RTFP – Failure to Read the Full Policy Costs the Insured

Insured’s Failure to Protect His Interest is His Own Worst Enemy for Not Reading Policy

In a case where it was undisputed that the insured admitted he did not read the policy or the numerous policy-renewal notices sent to him from 2006 to 2015 that explicitly set forth the policy limits and explicitly requested that he read them the insured sued for coverage he did not buy. Had he read the policy and notices the insured would have discovered that the policy limit for Coverage B was insufficient and could have, had he desired, requested additional coverage. Mr. Kevin Crook failed to do so and, thus, put himself in danger’s way and had no conscious appreciation of the danger of suffering a monetary loss until it happened.

In Kevin Crook v. Allstate Indemnity Company, The Barker Agency, and Allstate Insurance Company, 1180996, Supreme Court of Alabama (June 26, 2020) Kevin Crook appealed a summary judgment entered by the Tuscaloosa Circuit Court in favor of Allstate Indemnity Company (“Allstate Indemnity”), Allstate Insurance Company (“Allstate Insurance”), and The Barker Agency (hereinafter collectively referred to as “the defendants”) because the language of the policy was clear.

FACTS

Crook owns lake-front property in Tuscaloosa County. The property consists of a house, a bathhouse, a garage, a deck, and a boat dock. The deck is not directly connected to the house; an exterior stairway connects the house to the deck. The boat dock is, in turn, connected to the side of the deck opposite the stairway and house. A portion of the boat dock is covered with a roof supported by pilings, but the boat dock has no walls.

In 2006, Crook, through The Barker Agency, obtained property insurance on the house and other structures from Allstate Indemnity which was renewed through 2015. Crook admitted, although he was warned to review each renewal of the policy, was not aware of the actual policy limits provided by Allstate Indemnity and did not read the renewal notices. Crook simply trusted that the limits supplied by Allstate Indemnity were exactly what he needed.

On April 14, 2015, a storm damaged the deck and the boat dock; the amount of the damage caused “was at or greater than the coverage provided by” Coverage B. Kevin Smith, a “claims service analyst” inspected the damage reported by Crook. Smith concluded that the deck and the boat dock had been damaged by the storm and that the damage was covered under Coverage B, rather than Coverage A. Accordingly, on April 28, 2015, Allstate Indemnity paid Crook the Coverage B policy limit of $11,455.

Crook sued. Crook alleged that the damage to the deck and the boat dock should have been covered under Coverage A, which has a higher limit of insurance in the amount of $56,049. Concerning Crook’s negligent/wanton-procurement-of-insurance claim, Crook alleged that he relied upon the defendants to provide adequate coverage for the property and that the defendants “knew or should have known that [Coverage B] … would be insufficient to cover damages to [the] deck and [the] boat [dock].”

The circuit court entered a summary judgment in favor of Allstate Insurance as to all claims against it.

DISCUSSION

The Alabama Supreme Court, like other states, applies the following principles of construction in interpreting an insurance contract:

  1. The rules of contract interpretation are well settled. The issue whether a contract is ambiguous or unambiguous is a question of law for a court to decide.
  2. If a word or phrase is not defined in an insurance policy, then the court should construe the word or phrase according to the meaning a person of ordinary intelligence would reasonably give it. The court should not define words it is construing based on technical or legal terms.
  3. When analyzing an insurance policy, a court gives words used in the policy their common, everyday meaning and interprets them as a reasonable person in the insured’s position would have understood them.
  4. If, under this standard, they are reasonably certain in their meaning, they are not ambiguous as a matter of law and the rule of construction in favor of the insured does not apply.
  5. A policy is not made ambiguous by the fact that the parties interpret the policy differently or disagree as to the meaning of a written provision in a contract.
  6. A court must not rewrite a policy so as to include or exclude coverage that was not intended.
  7. However, if a provision in an insurance policy is found to be genuinely ambiguous, policies of insurance should be construed liberally in respect to persons insured and strictly with respect to the insurer.

The policy issued by Allstate states that Coverage A applies to Crook’s “dwelling including attached structures. Structures connected to your dwelling by only a fence, utility line, or similar connection are not considered attached structures.” It was undisputed that the house is a dwelling and that the deck and the boat dock are structures.

Crook argued that the exterior staircase attaches the deck to the house and that the deck, in turn, which is attached to the boat dock, attaches the boat dock to the house.

The various jurisdictions that have considered the issue determined that Coverage B applies to cover damage to an “other structure” when there is “clear space” between the dwelling and the other structure, even if the dwelling and the damaged other structure are connected by a structure such as a deck.

In the present case, the deck is connected to the house by an exterior staircase. There is a “clear space” between the house and the deck and the boat dock. Neither the deck nor the boat dock is attached to the house. There exists clear space between the structures. Accordingly, applying the plain language of the policy, the circuit court properly determined that the damage to Crook’s deck and boat dock is covered under Coverage B, rather than Coverage A.

The plain language of the policy indicates that Coverage B applies to the deck and the boat dock because those structures are not attached to the dwelling.

It was undisputed that Crook did not read the policy or the numerous policy-renewal notices sent to him from 2006 to 2015 that explicitly set forth the policy limits and explicitly requested that he read them. Had he done so, Crook would have discovered that the policy limit for Coverage B was only $11,455 and could have, had he desired, requested additional coverage. Crook failed to do so and, thus, put himself in danger’s way and should have had a conscious appreciation of the danger of suffering a monetary loss.

The Supreme Court affirmed the circuit court’s summary judgment in favor of Allstate Insurance.

ZALMA OPINION

Insurers, like Allstate, always ask their insureds to read the policy, consider the limits provided, and determine if the policy issued provides the coverages needed by the insured. Unfortunately, many, like Mr. Crook, fail to read their policy. Had he done the duty to review the policy when he received it, or the multiple times it was renewed, he would have learned that the coverage for his dock was limited and not sufficient to indemnify him completely if there was a major loss. He did not do so and, rather than accepting the fact that his inaction and inattention to the insurance needed, was the cause of his loss, elected to sue his agent and his insurer for not forcing him to buy more insurance coverage.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

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A Video Explaining How to Negotiate the Settlement of a Liability Claim

How to Negotiate a Settlement

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

After the adjuster determines that coverage exists, that the insured is probably liable for causing bodily injury or property damage to a third person, the adjuster must negotiate a settlement with the claimant or his or her attorney.

Just like the plaintiff’s attorney in a personal injury case, the insurance adjuster will investigate the claim – the facts of the accident and the plaintiff’s damages.

A very skillful and well-prepared insurance adjuster will often know more about the accident and about the plaintiff’s background than the plaintiff’s lawyer does.

There is no perfect method of valuing and negotiating a personal injury claim or suit. Each must be dealt with individually and the adjuster must be flexible enough to obtain a settlement that is agreeable to the insured, the plaintiff or claimant, and the lawyer representing the plaintiff or claimant.

The main facts determining how an accident settlement comes out are how well the adjuster has prepared all stages of the claim – investigation, supporting documents, demand letter, response, and counter offers and demands. How much the plaintiff or claimant is willing to settle for if it falls within the evaluation of the settlement value reached by the adjuster and the insurer will allow the parties to reach agreement.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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Ten Volumes Explaining How to Deal With Insurance Claims

Everything Needed by the Insurance Claims Professional from Barry Zalma

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

Zalma on Insurance Claims – Second Edition

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

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

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

This series of books is the latest addition to Barry Zalma’s insurance claims series of books and articles that will form the most thorough, up-to-date, expert-authored insurance claims guide available today.

Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the ten volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law. A Comprehensive Review of insurance, insurance claims, the law of insurance policy interpretations, the practicalities of Property, Casualty and Liability Insurance Claims.

Zalma on Insurance Claims Volume 101 – Second Edition

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

This volume covers

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

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

Available as a paperback

Available as a Kindle Book

Zalma on Insurance Claims Part 102 – Second Edition

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

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

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 103 Second Edition

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

The Implied Covenant of Good Faith and Fair Dealing

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

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

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

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 104

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

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

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

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 105

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

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

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

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 106 Second Edition

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

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

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

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

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

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

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

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 107 – Second Edition

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

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

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

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 108 -Second Edition

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

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

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

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 109 Second Edition

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

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

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

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 110 Second Edition

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

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

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

Available as a Kindle book

Available as a paperback


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/


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A Video of True Crime Stories from Heads I Win, Tails You Lose

Heads I Win, Tails You Lose – True Crime Stories of Insurance Fraud

See the full video at https://youtu.be/AWRB2d_zYjE

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.

The stories that follow 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 these stories make the reader angry 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. No resemblance to any person is intended and any resemblance is purely coincidental.

Insurers, in a search for profit, have decimated their professional claims staff. They laid off experienced personnel and replaced them with young, untrained and unprepared people. A virtual clerk replaced the old professional claims handler. Process and computers replaced skill and judgment. The promises made by an insurance policy are kept by the professional claims person. A professional claims staff is an effective cost-effective method to avoid litigation.

The professional claims person is an important part of the insurer’s defense to litigation against insurers for breach of contract. A staff of claims professionals dedicated to excellence in claims handling. Experience establishes that claims professionals resolve more claims for less money without the need for either party to involve counsel. A happy insured or claimant satisfied with the results of his or her claim will never sue the insurer.

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


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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Made Whole Doctrine Does Not Apply to a Self-Insured-Retention

The Made-Whole Doctrine Does Not Apply To First-Dollar Risk in New Jersey

A self-insured retention or deductible is an amount of risk that the insured has agreed to assume in exchange for a lower premium cost for the insurance policy. Where the award from a subrogation action against a third party is insufficient to reimburse both the insured’s self-insured retention and the carrier’s loss in excess of the self-insured retention, to place priority of recovery with the insured would, in effect, convert the policy into one without a self-insured retention. In City of Asbury Park v. Star Insurance Company, A-20 083371, Supreme Court Of New Jersey (June 29, 2020) the United States Court of Appeals for the Third Circuit asked the Supreme Court of New Jersey whether,  the made-whole doctrine applies to first-dollar risk that is allocated to an insured under an insurance policy, i.e., a self-insured retention or deductible.

FACTS

From February 2010 to February 2011, the City of Asbury Park (the City) had an insurance policy with Star Insurance Company (Star) that provided coverage for workers’ compensation claims against the City. The policy included a “self-insured limit retention for workers’ compensation” losses against the City in the amount of $400,000 per occurrence. In turn, Star agreed to indemnify the City for its workers’ compensation losses that exceeded the self-insured retention.

In January 2011, John Fazio, an employee of the Asbury Park Fire Department, suffered injuries while fighting a fire. He filed a workers’ compensation claim against the City, which in turn paid him $400,000, the full amount of its self-insured retention limit; Star paid $2,607,227.50, the amount exceeding the self-insured retention limit.

Fazio later filed suit against a third party for the injuries he suffered in the 2011 fire. Fazio and the third party reached a settlement agreement for $2,700,000. Subsequently, Fazio, the City, and Star agreed that $935,968.25 of the settlement proceeds would be set aside to partially reimburse the City and Star.

Star issued a demand to recover the entire $935,968.25, contending that it was entitled to be reimbursed in full before the City could recover amounts paid on the self-insured retention. The City asserted that under the made-whole doctrine, it was entitled to be reimbursed in full before Star could assert its subrogation right. Star responded that the made-whole doctrine does not apply to self-insured retentions to avoid unjustly enrich the City.

The City filed a declaratory judgment action against Star.

ANSWER TO THE THIRD CIRCUIT

The Court answered the certified question in the negative. Under equitable principles of New Jersey law, the made-whole doctrine does not apply to first-dollar risk, such as a self-insured retention or deductible, that is allocated to an insured under an insurance policy.

In the insurance context, subrogation is a doctrine allowing the insurer to seek recovery from the party at fault, exercised after the insurer has indemnified its insured under the terms of an insurance policy. Subrogation rights are created in one of three ways: (1) an agreement between the insurer and the insured, (2) a right created by statute, or (3) a judicial device of equity to compel the ultimate discharge of an obligation by the one who in good conscience ought to pay it.

The Made Whole Doctrine

Under the make-whole doctrine, an insurer cannot assert a subrogation right until the insured has been fully compensated for his or her injuries.

A self-insured retention or deductible is an amount of risk that the insured has agreed to assume in exchange for a lower premium cost for the insurance policy. Where the award from a subrogation action against a third party is insufficient to reimburse both the insured’s self-insured retention and the carrier’s loss in excess of the self-insured retention, to place priority of recovery with the insured would, in effect, convert the policy into one without a self-insured retention. Such interference with the contract would essentially write a better policy for the insured than the one purchased.

In the insurance context, subrogation is a doctrine allowing the insurer to seek recovery from the party at fault, exercised after the insurer has indemnified its insured under the terms of an insurance policy. The doctrine is based on the principle that a benefit has been conferred upon the insured at the expense of the insurer and vests in the latter any rights the former may have had against a third party who is liable for the damages. In subrogation cases, the insured’s right to recovery against a third party tortfeasor vests in the insurer, and the insurer steps into the shoes of the insured, and files suit against the tortfeasor subject to any defenses which would defeat recovery by the insured.

When an insurance carrier which has satisfied a loss it was paid to cover, seeks to recoup by asserting a claim its insured has against another with respect to that loss, the final question must be whether justice would be furthered by that course. While the made-whole doctrine generally applies in New Jersey, its courts have never addressed the question of whether the doctrine applies to first-dollar risk, such as deductibles and self-insured retentions, borne by insureds.

Considering the equitable principles that guide the doctrine of subrogation alongside insurance policies that allocate first-dollar risk to the insured, the Supreme Court found  that the made-whole doctrine does not apply to first-dollar risk allocated to the insured. A self-insured retention or deductible is an amount of risk that the insured has agreed to assume in exchange for a lower premium cost for the insurance policy. Where the award from a subrogation action against a third party is insufficient to reimburse both the insured’s self-insured retention and the carrier’s loss in excess of the self-insured retention, to place priority of recovery with the insured would, in effect, convert the policy into one without a self-insured retention. Such interference with the contract would essentially write a better policy for the insured than the one purchased.

Read together, if the Policy unambiguously provides Star with all of the City’s rights to recovery against third-party tortfeasors in the event that Star makes a payment under the Policy, that conclusion means that the made-whole doctrine would not apply.

Under equitable principles of New Jersey law, the made-whole doctrine does not apply to first-dollar risk, such as a self-insured retention or deductible, that is allocated to an insured under an insurance policy.

