to arbitration once a movant shows both that an arbitration agreement was validly formed and that it covers the claims at issue. To establish that an agreement was formed when (as here) a motion to compel arbitration is based on a complaint standing alone, a defendant must show that the complaint and the documents on which s it relies facially suggest that the parties agreed to arbitrate.

GEICO does not contest the Practices’ reliance on two documents to suggest formation of an arbitration agreement. The first is GEICO’s Precertification and Decision Point Review Plan (the “Plan”). This document, required by New Jersey law and approved by the New Jersey insurance regulator, governs GEICO’s reimbursement of PIP claims. GEICO could force the Practices to prove more than a suggestion by submitting or pointing to additional facts sufficient to place the arbitration agreement in issue.

It would not have taken much for GEICO to put contract formation in play. To compel arbitration of GEICO’s IFPA claims, the Third Circuit concluded it must hold that the arbitration agreement in the Plan covers them.

Nothing in the amended complaint precludes arbitration of GEICO’s IFPA claims. Rather the law requires it. Therefore, Third Circuit concluded the District Court abused its discretion in denying the motion and the Third Circuit ordered arbitration.

ZALMA OPINION

Since local prosecutors failed to deal with health care providers who try to defraud insurers like GEICO, it used the qui tam provisions of the IFPA to sue the medical providers and thereby take the profit out of their crime. The health care providers compelled arbitration thereby requiring GEICO to prove fraud in each individual claim which will probably cost more than the amount of the fraud. What is needed is for the state to prosecute the fraud perpetrators or allow the fraud to continue since it may become self-defeating for GEICO to go through with hundreds of individual arbitrations. Regardless of the legal basis for the Third Circuit’s decision, its practical effect is to make PIP fraud profitable and the fraudsters should sing Hosannas for the Third Circuit’s decision. The criminal doctors need to be prosecuted as DOJ is prosecuting Medicare and Medicaid fraudsters.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Swimming Pool Claim Sunk

Private Limitation of Action Provision Defeats Bad Faith Suit

Post 4780

See the full video at https://rumble.com/v4pm4n0-swimming-pool-claim-sunk.html  and at https://youtu.be/W9XJi0tdetE

No Right to Bad Faith If No Coverage for Loss

James H. Drevs and Patricia Henderson appealed from the order of the Law Division dismissing with prejudice their complaint seeking insurance coverage for storm damage to their real property.

In James H. Drevs and Patricia Henderson v. Metropolitan Property And Casualty Insurance Company, No. A-0637-22, Superior Court of New Jersey, Appellate Division (April 4, 2024) the Appellate Division applied the private limitation of action provision of the policy.

FACTS

Plaintiffs own property in Cherry Hill, which has a home and an inground swimming pool. In 2020, the property was insured under a policy issued by Farmers Property and Casualty Insurance Company, formerly known as defendant Metropolitan Property and Casualty Insurance Company.

On or about July 6, 2020, a windstorm and significant rainfall damaged plaintiffs’ home and swimming pool. Plaintiffs filed two claims for insurance coverage with defendant arising from the storm: the first claiming damage to the roof of their home and the second claiming a partial collapse of their inground pool.

Defendant undertook an investigation of plaintiffs’ claims. It hired an engineering firm to investigate the cause of the partial collapse of the pool. The engineering firm concluded the pool damage was caused by excessive hydrostatic pressure from significant rainfall during the July 6, 2020 storm. The insurer’s claims coordinator sent plaintiffs a letter denying their claim for coverage of the damage to the pool.

The claims coordinator issued a check to plaintiffs for the covered portion of the loss from the damaged roof of their home.

Plaintiffs sued defendant alleging breach of contract and bad faith in its denial of plaintiffs’ claim for coverage for the damage to their pool.

According to defendant, the one-year period began running again on September 14, 2020, when it denied plaintiffs’ pool damage claim. Defendant argued that because the complaint was filed on May 19, 2022, a year and eight months after September 14, 2020, it was time barred.

The trial court issued an oral opinion granting defendant’s motion.

ANALYSIS

The appellate court found no basis on which to reverse the trial court’s order. Plaintiffs’ policy is referenced in the complaint. The correspondence from defendant denying plaintiffs’ pool damage claim and granting their claim for damages to their house form the basis of plaintiffs’ claims. The September 14, 2020 letter unequivocally denied plaintiffs’ claim for coverage of the damage to their pool. Plaintiffs produced no evidence that the parties engaged in discussions, correspondence, or any other type of interaction in the seven months between defendant’s denial of plaintiffs’ pool damage claim and correspondence by counsel for the plaintiffs.

It was undisputed that more than one-and-a-half years passed between the September 14, 2020 denial of plaintiffs’ pool damage claim and the May 19, 2022 filing of the complaint.

A bad faith claim may not be asserted by a party who cannot establish a right to payment of the claim as a matter of law.

Because plaintiffs filed an untimely complaint challenging the denial of their claim, they cannot prove they are entitled to coverage for the damage to their pool.

ZALMA OPINION

Every first party property policy or homeowners policy contain a private limitations of action provision preventing insureds from suing one year after a loss. New Jersey, and many states, toll the running of the statute from the date of loss until the date the insurer makes an unequivocal denial of coverage. The insureds waited more than a year and a half after the denial of the claim and its suit was barred. They are not without a remedy, their lawyer knew or should have known of the limitation and failed to file suit within the period allowed nor did he seek an extension to the time to sue.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Zalma’s Insurance Fraud Letter – April 15, 2024

ZIFL, Volume 28, Issue 8

Subscribe to ZIFL Here  Post 4779

See the full video at https://rumble.com/v4p2ule-zalmas-insurance-fraud-letter-april-15-2024.html and at https://youtu.be/p6L-wEbN4_g

The Source for the Insurance Fraud Professional

Zalma’s Insurance Fraud Letter (ZIFL) continues its 28th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/

No Reason to Release Convicted Arsonist Early

In United States Of America v. Jonathan Paul Wiktorchik, Jr., No. 23-2564, United States Court of Appeals, Third Circuit (March 25, 2024) Federal Prisoner Jonathan Wiktorchik appealed, acting as his own lawyer, from the District Court’s denial of his motion for compassionate release.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

More McClenny Moseley & Associates Issues

This is ZIFL’s twenty sixth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana. March 11, 2024. Matthew Monson Reported That Mcclenny’s Sale To Moseley Uncovered! It was common knowledge that James McClenny sold his interest in MMA to Zach Moseley. New details revealed in a recent court filing. The deal was effective March 31, 2023.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

Now Available New Book

The Compact Book of Adjusting Property Claims – Fourth Edition

On January 2, 2024, in Kindle, paperback and hardback formats, The Compact Book of Adjusting Property Claims, Fourth Edition is now available for purchase here and here. The Fourth Edition contains updates and clarifications from the first three editions plus additional material for the working adjuster and the insurance coverage lawyer.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

Never Lie on an Application for Insurance

Conceal or Misrepresent Material Facts Requires Rescission in Alabama

Allied World sued general liability insurer concerning policies issued to Clint Lovette (“Lovette”) and his companies.  ((collectively “Lovette Defendants”) for the policy periods of March 16, 2018, to March 16, 2019, and March 16, 2019, to March 16, 2020. Allied World sought a judicial determination in its favor that it does not owe the Lovette Defendants a defense or indemnity regarding two cases.

In Allied World Surplus Lines Insurance Company v. Lovette Properties, LLC, et al., No. 2:22-cv-00738-RDP, United States District Court, N.D. Alabama, Southern Division (March 15, 2024) the USDC resolved the disputes.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

Pro Se Plaintiff’s Qui Tam Suit Fails

Private Citizen May Not Compel Enforcement of a Criminal Law

Ronald Rothman appealed from an order of the District Court dismissing his complaint with prejudice and remanding a foreclosure proceeding to state court.

In Ronald S. Rothman v. CABANA SERIES IV TRUST; IGLOO SERIES IV TRUST; U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee; WELLS FARGO BANK, N.A.; BALBEC CAPITAL, L.P.; SN SERVICING CORPORATION; FRIEDMAN VARTOLO, LLP; QUENTEN GILLIAM, ESQ., No. 23-2455, United States Court of Appeals, Third Circuit (April 2, 2024) the USCA, 3rd Circuit resolved the dispute.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

Health Insurance Fraud Convictions

Holy Health Care Services, LLC Owner Sentenced to 3 Years In Federal Prison For Health Care Fraud Scheme

Julius Bakari, age 46, of Silver Spring, Maryland, was sentenced to 3 years in federal prison, followed by 3 years of supervised release, for conspiracy to commit health care fraud in connection with a scheme to fraudulently bill Medicaid.  The defendant’s conviction stems from a scheme involving services purportedly provided by Holy Health Care Services, LLC (“Holy Health”), a mental health services provider with locations in Washington, D.C.  Judge Xinis also ordered Bakari to pay restitution in the amount of the loss, $3,343,781.  The sentence was imposed on April 9, 2024.

Read the full article with dozens more convictions and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

Arson for Profit

Arson for profit is the most egregious form of insurance fraud. Perpetrators of an arson for profit scheme do not consider the fact that arson can cause residents, neighbors, police, or firefighters to be injured or killed. Claims based on an arson-for-profit, are based upon the lack of intelligence or ability of the arsonist.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

New Book Now Available from Barry Zalma

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims. The newest book joins other insurance, insurance claims, insurance fraud, and insurance law books by Barry Zalma all available at the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

The Tiffany Kid

A Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

How a Rich Kid Became an Insurance Fraudster.

