Ethics for the Insurance Professional

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

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

Barry Zalma, Inc.

© 2018 – Barry Zalma

I have placed these books on Amazon.com as both e-books and as paperbacks to explain, in fiction based on reality, information to help everyone understand that insurance fraud can be defeated by a thorough investigation.

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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The Importance of Careful Policy Drafting

Collapse Requires Actual Abrupt Falling Down

Homeowners learn the hard fact that concrete is not impervious. Chemicals in soil can react with the concrete and cause it to deteriorate, crack and if not repaired break and fall in. Insurance policies insure against direct fortuitous physical loss. It is not designed to cover losses due to wear and tear, deterioration, or defective construction.

In Bart Zamichiei And Tammy Zamichiei v. CSAA Fire & Casualty Insurance Company, No. 3:16-cv-739 (VAB), United States District Court District Of Connecticut (February 20, 2018) the USDC was asked by the plaintiffs to ignore the clear and unambiguous wording of a policy and provide coverage to the Zamichieis for slow deterioration of their basement under the collapse provisions of the policy.

CSAA moved for summary judgment, arguing that the insurance policy at issue unambiguously covers only abrupt collapses—not an ongoing condition from which damage results.

FACTUAL BACKGROUND

The Zamichieis live at 39 Old Monson Road in Stafford Springs, Connecticut (“Property”).

The Policy

CSAA issued a homeowners insurance policy (“Policy”), effective January 23, 2015 through January 23, 2016 that excluded: “(f) Settling, shrinking, bulging or expansion, including resultant cracking, of . . . foundations, [and] walls . . . .” It also excluded collapse which it defined as: “Collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or any part of the building cannot be occupied for its current purpose. (2) A building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse. (3) A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building. (4) A building or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.”

The Property

The Zamichieis built the Property in 1989, moved into it in January 1990, and have lived there continuously since it was completed.  Three-to-four years ago, Mr. Zamichiei observed a horizontal crack in the basement adjacent to the hatchway door of the external stairs.

On September 16, 2015, William Neal, P.E., a consulting engineer, inspected the Property. He attributed the “spider-web cracks” to Alkali Silica Reaction (“ASR”) and recommended replacement of the concrete. Mr. Neal testified that putting “poor aggregate” into the concrete when it was mixed was a “singular event” that “caused” the cracking. According to Mr. Neal, the concrete was “doomed” from the day it was poured, and impairment of it was “inevitable” based on the use of defective materials.

At the time of Mr. Neal’s inspection, the Property’s foundation did not require immediate replacement and was not structurally dangerous.  The Zamichieis are using the Property for its intended purpose, namely to live in it.. The Property has neither caved in, fallen down, nor is it in imminent danger of falling down or caving in.

The Zamichieis sought coverage under the Policy’s Collapse provision. CSAA denied coverage of the Zamichieis’ claim.

DISCUSSION

This case, like a number of other recent decisions in the District of Connecticut, requires the Court to examine the provisions of an insurance policy, after homeowners have discovered that the concrete supporting the walls of their house is deteriorating. The issue here is whether progressive deterioration caused by a chemical reaction and resulting in cracking concrete falls within a provision of Plaintiffs’ homeowner’s insurance policy covering collapses.

The Court must read the words of the policy with their natural and ordinary meaning, and resolve any ambiguity in favor of the insured. The Court must construe the contract language in favor of the insured unless there is a high degree of certainty that the policy language clearly and unambiguously excludes the claim.

POLICY COVERAGE FOR COLLAPSE

CSAA argues that the Policy does not cover the Zamichieis’ alleged loss because the loss does not constitute a “Collapse” under the Policy. Specifically, CSAA argues that “because the [Property] is still standing, has not sustained an abrupt falling down or caving in and is still being used for its intended purpose, the [Property] has not ‘collapsed’ as contractually defined.” CSAA also argues that the Policy unambiguously does not cover losses caused by a chemical reaction because the technical source of the cracking is irrelevant when the Zamichieis’ loss consists of the foundation settling, shrinking, bulging or expanding, all excluded causes of loss.

Under Connecticut law, the substantial impairment of a wall’s structural integrity is sometimes considered a collapse. In this case, the court concluded that the contract’s language, unlike the language in earlier cases, includes the phrase “abrupt,” and not the word “ensue.” This case turns on whether “abrupt,” attached to “falling down or caving in,” “expressly . . . define[s] the term to provide for the limited usage.”

The Zamichieis acknowledged that the chemical reaction that resulted in the impairment of the concrete was “inevitable,” and suggested that the concrete was “doomed” from the day it was poured, but argue that the definition of “collapse” is merely a definition of terms, whereas the remaining provisions clarify instances when collapse has not occurred. The Zamichieis therefore argue that the term “collapse” is ambiguous in light of the qualifying language in the policy, e.g., the Policy covers hidden decay, which the Zamichieis argue is a gradual process.

The Court disagreed. By any reasonable interpretation, a contract provision requiring a “sudden” collapse in order to trigger coverage, would not include a barely perceivable chemical reaction that slowly reduces the structural integrity of concrete over a period of years. Because the term “sudden,” as used in the collapse coverage provision, means temporally abrupt, the insureds must point to evidence that the loss for which they seek coverage occurred abruptly, and not merely unexpectedly, for it to be a covered collapse.

Since the CSAA Policy required “an abrupt falling down or caving in,” the term “abrupt” therefore is unambiguous and must be “accorded its natural and ordinary meaning.” The CSAA insurance policy unambiguously covers only “abrupt” collapse, and the Zamichieis have not shown that their home has collapsed within the meaning of the Policy.

The Zamichieis’ expert stated that, at the time of inspection, the Property’s foundation did not require immediate replacement and was not structurally dangerous. Furthermore, the Zamichieis continue to use the Property for its intended purpose, and it has neither caved in nor fallen down, and it is not in imminent danger of falling down or caving in.

POLICY COVERAGE FOR A CHEMICAL REACTION

Alternatively, the Zamichieis argue that a chemical reaction constitutes a “risk of direct physical loss to property” under the Policy and therefore would be a covered loss. CSAA responded that the Zamichieis “cannot plausibly allege that the ‘loss’ was the chemical reaction itself while at the same time alleging that the ‘loss’ consists of ‘damages caused by a chemical reaction.'”

Importantly, the Policy also excludes coverage for “latent defect, inherent vice, or any quality in property that causes it to damage or destroy itself,” and “[f]aulty . . . [m]aterials used in . . . construction.” Here, the cracking concrete at issue was faulty at the time it was used in the construction of the Property and is specifically excluded.

The Zamichieis have, therefore, not raised a genuine issue of material fact as to whether the Policy covers chemical reactions.

CONCLUSION

Because the Zamichieis’ policy covers only “an abrupt falling down or caving in of a building,” and not the gradual deterioration of property over time, the Court concluded that CSAA’s policy excludes coverage for the damage to the Zamichieis’ basement, and granted CSAA’s motion for summary judgment

ZALMA OPINION

But for the use of the word “abrupt” instead of the word “ensue” in the policy the Zamicheieis’ had no coverage. CSAA carefully worded the terms of the policy and successfully excluded a risk of loss no insurer truly wants to cover – the slow deterioration of property. In fact, if, as time goes on and the structure finally collapses there would be no coverage because, based on the expert’s testimony, the loss is not fortuitous but inevitable.


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

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The Compact Book of Adjusting Property Insurance Claims

A Manual for the First Party Property Insurance Adjuster

The insurance adjuster is not mentioned in a policy of insurance. The The Compact Book of Adjusting Property Insurance Claims: A Manual for the First Party Property Insurance Adjusterobligation to investigate and prove a claim falls on the insured. Standard first party property insurance policies, based upon the New York Standard Fire Insurance policy, contain conditions that require the insured to, within sixty days of the loss, submit a sworn proof of loss to prove to the insurer the facts and amount of loss.

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

Technically, if the wording of the policy was followed literally the insurer could sit back, do nothing, and wait for the proof. If the insured was late in submitting the proof the insurer could reject the claim. If the insured submits a timely proof of loss the insurer could either accept or reject the proof of loss. If the insurer rejected the proof of loss the insured could either send a new one or give up and gain nothing from the claim. Suit on the policy would be difficult because the policy contract limited the right to sue to times when the proof of loss condition had been met.

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

Available as a Kindle book.

Available as a paperback.


Barry Zalma, Inc.

© 2018 – Barry Zalma

I have placed these books on Amazon.com as both e-books and as paperbacks to explain, in fiction based on reality, information to help everyone understand that insurance fraud can be defeated by a thorough investigation.

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Known Loss Provision Prevents Coverage

Knowledge of Ongoing Property Damage Defeats Coverage

People who are accused of tortious conduct are loathe to report the accusation to their insurer. Even though they know someone incurred property damage, and would continue to incur property damage, are obligated by every liability policy written in the United States to promptly report that known loss to the liability insurer. Further, since liability insurance only insures against fortuitous losses a loss that occurred, or began and continues, before the issuance of a policy cannot be fortuitous.

In Zepp Realty, P.A. and Charles Zepp v. Sentinel Insurance Company Ltd., Civil No. RDB-17-1773, United States District Court For The District Of Maryland (February 20, 2018) Zepp Realty, P.A. (“Zepp Realty”) and Charles Zepp sued Sentinel Insurance Company Ltd. (“Sentinel”) seeking damages for alleged breach of contract because Sentinel refused to defend or indemnity Zepp because it was excluded by the known loss provision of the Sentinel policy..

BACKGROUND

The suit arose because Zepp claimed Sentinel wrongfully refused to defend and indemnify Zepp Realty and Charles Zepp under their insurance policy with Sentinel in a real-estate related lawsuit filed against Zepp.

In October 2014, Robert and Kimberly Rullan (the “Rullans”) sued Zepp in the Circuit Court for Howard County, Maryland (the “Underlying Action”), setting forth allegations against Zepp in Zepp’s capacity as both a real estate developer and real estate agent. In the Underlying Action, the Rullans alleged they purchased property in a subdivision developed and marketed by Zepp, on which they experienced periodic flooding during rain events.

The Rullans first experienced the flooding in the fall of 2011, at which time they notified Zepp of the problem via email. According to the Rullans, Zepp and the homebuilder “acknowledged their responsibility…and undertook efforts to correct such defects.”

The Rullans again reached out to Zepp via email on May 1, 2014 to discuss the flooding problem. This time, they described the flooding with terms such as “a flood plain,” “a swamp,” and “a 40′ wide by 1 ½’ deep river.” After receiving this email, the Rullans claim Zepp again visited the property and undertook repair efforts, which were ultimately unsuccessful.

In October 2014, the Rullans filed suit against Zepp and other defendants over the property defects.  Zepp informed Sentinel of the Underlying Action and requested Sentinel defend and indemnify Zepp. Sentinel denied coverage.

Zepp ultimately settled the Underlying Action with the Rullans for $25,000. In defending the Underlying Action, Zepp paid $108,577.50 in attorneys’ fees and $5,825 in mediation and arbitration fees.

Sentinel moved for summary judgment on October 2, 2017.

ANALYSIS

General Principles of Insurance Policy Interpretation

Under Maryland law, an insurance policy is construed according to contract principles. Under the objective law of contract interpretation, the written language embodying the terms of an agreement will govern the rights and liabilities of the parties, irrespective of the intent of the parties at the time they entered into the contract. Any ambiguity in an insurance policy should be construed liberally in favor of the insured and against the insurer as drafter of the instrument.

The obligation of an insurer to defend its insured under a contract provision is determined by the allegations in the tort actions. If the plaintiffs in the tort suits allege a claim covered by the policy, the insurer has a duty to defend. Even if a tort plaintiff does not allege facts which clearly bring the claim within or without the policy coverage, the insurer must still defend if there is a potentiality that the claim could be covered by the policy.

Allowing an insurance company to refuse to defend an insured based solely on allegations in a complaint filed by an uninterested third-party leaves the insured with no choice but to rely on a plaintiff to file a well-pleaded complaint in order to establish a potentiality of coverage under the insured’s insurance policy. An insurance company, however, in Maryland may not use extrinsic evidence to contest coverage if the underlying complaint establishes a potentiality of coverage.

Zepp claims Sentinel had a duty to defend and indemnify Zepp in the Underlying Action under the Policy. Sentinel, however, contends it had no such duties because the Underlying Action was not covered by the Policy under the Policy’s known loss provision.

General Scope of Coverage Under the Policy

Most relevant here is the exclusion for known losses (the “Known Loss Provision”). Specifically, the Policy states coverage only applies where, prior to the policy period, no insured knew that the bodily injury or property damage had occurred, in whole or in part. If such a listed insured knew, prior to the policy period, that the bodily injury or property damage occurred, then any continuation, change, or resumption of such bodily injury or property damage during or after the policy period will be deemed to have been known prior to the policy period.

The policy explains “bodily injury” or “property damage” is deemed to have been known to have occurred when an insured:

“(1) Reports all or any part of the ‘bodily injury’ or ‘property damage’ to us or any other insurer;

“(2) Receives a written or verbal demand or claim for damages because of the ‘bodily injury’ or ‘property damage’; or

“(3) Becomes aware by any other means that ‘bodily injury’ or ‘property damage’ has occurred or has begun to occur.”

Where the policy contains its own known loss provision, and where Zepp clearly received written claim for damages or was aware of property damage has occurred or began to occur, as in this case, the provision should be enforced as written. The District court agreed.

A known loss provision in an insurance policy that bars liability for mere knowledge of events that may potentially create liability in the future must be enforced according to its own terms, even though the common law known loss doctrine only bars coverage when liability is substantially certain.

Maryland contract interpretation principles support enforcing known loss provisions in insurance policies as written. Enforcing a known loss provision in an insurance policy according to the terms of the provision itself, as opposed to enforcing it in accordance with the common law known loss doctrine, is most faithful to Maryland’s principles of contract interpretation.

Potentiality of Coverage of Underlying Action Under the Policy

Without turning to extrinsic evidence, the allegations of the Underlying Action alone establish there was no coverage under the Policy. The Underlying Action alleges Zepp knew as early as the fall of 2011 about the periodic flooding problem on the property. The Known Loss Provision of the Policy applies where the insured became aware by any means that property damage had occurred or had begun to occur. Thus, Zepp’s knowledge of the periodic flooding in the fall of 2011, however limited that knowledge was, is sufficient to exclude from coverage his resultant liability under the terms of the Policy’s Known Loss Provision.

The Rullans’ emails and Zepp’s own observance of the property show Zepp had notice that the Rullans were experiencing damaging flooding prior to the Policy’s effective date.

The Policy’s Known Loss Provision did not require Zepp know of its liability for the damage with certainty. Additionally, it is irrelevant under the Policy whether the flooding as alleged in the Underlying Action was worse than described in the original emails to Zepp because the policy specifically states, “any continuation, change or resumption of… ‘property damage’ during or after the policy period will be deemed to have been known prior to the policy period.”

Even viewed in the light most favorable to Zepp, this extrinsic evidence establishes the periodic flooding alleged in the Underlying Action was a “known loss” under the Policy. Because there was no potentiality of coverage under the Policy, Sentinel did not breach its contract with Zepp in refusing to defend and indemnify Zepp in the Underlying Action. Accordingly, Sentinel is entitled to judgment as a matter of law.

ZALMA OPINION

The lesson Zepp learned is to never wait to report a potential loss to his insurer and to inform every insurer from whom he seeks insurance to report the existence of a potential loss. Zepp knew the Rullan’s property was suffering damage and that they were upset and required the problem be fixed. It was not fixed, suit was file, and there was no coverage because Zepp knew about the property damage before he acquired the policy from Sentinel.


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Barry Zalma Releases Insurance Education Books on Amazon.com

Insurance Education Books on Amazon

Publications by 50+ Years Insurance Expert Inform Industry Professionals on Insurance Fraud

Culver City, CA – After practicing insurance law for over five decades, Barry Zalma, Esq., CFE, an internationally recognized and award-winning insurance expert and author, is releasing multiple education books on Amazon.com. Designed to inform claims people, special investigation unit investigators, and insurance defense and coverage lawyers on insurance claims and insurance fraud, the publications leverage key insights and learnings from his 50+ years of practical experience as a claims person and insurance coverage attorney.

Shared Zalma, “To be an insurance professional requires continuous learning. That’s the motivation behind my writing; I have felt a need to share my experiences to help claims personnel, SIU investigators and claims counsel learn how to properly and thoroughly investigate insurance claims and avoid accusations that they committed the tort of bad faith.”

To view all publications that can be purchased through Amazon as Paperback and Kindle e-books, visit Zalma’s author page or zalma.com/zalma-books/. A selection of the insurance resources available include:

Books by Zalma are also available from the American Bar Association and the National Underwriter Company. In addition to his library of education books, Zalma has also released a series of novels and true crime stories on Amazon, including Heads I Win, Tails You Lose, a collection of more than 80 fictionalized stories based on fraudulent claims he investigated as counsel to multiple insurers.

