Zalma on Insurance Claims

Materials Needed by Every Insurance Claims Professional

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.”

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

Zalma on Insurance Claims Volume 101

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

This series of ten 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.

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

  • Property insurance claims;
  • Third-party liability claims;
  • Casualty claims; and
  • Insurance Fraud

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. As you read through the various volumes of Zalma on Insurance Claims, you will find comprehensive—yet comprehensible—coverage of key topics, including:

  • What is Insurance?
  • The History of Insurance
  • The covenant of good faith and fair dealing.
  • The tort of Bad faith
  • Conditions,
  • Warranties,
  • Exclusions
  • Declaring a policy void
  • Duties of insured and insurer
  • Evaluation and settlement
  • Identifying insurance fraud
  • Investigation
  • Kinds of insurance policies
  • Other insurance clauses
  • Preparing a case for trial
  • Processing a claim
  • Responses to fraud
  • Subrogation and salvage
  • Underwriting and
  • Many more property and casualty insurance matters.

Zalma on Insurance Claims Part 102

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

  • Other Insurance Clauses
  • Underwriting
  • Conditions, Warranties and Exclusions

Zalma on Insurance Claims Part 103

This is part 103 of Zalma on Insurance Claims and will deal with:

1.Duties of the Insured and the Insurer
2.Declaring a Policy Void
3.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.

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.

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.

Zalma on Insurance Claims Part 106

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

Chapter 1 Property Insurance & the Tort of Bad Faith
Chapter 2 Grounds for Finding Bad Faith
Chapter 3 Avoiding Charges of Bad Faith
Chapter 4. Punitive Damages
Chapter 5.Bad Faith & Liability Insurance
Chapter 6.Defenses to the Tort of Bad Faith
Appendix 1 – California Civil Code Section 3294

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

Zalma on Insurance Claims Part 107:

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.

Zalma on Insurance Claims Part 108

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.

Zalma on Insurance Claims Part 109 

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.

Zalma on Insurance Claims Part 110

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.

Read about these and other insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Private Limitations of Action Provision Enforced

Ninth Circuit Affirms Summary Judgment Because Suit Was Filed Too Late

Every first party property insurance policy contain a special provision that limits the time available for an insured to sue the insurer in the event a claim is rejected. The private limitations provision is usually less than the state’s statute of limitations and protects the insurer from stale claims.

In Maxwell B. Williams and Claire N. Williams v. Travelers Home and Marine Insurance Company and Travelers Indemnity Company, No. 17-17368, United States Court Of Appeals For The Ninth Circuit (October 17, 2018) the Ninth Circuit was asked to ignore a private limitation of action provision.

FACTS

Maxwell and Claire Williams brought a diversity insurance coverage action seeking coverage under their homeowners’ policy after suffering a water loss at their residence in Las Vegas, Nevada. The Williamses appeal the district court’s grant of summary judgment in favor of Travelers Home and Marine Insurance Company (“Travelers”).

In Nevada, a claim for bad faith must be filed within four years of the triggering event. A claim based on violation of statute must be filed within three years of the triggering event. Under Nevada law, an insured’s limitations period does not begin to run until the insurer “formally denies” liability or additional benefits. No magic words are necessary to constitute a denial of further benefits; rather the limitations period is triggered by notification that the carrier has failed to fulfill its promise to pay a claim.

Here, the limitations period was triggered by Travelers’ October 5, 2011 letter, which stated that Travelers was closing the claim file because the Williamses had failed to cooperate with Travelers’ previous two requests for inspection of the property and additional information in support of the claim. The letter notified the Williamses that Travelers was “closing [its] file,” and referred the Williamses to their insurance policy’s “Suit Against Us” provision, which set forth a two-year limitation period for breach of the policy. The letter put the Williamses on notice that Travelers would not make further payments on the claim.

The only evidence the Williamses offered of any post-closure activity is Travelers’ July 7, 2012 letter, which advised the Williamses that Travelers did not have a record of the check it issued to them on May 26, 2011 being cashed. The letter did not indicate that any further consideration had been or would be given to the Williamses’ claim or that Travelers contemplated further payment.

The Williamses filed suit on June 17, 2016—well over four years after the limitations period was triggered by the October 5, 2011 letter.

DECISION

The Williamses’ claims for bad faith and violations of statute were barred by the applicable statutes of limitation.

Nevada has a six-year limitation period for general breach of contract actions. However, the Policy contains a two-year suit limitation provision. Suit limitation provisions are enforceable in Nevada so long as the period provided in the contract is a reasonable balance between the insurer’s interest in prompt commencement of action and the insured’s need for adequate time to bring suit.

As noted above, the Williamses filed suit on June 17, 2016—over four and a half years after the limitations period was triggered by the October 5, 2011 letter. The Williamses’ breach of contract claim was barred by the two-year suit limitation provision.

ZALMA OPINION

The Ninth Circuit found the decision, as it should, a simple decision based on arithmetic. The suit was filed  more than four years after the denial. The language of the policy was clear and easy to understand. The failure to file suit within four years of the denial was slothful and gave the court no basis to give the insureds’ the opportunity to sue their insurer.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

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Insurance Claims Law

Insurance Claims Law

Available now from Barry Zalma, ClaimSchool, and Amazon.com are books and materials essential to the claims professional. COIL provides regular commentary on insurance law to allow the claims professional to remain current on what the courts are doing with regard to insurance law. The ten volume “Zalma on Insurance Claims” provides the claims professional with everything needed to professionally investigate and adjust property and casualty claims.

COIL Commentary on Insurance Law

Volume 1, Number One

A Journal providing information about insurance, insurance claims handling and insurance law as it changes with new decisions.

A Journal providing information about insurance, insurance claims handling and insurance law as it changes with new decisions from the state and federal appellate courts.Future issues will be issued regularly providing information on new and interesting insurance appellate decisions.  Articles included:

  • What is Insurance?
  • Claims in a Catastrophe
  • Misrepresentation or Concealment of a Material Fact
  • Only in California “Once” is with “Such Frequency as to Indicate a General Business Practice”

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.”

Zalma on Insurance Claims Volume 101

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

This series of ten 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.

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

  • Property insurance claims;
  • Third-party liability claims;
  • Casualty claims; and
  • Insurance Fraud

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. As you read through the various volumes of Zalma on Insurance Claims, you will find comprehensive—yet comprehensible—coverage of key topics, including:

  • What is Insurance?
  • The History of Insurance
  • The covenant of good faith and fair dealing.
  • The tort of Bad faith
  • Conditions,
  • Warranties,
  • Exclusions
  • Declaring a policy void
  • Duties of insured and insurer
  • Evaluation and settlement
  • Identifying insurance fraud
  • Investigation
  • Kinds of insurance policies
  • Other insurance clauses
  • Preparing a case for trial
  • Processing a claim
  • Responses to fraud
  • Subrogation and salvage
  • Underwriting and
  • Many more property and casualty insurance matters.

Zalma on Insurance Claims Part 102

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

  • Other Insurance Clauses
  • Underwriting
  • Conditions, Warranties and Exclusions

Zalma on Insurance Claims Part 103

This is part 103 of Zalma on Insurance Claims and will deal with:

1.Duties of the Insured and the Insurer
2.Declaring a Policy Void
3.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.

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.

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.

Zalma on Insurance Claims Part 106

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

Chapter 1 Property Insurance & the Tort of Bad Faith
Chapter 2 Grounds for Finding Bad Faith
Chapter 3 Avoiding Charges of Bad Faith
Chapter 4. Punitive Damages
Chapter 5.Bad Faith & Liability Insurance
Chapter 6.Defenses to the Tort of Bad Faith
Appendix 1 – California Civil Code Section 3294

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

Zalma on Insurance Claims Part 107:

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.

Zalma on Insurance Claims Part 108

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.

Zalma on Insurance Claims Part 109 

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.

Zalma on Insurance Claims Part 110

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.

Read about these and other insurance books and materials by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Agent Who Kept Premium owed to Zurich Loses at Ninth Circuit

Agent Defrauds Insurer by Not Remitting Premium Collected

Insurance agents, by contract with insurers they represent, must place all premium collected on behalf of the insurer and place the funds in a separate trust account. Depending on the terms of the contract the agent then deducts the agreed commission and remits the remainder to the insurer. Failure to remit the premium, less the commission, is a theft or conversion of funds to which the agent had no entitlement.

In Zurich American Insurance Company v. Sealink Insurance Service Corp. And Yan Sara Zhang, and Phann Gelinda Keo, et al., No. 17-55776, United States Court of Appeals for the Ninth Circuit (October 15, 2018) Defendants Yan Sara Zhang and Sealink Insurance Service Corporation appealed from the district court’s denial of their motion to set aside the entry of default and default judgment against them.