The insured grew up with his wealthy parents on the shores of San Francisco Bay in Marin County. He wanted for nothing that money could buy. He was tall, blond, blue-eyed and handsome. Debutantes pulled their sister’s hair for the chance to dance with him. Life was good, but dull.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

Other Insurance Fraud Convictions

Benicia Contractor Pleads Guilty To Insurance Fraud for Underreporting Nearly $1 Million In Payroll 

Kent Bo Fridolfsson, 67, of Benicia, pleaded guilty to six charges of insurance fraud and grand theft after a joint investigation with the California Department of Insurance, Solano County District Attorney’s Office and the Employment Development Department (EDD) revealed he underreported payroll by nearly $1 million to illegally save on workers’ compensation insurance and taxes. Fridolfsson was placed on formal probation, ordered to pay over $725,000 in restitution, and ordered to surrender his contractor’s license.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

Insurance Fraud Schemes

Every claims person and SIU investigator must be aware of the various schemes used by insurance criminals to defraud insurers. For example, the NAIC identified the following common schemes that result in the crime of insurance fraud…

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Go to the podcast Zalma On Insurance at https://podcastrs.spotify.com/pod/show/barry-zalma/support Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf

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Fairly Debatable Action by Insurer

Reasonable & Arguable Reason to Deny Claim not Bad Faith

Post 4778

See the full video at https://rumble.com/v4ow4tt-fairly-debatable-action-by-insurer.html  and at https://youtu.be/46hejNuhMRQ

William A. Lemons, Jr., M.D., a doctor who specialized in obstetrics and gynecology (“OB/GYN”), sued Principal Life Insurance Company (“Principal”) for breach of contract and bad faith for its refusal to pay him disability benefits under a “regular occupation rider” provision contained in his insurance policy with the company. A jury returned a verdict in favor of Lemons on the breach of contract claim and in favor of Principal on the bad-faith claim.

William A. Lemons, Jr. MD v. Principal Life Insurance Company, No. 22-12064, United States Court of Appeals, Eleventh Circuit (April 5, 2024)

FACTUAL BACKGROUND

Lemons decided to open his own OB/GYN practice, which he called Covenant Gynecology & Wellness, P.C. (“Covenant”). In October 2015, during Covenant’s business development phase, Lemons worked for Blue Cross Blue Shield (“BCBS”) as an insurance claims consultant. A few months later, in February 2016, he began working at the Birmingham Metro Treatment Center, an opioid addiction treatment and recovery facility. A month later, he started working at the Fritz Clinic, another opioid treatment clinic.

In April 2016, Lemons opened Covenant and started seeing patients. He did not deliver babies or otherwise engage in obstetrics, and he did not submit any insurance claims for any obstetrics-related work. Eventually, Lemons devoted most of his time and resources to Covenant, and he reduced the number of hours at his other jobs to concentrate more on his OB/GYN practice. Lemons’ solo medical practice was unsuccessful. On July 15, 2016, he closed Covenant because he was not seeing enough patients. Lemons’s deteriorating health also played a significant role in his decision to close Covenant. Beginning in 2013, Lemons started developing hand tremors and was officially diagnosed with a neurological condition in March 2016.

In November 2016, Lemons completed a disability claim form and reported that, as of July 15, 2016, he was totally disabled and could no longer work as an OB/GYN. Lemons was interviewed and stated that he was working at BCBS approximately 15 hours per week, at Birmingham Metro approximately 12-18 hours per week, and at the Fritz Clinic 4 hours per week. He maintained that, at the time of his disability, his regular occupation was as an OB/GYN and, therefore, Principal should approve his claim under the “regular occupation rider.” The claims person responded that because Lemons was working other non-OB/GYN jobs when he became disabled, Principal could not just look at his occupation as an OB/GYN and would need to consider his other jobs in evaluating his claim.

Principal eventually approved Lemons’ claim under a “loss of earnings” provision in the policy based on the reduction to Lemons’s income as a result of his disability. A few weeks later, on February 9, 2017, Principal denied Lemons’s claim for benefits under the “regular occupation rider” provision. Principal explained that, because Lemons regularly worked at BCBS, Birmingham Metro, and the Fritz Clinic prior to the onset of his disability, he was not “totally disabled from all occupations that [he was] engaged in prior to [d]isability” as the regular occupation rider required.

ANALYSIS

The Supreme Court of Alabama has made clear that mental anguish damages are unavailable for breach of contract claims related to long-term disability insurance policies. Therefore, the Eleventh Circuit affirmed the district court’s ruling as to Lemons’s recoverable damages.

The “Benefit Update Rider” Claim

Lemons acknowledges that he did not specifically plead a separate claim related to the “benefit update rider” provision. It is undisputed that Principal sent letters to Lemons regarding the “benefit update rider” provision in 2004, 2007, and 2010. The 2004 letter explained that his benefits had increased to $10,000 per month, and the subsequent letters informed him that his benefits had been capped at that amount.

The Bad-Faith Claim

The Eleventh Circuit concluded that the district court did not err in denying Lemons’ motions. At trial, Lemons testified that he spent most of his time working at Covenant prior to the onset of his disability. He admitted that he did not derive any income from his practice at Covenant and did not submit any insurance claims for OB/GYN services to patients. The jury also could have found that Principal had an arguable reason for not issuing Lemons benefits pursuant to the “regular occupation rider” policy provision because the evidence showed that Principal gathered-as part of its decisional process-information suggesting that Lemons’s regular occupation was not as an OB/GYN.

The verdict in this case was not against the clear weight of evidence given the genuine issue of fact as to whether a breach of contract occurred. The Eleventh Circuit affirmed the district court’s judgment.

ZALMA OPINION

Lawyers representing people whose claim was rejected in whole or in part will always include a cause of action for the tort of bad faith and seek exemplary as well as tort damages. However, if, as in this case the insurer honors the claim that was available to the insured and refused to provide benefits related to his specialty of OB/GYN because he tried but never acted as an OB/GYN and admitted he made no money from the failed practice. They paid what they owed and there was neither a genuine dispute about the coverage nor were the actions of the insurer fairly debatable.

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Pro Se Plaintiff’s Qui Tam Suit Fails

Private Citizen May Not Compel Enforcement of a Criminal Law

Post 4774

See the full video at https://rumble.com/v4olbw5-pro-se-plaintiffs-qui-tam-suit-fails.html  and at https://youtu.be/1AwpmNfjQek

Ronald Rothman appealed from an order of the District Court dismissing his complaint with prejudice and remanding a foreclosure proceeding to state court.

In Ronald S. Rothman v. CABANA SERIES IV TRUST; IGLOO SERIES IV TRUST; U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee; WELLS FARGO BANK, N.A.; BALBEC CAPITAL, L.P.; SN SERVICING CORPORATION; FRIEDMAN VARTOLO, LLP; QUENTEN GILLIAM, ESQ., No. 23-2455, United States Court of Appeals, Third Circuit (April 2, 2024) the USCA, 3rd Circuit resolved the dispute.

FACTS

In June 2023, Rothman sued the defendants alleging that defendants violated federal civil and criminal laws in connection with an “invalid mortgage loan.” Rothman claimed that the loan was obtained by his son in 2006 to finance the purchase of a property from Rothman, that the “Notice of Settlement” for the loan was improperly recorded, and that the defendants illegally collected (or benefitted from) insurance payments on the “invalid” loan. The action was based on the False Claims Act and numerous criminal statutes, including the RICO Act. Rothman sought “declaratory judgments,” nullifying the mortgage loan and the sale of the property, and requiring restitution of the insurance payments.

In July 2023, Rothman filed a letter with the District Court, seeking to remove a 2022 foreclosure action (which stemmed from an alleged default of the mortgage loan) from the New Jersey Superior Court, Chancery Division, to the District Court. In a Memorandum Order entered July 31, 2023, the District Court granted Rothman’s motion to proceed in forma pauperis, and screened and dismissed the complaint with prejudice pursuant to 28 U.S.C. § 1915(e)(2)(B).

JURISDICTION

Appellees contend the Third Circuit lacked jurisdiction to review the order remanding the foreclosure matter. The complaint was not a notice of removal but rather an original action, and the District Court appropriately treated it as such.

In its Memorandum Order, the District Court considered the claims and dismissed them. That determination was final. It is reviewable by the Third Circuit. A district court cannot prevent appellate review of a final order by contemporaneously remanding a case to state court.

THE COMPLAINT

The complaint sought to hold defendants civilly and criminally liable for insurance fraud. Rothman claimed that the suit was “in the [p]ublic [i]nterest” because the defendants were depriving the “American [p]ublic and [c]itizens” of the federal funds.

The Third Circuit agreed with the District Court that Rothman, in essence, asserted a False Claims “qui tam” suit. In such cases, the Government is the real party in interest. Although a private person (the relator) may bring the suit on behalf of the Government circuit courts agree that a pro se litigant, like Rothman, may not. Nor could Rothman, as a private citizen, compel enforcement of criminal law. The District Court properly dismissed the complaint.

ZALMA OPINION

Qui tam suits are a powerful tool against insurance fraud. However, as the Third Circuit made clear, a private citizen acting in pro se may not nor may a private citizen compel enforcement of criminal law. The case established the old saying that “he who represents himself has a fool for a client.”