ZALMA OPINION

When a person or entity buys a policy with a self-insured retention he or it agrees to accept full responsibility – as if uninsured – for all losses up to the self-insured retention. A deal made with an insurer to only pay for losses over the amount of the self-insured retention coupled with an agreement to subrogate the insurer to the rights of the insured against third party tortfeasors allows the insurer to take what it can from the third party up to the amount paid before the insured is allowed to recover part or all of its self-insured retention. If the City had no insurance at all and paid the full amount of the firefighter’s workers’ compensation claim it could take the full amount from the tortfeasor, a right it gave to the insurer when it agreed to provide it with a right of subrogation.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video About How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives

ETHICS FOR THE INSURANCE PROFESSIONAL

See the full video on YouTube at: https://youtu.be/tc62pBO_b0E

Insurance is, by definition, a business of the utmost good faith. This means that both parties to the contract of insurance must act fairly and in good faith to each other and do nothing that will deprive the other of the benefits the contract of insurance promised.

Without the covenant of good faith and fair dealing and ethical people who work in the insurance industry applying and fulfilling the covenant, insurance is impossible. One cannot act fairly and in good faith without being a person with a well-formed ethical compass.

In Carter v. Boehm S.C. 1 Bl. Burr 1906, 11th May 1766. 593, 3 Lord Mansfield in the British House of Lords stated: “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.” Insurers, when making a decision to insure or not insure a risk, rely on the information provided to them by the insured. As Lord Mansfield instructed, the insured must provide the information requested honestly and in good faith.

The implied covenant explains that no party to a contract of insurance should do anything to deprive the other of the benefits of the contract.

The implied covenant of good faith and fair dealing imposes obligations not only as to claims by a third party but also as to those by the insured. When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort. For the insurer to fulfill its obligation not to impair the right of the insured to receive the benefits of the agreement, it again must give at least as much consideration to the latter=s interests as it does to its own.

See multiple videos on my channel at https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

 

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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No Coverage for a Loss Known Before Inception of the Policy

$50.56 Million Judgment Useless When Defendant is Judgment Proof and Insurer Owes Nothing

After more than ten years of litigation between a group of neighbors in Elkhart, Indiana and a nearby wood recycling facility the disputes came to an end with the Seventh Circuit. The neighbors alleged that VIM Recycling’s waste disposal practices exposed them to dust and odors in violation of federal environmental law. They also brought state tort law claims for the resulting loss of use and enjoyment of their property and adverse health effects. At certain points the defendants—VIM Recycling, a related entity, and their owner, Kenneth Will—successfully fended off the neighbors’ claims. But sometimes they did nothing at all. These litigation choices eventually led to a $50.56 million default judgment against VIM.

In Carmine Greene, et al. v. Westfield Insurance Company, No. 19-2260, United States Court of Appeals For the Seventh Circuit (June 26, 2020) what began as a case about environmental pollution evolved into a joint garnishment action against VIM’s insurer, Westfield Insurance, to satisfy some of that $50.56 million judgment.

FACTS

VIM began operating its Elkhart wood recycling facility around 2000. Problems allegedly began in the nearby residential community soon thereafter. By 2009 a group of neighbors banded together to bring a class action lawsuit to recover for damage to their property. The plaintiffs alleged that the company processed old, dry wood outside without the proper emissions, all of which violated the Fugitive Dust Control Plan that the Indiana Department of Environmental Management, or IDEM, imposed on the site in July 2000.

The neighbors claimed that VIM’s disposal practices harmed the surrounding environment and their health.

While some of the pollution and injuries were taking place, VIM had acquired general commercial liability policies with Westfield Insurance. These policies collectively ran from January 1, 2004 through January 1, 2008, and obligated Westfield to pay up to $2 million of any judgments against VIM for “property damage” or “bodily injury.”

The litigation history was important to the court’s decision. It involves three separate lawsuits over the course of 10 years.

First Lawsuit

On October 27, 2009, the neighbors filed their original complaint in the Northern District of Indiana against three related VIM defendants. At the time of the court’s dismissal, Westfield Insurance had no knowledge of (or involvement in) the litigation. The reason was because VIM never notified Westfield that it had been sued in federal court for events that took place within the policy coverage periods.

Second Lawsuit.

VIM did seek coverage from Westfield in a different case. On May 24, 2010, the neighbors filed a second, nearly identical lawsuit against VIM in Indiana state court. Pending an investigation into its own coverage obligations, Westfield responded by hiring its own lawyer to serve as its assigned defense counsel for VIM in this state action.

Third Lawsuit.

Westfield meanwhile continued to evaluate its potential exposure in the case pending in state court. It concluded that it had no coverage obligations and sent a letter to VIM stating as much. It then sought a declaratory judgment in federal court against both VIM and the neighbors. VIM never answered the complaint, and the district court entered a default declaring that Westfield had no duty to defend or indemnify VIM in the state action.

Between 2010 and 2011 there were three cases in play—the original federal case (this case), the state case, and the federal declaratory judgment case relating to the state case. Westfield Insurance successfully disclaimed any obligation in Indiana state court through the federal declaratory judgment action but did not concern itself with this case, which it had only heard about indirectly from its own lawyer when it had been dismissed.

ANALYSIS

After securing the default judgment but realizing they were unable to recover much from VIM, the neighbors moved to institute proceedings against Westfield under Federal Rule of Civil Procedure 69, which allows the court to “garnish,” or recover, a money judgment that one party owes another. The neighbors invoked the rule and sought to garnish West field’s indemnity obligation to VIM pursuant to its insurance policies to satisfy part of the $50.56 million award.

There are two relevant exclusions in VIM’s general commercial liability policies with Westfield. The policies generally applied to any damages VIM was legally obligated to pay because of “bodily injury” or “property damage” that took place within the coverage period. If an exclusion applies, however, Westfield had no obligation to VIM, and the neighbors cannot seek to recover any of their judgment from Westfield.

Each of the four policies in place during the relevant period contained an exclusion for “known claims.” VIM’s policies with Westfield specifically stated that they did not cover losses if “a listed insured or authorized employee knew prior to the policy period, that the bodily injury or property damage occurred” and that “any continuation, change or resumption” of the property damage or bodily injuries “during or after the policy period will be deemed to have been known prior to the policy period.” The second exclusion provides that coverage does not extend to any bodily injury or property damage “expected or intended from the standpoint of [VIM].”

The Seventh Circuit interpreted the “known claim” and “expected or intended injury” exclusions based on their plain language. Though they are distinct the language of both focuses on when VIM first learned about the property damage and bodily injuries that gave rise to the neighbors’ lawsuit in 2009.

Recall that, as part of entering a default judgment against VIM, the district court properly deemed and accepted as true all allegations advanced by the neighbors in their second amended complaint. Considered collectively, the record supplies overwhelming evidence that VIM—and Kenneth Will in particular—knew about the fugitive dust and resulting injuries before the first Westfield policy went into effect. Any damages for those injuries, then, were both known claims and expected injuries.

The pertinent inquiry concentrates more on known facts. Expected injury or damage means that the insured acted although he was consciously aware that the harm caused by his actions was practically certain to occur.

Will was certainly aware of these underlying facts before the policies went into effect. He knew that the neighbors were complaining to IDEM between 2000 and 2003. Indeed, he admits in his affidavit that he paid to have their cars washed.  All of this occurred before 2004. By January 1, 2004 Will knew of and routinely acknowledged the dust problems. The overwhelming weight of evidence here—the facts the neighbors themselves relied on when they won their default judgment in 2015—supports the district court’s conclusion that VIM was consciously aware that the kind of environmental harms alleged in the Class’s complaint, and on which the default judgment is based, were practically certain to result from their operation of the Elkhart facility over the period of coverage.  Summary judgment was appropriate because there is no genuine dispute of material fact.

An insurer that has received notice of a lawsuit and believes it has no duty to defend should act as Westfield did in VIM’s state case—it should either file a declaratory judgment action or hire counsel to defend its insured under a reservation of rights.

The record does not support a conclusion that Westfield acted in bad faith by flatly refusing VIM coverage in this federal case. Westfield in no way avoided or breached its duty to defend by leaving its insured out in the cold. At best it had only indirect notice of the lawsuit and no indication that VIM or the neighbors—who were both in possession of the facts essential to provide direct notice—would ever seek coverage. Since Westfield shirked no responsibilities in the face of VIM’s and the neighbors’ belated, opportunistic pursuit of policy coverage, even if the indirect notice triggered any duty to defend, Westfield would not be estopped from claiming its applicable policy exclusions.

ZALMA OPINION

Judgment proof defendants who allow major judgments to be entered against them because they have no assets to pay the judgments cause creative plaintiffs’ lawyers to try to collect from the defendant’s insurer. The problem the plaintiffs’ lawyers face, as did the plaintiffs’ in this case, is to collect from the policy it must provide coverage to the insured to defend and the insurer must breach its duty to defend. In this case the insurer provided a defense to what it knew about, excluded the loss by clear and unambiguous policy language and was forced to deal with the case for many years because of arguments that attempted to change facts to fit coverage. Creative, perhaps, but still a failure and the $50 million judgment is no more than a piece of paper that can be framed and put on a wall and is worth the value of the frame.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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FALSE SWEARING

False Swearing About Material Facts Voids an Insurance Policy and Defeats a Fraudulent Claim

See the full video at https://youtu.be/2fcN-QJHkBk

In common language the “false swearing” provision of an insurance policy merely means that if the insured lies under oath the policy is void whether the lie is in a proof of loss or at an examination under oath. In Texas and Oklahoma, false swearing is explained this way:

Where an insured knowingly and willfully overestimates the value of property destroyed or damaged, the policy is voided and the insured’s right to recover is defeated.

The reason for the false swearing defense can be explained because it would be unjust to allow a claimant to misrepresent facts under oath that might lead to a valid defense and then allow him to escape the consequences of the falsehood simply because he had succeeded so well that the company was unable to establish the defense.
In common language the “false swearing” provision of an insurance policy merely relates to a lie under oath.

As both the proof of loss and the testimony at examination under oath are sworn to by the insured, any material falsehood is sufficient to establish the defense of false swearing. The same is true of any difference between the facts testified to during the examination under oath or stated in the proof of loss, and the facts developed from an audit of the insureds books and records or an insurer’s investigation.

The U.S. Supreme Court stated the rule, as follows:

“A false answer as to any matter of fact material to the inquiry, knowingly and willfully made, with an intent to deceive the insurer, would be fraudulent. If it accomplished its result, it would be a fraud effected; if failed, it would be a fraud attempted. No one can be permitted to say, in respect to his own statements upon a material matter, that he did not expect to be believed; their materiality, in the eye of the law, consists in their tendency to influence the conduct of the party who has an interest in them and to whom they are addressed.” [Claflin v. Commonwealth Insurance Co., 110 U.S. 81, 3 S. Ct. 507, 28 L. Ed. 76 (1884).]

See multiple videos on my channel at https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

 

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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No Coverage for a Staged Accident

How to Collect Sufficient Evidence to Prove a Staged Accident Scheme

In a case involving multiple parties involved in an alleged side-swipe accident between a Honda and a limousine, Encompass Home & Auto Insurance Company and others collected a great deal of evidence, claimed they were the victims of a staged accident scheme and refused to pay the allegedly injured plaintiffs and the health care providers who provided services to the allegedly injured. The presented evidence to the Supreme Court of the State of New York and sought summary Judgment.

In Encompass Home & Auto Insurance Company v.  Elizinda Makendy, Maxime Makendy, Marclish Davidson, Alice Alarcon, et al, Index No. 160580/2015, 2020 NY Slip Op 31907(U), Supreme Court Of The State Of New York New York County Part IAS Motion 47EFM (June 12, 2020) the court considered a declaratory judgment suit brought by plaintiff, Encompass Home & Auto Insurance Company (Encompass).

The alleged staged automobile collision occurred on August 25, 2014. According to a certified police report, a 2000 Honda registered to Encompass’s insured, Elizinda Maxime, and operated by Marclish B. Davidson was involved in a sideswipe collision at approximately 1:50 am in Nassau County, New York with a 2007 Lincoln limousine operated by Bemba Keita. Alice Alarcon was a passenger in the Honda and the passengers in limousine were several. The Encompass policy was issued to Elizinda Maxime and Makendy Maxime. The limousine was owned by Paris Limousine Services and insured by American.

The Facts Establishing a Staged Accident

Subsequently, both Encompass and American opened investigations into the collision by among other things conducting examinations under oath of the individuals involved. Encompass’s and American’s investigations unearthed some of the following:

  • The driver of the Honda, Marclish B. Davidson resided at the time of the collision at 1290 Ocean Avenue, Brooklyn New York Apartment 3G and his full name is Marclish Baptiste Davidson.
  • On July 14, 2015 a Marclish Baptiste was involved in an automobile collision where he struck a livery vehicle in Brooklyn, New York.
  • According to the police report Marclish Davidson and Marclish Baptiste share the same date of birth, address and driver’s license number.
  • On July 14, 2015 Marclish was operating a Ford registered to Peterson Bellevue, residing at 15 Taylor Street, Johnson City, NY.
  • On May 26, 2015 the Bellevue vehicle was being operated by Gersey Louissant when it sideswiped a livery vehicle.
  • Alice Alarcon was a passenger in the Bellevue vehicle at the time, the same Alice Alarcon who was a passenger in the Encompass vehicle operated by Marclish on August 25, 2014
  • Gersey Louissant, the driver of the Bellevue vehicle on May 26, 2015, was friends with her May 26, 2015 passenger, Alice Alarcon.
  • Louissant was also friends with “Carly” and “Claud” residing at 499 Gates Avenue and had visited their apartment for parties (Ex 32, Examination Under Oath [EUO] of Louissant taken by Kemper Insurance, Peterson Bellevue’s insurer.
  • “Carly” and “Claud” are Carline Joseph and Joseph Blanc, passengers in the limousine that Marclish sideswiped with the Honda on August 25, 2014.
  • The 2000 Honda involved in the August 25, 2014 collision was purchased by Jefferson Juste but registered in his cousin’s name, Elizinda Maxime with whom he resides.
  • The Honda was insured by Elizinda and her husband, Makendy Maxime.
  • According to Elizinda Maxime, Juste gave her three different reasons why Marclish had the keys. First, he left them at Maxime’s house by mistake, second, he gave Marclish the car to help him move, and third, Marclish took the keys without permission.
  • Marclish testified that at the time of the collision he was driving a Nissan Pathfinder (not a Honda) owned by “Maxime” a female friend that he has known for two years but did not know her last name.
  • After the collision Marclish and Alarcon treated at the same medical facility located at Rutland Road and Utica Avenue in Brooklyn.
  • The passengers in the limousine also all treated at the same medical office.
  • Except for Jean Adolphe, all the limousine passengers testified that Joseph Blanc referred them to the medical facility
  • Jean Adolphe testified that Shana recommended the facility based upon the recommendation of an unknown friend.
  • The trip was arranged by Joseph Blanc or that they were going to a party for Blanc’s friend or family member.
  • The drivers of both vehicles and all their passengers are named defendants in this action.