In evaluating such a motion, an appellate court must consider three factors:

1. whether the party seeking to set aside the default engaged in culpable conduct that led to the default;
2. whether it had no meritorious defense; or
3. whether reopening the default judgment would prejudice the other party.

A finding that any one of these factors is true is sufficient reason for the district court to refuse to set aside the default.

The Ninth Circuit did not reach the issue of defendants’ culpable conduct because defendants’ lack of a meritorious defense was sufficient to justify the district court’s refusal to set aside the default and default judgment. Defendants have no meritorious defense to Zurich American Insurance Company’s breach of contract claim.

The defendants point to the lack of a written agreement and argue that the contract at issue does not exist. However, they do not dispute that Sealink sold insurance policies issued by Zurich in exchange for Sealink’s remittance of premiums, and there is ample evidence of an agreement governing that arrangement. Defendants offer no facts to dispute the existence of an agreement, and general objections to the existence of a contract are insufficient to satisfy the meritorious defense requirement.

Defendants also lack a meritorious defense to Zurich’s breach of fiduciary duty claim.

Defendants do not dispute that Sealink failed to maintain the premiums it owed Zurich in a segregated trust account as required by California Insurance Code sections 1733 and 1734. Defendants’ argument that those provisions do not provide Zurich with a cause of action is mistaken. The Ninth Circuit concluded that a civil action will lie for damages proximately resulting from a licensee’s breach of the fiduciary obligations imposed by sections 1733 and 1734.

Finally, defendants fail to assert a meritorious defense to the size of the default judgment award. The district court determined that the declaration of Zurich’s legal collection specialist and the billing statement generated by Zurich constituted proof sufficient to support Zurich’s requested damages. Defendants’ challenge to the sufficiency and reliability of that evidence does not amount to a meritorious defense.A mere general denial regarding the extent of the deficiency owed is not enough to justify vacating a default or default judgment.

Defendants fail to offer specific facts disputing the damages amount despite being in the best position to have the accurate records required to refute Zurich’s evidence. Defendants’ assertion that they lack records substantiating the claimed amount does not amount to an allegation of “sufficient facts that, if true, would constitute a defense.

The district court did not err in failing to set aside the default judgment pursuant to Federal Rules of Civil Procedure that provides for relief when a judgment is void. In contrast to the other grounds for relief a default judgment may be vacated on this ground even if the defendant lacks a meritorious defense.

The defendants argued that the judgment is void due to inadequate service of process. But Zurich’s service of process satisfied the statutory requirements. Zurich’s substituted service of the summons and complaint on Zhang was proper. Zurich’s service of the summons and complaint on Sealink complied with Federal Rules of Civil Procedure.

Finally, Zurich served both Zhang and Sealink with its motion to enter default judgment in accordance with the Central District of California’s Local Rules.

ZALMA OPINION

This case establishes that insurance fraud is not limited to people who are insured defrauding an insurer. In this case the insurer trusted the agents and allowed them to bind insurance with Zurich in exchange for a promise to remit premiums. Zurich was the victim of fraud by the agent and, rather than attempt a criminal prosecution for conversion, sued the agent and obtained a judgment which was upheld by the Ninth Circuit Court of Appeal. Zurich should execute on the judgment and obtain the full amount of the judgment. If not, it should seek prosecution of those who unlawfully converted Zurich’s funds to their own use. Hopefully this case will teach Zurich and other insurers to trust but verify the honesty of their agents.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

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Important Insurance Books from Barry Zalma

New Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of insurance law treatises from consultant, expert witness, arbitrator, and mediator Barry Zalma.

Barry Zalma practiced law in California for more than 44 years as an insurCal Lawance coverage and claims-handling lawyer, and has spent more than 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

 

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner.

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

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.


Books from ClaimSchool, Inc.

“Insurance Law”

Insurance Law is the most comprehensive, and yet practical, Product Detailsinsurance law authority available today. Written by nationally-renowned insurance coverage expert Barry Zalma, an insurance coverage attorney, consultant, expert witness and blogger, Insurance Law introduces the new insurance professional to the fundamental principles of insurance and provides the experienced litigator analyses of today’s leading insurance law decisions nationwide.

Insurance Law is the most comprehensive, and yet practical, insurance law authority available today.

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

In addition to case law, the author has provided countless citations to relevant statutory, regulatory, and judicial sources which are guaranteed to kickstart your research.

Price Reduced from $196- Send Check for $75.00 to ClaimSchool, Inc., 4441 Sepulveda Blvd., Culver City, Ca 90230 and the book will be mailed to you.

Mold Claims Coverage Guide

Today, mold claims are common, but they continue to grow in complexity, involving not only property damage but bodily injury as well. Mold-related lawsuits have dramatically increased over the past few years, and tProduct Detailshe numbers continue to rise. Coverage requirements—and related issues—can be complicated and confusing.  This resource will remove the complexity and allow the insurer, insured, property owner or developer and their counsel to deal with mold quickly and effectively and, if possible, avoid unnecessary litigation.

Price Reduced – Send Check for $50.00 to ClaimSchool, Inc., 4441 Sepulveda Blvd., Culver City, Ca 90230 and the book will be mailed to you.

Construction Defects Coverage Guide

This insightful and practical two volume resource was envisioned anProduct Detailsd written by nationally renowned expert Barry Zalma, and it thoroughly explains how to identify construction defects and how to insure, investigate, prosecute, and defend cases that result from construction defect claims.

Construction Defects Coverage Guide was designed to help property owners, developers, builders, contractors, subcontractors, insurers, and lenders, as well as their risk managers and lawyers rapidly resolve construction defect claims when they arise and avoid construction litigation.  If litigation becomes necessary it will help the prosecution or defense of construction defect suits effectively.

Price Reduced from $196 – Send Check for $75.00 to ClaimSchool, Inc., 4441 Sepulveda Blvd., Culver City, Ca 90230 and the book will be mailed to you.

Insurance Claims: A Comprehensive Guide

Insurance contracts and clauses are specific in nature—but the manner in which insurance claims are pursued and resolved can be remarkably different.  Mistakes in handling a claim can undermine the outcome—and ultimate value—of the claim itself.

Insurance Claims: A Product DetailsComprehensive Guide is the one resource that enables insurance professionals, producers, underwriters, attorneys, risk managers, and business owners to successfully handle insurance claims from start to finish—employing proven, practical techniques and best practices every step of the way.

Price Reduced from $196 – Send Check for $75.00 to ClaimSchool, Inc., 4441 Sepulveda Blvd., Culver City, Ca 90230 and the book will be mailed to you.


Books from the American Bar Association

The Insurance Fraud Deskbook

Author: Barry Zalma

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

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

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

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

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

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

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

Diminution in Value Damages: How to Determine the Proper Measure of Damage to Real and Personal Property

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

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

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

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


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

Property Investigation Checklists: Uncovering Insurance Fraud provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims:
• Recognizing suspicious claims
• Proper investigation procedures
• Analysis of laws concerning fraudulent personal and real property claims
• Evaluating and settling claims.
The book also examines recent developments in areas such as arson investigation procedures, bad faith, and extracontractual damages. The appendix includes the NAIC Insurance Information and Privacy Protection Model Act.
Read about these and other insurance related books from Barry Zalma at http://zalma.com/blog/insurance-claims-library/
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No “Occurrence” in Ohio for Contractor’s or Sub-Contractor’s Defective Work

An “Occurrence” Must Be Fortuitous

Ohio, bucking the majority of court opinions, has interpreted the standard Commercial General Liability (CGL) policy to require for coverage to exist that a loss is fortuitous. An “occurrence” to Ohio courts require that the damage is accidental, fortuitous, and not a normal business risk of a person in the construction business. Policies are interpreted by Ohio to not insure an insured’s work itself; rather, the policies generally insure consequential risks that stem from the insured’s work.

CGL policies are not intended to protect owners from ordinary “business risks” that are normal, frequent or predictable consequences of doing business that the insured can manage.

In Ohio Northern University v. Charles Construction Services, Inc., Et Al.; Cincinnati Insurance Company, No. 2017-0514, 2018 OHIO 4057, Supreme Court Of Ohio, (October 9, 2018) the Ohio Supreme Court followed its 2012 decision that held that an insurance claim filed by a contractor under its commercial general liability (“CGL”) insurance policy for property damage caused by the contractor’s own faulty workmanship does not involve an “occurrence” such that the CGL policy would cover the loss. [Westfield Ins. Co. v. Custom Agri Sys., Inc., 133 Ohio St.3d 476, 2012-Ohio-4712, 979 N.E.2d 269, syllabus.]