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Who’s on First?

Insurer Files Interpleader to Allow Claim Payment to Proper Competing Claims Against Funds

Post 4773

See the full video at https://rumble.com/v4of8jo-whos-on-first.html  and at https://youtu.be/mCY8rYGqSGc

In an interpleader action arising out of a jury trial in Hanover Am. Ins. Co. v Tattooed Millionaire Entertainment, LLC, No. 2:16-cv-02817-JPM-tmp (W.D. Tenn. 2016) (“Hanover I”).  In Hanover I, a jury trial was held on “insurance claims submitted to Hanover [by Defendants in the instant case] in connection with a 2015 arson fire and alleged theft at the House of Blues recording studio located on Rayner Street in Memphis, Tennessee.”

In Hanover American Insurance Company v. Tattooed Millionaire Entertainment, LLC, Christopher C. Brown, and John Falls, No. 2:20-cv-02834-JPM-cgc, United States District Court, W.D. Tennessee, Western Division (April 4, 2024) the USDC distributed the available funds.

PUBLIC POLICY CAN BAN PAYMENT

The Hanover I jury held that:

  1. Christopher C. Brown (“Brown”) and Tattooed Millionaire Entertainment, LLC (“TME”) were indistinguishable; and
  2. Brown/TME made material misrepresentations with the intent to deceive and committed unlawful insurance acts during the claims process, and thus Hanover was entitled to recover the advance payments made to Brown/TME.
  3. The Hanover I jury also held that Falls did not make material misrepresentations or commit unlawful insurance acts, and thus awarded him the maximum amount covered by his policy: $2.5 million in Business Personal Property (“BPP”) and an additional $250,000 in Business Income (“BI”).

After the jury trial concluded, the USDC granted Hanover’s Rule 50(b) motion for judgment notwithstanding the verdict and entered an amended judgment denying Falls’ recovery. The Sixth Circuit, however, reversed the post-trial ruling and remanded with instructions to reinstate the jury verdict as to Falls, which the USDC did.

INTERPLEADER & DECLARATORY RELIEF ACTION

In the current action: “Hanover II,” Hanover filed its Complaint for interpleader and declaratory relief. Hanover claims that the $2.5 million BPP insurance awarded to Falls is subject to multiple competing claims. Hanover’s Declaratory Relief Complaint seeks a declaration that the $2.5 million BPP award is null and void as a matter of Tennessee public policy. It also pleads in the alternative that the Court must resolve the various competing claims to the BPP insurance proceeds and declare to whom, and in what amount, those funds should be paid.

Stipulated to Facts

Prior to trial the Parties stipulated to the following facts during pre-trial conference:

  • John Falls leased Studio B at the former House of Blues studio located on Rayner Street in Memphis, Tennessee, and the equipment therein from Christopher Brown who owned TME.
  • Falls obtained insurance from Hanover that included, inter alia, $2.5 million in coverage for BPP and $500,000 in coverage for BI.
  • Brown/TME had a separate policy that covered, inter alia, the structure of the studio building.
  • On November 5, 2015, an arson fire occurred at the House of Blues recording studio located on Rayner Street in Memphis, Tennessee, causing substantial damage to the building and the BPP therein.
  • The evidence presented at the trial of the original action (Hanover I) established that Brown/TME falsified documents and submitted fake invoices, phony receipts, and doctored bank account statements in connection with the insurance claims following the fire.
  • In the appeal regarding the original action, the Sixth Circuit wrote: “The jury awarded Falls $2,500,000 as the amount of insurance he was owed, up to his policy limit, for Business Personal Property coverage …. The BPP payment covers the loss of the gear in Falls’ studio. However, Brown is the ultimate owner of the lost gear, on which Falls had a perpetually renewable leasehold.”

The public-policy argument, an ancient equity maxim that no one should benefit from his own wrongdoing does not mean that Falls takes nothing of the $2,500,000 BPP award.

The Court’s Previous Rulings

The Court ruled on several Summary Judgment motions and held that claim preclusion prevents Hanover from asserting claims or arguments against Falls regarding his interests in BPP but does not prevent Hanover from pursuing claims and arguments against TME/Brown. The Court also dismissed TME/Brown’s counterclaim for conversion against Hanover.

ANALYSIS

The key determination in this case is whether and what type of interest did Falls have regarding the BPP. As the Sixth Circuit already noted “Falls had a property interest in the ‘gear,’ in the form of his leasehold with unlimited renewal options. Leaseholds have been held to be insurable interests.”

Public Policy Question

Because the jury in Hanover I found Brown/TME to be interchangeable and Brown himself admitted to fraud in connection with Studio B, awarding Brown/TME any of the BPP profits would go against long standing public policy of not benefiting the wrongdoer for his own wrongdoing. Therefore, the Court held that Brown is not entitled to any of the BPP profits.

Summary of Court Findings

The Court found:

  • Hanover is precluded from arguing against Falls’ recovery;
  • Falls’ lease for Studio B and equipment therein did not terminate with the fire;
  • Loss Payable Clause modifies the language of the Schedule in Fall’s insurance contract, requiring Hanover to pay BPP jointly to Falls and Brown/TME as interests may require;
  • Falls is entitled to recover $2,066,217.30 for the destroyed/missing BPP;
  • The decision in the State Court Action is not binding on this Court;
  • Brown/TME are not entitled to recover any part of BPP, as such recovery would violate longstanding Tennessee public policy; and
  • Intervenor’s claim is moot, given that Brown/TME are unable to recover any of the BPP.

CONCLUSION

The Court ORDERED as follows:

  • Hanover SHALL pay John Falls $2,066,217.30 of the BPP;
  • Hanover SHALL NOT pay or credit the remaining $433,782.70 to Brown/TME; and
  • Intervenors’ claim is DISMISSED WITH PREJUDICE.

ZALMA OPINION

Insurance disputes are often difficult to resolve as established by this case that started with a jury verdict, a judgment notwithstanding the verdict, an appeal reversing the USDC, an interpleader action to determine who was on first and could recover more than $2 million, who shall not recover because of public policy and whether any competing claims could recover anything, and Hanover was able to keep$433,782.70 because no one was entitled to the funds. It took many years to resolve and we can only hope this is the end of a case where an insurer is required to pay an innocent person when the named insured was found to have committed fraud in an arson-for-profit scheme.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Court Slaps Down SLAPP Suit

Lawyers Fraudulent Billing is not Pre-Litigation Protected Petitioning Activity

Post 4772

See the full video at https://rumble.com/v4o7s9c-court-slaps-down-slapp-suit.html  and at https://youtu.be/9NFVUji0uF4

Strategic Lawsuits Against Public Participation (SLAPP suits) are meritless lawsuits designed to harass parties for engaging in protected activities (the right of petition or free speech). A party can move to dismiss a SLAPP suit by filing an anti-SLAPP motion. The movant must show the purported SLAPP suit arises from its protected activities; if shown, the respondent can defeat the motion by showing its lawsuit has merit.

In OC Media Tower, L.P. et al. v. Louis Galuppo et al., G062372, California Court of Appeals, (March 28, 2024) the Court of Appeals resolved the dispute.

FACTS

Plaza Del Sol Real Estate Trust (Plaza) made $67 million in loans to OC Media Tower, L.P., and OCR Land LLC (collectively, OC Media). The loans were secured by deeds of trust and promissory notes in which OC Media agreed to pay Plaza’s attorney fees for any needed collection efforts. OC Media defaulted on its loans. Plaza agreed to accept a lower payoff amount (about $50.5 million), contingent on OC Media selling its encumbered real estate. During escrow, attorney Galuppo submitted an invoice stating its fees (about $25,000) for its client Plaza. At the close of escrow, Plaza was paid the agreed upon payoff amount and Galuppo was paid its stated attorney fees.

Plaza later sued OC Media for fraud and other causes of action. Plaza alleged it learned after the close of escrow that OC Media had made false statements about its real estate sale to induce Plaza to accept less than what it was owed. OC Media filed a cross-complaint against Plaza and Galuppo for fraud and another cause of action. OC Media alleged Galuppo’s attorney fees were false and unsupported.

Galuppo filed an anti-SLAPP motion to dismiss OC Media’s cross-complaint. Galuppo asserted its invoice stating Plaza’s attorney fees was a prelitigation demand for payment (protected petitioning activity). The trial court denied Galuppo’s anti-SLAPP motion because “an allegedly false invoice for payment generally does not constitute petitioning activity under the anti-SLAPP statute.”

DISCUSSION

In an anti-SLAPP motion, the trial court should distinguish between speech or petitioning activity that is mere evidence related to liability and liability that is based on speech or petitioning activity.

The Court of Appeals found that the record does not support Galuppo’s assertion that its invoice was a prelitigation demand for payment. Further, the basis of OC Media’s cross-complaint is not that Galuppo made a tortious demand for payment. Rather, OC Media claims the amount of attorney fees actually billed by Galuppo was fraudulent.

Appellants claimed the demand for $24,433.08 in attorney fees was a communication preparatory to and in anticipation of filing litigation. In an anti-SLAPP motion, the movant bears the burden of establishing the challenged claims arise from its protected activity. The essential elements of fraud that give rise to a cause of action for deceit or intentional misrepresentation are:

  1. misrepresentation (false representation, concealment, or nondisclosure);
  2. knowledge of falsity (or scienter);
  3. intent to defraud, i.e., to induce reliance;
  4. actual and justifiable reliance; and
  5. resulting damage.