DISCUSSION

An intentional and staged collision caused in the furtherance of an insurance fraud scheme is not a covered accident under a policy of insurance [Progressive Advanced Ins. Co. v McAdam, 139 AD3d 691, 692 [2nd Dept 2016]). The Court of Appeals described the modus operandi of staged accident rings in Medical Society of the State of NY v Serio as follows: “[R]ingleaders (often associated with organized crime) [ ] purchase minimum automobile insurance, perhaps under a fraudulent name, on wrecked or salvaged vehicles, and recruit others to fill up the vehicles and participate in staged accidents (typically sideswipes or fender benders). These purported victims [are] then steered to corrupt medical clinics, called ‘medical mills,’ where they feign[] aches, pains and soft tissue injuries. The medical mills [ ] then generate stacks of medical bills for each passenger, detailing treatments and tests that [are] unnecessary or never performed.”

Since direct proof of insurance fraud is rarely available, the requisite degree of proof can be satisfied by circumstantial evidence. Circumstantial evidence at a framed issue hearing established that the subject collision was intentional. Marclish’s changing narratives surrounding the events of the accident are consistent with someone engaged in an ongoing staged accident ring. Marclish was involved in at least one other staged accident with a livery vehicle while he was driving a vehicle registered in someone else’s name. Marclish’s July 14, 2015, collision occurred while he was driving the Bellevue vehicle which was involved in at least three other staged accidents on May 26, 2015, October 6, 2015 and January 3, 2016 (Ex M). Not only was Marclish connected to the Bellevue staged accidents, so was Alice Alarcon who was a passenger in the Bellevue when it collided with a livery vehicle.

The direct and indirect interconnections among the individuals involved in the August 25, 2014 collision, in the absence of any explanation for these remarkable coincidences is sufficient evidence to establish that Marclish, Alarcon and Joseph Blanc staged the August 25, 2014 collision and Joseph Blanc recruited the passengers for the limousine.

Circumstantial evidence sufficient to establish prima facie that defendant was involved in a financial fraud conspiracy existed. Since plaintiff has made out its prima facie showing of entitlement of summary judgment, the burden shifts to defendants to demonstrate the existence of a triable issue of material fact and none were presented.

The motor vehicle collision of August 25, 2014 was not the product of a covered event as defined by the applicable insurance policy issued by Encompass Home & Auto Insurance Company, the August 25, 2014 collision was the product of a staged and/or intentional event and Encompass Home & Auto Insurance Company, by reason of no coverage, is not required to provide a defense and/or indemnification to any of the defendants.

The motor vehicle collision of August 25, 2014 was not the product of a covered event as defined by the applicable insurance policy issued by Encompass nor American Alternative Insurance Corp. The August 25, 2014 collision was the product of a staged and/or intentional event. American Alternative Insurance Corp. has no duty to either defend nor indemnify the defendants and cross-claim defendants in any action, claim, suit, arbitration or other type of proceeding brought as a result of the August 25, 2014 collision. American Alternative Insurance Corp. has no duty to provide coverage for any claims for No-Fault benefits, personal injury, property damage, uninsured motorist benefits or underinsured motorist benefits made by or on behalf of any person or entity in connection with the August 25, 2014 collision. American is entitled, on its cross-claim, to damages in the amount of insurance benefits conferred to the defaulting parties.

ZALMA OPINION

When an insurer – even in a no fault state like New York – believes it is the victim of a staged accident scheme it has two options: ignore the fact and pay or investigate thoroughly and fight. In this case the insurers investigated thoroughly, presented unimpeachable evidence to the court, and caused the “victims” of the accident to refuse to participate and only fought with the medical vendors who provided services to the fake victims. Every insurer faced with a staged accident should do what Encompass and American Alternative did in this case, fight the fraud, investigate thoroughly and file a declaratory relief action to get court approval of its conclusion.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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A Video on Getting the Whole Truth – Interviewing Techniques for the Lawyer

A New Book from the ABA on Interviewing for the Professional

“Getting the Whole Truth: Interviewing Techniques for the Lawyer”

by Barry Zalma, Esq., CFE

Get the book here.

See the Video here

Learn techniques that can help you interact with others and effectively gather the facts you need.

The purpose of an interview is to uncover the truth; the method of uncovering the truth is the art of the interview. Obtaining sufficient relevant information is imperative in everything a lawyer does to protect the interests of the client, yet interviewing techniques are not emphasized in law school training.

Getting the Whole Truth teaches lawyers–from novices meeting their first clients to experienced trial lawyers–effective methods of obtaining information by human interaction. No matter from whom you are seeking information or what your reason for desiring it, these techniques can help you meet and interact with others and effectively gather the facts you need.

Only $59 Non-Members, $44 Members

 


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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July 1, 2020 Issue of Zalma’s Insurance Fraud Letter

ZALMA’S INSURANCE FRAUD LETTER

Read the full text of the July 1, 2020 issue of Zalma’s Insurance Fraud Letter at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-barry-zalma-esq-cfe-9c and Read last two issues of ZIFL here.

Guilty of Arson For-Profit-Fraud Deserves Long Sentence

More Trouble for the Strems Law firm in Florida

Evil Doctor Sentenced to One Hundred and Eighty Months

Health Insurance Fraud Convictions

Other Insurance Fraud Convictions

Consider Books to Show Your Appreciation to Your Insurer Clients or Claims Employees

“Getting the Whole Truth: Interviewing Techniques for the Lawyer” by Barry Zalma, Esq., CFE:

Getting the Whole Truth teaches lawyers–from novices meeting their first clients to experienced trial lawyers–effective methods of obtaining information by human interaction. No matter from whom you are seeking information or what your reason for desiring it, these techniques can help you meet and interact with others and effectively gather the facts you need.

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What Can Insurance People Do to Change the Poor Insurance Fraud Conviction Statistics?

The Obligation of an Insurance Professional to Defeat Insurance Fraud

The full video is available at https://youtu.be/NzuuxwjgnH0

It is the obligation of all who work to protect insurers against insurance fraud to do something to change the situation. Methods that are available and that should be exercised by every person who wants to reduce the effect of insurance fraud include:

  1. Lobby to change the system so that:
  • all the money goes to all kinds of insurance fraud at the discretion of the Commissioner of Insurance;
  • prosecutors must be assigned to the Fraud Bureau and their only job must be to prosecute insurance fraud; and
  • when the local District Attorney does not file a criminal complaint, the fraud investigator or lawyer for the insurer, must complain, loudly.
  1. Work within the system we have:
  • report every suspected fraudulent claim to the Fraud Division;
  • follow-up with the Fraud Division after you get the letter saying they won’t investigate;
  • supplement the Suspected Fraudulent Claim (SFC) report with investigation results and transcripts of examinations under oath;
  • develop a personal relationship with investigators at the Fraud Division; and
  • develop a personal relationship with supervising investigators at the Fraud Division.
  1. When the Fraud Division refers a case to a prosecutor determine the identity of the prosecutor.
  • make it clear to the prosecutor that you represent an interested and proactive victim;
  • make it clear to the prosecutor that your insurance company is upset that it is the victim of a crime;
  • make it clear to the prosecutor that you will make available to him or her anything required;
  • make it clear to the prosecutor that you, and other employees of the insurance company, will be available to testify;
  • if you are in California and sixty days go by after the case is referred to the District Attorney demand compliance with the requirements of the California Insurance Code. California Insurance Code § 1872.4 provides, in relevant part, as follows:

If prosecution by the district attorney concerned is not begun within 60 days of the receipt of the commissioner’s report, the district attorney shall inform the commissioner and the insurer as to the reasons for the lack of prosecution regarding the reported violations.” [Italics added]


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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It’s Not Nice to Lie to Your Insurance Company

Fraudulently Obtained No Fault Insurance is Subject to Rescission

This case involves a policy of no-fault insurance issued by IDS to Isha Simpson and Aquanetta Terry. Simpson and Terry are friends who co-own a 2014 Chrysler 300. Simpson and Terry are not related legally or biologically, and they did not share a residence. When Terry testified that she and her friend Simpson used Simpson’s address on the application because it was less expensive to purchase insurance with Simpson’s  address than with Terry’s Detroit address they admitted to a fraudulent application.

In Northland Radiology, Inc, Theramedic Rehab & Physical Therapy, and Integrative Neurology, PLLC, and ZMC Pharmacy, LLC and Northwest Labs, Inc, Intervening Plaintiffs, and American Anesthesia Associates, LLC v.  USAA Casualty Insurance Company and Ameriprise Insurance Company, and IDS Property Insurance Company, No. 346345, State Of Michigan Court Of Appeals (June 18, 2020) American Anesthesia Associates, LLC (AAA), appealed the order of the trial court granting defendant, IDS Property Insurance Company (IDS), summary disposition. IDS cross-appealed the same order, challenging the trial court’s determination that it was obligated to refund the full premium amount to its insureds to effectuate rescission of its no-fault insurance policy.

FACTS

In 2016, Simpson and Terry applied to purchase a policy of no-fault insurance from IDS. They listed themselves at the top of the first page of the application next to “applicant” and provided Simpson’s address in Redford, Michigan.  Simpson and Terry listed themselves as drivers. Above the signature line were warnings that the statements made in the application were made for the purpose of procuring an insurance policy and that the policy could be rescinded if the statements were untrue or incomplete. Simpson and Terry both signed the application. Both Simpson and Terry later testified that Terry has her own residence in Detroit and never lived at Simpson’s Redford address.

The policy warned that coverage would not be provided to a claimant who intentionally concealed or mispresented a material fact, engaged in fraud, or made a false statement. Specifically, the policy provided:

FRAUD

 We do not provide coverage for any insured or person making claim under this policy who, whether before or after a loss, has:

  1. Intentionally concealed or misrepresented any material fact or circumstance;
  2. Engaged in fraudulent conduct; or
  3. Made false statements;

relating to this insurance and/or in connection with any accident or loss for which coverage is sought under this policy.

In February 2017, Simpson was a passenger in the Chrysler 300 when another car hit the vehicle. Simpson sued IDS, as well as the driver and the owner of the other vehicle, seeking damages for injuries arising from the car accident and alleging that IDS refused to pay personal protection insurance benefits owed under the no-fault act. Simpson subsequently assigned her right to seek reimbursement for services to various healthcare providers, including AAA.

An IDS underwriter testified that based upon its underwriting guidelines, because the Chrysler 300 was co-titled to Simpson and Terry, Simpson and Terry were not related, Terry never lived at the Redford address, and the vehicle was not garaged at the address, IDS would not have issued the policy.

The trial court granted IDS’s motion, determining that there was no genuine issue of material fact that Simpson made a material misrepresentation on the application by listing Terry as a driver living in Simpson’s household when evidence showed that Simpson and Terry were not related and Terry never lived at Simpson’s address.

ANALYSIS

An insurance policy is a contract that is subject to the rules of contract interpretation and common-law contract defenses, including fraud, unless those defenses are prohibited by statute. The no-fault act does not prohibit an insurer from invoking the common-law defense of fraud, nor does it limit or narrow the remedy of rescission.

Fraudulent misrepresentation may support an equitable remedy, such as rescission of a contract. To establish fraudulent misrepresentation, the plaintiff must show that

  • the defendant made a material representation,
  • it was false,
  • when the defendant made the representation, the defendant knew it was false, or made it recklessly, without knowledge of its truth and as a positive assertion,
  • the defendant made the representation intending the plaintiff to act upon it,
  • the plaintiff acted in reliance upon it, and
  • the plaintiff suffered damage as a result.

A misrepresentation is material when an insurer would not have issued a policy in the manner or at the rate at which it was issued if the misrepresentation or nondisclosed fact had been known to the insurer. An insurer’s statement that it would not have issued a policy if it had known the previously-undisclosed information is sufficient to establish materiality. In this case, the evidence supports the trial court’s finding that Simpson and Terry made material misrepresentations in the application for insurance.

Rescission is justified without regard to the intentional nature of the misrepresentation, as long as it is relied upon by the insurer. Reliance may exist when the misrepresentation relates to the insurer’s guidelines for determining eligibility for coverage. Since its underwriting guidelines would require IDS to refuse to issue the policy to Simpson and Terry if it had known that they were not living together. Therefore, the trial court’s determination that Simpson and Terry made material misrepresentations in the application is supported by the record.

An insurer may rescind a policy on the basis of a material misrepresentation made in an application for no-fault insurance. When an insurer rescinds an insurance policy as the result of fraud by the insured, the rescission abrogates the policy and returns the parties to the relative positions that they would have occupied if the contract had never been made.

The trial court noted in its opinion that rescission is not a matter of right, but is instead discretionary with the trial court. The trial court found that Simpson made a material misrepresentation in the application for insurance regarding whether Terry was a member of Simpson’s household living at the address stated in the application. The trial court concluded that based upon the evidence IDS permissibly rescinded the policy. Although AAA is innocent of the fraud perpetrated by Simpson and Terry, it is the assignee of Simpson and therefore is essentially the same person as Simpson, standing in her shoes for purposes of recovery against IDS. IDS’s rescission of the policy therefore is effective against AAA because it is effective against Simpson.

The trial court correctly determined that IDS was required to refund the premiums in light of the rescission of the policy. However, requiring IDS to refund the premiums without considering IDS’s claim that it had already paid to or on behalf of the insureds more than the amount of the premiums, restores Simpson and Terry to their precontract position, but not IDS.

IDS should be given an opportunity to present its claim that the refund of the premiums should be weighed against amounts paid by IDS under the policy in the trial court’s balancing of the equities.

ZALMA OPINION

A lie on the application for insurance to get less expensive insurance with Simpson’s Redford address than with Terry’s Detroit address was sufficient to prove the application was fraudulent and neither the named insureds nor their assignees were entitled to any of the benefits of the policy. Rescission is an equitable remedy that is available to protect insurers against fraudulently obtained insurance. The insureds tried to save money by lying on the application for the insurance and, because of their fraud to save money, they lost the insurance coverage and their assignee was left with nothing.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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Zalma on Insurance Claims – A Tool for Every Insurance Professional

Zalma on Insurance Claims – Second Edition

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

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

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

This series of books is the latest addition to Barry Zalma’s insurance claims series of books and articles that will form the most thorough, up-to-date, expert-authored insurance claims guide available today.

Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the ten volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law. A Comprehensive Review of insurance, insurance claims, the law of insurance policy interpretations, the practicalities of Property, Casualty and Liability Insurance Claims.

Zalma on Insurance Claims Volume 101 – Second Edition

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

This volume covers

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

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

Available as a paperback

Available as a Kindle Book

Zalma on Insurance Claims Part 102 – Second Edition

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

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

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 103 Second Edition

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

The Implied Covenant of Good Faith and Fair Dealing

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

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

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

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 104

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

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

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

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 105

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

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

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

Available as a Kindle Book

Available as a paperback

Zalma on Insurance Claims Part 106 Second Edition

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

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

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

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

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

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

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

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 107 – Second Edition

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

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

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

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 108 -Second Edition

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

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

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

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 109 Second Edition

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

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

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

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 110 Second Edition

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

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

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

Available as a Kindle book

Available as a paperback

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


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/


Posted in Zalma on Insurance | Leave a comment

Insurer Read Your Policy

When The Full Policy is Read it Must Provide Coverage

Owners Insurance Company (Owners) appealed the entry of a final summary judgment in favor of Allstate Fire and Casualty Insurance Company (Allstate) in an action filed by Allstate against Owners and Allstate’s insured, James M. Horne, Jr. (Horne) in Owners Insurance Company v. Allstate Fire And Casualty Insurance Company and James M. Horne, Jr., Case No. 2D18-2309, District Court Of Appeal Of Florida Second District (June 19, 2020) to decide if Owners is required to provide UM benefits to Horne.