A huge proponent of insurance education, Zalma has also published numerous articles, blogs, white papers, webinars and education courses on a myriad of topics impacting insurance practitioners. Examples of this work include his blogs, Zalma on Insurance and Zalma’s Insurance 101 and webinars on Illumeo.com. The first features published digests of interesting appellate decisions relating to insurance coverage, insurance claims and insurance fraud, while the latter is a video blog featuring 1,024 short videos providing a complete insurance claims education in three to four minute increments. As a recognition to his achievements, Zalma received Claims Magazine/ACE Legend Award in 2016, honoring a lifetime of insurance education.

About Barry Zalma

Barry Zalma. Esq., CFE, Consultant, assists his clients to resolve any insurance problem faced by lawyers representing insurers, lawyers representing policyholders, insurance claims management, insurance claims personnel, and those they seek to serve. The experience and skill of Mr. Zalma as a consultant and expert witness can make the difference before a jury, other trier of fact, or mediator. Mr. Zalma has served the insurance industry for more than 50 years as a claims person and insurance coverage attorney. He has represented insurers, advised insurers on claims handling, interpreted coverages, written insurance policy wordings, and testified as an insurance coverage, insurance bad faith, insurance claims handling and insurance fraud expert on behalf of insurers and policyholders. He now limits his practice to consultation and acting as an expert witness. Visit www.zalma.com to learn more.

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Adjuster’s Statement Concerning a Flood Insurance Claim That is Contrary to Policy Wording is Unenforceable

Flood Insurance Statutes Preempt State Law Claims

Flood catastrophes almost invariably result in disputes over insurance proceeds, insurance, and repairs. The National Flood Insurance Program created flood insurance benefits paid from the Treasury of the United States. As a result federal courts have jurisdiction over flood claim disputes and deal with those claims strictly requiring total precision when applying the intent of the statutes.

In D & S Remodelers, Inc. v.  Wright National Flood Insurance Services, LLC, formerly known as Fidelity National Insurance Services, LLC; Colonial Claims Corporation, No. 17-5554, United States Court Of Appeals For The Sixth Circuit (February 14, 2018) plaintiff D & S Remodelers, Inc. (D & S), appealed from the district court’s dismissal of its claims against insurance adjuster Colonial Claims Corporation (Colonial) and flood insurance provider Wright National Flood Insurance Company (Wright). Finding all of plaintiff’s claims were preempted by the National Flood Insurance Act of 1968 (NFIA), 42 U.S.C. § 4001, et seq., the district court granted judgment in favor of defendants pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(c).

FACTS

Following Hurricane Sandy, the Foundry at Hunters Point Condominiums (the Foundry) needed substantial work to repair damage to its structure and interior. D & S, a company that performs remediation services, was working at a nearby building entered into an agreement that failed to specify the scope of the services or materials that D & S would provide. D & S characterized this agreement as an “open services” contract governing their relationship. The agreement included a “Responsibility of Payment” provision, in which the Foundry agreed to remit to D & S any payments made by an insurer.

Pursuant to this general agreement, D & S provided flood remediation services from October 2012 to January 2013. D&S claimed that representatives of the defendants instructed D & S to perform additional remediation and repair services that were substantially broader in scope than the initial emergency services. These newly negotiated services included the decontamination and repair of large parts of the Foundry’s structures, such as the parking garage, mechanical rooms, elevator shafts, and other common areas. D & S alleges that Wright, through its agent Colonial, agreed to pay D & S for all of the services and materials D & S provided. Plaintiff also alleges that Colonial separately made numerous oral agreements to pay D & S for all of the services provided, and this, D & S submits, “represented that any insurance claim submitted to The Foundry’s insurer, or available disaster relief fund, would be accepted and full payment would be made to D & S.”

D & S calculates that it provided over $500,000 in negotiated services to the Foundry by the time it completed its work in January of 2013. At this point, D & S and the Foundry defendants worked together to get their claims satisfied under the Foundry’s flood insurance policy. Despite these efforts, D & S was not paid.

D & S sued the Foundry, the unincorporated association that runs it, and eight individual defendants comprising the unincorporated association. Later, an amended complaint added defendants New Bedford Management Corporation, Wright, and Colonial to the lawsuit.

The claims against the Foundry were dismissed by stipulation after those defendants and D & S entered into a confidential settlement.

Wright filed a motion to dismiss under Rule 12(b)(6), arguing that the NFIA preempted D & S’s claims. The district court granted Wright’s motion. The court reasoned that, pursuant to the standard flood insurance policy under the NFIA, “all disputes arising from the handling of any claim under [a flood policy] are governed exclusively by the flood insurance regulations issued by [the Federal Emergency Management Agency (FEMA)], the [NFIA], and Federal common law.”

Furthermore, it emphasized that the terms of the policy “expressly provide that, while a [flood insurance] carrier may authorize a private third-party adjuster to assist with the investigation and handling of claims made under a [flood insurance] policy, the adjuster shall not be authorized to approve or disapprove claims or to tell the insured whether claims will be approved.”

The court then noted that these legal principles were not disputed, but D & S argued that this analysis did not apply because it was not the insured under the policy, and its claims were not based upon the policy. Instead, D & S asserted that its claims against Wright were based upon a wholly separate transaction between Colonial and D & S that bound Wright to pay for D & S’s work on the Foundry’s behalf. The district court disagreed, ruling the alleged representations made by Colonial—that Wright would pay D & S for its services under the flood insurance policy—were in the context of adjusting the policy, and that the NFIA preempts all such state law claims.

ANALYSIS

The National Flood Insurance Program was established by the National Flood Insurance Act of 1968, 42 U.S.C. § 4001, et seq.

The issue before the Sixth Circuit court was the preemptive effect of that federal statutory and regulatory scheme to the claims raised by D & S. Under the Supremacy Clause of the United States Constitution, state laws that interfere with, or are contrary to the laws of congress, made in pursuance of the constitution’ are invalid. When determining whether federal law preempts state law, the court must focus on congressional intent.

The flood insurance policy at issue, and all disputes arising from the handling of any claim under the policy, are governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4001, et. seq.) and Federal common law.

The Sixth Circuit recognized that the United States Treasury bears no responsibility to pay damages for procurement claims, and they present no danger to the federal interests undergirding preemption in the claims-handling context. Our court distinguished the two types of claims based on whether the plaintiff was already covered by the standard flood insurance policy, or instead was a potential future policyholder.

Contrary to the allegations of D&S the district court correctly rejected its state-law claims for unjust enrichment, intentional misrepresentation and fraudulent inducement, and negligent misrepresentation against both Wright and Colonial. As the district court noted, (1) D & S never interacted with Wright directly, and (2) by D & S’s own allegations, it only interacted with Colonial (allegedly Wright’s agent for purposes of the Foundry’s flood claims) at two meetings between the Foundry defendants and D & S, at which time the parties discussed the flood remediation services D & S was to provide.

The fact that D & S is not an insured and was never covered by flood insurance is irrelevant; the preemption prescribed by the regulation is not so limited. Because all of D & S’s claims necessarily arise from the handling of the Foundry’s claims under an existing policy, the district court correctly ruled all of plaintiff’s claims are preempted.

Since all of D & S’s state-law claims arise from the handling of a flood insurance claim under the policy between the Foundry and Wright. Under both the plain language of the regulation and caselaw, plaintiff’s claims are preempted by the NFIA. Thus, the district court correctly granted Wright’s motion to dismiss and Colonial’s motion for judgment on the pleadings.

D & S’s contract claim against Wright was based entirely on the actions of Colonial, which D & S postures as Wright’s agent. The allegations against Wright all pertained to the work D & S was doing for Wright’s “insureds.” But under the standard flood insurance policy, an insurance adjuster is “not authorized . . . to approve or disapprove claims or to tell you whether we will approve your claim.” 44 C.F.R. Pt. 61, App. A(3), Art. VIII(J)(8). [emphasis added] It is, therefore, unreasonable as a matter of law to rely on an adjuster’s statements during the claims process if they contradict the insurance policy.

D & S’s contract claim against Colonial also fails. D & S readily admits that it must present allegations of a separate agreement—beyond the insurance policy—between it and Colonial to survive judgment on the pleadings on that claim, because it has no standing to assert claims under the insurance policy. Any “agreement” between Colonial and D & S was clearly related to the flood insurance policy, and plaintiff has not alleged any contract claim against Colonial on which relief could be granted.

ZALMA OPINION

Flood insurance is nothing like any other insurance contract. Rather than being paid by an insurer the claims are paid by the U.S. Treasury and, since the NFIA usually pays out more than it collects in premium, U.S. courts are loathe to allow a claim that is not strictly in compliance with the statute. D&S played fast and loose with the parties and appropriately lost its attempt to take money from the government flood insurance program.


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

 

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“The Compact Book on Adjusting Liability Claims”

 “A Handbook for the Liability Claims Adjuster”

This Compact Book of Adjusting Liability Claims is designed to Product Detailsprovide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster.

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

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

Available as a Kindle book

Available as a paperback.


© 2018 – Barry Zalma

I have placed these books on Amazon.com as both e-books and as paperbacks to explain, in fiction based on reality, information to help everyone understand that insurance fraud can be defeated by a thorough investigation.

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Unwise to Waive Viable Coverage Argument

Never Try a Totally New Argument On Appeal

Lawyers and litigants select a theory on which to try a serious case. They present all the evidence and make all the arguments on that theory. If they lose at trial the only thing available for the losing litigant is to try to convince the appellate court that the trial court erred and its theory of the case was correct.

However, when the litigant abandons its trial theory and focuses its appeal on new theories it faces a very unhappy and disappointed appellate court. That is what happened at the Third Circuit in Tri-Arc Financial Services, Inc. v. Evanston Insurance Company; Markel Service, Incorporated, No. 16-4404, United States Court Of Appeals For The Third Circuit (2018).

FACTS

Tri-Arc Financial Services, Inc. (“Tri-Arc”) appeals from the dismissal of its lawsuit against Evanston Insurance Company and Markel Service, Inc. (collectively “Evanston”) seeking a declaratory judgment that Evanston — Tri-Arc’s professional liability insurer — was required to defend Tri-Arc in a third-party lawsuit that was brought against Tri-Arc. On appeal, Tri-Arc raises two bases upon which to reverse the District Court’s dismissal, neither of which were presented to the District Court for consideration.

Glenn Fischer was a Tri-Arc partner, who, purporting to represent the company, sold phony insurance policies supposedly from Wesco Insurance Company and Amtrust Financial Services, Inc. (collectively, “Wesco”). Fischer then absconded with the premium payments. One of the victims of Fischer’s scheme was Vehicle Leasing II, LP (“Vehicle Leasing”), who paid over a million dollars in supposed premium payments to Fischer before learning that no policy had ever been issued to it. Vehicle Leasing filed a lawsuit against Wesco, which in turn filed a third party complaint against Fischer and Tri-Arc, asserting that Fischer and Tri-Arc were the liable parties, or at the very least that they were liable to Wesco for indemnity and contribution. Upon being notified of the lawsuit, Tri-Arc made a demand upon its own insurer, Evanston, who refused to defend Tri-Arc in the lawsuit. In support, Evanston cited Exclusion F in the insurance policy for any claims related to premium payments.

TRIAL COURT DECISION

The District Court rejected Tri-Arc’s argument on the basis that Vehicle Leasing’s claim was predicated on seeking repayment of what it thought were premium payments, and “if the underlying complaint asserts a claim for lost premiums, Exclusion F applies, regardless of how the underlying claim is characterized.” The District Court accordingly granted Evanston’s motion and ordered the case closed. Tri-Arc timely appealed.

ARGUMENTS ON APPEAL

Tri-Arc’s primary argument on appeal — that the premium exclusion clause is ambiguous because it does not define “premium” — was not raised below. On the contrary, Tri-Arc made precisely the opposite argument before the District Court, asserting in effect that the definition of “premium” is perfectly clear. Rather, it argued that the policy’s premium exclusion was inapplicable because the payments to Fischer, which were untethered to an actual insurance contract, “cannot constitute premium payments.”

ANALYSIS

On appeal, Tri-Arc argued that the problem is not that the payments cannot count as premiums, but that “premium” in the contract is ambiguous because it does not define whether it excludes coverage for a premium that is constructively received. Tri-Arc relied solely upon the assertion that, whether or not received, the payments were not premium payments. The District Court was therefore not given notice of this argument and so never addressed whether the word “premium” was itself ambiguous in the context of the insurance contract.

The appellate court was urged to reverse on the basis of another argument not raised before that court. Unfortunately, for their argument, an appellate court is not a court of first instance, so as a general matter it will refuse to consider arguments not preserved below. And where the unpreserved argument was waived, meaning intentionally abandoned, it has no authority to address the argument. The nature of the claim made clear  to the Third Circuit that Tri-Arc’s failure to pursue the claimed ambiguity argument  at the trial court was a conscious or tactical choice made in favor of the argument that it did make, as opposed to an inadvertent omission, and thus constitutes a waiver.

The crucial question regarding waiver is whether defendants presented the argument with sufficient specificity to alert the district court.

An appellate court should not, and will not, reach a forfeited issue in civil cases absent truly exceptional circumstances. Tri-Arc’s assertion that the particular insurance contract that it entered into with Evanston is ambiguous for want of a specific definition of the word “premium,” a word that Tri-Arc asserted previously in this litigation has had the same clear definition from time immemorial, satisfies neither of the narrow exceptions.

The Third Circuit has consistently held that it will not consider issues that are raised for the first time on appeal. This rule is especially applicable here, where Tri-Arc — both prior to and during the course of this litigation — had steadfastly adhered to a single theory of liability, upon which Evanston staked its defense and upon which the District Court ruled, only to append this alternative theory that should have been equally apparent in the first instance.

ZALMA OPINION

The one thing that is necessary in every insurance coverage dispute is that the parties must posit to the trial court every possible argument, even if the arguments are contradictory. Taking away the ability of the trial court to choose forces the court to rule on the sole argument made. Tri-Arc had more than one possible argument and chose the wrong one.


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

 

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For Want of a Contract Lawyers Get No Fees

Contingent Fees Only Available to Lawyer from Client

Contingent fee lawyers obtain a fee from their client when they recover funds to indemnify the client for a loss. A tort lawyer’s work also provides contingent assistance and funds to the health care provider who treated the lawyer’s client.

In Adler Stilman, PLLC v.  Oakwood Healthcare, Inc., and State Farm Mutual Automobile Insurance Association, No. 333538, State Of Michigan Court Of Appeals (February 13, 2018) a law firm sought a contingent fee recovery from a health care provider who received a separate award than that received by the lawyer’s injured client. The health care provider refused, claiming they did not retain the lawyer and owed him nothing.

FACTS

Adler Stilman PLLC is a law firm that represented a truck driver, Ronald Reese, in connection with injuries he received on the job in January 2014. Defendant Oakwood Healthcare, Inc. (Oakwood) provided medical treatment to Reese after his accident. By way of written correspondence, plaintiff informed Oakwood in March 2014 that it represented Reese; that it was searching for no-fault insurance coverage of his damages, including the fees owed Oakwood; and that plaintiff asserted a lien on any recovery under the contingent-fee arrangement between plaintiff and Reese under which plaintiff was entitled to one-third of any recovery.

In late November 2014, plaintiff, after determining that no other no-fault or workers compensation coverage existed, filed a lawsuit on Reese’s behalf against the Michigan Assigned Claims Plan (MACP), as well as the owner of the truck and trailer and several related entities in the Wayne Circuit Court (the first lawsuit). After the lawsuit was filed, the MACP assigned Reese’s claim to defendant State Farm Mutual Automobile Insurance Association (State Farm). A few days later, Oakwood intervened in that lawsuit.

Reese and Oakwood received separate case-evaluation awards against State Farm. All three parties accepted those two awards, and State Farm paid Reese $99,000 and paid Oakwood $93,500.  Oakwood did not pay plaintiff any portion of its recovery.

Plaintiff sued Oakwood and State Farm in the present case, asserting that (1) Oakwood should have paid plaintiff one-third of its case-evaluation award against State Farm as an attorney fee, and (2) that State Farm paid Oakwood directly without regard to plaintiff’s claimed charging lien for attorney fees. Specifically, plaintiff sought $32,500 in costs and attorney fees. Oakwood and State Farm filed motions for summary disposition in lieu of responsive pleadings, arguing that plaintiff was not entitled to the one-third of Oakwood’s case-evaluation award. The trial court, after a brief hearing, agreed with defendants and granted them summary disposition.

CHARGING LIEN

A special or charging lien is an equitable right to have the fees and costs due for services secured out of the judgment or recovery in a particular suit. The charging lien creates a lien on a judgment, settlement, or other money recovered as a result of the attorney’s services. Attorney charging liens are not recognized by statute but exist in the common law.