The Cross-Complaint and Anti-SLAPP Motion

OC Media and OCR Land LLC sued Plaza, Galuppo, and Morris Cerullo World Evangelism for fraud and the common count of money had and received. OC Media alleged that prior to the close of escrow it had asked Galuppo to provide the amount of attorneys’ fees and costs that Plaza had incurred in connection with the sale of the Property at 625 N. Main. OC Media stated that on October 16, 2020, Galuppo transmitted by email a document purporting to be an invoice through which it was represented that Plaza had incurred $24,433.08 in legal fees. OC Media alleged that the invoice was fraudulent.

The trial court denied appellants’ anti-SLAPP motions to dismiss or strike OC Media’s cross-complaint in a written order. Cross-defendants did not demonstrate litigation was genuinely contemplated and was more than a possibility at the time the invoice amount was communicated. Cross-defendants failed to establish that cross-complainants’ claims or the other challenged portions of the cross-complaint arise from cross-defendants’ protected petitioning activity.

Mr. Galuppo’s subjective intent to file a lawsuit in the event OC Media breached its contractual obligations was merely theoretical (i.e., it was not under serious consideration); therefore, Galuppo’s e-mailing of the invoice to the title insurance company was not protected prelitigation activity under the anti-SLAPP statute.

There are simply no documents from Galuppo – or any other attorney representing Plaza-directed to Harrah, OC Media, or its counsel attempting to resolve outstanding legal disputes. Therefore, the Court of Appeals rejected Galuppo’s claim that the invoice was part of an ongoing series of prelitigation demands communicated to OC Media as part of a lawsuit that was under serious consideration.

OC Media’s cross-complaint is not a SLAPP suit. The judgment was affirmed.

ZALMA OPINION

Galuppo attempted to avoid the position of a cross-defendant by filing a SLAPP motion by claiming his bill to his client for the sale of real property was protected petitioning activity. In fact the Court of Appeals noted that the people suing Galuppo used his billing as evidence of fraud. A false and fraudulent lawyers bill is not a protected activity subject to dismissing what is claimed to be a SLAPP suit.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Real Property Damage Required for Defense

“Property Damage” Must Be Actual Not Potential

Post 4771

See the full video at https://rumble.com/v4nnf3u-real-property-damage-required-for-defense.html  and at https://youtu.be/z2azn1FG2EQ

Breach of Construction Contract Not an Insured Peril

After the plaintiff’s motion for summary judgment was rejected and the defendant insurer’s motion for summary judgment was granted the plaintiff appealed. In Westchester Modular Homes Of Fairfield County, Inc. v. Arbella Protection Insurance Company, No. AC 45433, Court of Appeals of Connecticut (April 2, 2024) and the Court of Appeals resolved the dispute.

FACTS

On or about April 27, 2016, the plaintiff entered into a contract with Diana Lada L’Henaff and Jean Jacques L’Henaff for the construction of a new modular home on property located in New Canaan (property). During construction, disputes arose between the L’Henaffs and the plaintiff. Ultimately, the L’Henaffs terminated their contract with the plaintiff on December 14, 2016. The plaintiff filed a mechanic’s lien on the property on or about February 3, 2017, and commenced an action to foreclose on the lien on or about April 7, 2017 (underlying litigation).

The L’Henaffs filed a counterclaim that alleged that they “desired to build a modern home and had very carefully and specifically specified the type of insulation, materials, and finishes that they required the builder that won the job to satisfy.” The L’Henaffs alleged that work on the project progressed slowly and with constant problems. The L’Henaffs alleged that the plaintiff had breached the construction contract.

The plaintiff, as a named insured under a commercial general liability policy issued by the defendant (policy), filed a claim for coverage with the defendant which was refused. The defendant disclaimed coverage on the basis that the first revised counterclaim filed in the underlying litigation did not allege “property damage” caused by an “occurrence” and, therefore, it did not trigger coverage under the policy.

The trial court determined that the pleadings in the underlying litigation did not allege property damage. As to the extrinsic documents submitted to the defendant by the plaintiff, the court determined that such evidence established only the existence of possible defective work that could lead to future property damage if not remedied but that it did not demonstrate the existence of current property damage.

DISCUSSION

Because there are no factual issues in dispute in the present case, the court was only faced with the legal question whether the defendant had a duty to defend the plaintiff. Specifically, the defendant contended that the extrinsic documents suggested, “at most, that the construction deficiencies could potentially result in water damage to nondefective areas of the property if not fixed.” (Emphasis in original)

The Plaintiffs alleged construction defects and did not allege damage that the defects caused to other, nondefective property. Since the plaintiffs expert testified that he had identified defective work that, if not remedied, could lead to property damage in the future but identified no damage, Plaintiffs failed to allege facts bringing the underlying litigation seeking property damage that would have required a defense.

The Court of Appeals made clear that repairs to structural deficiencies, made for the purpose of preventing physical injury to tangible property before the alleged deficiency has caused property damage are not within the insuring agreement’s definition of property damage.

Because there was no indication of water damage at all. At most, the construction deficiencies could potentially result in water damage to nondefective areas of the property if not fixed. Damage to nondefective property in the form of rot or mold caused by water intrusion would be property damage within the terms of the policy language. However, the plaintiff did not present any evidence of actual damage or case law holding that the presence of water, in the absence of actual damage, amounts to covered physical damage.

The Court of Appeals concluded that the notification of the mere presence of water, without some corresponding physical damage, did not provide the defendant with actual knowledge of facts establishing a reasonable possibility of coverage because the presence of water does not constitute property damage within the terms of the policy.

Accordingly, the defendant did not have a duty to defend the plaintiff in the underlying litigation, and the court properly rendered summary judgment in favor of the defendant.

ZALMA OPINION

When an insured breaches the terms of a construction contract it will invariably be sued by the other party to the contract for damages resulting from the breach. Westchester Modular Homes breached its contract by creating a defective modular home that would, in the future, if defects were not cured, suffer physical damage. Since there was no physical damage to the structure – just the potential of damage – coverage did not apply and Westchester was obligated to defend and indemnify itself to the allegations of the underlying litigation.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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To Plead Fraud Plaintiff Must Identify Acts of Fraud

Suspicion of Fraud Cannot Support Qui Tam Action

Post 4770

See the full video at https://rumble.com/v4ngeyi-to-plead-fraud-plaintiff-must-identify-acts-of-fraud.html and at https://youtu.be/V8lmqgXsMNU

Richard Campfield, suing for the State of California, appealed the trial court sustained the demurrer of defendants Safelite Group, Inc. and its subsidiaries, Safelite Solutions LLC and Safelite Fulfillment, Inc. (collectively, Safelite) without leave to amend. Campfield contends he adequately alleged a cause of action under the Insurance Fraud Prevention Act (Ins. Code, § 1871 et seq.) (IFPA) within the statute of limitations.

In State Of California, ex rel. Richard Campfield v. Safelite Group, Inc., et al., A168101, California Court of Appeals, First District, Fourth Division (March 29, 2024) explained the requirements to plead a Qui Tam action under the IFPA.

BACKGROUND

Campfield owns a windshield repair company that licenses and sells products for repairing vehicle windshield cracks. Safelite is the nation’s largest retailer of vehicle glass repair and replacement services. Safelite also serves as the third party administrator for over 175 insurance and fleet companies, including 23 of the top 30 insurers in California and the country, for processing and adjusting policyholders’ vehicle glass damage claims, and it has direct electronic access to over 20 insurance company databases.

In 2015, Campfield sued Safelite in federal district court in Ohio, alleging Safelite’s continued reliance on its six-inch rule violated the Lanham Act’s (15 U.S.C. § 1051 et seq.) Safelite admitted in responses to interrogatories in the Ohio action that it has never conducted studies on the safety or viability of repair of cracks longer than six inches.

Campfield filed under seal the complaint in the present action against Safelite, alleging a single qui tam cause of action for violation of the Insurance Frauds Prevention Act (IFPA). The Insurance Commissioner and the San Francisco County District Attorney declined to intervene, so in September 2022 the trial court unsealed the complaint.

Safelite demurred, arguing, among other things, that the complaint failed to allege facts constituting a cause of action under the IFPA. Campfield failed to plead his claim with sufficient particularity, and the statute of limitations barred the complaint. After briefing and a hearing, the trial court sustained the demurrer without leave to amend based on the statute of limitations and noted that Safelite had raised “substantial arguments” that the complaint had not stated a cognizable claim and that the action was barred by the IFPA’s public disclosure bar. The trial court then dismissed the action.

DISCUSSION

The IFPA was enacted to prevent automobile and workers’ compensation insurance fraud in order to, among other things, significantly reduce the incidence of severity and automobile insurance claim payments and therefore produce a commensurate reduction in automobile insurance premiums.

The sole cause of action in the complaint is based on Insurance Code section 1871.7, subdivision (b), which allows for the imposition of civil penalties and other remedies against anyone who violates Insurance Code section 1871.7 or Penal Code sections 549, 550, or 551. Campfield alleges Safelite violated Penal Code section 550, subdivision (b)(1) and (2).

As in any action sounding in fraud, an IFPA action must be pleaded with particularity.