That decision turned on the CGL policy’s definition of “occurrence” as an ” ‘accident, including continuous or repeated exposure to substantially the same general harmful conditions.’ ” quoting the policy. Because the CGL policy did not define “accident,” the Supreme Court looked to the word’s common meaning and concluded that an “accident” involves “fortuity. As a result the Supreme Court held that under the language of the CGL policy, property damage caused by a contractor’s own faulty work is not accidental and is therefore not covered.

Here, the question is whether the general contractor’s CGL policy covers claims for property damage caused by a subcontractor’s faulty work.

FACTS

In 2008 Ohio Northern University (“ONU”) contracted with Charles Construction Services, Inc., to build The University Inn and Conference Center, a new luxury hotel and conference center on ONU’s campus.

Charles Construction promised to perform all the work itself or through subcontractors. The contract required Charles Construction to maintain a CGL policy.

Charles Construction obtained from appellant, Cincinnati Insurance Company (“CIC”), a CGL policy. The general liability maximum payout under the CGL policy was $2 million.

The project’s estimated cost was $8 million. In September 2011, after work was completed, ONU discovered that the inn had suffered extensive water damage from hidden leaks that it believed were caused by the defective work of Charles Construction and its subcontractors. In the course of repairing the water damage, ONU discovered other serious structural defects. ONU estimated its repair costs at approximately $6 million.

ONU sued Charles Construction for breach of contract and other claims related to the inn’s damage. Charles Construction answered and filed third-party complaints against several of its subcontractors. Charles Construction submitted to CIC a CGL-policy claim and asked CIC to defend it in court and indemnify it against any damages. CIC intervened in order to pursue a declaratory judgment against Charles Construction and to submit jury interrogatories related to insurance coverage. CIC explained that it would defend Charles Construction while reserving its right to argue that the CGL policy did not cover ONU’s claim.

After CIC intervened, it sought a declaratory judgment that it did not have to defend or indemnify Charles Construction under the CGL policy. In January 2015, CIC filed a motion for summary judgment relying on Custom Agri, which it characterized as holding that “claims for defective workmanship are not claims for ‘property damage’ caused by an ‘occurrence.’ ” The trial court issued judgments in favor of CIC, reasoning that this court’s decision in Custom Agri “constrained” it and that consequently, CIC could deny Charles Construction’s claim and had no duty to defend Charles Construction.

Charles Construction and ONU appealed to the Third District Court of Appeals. The Third District read Custom Agri narrowly and noted that it did not address any subcontractor-specific CGL-policy terms. It found the CGL policy language to be ambiguous as to whether it covers claims for property damage caused by subcontractors’ defective work, and because ambiguous language is construed against the insurer, it reversed the judgment of the trial court.

ANALYSIS

Custom Agri

The Supreme Court noted that the general principle underlying CGL policies is that they are not intended to protect business owners from ordinary business risks. Courts generally conclude that the policies are intended to insure the risks of an insured causing damage to other persons and their property, but that the policies are not intended to insure the risks of an insured causing damage to the insured’s own work.

The CGL policy is not intended to insure business risks that are the normal, frequent, or predictable consequences of doing business and which businesses can control and manage. A CGL policy does not insure the insured’s work itself; rather, it insures consequential damages that stem from that work. As a result, a CGL policy may provide coverage for claims arising out of tort, breaches of contract, and statutory liabilities as long as the requisite accidental occurrence and property damage are present.

Faulty workmanship claims generally are not covered, except for their consequential damages, because they are not fortuitous. In short, contractors’ “business risks” are not covered by insurance, but derivative damages are. The key issues are whether the contractor controlled the process leading to the damages and whether the damages were anticipated.

The Supreme Court in Custom Agri concluded that “claims for faulty workmanship, such as the one in the present case, are not fortuitous in the context of a CGL policy like the one here.” Therefore, they are not claims for ‘property damage’ caused by an ‘occurrence’ under a CGL policy such as the one in the present case.

The CGL policy

As in Custom Agri, the decision depends on the specific terms of the CGL policy, including the PCOH and subcontractor-specific language.

By its terms, the CGL policy emphasizes that only “an occurrence” can trigger coverage for property damage. But the damage must be due to an “occurrence,” which is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” There is no question that the damage to the inn was “property damage” that was discovered after work was completed. But without an “occurrence” as defined in the CGL policy, there is no coverage for any property damage.

Under the CGL policy’s plain language, property damage caused by a subcontractor’s faulty work does not meet the definition of an “occurrence” because faulty work is not fortuitous

The Ohio Supreme Court made a determination that the claims “are not claims for ‘property damage’ caused by an ‘occurrence’ under a [CGL] policy” because faulty work is not fortuitous in Custom Agri. Here, the Supreme Court similarly held that a subcontractor’s faulty work does not meet the definition of an “occurrence” because it is not based in fortuity.

There is no question that the water-related damage to the inn was “property damage” and was discovered after work had been completed. But unless there was an “occurrence,” the subcontractor language has no effect.

The Supreme Court concluded that the subcontractors’ faulty work was not fortuitous. It acknowledged that its reasoning in this case contrasts with recent decisions of other courts. The language requiring that “property damage” be caused by an “occurrence” remains a constant in the policies. And under Ohio precedent, faulty workmanship is not an occurrence as defined in CGL polices like the one before it.

Regardless of any trend in the law, the Ohio Supreme Court concluded it must look to the plain and ordinary meaning of the language used in the CGL policy before it. When the language of a written contract is clear, the Supreme Court may look no further than the writing itself to find the intent of the parties.

Property damage caused by a subcontractor’s faulty work is not fortuitous and does meet the definition of an “occurrence” under a CGL policy. CIC was not required to defend Charles Construction against ONU’s lawsuit or indemnify Charles Construction against any damages.

The Supreme Court concluded that property damage caused by a subcontractor’s faulty work is not an “occurrence” under a CGL policy because it cannot be deemed fortuitous.

ZALMA OPINION

Ohio courts do not feel a need to follow what they believe to be the errors of their brother courts in other states. They read the insurance contracts in light of their interpretation of the law regardless of the fact that they are in the minority. The Supreme Court noted, however, that the Supreme Court of Arkansas reached the same conclusion only to have its legislature pass a statute that states that a CGL policy offered for sale in Arkansas shall define “occurrence” to include “[p]roperty damage * * * resulting from faulty workmanship.” The Ohio Supreme Court made clear that if it were so inclined the Ohio General Assembly could take similar action in response to its opinion.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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Fictionalized True Insurance Crime Books

Fictionalized True Insurance Crime Books

The following true crime books resulted from my 51 years as an insurance claims professional and insurance coverage attorney. The names and places have been changed to protect the guilty.

“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 Money

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

Product DetailsAvailable 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 Profit: How an Attempt to use Arson & Fraud to Fund Terrorism Failed”

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

Available as paperback.

Available as a Kindle Book.

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

 

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

Available as a paperback.

Available as a Kindle book.

Read about these and other insurance books by Barry Zalma at http://zalma.com/zalma-on-insurance-claims/

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Coverage Cannot Be Created by Estoppel

Endorsement Changes Basic Policy Wording

Insurance policies are contracts that bind the parties to the agreements stated in the policy wording. Basic insurance contracts start with a standard form providing the coverages sought that can then be modified or limited by endorsements attached to the policy so that the insurer can limit coverage to those it is willing to take. Courts must interpret the contract of insurance by reading the entire contract before applying its terms and conditions to the facts of a law suit.

In Gotham Insurance Company v. West Coast Fire Protection Corp., Giovanni Blanco, Maria Foreste, Raymond Foreste, each individually, and as parents and natural guardians of E.F., No. 17-14092, United States Court Of Appeals For The Eleventh Circuit (October 10, 2018) the Eleventh Circuit was asked to expand the coverages provided by an umbrella liability policy. The District Court found no coverage and West Coast Fire Protection Corp., Giovanni Blanco, Maria Foreste, and Raymond Foreste appealed the district court’s order granting summary judgment in favor of Gotham Insurance Company.regarding the scope of coverage under West Coast’s umbrella insurance policy.

FACTUAL BACKGROUND

A vehicle Blanco was driving struck the Forestes’ child, causing her serious and permanent injuries. At the time of the accident, Blanco was working for West Coast and driving a vehicle owned by the company. West Coast had an automobile insurance policy with Allstate, as well as commercial general liability and umbrella policies with Gotham.

After the accident, the Forestes sued West Coast and Blanco in state court. Allstate defended. Gotham confirmed to Allstate that Gotham had “excess coverage of $2,000,000 for this loss” under the umbrella policy. In a separate letter Gotham told the Forestes’ counsel that it was West Coast’s excess coverage provider.