In this case, there is no dispute that Oakwood was not plaintiff’s client and that the parties had not entered into a retainer agreement or a contingent fee agreement. Accordingly, under the facts of this case, plaintiff is not entitled to payment from Oakwood for any alleged services rendered to Oakwood on plaintiff’s own initiative. While the parties do not dispute that plaintiff sent written correspondence to Oakwood Southshore Hospital and Oakwood Heritage Hospital in March of 2014 advised that “Pursuant to the Michigan No-Fault Act[,] we are placing you on notice that we will be charging your facility a fee for collecting this money on his behalf” it was never accepted by Oakwood.

For example, in correspondence to the MACP on December 3, 2014, attorney Bruce K. Pazner expressly informed the MACP and attorney Barry D. Adler, “that Oakwood Healthcare, Inc. does not authorize Barry Adler or any attorney, other than my office, to represent its interests with respect to this claim.”

The court rejected the contention of the medical providers that they never requested the assistance of defendant’s attorney and therefore have no obligation to him. It can be said that medical providers would have an obligation to the attorney, his lien notwithstanding, on the theory of unjust enrichment. The providers knew that the attorney was expending time and energy in substantiating the insurance claims which led to their payment by Aetna. They were willing to accept his assistance in the knowledge that it would result in their payment. Only when it became clear that the attorney would have to assert his lien against the only existing fund, the PIP benefits, did the providers move to deny the attorney his share.

UNJUST ENRICHMENT

In addition the appellate court concluded that the trial court properly dismissed plaintiff’s unjust enrichment claim. Plaintiff’s claim is that it expended investigatory efforts prior to filing the complaint, that the complaint ultimately led to Oakwood recovering approximately $90,000, and it is inequitable for Oakwood to retain that amount without compensating plaintiff $32,500 for its work.

No person is unjustly enriched unless the retention of the benefit would be unjust. In order to establish a claim of unjust enrichment, plaintiff must demonstrate: (1) the receipt of a benefit by the other party from the complaining party and (2) an inequity resulting to the complaining party because of the retention of the benefit by the other party. The equitable doctrine of unjust enrichment must be employed with caution because it”vitiates normal contract principles.

There is no inequity in Oakwood retaining its full case evaluation award. As already made clear, both Reese and Oakwood were separately represented by counsel throughout the litigation, and both received their own separate case evaluation award. Each of their counsel presumably received compensation-pursuant to contractual agreements, consistent with the American rule-from their own clients. Nothing is inequitable about that.

At best, the law firm obtained the insurance proceeds not for the benefit of the medical providers but for the benefit of its clients who hired the law firm to attempt to compel BCBSTX to provide medical insurance coverage. The medical providers received an incidental benefit in this case.

The trial court properly granted summary disposition in favor of defendants.

ZALMA OPINION

The lesson lawyers should take from this case is to get an engagement agreement from a medical provider if the lawyer intends to work for the benefit of the health care provider. Since they did not obtain an agreement the lawyer’s work that incidentally benefited the health care provider was voluntary and not subject to a lien nor did it give the lawyer’s an equitable right to a portion of the recovery. As Sam Goldwyn once said “your oral contract ain’t worth the paper it’s printed on.”


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

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Excess Can’t Deny Claim if Notice is Prompt

Notice to Excess Not Required Until Insured Knows the Claim Will Exhaust the Primary Insurance

Liberty Mutual Fire Insurance Company,  as subrogee of Edison Properties, LLC, et al. v. Navigators Insurance Company, 2018 NY Slip Op 00631, 5602 653341/13, Appellate Division of the Supreme Court of the State of New York (February 1, 2018)

The Supreme Court (trial court), New York County (Ellen M. Coin, J.), entered on or about March 20, 2017, denied the motion of defendant Navigators Insurance Company (Navigators) for summary judgment dismissing the complaint, and granted the motion of plaintiff Liberty Mutual Fire Insurance Company (Liberty Mutual) as subrogee of Edison Properties, LLC, Edison Construction Management, LLC and 5030 Broadway Properties, LLC for summary judgment awarding Liberty Mutual the amount of $850,000, plus statutory interest and costs as against Navigators.

An insurer’s duty to cover the losses of its insured “is not triggered unless the insured gives timely notice of loss in accordance with the terms of the insurance contract” (Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 42 [1st Dept 2002] [internal quotation marks omitted]).

Even if the insurance policy were construed as specifying that only the named insured was required to provide notice of occurrences, demands and suits to the insurer, the duty to give reasonable notice as a condition of recovery is implied in all insurance contracts and is applicable to an additional insured. Where notice to an excess carrier is at issue, the focus is on whether the insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage and trigger its excess coverage, and whether any delay between acquiring that knowledge and giving notice to the excess carrier was reasonable under the circumstances.

The appellate court found that Liberty Mutual’s November 17, 2010 letter was sufficient to provide notice of claim to Navigators. However, even if the June 2010 supplemental bill of particulars implicated Navigators’ excess policy and the notice was untimely, Navigators’ disclaimer, issued 37 days later, was untimely as a matter of law.

ZALMA OPINION

The New York appellate courts have an uncanny ability to take a difficult issue and, in a clear and concise opinion, dispose of the problem.  Notice of claim defenses are clearly difficult for both sides and this one made it clear that notice to an excess insurer is only required when the primary insurer and the insured learn there is a potential to impinge on the excess insurer’s limits.


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

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Passover is Coming – Be Prepared

Passover Seder for Americans: An All English – Easy to Perform – Passover Seder Paperback

Passover is one of the many holidays Jewish people celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being? Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.

Available as a Kindle book.

Available as a paperback.

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Three Books Showing How Insurance Fraud Was Defeated

Murder & Old Lace: Solving Murders Performed for Insurance Money

 

Product Details

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

Available as a Kindle book.

Available as a paperback.

Arson for Profit: How an Attempt to use Arson & Fraud to Fund Terrorism Failed

This story is based on a real case involving a member of Russian/Armenian organized crime, real insurers, investigators, lawyers, fire fighters, and insurance brokers. The names, descriptions, and identities of the people involved have been changed to protect both the guilty and the innocent. The report to the US Senate, after this case was decided by the California Courts, reveal that the threats made on MOM and lawyer Hazan were real and they are lucky that the threats were never fulfilled. The person identified in this story as Levonyan was described to the US Senate as the leader of a Russian/Armenian organized crime ring. It is important to take seriously threats from criminals. Insurance fraud and arson-for-profit are not victimless crimes. They are crimes of violence that cost everyone who lives in the U.S.]

Available as paperback.

Available as a Kindle Book.

M.O.M. & The Taipei Fraud: How an Experienced Adjuster Defeated a $7 Million Fake Burglary Claim

 

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

Available as a paperback.

Available as a Kindle book.


© 2018 – Barry Zalma

I have placed these books on Amazon.com as both e-books and as paperbacks to explain, in fiction based on reality, information to help everyone understand that insurance fraud can be defeated by a thorough investigation.

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Life Insurer Must Pay What It Owes – Promptly

No Reasonable Excuse to Refuse to Pay Beneficiary

Once a life insurer receives proof of the insured’s death and a claim from the beneficiary it must pay the limits immediately but not later than 30 days. When the insurer delays without reason it is, in Illinois, found to act vexatiously, and required to pay attorneys fees and costs to the beneficiary.

In Anne Mangano, an individual v. Jackson National Life Insurance Company, a Michigan corporation, Barbara Mangano, et al., No. 16-11685, United States Court Of Appeals For The Eleventh Circuit (February 5, 2018) Jackson National Life Insurance Company had a dilemma: After her husband Norman Mangano died, Anne Mangano sought payment on Norman’s life-insurance policies. But Anne was not listed as a beneficiary on those policies in Jackson’s records. Instead, Norman’s former wife Barbara Mangano was the identified beneficiary on Jackson’s records.

Rather than taking meaningful steps to sort out the correct beneficiary, Jackson used the circumstances to stall payout for nine months. Only after Anne filed suit did Jackson eventually concede that Anne was entitled to payment.

After Jackson finally paid, mooting Anne’s initial lawsuit, Anne sought payment of attorney’s fees and interest accrued during the nine-month delay. The district court denied both items.

FACTS

Between 1985 and 1988, Jackson issued three life-insurance policies to Norman Mangano (“the Policies”). These Policies stated that Jackson would pay the face amount of the policy “to the designated Beneficiary upon due proof of the death of the Insured and not later than two months after receipt of such proof.” Collectively, the Policies provided for the payment of $150,000 to a designated beneficiary.

At the time the Policies were issued, Norman designated his then-wife Barbara as his beneficiary, a fact reflected in Jackson’s internal records. Each policy contained the same provision permitting the policyholder to change the beneficiary “by filing at the Home Office of the Company an acceptable written request,” and any change was to “take effect only when recorded by the Company at its Home Office.” They divorced on May 21, 1990, and their Judgment for Dissolution of Marriage, entered in DuPage County, Illinois, incorporated a Property Settlement Agreement. In part, it provided for Norman to have “as his sole and exclusive property,” among other things, the Policies. Additionally, the Property Settlement Agreement included a general release between Norman and Barbara. By the release Barbara gave up the right to the proceeds of the life insurance policies.

Norman passed away on May 24, 2014. Anne called to notify Jackson on June 10. On June 26, 2014, Anne’s financial advisor (the same outfit that submitted Norman’s Designation of Beneficiary form in 1993) sent Jackson a letter on Anne’s behalf demanding payment to her under the Policies. Enclosed with the letter was a copy of the Dissolution of Marriage, Norman’s signed July 6, 1993, Designation of Beneficiary, and a copy of the transmittal letter that Norman and Anne’s financial advisors had sent with the original Designation of Beneficiary form.

On September 4, 2014, almost three months after Jackson first advised Anne that Barbara was listed as the beneficiary in Jackson’s records, and more than two months after Anne sent Jackson a copy of the 1993 Designation of Beneficiary form, Jackson called Barbara for the first time. Jackson later reported that during their phone conversation, Barbara expressly refused to waive her legal rights to the Policies’ proceeds, though Jackson did not reveal what specifically she said.

Anne made one final written demand on Jackson for payment of the Policies’ full proceeds. Attached to the demand was a copy—though not a certified copy—of Norman’s death certificate. Jackson never responded to this demand.

Jackson waited nearly a month after Anne filed her complaint, and then on November 21, 2014, removed Anne’s lawsuit to federal court. At that time, along with an answer, Jackson filed a Counterclaim for Interpleader. The Counterclaim named Barbara and Anne as defendants and claimed that Jackson risked exposure to double litigation and double liability as a result of adverse claims.

Although Barbara did not respond Jackson never sought entry of a default judgment against Barbara.  The district court entered summary judgment in Jackson’s favor as to attorney’s fees and interest but entered final judgment for Anne as to her claim for benefits under the life-insurance policies.

DISCUSSION

The district court below applied the substantive law of Illinois, where Norman originally entered into his life-insurance agreement with Jackson. Anne seeks attorney’s fees under Section 155 of the Illinois Insurance Code, and she seeks interest under Chapter 215, Section 5/224 (1)(l) of the Illinois Compiled Statutes.

Before we may evaluate whether the district court abused its discretion in declining to award fees, we must consider whether, as a matter of law, the district court correctly applied the “vexatious and unreasonable” standard to Jackson’s conduct. The appellate court concluded that it did not. For that reason, the appellate court concluded it must vacate the award of summary judgment denying fees and remand to allow the district court to consider whether to exercise its discretion to award fees, accounting for the fact that Jackson’s delay was “vexatious and unreasonable” as a matter of law.

The Illinois legislature enacted Section 155 to provide a remedy to an insured who encounters unnecessary difficulties when an insurer withholds policy benefits. In passing Section 155, the Illinois legislature intended to make suits by policyholders economically feasible and to punish insurers.

Under Section 155, “vexatious” means without reasonable or probable cause or excuse. Ultimately, though, whether conduct rises to the level of “vexatious and unreasonable” under Section 155 depends on the totality of the circumstances.

The district court here concluded that while Jackson negligently failed to record the change of beneficiary form, there was “no evidence to suggest the failure was done in bad faith,” and Jackson’s delay was not vexatious and unreasonable because the company was investigating “the conflict between [Anne’s] claim that she was the beneficiary and Barbara Mangano as being the beneficiary designated by the Policies in [Jackson’s] file.”

The record unambiguously reflects that Jackson’s was an attitude of delay, deter, and defer. Jackson did nearly nothing to investigate Barbara’s alleged competing claim—and conducted the modest investigation it did undertake only after much delay.

The record reflects that Jackson used Barbara’s oral claim of entitlement—without any investigation—as an excuse to delay payout of the insurance proceeds. Even after Jackson had Barbara’s waiver in hand, it still did not seek a default judgment.

While Jackson had a basis for believing a dispute to exist at some point, Barbara’s unsubstantiated oral claims alone simply do not justify the nine months Jackson took to pay Anne the proceeds, since Jackson did nothing effective to actually investigate Barbara’s claim. If Jackson truly believed there was a dispute, it could have filed an interpleader action immediately rather than waiting five months for Anne to sue first. Jackson’s own actions belie its contention that a bona fide dispute really existed.

In the end Jackson offered no explanation as to why it waited so long to investigate the questions raised by Anne’s claim, let alone to pay out the Policies’ proceeds once it had ample evidence at its disposal.  As a matter of law, its conduct was vexatious and unreasonable.

Jackson received sufficient information as to its liability before January 30, 2015. By then, it long had the documents Anne sent on June 26, 2014, and Barbara’s deadline to respond to the interpleader action had passed unheeded. Because no other legal impediments were dependent on third parties, the only question is whether Jackson had received “due proof” of Norman’s death before January 30.

Since it is clear Jackson paid Anne more than thirty-one days after all three of the events listed in Section 5/224, Anne is entitled under the statute to prejudgment interest.

Jackson’s response to Anne’s claim—one of delay, deter, and defer—was vexatious and unreasonable as a matter of law. On remand, the district court must consider whether or not she is entitled to attorney’s fees in light of this circumstance. We also conclude that Jackson had due proof of Norman’s death more than thirty-one days before it paid Anne. Anne is entitled to prejudgment interest under Section 5/224.

ZALMA OPINION

Insurance is, as I have often said, a business of utmost good faith. When an insurer, like Jackson acted in this case, investigates a claim with actions designed to delay, deter, and defer payment, it has clearly breached the covenant of good faith and fair dealing. There should be no excuse for such inadequate claims handling and lack of a thorough investigation.


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

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“Murder And Insurance Fraud Don’t Mix”

A Professional Claims Investigator Stops a Murderer

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

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

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

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


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Zalma’s Insurance Fraud Letter – February 15, 2018

The Essential Resource For The Insurance Fraud Professional

Arson and Fraud Conviction Upheld

Samuel F. Crawford appealed from a judgment convicting him upon a jury verdict of arson in the third degree, attempted insurance fraud in the fifth degree, conspiracy in the fifth degree, and two counts of arson in the fourth degree, based on evidence that he conspired with others to set fire to his vacant rental property in order to collect insurance money. The fire destroyed defendant’s property and caused damage to two neighboring properties. In The People Of The State Of New York v. Samuel F. Crawford, 1482 KA 14-01983, 2018 NY Slip Op 00945, Supreme Court Of The State Of New York Appellate Division, Fourth Judicial Department (February 9, 2018) chutzpah was rampant in the appellate court.

When you brag to the police that you did the crime it should be obvious that you must do the time. To appeal the verdict on such flimsy grounds appears to approach frivolity. If it wasn’t so serious, if time in jail was not involved, the court’s members should have fallen down laughing when it read the briefs and evidence.

Zalma’s Insurance Fraud Letter, Volume 22, No. 4

New Insurance Books by Barry Zalma

 Now available as Kindle or paperback books are the following non-fiction texts for insurance professionals:  

  • Insurance Fraud & Weapons to Defeat Insurance Fraud – Volumes One and Two
  • Rescission of Insurance
  • Ethics for the Insurance Professional
  • Random Thoughts on Insurance – A Collection of Blog Posts from Zalma on Insurance
  • The Insurance Examination Under Oath
  • The Compact Book on Adjusting Liability Claims

Now available as Kindle or paperback books are the following fiction pieces on insurance matters:

  • Heads I Win, Tails You Lose
  • Arson for Profit
  • Murder & Old Lace
  • Murder and Insurance Fraud Don’t Mix
  • Candy & Able – Murder for Insurance Money

See all Barry Zalma Books Available on Amazon here.

 

The Current Issue Contains the Following  

  • Arson and Fraud Conviction Upheld
  • Become a Certified Expert in Corporate Property Insurance and a Certified Expert in Corporate Liability Insurance
  • Jailhouse Lawyer Fails to Get Parole Terms He Wanted
  • Introducing Barry Zalma’s Insurance Law Deskbook
  • Pill Mill Doc Stays In Jail
  • Barry Zalma Speaks at Your Request
  • Wisdom
  • Maryland Issued $466K in Insurance Fraud Fines
  • Barry Zalma
  • Noted Insurance-fraud Attorney to Lead Coalition’s Government Affairs Effort
  • Good News From the Coalition Against Insurance Fraud
  • Health Insurance Fraud Convictions
  • Zalma’s Flat Rate Opinions
  • Other Insurance Fraud Convictions
  • Books from the American Bar Association
  • Zalma’s Insurance Fraud Letter

Zalma on Insurance – A Blog

Check in every day for a case summary at http://zalma.com/blog:

 

I have completed a video blog called that consist of 1022 three to four minute videos starting with “What is Insurance” and moving forward to insurance fraud investigations explaining the basics of insurance and insurance claims handling in a painless fashion that can be viewed every morning with the first cup of coffee at  Zalma’s Insurance 101.