ANALYSIS

To effectively state his IFPA cause of action, Campfield must allege facts showing that Safelite presented, or caused to be presented, a false statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy or prepared or made a false statement intended to be presented to any insurer or any insurance claimant in connection with, or in support of or opposition to, any claim or payment or other benefit pursuant to an insurance policy. Campfield alleged Safelite violated these provisions when it prepared and presented false statements to insurance companies either as insurers’ third party administrator or as a windshield repair and replacement service.

The pleading standard Campfield must meet is not onerous. Campfield must identify every fraudulent claim at the pleadings stage. However, Campfield did not identify one example of any specific fraudulent claims. As a result Safelite did not have concrete allegations to defend against. The failure of allegations of specific fraudulent claims left Safelite with the need to guess.

A lack of discovery cannot excuse Campfield’s failure to plead his IFPA claim with sufficient detail defeated his suit. The heightened pleading standard exists in part to deter the filing of complaints as a pretext for the discovery of unknown wrongs and to prohibit plaintiffs from unilaterally imposing upon the court, the parties and society enormous social and economic costs absent some factual basis.

Qui tam actions like Campfield’s under the IFPA are meant to encourage private whistleblowers, uniquely armed with information about false claims, to come forward. These insiders should have adequate knowledge of the fraudulent acts to comply with the heightened pleading requirement.  The IFPA is not intended to provide a mechanism for those with general suspicions of wrongdoing like Campfield to engage in discovery seeking to confirm their suspicions.

ZALMA OPINION

The qui tam provision of the IFPA is a wonderful tool in the battle against insurance fraud. It has acted as a way to defeat fraud that local prosecutors are unwilling to prosecute. Rather than putting fraudsters in prison the qui tam provision allows the relator and the state to take the profit out of the crime. However, as this case establishes, it is not a place to shop for evidence when a person only suspects, but has no specific acts of fraud. Insurers should file qui tam actions if they have evidence and should not if they don’t have evidence to allege fraud with specificity.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Life Insurance Can Be Hazardous to Your Health

Insurance Fraud by Board & Care Facility

Post 4769

See the full video at https://rumble.com/v4n98rz-life-insurance-can-be-hazardous-to-your-health.html  and at https://youtu.be/2z9EdkKPVUU

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.  Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

The Hungarian owned and operated a board and care facility for the aging in Carson City, Nevada. He brought his younger brother over from Hungary in 1975 to help him in the business. It was only a twenty-bed facility and with little help, the two could manage the entire business.

The oldest brother was the thinker. He got an honorary PhD from the New World Society of Abundant Consciousness that ran a school in the desert just north of Pahrump, Nevada. After receiving his honorary degree for a donation of $15,000, he insisted on the title doctor.

The doctor had no training in any field. He had a high school diploma and had operated several restaurants before buying the board and care facility. He believed that the title conferred on him the right to prescribe medicine, to give psychological advice, and to do anything he pleased. He would get drugs for his patients from other than legitimate sources. He would bill their insurers as if they were prescription drugs prescribed by a staff physician.

His younger brother maintained the facility, cooked the meals for the residents, doubled as a nurse and ran the business. The doctor acted like royalty.

Since the small business required both to work if it was to make a profit, the business began to deteriorate. Cash flow was minimal. Patient services became almost nonexistent. The doctor skimmed as much money into his pocket as he could and keep the patients alive. Neither he nor his brother drew anything much more than subsistence monies from the business.

The dedicated younger brother made the business work. He began to cut personal corners. First, he decided to drop a $100,000 life insurance policy. With the reduced earnings of the business, he could not afford to pay the premium.

The doctor, who used the same insurance agent, was told of the intent of the brother to cancel. The doctor asked the agent to keep the policy in effect without his brother’s knowledge. The doctor would pay the premium as a business expense of the board and care facility.

The agent, not wishing to lose his commission, agreed and kept the policy in force, accepting premium payments from the doctor.

The younger brother suffered from severe hypertension. His controlled the disease by diet and medications. He trusted his older brother. He thought his older brother was wise and knowledgeable. He thought his older brother had, at least, the same level of expertise as any physician and trusted his brother more than a physician.

After the doctor had paid the first monthly premium on the life insurance policy, he explained to his brother that the hypertension drugs prescribed for him were dangerous. He told his younger brother that he had in the inventory of the board and care facility drugs that were more effective. Since they were in the stock of the facility the doctor could give them to his brother at no cost. The brother stopped taking his prescribed medicine and started taking the drugs given him by his brother. The doctor did not tell his brother that the drugs contained digitalis. Digitalis is a drug that, although useful in reducing chest pains in people with heart conditions, is poisonous in the amounts the doctor told his brother to take. It is even more poisonous to a person with hypertension.

Within two weeks of taking his brother’s drugs, the younger brother was found by his wife apparently dead, on his kitchen floor. Paramedics arrived and immediately began CPR. Because she did not know what to do after calling the paramedics, the wife called her brother-in-law. He arrived at the scene about the same time as the paramedics. He was hysterical and interfered with the paramedics. They had to forcibly remove him from his brother so they could perform CPR. They put the brother in an ambulance and began racing toward the emergency hospital with red lights and siren. The doctor followed and almost sideswiped the ambulance twice. They called for police help on their radio. A Pahrump police officer pulled the doctor off to the side of the road and restrained him for sufficient time to allow the ambulance to arrive at the hospital.

They could not revive the younger brother. They pronounced him dead one hour after arrival at the hospital. The doctor convinced the wife there should be no autopsy. His brother, her husband, had a severe heart condition that was well documented. He explained that there should be no reason to cut his body to satisfy a local ordinance.

The doctor convinced the brother’s family physician to sign the death certificate showing the cause of death as a heart attack. The family physician did so without evidence of such a heart attack. The family physician had not even seen the deceased within six months of his death. The family physician clearly violated the law. He thought the death certificate would help the family who appeared adamantly against the invasive procedures of an autopsy.

The widow was not an intelligent woman. She had limited education in her country of birth, Hungary. She could barely read or write the English language and spoke it with a thick accent. She relied totally on her brother-in-law. He handled the disposition of her husband’s estate. She signed whatever papers he put before her.

One paper he put in front of her was a claim form making claim on the life insurance policy. The claim form did not use the sister-in-law’s address but, rather, a P.O. box held in secret by the doctor. The insurance company, presented with an appropriate claim form signed by the widow and what appeared to be a proper death certificate, immediately issued its check for $100,000 plus interest, made payable to the widow, the sole beneficiary named in the policy.

The doctor received the check. He signed the widow’s name to it and deposited the money in his account. He used the money to pay the debts of the board and care facility and to buy a new home for himself on five acres of desert property outside Pahrump. The widow was left with nothing but debts. She sold the home she and her husband lived in since arriving in the U.S. After paying a commission to the realtor and the funeral expenses she had only $1,000 left. Her brother-in-law loaned her $10,000 which she used to buy some secondhand furniture and move into a small apartment. She met a blackjack dealer at a casino and married him so she would have some means of support.

The doctor lived in luxury for a year off the proceeds and then began planning his next insurance fraud. He has no other brothers to kill, so he decided to obtain life insurance on the residents of the board and care facility none of whom had a long life expediency.

Adapted from my book “Insurance Fraud Costs Everyone” Available as a Kindle Book and Available as a Paperback from Amazon.com.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Never Lie on an Application for Insurance

Conceal or Misrepresent Material Facts Requires Rescission in Alabama

Post 4768

See the full video at https://rumble.com/v4n1gi5-never-lie-on-an-application-for-insurance.html  and at https://youtu.be/JwHq6xb6pA4

Allied World issued general liability policies to Clint Lovette (“Lovette”) and his companies.  (collectively “Lovette Defendants”) for the policy periods of March 16, 2018 to March 16, 2019 and March 16, 2019 to March 16, 2020. Allied World sought a judicial determination in its favor that it does not owe the Lovette Defendants a defense or indemnity regarding two cases.

In Allied World Surplus Lines Insurance Company v. Lovette Properties, LLC, et al., No. 2:22-cv-00738-RDP, United States District Court, N.D. Alabama, Southern Division (March 15, 2024) the USDC resolved the disputes.

FACTS

In early September 2017, the Wheelers threatened to sue Lovette Properties to recover all sums paid if the Wheeler project was not completed by the end of 2017. The Wheelers informed Lovette Properties that they were considering all available options for remedying the situation and asserted that their letter “does not constitute a waiver of any of our rights or remedies, all of which are expressly reserved.”

The 2018/2019 Policy

On April 16, 2018, Clint Lovette, on behalf of Lovette Properties, signed and submitted a “Contractor’s Supplemental Application” requesting general liability insurance coverage from Allied World. In the Contractor’s Supplemental Application, Lovette falsely represented: (1) that the Lovette Defendants had no losses, claims, or suits against them in the past 8 years; (2) that no claims or legal actions were pending; (3) that the Lovette Defendants had no knowledge of any pre-existing act, omission, event, condition, or damage to any person or property that might reasonably be expected to give rise to any future claim or legal action against any person or entity identified in the application; (4) that the Lovette Defendants had not been accused of faulty construction in the past 8 years; and (5) that the Lovette Defendants had not been accused of breaching a contract in the past 8 years.

The Wheelers filed an Arbitration Complaint against Lovette seeking recovery of the costs associated with completing the renovation of their house; consequential damages for the cost of repairs to the house; the costs for maintaining another household during construction; damages for mental anguish and emotional distress; and “exemplary damages to the extent permitted by law [and] … the costs of this action, attorneys’ fees, expenses, and interest on the judgment as allowed by law.”