The Forestes then made a time-limited settlement demand, seeking the combined policy limits of West Coast’s automobile policy with Allstate ($1 million) and its umbrella policy with Gotham ($2 million). A few days before the expiration of the settlement demand, Gotham informed West Coast that under the terms of the umbrella policy there was no coverage for the Forestes’ claim.

Gotham then filed this declaratory judgment action in federal district court against West Coast, Blanco, and the Forestes seeking a declaration that there was no coverage under the umbrella policy.

THE UMBRELLA POLICY’S TERMS

The record includes a certified copy of the policy, which consists of a declarations page, a coverage form, and various endorsements.

The umbrella policy’s declarations page identifies West Coast as the insured, lists the policy number, and indicates the policy period. It also states that the policy has a $2 million limit of liability. The declarations page includes a space for the identification of “Form(s) and Endorsements(s) [sic] made a part of the policy at the time of issue.”

The certified copy of the policy includes a “Commercial Liability Umbrella Coverage Form,” Form CU 00010900. This form sets forth the coverages and exclusions under the umbrella policy. It provides that Gotham will pay on behalf of West Coast for certain losses because of bodily injury or property damage.

An endorsement attached to the policy is the Auto Exclusion Endorsement, Form UM 00780911. This endorsement lists West Coast as the insured, indicates the policy number for the umbrella policy, and identifies the endorsement’s effective date. The endorsement states that it “modifies” West Coast’s umbrella policy by adding an exclusion. The exclusion provides that “[t]his insurance does not apply[] [t]o any liability arising out of the ownership, maintenance, operation, use, loading or unloading of any ‘auto.'”

DISCUSSION

The Policy Unambiguously Bars Coverage Under the Auto Exclusion Endorsement.

The appellants contended that the policy is ambiguous and reasonably can be interpreted not to include the Auto Exclusion Endorsement, which is not listed as a form or endorsement on the policy’s declarations page. The Eleventh Circuit disagreed and found that the only reasonable interpretation of the insurance policy as a whole is that the Auto Exclusion Endorsement is a part of the policy.

If the allegations asserted in the complaint fall outside the policy’s coverage, there is no duty to defend. When there exists no duty to defend, an insurer has no duty to indemnify.

In interpreting the plain language of the policy the court must read the policy as a whole, endeavoring to give every provision its full meaning and operative effect. In interpreting the policy as a whole, the court must consider not only the printed policy form but also the policy’s declarations page and any endorsements to the policy.

The rule of construction and interpretation of the policy in favor of the insured and against the insurer applies only when a genuine inconsistency, uncertainty, or ambiguity in meaning remains after resort to the ordinary rules of construction.

The Auto Exclusion Endorsement is clearly part of the umbrella policy because the endorsement on its face indicates that it is made a part of the policy. To interpret the policy otherwise will run afoul of the requirement that an appellate court must endeavor to give every provision its full meaning and operative effect.

The policy, viewed as a whole, reflects that the parties contemplated that an endorsement could modify the policy without being listed on the declarations page. Not only does the Auto Exclusion Endorsement itself say that it is a part of the policy, but the Schedule of Forms and Endorsements, which itself is an endorsement, identifies the Auto Exclusion Endorsement and other endorsements included in the certified copy of the policy.

Because the endorsement plainly bars coverage for the Forestes’ state court claims, which arose out of an auto accident, the district court properly concluded that Gotham had no duty to defend or indemnify West Coast or Blanco.

Gotham’s Conduct Does Not Give Rise to Coverage by Estoppel.

The appellants also make the independent argument that Gotham had a duty to defend and indemnify West Coast and Blanco in the Forestes’ state court action based on a theory of coverage by estoppel. They contend that because Gotham represented to West Coast and Blanco that there was coverage, it was estopped from later denying coverage. Coverage by estoppel does not apply here because there is no evidence that West Coast or Blanco experienced a detrimental change in position as a result of relying on Gotham’s representation that there was coverage.

Under Florida law, the doctrine of estoppel generally may not be used to create or extend coverage where none originally existed. The Florida Supreme Court has recognized a “very narrow exception” to this rule under which “the doctrine of promissory estoppel may be utilized to create insurance coverage where to refuse to do so would sanction fraud or other injustice.”

The essential elements of estoppel are

  1. a representation as to a material fact that is contrary to a later-asserted position,
  2. reliance on that representation, and
  3. a change in position detrimental to the party claiming estoppel, caused by the representation and reliance thereon. [Tome v. State Farm Fire & Cas. Co., 125 So. 3d 864, 867 (Fla. Dist. Ct. App. 2013)]

Promissory estoppel will apply only if the insured can show prejudice because it is the fact that the insured has been prejudiced which estops the insurer from denying the indemnity obligation of the insurance policy. Since Gotham denied coverage before the settlement offer expired the appellants have failed to show detrimental reliance on Gotham’s representation of coverage, promissory estoppel does not apply.

ZALMA OPINION

Florida should reconsider its “narrow” application of coverage by estoppel. Insurance contracts should be read as written and courts should not provide coverages not negotiated or acquired before a loss. Coverage by estoppel is another way of saying an insurer who defrauds its insured by claiming coverage that does not exist should pay the damages incurred by the insured. Coverage by estoppel should be impossible. Damages for fraud can always be available if proved.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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“Insurance Fraud & Weapons to Defeat Insurance Fraud”

“Insurance Fraud & Weapons to Defeat Insurance Fraud”

In Two Volumes

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

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.

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

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

Insurance Fraud & Weapons to Defeat Fraud - Volume Two: A Manual for Those Working to Defeat Insurance Fraud by [Zalma, Barry]This book contains appellate decisions regarding insurance fraud from federal and state appellate courts across the country and full text of many insurance fraud statutes.

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

Read about these and other insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Zalma’s Insurance Fraud Letter – October 15, 2018

Insurance Fraud Perpetrator Abuses The Court System

Leader of Staged Accident Ring Stays in Prison

Maxo Jean was the leader of a team of people who staged automobile accidents so that they could defraud insurers by presenting false and fraudulent claims supported by the work of unethical doctors, chiropractors and lawyers.

In United States Of America v. Maxo Jean, 13 Cr. 280 (DC), 18 Civ. 2888 (DC), United States District Court Southern District Of New York (October 3, 2018) the court was faced with more work from Mr. Jean years after his conviction of conspiracy to commit mail, wire, and health care fraud, in violation of 18 U.S.C. § 1349. The District Court had sentenced Jean in 2014 principally to 120 months’ imprisonment and three years’ supervised release. Later, the Second Circuit affirmed Jean’s conviction and sentence. United States v. Jean, 647 F. App’x 1, 4-5 (2d Cir. 2016) (summary order). Unwilling to accept the decisions of the jury, the trial court and the Second Circuit Court of Appeal, Jean moved the court to vacate, set aside, or correct his sentence on the basis that his attorneys were constitutionally ineffective. He failed.

Maxo Jean was a very bad man who was convicted of multiple crimes as a result of his scheme to stage false auto accidents and use them – with his co-conspirators – to defraud insurance companies. He has abused the system by causing delays changing counsel, by filing a worthless appeal to the Second Circuit, by filing motions as his own attorney (probably because no honorable lawyer would file them) and bringing this last ditch motion claiming his counsel was ineffective. The public and the court system lost the time needed to deal with him. He will serve out the remainder of his sentence and, hopefully, will no longer abuse the court system.


In this Month’s Issue

  1. Leader of Staged Accident Ring Stays in Prison
  2. Barry Zalma Speaks at Your Request
  3. Doctor and Lawyer In UK Get Suspended Sentence
  4. Florida Activates Disaster Fraud Teams Ahead of Hurricane Michael
  5. North Carolina Collects $8 Million in Fraud Penalties
  6. Good News From the Coalition Against Insurance Fraud
  7. Health Insurance Fraud Convictions
  8. Other Insurance Fraud Convictions

Books from Barry Zalma – All Available at the Insurance Claims Library

  1. Zalma on Insurance Claims
  2. Construction Defects and Insurance
  3. Mold Claims
  4. Time to Rescind the Tort of Bad Faith
  5. Insurance Fraud & Weapons to Defeat Insurance Fraud
  6. The Compact Book of Adjusting Property Insurance Claims
  7. The Compact Book of Adjusting Liability Insurance Claims
  8. California Fair Claims Settlement Practices Regulations
  9. California SIU Regulations
  10. Ethics for the Insurance Professional
  11. Rescission of Insurance
  12. The Insurance Examination Under Oath
  13. Random Thoughts on Insurance – Five Volumes

Fictionalized True Insurance Crime Books

  1. Heads I Win, Tails You Lose
  2. Candy and Abel: Murder for Insurance Money
  3. Murder And Insurance Fraud Don’t Mix
  4. Murder & Old Lace: Solving Murders Performed for Insurance Money
  5. Arson for Profit

From Full Court Press

  1. Insurance Law Deskbook
  2. California Insurance Law Deskbook
  3. Insurance Bad Faith and Punitive Damages Deskbook

From the American Bar Association

  1. The Insurance Fraud Deskbook
  2. Diminution in Value Damages

From Thompson Reuters

Property Investigation Checklists Uncovering Insurance Fraud, 12th Edition


For details go to http://www.zalma.com & http://zalma.com/blog/insurance-claims-library/ & http://zalma.com/blog & at http://www.zalma.com/videoblog & http://amazon.com.