FACTS

Horne resided with his mother and stepfather, who had an automobile insurance policy with Owners. The Owners policy provided uninsured motorist (UM) coverage but only afforded it to relatives who did not own an automobile. Horne got into an accident while driving his own automobile. Allstate sought a declaration that Horne was covered under the Owners policy for injuries he suffered in the accident.

Because the Owners policy provided basic liability coverage to resident relatives, the trial court concluded that Owners was required to provide UM coverage to Horne.

ANALYSIS

Owners argued that “the basic liability coverage under the Owners policy extends only ‘to relatives who do not own an automobile.'” However, upon a closer examination of the policy these relatives are only excluded from the extended liability coverage of unlisted automobiles. Section II of the policy, entitled “Liability Coverage,” provides the following:

We will pay damages for bodily injury and property damage for which you become legally responsible because of or arising out of the ownership, maintenance or use of your automobile (that is not a trailer) as an automobile. We will pay such damages . . . on behalf of any relative using your automobile (that is not a trailer).

This provision affords Horne, who is a relative as that term is defined in the policy, basic liability coverage when driving one of the listed automobiles. Neither Owners nor Allstate cited to the Section II Liability Coverage provision in their briefs but the appellate court found the provision to be telling.

Allstate argued that Horne was entitled to UM coverage because “he is insured for basic liability coverage” under the overlooked Section II Liability Coverage provision.  However, if a trial court reaches the right result, as it did here, that decision will be upheld if there is any basis which would support the judgment in the record.

Under Florida law, if a motor vehicle liability insurance policy provides bodily injury liability coverage, then it must also provide UM coverage to those insured under the policy. Uninsured motorist protection does not inure to a particular motor vehicle, but protects the named insured or insured members of his family against bodily injury inflicted by the negligence of any uninsured motorist under whatever conditions, locations, or circumstances any of such insureds happen to be in at the time.

A policy may include specified provisions that exclude certain insureds from UM coverage if the named insured knowingly accepts such a limitation and the insurer offers a reduced premium.

To limit coverage validly, the insurer must satisfy the statutorily-mandated requirement of notice to the insured and obtain a knowing acceptance of the limited coverage and must file revised, decreased premium rates for such policies. Owners neither obtained the informed acceptance nor provided the reduced rates required of insurers that include the statutory exceptions to the UM-coverage mandate in their policies.

Since the Owners policy provides basic liability coverage to Horne, Florida law mandates the provision of UM coverage to him as well. As such, the trial court correctly granted summary judgment in favor of Allstate.

ZALMA OPINION

Had Owners Read The Full Policy (RTFP) it would have seen that it owed UM coverage to Horne and would have avoided the lawsuit and appeal. Under Florida law, since the Owners policy provided liability coverage to Horne as a member of its named insureds’ household, it was required to also provide UM benefits to Horne.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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A Video Explaining Why Arson is a Named Peril

Thank you to Everyone who Wished Me a Happy Birthday

More of you than I can respond to wished me a happy birthday. Thank you all. It was a nice day with my family, most on ZOOM, and a time to prove I’m still going strong. Thanks again.

Arson is a Covered Peril

Because arson is a fire, it is not an excluded peril in any first party property policy of insurance. An arson is never a defense to an insurance claim alone. Only when arson is caused by the named insured, or any insured is involved in causing the fire to occur for the purpose of defrauding an insurer. In Eddie P. Bates v. Hartford Insurance Company of the Midwest, No. 09-12840 (E.D.Mich. 03/03/2011) the insurer attempted to deny coverage by claiming that the fire was a “vandalism.” Since the house was vacant for more than 30 days there was no coverage available under the policy. The insurer’s effort to avoid payment was defeated because the insurer named vandalism and fire as separate perils, but did not, as it did for vandalism, exclude “fire” after the dwelling was vacant for more than 30 days.

As a result, the United States District Court Eastern District of Michigan Southern Division found that Plaintiff, Eddie Bates was correct when he alleged that the Defendant, the Hartford Insurance Company of the Midwest breached the parties’ insurance contract when it wrongfully denied his requests for payment under his fire insurance policy.

Bates  owns a residential rental property in Detroit, Michigan that was damaged by a fire on June 17, 2008. Bates asserts that he did not learn about the fire loss until his return to the United States from a vacation on June 23, 2008. He reported the fire loss to Hartford on the following day.  Upon its receipt of this claim, Hartford sought a copy of the police report from the Detroit Police Department. Hartford claimed that the Bates house was vacant in the days which immediately preceded the fire putting into issue an exclusion.

This case teaches that when asserting a policy defense, it is imperative that the insurer read the words of the policy and not read words into the policy that are not there.  Although a vandal may, as part of his vandalism, cause a fire, the efficient proximate cause of the loss was fire. If the insurer wished to avoid losses by fire started by a vandal, it would be easy to write that exclusion into its policy.

Video is also available at https://youtu.be/0e88OTplUWk

 

 


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Needed by Every First-Party Property Adjuster, Lawyer or Insured

Everything Needed by the Insurance Claims Professional from Barry Zalma

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

The Insurance Examination Under Oath Second Edition

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

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

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

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

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

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

Available as a paperback here   Available as a Kindle book here

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book     Kindle Book


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Lack of Insurance Preserves Sovereign Immunity

Sovereign Immunity Bars Tort Lawsuit Against State

Plaintiff Carmela Powell (“Plaintiff”) sued Defendant State of Delaware, Department of Corrections (“Defendant”) alleging that she was injured while visiting an inmate at the James T. Vaughn Correctional Center. The Complaint alleges the Defendant negligently caused Plaintiff’s injuries.

For most of American history, sovereign immunity protected federal and state governments and their employees from being sued without their consent. Starting in the mid-1900s, however, a trend toward government accountability began to erode sovereign immunity. In 1946, the federal government passed the Federal Tort Claims Act (28 U.S.C.§2674), waiving immunity to suit and liability for some actions. Many, but not all, state legislatures followed by enacting statutes to define the limits of immunity for state governmental entities and employees.

Sovereign immunity takes two forms:

  1. immunity from suit (also known as immunity from jurisdiction or adjudication) and
  2. immunity from enforcement.

The former prevents the assertion of the claim; the latter prevents even a successful litigant from collecting on a judgment.

FACTS

In Carmela Powell v. State Of Delaware Department Of Corrections, C.A. No. N18C-12-233 ALR, Superior Court Of The State Of Delaware (June 16, 2020) the court was faced with a motion from the Defendant to dismiss the Complaint arguing that Plaintiff’s claims are barred by the doctrine of sovereign immunity.

Attached to Defendant’s motion was an affidavit of Debra Lawhead, the Insurance Coverage Administrator of the State of Delaware, which supports Defendant’s sovereign immunity argument by establishing the Defendant had no insurance and had not waived the immunity. The Court converted Defendant’s motion to dismiss into a motion for summary judgment and afforded the parties additional time to present all materials pertinent to such a motion.

ANALYSIS

The Court may grant summary judgment only where the moving party can 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 genuine issue of material fact is one that may reasonably be resolved in favor of either party.

The doctrine of sovereign immunity provides that neither the State nor a State agency can be sued without its consent. The General Assembly, however, can waive sovereign immunity by an Act that clearly evidences an intention to do so. There are two means by which the State may waive sovereign immunity: by procuring insurance coverage for claims in the Complaint; or by statute which expressly waives immunity.

The affidavit of Ms. Lawhead established that the State has not waived immunity. Ms. Lawhead avers that she reviewed the Complaint that the State of Delaware, and its agency thereof, has not purchased any insurance that would be applicable to the circumstances and events alleged in the Complaint. Ms. Lawhead’s affidavit confirms that no other statute waives immunity in this instance—a proposition that Plaintiff has not contested.

Accordingly, the doctrine of sovereign immunity bars Plaintiff’s claims against Defendant and Defendant is therefore entitled to judgment as a matter of law.

ZALMA OPINION

States often buy insurance to protect, and indemnify, the public against negligent acts by state officers, agents or employees and, if insurance is not available, waive immunity by statute. The wise state, trying to protect the assets of the state, avoid litigation by refusing to buy liability insurance and/or refusing to waive sovereign immunity. Whether the Defendant was negligent in causing injury to Ms. Powell or not, the Defendant was immune from that suit by the ancient doctrine of sovereign immunity.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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A Video Explaining the Hazard Created by The Mutability of Memory

THE MUTABILITY OF MEMORY

It is important that every investigator or lawyer preparing a case for trial must understand how memory influences the information obtained. Very few people have a perfect eidetic (photographic) memory. Memory is a fluid and often unreliable human function.

See the full video at https://youtu.be/i5OUcPXDc3A

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

The professional recognizes that some interview techniques can cause honest subjects—those who are innocent but “just trying to be helpful”—to “misremember” and provide unreliable, even false, information. It has long been known that false memories can be implanted by a process of suggestion, especially when used by skillful but unscrupulous attorneys or interviewers.

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

The Professional should never rely solely on the testimony of an eye-witness. They are usually not totally reliable. Every witness statement must be backed up with corroborating witnesses, documents, and physical evidence before it can be relied upon.

 


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

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A Video Explaining The Law of Unintended Consequences and the Tort of Bad Faith

Is the Tort of Bad Faith a Victim of  the Law of Unintended Consequences?

 

The law of unintended consequences is not statutory. No state or federal government has enacted it into law. No executive has signed the law. It is, rather, a law of the nature of people. It is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable out comes.

Science and general observation allows the statement that actions of people, especially of governments, will always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries. Regardless, for just as long, politicians, insurers and popular opinion have largely ignored it to their detriment.

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

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive.

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


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Changed Theory of Damages Not a New “Claim”

Claims Made Policy only Responds to Claims Made During Policy Period

During the damages phase of an ten year old lawsuit plaintiffs in the case argued that the bank owed certain damages not alleged in the original suit. The defendant called upon its claims made policy insurer, Federal Insurance, to defend against the argument and to cover the bank’s corresponding losses. Federal Insurance refused, explaining in part that the damages argument was not a “claim” under the policy.

In Market Street Bancshares, Inc., parent organization of Peoples National Bank, N.A., a/k/a Peoples National Bank of McLeansboro v. Federal Insurance Co., d/b/a Chubb Group of Insurance Companies, No. 18-3395, United States Court of Appeals For the Seventh Circuit (June 19, 2020) was asked to reverse a trial court decision in favor of the insurer.

BACKGROUND

In 2014, in exchange for an insurance premium, the insurer, Federal Insurance Company, agreed to defend and indemnify the bank, Peoples National Bank, against “claims” made by third parties during the policy period, which ran from April 15, 2014, to April 15, 2017. When they entered this agreement, the bank had been embroiled in an ongoing lawsuit for about a decade.

Peoples National Bank became entrenched in litigation after a business deal collapsed, triggering obligations that the bank failed to fulfill. The business deal had to do with a corporation that Terry and Robert Newman formed in 1996 to operate various Taco John’s restaurant franchises.

In 2001, the Newmans agreed to sell their corporation to Amigos Food Service, LLC. The sale involved various agreements by the Newmans, Amigos, and Peoples. One agreement provided that Amigos would secure a $150,000 letter of credit naming the Newmans and Peoples as beneficiaries. Another agreement—between the Newmans and Peoples—provided that $81,000 of the letter-of-credit proceeds would be retained to assure rent payments on the property in Anna, Illinois.

Ultimately, Amigos defaulted on its obligations. Rent on the Anna property went unpaid. And the landlords demanded the unpaid rent from the Newmans, who turned to Peoples for the $81,000 letter-of-credit proceeds set aside for this purpose. But the money wasn’t available. Peoples had allocated it to satisfy other debts Amigos had accumulated. As a result, the Newmans failed to pay the overdue rent, the landlords sued the Newmans for it in Illinois state court, and the Newmans filed a third-party complaint against Peoples in 2003.

About nine years passed before the Illinois trial court entered judgment on the Newmans’ contract claim; the court determined that Peoples was liable for breaching its agreement concerning the letter-of-credit proceeds. About two years after that, in 2015, the court granted summary judgment to the Newmans on their other two counts.

Between those judgments, in 2014, Peoples entered an agreement with Federal Insurance for professional liability insurance. The agreement was for a claims-made policy under which Federal Insurance would defend and indemnify Peoples against “Loss on account of any Claim first made against [Peoples] during the Policy Period.” The policy period spanned three years, April 15, 2014, to April 15, 2017.

In 2016, the Newmans’ case went to a bench trial on damages for the conversion and breach-of-fiduciary-duty counts. The Newmans argued for and presented evidence of damages based on the so-called “Pledge Agreement”—one of the agreements entered in connection with the Newmans’ sale of the corporation. Basically, the Newmans argued that the bank was required, under the Pledge Agreement, to timely notify the Newmans of Amigos’s default and that the bank’s failure to do so caused certain damages. The Newmans later submitted a written closing argument for the Pledge Agreement damages, and the trial court awarded those damages alongside others.

While that damages issue was pending, Peoples gave Federal Insurance information about the Newmans’ lawsuit and contended that the Newmans’ damages argument based on the Pledge Agreement was a “claim” made during the policy period, triggering Federal Insurance’s duty to defend and indemnify Peoples against it. Federal Insurance explained that the damages argument was not a “claim” under the policy; and even if it were, it fell outside the covered period, because it would have been considered “first made” when the Newmans commenced the lawsuit in 2003, well outside the policy period.

The bank maintained that the Newmans’ damages assertion based on the Pledge Agreement is a “claim,” under the insurance policy, that gave rise to Federal Insurance’s duty to defend and indemnify.

ANALYSIS

The insurance policy provided that Federal Insurance had a “duty to defend any Claim covered by” the policy and must pay Peoples for “loss,” including “defense costs,” on account of a covered “claim.” Illinois law recognizes that the insurer’s duty to defend arises when the facts alleged in the underlying complaint fall within, or potentially within, the policy’s coverage provisions.

The issue to be resolved by the Seventh Circuit was whether the Newmans’ damages assertion—advanced about thirteen years into the lawsuit—potentially bring it within the policy’s coverage. If a provision is susceptible to only one reasonable reading, no ambiguity exists, and the policy must be applied as written.