The Adams Case

On April 15, 2020, Allison and Carl Adams (“the Adamses”) sued Lovette. In the Complaint, the Adamses alleged that Lovette Properties abandoned the project before completion and left the house in a manner that did not comply with the applicable building codes and industry standards. The Adams case was tried as a bench trial that entered a judgment for $149,214.23 in favor of the Adamses only on the contractual and negligence claims.

DISCUSSION

Allied World asserted that summary judgment in its favor was proper because the Policies must be rescinded and thus Allied World is relieved of its obligation to defend or indemnify the Lovette Defendants in both the Wheeler arbitration and the Adams case.

Rescission under Alabama Code § 27-14-7

Because of the Lovette Defendants’ misrepresentations, omissions, concealment of facts, and incorrect statements in the 2018 and 2019 Contractor’s Supplemental Applications Alabama statutes prevent recovery under the Policies and an insurer can rescind a policy or deny coverage if, in the application or in negotiations therefor, the insured made misstatements that either (1) were fraudulent (i.e., made intentionally with knowledge); (2) were material to the risk (although innocently made); or (3) affected the insurer’s good faith decision to issue the policy for which the insured applied.

In Alabama, misrepresentation of a material fact made willfully to deceive, or recklessly without knowledge, and acted on by the opposite party, or if made by mistake and innocently and acted on by the opposite party, constitutes legal fraud.

Under the language of Allied World’s policies, even if Lovette’s misrepresentations were innocently made, Allied World has a right to void the policy so long as the misrepresentations were (1) material and (2) relied upon. Based on the record, it is readily apparent that the applications contain misrepresentations.

ALLIED WORLD IS ENTITLED TO RESCIND THE INSURANCE POLICIES

An insurer may void a policy if it can show that:

  1. The insurer in good faith would either not have issued the policy or contract or would not have issued a policy or contract at the premium rate as applied for or would not have issued a policy or contract in as large an amount or would not have provided coverage with respect to the hazard resulting in the loss if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.
  2. The key question is the good faith of the insurer in refusing to issue the policy.
  3. To meet its burden, Allied World offers the affidavit of Preston Starr. In his affidavit, Starr states that, had Lovette given a “YES” answer to any of the questions at issue in this matter, it would have charged a higher premium for the Policy and would never have issued a Policy that provided coverage for any claims out of Lovette’s work done for the Wheelers.
  4. In addition, Starr affirmed that, whenever an applicant discloses a known incident that could arise into a future claim, C&S consistently and repeatedly attaches a “Known Claimant/Incident Exclusion” Form to the policy that documents “the name of the party alleging potential wrongdoing, the date of the alleged loss, and as many specific details as possible, so that if a claim shows up in the future on the policy, Allied World have an exclusion specifically excluding coverage for that claim.

Under Alabama law testimony from an insurance company’s underwriter that is “supported by other uncontradicted evidence in the record” – such as the company’s underwriting guidelines – can be sufficient to establish materiality or that a company in good faith would not have issued the policy as written as a matter of law.

For these reasons, summary judgment in Allied World’s favor is due to be granted, and both Policies are due to be rescinded.

ZALMA OPINION

Alabama law, like that in most states, allows for rescission of a policy when the insured obtains a policy by concealment or misrepresentation about a material fact. Lovette did not advise Allied World of the pending claims which were material to the decision of Allied World to insure or not insure Lovette. Equity required the policies to be declared void from their inception.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Compassion Not Available for Arsonist

No Reason to Release Convicted Arsonist Early

Post 4767

See the full video at https://rumble.com/v4mua6c-compassion-not-available-for-arsonist.html and at https://youtu.be/ab6rFw_DLSE

In United States Of America v. Jonathan Paul Wiktorchik, Jr., No. 23-2564, United States Court of Appeals, Third Circuit (March 25, 2024) Federal Prisoner Jonathan Wiktorchik appealed, acting as his own lawyer, from the District Court’s denial of his motion for compassionate release.

THE CONVICTION

In 2011, after a jury trial in the Eastern District of Pennsylvania, Wiktorchik was convicted of arson, use of fire to commit a felony, mail fraud, and making false statements. Wiktorchik’s conviction was based on a fire he deliberately set to his chiropractic office, which also destroyed four other businesses. Wiktorchik repeatedly lied to investigators regarding his involvement and changed his story on multiple occasions. He was sentenced to 204 months of imprisonment and has an anticipated release date of August 23, 2025.

MOTION FOR COMPASSIONATE RELEASE

In May 2023, Wiktorchik filed a motion for compassionate release arguing that his chronic medical conditions and the COVID-19 pandemic supported his early release. Wiktorchik, who is not vaccinated, was hospitalized in January 2021 after contracting COVID-19 and has since been reinfected at least twice. He asserted that he now suffers from “long COVID” and that each reinfection exacerbated the condition, “leading to further dehabilitating [sic] and deteriorating health conditions” for which he was not receiving proper treatment.

The District Court denied relief. It concluded both that Wiktorchik had not established any extraordinary and compelling reason for his release, and that the relevant sentencing factors weighed against release.

ANALYSIS

The Third Circuit reviews such an appeal for abuse of discretion by a district court’s order denying a motion for compassionate release, including a determination that the sentencing factors do not weigh in favor of granting compassionate release. The Third Circuit will not disturb the District Court’s decision unless there is a definite and firm conviction that it committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors. The Third Circuit found it could summarily affirm the district court’s decision if the appeal fails to present a substantial question.

The compassionate-release statute states that a district court may reduce a defendant’s term of imprisonment if extraordinary and compelling reasons warrant such a reduction. Before granting compassionate release, a district court must consider the factors set forth in the statute to the extent that they are applicable. Those factors include the nature and circumstances of the offense, the history and characteristics of the defendant, and the need for the sentence to reflect the seriousness of the offense, promote respect for the law, provide just punishment, afford adequate deterrence, and protect the public from future crimes by the defendant.

Compassionate release is discretionary, not mandatory. Therefore, even if a defendant is eligible for it, a district court may deny compassionate release upon determining that a sentence reduction would be inconsistent with the statute’s requirements.

In reaching its decision the Third Circuit was unable to discern abuse of discretion in the District Court’s conclusion that compassionate release was not appropriate. The District Court appropriately considered that Wiktorchik “has a history of committing economic as well as dangerous crimes,” and observed that the current offenses were committed less than a year after Wiktorchik was convicted of insurance fraud. It explained that Wiktorchik’s crimes showed a disregard for the property of others, noting that other businesses were damaged as a result of the arson.  In determining that the factors did not warrant compassionate release the District Court concluded that Wiktorchik received just punishment for his offenses and that adequate deterrence and the protection of the public would be undermined and at risk if Wiktorchik were released for compassionate reasons.

Wiktorchik argued that the District Court failed to give sufficient weight to his rehabilitative efforts, including his lack of a disciplinary record while incarcerated. However, even considering these efforts,

Because this appeal does not present a substantial question, the District Court’s judgment was summarily affirmed.

ZALMA OPINION

Arson-for-Profit is a violent type of insurance fraud. It not only destroys the property that was insured for the benefit of the arsonist it destroys the property of other and often causes the injury or death of innocents, neighbors, and firefighters. It is a heinous crime and the defendant must serve the entire sentence to protect the public at large from his criminal acts and deter others from attempting the same crime.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Zalma’s Insurance Fraud Letter – April 1, 2024

ZIFL-04-01-2024 Volume 28, Number 7

Subscribe to ZIFL Here

Post 4766

The Source for the Insurance Fraud Professional

Zalma’s Insurance Fraud Letter (ZIFL) continues its 28th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma.  It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/

This month’s issue contains multiple articles for the insurance fraud professional and the insurance claims professional. The current issue can be read in full at http://zalma.com/blog/wp-content/uploads/2024/03/ZIFL-04-01-2024-1.pdf and includes the following articles:

Prison Employee Commits a Crime She Was Employed to Prevent

GUILTY OF WORKERS’ COMPENSATION FRAUD

On January 10, 2022, defendant Tiffinie Marvell Jones was convicted by a jury of one count of insurance fraud. Jones filed a motion for a new trial, which was denied. On appeal, Jones argued that there was insufficient evidence to support the verdict, that her trial counsel provided ineffective assistance, and that the trial court abused its discretion when it denied her motion for a new trial.

In The People v. Tiffinie Marvell Jones, F085205, California Court of Appeals, Fifth District (March 14, 2024) the Court of Appeals affirmed her conviction.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/03/ZIFL-04-01-2024-1.pdf.

More McClenny Moseley & Associates Issues

This is ZIFL’s twenty fifth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana.

From the Coalition Against Insurance Fraud

The Top 5 Covid-19 Scams

  1. Fake “corona” insurance
  2. Cancelled health insurance
  3. corona medicines, tests
  4. Senior Scams
  5. Bogus Travel Insurance

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/03/ZIFL-04-01-2024-1.pdf.

Health Insurance Fraud Convictions

Physician Pays $95,000 to Resolve Allegations of Genetic Testing Fraud

Nishi Patel, MD, a physician who received his medical training at Drexel University, will pay $95,000 to resolve allegations that he violated the False Claims Act by ordering medically unnecessary genetic testing for Medicare beneficiaries.