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Important New Books

If you must deal with an infestation of mold in a house or commercial building and need to know what to do, how to present a claim to an insurer, how to deal with a claim as an insurer, or how to litigate mold claims you need the four volume set that is the update of Barry Zalma’s premier work the “Mold Claims Guide.” You may also wish to understand why the tort of bad faith has run its course and is now creating inequities that it was designed to protect in Barry Zalma’s new book, “Time to Rescind the Tort of Bad Faith,” which explains why the law of unintended consequences has taken over the tort of bad faith and created inequities that cost every person who buys insurance money they would not need to spend if there was no such tort.

Mold Claims

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

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

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

•Mold, fungi and bacteria claims; and
•Mold, Fungi, Bacteria litigation.

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

TMold Claims Volume Four: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.he 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.


Time to Rescind the Tort of Bad Faith

Insurance and the Law of Unintended Consequences Paperback 

Insurance is, and always will be, a business of the utmost good faith. Time to Rescind the Tort of Bad Faith: Insurance and the Law of Unintended ConsequencesAll parties to the insurance contract agree, in good faith and fair dealing, to do nothing to deprive the other the benefits of the contract. Insurance is, and always be, nothing more than a contract.

The insurer makes a promise to the insured that if a contingent or unknown loss occurs caused by a peril or risk insured against and not excluded, to pay the insured indemnity as promised by the contract up to the limits provided.

The insured promises to truthfully disclose the risks of loss faced by the insured, property owned by the insured, the business of the insured and/or the insured’s liability exposures. The insured also promises to honestly present a claim, prove the claim, and cooperate with the insurer in its investigation. If the parties to the insurance contract deal with each other fairly and in good faith the policy remains viable, claims are paid promptly and to the satisfaction of the insurer and the insured.

Only if a true tort occurs can the insured waive the contract action and sue in tort. Breach of contract, by centuries old tradition, is not a tort and cannot and should not be considered a tort. The Tort of Bad Faith has served its purpose and is now causing more problems than it solves. It is time the courts and state legislatures rescind the tort and return to common law contract damages.

Read about these and more insurance books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library/

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Insurance Fraud Perpetrator Abuses The Court System

Leader of Staged Accident Ring Stays in Prison

Maxo Jean was the leader of a team of people who staged automobile accidents so that they could defraud insurers by presenting false and fraudulent claims supported by the work of unethical doctors, chiropractors and lawyers.

In United States Of America v. Maxo Jean, 13 Cr. 280 (DC), 18 Civ. 2888 (DC), United States District Court Southern District Of New York (October 3, 2018) the court was faced with more work from Mr. Jean years after his conviction of conspiracy to commit mail, wire, and health care fraud, in violation of 18 U.S.C. § 1349. The District Court had sentenced Jean in 2014 principally to 120 months’ imprisonment and three years’ supervised release. Later, the Second Circuit affirmed Jean’s conviction and sentence. United States v. Jean, 647 F. App’x 1, 4-5 (2d Cir. 2016) (summary order). Unwilling to accept the decisions of the jury, the trial court and the Second Circuit Court of Appeal,  Jean moved the court to vacate, set aside, or correct his sentence on the basis that his attorneys were constitutionally ineffective.

BACKGROUND

For nearly six years, Jean served as the leader of a conspiracy to deliberately cause car accidents and defraud insurance companies. Jean recruited drivers and passengers, whom he directed to crash into the cars of innocent victims. After the accidents, Jean brought the drivers and passengers to corrupt medical clinics for treatment for fake injuries, and then directed those individuals to file fraudulent insurance claims for those fake injuries. The group staged at least 31 accidents.

Prior Proceedings

Jean was charged with one count of conspiracy to commit mail, wire, and health care fraud, in violation of 18 U.S.C. § 1349.  The government later filed a superseding indictment against Jean. The superseding indictment broadened the timeframe of the conspiracy.

Plea Offers and Change of Counsel

Following Jean’s arrest Henry Steinglass, Esq. was appointed to represent Jean pursuant to the Criminal Justice Act. During the course of Steinglass’s representation, Jean rejected two plea offers made by the Government. Accordingly, a jury trial was set.  Six days before trial, Jean asked the District Court to relieve Steinglass as counsel and notified the Court that an attorney of his choosing, Carlos A. Martir, Jr., Esq., would be representing him moving forward. The District Court granted Jean’s motion to change counsel and adjourned the trial a later date.

Trial

At trial, Jean’s coconspirators testified against him. These individuals corroborated each other. Their testimony was also corroborated by insurance, phone, and bank records, as well as an in-person recording of a conversation between the defendant and another accident participant.

The jury found Jean guilty. After the verdict Jean asked that Martir be relieved as counsel. The Court then appointed Neil Checkman, Esq. to represent Jean pursuant to the Criminal Justice Act. Checkman represented Jean through his sentencing.

Sentencing

After losing a motion for new trial the court sentenced Jean principally to a term of 120 months’ imprisonment and three years’ supervised release. Jean appealed his conviction and sentence to the Second Circuit, challenging, among other things, the denial of his motion for a new trial. Jean filed a supplemental pro se brief in addition to the brief filed on his behalf by Checkman and his co-counsel. The Second Circuit affirmed Jean’s conviction and sentence in a summary order. Jean filed a petition for rehearing, which was denied.

Post-Appeal Motions

In 2018 Jean filed the instant motion to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. § 2255 on the basis that his attorneys were constitutionally ineffective. Both Martir and Checkman submitted statements under penalty of perjury disputing Jean’s contentions.

DISCUSSION

Jean’s motion was denied because the motion was time-barred since it was filed more than a year after his judgment of conviction became final. Second, even assuming that Jean is not precluded from making this challenge, the motion fails on the merits.

APPLICABLE LAW

Ineffective Assistance of Counsel

Jean argues that both Martir and Checkman failed to provide effective assistance of counsel. With respect to Martir, Jean argues that Martir failed to (1) discuss whether to accept a guilty plea versus proceeding to trial; (2) provide him with copies of discovery both before and during trial; and (3) challenge certain evidence introduced at trial. With respect to Checkman, Jean argues, among other things, that Checkman (1) failed to obtain discovery – namely, a recorded conversation between Jean and a participant of a staged accident – and review it with him prior to the hearing on his motion for a new trial; and (2) refused to raise the arguments that Jean presented in his pro se supplemental brief in his direct appeal.

Applicable Law

To demonstrate ineffective assistance of counsel, a defendant must satisfy a two-prong test:

  1. The defendant must show that his counsel’s performance “fell below an objective standard of reasonableness” under prevailing professional norms. The court’s review must be highly deferential and indulge a strong presumption that counsel’s conduct falls within the wide range of reasonable professional assistance. A defendant must overcome the presumption that, under the circumstances, the challenged action might be considered sound trial strategy. The court must consider that actions or omissions that might be considered sound trial strategy do not constitute ineffective assistance.
  2. A defendant must show that the deficient performance prejudiced the defense, that is, the defendant must demonstrate that but for counsel’s unprofessional errors, the result of the proceeding would have been different.

In the context of a claim of ineffective assistance regarding a decision to reject a guilty plea, a defendant must prove that there is a reasonable probability that, but for counsel’s errors, he would have accepted a plea offer and not proceeded to trial. To do so, a defendant must provide objective evidence beyond his own self-serving, post-conviction statement that he would have pleaded guilty.

Both elements must be satisfied for a defendant to demonstrate that his counsel was not functioning as the counsel guaranteed the defendant by the Sixth Amendment, and that the defendant was, as a result, deprived of a fair proceeding.

Prejudice

Even assuming Martir’s conduct was somehow deficient, Jean cannot show that (1) he would have pleaded guilty or (2) the outcome in this case would be any different absent the alleged deficiencies that occurred prior to and during trial. Jean cannot show he was prejudiced by Martir’s alleged deficiencies at trial because the outcome would not have been different in the absence of the alleged deficiencies.

Even assuming Checkman’s conduct was somehow deficient, Jean cannot show that (1) the outcome would have been different if Checkman had reviewed the recorded conversation or (2) a new trial would have been granted.