The videoblog is adapted from my book, Insurance Claims: A Comprehensive Guide available at the Zalma Insurance Claims Library.
Some of the 1,022 videos follow: If you start at Volume 1 at the bottom of the blog’s first page and view one or two videos a day you will have approximately 12 to 24 hours of training a year until you get to the last video.

Advertise  

Are you a lawyer, law firm, independent insurance adjuster or insurer who would you to promote yourself or your firm to more than 200 daily visits by insurance professionals or the more than 2000 subscribers to ZIFL?

If you are, an ad on the blog Zalma on Insurance or Zalma’s Insurance Fraud Letter, to such a selective audience of insurance professionals and management can be more effective than any other form of advertising.

Regards,Barry ZalmaBarry Zalma, Inc.     (c) 2018, Barry Zalma & ClaimSchool, Inc.

Subscribe to e-mail Version, it’s Free! –
http://zalma.com/zalmas-insurance-fraud-letter-2/
Go to my blog: Zalma On Insurance at http://zalma.com/blog
Go to my website at http://www.zalma.com

Go to Zalma Books – E-Books and Articles by Barry Zalma –
http://zalma.com/zalma-books/
Go to my videoblog: Zalma’s Insurance 101 at http://www.zalma.com/videoblog

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


© 2018 – Barry Zalma

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

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

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

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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“Candy and Abel”

“Murder for Insurance Money”

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

Available as a Kindle Book.

Available as a paperback.

 

 

 


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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The Case of the Art Flambé

Arson-for-Profit and Rembrandt

The following is one of the more than 80 fictionalized real-life insurance fraud stories Product Detailsfrom my book, “Heads I Win, Tails You Lose” available on Amazon.com. Available as a Kindle Book. and Available as a paperback.

FROM MODEL CITIZEN TO CRIMINAL

When a person decides to perpetrate an insurance fraud, he pushes the pause button on his morality. His plan to commit the fraud will then become so flamboyant and creative that even the most innocent of claims adjusters will detect the crime. Such was the case of a Belgian immigrant. He came to the United States shortly after World War II. He eked out a living with various jobs as a low paid engineering draftsman.

Before he decided to change his career and try arson for profit, he had lead a dull, but exemplary, life. He, at the age of sixty, married his second wife. Later they had a child. When the child was three, he contracted phlebitis and underwent several surgeries. He was unable to keep up with his work and, in any event, the aerospace industry had just lost several major contracts. He lost his job.

Unemployment Compensation did not pay enough for him to make the $1,400 a month payments on his small three bedroom house in Cerritos, California. His lender foreclosed.

After the foreclosure sale had occurred, he was still living in the house. His homeowner’s policy was still in effect. He no longer had an interest in the house and was subject to eviction. The insured recruited his sixteen-year-old son, from his first marriage, to set fire to the house. He made certain that when the fire occurred he, his wife and young daughter were away visiting relatives in Victorville. The house, with the assistance of much gasoline, burned to the foundation.

Much to his surprise (he was not an insurance scholar) the insurance company immediately denied his claim for the loss of his structure. He did not know that he must, at the time of the fire, have an interest in the structure to collect indemnity. The mortgagee, now the owner, received full payment. He had $100,000 in contents coverage and needed to collect it all.

Of course, because of his extended illness and lack of income, the house had relatively threadbare and simple furniture and furnishings. He needed to bring the values up somehow to effect a policy limits payment.

He prepared an inventory of all of his household furniture and furnishings and added to that an original oil painting by Rembrandt, an original oil painting by Pablo Picasso and an original oil painting by Vincent Van Gogh.

The adjuster was surprised that anyone who owned such valuable art work had difficulty making $400 a month payment to his mortgage company. The adjuster could not understand how the insured could allow his house to go by foreclosure. The adjuster retained counsel to examine the insured under oath.

UNMASKING FRAUD

Under oath, the insured’s testimony established that the insured had attempted to perpetrate a fraud on his insurer.

The insured testified that he was of royal birth, his father being a baron in Belgium. The Baron lived in a castle outside of Antwerp having earned his fortune in the diamond trade. The baron, pleased to learn that he had become a grandfather again, brought his son, daughter-in-law and new granddaughter to visit him at the castle. They spent a month at the castle enjoying the generosity of the baron. Before the insured left, the baron pointed to three oil paintings on the castle wall and told his son to take them home. Grandfather, the Baron, made the paintings a gift in honor of the birth of the new granddaughter.

The insured testified that he took the oils out of their frames, rolled them up and placed the three in a shipping tube which he hand-carried back to the United States. Since they were gifts, he did not report them to U.S. Customs. He had no written record of his ownership or possession of the paintings.

He described the Rembrandt as the dark painting of people sitting about a table with a bright point of light. When asked to describe the painting by Van Gogh, the insured testified:

“Another Dutchman. The painting was in the same style.”

Of course, counsel knew that although Rembrandt painted in very dark colors. Van Gogh, however, painted in wild, bright, and exuberant color schemes. A dark and brooding painting like that of Rembrandt never came off Van Gogh’s brush. Further, counsel knew (after consulting with an art expert) that Rembrandt painted most of his works on board – planks of wood. It was, therefore, impossible to roll it up and put it in a tube. If the insured had one of Rembrandt’s rare canvasses and had rolled it up when he arrived home in Cerritos he would have found a clean canvas and a pile of paint chips at the bottom of the tube.

The insured tried to help the insurer’s investigation. He provided a photograph of a family dinner where the Rembrandt was visible in the background. The insured identified the photograph as depicting the original Rembrandt oil painting in its background. Counsel for the insurer had the photograph enhanced and enlarged. The enlargement showed the single, bright point of light described by the insured was cast by a painting of an electric light bulb. Of course, Tom Edison had not been born when Rembrandt was painting, and would not be born for at least three hundred more years.

To the surprise of the insured only the insurer rejected the claim presented by the insured for fraud, false swearing, and material misrepresentation of fact.

Suit was filed by the Insured for breach of contract and breach of the covenant of good faith and fair dealing. Although the fraud was obvious and blatant the costs of defense of the bad faith action mounted. The suit dragged on for three years. Trial counsel for the insurer were unable to convince a court to grant summary judgment. Finally, at a mandatory settlement conference the lawsuit settled for a payment by the insurer of $30,000 against the wishes of defense counsel who, regardless, admitted he would have charged more than $30,000 to take the case through trial.

There is no question that the settlement was an appropriate economic decision if the insurer was only considering the single lawsuit. They were dealing with a plaintiff’s lawyer they saw on a regular basis. To pay him “tribute” as an economic decision was illogical. When a plaintiff’s bad faith lawyer is paid $30,000 by an insurer for a lawsuit that any three-year-old would know was a blatant fraud, he has been given an invitation to file more suits against that insurer, regardless of the merits of the lawsuit.

Paying a blatant fraud is tantamount to providing plaintiff’s counsel with the key to the vault that holds the assets of the company. The insurer that does so fools itself only that it is making a reasonable economic decision. It will pay, in the future, thousands of dollars because the plaintiff’s bar knows they will pay off rather than pay their lawyers to defend the most spurious of suits.


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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“Random Thoughts on Insurance Volume V”

 Digests from Barry Zalma’s Blog: ‘Zalma on Insurance’

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

The case digests and articles in this book summarize cases published by courts of the various states and the United States in 2016 and 2017.

The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Available as a Kindle book.

Available as a paperback.


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

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Jail House Lawyer Fails to Get Parole Terms He Wanted

Demand for Kind Parole Terms Fails

Insurance fraud is a serious crime. When you plead to the crime you will serve time in jail. When you are capable of Parole you are released to the public but you are not released from confinement for your crime. You are still in custody, just under different terms.

In Demetrius D. Moore, #S09786 v. Illinois Department of Correction, Prison Review Board, Pinckneyville C.C., Warden Love, Warden K. Jaimet, Unknown Warden, Counselor E. Landis, J. Hoch, Cws Supervisor, Unknown Counselor, Unknown Prison Review Board Employee, And Field Services Employees, Case No. 17-cv-01374-DRH, United States District Court For The Southern District Of Illinois (February 1, 2018) Plaintiff Demetrius D. Moore is incarcerated at Pinckneyville Correctional Center (“Pinckneyville”). He is currently awaiting release on parole with a projected parole date of March 19, 2018. He brings this civil rights action pursuant to 42 U.S.C. § 1983 in order to challenge certain conditions of his parole.

Plaintiff maintains that the Prison Review Board (“PRB”) and other defendants have imposed certain conditions on him that are consistent with his classification as a convicted sex offender. However, he is not a convicted sex offender and is not required to register as one. Plaintiff asks the District Court to declare these conditions unconstitutional and enjoin their enforcement. He also seeks monetary damages against the defendants.
The Complaint is now subject to preliminary review pursuant to 28 U.S.C. § 1915A, which provides:

(a) Screening – The court shall review, before docketing, if feasible or, in any event, as soon as practicable after docketing, a complaint in a civil action in which a prisoner seeks redress from a governmental entity or officer or employee of a governmental entity.

(b) Grounds for Dismissal – On review, the court shall identify cognizable claims or dismiss the complaint, or any portion of the complaint, if the complaint-

(1) is frivolous, malicious, or fails to state a claim on which relief may be granted; or
(2) seeks monetary relief from a defendant who is immune from such relief.

An action or claim is frivolous if “it lacks an arguable basis either in law or in fact.” Neitzke v. Williams, 490 U.S. 319, 325 (1989). Frivolousness is an objective standard that refers to a claim that any reasonable person would find meritless. An action fails to state a claim upon which relief can be granted if it does not plead enough facts to state a claim to relief that is plausible on its face. The claim of entitlement to relief must cross the line between possibility and plausibility. At this juncture, the factual allegations of the pro se complaint are to be liberally construed.

The Complaint

While awaiting trial on unrelated charges at Madison County Jail, the Madison County Sheriff’s Department allegedly charged Plaintiff with criminal sexual assault and criminal sexual abuse of his cellmate. On March 29, 2016, Plaintiff’s defense attorney notified him that the State’s Attorney would agree to dismiss these charges against Plaintiff, in exchange for his plea of guilty in his pending criminal cases for residential burglary, conspiracy to commit insurance fraud, and aggravated battery. As part of this agreement, Plaintiff would not be treated as a sex offender.

On this basis, Plaintiff entered a plea of guilty to residential burglary, conspiracy to commit insurance fraud, and aggravated battery. He was sentenced to 10 years for the residential burglary conviction, 2 years for the insurance fraud conviction, and 5 years for the aggravated battery conviction. Plaintiff’s projected parole date is March 19, 2018.
On October 25, 2017, Plaintiff received a copy of his parole conditions by mail.

The PRB imposed the following conditions of parole on Plaintiff, which he now challenges: (1) anger management counseling; (2) sex offender counseling; (3) outpatient mental health counseling; and (4) 90 days of electronic monitoring. An unknown IDOC employee also informed Plaintiff that he is prohibited from residing in a household with children. Plaintiff maintains that the defendants erroneously classified or treated him as a sex offender when setting his conditions of parole, despite the fact the he is not a convicted sex offender and is not required to register as one. He seeks an order requiring the defendants to remove these conditions of his parole.

Discussion

A petition for a writ of habeas corpus is the proper route if the prisoner is seeking what can fairly be described as a quantum change in the level of custody—whether outright freedom, or freedom subject to the limited reporting and financial constraints of bond or parole or probation. If, however, the prisoner is seeking a different program or location or environment, then he is challenging the conditions rather than the fact of confinement and his remedy is under civil rights law.

Plaintiff is seeking the former. He is currently in custody, and he seeks to challenge the conditions of his parole. Parole is also a form of custody. The challenged restrictions “define the perimeters of Plaintiff’s confinement. These conditions are what distinguish parole from outright freedom.

A state prisoner’s § 1983 action is barred, no matter what relief is sought, if success in the action would necessarily demonstrate the invalidity of his confinement or its duration. Plaintiff is in custody and seeks to challenge his parole conditions, which are part of his custody. Therefore, his civil rights claim is not cognizable under § 1983. The instant § 1983 action must be dismissed outright. The Court is not authorized to convert the § 1983 suit into a § 2254 proceeding because doing so may disadvantage Plaintiff.

Before bringing a federal habeas action, Plaintiff should be aware that he must first exhaust his state remedies, unless he can demonstrate cause and prejudice. A federal habeas petition is subject to immediate dismissal, if Plaintiff cannot demonstrate that he has presented his claims to the Illinois courts and has been denied relief at the trial and appellate levels.

ZALMA OPINION

The suit brought by Moore was not just frivolous, it was legally incorrect and wasted the time of the trial court. The court, being kind, dismissed the case without prejudice and told the criminal how to do what he wanted different than what he did. Why the court was so kind is beyond me. The man admitted to multiple criminal acts, including insurance fraud, and while waiting for trial was caught sexually abusing his cell mate. He is not, it seems, a great candidate for parole and should have been please he was being let out of jail under restrictive circumstances.


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

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“HEADS I WIN, TAILS YOU LOSE”

Stories of How Insurance Fraud is Defeated & How it Succeeds

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

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

It Takes Courage to Fight Insurance Fraud

The legislatures of the various states, the United States Congress, the National Association of Insurance Commissioners, The National Insurance Crime Bureau and insurance industry groups have finally decided that the war against insurance fraud is worth fighting. Until the states, the local police agencies, the district attorneys, the United States Attorneys, and the Attorneys General of the various states join in the battle it will be fought to a stalemate. The insurance industry cannot successfully fight insurance fraud alone.

The stories in the book were written to show how insurance fraud is taking money out of the pockets of innocent and honest people who buy insurance. For every dollar taken by a fraud an insurer must collect two dollars in premiums. Every person in the US who does not commit fraud is paying to support those who do. A minimum of $20.00 for every $100.00 every person insured pays in premiums goes into the pockets of insurance criminals.

If the stories make the reader angry the read must write to your local District Attorney, States Attorney, Attorney General or US Attorney and let them know of your anger. If enough people complain perhaps, the prosecution levels will increase. Although each of the stories that follow is based in fact, the names, locations and facts of the claims have been changed to protect the guilty.

This is mostly a work of fiction based on the real experiences of a practicing lawyer and Certified Fraud Examiner.

Available as a Kindle Book.

Available as a paperback.


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

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Arson and Fraud Conviction Upheld

Chutzpah: Appeal of Conviction After Videotaped Confession

As I have said before “Chutzpah” is a Yiddish word for utmost unmitigated gall. The best definition is the person who murders his parents and then pleads for mercy because he is an orphan. When a defendant admits, on video tape, to an arson for profit scheme it takes a great deal of chutzpah to then seek to reverse his conviction because he was not given a fair trial and he had a poor lawyer.

In The People Of The State Of New York v. Samuel F. Crawford, 1482 KA 14-01983, 2018 NY Slip Op 00945, Supreme Court Of The State Of New York Appellate Division, Fourth Judicial Department (February 9, 2018) chutzpah was rampant in the appellate court.

FACTS

Samuel F. Crawford appealed from a judgment convicting him upon a jury verdict of arson in the third degree, attempted insurance fraud in the fifth degree, conspiracy in the fifth degree, and two counts of arson in the fourth degree, based on evidence that he conspired with others to set fire to his vacant rental property in order to collect insurance money. The fire destroyed defendant’s property and caused damage to two neighboring properties.

ANALYSIS AND CONCLUSIONS

Contrary to defendant’s contention the County Court properly refused to suppress his statements to the police. The People proved beyond a reasonable doubt that the statements were not products of coercion, but rather were the “result of a free and unconstrained choice’ ” by defendant. It is difficult to prove coercion by police when the defendant brags about his criminal activities on videotape.

Contrary to defendant’s further contention, the trial testimony regarding his parole status was properly admitted in evidence to complete the narrative of the events leading up to the charged crimes. Although the appellate court agreed with defendant that the court abused its discretion in precluding defendant from cross-examining a prosecution witness concerning that witness’s alleged prior threat to burn down another person’s structure, it concluded that the error was harmless because the evidence of defendant’s guilt, including his videotaped confession, was overwhelming and there was no significant probability that defendant, otherwise, would have been acquitted.

Defendant’s contention that he was deprived of a fair trial by prosecutorial misconduct during the cross-examination of defendant and on summation was not preserved for the court’s review and it declined to exercise the power to review that contention as a matter of discretion in the interest of justice.