Read the full article including dozens of convictions and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/03/ZIFL-04-01-2024-1.pdf.

New Book Now Available from Barry Zalma

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition, the newest book joins other insurance, insurance claims, insurance fraud, and insurance law books by Barry Zalma all available at the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Other Insurance Fraud Convictions

Public Insurance Adjuster Sentenced to Three Years in Prison After Stealing $108k From Homeowners, Gwinnett DA

Stephen E. Chastain, 62, represented a Gwinnett County couple as their insurance adjustor after their house burned in 2019, according to the Gwinnett County district attorney. According to the district attorney, it was stipulated that Chastain would take 15% of the settlement as his fee. The district attorney said the company “did very little work, and the victims never saw the entirety of their insurance settlement.”

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/03/ZIFL-04-01-2024-1.pdf.

SOFT FRAUD

How Most Get Away With Insurance Fraud

For reasons known only to governmental entities some insist on categorizing fraud into both “hard” and “soft” fraud. By so doing the governmental entities that so categorize fraud make one type of fraud less heinous and less criminal than the other. Fraud, whether categorized “soft” or “hard,” are criminal and if a person is tried and convicted of fraud both can be sent to jail for the same amount of time.

The types of insurance fraud some call “soft fraud” are found in every type of claim presented to an insurer.

Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or claimant exaggerates a legitimate claim…. According to the Insurance Research Council, soft fraud is far more frequent than hard fraud. Because of the frequency of soft fraud, it adds more to overall claims cost than hard fraud does.

Soft fraud occurs when a policyholder exaggerates an otherwise legitimate claim or when an individual applies for an insurance policy and lies about certain conditions or circumstances to lower the policy’s premium.

Adapted from my Book, “Insurance Fraud – Second Edition” Available as a Kindle book; Available as a Hardcover;  Available as a Paperback 

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Go to the podcast Zalma On Insurance at https://podcastrs.spotify.com/pod/show/barry-zalma/support Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Litigation Between Insurers Should be Avoided

Potential of Coverage is Enough to Require an Insurer to Defend

Post 4765

See the full video at https://rumble.com/v4m2j79-litigation-between-insurers-should-be-avoided.html  and at https://youtu.be/CzzxD2wh46g

When two or more insurance companies issue policies with a potential for coverage of a claim of bodily injury they should work together to protect their mutual insured rather than litigate with the insured and the other insurers. Litigation is expensive and may result in a case and result they did not wish to have.

In Admiral Insurance Co. v. Track Group, Inc. f/k/a Securealert, Inc., and Jeffrey Mohammed Abed, and Certain Underwriters At Lloyd’s, London Subscribing To Policy No. CJ10028219, No. 1-23-1210, 2024 IL App (1st) 231210-U, Court of Appeals of Illinois, First District, Third Division (March 27, 2024) the Illinois Court of Appeals looked to protect the interests of the insured other than the interest of the insurers.

FACTS

This appeal concerned an insurance coverage dispute between a general liability carrier and a professional liability carrier. Certain Underwriters at Lloyd’s, London Subscribing to Policy No. CJ10028219 (Underwriters) and Admiral Insurance Co. (Admiral) both insured Track Group, Inc., a company in the business of electronically monitoring individuals using ankle monitors. Track Group was sued after a person wearing the ankle monitor sustained severe injuries while driving his vehicle. Underwriters had paid the costs of Track Group’s defense up to the time of the decision but it argued that Admiral should share in the costs, as it believes both insurance policies provide coverage in this case. The circuit court held that Admiral did not owe coverage under the terms of its insurance policy with Track Group.

BACKGROUND

Underwriters issued Track Group a general liability insurance policy, while Admiral issued a professional liability insurance policy. Track Group sought coverage under both policies in connection with a personal injury lawsuit filed against it in Los Angeles, California. The plaintiff in that suit, Jeffrey Mohamed Abed, alleged that his leg was torn from his body after his foot, on which he was wearing the ankle monitor, became lodged between the gas and brake pedals in the vehicle he was driving. Admiral denied coverage and filed a declaratory action, contending that it does not owe coverage under these circumstances.

The circuit court granted Admiral’s motion for summary judgment and denied Underwriters’ motion for summary judgment.

ANALYSIS

On appeal, Underwriters argued that the circuit court erred in granting summary judgment in favor of Admiral, contending that the court’s interpretation of the Admiral policy was overly narrow. Underwriters argued that Admiral policy covers the injury at issue.

Where policy language is susceptible to more than one reasonable interpretation, it is considered ambiguous and will be construed strictly against the insurer. Courts construe the policy as a whole, giving effect to each provision where possible because the court must assume that the provision was intended to serve a purpose.

According to the plain language of the policy Admiral is potentially liable for wrongful acts arising out of the provision of “professional services” and “technology products.”  The policy includes a general exclusion for bodily injury and property damage. However, that exclusion does not apply to bodily injury arising out of the provision of “professional services.” In other words, Admiral’s policy could potentially cover bodily injury arising out of the provision of “professional services.”

One of the four components of the ankle monitor is an internal central processing unit. The ankle monitor can make and receive calls, generate alarms, receive radio frequency transmissions, and communicate movements to Track Group. Because the ankle monitor is an electronic device that can store, retrieve, and process data it is potentially a computer. Moreover, the ankle monitor likely constitutes “hardware.” Because the ankle monitor is potentially computer hardware, the Court of Appeals held that it is potentially covered by Admiral’s policy and potential coverage is all that is required to trigger an insurer’s duty to defend its insured.

Because the facts of Abed’s lawsuit against Track Group potentially fell within the terms of the policy the decision of the Circuit Court was reversed.

ZALMA OPINION

The court did what the insurers should have done – it read the policy which covered claims resulting from professional services or technology products. Since the ankle monitor was clearly a technology product and was claimed to be the cause of the injury that ripped off Mr. Abed’s leg, there was a potential of coverage and all of the insurers owed Track Group a defense. Working together both insurers could have saved money and served their insured fairly.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Soft Fraud

How Most Get Away With Insurance Fraud

Post 4764

See the full video at https://rumble.com/v4luxm2-soft-fraud.html  and at https://youtu.be/52DjezN4OX8

For reasons known only to governmental entities some insist on categorizing fraud into both “hard” and “soft” fraud. By so doing the governmental entities that so categorize fraud make one type of fraud less heinous and less criminal than the other. Fraud, whether categorized “soft” or “hard,” are criminal and if a person is tried and convicted of fraud both can be sent to jail for the same amount of time.

The types of insurance fraud some call “soft fraud” are found in every type of claim presented to an insurer.

Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or claimant exaggerates a legitimate claim…. According to the Insurance Research Council, soft fraud is far more frequent than hard fraud. Because of the frequency of soft fraud, it adds more to overall claims cost than hard fraud does.

Soft fraud occurs when a policyholder exaggerates an otherwise legitimate claim or when an individual applies for an insurance policy and lies about certain conditions or circumstances to lower the policy’s premium.

The reality is that Soft Fraud is a criminal violation and a breach of a material condition of the policy. It contributes to increased insurance costs.  As a result of increased insurance costs, millions of Americans cannot afford sufficient insurance coverage. One cannot commit an innocent or partial fraud any more than one can be partially dead. Once fraud is committed the contract of insurance is violated and voidable and the crime has been committed.

Soft fraud, in contrast, usually involves legitimate losses that are exaggerated by the policyholder. For example, if a person is in a car accident and files a claim with her auto insurance company but overstates the severity of the damage to her car. The insured did not fabricate the accident or the underlying claim, but nevertheless committed soft fraud by not being completely truthful with the insurance company.

Regardless of whether or not the fraudulent act is soft or hard, insurance fraud is a felony under the law of most states.

The discussion that follows describes the most insidious and prevalent types of soft fraud.

PADDING

Padding is found when injuries or damages are exaggerated to increase a claim’s value. It is what has been called an insidious type of fraud difficult to detect and often considered harmless by insureds, claimants, police, and prosecutors.

Padding can come in a variety of forms. In first party claims, an insured is generally considered to be in the best position to know the value of property for which he or she is making a claim. An insurer depends upon the insured to provide an honest description and estimate of the value of the property, and most courts hold an insured to a high level of honesty when reporting a loss to an insurer.

Padding is found in property insurance when insureds inflate the number of items lost or destroyed or exaggerate the value of the items claimed damaged, destroyed, or stolen. This can be as simple as increasing the size of a stolen television from 32 inches to 42 inches; from a cathode ray tube to flat screen; from $100 cash to $500 cash; or from two pairs of jeans to five pair.

According to an Insurance Research Council (IRC) study, approximately 90 percent of the costs of insurance fraud are the result of claims padding. Claimants add damage, injuries, and fictitious passengers to their insurance claims. The other 10 percent are the result of organized accident staging rings. Because of the sheer number of offenders, and the light sentences received by the few that are convicted, pursuing these crimes has not a priority for law-enforcement or insurers. [Whyen v. Summers, 58 Misc.3d 1223(A), 97 N.Y.S.3d 57 (Table) (N.Y. Sup. Ct., 2018)]

On third party claims the padding can be as simple as adding a week of lost earnings that, in fact, was not lost; allowing the doctor to bill for three visits not made; or going to a chiropractor who charges for x-rays not taken.