The type of insurance purchased here is a claims-made, professional-liability policy. In a claims-made policy like this one, the pertinent risk is that an injured third party will assert a claim against the insured during the policy period. This contrasts with the risk involved in an occurrence policy—the risk that an injurious act or omission will occur during the policy period.

The difference between these risks highlights the purpose of a claims-made policy which is to allow the insurance company to easily identify its risk, which in turn may offer insureds more-available and less-expensive policies. Because the claims made policy protects against the risk of an injured party bringing a claim against the insured during the covered period, the insurer’s risk exposure is clearer; claims brought outside the policy period are not covered.

Peoples does not contest that the Newmans’ 2003 complaint, which commenced the underlying lawsuit, initiated a “claim” under the policy’s definition nor can Peoples contest that the Newmans’ closing argument in the damages phase of that lawsuit was part of the civil action begun in 2003. Under the policy, a “claim” taking the form of “a civil proceeding commenced by the service of a complaint” spans the entire civil action, not just the legal theories and factual allegations in the complaint that commenced the action. Because the Newmans’ damages argument was part of the civil action begun by the 2003 complaint, the damages argument is not itself a “claim.” Based on the plain meaning of the policy’s terms, read in context and in light of the policy’s purpose and the ordinary meaning of “a civil proceeding” the whole civil action brought by the third party against the insured.

The question is not where the causes of action in a lawsuit begin and end; it is whether the damages argument is a “claim” under the insurance policy. Put differently, the policy’s terms—rather than the plaintiffs’ causes of action—dictate the scope of a “claim.”

The purpose underlying the claims-made policy likewise indicates that each type of “claim” excludes the others. Just as giving “proceeding” a narrow meaning would muddy the insurer’s risk exposure, so too would the scenario of overlapping claims. If an argument in the damages phase of a lawsuit could be both part of a “claim” begun by a complaint and itself a “claim,” the insurer’s risk exposure would be significantly more difficult to calculate.

ZALMA OPINION

The plaintiff bank, that saved money by purchasing a claims made policy rather than an “occurrence” policy (which would have excluded the Newman’s suit if disclosed) to cover an old suit because the plaintiffs alleged a different kind of damages on the old law suit. It was a creative claim but the Seventh Circuit realized that accepting the argument would totally change the purpose and meaning of a claims made policy. Creative but not convincing, Federal did not owe defense or indemnity.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

 

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Conversion is an Intentional Tort and Can Never be an Occurrence

No Duty to Defend if there is no Occurrence

Defendants, McKeown Classic Homes, Inc. and Jerome McKeown (collectively McKeown), appealed the trial court’s entry of summary judgment in favor of plaintiff, Pekin Insurance Company (Pekin), finding Pekin had no duty to defend McKeown in the underlying action. Additionally, McKeown appeals the trial court’s denial of its motion to reconsider the grant of summary judgment to Pekin.

In Pekin Insurance Company v. McKeown Classic Homes, Inc., an Illinois corporation, Jerome McKeown, Janet H. Hula, Michelle Hula-Miller, and Eric B. Miller, (McKeown Classic Homes, Inc. and Jerome McKeown), 2020 IL App (2d) 190631-U, No. 2-19-0631, Appellate Court Of Illinois Second District (June 16, 2020) the Illinois Appellate Court was asked to determine the existence of a duty to defend.

BACKGROUND

Janet Hula, Michelle Hula-Miller, and Eric Miller (collectively claimants) sued McKeown alleging breach of contract and conversion stemming from McKeown’s work on claimants’ property pursuant to a construction agreement. Count II (conversion) alleged that McKeown, “without authority and knowledge of the [claimants], took hundreds of planks of knotty pine wood, a Dutch door, a hand sink, four windows and glass door knowingly belonging to the [claimants] without [claimants’] consent.” Count II alleged that claimants demanded McKeown return the above items, but he refused to do so. Count II stated that, as a proximate result of McKewon’s conversion, claimants suffered $25,000 in damages. Claimants further alleged that McKeown’s acts were “willful, wanton, malicious, and oppressive and were undertaken with the intent to defraud and justify the awarding of punitive damages.”

After refusing to accept McKeown’s tendered defense to claimants’ complaint, Pekin filed a complaint for declaratory judgment seeking a declaration that it had no duty to defend McKeown in the underlying action. Pekin stated that its Commercial General Liability Insurance Policy (the policy) issued to McKeown contained certain exclusions applicable to the conversion claim asserted by claimants in the underlying action.

Pekin filed a motion for summary judgment stating that it had not duty to defend McKeown against claimants’ underlying complaint for conversion. Pekin argued in its motion that the conversion claim did not allege an “occurrence” as defined in the policy, but rather an intentional act to deprive claimants of their own property.

McKeown alleged the converted items were taken by “mistake” and would therefore be an “occurrence” under the terms of the policy, triggering Pekin’s duty to defend. The trial court found that claimants’ claim for conversion “[A]llege intentional conduct, and they allege that once that conduct was brought to McKeown’s attention, [he] refused to return them. And there is nothing in here that tells me that there is negligence or an accident. What I have got to go on are the allegations of the complaint. *** There is a refusal to return [items] once they are known. And I go back to the duty to defend in this case is what you are asking the Court to rule on. It rests upon the allegations of the complaint.”

The trial court granted Pekin’s motion for summary judgment and found there was no duty to defend McKeown under the terms of the policy.

ANALYSIS

Summary judgment is proper where, when viewed in the light most favorable to the nonmoving party, the pleadings, depositions, admissions, and affidavits on file reveal 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 genuine issue of material fact exists when the material facts are disputed or when the material facts are undisputed but reasonable persons might draw different inferences from those undisputed facts.

In a declaratory judgment action where the issue is whether the insurer has a duty to defend, a court looks first to the allegations in the underlying complaint and compares those allegations to the relevant provision of the insurance policy. An insurer’s duty to defend arises when (1) the complaint is brought against an insured and (2) the facts as alleged in the complaint fall, or potentially fall, within the policy’s coverage.

When construing an insurance policy, a court’s primary objective is to ascertain and give effect to the intentions of the parties as expressed in their insurance contract. If the words of the policy are clear and unambiguous, the court must afford them their plain and ordinary meaning.  If the underlying complaint alleges facts within or potentially within policy coverage, the insurer is obligated to defend its insured even if the allegations are groundless, false, or fraudulent. A trial court may look beyond the underlying complaint in order to determine an insurer’s duty to defend.

An insurer must defend only if the complaint alleges facts within or potentially within the coverage of the policy, unless the insurer possesses knowledge of true but unpleaded facts that, when taken together with the allegations in the complaint, indicate that the claim is within or potentially within the policy coverage.

McKeown’s explanation that the alleged converted items were “mistakenly removed by a subcontractor” was not known to Pekin until it was included in its counterclaim for declaratory judgment. McKeown never provided an affidavit or other communication to inform Pekin of the identity of the purported subcontractor responsible for taking the items from claimants’ property, further hindering any prospect of investigating the validity of McKeown’s claim for coverage under the policy. Where the insurer is unaware of the purported true but unpleaded fact, that fact may not be considered in determining the duty to defend.

The complaint must be read as a whole to assess its true nature. The facts alleged in the complaint reveal whether the insurer has a duty to defend, not arguments as to the semantics of those facts. Here, the underlying complaint alleged that McKeown’s refusal to return the items was “willful, wanton, malicious, and oppressive and undertaken with the intent to defraud.” Reading the complaint as a whole, the facts alleged do not lead to a reasonable interpretation that McKeown’s alleged conversion was a mistake. Claimants unambiguously alleged an intentional tort of conversion.

As the underlying complaint clearly alleged an intentional act on the part of McKeown, the “property damage” was not caused by an “occurrence” as defined in the policy. Based on the clear and unambiguous allegations of intentional conduct by McKeown in claimants’ underlying claim for conversion, no accident or “occurrence” as defined by the policy triggered Pekin’s duty to defend. The trial court did not err in granting summary judgment to Pekin as there is no other reasonable interpretation of claimants’ allegations than one of intentional conversion against McKeown.

Since there was no occurrence as defined in the language of the insurance policy there was no duty to defend.

ZALMA OPINION

Liability insurance, by definition, requires the existence of a fortuitous act that is either unknown or unintended by the insured. When the only tortious charge against the insured is the intentional tort of conversion, it is an event that is both known and intended and thus not an occurrence. Pekin, therefore, had no obligation to defend or indemnify McKeown.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

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A Video Explaining an Oddity of Rescission of Insurance in New Jersey

Rescission and Fraud

Rescission of an insurance policy, by definition, means the policy never existed and the parties are returned to the status quo. The insured gets the premium back and the insurer gets the policy back with no obligation under the policy.

In Citizens United Reciprocal Exchange v. Perez, 432 N.J. Super. 526, 75 A.3d 1233, N.J.Super.A.D., September 13, 2013 a New Jersey Appellate court proved the truth of the prediction made by George Orwell in his classic “Animal Farm” that all litigants in the United States are equal but some are more equal than others.

Insurers, even when victims of fraud, must pay more than they would have been required to pay had they not voided the policy and the fraud perpetrators profit from their fraud by having their obligation to an injured person paid by the defrauded insurer.

The appellate court concluded that protection of innocent third parties is a primary concern of New Jersey’s personal injury no-fault system. In this case there were two innocent third parties.

Mr. Green, injured in the automobile accident, and CURE, forced to pay Mr. Green on a void policy obtained by fraud reformed to add $5,000 in coverage more than they agreed to pay.

This case reaches the ridiculous result that asserting its right to void the policy for fraud cost more than accepting liability and ignoring the fraud. The only person who profits from the fraud are the fraud perpetrators.

 


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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A Video Explaining The Need For Ethics

Ethics for Independent Insurance Adjusters

Independent insurance adjusters serve insurance companies who do not have sufficient claims staff to handle insurance claims on behalf of those various insurers without staff in every jurisdiction where there is property the risk of loss of which was insured.

The professional insurance adjuster recognizes that the work of adjusting insurance claims is a profession of public trust. Independent insurance adjusters should maintain a standard of integrity that will promote the goal of building public confidence and trust in the insurance industry.

Independent insurance adjusters, and company employed insurance adjusters, should follow ethical standards.

In Oklahoma, it was found that a disbarred or suspended lawyer needed to be prohibited from negotiating insurance claim settlements, including but not limited to, as a private insurance adjuster. The court concluded that the disbarment took the lawyer out of the ability to treat an insured with the utmost good faith and refused to issue a license as a public insurance adjuster.

In Florida, unprofessional conduct of an attorney occurring during his employment as an insurance adjuster and not as a practicing attorney nevertheless warranted his disbarment.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Failure of Genuine Dispute Doctrine or Just Poor Adjusting

Summary Judgment Improper When Evidence Disputes Good Faith Investigation

The insurance industry often finds itself a defendant in breach of contract and bad faith lawsuits because they use inadequate, incompetent or poorly trained insurance adjusters and by the failure to properly instruct experts retained to help in the evaluation of a claim that requires expert advice. State Farm found itself in such a situation in a claim that resulted from a single claim of smoke damage from a wildfire event.

Leonard and Patricia Fadeeff’s home and personal property were damaged by the 2015 Valley Fire that swept across a wide swath of northern California. The trial court granted State Farm’s motion for summary judgment. The California Court of Appeal reversed the summary judgment in Leonard Fadeeff, et al. v. State Farm General Insurance Co., A155691, Court Of Appeal Of The State Of California First Appellate District Division Two (June 8, 2020)

FACTUAL BACKGROUND

Their insurer, State Farm General Insurance Company (State Farm), paid for cleaning, repairs and some living expenses, but denied the Fadeeffs’ supplemental demand for policy benefits for additional repairs and contents replacement.

The Fadeeffs sued State Farm for breaching the implied covenant of good faith and fair dealing in their property policy, commonly known as insurance bad faith, and sought punitive damages.

The Fadeeffs’ home in Hidden Valley Lake, California was insured under a State Farm homeowners’ policy that covered building loss and personal property. In September 2015, the Valley Fire in Lake County caused smoke damage to the Fadeeffs’ property, which they timely reported. With State Farm’s approval, the Fadeeffs retained ServPro to assist with smoke and soot mitigation and cleaning. State Farm “call[ed] the shots” with respect to what ServPro could do in connection with the Fadeeffs’ claim. ServPro power washed the exterior siding of the home to clean smoke, soot and ash.

State Farm’s file notes from its independent adjuster Greg Gannaway state that the home was “well maintained with no apparent deferred maintenance” and that “[a]ll damage is related to smoke and soot.” State Farm found smoke and soot on the interior walls, ceilings and carpeting, and on all exterior elevations including on the very large deck and handrail.

The Fadeeffs hired a public adjuster and submitted supplemental claims for further dwelling repairs and additional contents replacement in January 2016, totaling approximately $75,000. State Farm used a different independent adjuster (James Carpenter) to investigate the supplemental claims. Carpenter is not a licensed adjuster in California, nor is he licensed in any building trade. He inspected the Fadeeffs’ property in March 2016 and stated he could not find smoke damage.

In connection with the supplemental claims, State Farm retained Forensic Analytical Consulting Services (FACS) to inspect the Fadeeffs’ home and a company called HVACi to inspect the Fadeeffs’ HVAC system. State Farm has an internal “Operations Guide” for the use of third-party experts in handling first party claims. It requires that adjusters prepare a written referral letter to the third-party expert that “provide[s] clear and concise instructions, and list[s] the specific question(s) to be addressed by the independent expert.” The Operations Guide was not followed.

FACS took only surface samples from the Fadeeffs’ home. The FACS report noted other “sources of combustion” at the Fadeeffs’ property. Brinkerhoff testified that he never asked the Fadeeffs when they had last used any of these sources of combustion. The FACS and HVACi reports supported Carpenter’s conclusion to deny those portions of the supplemental claims they addressed. State Farm sent a letter dated April 25, 2016, to the Fadeeffs’ public adjuster denying all of the supplemental claims and included copies of the two reports.

DISCUSSION

For a defendant to prevail on a motion for summary judgment, it must show that at least one element of plaintiff’s cause of action cannot be established, or the defendant has an affirmative defense.

The genuine dispute rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured’s claim. A genuine dispute exists only where the insurer’s position is maintained in good faith and on reasonable grounds. Ordinarily, reasonableness is a factual issue to be decided by a jury.

An insurer is only entitled to summary judgment based on a genuine dispute over coverage or the value of the insured’s claim only where the summary judgment record demonstrates the absence of triable issues as to whether the disputed position upon which the insurer denied the claim was reached reasonably and in good faith.