Viewing the evidence in light of the elements of the crimes as charged to the jury the verdict was not against the weight of the evidence.

Defendant’s contention with respect to the court’s alleged violation of his right to due process in imposing the maximum sentence is patently without merit.

Finally, the appellate court concluded that the sentence is not unduly harsh or severe.

ZALMA OPINION

When you brag to the police that you did the crime it should be obvious that you must do the time. To appeal the verdict on such flimsy grounds appears to approach frivolity. If it wasn’t so serious, if time in jail was not involved, the court’s members should have fallen down laughing when it read the briefs and evidence.


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

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“The Insurance Examination Under Oath”

The Best Weapon Against Insurance Fraud

Now Available at Amazon.com as a Kindle book or a paperback.

Product Details

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by a condition of the insurance contract that compels the insured to appear and give sworn testimony on the demand of the insurer or find his, her or it claim rejected for breach of a condition. A notary and a certified shorthand reporter are always present to give the oath to the person interviewed and record the entire conversation.

Courts that construe submission to an EUO as a condition precedent to recovery generally do not require the insurer to prove that it suffered actual prejudice from an insured’s unexcused refusal to submit to an examination. Lorenzo–Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 790 N.E.2d 692, 695–96 (2003). The EUO provides a mechanism for the insurer to corroborate the claim by obtaining information that is primarily or exclusively within the possession of the insured.

The adjuster, the independent adjuster, the Special Investigation Unit (“SIU”) investigator, the independent insurance adjuster and, in complex cases, the attorney retained to represent the insurer questions the person interviewed in a manner similar to a deposition in a legal proceeding. Because of the formality of the proceeding — it includes an oath, and the presence of a certified shorthand reporter — the task of establishing rapport with the person interviewed so that relevant information may be obtained from the insured is more difficult than in an informal interview. Unlike legal proceedings where questions are limited to those seeking a “yes” or “no” or brief answer the EUO seeks narrative responses from the person questioned.

Barry Zalma wrote this book to help everyone in the claims profession who is faced with a potential fraud or the inability of the insured to prove his, her or its loss any other way.

Available as a Kindle book.

Available as a paperback.


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Lawyer Accused of Insurance Fraud Scheme Entitled to Defense

Accusation that Lawyer Took Kickbacks from Auto Liability Claims Not Enough to Defeat Claim For Defense

Insurance companies, chafing from multiple millions paid out in insurance fraud schemes are fighting back by suing the lawyers – among others – involved in the scheme. New Jersey lawyer Karim Arzadi was named as a defendant in one of those schemes and sought defense from his errors and omissions (legal malpractice) insurer. His insurer refused to defend and he sued.

In Karim Arzadi, Joworisak & Associates, LLC, f/k/a Arzadi, Joworisak & Associates and Law Offices Of Karim Arzadi v. Evanston Insurance Company, and ABC Insurance Company, 1-10, Civil Action No. 2:17-CV-5470-SDW-CLW, United States District Court For The District Of New Jersey (February 7, 2018) the USDC was asked to determine whether Arzadi and his law firm were entitled to defense or indemnity.

BACKGROUND

Karim Arzadi (“Arzadi”), is an attorney licensed to practice in the State of New Jersey who maintains an office in Perth Amboy, New Jersey. To cover potential liability arising from his practice, Arzadi secured a Professional Insurance Liability Policy Number LA808257 (the “Policy”) from Defendant Evanston Insurance Company (“Defendant” or “Evanston”).

On or about January 3, 2017, Plaintiffs Arzadi and Joworisak & Associates, LLC were named as party-defendants in Allstate of New Jersey, et al., v. Bandy, et al., Docket No.: OCN-L-19-17 (“Allstate suit”). Plaintiffs are alleged to have “engaged in a continuing fraudulent scheme that is designed to defraud the Allstate Plaintiffs . . . by inducing the payment of PIP [personal injury protection] healthcare benefits . . . pursuant to an unlawful practice . . . .”

The lawyers sued Evanston in the Superior Court of New Jersey, seeking a declaratory judgment that Evanston has a duty to defend or indemnify Plaintiffs in the Allstate suit. On June 30, 2017, for the first time, Evanston’s counsel issued a letter to Plaintiffs disclaiming coverage in the Allstate suit because Plaintiffs are alleged to have engaged in fraudulent conduct which “does not fall under the Policy’s definition of Professional Legal Services,” and because “the Claim is not made against them in their insured capacity.” Later, defendant removed the case to the USDC.  The parties filed Cross-Motions for Partial Summary Judgment on the duty to defend issue.

DISCUSSION

An insurance policy is a form of contract, and its interpretation is a question of law for the court. In the first instance, the court interprets the language of an insurance policy according to its plain and ordinary meaning.  Any ambiguity in a term of the policy is resolved in favor of the insured.

Duty to Defend

Where the insurance policy states a duty to defend, the insurer is contractually obliged to provide the insured with a defense against all actions covered by the insurance policy. Thus, when a complaint is filed against the insured alleging a potentially covered claim, the insurer’s duty to defend is triggered.

The parties did not dispute that the Policy is valid and the allegations arising from the Allstate suit were received during the Policy Period. The USDC was satisfied that Plaintiffs complied with the reporting requirement under the Policy by submitting a claim to Evanston on or about March 9, 2017.

Scope of Claim

Under the Policy, Defendant must defend Plaintiffs against claims alleging a “Wrongful Act arising out of Professional Legal Services.” The Policy defines Professional Legal Services as “services rendered by an Insured (1) as a lawyer . . . provided that such services are connected with and incidental to the Insured’s profession as a lawyer and are performed by or on behalf of the Named Insured or any Predecessor Firm . . . .”

Plaintiffs are named as defendants in eight of the sixteen counts in the Allstate suit. The Allstate suit alleges, inter alia, that Plaintiffs violated Section 4(e) of the New Jersey Insurance Fraud Prevention Action, N.J. Stat. Ann. § 17:33A-1, et seq. (“IFPA”), by participating in a “Kickback Scheme” while representing clients in personal injury matters. Defendant argues that these allegations “serve merely as contextual background for the actual claims at issue,” i.e. an insurance fraud conspiracy, which does not qualify as a professional legal service.

The Allstate suit contained allegations that Arzadi advised clients how to proceed with their personal injury claims, which falls squarely within the Policy’s definition of Professional Legal Services. In determining whether particular acts constitute professional services, the important question is simply whether a substantial nexus exists between the context in which the acts complained of occurred and the professional services sought.

There is clearly a substantial nexus between the representation and the professional services his clients sought. Indeed, if Arzadi had not been acting as an attorney, he would not have been able to commit the alleged fraudulent acts.

Interpreting the Policy according to its plain and ordinary meaning the language is clear, the Policy provides that it will cover any act as long as it is connected to the Insured’s profession as a lawyer. Providing legal advice, as Arzadi is alleged to have done, is certainly connected to his practice as a lawyer. Therefore, the Court found that the allegations contained in the Allstate suit generally fall within the scope of a covered Claim under the Policy.

“Prior Knowledge” Condition

The Policy contains a “prior knowledge” condition that precludes coverage if prior to the effective date of the Policy, May 23, 2016, Plaintiffs had knowledge of the Wrongful Act “which would lead a reasonable person in [Plaintiffs’] position to conclude that a Claim was likely.”

Defendant argues that Plaintiffs had prior knowledge of the conduct alleged in the Allstate suit based on two prior lawsuits; however, these arguments were not persuasive to the USDC. With respect to the first suit, Plaintiffs were not a party to that litigation. Thus, prior knowledge cannot be imputed to Plaintiffs. With respect to the second lawsuit,  that litigation was filed as a wrongful termination suit under the Conscientious Employee Protection Act (“CEPA”). Because the underlying allegations were connected to employment related claims, Plaintiffs conceivably may not have had prior knowledge that those allegations were likely to form a basis for the insurance fraud allegations contained in the Allstate suit.

Defendant argued that under Exclusion F (the Fraudulent Acts Exclusion), Plaintiffs are barred from coverage because the Allstate suit alleges that Plaintiffs “committed intentional, willful, dishonest and fraudulent acts.” While it is true that the Allstate suit contains fraud allegations, Exclusion F only bars coverage for fraudulent acts if a final judgment or adjudication is entered against Plaintiffs. The Allstate suit is in the preliminary stages of litigation and the underlying allegations have not been substantiated by any court. Therefore, Exclusion F does not bar Plaintiffs from coverage.

Indemnity

Unlike the duty to defend, which arises whenever the claims asserted by the injured party potentially come within the coverage of the policy, the duty to indemnify is triggered only when the insured is determined to be liable for damages within the policy’s coverage. Because the Allstate suit is pending, this Court finds that it is premature to make a determination on the issue of whether indemnification applies.

ZALMA OPINION

The court noted that Arzadi could not commit the fraudulent acts alleged by Allstate without giving legal advice as a lawyer. Since insurance requires fortuity, an accident, there should be no coverage for defense or indemnity of a series of intentional acts. Evanston should defend under a reservation of rights and, if Allstate proves its case, refuse to indemnify and obtain a return from Arzadi of the money spent to defend him. If he didn’t commit fraud there will be no need to pay.


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

 

 

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Rescission of Insurance

The Equitable Remedy that Protects Insurers from Fraud

Rescission is an equitable remedy as ancient as the common law of Britain. When the United States was conceived in 1776 the founders were concerned with protecting their rights under British common law. They adopted it as the law of the new United States of America modified only by the limitations placed on the central government by the U.S. Constitution approved in 1789. The viability and ability to enforce contracts was recognized as essential to commerce. Courts of law were charged with enforcing legitimate contracts. Courts of equity were charged with protecting contracting parties from mistake, fraud, misrepresentation and concealment since enforcing a contract based on mistake, fraud, misrepresentation or concealment would not be fair. The common law developed rules that courts could follow to refuse to enforce the terms of a contract that was entered into because of mutual mistake of material fact, a unilateral mistake of material fact, the breach of warranty (a presumptively material promise to do or not do something), a material concealment, or a material misrepresentation. The remedy – called rescission – created a method to apply fairness to the insurance contract and allow an insurer to void a contract and allowed courts to refuse to enforce such a contract entered into by misrepresentation or concealment of material facts.

Available as a paperback. 

Available as a Kindle book.

Now available from Amazon.com is my new book on Rescission. People who commit insurance fraud know the crime but know nothing about insurance law. Every claims person, claims manager and insurance lawyer need to understand the law of rescission of insurance to allow them an important tool to defeat insurance fraud.


© 2018 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

 

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No Way a Bicycle is a Covered Automobile

A Professional Service Corporation is a Distinct Entity

Darryl Isaacs, a Kentucky lawyer did business as a professional service corporation (PSC). He was seriously injured when riding a bicycle he was hit by a car that was severely underinsured. He sought coverage under the commercial automobile coverage provided to his PSC.

In Darryl Isaacs; And Theresa Isaacs v. Sentinel Insurance Company, Limited D/B/A The Hartford, NO. 2017-CA-000204-MR, Commonwealth of Kentucky Court of Appeals (February 2, 2018) Darryl Isaacs and Theresa Isaacs appealed from a January 24, 2017, Order of the Jefferson Circuit Court granting a motion for summary judgment filed by Sentinel Insurance Company, Limited d/b/a The Hartford, (Sentinel Insurance) establishing no coverage under the commercial automobile policy.

FACTS

Darryl Isaacs was riding a bicycle on River Road in Jefferson County, Kentucky. Isaacs was struck on his bicycle by a motor vehicle operated by Michael Baumann. As a result of the accident, Isaacs alleges to have suffered numerous physical injuries.

Isaacs and his wife, Theresa (collectively referred to as appellants) filed complaints against, inter alios, Baumann and Sentinel Insurance. Appellants asserted that Baumann negligently caused the accident and that Baumann’s motor vehicle insurance liability limits were insufficient to compensate Isaacs for his damages. They alleged they were entitled to underinsured motorist (UIM) coverage under a motor vehicle policy of insurance issued by Sentinel insurance to Isaacs & Isaacs, P.S.C.

Plaintiffs accepted Baumanns insurance policy limits and sought to recover underinsurance motorist coverage benefits pursuant to their policies of insurance issued by Sentinel pursuant for their uncompensated damages.

Plaintiffs seek underinsured motorist coverage benefits under the Sentinel policy for their uncompensated damages in the amount of $3,000,000.00.

THE TRIAL COURT

Appellants filed a motion for declaratory judgment seeking a declaration that Sentinel Insurance was legally obligated to provide UIM coverage to Isaacs. In particular, appellants acknowledged that the named insured on the motor vehicle insurance policy was Isaacs & Isaacs, P.S.C. and not Isaacs individually. However, appellants maintained that Isaacs & Isaacs, P.S.C. was essentially Isaacs as he was the “sole owner” of the P.S.C. Thus, appellants argued that as the sole owner of the P.S.C. Isaacs was entitled to UIM coverage as a named insured in said policy.

Sentinel Insurance subsequently filed a motion for summary judgment arguing that Isaacs was not entitled to UIM coverage under the plain terms of the insurance policy. Sentinel Insurance pointed out that it issued a commercial motor vehicle insurance policy to Isaacs & Isaacs, P.S.C. which policy identified the named insured  as Isaacs and Isaacs, P.S.C.  The circuit court granted Sentinel Insurance’s motion for summary judgment and dismissed appellants’ claims against Sentinel Insurance.

DISCUSSION

Appellants submitted that “Darryl Isaacs and Isaacs & Isaacs PSC are synonymous for purpose of interpreting his policy of automobile insurance with Sentinel.” If such interpretation is rejected, appellants then argued that the doctrines of illusory coverage and reasonable expectations mandate UIM coverage be extended to Isaacs for his injury claim.

The insurance policy is unambiguous that Isaacs & Isaacs, P.S.C. is the named insured as set forth on the declarations page. Additionally, the policy is also unambiguous that if the named insured is a corporation or other “form of organization,” insureds under the UIM coverage are limited to “those persons occupying a covered auto.” So, an individual is entitled to UIM coverage only if occupying a covered motor vehicle at the time of the accident.

In this case, Isaacs was riding a bicycle at the time of the accident and was not occupying a covered auto. Under the clear and unambiguous terms of the insurance policy, Isaacs was not an insured entitled to recover UIM benefits. Additionally, the appellate court rejected appellants’ argument that Isaacs & Isaacs, P.S.C. and Isaacs are “synonymous” under the insurance policy. The insurance policy clearly does not equate the two being one in the same.

In Kentucky, a professional service corporation (P.S.C.) is a corporate entity as set out in Kentucky Revised Statutes (KRS) 274.015. The corporation must provide professional services to the public of the type which requires as a condition precedent thereto, the obtaining of a license or other required legal authorization to perform the service. Thus, licensed attorneys like Isaacs, are “qualified” persons under the statute who may form a P.S.C. to conduct their legal practice. More importantly, a P.S.C. formed under KRS Chapter 274 has the “same powers, authority, duties and liabilities as a corporation formed under KRS Chapter 271B.” KRS 274.015(2).

A professional service corporation is a distinct legal entity under Kentucky law. Isaacs’ argument that he is one and the same as his P.S.C. for insurance purposes because of a tax election is totally without legal merit under Kentucky law, as the record reflects he is a shareholder of the corporation. Similarly, Isaacs’ argument that he is the named insured of the corporation’s automobile insurance policy by virtue of his stock ownership in the P.S.C. is also without merit.

The motor vehicle policy issued by Sentinel plainly listed the named insured as Isaacs & Isaacs, P.S.C. This is a legal entity or business organization where the UIM policy endorsement clearly identifies “insureds” in Paragraph (B)(2)(a) as persons occupying a covered automobile or temporary substitute for the covered automobile at the time of the accident.

There is no language in this policy that contemplates that UIM coverage would be extended to a shareholder of the P.S.C. who is injured while riding a bicycle. As there is no ambiguity relating to UIM coverage in this instance, the doctrine of reasonable expectations is simply inapplicable. The trial court was correct: no coverage.

ZALMA OPINION

Lawyers should never represent themselves. Isaacs created a PSC and bought a commercial auto policy that limited its UM/UIM coverage to insureds injured while in a covered auto listed in the policy. Since he was injured on a bicycle there is no way the policy could provide coverage to Isaacs.  PSC’s are not fictions. They are a means of practicing law that provide the lawyer the limited liability of the corporate form.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

 

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Ethical Behavior is the Basis of Every Insurance Transaction

Ethics for the Insurance Professional

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

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

© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

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No Reformation When Insured Accepts Offer for Less than Requested

The Burden of Proof is on he who Seeks Reformation

Insurance agents and brokers obtain the insurance ordered by the insured. It is the obligation of the person insured to be certain the insurance acquired is the insurance wanted. When one gets the insurance ordered but fails to get the insurance needed to reform the policy to state what was needed instead of what was requested or obtained it is necessary to prove by clear and convincing evidence that a mistake or fraud occured.