Standard fire insurance, all-risk property insurance, package first party property policies and most third party liability policies state that the policy is void if the insured intentionally conceals or misrepresents any material fact or circumstance about the insurance or a claim, whether before or after the loss.

When an insured submits fraudulent invoices to inflate a claim the insurer has the right, under the policy wording, to void the entire policy. The insured’s argument that he was entitled to recover that part of his claim not supported by fraudulent documents should be dismissed out of hand. One cannot commit a small fraud any more than a person can be just a little dead.

A slight misstatement of value normally will not be sufficient to allow an insurer to void an insurance policy for fraud unless the insured knew at the time the misstatement was made that the statement was false and the insurer can prove that the misstatement was made with the intent to deceive it. Misrepresentation, concealment, and fraud are not limited by the amount of the fraud but by the intent of the person making the claim. An insured who presents, with the intent to defraud, $1,000 in false invoices is as culpable as an insured who presents, with the intent to defraud, $1,000,000 in false claims. In both cases, if proved, the policy of insurance, by its terms and conditions, is void and the claim is forfeited.

If the differences in numbers between those presented by the insured and those presented by the insurer are honest differences of opinion or calculation errors a policy cannot, and should not, be declared void. The insured must intend to deceive and the insurer must be in a position to prove that intent and that it was deceived before it can void the policy.

Honest people deceive their insurers. They think the deception is just harmless fudging. “Soft fraud” wrongfully takes money from an insurer and is also a crime. Soft fraud, like hard fraud, raises everyone’s insurance costs. The greatest amount of money lost to fraud is lost to schemes designated as “soft fraud.” Since most soft fraud succeeds the amount it costs the insurance industry is difficult, if not impossible, to determine. Prosecuting some “soft fraud” perpetrators can put the fear of prison in the minds of the general public and save more money, in the long run, than prosecuting and convicting a single major fraud perpetrator. Unfortunately, police and prosecutors are often unwilling to prosecute cases of so-called “soft fraud” even when the evidence is damning.

Years ago, the author took the Examination Under Oath of an insurance broker who inflated a claim for damage to personal property by creating, with the use of white out paint and a photocopy machine, fake invoices for the replacement of property never replaced to collect the difference between actual cash value and replacement cost value. At Examination Under Oath the insured admitted to faking the receipts and was eventually convicted of insurance fraud and served a few months in jail for her crime.

ZALMA OPINION

Insurance fraud is working to destroy the economy and the ability of insurers to service their clients properly. States attempt to deter it by enacting statutes making it a crime to defraud an insurer and make the insurers, by statute, to investigate and enforce the crime. Yet prosecutors don’t like insurance fraud cases because they are document heavy and no person has been physically injured. Prosecution of insurance fraud is anemic and prosecution of soft fraud is non-existent. Learn from this and defeat fraudulent claims by refusing to pay. You will have no help from police or prosecutors but you can deter the attempts to defraud a proactive insurer.

This blog was adapted from my book “Insurance Fraud – Volume One available on Amazon.com

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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Red Flags of Insurance Fraud

Indicators of Insurance Fraud are Investigative Tools

Post 4763

See the full video at https://rumble.com/v4ln1xr-red-flags-of-insurance-fraud.html  and at https://youtu.be/xSnn0wy1yUU

Suspicious claims have common attributes. Insurers and their anti-fraud organizations have collated the common attributes into lists of indicators or red flags of fraud. The lists were created as training aids and to be used to determine whether further investigation is required to determine if a claim is legitimate or false and fraudulent. Continually growing, these lists are known as the “red flags” or “indicators” of fraud lists. There are many different categories, ranging from those associated with the claim itself or with insureds to indicators of specific types of fraud, such as bodily injury fraud or arson for profit.

If, when assessing a claim, three or more red flags are found the need for further investigation should be considered and evaluated by the claims person, a supervisor and the insurer’s special investigative unit. The existence of red flags does not mean a fraud has occurred. Red flags are only a signal to the adjuster to investigate further so that the suspicion may be either removed or confirmed. It is not any single indicator that alerts the adjuster to the possibility of a fraudulent claim but a combination of the red flag or red flags discovered coupled with the results of the thorough claims investigation.

Although the existence of multiple red flags should trigger an investigation, failure to investigate has been held to be reasonable as long as there are no patent inaccuracies or actual knowledge of false representations.

Red Flags

  • More than one mortgage,
  • late payments,
  • divorce,
  • prior claims,
  • multiple claims,
  • problems affecting title to the property,
  • over-insurance,
  • an increase in insurance coverage right before the claim,
  • recent cancellations of insurance held with prior insurers,
  • liens,
  • threats of foreclosure on the property,
  • lawsuits, and
  • recent job transfers.

As the Nebraska Department of Insurance states in its booklet, Fraud Detection Hints, it is “important to remember that the … possible ‘red flags’ [indicate] that there may be some evidence consistent with an insurance fraud scheme. Any one or two of these by themselves may not raise your suspicions; however, when you have several of these hints (red flags) present or a pattern begins to emerge, you should investigate further or forward your suspicion to the Insurance Fraud Prevention Division.” [O’Donnell v. Allstate Insurance Co., 734 A.2d 901, 1999 PA Super 161 (Pa. Super., 1999); and LeForge v. Nationwide Mut. Fire Ins. Co., 82 Ohio App. 3d 692 (Ohio App., 1992).]

Red Flags Common to a Claim

An adjuster should consider further investigation if a claim occurs:

  • shortly after the issuance of the policy;
  • shortly after the limits of the policy are increased;
  • in an insured’s first insurance;
  • shortly before the expiration of a policy;
  • within days of a notice of cancellation being served; or
  • on a policy acquired from an agent far from the insured’s home or business

Red Flags Connected with the Insured or Claimant

Adjusters evaluate the manner in which the insured makes a claim. A few red flags that may raise suspicions include some of the following when the insured or claimant:

  1. retains or is represented by counsel on the day of the loss;
  2. does not want to retain counsel;
  3. is represented by a public adjuster on the day of the loss;
  4. wants a settlement approved quickly;
  5. does not want the claim to go to a supervisor, regional office, or claims committee for authority;
  6. is exceedingly cooperative and undemanding;
  7. is exceedingly demanding and threatens a bad faith suit from the date of first contact;
  8. demands a proof of loss form at the initial meeting;
  9. is familiar with insurance claims terminology;
  10. asks for the claims manager by name;
  11. is familiar with the adjuster’s authority limits, and wants to settle for a sum within those limits;
  12. handles all business in person (thus avoiding mail and potential prosecution for violation of federal mail fraud statutes);
  13. provides an address that is a post office box, mail drop, or hotel; or
  14. reduces the demand for settlement when it is suggested by the adjuster that he or she file suit.

The adjuster or investigator should also pay attention to the insured’s or claimant’s history and background, including their financial situation.

Red Flags Concerning the Insured

  • The insured has lived at his current address less than six months.
  • The insured has been with current employer less than six months.
  • The insured has a previous history of losses.
  • The insured cancels scheduled appointments with the adjuster for statements and/or Examination Under Oath.
  • The insured is employed with an insurer.
  • The insured is unusually aggressive and pressures for a quick settlement.
  • The insured does not have a telephone.
  • The insured’s telephone number is only a mobile cellular phone.
  • The insured is difficult to contact.
  • The insured claims to be self-employed but is vague about the business, and his responsibilities.
  • The insured is very knowledgeable about claims process and Insurance terminology.
  • The insured offers inducement for a quick settlement.
  • The insured is unsolicited new, walk-in business, not referred by an existing policyholder.
  • The insured’s address is not consistent with his employment or income.
  • The insured only gives a post office box as his address.
  • The insured is unemployed or in a transient occupation.
  • The insured seeks a copy of the policy before agreeing to insure.
  • The insured is vague about loss.
  • The insured’s report of loss is inconsistent.
  • The insured has a selective memory.
  • The insured has financial difficulties.

Fraud by Insurers

Insurers and their officers commit fraud in many ways, including, but not limited to:

  • Submission of falsified financial statements.
  • Misuse of company funds.
  • Issuance of unauthorized insurance policies.
  • Insurance plans not authorized by the state Departments of Insurance.
  • Individuals not licensed to do the business of insurance.
  • Fraudulent group/individual health plans.

Some examples of fraud by insurers claimed under homeowners policies:

  • Insisting that the insured allow the insurer to generate the loss inventory after a covered loss.
  • Issuing policies with a declaration page showing policy limits that the insurer knows is higher than the actual cash value or replacement cost of the property, the risk of loss of which is insured, to take premium for a greater risk than that actually taken.
  • Using economic coercion to force the claimant to use their preferred repair vendor.
  • Undercutting market rates to lure employers to acquire Workers’ Compensation insurance while failing to properly maintain sufficient funds in reserve to cover claims.
  • Use of an unqualified or dishonest Medical Examiner to avoid payment of claims.
  • Use of unethical defense attorneys to avoid payments of claims.
  • Use of unethical private investigators.
  • Use of Special Investigative Unit investigators whose only purpose is to deny claims rather than in an effort to avoid fraud.

ZALMA OPINION

Red flags are not evidence. They are often contradictory. They are evidence that a fraud might be happening and require, when more than three or four red flags show up in an investigation that it is time to refer the claim to the insurer’s Special Investigative Unit to determine if there exists admissible evidence that a fraud has been attempted.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808

 Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg.

Go to the Insurance Claims Library – https://lnkd.in/gwEYk

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