Jean was not prejudiced by Checkman’s decision to omit such an argument from the counseled brief.

In fact, Jean was able to raise this challenge himself in his pro se supplemental brief, and he did so. The Second Circuit considered and rejected it. In addition, Jean cannot show that even if this argument had been raised by Checkman, the Second Circuit would have accepted it. This information leads to the conclusion that the proceedings would not have been any different absent the alleged ineffective performance of counsel.

Jean failed to show a basis for relief. Accordingly, his petition is denied.

ZALMA OPINION

Maxo Jean was a very bad man who was convicted of multiple crimes as a result of his scheme to stage false auto accidents and use them – with his co-conspirators – to defraud insurance companies. He has abused the system by causing delays changing counsel, by filing a worthless appeal to the Second Circuit, by filing motions as his own attorney (probably because no honorable lawyer would file them) and bringing this last ditch motion claiming his counsel was ineffective. The public and the court system lost the time needed to deal with him. He will serve out the remainder of his sentence and, hopefully, will no longer abuse the court system.

 

 


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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Are You Ready to Deal With a Mold Claim?

Mold Claims

This series of books is the latest addition to Barry Zalma’s insurance claims series of books and articles that will form the most thorough, up-to-date, expert-authored insurance claims guide available today. Mr. Zalma’s “Mold Claims Coverage Guide” has been updated, rewritten and published as either a Kindle book or a paperback and is available for easy to afford prices from Amazon.com.

Mold Claims Volume One: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.

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

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

•Mold, fungi and bacteria claims; and
•Mold, Fungi, Bacteria litigation.

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

TMold Claims Volume Four: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.he 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.

 

Read about these and other insurance books at the Insurance Law Library http://zalma.com/blog/insurance-claims-library/

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No Coverage for Defense of Qui Tam Suit

Claim of False Billing Not a Claim “arising out of” Medical Professional Services

Insurance contracts must be interpreted by reading the entire contract and determining if it provides coverage to the facts alleged. Affinity Living Group and Charles Trefzger, are defendants in a qui tam lawsuit pending in the United States District Court for the Eastern District of North Carolina. They sued Starstone Specialty Insurance Company (“Starstone”) seeking to compel Starstone to defend and indemnify Affinity and Trefzger  in the qui tam suit.

In Affinity Living Group, LLC, and Charles E. Trefzger, Jr., Plaintiffs, v. Starstone Specialty Insurance Company, and Homeland Insurance Company Of New York, 1:18-CV-35, United States District Court for the Middle District Of North Carolina (October 5, 2018) the issue was resolved by the District Court.

BACKGROUND

In 2016, Stephen Gugenheim filed a qui tam suit in the Eastern District of North Carolina against a number of North Carolina adult care homes, including Mr. Trefzger, whom he identified as the owner of all the homes, and Affinity, which he identified as the managing entity. He sued on behalf of the United States and the State of North Carolina, alleging that the defendants acted in concert to submit false claims for Medicaid reimbursements for services that were not actually provided to residents of their adult care homes. Mr. Gugenheim further alleged that the facilities were understaffed, that they were unable to provide “personal care services” which met the assessed needs of residents, and that staffing levels fell below requirements for obtaining Medicaid reimbursements. Finally, he alleged that the defendants falsely certified compliance to obtain Medicaid reimbursements, in violation of the False Claims Act and a similar North Carolina statute.  The suit seeks treble damages and penalties for each false statement.

Affinity carries separate insurance policies through Homeland Insurance and StarStone, each of which provides indemnification and defense against certain claims arising out of services rendered at Affinity’s adult care facilities. Affinity’s policy with Homeland is the first line of defense, and the StarStone policy is an “umbrella” plan that applies only if the Homeland policy is exhausted on, or is inapplicable to, a covered claim.

After Mr. Gugenheim filed suit, both Homeland and StarStone denied coverage. In its denial letter, StarStone stated that the Gugenheim complaint did not fall within the policy’s coverage provisions “because the complaint does not allege damages resulting from a claim arising out of a medical incident.” (emphasis in original indicating terms that are defined in the policy).

Affinity and Mr. Trefzger then sued Homeland and StarStone. They seek a declaratory judgment that the insurance policies obligate Homeland and StarStone to indemnify and defend against the Gugenheim suit and to reimburse them for defense costs already incurred. They also seek damages for breach of contract.

ANALYSIS

Construction and application of insurance policy provisions is a question of law appropriate for summary disposition.

Affinity has coverage for the qui tam lawsuit under the StarStone policy if two conditions are met: (1) the primary insurance policy underlying the StarStone policy (here, the Homeland policy) does not apply to, or was exhausted on, a claim against the insured; and (2) the claim against the insured and the damages sought otherwise fall within the coverage provisions of the StarStone policy. Because Homeland, the primary carrier, denied coverage for the Gugenheim suit and the Court has agreed that the Homeland policy excludes coverage, the first condition has been satisfied.

the Gugenheim complaint is a qui tam action filed on behalf of the United States and the state of North Carolina alleging violations of the federal False Claims Act and the North Carolina False Claims Act. To state a claim under the federal False Claims Act, the plaintiff must prove:

  1. that the defendant made a false statement or engaged in a fraudulent course of conduct;
  2. such statement or conduct was made or carried out with the requisite scienter;
  3. the statement or conduct was material; and
  4. the statement or conduct caused the government to pay out money or to forfeit money due.

The coverage provision in the StarStone policy provides: “We [StarStone] will pay on behalf of the insured [losses above the applicable limit] which the insured becomes legally obligated to pay as damages resulting from a claim arising out of a medical incident.” The policy defines “medical incident” as “an alleged or actual act, error or omission in the insured’s rendering or failure to render medical professional services.” “Medical professional services” is defined by the policy as “the health care services or the treatment of a patient including,” inter alia, medical, dental, and counseling services.

The plain language of the policy is clear that billing for medical professional services is not itself a medical professional service. Billing is not a “health care service” or “the treatment of a patient” and is not included among the examples of the covered services listed in the policy. Billing is different in kind from all of these activities.

A number of courts have held that alleged false billings for health care services do not qualify as “medical incidents” or “medical professional services” under other professional liability policies. Billing for medical services does not fall within the policy definition of “medical professional services,” and thus does not qualify as a covered “medical incident.”

The Gugenheim complaint does allege a “medical incident” within the meaning of the policy. It is undisputed that the personal care services discussed in the complaint are “medical professional services,” and the Gugenheim complaint alleges that Affinity failed to render or otherwise provided deficient personal care services to the residents of its adult care homes. The question is therefore whether the Gugenheim claim “arises out of” these alleged or actual acts, errors, or omissions in Affinity’s rendering or failure to render personal care services. The policy itself does not define the phrase “arising out of,” but North Carolina law is clear that the term carries “much broader significance” than the phrase “caused by.” The words “arising out of” are ordinarily understood to mean “incident to,” or “having connection with.”  There must be a “causal connection” between the conduct defined in the policy and the occurrence for which coverage is sought. Coverage does not exist where the occurrence is the result of some independent act disassociated from the conduct defined in the policy.

The Gugenheim claim seeks damages for injuries to the government arising out of Affinity’s alleged false billing, not for injuries to residents arising out of deficiencies in personal care services. Those allegations are mere surplusage designed to reinforce the false billing claims.

False or fraudulent billing is disassociated from Affinity’s rendering or failure to render personal care services. It is, at best, an “intervening cause” that severs any connection between the medical incident alleged in the complaint and the injuries to the government that the False Claims Act suit seeks to recover for. Thus, the court concluded that the Gugenheim claims do not “arise out of” the rendering or failure to render medical professional services and the policy does not provide coverage to Affinity.

Coverage exists under the fact situation in this case only for a “claim arising out of . . . an alleged or actual act, error or omission in the insured’s rendering or failure to render medical professional services.” The “independent act” of false or fraudulent billing is “disassociated from” the rendering or failure to render medical services.

The Gugenheim claim seeks to recover for the government’s injuries arising out of Affinity’s allegedly false billing, not injuries to the patients arising out of personal care services. The claim does not “arise out of a medical incident,” and StarStone is not obligated to defend or indemnify the plaintiffs here in the qui tam suit.

ZALMA OPINION

The plaintiffs were charged by the qui tam suit with the intentional act of defrauding the U.S. Government. If proved any judgment obtained on behalf of the U.S. would not be covered since the judgment would be based on an intentional and non-fortuitous act. Since Gugenheim only claimed false billing the court properly refused any coverage for defense or indemnity because the claim had nothing to do with the risks of loss insured against.