In AIG Specialty Insurance Co. v. Interstate Fire & Casualty Co., A148343, Court Of Appeal Of The State Of California First Appellate District Division Five (February 5, 2018) AIG sued, seeking reformation of an insurance contract.. Summary judgment was granted upholding the policy as written and AIG appealed.

BACKGROUND

In September 2010, Willis Insurance Services of California (Willis Insurance)—a retail insurance broker, dealing directly with parties seeking insurance—contacted Swett & Crawford—a wholesale insurance broker, assisting retail brokers in placing coverage—requesting assistance in securing insurance for S.N. Barnes, LP (Barnes LP). James Lynch of Swett & Crawford contacted Interstate to solicit quotes for primary general liability and excess liability insurance. Interstate subsequently issued a one-year insurance policy to Barnes LP for commercial general liability and $3 million excess liability coverage. No excess automobile liability coverage was sought or issued in this 2010 policy.

On September 21, 2011, seven days before the expiration of the 2010 policy, Lynch sent an email to Interstate about renewing the Barnes LP policy. Lynch’s email stated, “need ASAP . . . . they want [to] renew it on Friday. GL and $3M excess (x GL only).” By the term “x GL,” Lynch meant excess general liability. Harris testified at her deposition that, although she did not remember working with Lynch on this renewal policy, she understood “x GL only” to mean excess general liability only.

The email also stated, “Please see attached Acords and supp app.” An ACORD (Association for Cooperative Operations Research and Development) application is a standard application used in the insurance industry to submit information to an insurance company. The ACORD application attached to Lynch’s email was prepared by Willis Insurance and included an “Umbrella Section,” which listed as “Underlying Insurance” both the primary liability insurance provided by Interstate and an expired automobile liability insurance issued by another insurance company.

At her deposition, Harris testified that typically, when she received a request to renew an insurance policy, she “may glance through the renewal ACORD app” in order to “see if boxes have been checked or just make sure it’s not a blank ACORD app,” but she would not look at the specific coverage requested in the ACORD application. Instead, she would base coverage “off of quoting per expiring or if anything’s changed, the producer or the broker would put it in a cover email.”

Harris provided Lynch with a quote for excess coverage which only listed excess general liability and did not include excess auto liability coverage. Lynch accepted the coverage on behalf of Barnes LP effective September 28, 2011. Harris subsequently prepared an underwriting summary of the excess coverage policy where auto liability was not included in the excess coverage.

In October 2011, Norman Barnes was involved in an auto accident causing serious injuries to the driver of another vehicle. AIG’s complaint alleges that at the time of the accident, Norman Barnes was acting within the scope of his employment at Barnes LP. The injured driver was apparently a highly paid employee who suffered head trauma in the accident.

In November 2011, one month after the accident, Lynch asked Harris to add the excess auto liability coverage, which she agreed to do at no additional premium. However, Harris stated the excess auto coverage would apply starting in November, and declined Lynch’s request that Interstate “backdat[e]” its effective date to September 28, 2011, when the renewed policy began.

The injured driver and Barnes LP eventually settled for $4 million. Barnes LP’s primary auto liability insurer paid its policy limit of $1 million toward the settlement. The remaining $3 million was paid by Swett & Crawford’s insurance carrier, AIG, in exchange for which Barnes LP dismissed its claim against Swett & Crawford and assigned to Swett & Crawford its claims against Interstate.

In October 2014, AIG sued Interstate alleging reformation, equitable subrogation, and breach of contract. Interstate moved for summary judgment. The trial court granted the motion, finding: “The undisputed facts show that: 1) Interstate never agreed to provide excess insurance over the [primary insurer’s] automobile liability policy for the date of the accident involving Mr. Barnes and 2) Interstate had no obligation, by contract or otherwise, to provide such coverage. …”

DISCUSSION

When, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention. (Cal. Civ. Code, § 3399.) ” The parties agree that entitlement to reformation must be shown by clear and convincing evidence.

Mutual Mistake

Determining whether a mutual mistake has occurred, a court may consider parol evidence. Extrinsic evidence is necessary because the court must divine the true intentions of the contracting parties and determine whether the written agreement accurately represents those intentions.

The burden, after clear and convincing evidence was presented by the excess insurer that no auto coverage existed, shifted to AIG to show the existence of a triable issue of material fact.

AIG points to the ACORD application attached to Lynch’s September 21, 2011 email which includes excess auto coverage, the statement in Lynch’s cover email asking Interstate to “see attached Acords and supp app,” and the testimony of an Interstate employee that underwriters were supposed to review ACORD applications submitted with policy renewal requests. Of course, an application is merely a request for an offer. There is no obligation on the part of an insurer to make an offer just because it is requested in the application.

If the moving party’s evidence is not controverted, the court must ordinarily accept it as true for purposes of the summary judgment motion.  The witnesses’ declarations may well be self-serving, but where (as here) they are uncontradicted, case law establishes that such a showing can provide the basis for summary judgment. AIG’s attack on Harris’s testimony as self-serving and improbable is insufficient to defeat Interstate’s showing on summary judgment.

The appellate court agreed that after Interstate’s prima facie showing, AIG failed to submit evidence showing the existence of a triable issue of fact regarding a mutual mistake over the inclusion of excess auto coverage.

Inequitable Conduct

AIG argues that, even if failed to show a triable issue of fact regarding mutual mistake, its evidence that Interstate’s conduct was inequitable precludes summary judgment. If by inadvertence, accident, or mistake the terms of a contract of insurance are not fully or correctly set forth in the policy, it may be reformed in equity so as to express the actual contract intended by the parties.  In addition, if the mistake is mutual or if there has been fraud or inequitable conduct by one of the parties to the contract it may be reformed.

Evidence that Interstate failed to follow its own internal policies for reviewing renewal ACORD applications does not constitute inequitable conduct warranting reformation of the contract. Rather, Interstate advised Barnes of the insurance it offered – with no coverage for auto liability – and Barnes accepted that offer.

ZALMA OPINION

When an insured presents an application to an insurer seeking offers of insurance and receives an offer less than that requested it is the obligation of the insured to either reject the offer or seek new offers. Here, Barnes accepted the offer for less than the coverage requested – apparently as a result of the error of its broker – and was only able to settle a massive injury claim with money paid by AIG, the brokers E&O insurer. Since Interstate made a clear offer that was accepted there was no ground for reformation.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

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Pill Mill Doc Stays In Jail

Doc’s Appeals Fail After Jury Conviction

Some doctors, who take an oath to “first do no harm” have decided that profit is more important than keeping their oath. The profits of giving out hundreds of prescriptions for high powered pain killers and hallucinogens causes rare doctors to violate their oath and criminal law.

In Commonwealth of Pennsylvania v. Lawrence P. Wean, J-A29023-17, No. 1165 EDA 2016, , No. 1167 EDA 2016, Superior Court Of Pennsylvania (JANUARY 26, 2018) Lawrence P. Wean, M.D., was convicted after a jury trial of twelve counts of unlawful prescribing of a controlled substance by practitioner, and three counts of insurance fraud, at docket number CP-23-CR-850-15; and seventy-seven counts of unlawful prescribing of a controlled substance by practitioner at docket number CP-23-CR-4420-15.

FACTS

The charges relate to Dr. Wean’s providing nine of his patients and two undercover detectives with prescriptions for thousands of controlled substances such as Oxycodone, Xanax, Percocet, Vicodin, Restoril, and Adderall, for a fee, with little or no physical examination or related illnesses, and then billing their insurance.

On December 17, 2014, police officers executed a search warrant at Appellant’s office in Media, PA. Dr. Eric Lipnack, DO, a licensed physician for forensic analysis, examined approximately thirty random files seized from the office. During trial, Dr. Lipnack testified as an expert in the areas of physical medicine, rehab, pain management and prescribing controlled substances. He relied, in part, and over defense objection, on the Pennsylvania Minimum Standards of Practice as related to the proper prescribing of medications.

On October 2, 2015, the jury convicted Dr. Wean of the previously mentioned crimes. The court sentenced him on December 9, 2015 to an aggregate term of imprisonment of not less than ten nor more than 20 years, fines, forfeiture of $837.00 seized as derivative contraband, and $62,141.19 payable to the Delaware County District Attorney’s Office for the cost of prosecution

ISSUES ON APPEAL

[1.] Whether the restitution order in the amount of $62,141.19 in favor of the Delaware County District Attorney’s Office was proper because the District Attorney’s Office is not a victim under the Crime Victims Act, and if improper did the order upset the sentencing scheme?

[2.] Whether the trial court erred in failing to rule 35 [P.S. §] 780-111(d) unconstitutional?

[3.] Whether the trial court erred in failing to grant the defense request for a jury instruction charging that a mere finding that Dr. Wean deviated from the civil Pennsylvania Minimum Standards of Practice introduced by the Commonwealth, without more, called for a finding of not guilty on the Drug Act charges?

[4.] Whether the trial court erred in charging that the Pennsylvania Minimum Standards of Practice, were in evidence “only to the extent that such evidence may be helpful to you in determining whether or not the Commonwealth proved each criminal offense charged in this case beyond a reasonable doubt.” To be clear on this issue, Dr. Wean claimed he cannot be convicted for unlawfully prescribing a controlled substance merely upon a showing that the medical care rendered was beneath a minimum standard of practice which was introduced as an exhibit in this case.

DISCUSSION

Section 4403 of The Second Class County Code provides, in pertinent part, “[i]n any case where a defendant is convicted and sentenced to pay the costs of prosecution and trial, the expenses of the district attorney in connection with such prosecution shall be considered a part of the costs of the case and be paid by the defendant.” 16 P.S. § 4403.

The record, as a result, belies Dr. Wean’s claim that the trial court erred in sentencing him to pay restitution to the District Attorney’s Office. Moreover, section 4403 provided the court with statutory authorization to sentence Appellant to remit the costs of the Commonwealth’s expert witness to the District Attorney’s Office. The court concluded, therefore, that the first issue had no merit and found the violation of the Constitution challenge was frivolous. Moreover, the court concluded Dr. Wean’s second issue is waived.

Dr. Wean’s third and fourth issues raise challenges related to the court’s jury instructions, and the appellate court noted that it is well-settled that the failure to object to a jury charge before the jury retires to deliberate waives that issue for appeal. Here, the Commonwealth introduced the minimum standards of practice at trial, and the trial court allowed the parties to submit proposed instructions regarding how they should be treated, which they discussed thoroughly with the court. Based on the parties’ submissions, the court read them the cautionary charge it proposed to give, asking them if it was acceptable. Any issues regarding the instruction as actually given, or the court’s failure to charge the jury in accordance with Dr. Wean’s proposed instruction, were waived.

A charge is considered adequate unless the jury was palpably misled by what the trial judge said or there is an omission which is tantamount to fundamental error. Consequently, the trial court has wide discretion in fashioning jury instructions. The trial court is not required to give every charge that is requested by the parties and its refusal to give a requested charge does not require reversal unless Dr. Wean was prejudiced by that refusal.

The appellate court, finally, concluded that the trial court’s instruction to the jury as a whole, particularly regarding the Commonwealth’s burden of proof and the necessary elements it was required to prove beyond a reasonable doubt, was adequate and clear.

Dr. Wean utterly failed to prove that the court’s denial of his proposed sentence prejudiced him. Dr. Wean’s third and fourth issues lacked merit.

ZALMA OPINION

A doctor who prescribes opiods and other mind altering drugs without a medical basis violates the Hippocratic oath and criminal statutes. Such drugs result in hundreds of deaths by overdose and harms the public as a whole. The ten to twenty year sentence was fair, reasonable and kind and yet the convicted doctor tried – without merit – to cause an appellate court to change his sentence. Fortunately the appellate court did not fall prey to his attempt. He has gone directly to jail and will not pass go or hurt anyone else.

 


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

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A Book for Every SIU Investigator, Claims Person or Claims Lawyer

Insurance Fraud and Weapons to Defeat Fraud

My new book, Insurance Fraud and Weapons to Defeat Fraud, is now available  with Volume One as a paperback and a Kindle book.   Volume Two is available as a Kindle book or a paperback.

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.https://i0.wp.com/images-na.ssl-images-amazon.com/images/I/51dZyx43XVL._AC_US218_.jpg?w=640&ssl=1

As those in the insurance industry are aware, many insurance fraud cases go unreported, either because the victimized organizations do not recognize that they have been defrauded, because they choose not to report the crimes for fear of bad publicity, or simply because they do not want to deal with the repercussions and expenses attendant on insurers who report fraud to the appropriate authorities. If each insurer recognized that at least three percent of its gross premium goes to perpetrators of fraud the insurer might be willing to invest more money in its special fraud investigation units. Those who believe they can pass the cost of fraud on to the customers are mistaken. The more an insurer pays fraud perpetrators the more fraud perpetrators will seek out insurance with that insurer so that they, too, can profit from fraud.  The truth is that fraud reduces the profit an insurer can make. Those who own stock in insurers should be complaining to the insurer about the lack of effort to protect the profits of the insurer and the dividends the shareholders are entitled to receive.

Insurance fraud is a tort, a civil wrong. Black’s Law Dictionary, 6th Edition, defines fraud as:

An intentional perversion of the truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right; a false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury.

In simple language, fraud can be defined as a lie told for the purpose of obtaining money from another who believes the lie to be true. Civil insurance fraud exists if an insured:

  • makes a representation to the insurer that the insured knows is false;
  • conceals from the insurer a fact he or she knows is material to the insurer;
  • makes a promise he or she does not intend to keep; and
  • makes a misrepresentation on which the insurer relies in issuing the policy that results in the insurer incurring damage.

To protect insurers against fraud, most insurance policies contain, in clear and unambiguous language, a clause similar to the following from the New York Standard Fire Policy:

This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein…

Fraud may be committed at different stages in the insurance transaction by:

  • applicants for insurance,
  • policyholders,
  • third-party claimants and
  • professionals who provide services to claimants.
  • Those who commit insurance fraud range from:
  • organized criminals who steal large sums through fraudulent business
  • activities;
  • insurance claim mills;
  • professionals and technicians who inflate the cost of services or charge for services not rendered;
  • people in need of cash who are recruited, for a fee, to be “victims” in an auto accident;
  • ordinary people who want to cover their deductible; or
  • ordinary people who view filing a claim as an opportunity to make a little money.

Health care, workers’ compensation and auto insurance are believed to be the sectors most affected by insurance fraud. However, insurance fraud comes in all shapes and sizes. They include:

  • Staged Auto Accidents.
  • Arson-for-profit.
  • Health Insurance Fraud (corporate).
  • Health Insurance Fraud (individual).
  • Faked Death.
  • Murder for Insurance.
  • Insurer Fraud.
  • Faked thefts.
  • Murder for life insurance proceeds.
  • Workers’ Compensation fraud.

Hard Fraud vs. Soft Fraud

When someone deliberately fakes an accident, injury, theft, or intentionally commits arson or other loss to collect money without right from insurance companies, it is considered a hard fraud. Insurance criminals often act alone. Increasingly, organized crime rings stage large schemes that steal millions of dollars. When a legitimate loss occurs and an insured adds a single television, an I-Pod or a cellular phone to the loss to cover the deductible, it is considered a soft fraud.

Soft fraud is usually unplanned and arises when the opportunity presents itself. It is the significantly more prevalent form of fraud. An example of this type of fraud would be getting into a car accident and claiming your injuries are worse than they reallInsurance Fraud & Weapons to Defeat Fraud - Volume Two: A Manual for Those Working to Defeat Insurance Fraud by [Zalma, Barry]y are, getting you a bigger settlement than you would get if you were telling the truth about your injuries.

Another example of soft fraud would be claiming you had very expensive art that was destroyed when your home was burglarized. In reality your home was burglarized but your art collection really consisted of prints.

Both frauds, regardless of the appellation, are both civil and criminal fraud. Both soft fraud and hard fraud are crimes in almost every state and both deserve to be prosecuted to the fullest extent of the law.

A soft fraud is no less a crime than a hard fraud. The difference is premeditation. Both, if proved, are absolute defenses to an insurance claim. Both, if proved beyond a reasonable doubt are crimes.

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 tried and convicted both can be sent to jail for the same amount of time.

SOFT FRAUD

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.

The preceding was adapted from the new book: Insurance Fraud and Weapons to Defeat Fraud.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

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Two Books Needed by Every Claims Person

“The Compact Book on Adjusting Liability Claims: A Handbook for the Liability Claims Adjuster”

This Compact Book of Adjusting Liability Claims is designed to Product Detailsprovide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster.

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

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

Available as a Kindle book

Available as a paperback.

The Compact Book of Adjusting Property Insurance Claims: A Manual for the First Party Property Insurance Adjuster

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

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

Technically, if the wording of the policy was followed literally the insurer could sit back, do nothing, and wait for the proof. If the insured was late in submitting the proof the insurer could reject the claim. If th

e insured submits a timely proof of loss the insurer could either accept or reject the proof of loss. If the insurer rejected the proof of loss the insured could either send a new one or give up and gain nothing from the claim. Suit on the policy would be difficult because the policy contract limited the right to sue to times when the proof of loss condition had been met.