In Guebara v. Allstate Ins. Co. [(9th Cir. 2001)] 237 F.3d [987,] 994) the Ninth Circuit issued a caveat that an expert’s testimony will not automatically” insulate an insurer from a bad faith claim based on a biased investigation. It suggested several circumstances where a biased investigation claim should go to jury: (1) the insurer was guilty of misrepresenting the nature of the investigatory proceedings . . .; (2) the insurer’s employee’s lied during the depositions or to the insured; (3) the insurer dishonestly selected its experts; (4) the insurer’s experts were unreasonable; and (5) the insurer failed to conduct a thorough investigation. In essence, the dispute must be genuine. An insurer cannot claim the benefit of the genuine dispute doctrine based on an investigation or evaluation of the insured’s claim that is not full, fair and thorough.

State Farm did not dispute that it denied coverage for the exterior paint based on its unlicensed adjuster, Mr. Carpenter’s conclusion that the damage was due to wear, tear and deterioration. State Farm’s reliance on Carpenter undermined its argument that it reasonably relied on experts in denying the Fadeeffs’ claim. State Farm’s argument is unavailing because nothing in the FACS report or Brinkerhoff’s declaration refers to peeling or chipped exterior paint or wear, tear or deterioration.

There are other disputed facts that make summary judgment inappropriate on similar grounds. State Farm denied coverage for the “wallpaper and . . . carpet” aspect of the supplemental claim based on adjuster Carpenter’s conclusion that the damage was due to wear, tear and deterioration. Although Carpenter had no special expert qualifications to make a judgment about wear and tear of the linen wall covering, State Farm denied coverage for the wall covering based on the conclusion of its unlicensed adjuster.

Adjuster Carpenter retained FACS as a third-party expert. He was unaware of State Farm’s operational guide regarding the use of third party experts, and issued a retention letter to FACS that did not (contrary to the guide) provide clear and concise instructions and list the specific questions to be addressed.

ZALMA OPINION

Although the opinion, on the surface, appears to weaken the effect of the genuine dispute doctrine by reversing the trial court, it does no such thing. It reversed the summary judgment because the second adjuster working on the file who worked without a California license, was not trained about State Farm’s Operations Guide,  and had no specific expertise on property damage, was relied upon by State Farm to deny, at least part of,  the Fadeeff’s supplemental claim on the adjuster’s opinion and not the opinions of the experts.  In addition, the experts relied upon were not properly instructed in accordance with State Farm’s own requirements. Use of, and reliance upon, an unlicensed independent adjuster who contradicted the work of a licensed independent adjuster resulted in a claim denial that probably should never have happened. A catastrophic fire coupled with an inadequate adjuster, inadequately instructed experts and inadequate investigation relied upon by State Farm deprived State Farm of its genuine dispute defense and reflected a failure to thoroughly and fairly adjust the claim.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Intentional Act Exclusion Requires a Jury to Find Intent

No Summary Judgement When Claims of Self-Defense are Questions for Jury

In a case where an altercation between neighbors resulted in injury to one and the death of another resulted in a wrongful death suit and a declaratory relief action to show no coverage for intentional acts.  When one claims an unprovoked attack with a knife and the other claims self-defense (an exception to the intentional act exclusion) summary judgment should be impossible before a trier of fact determines which story it believes.

In Brandon S. Wise v. George O’Neil, et al, 20-3, State Of Louisiana Court Of Appeal, Third Circuit (June 17, 2020) the Louisiana Court of Appeal was asked to reverse a decision to grant summary judgment to an insurer applying the intentional acts exclusion.

FACTS

Brandon Wise (Brandon) moved into a home next door to George O’Neil (George) and his wife, Antoinette O’Neil (Antoinette) in Mermentau, Louisiana several years ago. Brandon’s son, Drey Wise (Drey), his nephew, Trevor Goodwin (Trevor), and other visitors repeatedly caused friction with George and Antoinette. George called law enforcement several times, but the behavior persisted.

George claims he appealed to Brandon to speak with his son and nephew because he believed they would listen to him. He asserts Brandon’s response to that request was just “f**k you.” After George proceeded to dial 911 Trevor physically attacked George. Drey and Brandon joined in the fray. The three continued to “beat” him, “kick” him, “stomp” him, rip gold chains off his neck and punch him.  They attacked him, and while he was on the ground, holding onto the knife, being beaten by the three men, Drey was stabbed three times. He was taken to the hospital but died from his wounds.

Brandon alleges a different version of the events in his petition for damages. Based on statements to law enforcement made by Brandon, George was arrested. A grand jury returned a no true bill and George was not charged with any offense.

Brandon sued George and Antoinette for damages resulting from the death of his son, Drey. The O’Neils answered the suit and filed a reconventional demand against Brandon, his son’s estate, and a third-party demand against Trevor. George claimed he suffered injuries in the attack by Brandon, Drey, and Trevor and that he acted in self-defense.

Louisiana Farm Bureau Mutual Insurance Company (Farm Bureau), the O’Neils’ insurer, filed a motion for summary judgment alleging it is not required to defend the O’Neils and it has no liability under its insurance policy for George’s intentional acts under the policy’s exclusions of coverage. The trial court granted Farm Bureau’s motion and dismissed the case against it with prejudice.

ANALYSIS

Farm Bureau contends that it does not matter which version of the event is closer to the truth for the policy exclusion to apply and asserted: “There is no dispute that George O’Neil intentionally pulled the knife from his pocket, released the blade, ‘brandished’ the knife and made a ‘thrust motion.'”

Farm Bureau, and the trial court, believed that, when George pulled the knife from his pocket and pressed the button opening the blade, this intentional act alone precludes coverage under the “intentional acts” policy exclusion regardless of the result and regardless of whether stabbing Drey was intentional, accidental, unintended, negligent, or unavoidable.

George, however, maintains the policy does not exclude coverage when an insured is forced to act in self-defense and the results of such unintentional and uncontrollable actions in the heat of defending a vicious attack on his person cannot be termed “intentional acts.”

George and Brandon disagree about the factual basis of this event and George’s actions. Indeed, there are several critical facts in dispute concerning the events which resulted in Drey’s untimely death. These disparities cannot be resolved without credibility determinations which are not appropriate for summary judgment. The fact that a grand jury did not charge George with any criminal offense is telling.

Summary judgment is rarely appropriate for disposition of a case requiring judicial determination of subjective facts such as intent, motive, malice, good faith, or knowledge. The issue of subjective intent is fact-intensive and is an issue to be determined by the totality of the circumstances examined on a case-by-case basis.

Farm Bureau’s application of the exclusionary language relies on its contention that George’s action in removing the knife from his pocket is an intentional act which alone ipso facto excludes coverage. This proposition turns logic on its head.

The subjective intent of the insured is the critical issue in determining whether an intentional acts exclusion applies. Further, this subjective intent is a factual determination that is the particular province of the trier of fact. The concept of intent requires a thought process, resulting in the resolution to commit a particular act. In the instant case the court recognized that the instinct of self-preservation is primordial.

The court concluded that there are genuine issues of material fact that preclude summary judgment. George claims he, too, simply reacted to a situation without time to consider the consequences of his reaction, and that Drey being stabbed was not intentional. Brandon disputes this claim. Neither the trial court, nor an appellate court, can resolve this pivotal factual dispute on summary judgment. A civil jury convened in this case might well judge his conduct was not intentional and done in self-defense.

The purpose of the intentional injury exclusion is to restrict liability insurance coverage by denying coverage to an insured in circumstances where the insured acts deliberately and intends or expects bodily injury to another. The subjective intent of the insured is the critical issue in determining whether an intentional acts exclusion applies.

The trial court judgment erroneously granted summary judgment to Farm Bureau and was reversed and remanded by the Court of Appeal to the trial court for further proceedings.

ZALMA OPINION

To paraphrase John Adams, facts are difficult things. The intentional act exclusion applies to refuse coverage for intentional acts unless those acts are performed in self-defense. Since the facts recited by the insured are a clear description of an act of self-defense and the plaintiffs’ recitation are the opposite, it could not be said as a matter of law that the exclusion applied or did not apply. Factual findings, with the trier of fact viewing the demeanor of the witnesses while they testify subject to cross-examination will establish whether George was a victim of a vicious assault and acted in self-defense or was an aggressor who violently stabbed and killed the plaintiff’s son. What they find will determine coverage and Farm Bureau must defend George up to a determination of the facts.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

 

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A Video Explaining How to Investigate a Mold Claim

Claims Handling and Investigation of the Mold Claim of Bodily Injury or Property Damage

See the full video at https://youtu.be/PEYoES-DvXc

Because multiple exclusions in a CGL policy or other liability policy may involve an adjuster, an insured or the attorney for either, the adjuster starting an investigation of a mold claim should protect the insurer from potential misunderstanding or inadvertent waiver of the insurer’s rights. In that regard the adjuster should make immediate, but no later than 24 hours after notice is received, contact with the insured. The insured should be asked at the first meeting to sign a non-waiver agreement that is a contract where both the insured and the insurer agree that the investigation of the claim will not waive any of the rights the insured and the insurer have nor will either be estopped as a result of the investigation.

The first contact by the insurer with the insured should advise the insured of the following:

  • the full name, address, and telephone number of the adjuster;
  • a description of the coverages available to the insured;
  • a statement of the periods of time the insurance is effective;
  • the insuring agreements that may provide coverage to the insured;
  • the conditions with which the insured must comply;
  • any forms the insurer requires that the insured submit to the insurer;
  • the investigation the insurer intends to conduct;
  • the request for a non-waiver agreement; and
  • the need to submit a sworn statement in proof of loss no later than 60 days after the request unless the time is extended in writing.

The brief description of available coverages should be made orally at the initial telephone contact and followed up with a written description.

Further investigation details are in the video.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Full Court Press and Barry Zalma Insurance Books

New Books from Full Court Press

The Insurance Law Deskbook

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

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

California Insurance Law Deskbook

9781949884289

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

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

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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law DeskbookZalma

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

California Insurance Law Deskbook

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

Insurance Bad Faith and Punitive Damages Deskbook

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

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

All available at fastcase.com bookstore.

© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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A Video Explaining Mold Claims Exclusions in Insurance Policies

Mold Exclusions

There can be no coverage for injuries caused by mold if at least six months elapsed between notice of mold and the date of alleged loss. Therefore, according to the Eighth Circuit Court of Appeal, mold under such facts is not “an undesigned, sudden, and unexpected event” as required by the policy. (Citation omitted.)

“While … first drop of leakage might be sudden, … contamination occurring over a period of time falls outside the definition of ‘accident.’” “[T]he purpose of a commercial general liability policy … is to provide coverage for tort liability for physical damage to others, and not to insulate an insured from economic losses flowing from breach of its contractual duties.”

In Florida, the court found an exclusion for mold damage to be clear and unambiguous even when the precipitating cause was other than mold. It held:

To the extent Plaintiff is claiming coverage for mold damage that resulted from displacement of the home due to sinkhole activity, such coverage is explicitly excluded from the policy. In unambiguous terms, the policy states that “there is no coverage for … [a]ny loss or damage to your … mobile home involving in any way the actual or potential presence of mold … whether occurring independently or if directly or indirectly caused by or resulting from an Insured Peril.”

In Texas, applying “surface water” and mold exclusions, the court found that an average reasonable person would not limit surface water to rain falling only on dirt and not on any paved surfaces or other structures. The ordinary, everyday meaning of words to the general public is what counts in interpreting policy language. The ordinary meaning of the words “surface water” in the policy can reasonably include rainwater that has collected on patio surfaces.

© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Battle of Experts Resolved Against He Who Avoided Reviewing All Evidence

Insured Must Prove Exhaustion of Primary Limits Required to Collect from Excess Insurers

Plaintiff, John Crane Inc. (JCI), appealed from various pretrial judgments of the circuit court, as well as its order finding that JCI had not proved exhaustion of its primary insurance policies. On appeal, JCI contends (1) the trial court erred in determining as a matter of law that the first primary umbrella policy had a $60 million per occurrence limit instead of a $20 million limit, (2) the trial court’s finding that JCI did not prove exhaustion was against the manifest weight of the evidence, and (3) the trial court erred in denying JCI’s motion for a new trial.

In John Crane Inc. v. Allianz Underwriters Insurance Company; et al, 2020 IL App (1st) 180223, No. 1-18-0223, Appellate Court of Illinois First District Sixth Division (June 12, 2020) the Illinois Court of Appeal resolved the dispute on its Second trial and Appeal.

BACKGROUND

JCI used asbestos fiber in manufacturing gaskets, mechanical sealing, and packing products. As of February 2017, JCI has been named a defendant in over 325,000 cases claiming exposure to its asbestos-containing products. JCI obtained primary insurance coverage from Lumbermens Mutual Insurance Company and American Motorists Insurance Company (hereinafter referred to collectively by their trade name, Kemper), as well as umbrella and excess coverage from multiple defendant insurance companies.  In May 2004 JCI filed a claim for declaratory judgment that Kemper’s primary coverage was exhausted and also sought a declaration of the obligations of its umbrella and excess insurance carriers.

Prior to the secibd exhaustion trial the trial court considered numerous pretrial motions.

The trial court conducted a 23-day bench trial on whether the 141 claims JCI had paid in underlying asbestos personal injury cases exhausted the Kemper primary policies. The parties stipulated that the Kemper primary policies have a total limit of $41,075,000. JCI presented Ross Mishkin as an expert in claim analysis and allocation. Mishkin concluded that the primary policies were exhausted in February 2008 as a result of JCI’s payment on claim number 76 of the 141 claims. Although the court qualified Mishkin as an expert, Mishkin did not always follow his own allocation rules, and he improperly “banked” claims.

Mishkin testified at trial that, if even one claim were removed from his analysis, his allocation “would no longer demonstrate that the primary policies were exhausted.” By Mr. Mishkin’s own admission, the Court’s conclusion that six of the claims were misallocated means his allocation no longer demonstrates that the primary policies were exhausted.

ANALYSIS

A court’s primary objective in construing an insurance policy is to give effect to the parties’ intent as expressed by the language of the policy. As with any contract, an insurance policy must be construed as a whole, giving effect to every provision if possible. If the policy’s words are clear and unambiguous, they must be given their plain, ordinary, and popular meaning. However, if the policy language is susceptible to more than one reasonable meaning, it is considered ambiguous and will be construed against the insurer.

JCI acknowledged that the aggregate limit of the first Kemper umbrella policy is $20 million per year, where the limits of liability section refers to the aggregate limit during each annual period while this policy is in force. However, JCI contends that the trial court erred in finding that the occurrence limit in the policy was also $20 million per year.

However, the fact remains that nowhere in endorsement 3 is there a reference to aggregate limits or any other specific limit. Endorsement 3 makes no distinction between the two types of limits. For this reason, other courts have construed this same language to mean that ” ‘the limits of the company’s liability’ may be applied separately” to each period of coverage and that both aggregate and occurrence limits are implicated.

The trial court, in its 140-page order, thoroughly addressed Mishkin’s allocation testimony. A trial court is not required to accept an expert’s conclusion if it finds his methodologies are unsound. The court found Mishkin’s methodology problematic and, as a result, determined that Mishkin erred in allocating these claims to the primary policies. Since an appellate court may not say that the opposite conclusion is clearly evident it concluded the trial court’s determination was not against the manifest weight of the evidence.