 


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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Everything Needed by the Insurance Claims Professional

Construction Defects and Insurance

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

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

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

The Eight volumes include:

Read details about these books and more insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Made Whole Doctrine Does not Apply to a Self Insured Retention

Subrogation Recovery Only to Insurer who Paid a Claim

A self insured retention (SIR) is a contractual device that allows an insurer to insurer excess liability of an insured without a concern for dealing with minor claims. The use of the SIR allows an insurer to charge a small premium since the insured agrees to use its own funds to deal with claims for amounts less than the SIR.

In City Of Asbury Park v. Star Insurance Company and John Does Corporation (1-10), Civ. A. No. 17-5059-BRM-LHG, United States District Court For The District Of New Jersey (October 1, 2018) Plaintiff City of Asbury Park’s (“Asbury Park” or the “City”) presented a Motion for Summary Judgment for Declaratory Judgment and (2) Defendant Star Insurance Company’s (“Star”) also submitted a Motion for Summary Judgment on the Priority of Recovery of Lien Proceeds pursuant to Federal Rule of Civil Procedure 56.

BACKGROUND

This case arises from the public entity excess liability insurance policy, number CP 0513638 (“Star Policy”) for the period February 15, 2010, to February 15, 2011, issued by Star to Asbury Park. In the Star Policy, Star agreed to indemnify the City in the event the City is liable, under the Workers’ Compensation Act, for damages on account of bodily injury suffered by an employee of the City in excess of the City’s self-insured retention of $400,000.00.

The Star Policy also states, in the event of any payment by Star, “Star will be subrogated to all of the City’s rights of recovery for that loss, and the City will execute and deliver instruments and papers and do whatever else is necessary to secure those rights.”

On January 20, 2011, John Fazio (“Fazio”), an employee of the Asbury Park Fire Department, “suffered life-threatening injuries while fighting a fire.” Following a workmen’s compensation action by Fazio, and pursuant to the policy, the City paid $400,000.00 self-insured retention limit, and Star paid $2,607,227.50 in workmen’s compensation benefits which created a lien totaling $3,007,227.50.

On December 28, 2012, Fazio filed suit against a third party related to the injuries suffered on January 10, 2011, and the City and Star asserted a workmen’s compensation lien in order to preserve their reimbursement rights. Fazio settled for $2,700,000.00 and agreed to set aside $935,968.25 in partial satisfaction of all liens held by the City and Star. The $935,968.25 is being held in escrow by workmen’s compensation defense counsel until otherwise “directed by the City or Star or ordered by the Court.”

Star seeks to recover the entire amount being held in escrow, but the City argues it “has subrogation rights arising out of its payment of its self-insured retention of $400,000.00 and is entitled to be reimbursed out of the” amount in escrow. Accordingly, Asbury Park sued seeking, pursuant to the Uniform Declaratory Judgment Act, a declaration that it is entitled to recovery of its $400,000.00 self-insured retention paid to [Fazio] in satisfaction of Worker’s Compensation claim.

DECISION

The City contends the make-whole doctrine applies, and therefore, the City should be compensated for its loss, namely the $400,000 payment of the self-insured retention, before Star can recover any of the lien proceeds. Star argues it should be granted the entirety of the $935,968.25 settlement because the plain language of the contract states the City agreed to absorb the first $400,000.00 of any workers’ compensation loss.

Courts should not, and cannot, make contracts for parties. Courts can only enforce the contracts which the parties themselves have made. When the terms of an insurance contract are clear, it is the function of a court to enforce it as written and not to make a better contract for either of the parties. Pursuing equity does not justify departing from the terms of an insurance contract that parties voluntarily entered. When interpreting the language of an insurance policy, it is the court’s responsibility ‘to give effect to the whole policy, not just one part of it.

Although the Superior Court of New Jersey, Appellate Division, found that without clear, express terms to the contrary, the insured must be “made whole” before the insurer can recover anything from a third-party tortfeasor the court acknowledged this right may be altered by a contract. The make-whole doctrine is a rule of interpretation and a gap filler. Additionally, parties have the ability to sign away their make-whole rights when entering into an insurance contract.

The make whole rule is an equitable principle which, absent an agreement to the contrary, prohibits an insurer from enforcing a right to subrogation until the insured has been fully compensated for his injuries – i.e., made whole.

Subrogation rights are created by an agreement between the insurer and the insured. Subrogation promotes equity by preventing an insured from recovering more than full indemnification as a result of recovering from both the wrongdoer and the insurer for the same loss.

An SIR is a thin layer of first dollar liability retained by the consumer (and specifically not transferred to the insurer) to ensure risk-sharing and loss avoidance. Under the policy, the insured agreed to pay the deductible as a first dollar obligation prior to implicating the insurer’s obligation to cover the damages. Therefore, the loss of the deductible is not a shortfall in the insurance coverage. Applying the make-whole doctrine under such circumstances would force the insurer to accept the risk of first dollar liability for which it did not agree nor receive a premium.

The plain language of the Star Policy contained an agreement by the City to retain the first $400,000 as a self-insured retention with Star’s coverage beginning solely in excess of the City’s self-insured retention. The Star Policy requires Star to indemnify the City for a loss, in excess of the City’s self-insured retention, sustained by the City because of liability imposed on the City by the Worker’s Compensation Act.

When interpreting the language in insurance policies, this Court reads the relevant provisions, each in the context of its corresponding insurance policy as a whole, giving meaning to each provision. Read together, the Star Policy unambiguously states the City has no insurance coverage for the first $400,000.00 and, therefore, is not entitled to acquire the lien funds before Star has been fully reimbursed.

Regarding both a deductible and a self-insured retention, the insured agreed to be responsible for a certain, pre-determined loss. In this case, the pre-determined loss was $400,000.00. The insurer owed nothing until the City first paid $400,000. If the City wanted first dollar coverage it could have negotiated this with Star when the insurance policy was drafted. It did not.

Therefore, applying the make-whole doctrine to self-insured retentions would convert the Star Policy to an insurance policy without a self-insured retention, allowing the City to gain an unbargained-for windfall at the expense of Star. Judgment was issued in favor of Star.

ZALMA OPINION

An SIR is not insurance. The SIR is the sole obligation of the insured. Since the insured did not bargain for elimination of the SIR it could recover the SIR from a tortfeasor before the insurer who paid as promised. The court, as it was required to do, applied the clear and unambiguous language of the policy and enforced it as written. There was no ground stated to change the policy to provide the subrogation rights the City desired and it was inequitable to give it rights for which it did not bargain or pay premium to receive.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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

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.”

Zalma on Insurance Claims Volume 101

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

This series of ten 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.

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

  • Property insurance claims;
  • Third-party liability claims;
  • Casualty claims; and
  • Insurance Fraud

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. As you read through the various volumes of Zalma on Insurance Claims, you will find comprehensive—yet comprehensible—coverage of key topics, including:

  • What is Insurance?
  • The History of Insurance
  • The covenant of good faith and fair dealing.
  • The tort of Bad faith
  • Conditions,
  • Warranties,
  • Exclusions
  • Declaring a policy void
  • Duties of insured and insurer
  • Evaluation and settlement
  • Identifying insurance fraud
  • Investigation
  • Kinds of insurance policies
  • Other insurance clauses
  • Preparing a case for trial
  • Processing a claim
  • Responses to fraud
  • Subrogation and salvage
  • Underwriting and
  • Many more property and casualty insurance matters.

Zalma on Insurance Claims Part 102

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

  • Other Insurance Clauses
  • Underwriting
  • Conditions, Warranties and Exclusions

Zalma on Insurance Claims Part 103

This is part 103 of Zalma on Insurance Claims and will deal with:

1.Duties of the Insured and the Insurer
2.Declaring a Policy Void
3.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.

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.

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.

Zalma on Insurance Claims Part 106

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

Chapter 1 Property Insurance & the Tort of Bad Faith
Chapter 2 Grounds for Finding Bad Faith
Chapter 3 Avoiding Charges of Bad Faith
Chapter 4. Punitive Damages
Chapter 5.Bad Faith & Liability Insurance
Chapter 6.Defenses to the Tort of Bad Faith
Appendix 1 – California Civil Code Section 3294

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

Zalma on Insurance Claims Part 107:

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.

Zalma on Insurance Claims Part 108

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.

Zalma on Insurance Claims Part 109 

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.

Zalma on Insurance Claims Part 110

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.

Read about these and other insurance books by Barry Zalma at the Insurance Claims Library.

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You Only Get What You Order and Pay For

No Reformation When Policy Ordered is Policy Delivered

It is an old refrain: when the insured fails to read the policy he or she can’t complain when it does not provide the coverage needed because it provides the coverage ordered. Litigation results when the insured’s failure costs him or her money.