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

Available as a Kindle book.

Available as a paperback.

 


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

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Diminution in Value Not Physical Damage

 Coverage Requires Physical Damage to Property

Insurance is a contract of indemnity. The terms and conditions of the policy contract are often in dispute and need a court’s interpretation to clarify its meaning.

In Decker Plastics Corp. v. West Bend Mutual Insurance Company, No. 17-1319, United States Court of Appeals For the Eighth Circuit (January 29, 2018) A1’s, Inc. (Al’s)  filed an action against Decker after the plastic bags Decker sold to A1’s deteriorated in the sunlight because they were not manufactured with an ultraviolet inhibitor. Al’s claimed damage and sought damage from Decker Plastics Corp. (Decker) sold plastic bags to Al’s.

Al’s filled the bags with landscaping materials (sand and rock) and stored them outdoors for sale to its wholesale customers. The bags deteriorated in the sunlight, spilling rock and sand off pallets and causing shreds of plastic to commingle with landscaping materials, both while in Al’s inventory and after delivery to its customers. Al’s sued Decker, alleging negligence, breach of warranty, and defective product. Decker’s insurer, West Bend Mutual Insurance Co. (West Bend), refused to defend or indemnify Decker under its commercial general liability (CGL) and umbrella/excess liability policies.

Decker paid $125,000 to settle Al’s claims. This coverage litigation followed claiming that Decker’s policies provided coverage for an “occurrence” resulting in “property damage.” The district court granted West Bend summary judgment, concluding there was no “occurrence” triggering property damage coverage. Decker appealed and the Eighth Circuit reversed, concluding “deterioration of the bags was the covered occurrence,” and “covered property damage (if any) was to Al’s property other than the bags.” Decker Plastics Inc. v. W. Bend Mut. Ins. Co., 833 F.3d 986, 988 (8th Cir. 2016). The Eighth Circuit sent the case back to the district court to address West Bend’s alternative claims that there was no covered “property damage” and that Al’s claims against Decker fell within policy exclusions. The district court again granted summary judgment for West Bend, concluding there was no covered property damage and three policy exclusions apply.

ANALYSIS

The Insuring Agreement section of the CGL policy provides that West Bend will pay “those sums that the insured becomes legally obligated to pay as damages because of . . . ‘property damage’ to which this insurance applies.” Both policies defined “property damage” to mean: “Physical injury to tangible property, including all resulting loss of use of that property. . . . or b. Loss of use of tangible property that is not physically injured.”

The modifier “physical” was added in a 1973 revision of the CGL policy form used by most insurers, this coverage limitation is unambiguous. Intangible damages, such as diminution in value, do not constitute physical injury to or destruction of tangible property.

The Supreme Court of Iowa has expressly agreed, as have most courts around the country. The critical question in this case is whether there was some “physical injury” to Al’s “tangible property.” If there was covered physical injury to tangible property, all damages caused by the injury, such as lost profits and investments, would be covered by the policy.

Al’s tangible property, its landscaping materials, did not suffer physical injury. Like the parties and the district court, the Eighth Circuit addressed this question by examining factually relevant cases. The mere incorporation of a defective component into a customer’s product is not “property damage” because it does not result in “physical injury.”

Simply filling Decker’s defective bags with Al’s landscaping materials did not cause covered property damage. On the other hand, when an insured’s customers covered tomato plants with plastic film that deteriorated, the Eighth Circuit held that covered property damage occurred when the plants became stunted, undersized, sunburned, or waterlogged, even though the customers’ damages were measured in economic terms such as lost profits.

Here, Al’s landscaping materials in Decker’s deteriorated bags became contaminated with small shreds of plastic. The rock and sand were not physically altered or destroyed, but contamination made the landscaping product unsaleable because the contaminating plastic could not be economically removed.

The district court thoroughly reviewed precedents and concluded undisputed facts established that Al’s “landscaping materials – the rock, gravel, and sand – were not physically injured due to the incorporation of the deteriorated packaging material.

After careful review of the undisputed facts of record, the relevant West Bend policy provisions, and the above-summarized authorities, the Eighth Circuit agreed. Absent physical alteration, Al’s property suffered only diminution in value. Accordingly, Decker’s claims were properly dismissed because there was no property damage triggering coverage under West Bend’s policies.

ZALMA OPINION

The CGL only provided coverage if there is physical damage to the property of the claimant. There is no question that Al’s was damaged and Decker paid $125,000 to resolve its suit. However, there was no physical damage to Al’s product and, as a result no coverage available. Although Decker successfully appealed once in the end it wasted its money and time by taking a second appeal.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

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“Candy and Abel: Murder for Insurance Money”

Life Insurance Fraud Defeated

As a famous Old Bailey Judge once said to a man in the dock who tried the same ploy by saying “as God is my judge, I’m not guilty” the judge replied: “He isn’t, I am, you are.”

Whenever a witness draws on the almighty to confirm the truth of his or her statements I become morProduct Detailse certain that person is not truthful. So, I sat silent for two minutes, just looking directly at the frozen in place Ms. Worthington before I asked:

“Isn’t it true that you only decided to buy a life insurance policy on your brother’s life after meeting with your attorney and after he agreed to give you the money to pay the down payment on the premium finance agreement?”

Read the short novel to learn how a young lawyer and wise old investigator defeated an attempt at life insurance fraud.

Available as a Kindle Book or paperback


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Flood Insurance Policy Must Be Strictly Construed

Filing Suit on Flood Policy Admits That Claim Was Denied

The National Flood Insurance Program (NFIP) is not the same as commercial insurance. Every claim is paid, eventually, by the U.S. Treasury. Therefore, federal courts are obligated to strictly construe NFIP policies as required by the NFIP statutes. Since an NFIP policy is also a type of insurance the insured is required to deal fairly and in good faith with the insurer and the U.S. Government.

In Anthony Migliaro v. Fidelity National Indemnity Insurance Company a/k/a Wright National Flood Insurance Company, No. 17-1434, United States Court Of Appeals for the Third Circuit (January 29, 2018) the Third Circuit was called upon to determine whether the rejection of a policyholder’s proof of loss constituted a “written denial of all or part of the claim,” thereby triggering the one-year private limitations of action that is set forth in every Standard Flood Insurance Policy (“SFIP”) and if so, whether a suit filed two years after the letter could be maintained.

BACKGROUND

After receiving a payment from Fidelity National Indemnity Insurance Company, based on an adjuster’s assessment of the damage to his property caused by Hurricane Sandy, Anthony Migliaro submitted a sworn proof of loss seeking additional compensation. Fidelity sent Migliaro a letter rejecting his proof of loss, and he filed suit. The District Court found that the letter rejecting Migliaro’s proof of loss was a “written denial of all or part of the claim.” Since Migliaro filed his complaint almost two years after he received the letter, the District Court dismissed the suit as time-barred.

The National Flood Insurance Program

Congress authorized the creation of the NFIP to “enable interested persons to purchase insurance against loss resulting from physical damage to or loss of . . . property . . . arising from any flood occurring in the United States.” 42 U.S.C. § 4011(a).

The national flood insurance system is an unusual hybrid of government and private insurance, but it is essentially a government program. Write Your Own (WYO) carriers are “fiscal agents” of the United States. SFIP policyholders pay premiums to WYO carriers and WYO carriers service the policies. However, the United States government ultimately pays all SFIP claims. Because SFIP claims are ultimately paid by the United States government, all SFIPs must be identical to the form codified at 44 C.F.R. pt. 61, app. A(1). With regard to Migliaro’s claim, every SFIP provides: “You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within one year after the date of the written denial of all or part of the claim[.] . . . This requirement applies to any claim that you may have under this policy and to any dispute that you may have arising out of the handling of any claim under the policy.”

Facts

Migliaro purchased an SFIP from WYO carrier Fidelity for his New Jersey property. The property sustained flood damage in October 2012 as a result of Hurricane Sandy. Fidelity sent an independent adjuster to assess the damage. The adjuster recommended a payment of $90,499.11. Fidelity adopted the adjuster’s recommendation and sent Migliaro a check for the recommended amount.

Five months later, Migliaro submitted a proof of loss, claiming an additional $236,702.57 in damages. On July 15, 2013, Fidelity sent Migliaro a letter titled “Rejection of Proof of Loss.” The letter rejected the proof of loss because “the amount claimed is not an accurate reflection of covered damage.” The letter also advised: “This is not a denial of your claim. … If there are additional covered damages identified, please forward documentation and they will be considered on a supplemental basis and a new corrected estimate and a new Proof of Loss will be provided.”

Migliaro provided no further information and brought suit against Fidelity in federal court.

ANALYSIS

The issue here is whether Fidelity’s rejection of Migliaro’s proof of loss constituted a “written denial of all or part of the claim,” thereby triggering the SFIP’s one-year limitation period.

Migliaro urged he did not accept the rejection as a denial of his claim. However, in so arguing, Migliaro necessarily admits that he viewed the July 15, 2013 letter rejecting his proof of loss as a written denial of his claim. This is because the private right of action against a WYO carrier is limited to a suit challenging the complete or partial denial of his claim. Therefore, the very act of bringing suit signaled that, to Migliaro’s mind, his claim had been denied.

By statute the policyholder’s cause of action arises “upon the disallowance . . . of any [SFIP] claim, or upon the refusal of the claimant to accept the amount allowed upon any such claim.” [42 U.S.C. § 4072.] The only communication of the disallowance was the written rejection of the proof of loss in the July 15 letter. Thus, by filing suit, Migliaro himself held out the July 15 letter rejecting his proof of loss as a denial of his claim. He cannot now argue otherwise.

Waiver of Sovereign Immunity

When Congress created the NFIP, its authorization of policyholders to sue FEMA upon disallowance of their claims constituted a limited waiver of the sovereign immunity typically enjoyed by the federal agency. An appellate court cannot enlarge the waiver beyond what the language requires. Strictly construed, 42 U.S.C. § 4072 provides a limited right to sue upon the disallowance of all or part of a claim, i.e. the complete or partial denial of a claim.

Under the WYO program, WYO carriers stand in FEMA’s shoes for litigation purposes.  Because a suit against a WYO company is the functional equivalent of a suit against FEMA an SFIP policyholder may only bring a suit against the WYO carrier as authorized by the SFIP.

Because flood losses, whether insured by FEMA or by a participating WYO insurer, are paid out of the United States Treasury, a claimant under a standard flood insurance policy must comply strictly with the terms and conditions that Congress has established for payment.

Because the only suit a policyholder can bring against a WYO carrier is one challenging the denial of his claim, by bringing suit on December 13, 2013, Migliaro necessarily acknowledged that Fidelity had denied his claim.

The United States, as sovereign, is immune from suit, save as it consents to be sued. A policyholder must also wait until his claim has been denied before he can file suit against a WYO carrier. According to the SFIP, “If you do sue, you must start the suit within one year after the date of the written denial of all or part of the claim[.]” 44 C.F.R. pt. 61, app. A(1), art. VII(R) (emphasis added).

Because a policyholder cannot bring suit until his claim has been denied in writing, Migliaro must have accepted that this had occurred when he brought suit. The only writing in the record that Migliaro could have construed as a denial of his claim was the July 15, 2013 letter rejecting his proof of loss. Thus, by bringing suit, Migliaro acknowledged that the letter constituted a written denial of his claim.

Because Migliaro’s complaint was filed almost two years after he received the July 15, 2013 letter, his suit was properly dismissed as time-barred.

Although the rejection of a proof of loss is not per se a denial of the claim in whole or in part, it does constitute a denial of the claim if, as here, the policyholder treats it as such by filing suit against the carrier.

ZALMA OPINION

By filing suit Mr. Migliaro was hoist on his own petard. Since the statute only allows suit after a claim is denied, the filing of suit was an admission that his claim had been denied. Since he filed two years after the letter the suit was time barred. Had he simply provided Fidelity with evidence of additional damage not covered by the initial assessment that claim would have been considered or denied and he could have sued within a year of an detailed denial or could have had his supplement paid. Failing to treat Fidelity fairly by proving his claim Migliaro destroyed his own claim.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Murder & Insurance Fraud Don’t Mix

How a Jeweler Tried to Get Rich by Faking a Robbery

Product DetailsOn January 16, just after completing the year-end-physical inventory, Gagik “George” Sassonian the owner of Yerevan Jewelry Manufacturing, was concerned about his finances. The Christmas selling season was bad. He had purchased diamonds on 90 day notes from his suppliers expecting to be able to pay them with the earnings from Christmas sales. His inventory at the end of the year was bigger than it was at the end of the third quarter. Sales were awful and he had no credit he could use to pay his creditors. The jewelry business was tight and Gagik was sure his vendors would not take the diamonds back.

Yerevan Jewelry was opened on Gagik’s arrival from Soviet Armenia in 1976. He brought with him diamonds worth $2 million with which he capitalized the new business. He was a criminal of the worst kind in the Soviet Union, he was an entrepreneur. He bought and sold jewelry and fine arts. When he was caught he was given a choice by the old KGB: leave the Soviet Union and be available to help the KGB in the future or spend 20 years in jail. Gagik came to the United States as a refugee claiming to be Jewish. The “Save Soviet Jewry” organization paid his way and set him up in the Fairfax District of Los Angeles, the largest Jewish community in Los Angeles County.

He was going broke so he created a scheme to defraud his insurer with a fake robbery.

Gagik, whose English is excellent but heavily accented and difficult for a native American to understand, gave the police a description of the man and the name given to by the robber. The police put out a bulletin but no one would admit that they even saw the man. Since there were no witnesses except the Down Syndrome jeweler who could not speak and Gagik, the investigation stopped at the taking of the report. Gagik reported that the thief had taken $1.25 million in loose diamonds and diamond and gold rings, bracelets and necklaces.

Available as a Kindle book.

 


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Zalma’s Insurance Fraud Letter – February 1, 2018

Zalma’s Insurance Fraud Letter

February 1, 2018

The Essential Resource For The Insurance Fraud Professional

“Chutzpah” or how a Guilty Plea to Insurance Fraud Defeats Claim

Chutzpah” is a Yiddish word meaning “unmitigated gall” where, for an example, a person who murdered his parents asks the court for clemency because he is an orphan.
In Sonya Fuller, Nationstar Mortgage, LLC v. Mercury Insurance Company Of Georgia, No. 17-12975, United States Court Of Appeals For The Eleventh Circuit (January 10, 2018) a person who pleaded guilty to insurance fraud had the unmitigated chutzpah to plead guilty to the crime of insurance fraud and still attempt to collect on the fire she caused to her dwelling.

New Insurance Books by Barry Zalma

  • Insurance Fraud & Weapons to Defeat Insurance Fraud – Volumes One and Two
  • Rescission of Insurance
  • Ethics for the Insurance Professional
  • Random Thoughts on Insurance – A Collection of Blog Posts from Zalma on Insurance
  • The Insurance Examination Under Oath
  • The Compact Book on Adjusting Liability Claims

Now available as Kindle or paperback books are the following fiction pieces on insurance matters:

  • Heads I Win, Tails You Lose
  • Arson for Profit
  • Murder & Old Lace
  • Murder and Insurance Fraud Don’t Mix
  • Candy & Able – Murder for Insurance Money

See all Barry Zalma Books Available on Amazon here.

The Current Issue Contains the Following  

  • California Takes Additional Legal Action Against Access Insurance Company
  • Become a Certified Expert in Corporate Property Insurance and a Certified Expert in Corporate Liability Insurance
  • Insurance Fraud Doesn’t Pay
  • Introducing Barry Zalma’s Insurance Law Deskbook
  • Where Did All the Medicaid Money Go?
  • Barry Zalma Speaks at Your Request
  • Dangerous to Lie to Your Life Insurer
  • Wisdom
  • The Insurance Fraud Hall of Shame for 2017
  • Barry Zalma
  • “Chutzpah” or how a Guilty Plea to Insurance Fraud Defeats Claim
  • Good News From the Coalition Against Insurance Fraud
  • Health Insurance Fraud Convictions
  • Zalma’s Flat Rate Opinions
  • Other Insurance Fraud Convictions
  • Books from the American Bar Association
  • Zalma’s Insurance Fraud Letter

Zalma on Insurance – A Blog

 The most recent posts to the daily blog, Zalma on Insurance, are available at  http://zalma.com/blog.

Check in every day for a case summary at http://zalma.com/blog

Zalma’s Insurance 101

I have completed a video blog called that consist of 1022 three to four minute videos starting with “What is Insurance” and moving forward to insurance fraud investigations explaining the basics of insurance and insurance claims handling in a painless fashion that can be viewed every morning with the first cup of coffee at  Zalma’s Insurance 101.

The videoblog is adapted from my book, Insurance Claims: A Comprehensive Guide available at the Zalma Insurance Claims Library.