The trial court not only found Mishkin’s allocations on six claims erroneous, it also found Mishkin’s overall methodology “problematic” for a number of reasons. First, neither Mishkin nor anyone at his group reviewed all the documents in the claim files. Mishkin initially received one million documents pertaining to the 141 claims at issue. Later, he was provided with two million additional documents pertaining to claims 68 through 141. Rather than review all two million additional documents, Mishkin testified that he fully reviewed the additional documents for eight of the claims to determine whether the documents would impact his trigger dates. Mishkin found that the additional documents were duplicative and did not affect his trigger dates. Therefore, he concluded that a complete review of the two million documents was unnecessary.

The trial court found that Mishkin’s failure to look at approximately two-thirds of the documents in the case greatly harms the reliability and credibility of his allocation. The court noted that Mishkin only reviewed 8 of the 74 claims for which additional documents were provided and, since each claim is unique, the trial court properly found Mishkin’s decision to use a small percentage of claims to make a conclusion as to all 74 claims unjustified.

Statistical analysis may be used in allocating asbestos claims. Given the wealth of information provided to Mishkin, the trial court concluded logically that a case-by-case analysis using all the documents would produce more accurate determinations. The trial court expressly rejected Mishkin’s method of ignoring more than two million documents.

On the other hand, Defendants’ expert witness, Dr. Denise Martin testified that the practice of banking does not comport with the standards in the insurance allocation field. At trial, the testimony on the banking issue became a classic battle of the experts. The trial court, as factfinder, listened to the conflicting testimony and used its judgment to make a determination. In this situation, the fact finder is in a better position to assess the credibility of the witnesses and give weight to each expert’s opinion, as measured by the reasons given for the conclusion along with the supporting facts.

The trial court found that “Mr. Mishkin’s methodology and allocation is [sic] not credible and cannot be given weight. *** Due to Mr. Mishkin’s frequent failures to follow his own protocol, decision to ‘bank’ claims, reliance on the general ‘Navy ID,’ and failure to review two-thirds of the documents concerning the underlying claims, the Court cannot rely on Mr. Mishkin’s allocation.”

Since the appellate court determined that the trial court did not err in the rulings challenged by JCI.  JCI has already had two lengthy exhaustion trials and now requests a third one to prove exhaustion “once and for all” with the remaining claims not analyzed by Mishkin.

A motion for a new trial cannot be used by JCI to get a third bite of the apple, to try again with the knowledge of strategies that did not succeed at trial. The trial court’s denial of JCI’s motion for a new trial was not an abuse of discretion.

ZALMA OPINION

When a liability policy is exhausted sufficiently to cause excess insurers to step in is often confusing to those not experienced in insurance claims. In this case two qualified experts reached decisions completely different: one stating the primary policies were exhausted and the other explaining why the primary limits were not exhausted. The trial and appellate court refused to rely upon an expert who contradicted his own conclusion and refused to follow his own system and admitted his conclusions were unreliable. The trial court sat through more than three weeks of trial testimony, weighed the credibility of the witnesses and ruled there was no exhaustion. JCI got nothing and was not entitled to a third trial to get its expert to do the work he was retained to do.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

 

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Fictionalized True Crime Reports on Insurance Fraud

Fictionalized True Insurance Crime Books

HEADS I WIN, TAILS YOU LOSE

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

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

Available as a Kindle Book.

Available as a paperback.

Candy and Abel: Murder for Insurance MoneyProduct Details

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

Available as a Kindle Book.

Available as a paperback.

Murder And Insurance Fraud Don’t Mix

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

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

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

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

Available as a Kindle book.

Available as a paperback

Murder & Old Lace: Solving Murders Performed for Insurance Money

Product Details

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

Available as a Kindle book.

Available as a paperback.

Arson for Terrorism and Profit

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

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

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

Available as a Paperback

Available as a Kindle book

M.O.M. & The Taipei Fraud

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

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

Available as a paperback.

Available as a Kindle book.

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

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

Available as a paperback.

Available as a Kindle book.

© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Posted in Zalma on Insurance | Leave a comment

Declaratory Relief Available in Florida to Determine Insurer’s Obligation to Indemnify

Insurer Has Right to Obtain Declaration Whether Loss Occurred Before Inception of Policy

Insurance is a contract that agrees to indemnify another against the risk of loss by a contingent or unknown event. If a loss or damage occurs before the inception of the policy the loss is neither contingent nor unknown to the insured.

In Security First Insurance Company v. Nanette Phillips, Case No. 5D19-2839, District Court Of Appeal Of The State Of Florida Fifth District (June 12, 2020) the Court of Appeal was asked to allow an insurer to obtain declaratory relief about whether the claim made was for a loss that predated the policy.

Security First Insurance Company (“Security First”) appealed the dismissal of its complaint in which it sought declaratory relief against one of its policyholders, Nanette Phillips. Believing that Phillips’ insurance policy barred recovery because the damage for which she filed a claim occurred prior to the inception of her policy, Security First alleged that there was a bona fide dispute between the parties, and that even though the dispute concerned a factual issue, it was entitled to seek declaratory relief.

FACTS

Soon after Phillips purchased her homeowners policy from Security First, she reported that her house sustained significant damages arising from ground cover collapse. Her policy precluded recovery for any damages which occurred prior to the inception of the policy. After conducting an investigation, Security First concluded that the damage claimed by Phillips predated and pre-existed her insurance policy and filed its action for declaratory relief.

The trial court ultimately found that the complaint was inappropriate in the context of a declaratory action, reasoning that this case was about whether the alleged damage occurred before or after Phillips purchased the policy, and that it was not simply a matter of policy interpretation. Agreeing with Phillips that Security First could raise its argument that the damage preexisted the insurance policy as an affirmative defense, the trial court dismissed the complaint with prejudice.

ANALYSIS

To be entitled to declaratory relief, a party must show he is in doubt as to some right or status and that he is entitled to have such doubt removed. More specifically, a complaint must allege that:

  1. there is a bona fide dispute between the parties,
  2. that the moving party has a justiciable question as to the existence or non-existence of some right, status, immunity, power or privilege, or as to some fact upon which the existence of such right, status, immunity, power or privilege does or may depend,
  3. that plaintiff is in doubt as to the right, status, immunity, power or privilege, and
  4. that there is a bona fide, actual, present need for the declaration.

The court of appeal noted that a bona fide controversy existed between the parties. Security First and Phillips clearly disagreed as to whether the ground cover damage occurred before or after the inception of the insurance policy. Phillips filed a claim, attempting to recover losses she claims to have sustained as a result of the damage. By contrast, Security First alleged in its complaint that the damage occurred before the insurance policy was purchased. Because the insurance policy would permit Security First to deny coverage if the ground coverage damage happened before the inception of the insurance policy, there was a genuine dispute between the parties, and Security First presented a justiciable question as to the existence of its right to deny coverage under the insurance policy.

Security First correctly argued that the trial court had the power to determine factual issues under the declaratory judgment act.  A trial court may render a declaratory judgment on the existence, or nonexistence: of any immunity, power, privilege, or right; or of any fact upon which the existence or nonexistence of such immunity, power, privilege, or right does or may depend, whether such immunity, power, privilege, or right now exists or will arise in the future. Therefore, the trial court had the authority to render a declaratory judgment, determining whether Phillips’ ground coverage damage occurred before the inception of her insurance policy with Security First.

Security First appropriately invoked the declaratory jurisdiction of the trial court in asking it to make a factual determination with respect to whether the ground damage occurred before the inception of Security First’s insurance policy. It was error to dismiss its complaint.

ZALMA OPINION

Security First was kind to its insured when it merely claimed no coverage because the loss pre-dated the policy. If Phillips intentionally obtained the policy after incurring a loss, not only was she prevented from having coverage for a non-contingent or known before insurance loss, she was attempting to defraud Security First who could, depending on the law of Florida, rescinded the policy or declared it void. If it can prove that the loss pre-dated the policy there is no reason for a court to honor her claim and it should grant declaratory relief.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

 

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The Law of Unintended Consequences and the Tort of Bad Faith

A Video Explaining Insurance Fraud and the Law of Unintended Consequences

See the full video at https://youtu.be/g3Rd-cjYW-I.

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

 

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive.

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

Available as a paperback  

Available as a Kindle book

© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Regulations of Insurance Claims Professionals and Ethics

Dad’s Day or any Gifts for Insurance Professionals

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Ethics for the Insurance Professional – Second Edition

How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives

Insurance is, by definition, a business of the utmost good faith. This means that both parties to the contract of insurance must act fairly and in good faith to each other and do nothing that will deprive the other of the benefits the contract of insurance promised.

Without the covenant of good faith and fair dealing and ethical people who work in the insurance industry applying and fulfilling the covenant, insurance is impossible. One cannot act fairly and in good faith without being a person with a well-formed ethical compass.

In Carter v. Boehm S.C. 1 Bl. Burr 1906, 11th May 1766. 593, 3 Lord Mansfield in the British House of Lords stated: “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.” Insurers, when making a decision to insure or not insure a risk, rely on the information provided to them by the insured. As Lord Mansfield instructed, the insured must provide the information requested honestly and in good faith.

The implied covenant explains that no party to a contract of insurance should do anything to deprive the other of the benefits of the contract.

The implied covenant of good faith and fair dealing imposes obligations not only as to claims by a third party but also as to those by the insured. When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort. For the insurer to fulfill its obligation not to impair the right of the insured to receive the benefits of the agreement, it again must give at least as much consideration to the latter=s interests as it does to its own.

Therefore, since, at least 1766, the business of insurance is a business of the utmost good faith, that is, each party to a contract of insurance must deal with each other ethically. The general duty of good faith and fair dealing incorporated by reference into every policy of insurance requires a complete understanding of ethics and ethical behavior.

In every insurance contract there is an implied covenant of good faith and fair dealing that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.

Available as a Paperback   

Available as a Kindle Book.

© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Ethics for the Insurance Professional – Second Edition

A Video Explaining The Need for Ethical Insurance Professionals

The insurance professional must ethically and act without conflicts of interest.

Depending upon the circumstances giving rise to the conflict, safeguards should ordinarily include every level of the officers and employees of the insurance company or insurer.

Most ethics committees and courts hold that the employment relationship of an attorney on salary from an insurer, does not, in and of itself, constitute a violation of the professional duties of attorneys. The Missouri Supreme Court has held that there is no difference between a corporation doing something through an employee and through an independent contractor. An American Bar Association formal opinion states that the

insurance company’s obligation to defend an action brought by a third person against the insured contemplates that the company will take charge of the defense, including the supervision of the litigation.

The Supreme Court of Tennessee reversed an ethics finding in Petition of Youngblood, 895 S.W.2d 322, 63 USLW 2575 (1995) that voided an ethics provision that made it improper for in-house attorney employees of an insurance company to represent individual insureds in legal matters arising under the company’s policy because it constitutes an in-house attorney employee as a separate and independent law firm that constitutes an unethical and deceptive practice.

The essential point of ethics involved is that the lawyer so employed shall represent the insured as his client with undivided fidelity. [ABA Comm. on Professional Ethics and Grievances, Formal Op. 282, p. 623 (1950).] The ethical lawyer, regardless of who pays his fees or salary, limits his duty to the person or persons he or she represents even if that representation causes an expense to the person paying the lawyer.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims

handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-

tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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A Sub-Limit Effectively Limits Insured’s Recovery

A  “Sublimit” Caps the Insurer’s Exposure at an Amount Below the Ordinary Policy Limit

In an insurance coverage dispute, Polynesian Inn, LLC (“Polynesian”), and Andrew Bickford appeal the district court’s grant of summary judgment to StarStone National Insurance Company (“StarStone”) on StarStone’s complaint seeking a declaration that it owed Polynesian no coverage under an excess liability policy because the underlying claim was subject to a “sublimit” of liability in the primary coverage. Appellants maintain that no “sublimit,” properly defined, applies in this case.

In StarStone National Insurance Company v. Polynesian Inn, LLC, d.b.a. Days Inn of Kissimmee, Andrew James Bickford, Jane Doe, as Personal Representative of the Estate of Zackery Ryan Ganoe, No. 19-13769, United States Court Of Appeals For The Eleventh Circuit (June 12, 2020) the Eleventh Circuit was asked to ignore the sub-limit and compel the insurer to pay its full stated limit.

FACTS

In April 2017, a woman wielding a knife attacked Bickford and Zackery Ganoe while they were guests at a hotel operated by Polynesian in Kissimmee, Florida. The woman stabbed Ganoe to death and slashed Bickford’s throat. Bickford survived and then made a claim for damages against Polynesian, which, at the time of the incident, was insured by a primary general-liability policy issued by Northfield Insurance Company (“Northfield”) and an excess-liability policy issued by StarStone.

The primary Northfield policy provided $1 million in liability coverage per occurrence, subject to a $2 million aggregate limit. In its unmodified form, the policy provides coverage for, among other things, sums that Polynesian became liable to pay as damages because of “bodily injury.” However, the Northfield policy includes an endorsement entitled “Limited Assault or Battery Liability Coverage” (the “A&B Endorsement”). In relevant part, the A&B Endorsement:

  1. adds an exclusion to coverage for “bodily injury” arising out of any “assault” or “battery” committed by any person;
  2. creates a separate coverage provision for “bodily injury” caused by “an assault or battery offense”; and
  3. establishes limits of $25,000 for each assault or battery offense, subject to a $50,000 aggregate limit.

There is no dispute that Bickford’s claim is subject to the $25,000 limit.

THE ISSUE

The issue here is whether the StarStone policy provides excess coverage. The StarStone policy, which has a $3,000,000-per-occurrence limit, is a “following form” excess-liability policy, meaning it “follows the definitions, terms, conditions, limitations and exclusions of the Followed Policy”—here, the Northfield policy. StarStone agreed to pay sums in excess of the Northfield policy’s “Total Limits” that the insured becomes legally obligated to pay as damages.

At the same time, the StarStone policy does not provide coverage “with respect to or as a result of any of the following clauses or similar clauses in the Followed Policy: . . . 3. Sublimit of liability, unless coverage for such sublimit is specifically endorsed to this Policy.” Doc. 80-4 at 5 (emphasis added).

When Polynesian submitted Bickford’s claim to StarStone, it denied coverage and then filed this action for a declaratory judgment. StarStone maintained that it owed no coverage for Bickford’s claim because the A&B Endorsement, which applied to the claim, was a “sublimit of liability.” The parties filed competing motions for summary judgment, and the district court granted summary judgment to StarStone.

ANALYSIS

The interpretation of a contract is a question of law subject to de novo review. Contract interpretation is governed by the intent of the parties, which is determined from the plain language of the agreement and the everyday meaning of the words used. Ambiguous provisions are construed against the insurer and in favor of coverage. An insurance policy that is plain and unambiguous must be enforced as written.

StarStone explained that the well-recognized definition of “sublimit” caps the insurer’s exposure at an amount below the ordinary policy limit for a particular type of loss. In support of that argument, StarStone points to the International Risk Management Institute’s (“IRMI”) online glossary of insurance terms, which defines “sublimit” as a limitation in an insurance policy on the amount of coverage available to cover a specific type of loss. A sublimit is part of, rather than in addition to, the limit that would otherwise apply to the loss. In other words, it places a maximum on the amount available to pay that type of loss, rather than providing additional coverage for that type of loss.

The Eleventh Circuit concluded that the district court correctly granted summary judgment to StarStone. The IRMI definition of “sublimit” adopted by the district court is consistent with the ordinary meaning of that term as reflected in legal and non-legal dictionaries. The limit must be part of, rather than in addition to, the limit that would otherwise apply to the loss. Under the ordinary meaning of that term, the A&B Endorsement qualifies as a sublimit because it caps the insurer’s exposure at an amount below the ordinary policy limit for a subcategory of loss. The A&B Endorsement operates to cap Northfield’s liability for that subcategory of loss at $25,000. The A&B Endorsement was designed to cap existing coverage for a particular subcategory of loss, not to create a new category of coverage that did not exist before the A&B Endorsement. The A&B Endorsement is therefore properly viewed as “part of, rather than in addition to, the limit that would otherwise apply to the loss.”

When the Eleventh Circuit and the state of Florida interpret policy language they consider the policy “as a whole” and in view of the the object and purpose of the contract. The purpose and effect of the A&B Endorsement as a whole is to cap existing coverage for bodily injury resulting from assault or battery, not to provide additional coverage for that type of loss.

Therefore, the A&B Endorsement is a “sublimit of liability” or “similar clause[]” under the plain language of the agreements and the everyday meaning of the words used. Therefore, the Eleventh Circuit concluded that the district court’s summary judgment that StarStone owes no coverage to Polynesian in excess of the limits of the Northfield policy with respect to Bickford’s claim was affirmed.

ZALMA OPINION

Insurance policies must always be interpreted as a whole. When an excess policy, following the form of the primary policy, that also clearly and unambiguously states, that it’s limit follows the sublimit the primary policy had for assault and battery. Since that limit was $25,000 and already paid by the primary insurer there was on obligation for the excess insurer to meet.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

 

 

 

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A Video Explaining the Waiver of Subrogation

The Waiver of Subrogation

Subrogation is an equitable remedy where a person who pays the debt of another is entitled to assume the rights of the person whose debt he or she paid. In insurance, when an insurer pays a claim, it assumes all of the rights of the person insured, to sue and recover the amounts paid from any third party who was responsible for the loss.

See the full video at  https://youtu.be/jq5R0orR7YU

Equity allows creative remedies for wrongs that do not fit within the confines of traditional tort or contract remedies (i.e., with cash). The maxim: “for every wrong there is a remedy” [California Civil Code Section 3523] applies to subrogation rights. It does not apply, however, if the person insured, with the permission of the insurer, waives the right to subrogation.

The maxim was adopted from the common law of England and is relied on in all jurisdictions. Even if the remedy is not readily ascertainable, a loss caused by some wrong requires a remedy to exist that will result in a recovery for the insurer. The remedy can be as simple as an order requiring the third party to turn over property, rather than cash, which can later be sold. It can be as complex as an order appointing a receiver to control and distribute the income from a property.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims

handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-

tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Guilty of Arson for Profit Fraud Deserves Long Sentence

If You know you are Guilty it is Often Unwise to Refuse a Plea Deal

Greg Lester (“Appellant”) was charged with 12 counts of conspiracy, arson, mail fraud, and money laundering offenses arising from an overarching scheme to commit insurance fraud. Following a jury trial, Appellant was convicted of one count of arson conspiracy, one count of money laundering conspiracy, one count of money laundering to conceal, and one count of unlawful monetary transaction. As a result, Appellant was sentenced to 60 months of imprisonment with the trial judge recognizing that arson is one of the worst insurance crimes because people – firefighters or innocents – are injured or killed.

In United States Of America v. Greg A. Lester, a/k/a Gregory A. Lester, No. 19-4032, United States Court Of Appeals For The Fourth Circuit (June 3, 2020) the Fourth Circuit was asked to remove a conviction or, if not, to reduce the sentence rendered by the District Court.

INDICTMENT

A grand jury indicted Appellant and his three co-defendants – his father, Windel Lester (“Windel”); his father’s then-wife, Georgetta Lester (“Georgetta”); and his brother, James Lester (“James”) (collectively, “the Lesters”) – in a 28-count indictment charging a scheme to commit insurance fraud in connection with multiple fires in West Virginia. Before trial there were three indictments referred to as the (“Superseding Indictment”.

The Superseding Indictments alleged the Lesters conspired with Browning, Dudley Bledsoe, and Ricky Gleason (collectively “Defendants”) to execute a scheme whereby they set fire to properties and then submitted fraudulent insurance claims on the properties. As a result of the scheme, Defendants allegedly defrauded insurance companies out of approximately $789,000.

The Defendants used Lester Home Center (the “Center”), located in Ikes Fork, West Virginia, as the base for their conspiratorial operations. There, they obtained accelerant to set the fires, used the Center’s fax machine to submit fraudulent insurance claims, and cashed some of the insurance checks. Specifically, for their fraudulent insurance claims, they also created fraudulent receipts to make it appear as though they had purchased furniture from the Center which was lost in the property fires.

COOPERATION AGREEMENT

Ultimately,the co-conspirators made a deal with the government and testified against Lester. He was offered a deal but refused.

TRIAL

Over the span of an eight day trial, the Government called 20 witnesses. Four witnesses in particular – Bledsoe, Gleason, Laron Safford, and William Toler – testified as to Appellant’s knowledge of and participation in the scheme.

VERDICT

After the close of the evidence, Appellant moved for judgment of acquittal on all counts against him, challenging the sufficiency of the evidence.

At the conclusion of the trial, the jury convicted Appellant of four of the 11 counts remaining against him as follows: arson conspiracy (Count Two); money laundering conspiracy (Count Three); money laundering to conceal (Count Twenty-Nine); and unlawful monetary transaction (Count Thirty-One).

Appellant expressed his desire to return home to support his wife and two daughters, who depended on him. The district court responded, “Well, you should have thought of them before you burned down somebody’s house, Mr. Lester. That’s all I have to say about that.”

Ultimately, the district court sentenced Appellant to a within Guidelines sentence of 60 months of imprisonment on each count, to run concurrently.

ARSON CONSPIRACY

To sustain a conviction of conspiracy to commit arson, the Government must prove that the defendant conspired to “use[] fire . . . to commit any felony which may be prosecuted in a court of the United States.” 18 U.S.C. § 844(h)(1). Based on the evidence adduced at trial, the court was satisfied that there was substantial evidence to support the jury verdict of arson conspiracy against Appellant.

SENTENCING

A sentence is procedurally reasonable if it is free of any significant procedural error. The appellate court assesses substantive reasonableness by taking into account the totality of the circumstances, including the extent of any variance from the Guidelines range.

Pursuant to the Guidelines, the base offense level is decreased by two levels when the defendant served as a minor participant in the criminal activity, or by four levels when the defendant served as a minimal participant in the criminal activity. The minimal participant adjustment is intended to cover defendants who are plainly among the least culpable of those involved in the conduct of the group.

However, the district court did not abuse its discretion in applying the two-level reduction as opposed to a four-level reduction as urged by Appellant. The district court explained that Appellant helped stage the Huntington property, set it up to be burned and knew the fire was going to occur.  Accordingly, the district court determined that “[Appellant] was deeply involved with knowledge of the whole scheme. The Fourth Circuit, consequently, concluded that the district court did not abuse its discretion in concluding that Appellant played a minor role and that the district court properly avoided unwarranted sentencing disparities among Appellant and his co-conspirators. Appellant declined the Government’s offer and chose to go to trial because he did not like what the Government had to offer him.

Based on the record as a whole, the Fourth Circuit found the District Court readily concluded that Appellant’s sentence of 60 months of imprisonment is well reasoned and substantively reasonable.

ZALMA OPINION

Lester helped stage an arson for profit fire, set it up to be burned, and knew the fire was going to occur. As such he was deeply involved in the crime and was appropriately convicted by a jury of his peers. He deserved the sentence he received and, with 20/20 hindsight now regrets not taking the deal he was offered by the prosecutors. Perhaps others, knowing their guilt, will take an offered plea deal.


© 2020 – Barry Zalma

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

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

 

 

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A Video About The Unethical Lawyer as a Criminal

Gottlieb v. Superior Court

283 Cal.Rptr. 771, 232 Cal.App.3d 804 (Cal. App., 1991)

A Supplement to Zalma’s Insurance Fraud Letter

I knew Kenneth Gottlieb when I was a young adjuster and as a defense lawyer as a person who was suspected of acting as a serious fraud perpetrator. After many years defrauding insurers Gottlieb was eventually arrested.

Gotlieb, as the Court of Appeal noted, delayed trial after his arrest for multiple years. The prosecution and the court finally insisted he submit to trial. He then caused his lawyers to file a petition for a mandate stopping the trial. It was not successful and Gottlieb refiled his mandate petition. Gottlieb, a felony defendant asked the Court of Appeal to reconsider his challenge to the denial of his speedy trial motion.

Because the court viewed Gottlieb’s first petition to be totally without merit, and viewed the refiling of the petition with one additional exhibit to be unwarranted, it issued an order directing defendant’s appellate counsel, Trope and Trope, to show cause why monetary sanctions should not be imposed against it.

The premise of defendant’s claim of denial of a speedy trial is that a delay of 10 years from his indictment to commencement of trial (together with the attendant stigma and stress of long-pending charges) constitutes a denial of his speedy trial rights even though he caused or consented to all delay and never asserted objection to delay prior to filing his motion to dismiss.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims

handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-

tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Zalma’s Insurance Fraud Letter – June 15, 2020

ZALMA’S INSURANCE FRAUD LETTER

Volume 24, Issue 12 – June 15, 2020; Subscribe to e-mail Version of ZIFL, it’s Free!  Read last two issues of ZIFL here. Go to the Barry Zalma, Inc. web site hereVideos from “Zalma on Insurance” on You  Tube

False Statement on Life Insurance Application Voids Coverage

Lie on Application Causes Beneficiary One Million

In Erin Peterson v. USAA Life Insurance Company, No. 18-1447, United States Court of Appeals Tenth Circuit (May 22, 2020) Ms. Peterson appealed from the district court’s grant of summary judgment to USAA Life Insurance Company (“USAA”). The d

istrict court granted USAA’s motion for summary judgment on the ground that Ms. Peterson’s late husband had knowingly misrepresented material facts in his application for term life insurance.

FACTS

Theodore Bobkowski applied for a $1 million, twenty-year term life insurance policy from USAA. The application required him to answer questions about his medical history. Question 5(b) asked, “Has [the] Insured ever consulted with a health care provider for: . . . asthma, emphysema, pneumonia or other respiratory system disorder?” Question 12 asked, “Has [the] Insured consulted a health care provider for any reason not previously disclosed?” Mr. Bobkowski answered both questions in the negative, and he certified that his answers were “true and complete and correctly recorded.”

USAA approved the application and provided Mr. Bobkowski with a policy in its favored “Preferred Ultra Premium” risk class that listed Mr. Bobkowski’s wife, Ms. Peterson, as the beneficiary.  Less than two years later, Mr. Bobkowski died tragically.

USAA denied Ms. Peterson’s claim on the ground that Mr. Bobkowski had

misrepresented material aspects of his medical history in the application. According to USAA’s underwriting guidelines, an applicant disclosing medical conditions like Mr. Bobkowski’s would not have qualified for the policy at issue, nor for any other policy within USAA’s Preferred Ultra Premium risk class.

The district court granted USAA’s motion, holding that Mr. Bobkowski had “knowingly concealed facts about his OSA diagnosis in his life insurance application.”

The Florida Bar vs. Scot Strems

Lawyers, by definition, and their licensure, are required to act ethically to their clients, adverse parties and counsel, and to the courts where they practice. Some, however, act contumaciously, disrespect the court, disrespect their opposing counsel, disrespect the insurers who they sued, and disrespected their clients. As a result, they breach the duty to act fairly and in good faith.

Department of Insurance Detective Honored by U.S. Attorney Southern District of California for “Excellence in the Pursuit of Justice

CDI Detective Receives Award for Investigation of The Year with FBI And San Diego County District Attorney’s Office

California Department of Insurance Detective Israel Garcia was honored by U.S. Attorney Robert Brewer in the third annual “Excellence in the Pursuit of Justice” awards. Detective Garcia received an award for “Investigation of the Year” for his work on a joint operation with the FBI and the San Diego County District Attorney’s Office, who also received awards.

“Detective Garcia’s collaboration with other agencies on this case is a testament to our department’s determination and commitment to fighting fraud and protecting consumers,” said Insurance Commissioner Ricardo Lara. “The Department of Insurance is honored to have one of our detectives receive this great award from the U.S. Attorney and is extremely proud to have Detective Garcia as an integral part of our law enforcement team.”

California Department Issues Cease and Desist Order Against Unlicensed Van Rental Company and Its Owners

Encino Couple Ordered to Stop Selling Insurance Products Since They and Their Company Are Unlicensed

The California Department of Insurance issued a Cease and Desist Order against unlicensed van rental company, Airport Van Rental, Inc. and its owners, Yazdan Irani, 57, of Encino, and his wife, Kimberly, 61, for operating a rental agency without a license and selling insurance-related products to the public.

Health Insurance Fraud Convictions

Portland Home Healthcare Company and Owner Settle False Claims Act Allegations

Noble Home Health Care, Inc. (“Noble”) and its owner Mohamed A. Hassan (“Hassan”) submitted false claims to MaineCare (Maine’s Medicaid program) from May 2016 through September 2016. MaineCare is primarily funded by the United States, which pays approximately two-thirds of all reimbursed claims.

The Portland home healthcare company and its owner have agreed to pay $

111,200.46 to settle allegations that they violated the False Claims Act.

Other Insurance Fraud Convictions

‘Crash and Buy’ Insurance Fraud

Brittany N. Mars, an Ada County, Idaho, woman who fudged the time of accident in documents to her auto insurer, was sentenced in the first week of June 2020 for insurance fraud.

Mars in February pleaded guilty to insurance fraud.

Mars was involved in an auto accident in 2017. An ensuing investigation by the Department of Insurance reportedly showed Mars did not have auto insurance at the time of the accident, but instead purchased a policy shortly after the accident and provided a false accident time to her auto insurer in hopes the damage to the vehicle would be covered.

Consider Books to Show Your Appreciation to Your Insurer Clients or Claims Employees

Go to the Insurance Claims Library

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrat

or or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

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

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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