Advertise 

Are you a lawyer, law firm, independent insurance adjuster or insurer who would you to promote yourself or your firm to more than 200 daily visits by insurance professionals or the more than 2000 subscribers to ZIFL?
If you are, an ad on the blog Zalma on Insurance or Zalma’s Insurance Fraud Letter, to such a selective audience of insurance professionals and management can be more effective than any other form of advertising.
For only $100 a month on the blog or $100 an issue on ZIFL your ad will be permanent and effective.
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Arson for Profit

How an Attempt to use Arson & Fraud to Fund Terrorism Failed

This story is based on a real case involving a member of Russian/Armenian organized crime, real insurers, investigators, lawyers, fire fighters, and insurance brokers. The names, descriptions, and identities of the people involved have been changed to protect both the guilty and the innocent. The report to the US Senate, after this case was decided by the California Courts, reveal that the threats made on MOM and lawyer Hazan were real and they are lucky that the threats were never fulfilled. The person identified in this story as Levonyan was described to the US Senate as the leader of a Russian/Armenian organized crime ring. It is important to take seriously threats from criminals. Insurance fraud and arson-for-profit are not victimless crimes. They are crimes of violence that cost everyone who lives in the U.S.]

The plot to create an arson fire for profit started as follows:

“It is time now to have a fire and collect the money for the cause. With what the insurance companies’ pay you the organization will be able to buy weapons, explosives and support a team of men who can exact revenge on the unholy Turks.”

“My family and I are ready.” Dickran replied, scratching the mark on his forehead. “When shall we have the fire?”

Dersogian, looking at the unkempt house filled with cheap furniture and porcelain from the Salvation Army Store, concluded the fire must be one that destroys all of the contents or the insurance investigators will discover their plan. He pulled out his kerchief, wiped his brow that was beaded with perspiration from the heat of a Los Angeles Summer, and said: “This Sunday. The Los Angeles Armenian Businessman’s Association is holding a dinner dance.”

Available as paperback.

Available as a Kindle Book.

 


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

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Insured May Cancel a Policy at any Time

Insurer Owes No Obligation to Beneficiary After Policy was Cancelled

Members of the public and most lawyers dislike insurance companies. They believe that, regardless of the preponderance of evidence that a life or accidental death policy was cancelled by the insured, the beneficiary sued the insurer and demanded extra-contractual damages for having the temerity to deny coverage on a non-existent policy.

In Michael C. Williams, Executor Of The Estate Of Kathryn M. Williams, a/k/a Kathryn Williams, Deceased v. Hartford Life And Accident Insurance Company, No. 17cv234, United States District Court For The Middle District Of Pennsylvania (January 29, 2018) the USDC refused to create a contract that did not exist.

BACKGROUND

In June of 2005, Kathryn Williams (hereinafter “Williams” or “the decedent”) took out a life insurance policy with Hartford Life and Accident Insurance Company (hereinafter “Hartford Life” or “defendant”) through her account with Citizens Bank. The policy, which included $1,000 basic coverage and $25,000 in supplemental coverage, provided benefits for individual accidental death and dismemberment. To pay for this policy, quarterly premium payments of $8.25 began being deducted from Williams’ Citizens Bank Account on June 1, 2005.

Several years later, on February 18, 2011, Williams called and spoke to a representative at Hartford Life. During this phone call, Williams expressed a desire to cancel her policy. Hartford Life confirmed Williams’ cancellation with a follow-up letter dated February 19, 2011. As such, Hartford Life cancelled the policy, effective March 1, 2011. No payments were deducted from Williams’ account for this policy after December 1, 2010.

On December 19, 2011, Williams died as the result of injuries suffered in a motor vehicle accident. Michael C. Williams (hereinafter “plaintiff”), executor of Williams’ estate, reported the damage and loss to Hartford Life. Hartford Life denied plaintiff’s claim for the accidental death of the decedent, and refused to pay plaintiff, citing the decedent’s cancellation as its reason.

LEGAL STANDARD

Granting summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

A fact is material when it might affect the outcome of the suit under the governing law. Where the non-moving party will bear the burden of proof at trial, the party moving for summary judgment may meet its burden by establishing that the evidentiary materials of record, if reduced to admissible evidence, would be insufficient to carry the non-movant’s burden of proof at trial. Once the moving party satisfies its burden, the burden shifts to the non-moving party, who must go beyond its pleadings, and designate specific facts by the use of affidavits, depositions, admissions, or answers to interrogatories demonstrating that there is a genuine issue for trial.

DISCUSSION

Specifically, the defendant argues that the plaintiff has not developed any evidence to show that the decedent’s policy was still in effect when she died, defeating both claims. We will address the breach of contract claim and the bad faith claim separately.

Breach of Contract

Plaintiff argued that the defendant breached its policy contract with the defendant by failing to pay the accidental death and dismemberment insurance proceeds to the plaintiff when the decedent died as the result of a car accident. Under Pennsylvania law, to establish a breach of contract a party must demonstrate (1) the existence of a contract, including its essential terms, (2) a breach of duty imposed by the contract, and (3) damages.

The defendant argues that it did not have an effective contract in place with the decedent when she died on December 19, 2011, because the decedent cancelled her policy on February 18, 2011. In support, the defendant has proffered an audio recording of a phone call between the decedent and a customer contact representative at Hartford Life. Plaintiff agrees that in this recording, the decedent clearly cancels her policy with the defendant. He argues, however, that he believes she “was cancelling her auto insurance policy with Hartford Insurance” and not her accidental death and dismemberment policy.

Further, the representative from Hartford Life responds to the decedent after she discloses her reason for canceling her policy, and tells her that before she cancels to “keep in mind that this insurance protects [her] when [she] is at home, when [she] is working, or even when [she] is traveling outside the United States.” At the conclusion of the audio recording, the representative cancels the decedent’s policy. The next day, Hartford Life sent a letter to the decedent confirming the cancellation. The bank deducted no further premiums for this policy from the decedent’s account.

While the court sympathized with the unfortunate set of facts the record makes clear that the decedent cancelled her accidental death and dismemberment insurance policy with the defendants nearly ten months before she died. As such, there was no contract between the parties at the time of the decedent’s death.

BAD FAITH IN HANDLING INSURANCE CLAIMS

Plaintiff also brought a bad faith claim against the defendant arguing that the defendant had no reasonable or sufficient basis to deny plaintiff the proceeds of the decedent’s policy. Pennsylvania has established a statutory remedy for bad faith on the part of insurance companies. “If the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions: (1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%[;] (2) Award punitive damages against the insurer[;] (3) Assess court costs and attorneys fees against the insurer.” 42 Pa. C.S.A. § 8371.

The term bad faith includes any frivolous or unfounded refusal to pay proceeds of a policy.  For purposes of an action against an insurer for failure to pay a claim, such conduct imparts a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self interest or ill will; mere negligence or bad judgment is not bad faith. Thus, for a plaintiff to recover under a bad faith claim, he must show (1) that the defendant did not have a reasonable basis for denying benefits under the policy; and (2) that the defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.

The defendant had a reasonable basis for denying the plaintiff benefits under the decedent’s policy—the policy had been cancelled nearly ten months prior. As such, the defendant’s refusal to pay benefits to the plaintiff was not frivolous or unfounded.

ZALMA OPINION

Although the defendant’s refusal to pay the plaintiff was not frivolous or unfounded the suit seeking damages, both contract and bad faith, from the Hartford was frivolous and unfounded. The court should have done more than tell the plaintiff he lost the case, it should have sanctioned the plaintiff and counsel for a frivolous suit.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

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Random Thoughts on Insurance, Volume V

Digests from Barry Zalma’s Blog

Zalma on Insurance

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

The case digests and articles in this book summarize cases published by courts of the various states and the United States in 2016 and 2017. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Available as a Kindle book.

Available as a paperback.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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Conflict Must be Significant, not Merely Theoretical, to Allow Independent Counsel

Coverage Issue That Has Nothing to do With Underlying Action Insufficient to Allow Independent Counsel

Most commercial insureds want to retain counsel of their choice to defend them when a tort action is brought against them and want their insurance company to pay that lawyer. They rely on independent counsel statutes and the California Court of Appeal decision: San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358.

In Centex Homes et al. v. St. Paul Fire And Marine Insurance Company, C081266, Court Of Appeal Of The State Of California Third Appellate District (Placer) (January 22, 2018)  Centex Homes and Centex Real Estate Corporation (Centex) and cross-defendant and respondent St. Paul Fire and Marine Insurance Company (St. Paul) presented to the Court of Appeal a dispute that arises out of construction defect litigation between certain Rocklin homeowners and Centex, the developer of their homes. St. Paul was an insurer for subcontractor Ad Land Venture (Ad Land), and agreed to defend Centex as an additional insured subject to a reservation of rights. Centex filed a cross-complaint against its subcontractors and St. Paul that sought, as the seventh cause of action, a declaration that Centex was entitled to independent counsel under California Civil Code section 2860 because St. Paul’s reservation of rights created significant conflicts of interest.

Centex appealed from a final judgment after the trial court granted St. Paul’s motion for summary adjudication of Centex’s seventh cause of action.

BACKGROUND

The underlying action was initiated by homeowners from two residential developments in Rocklin against Centex for alleged defects to their homes. Centex did not directly perform any of the construction on these homes. On March 30, 2012, Centex tendered its defense of the action to St. Paul as an additional insured pursuant to Ad Land’s policy. St. Paul agreed to defend Centex subject to a reservation of rights. The reservation of rights reserved St. Paul’s right to deny indemnity to Centex for any claims by the homeowners not covered by the policy, including claims of damage to Ad Land’s work and damage caused by the work of other subcontractors not insured by St. Paul. St. Paul also reserved its right to reimbursement of costs incurred defending uncovered claims. St. Paul appointed attorney David Lee to represent Centex and defend against the homeowners’ claims.

On July 12, 2012, Centex filed a cross-complaint against subcontractors including Ad Land alleging breaches of written, oral and implied contracts to indemnify, defend and obtain insurance, as well as causes of action for equitable indemnity, contribution and repayment, and declaratory relief.

The trial court granted St. Paul’s motion for summary adjudication. The court held that St. Paul met its initial burden by establishing that its reservation of rights did not create a conflict of interest and did not affect coverage issues that could be controlled by Lee. Additionally, St. Paul sufficiently established that Lee does not have a conflict of interest. ” St. Paul retained separate counsel, The Aguilera Law Group, to pursue its claims against Centex. Mr. Lee did not represent St. Paul.

THE RIGHT TO INDEPENDENT COUNSEL

Generally, an insurer owing a duty to defend an insured, arising because there exists a potential for liability under the policy, has the right to control defense and settlement of the third party action against its insured, and is a direct participant in the litigation. The insurer typically hires defense counsel who represents the interests of both the insurer and the insured.

Not every reservation of rights entitles an insured to select independent Cumis counsel. (Dynamic Concepts, Inc. v. Truck Ins. Exchange (1998) 61 Cal.App.4th 999, 1006.) Whether independent counsel is required depends upon the nature of the coverage issue, as it relates to the issues in the underlying case. There must be evidence that the outcome of the coverage issue can be controlled by counsel first retained by the insurer for the defense of the underlying claim.

It is only when the basis for the reservation of rights is such as to cause assertion of factual or legal theories which undermine or are contrary to the positions to be asserted in the liability case that a conflict of interest sufficient to require independent counsel, to be chosen by the insured, will arise. Where the reservation of rights is based on coverage disputes which have nothing to do with the issues being litigated in the underlying action, there is no conflict of interest requiring independent counsel. The mere possibility of an unspecified conflict does not require independent counsel. The conflict must be significant, not merely theoretical, actual, not merely potential.

The statute on independent counsel, Section 2860, specifies there is a right to independent counsel when a conflict arises but reflects that this conflict may be waived either at the time it arose or before, when it was merely a possible conflict. The statute provides that “a conflict of interest does not exist as to allegations or facts in the litigation for which the insurer denies coverage; however, when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim, a conflict of interest may exist.” In this case, Centex’s claim for declaratory relief is based on St. Paul’s reservation of rights letter.

While courts generally conceptualize defense counsel as representing the interests of both the insurer and the insured they are not necessarily both clients in a particular matter.

NO CONTROL OVER OUTCOME OF COVERAGE ISSUE

A conflict of interest does not arise every time the insurer proposes to provide a defense under a reservation of rights. There must also be evidence that the outcome of the coverage issue can be controlled by counsel first retained by the insurer for the defense of the underlying claim. Because Centex is strictly liable for construction defects, causation would not necessarily have been litigated in the underlying action. Centex offers no actual evidence or citations to authority to the contrary.

ST. PAUL DID NOT CONTROL BOTH SIDES OF THE LITIGATION

Centex’s claim that St. Paul controls both sides of the litigation also failed. In this case, however, for the reasons set forth above and because St. Paul did not appoint counsel for Centex with respect to the cross-complaint, it did not control both sides of the case. There was, therefore, no basis for appointment of independent counsel and St. Paul, by the policy wording, had the right to appoint defense counsel and control the defense.

ZALMA OPINION

Section 2860 was enacted because of abuse of the Cumis decision by a group of criminal lawyers known as the “Alliance” (see United States v. Stites, 56 F.3d 1020 (9th Cir. 05/26/1995)). As a result it became the law in California that not every reservation of rights creates a need for independent counsel. Without evidence that the conflict is significant, not merely theoretical, actual, not merely potential, independent counsel is not available.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

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The “Compact Book of Adjusting Liability Claims”

How to Adjust a Third-Party-Liability Claim

Adapted from Barry Zalma’s new book on Amazon.com. Click the links where you will fin it Available as a Kindle book & Available as a paperback.

This Compact Book of Adjusting Liability Claims is designed to provide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster.

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

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

  1. To understand the law of torts as applied in the state where the adjuster works.
  2. To understand the law of contracts as applied in the state where the adjuster works.
  3. To understand sufficient medical terminology to be able to evaluate claims of injury.
  4. To understand the costs to repair or replace damaged real or personal property.
  5. To understand how to read and apply the terms and conditions of a liability insurance policy.
  6. To understand how to thoroughly investigate all claims assigned.
  7. To conduct an investigation of every claim assigned fairly and in good faith with an intent to find coverage for the loss presented by the insured.
  8. To understand how to analyze the insurance coverage and apply the facts established by the adjuster’s thorough investigation to the policy wording.
  9. To be able to negotiate with claimants and lawyers to resolve bodily injury or property damage claims.
  10. To pay promptly all claims the insurer owes under the contract.
  11. To resist, and not pay, all claims the insurer does not owe under the contract of insurance.

Product DetailsThe average adjuster (a 22-year-old female graduate of a liberal arts college) has little or no training sufficient to allow her to fulfill the obligations. Some modern insurance companies simply hire a person to be an adjuster, provide no training, and send them out to deal with the public with only the assistance of a claims supervisor who may only have two years-experience.

This Compact Book of Adjusting Liability Claims is designed to provide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster.

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

The adjuster must be prepared to salve the insured’s emotions, explain why in the law and the policy it was appropriate to pay the claimant and that the settlement is in the best interest of both the insured and the insurer the adjuster represents.

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

The adjuster must also understand that investigation may establish that the insured is not responsible for the injuries claimed. Since most people would prefer not to be deposed by a claimant’s lawyer nor would they want to be cross-examined during a trial, it is the duty of the adjuster to explain to the insured the insured’s responsibility to assist in the defense of the eventual lawsuit. The duty to settle is not unlimited. It is also the obligation of the adjuster to prevent a claimant to take advantage of the insured and the insured’s insurer when investigation established that the insured is not responsible for the injuries claimed by the claimant.

The liability adjuster must also be knowledgeable about the fact that many liability claims are part of fraudulent schemes that are used by the unscrupulous to profit from fake accidents and injuries.

The best estimates the insurance industry has established is that insurance fraud takes more than $80 billion from the industry every year. Almost all of those less than legitimate claims are paid because:

  • The adjuster is untrained.
  • The adjuster is minimally trained.
  • The adjuster is either unable or unwilling to perform a thorough investigation.
  • The adjuster is so inexperienced that he or she does not know how to investigate.
  • The adjuster is unable to read a policy with comprehension, because
    • He or she has not been trained.
    • He or she has been trained inadequately.
    • He or she has no legal training and do not know the rules of contract interpretation.
  • The fraud perpetrator is intelligent, not greedy, and knowledgeable.
  • The insurer does not want to fight because legal costs to fight a fraud exceed the value of the claim.
  • The adjuster does not recognize the fraud.
  • The police authorities refuse to investigate, let alone, prosecute insurance fraud.

A thorough investigation of a claim must cover the duty the adjuster owes to the insured and the insurer. The liability claims investigation should never be limited to “holding the claimant down to what he asks for” or just giving a blank check to claimants. The adjuster’s obligation is to deal fairly and in good faith with the insured, the claimant, and the insurer.

Adapted from Barry Zalma’s new book on Amazon.com. Click the links where you will fin it Available as a Kindle book & Available as a paperback.


© 2017 – Barry Zalma

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

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

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

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