In Bethany H. Olson A/K/A Bethany H. Reischel, Gunner J. Olson And Emmajean T. Olson, State Of Wisconsin Department Of Health Services And Spring Valley Health Care Services v.  Wisconsin Mutual Insurance Company, Jeffrey J. Keyes, v. Rural Mutual Insurance Company And Lon Truax, Sr., Appeal No. 2017AP1567, State Of Wisconsin In Court Of Appeals District III (October 2, 2018) Jeffrey Keyes appealed a judgment dismissing his third-party claims against Rural Mutual Insurance Company (Rural) and its agent, Lon Truax, Sr.

Keyes asserted he is entitled to coverage for the claims of Bethany, Gunner and Emmajean Olson, all of whom were injured by Keyes’s operation of a personal automobile on a public road. Keyes seeks coverage under a farm umbrella endorsement attached to a farmowners policy he obtained from Rural through Truax. However, the endorsement contains an exclusion that specifically precludes coverage for the off-farm use of Keyes’s personal automobiles.

On appeal, Keyes asserts the circuit court improperly dismissed his claims for reformation of the farm umbrella endorsement and for agent negligence.

BACKGROUND

The Olsons sued Keyes claiming he negligently caused their injuries resulting from an automobile collision. The accident occurred near the intersection of County Roads B and N in St. Croix County, and it involved Keyes’s use of his GMC Sierra pickup truck, which he was using to tow a gooseneck trailer containing cattle.

At the time of the accident, Keyes’s personal automobiles were covered by an automobile policy issued by Wisconsin Mutual Insurance Company. Keyes also had a farmowners policy in effect with Rural that included liability and property coverage related to Keyes’s family farm in Knapp, Wisconsin. Further, Keyes had purchased $1 million in farm umbrella liability coverage, which was attached to the farmowners policy. However, umbrella coverage for the off-farm use of personal automobiles was specifically excluded by form F-782.

Rural denied Keyes’s claim because of the exclusion and the fact that the accident occurred off of Keyes’s farm.

Keyes sued Rural and Truax seeking coverage under the farm umbrella endorsement. Keyes sought reformation of the umbrella, alleging that at the time he purchased the policy in January 2013, Truax, as Rural’s agent, had assured him that “there would be coverage for the kind of claim” the Olsons asserted. Keyes sought to have the endorsement reformed to delete the exclusion and for a declaration that the Olsons’ claims were covered by the umbrella endorsement. Keyes also asserted an insurance agent negligence claim if the umbrella was not susceptible to reformation.

The circuit court granted Rural and Truax’s motion for summary judgment and dismissed Keyes’s third-party claims.

DISCUSSION

The court interprets insurance policies with the goal of ascertaining and giving effect to the parties’ intentions. To that end it interprets policy language according to its plain and ordinary meaning as understood by a reasonable person in the position of the insured.

The exclusion plainly eliminates umbrella coverage for losses arising out of the circumstances present — that is, the operation of a personal automobile while away from the farm premises. The exclusion is unambiguous. The court must apply unambiguous policy language as written.

Reformation Of The Umbrella Endorsement

Reformation is an equitable remedy that exists to effectuate the parties’ intentions at the time they entered into a contract. A mutual mistake made by the parties to the instrument which would defeat such intentions should be corrected in equity for the purpose of putting in effect such an intention. An insurance policy may be reformed because of mutual mistake when the policy does not contain the provisions intended by the parties to be included. But, the contract must be reformed to conform to some oral agreement or understanding which the written document was intended to express.

Importantly, the mutual mistake must have existed at the time the policy was issued, and the proponent of reformation must provide clear and convincing evidence demonstrating that agreement or understanding. Such evidence typically consists of communications or conversations between the insured and the agent that contain a request or understanding regarding the scope of desired coverage.

Keyes testified  that he ordered full coverage and that to him, “full coverage” meant that he “would be covered for anything, and – and full coverage in my words would relate back to the lapses – excuse me – not lapses, but the insufficient coverage that we had with Wisconsin Mutual.” Keyes stated that, to the best of his knowledge, he had told Truax he wanted to be covered for “anything and everything”; in other words, he told Truax he wanted an umbrella policy that would cover him for “any loss” that could foreseeably occur. When asked whether he had any specific discussion with Truax about the umbrella policy covering Keyes’s use of his automobiles off of the farm premises, Keyes responded, “No.”

After Rural issued the farmowners policy and umbrella endorsement, Keyes could not recall ever speaking again with Truax about the policy. Keyes could not remember whether he had read the policy or whether he had reviewed the policy with Truax. Keyes acknowledged that neither the application he had signed nor the farmowners policy that was eventually issued identified automobile coverage in its summary of coverages on the declarations page. “Indeed, Keyes agreed that he received the exact coverage that had been listed in his signed application.” (emphasis added)

The evidence, even considered in the light most favorable to Keyes, shows that his coverage request was a general one—he variously stated he wanted to be covered for “anything and everything,” he wanted “full coverage,” and coverage for “any loss.” When asked whether he specifically requested umbrella coverage for off-farm use of his automobiles, Keyes responded that he had not. “Generic requests for coverage are insufficient to trigger an obligation on the agent’s part to procure a specific type of insurance or coverage for a specific risk.”

Reformation is not a vehicle by which an insurer may be bound to cover a risk that it did not contemplate and for which it received no premium. In all, Keyes did not established a genuine issue of material fact regarding an agreement or understanding that Keyes’s off-farm use of his personal automobiles would be covered by the umbrella endorsement. To the contrary, the undisputed evidence, including Keyes’s own testimony, shows that he never specifically requested such coverage and that he received the exact coverage for which he applied.

The facts do not permit a reasonable factfinder to conclude a “mutual mistake” occurred between Truax and Keyes regarding such coverage at the time the Rural umbrella endorsement was issued, as the law requires. Accordingly, the circuit court correctly concluded Rural was entitled to summary judgment on Keyes’s reformation claim.

Here, there could be no duty on Truax’s part to procure the umbrella coverage Keyes now seeks because, by his own admission, he did not request such coverage. Based on the foregoing, no reasonable factfinder could conclude Truax had breached the relevant standard of care. Keyes admitted he received the coverage for which he applied, despite his vague request for “full coverage.”

ZALMA OPINION

No insurance policy provides coverage for every eventuality. If Keyes asked for such coverage the agent would have explained the impossibility of providing such coverage. He provided the coverage Keyes ordered and there was no problem with the coverage until the accident happened and he found the umbrella did not apply. An agent who is not a fiduciary, as was Truax, is only obligated to provide the insurance ordered not what a later fact situation informs the insured he only got what he ordered not what he needed.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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Insurance Claims Library

Everything Needed by the Insurance Claims Professional

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

COIL Commentary on Insurance Law

Volume 1, Number One

A Journal providing information about insurance, insurance claims handling and insurance law as it changes with new decisions.

A Journal providing information about insurance, insurance claims handling and insurance law as it changes with new decisions from the state and federal appellate courts.Future issues will be issued regularly providing information on new and interesting insurance appellate decisions.  Articles included:

  • What is Insurance?
  • Claims in a Catastrophe
  • Misrepresentation or Concealment of a Material Fact
  • Only in California “Once” is with “Such Frequency as to Indicate a General Business Practice”

Read about this and more insurance law materials by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Lawyers’ Outside Business Needs Appropriate Insurance

Legal Malpractice Policy Provides No Coverage for Non-Law Pursuits

I have chided lawyers in the past for not reading their client’s policy before litigating. In this case the lawyers failed to carefully read a policy written to protect themselves from legal malpractice actions. A lawyer who conducts business that is not practicing law should never – as did the defendants – rely on a malpractice policy to protect them from actions in the non-law business.

This maxim was made clear in Westport Insurance Corporation v. Hippo Fleming & Pertile Law Offices and Charles Wayne Hippo, Jr., Civil Action No. 3:15-cv-251, United States District Court For The Western District Of Pennsylvania (October 1, 2018) when the USDC for the Western District of Pennsylvania was faced with competing motions for summary judgment in a dispute involving a professional liability insurance policy that Westport issued to Defendants (the “Policy”).

Westport refused to defend or indemnify Hippo Fleming & Pertile Law Offices (“HFP”) and one of its attorneys, Hippo, in an action brought against them by Gregory S. Morris and Morris Development, Inc. (collectively “Morris.” The Underlying suit arose from legal services that Defendants provided Morris in real-estate development matters. Morris alleged that Defendants used information derived from their attorney-client relationship with Morris to benefit their own real-estate development projects, thereby harming Morris.

RELEVANT FACTUAL HISTORY

HFP applied for professional-liability insurance from Westport in early 2007. The application for the Policy included an “Outside Interest Supplement” that broadly required HFP to disclose all outside interests of its attorneys, including all instances where an attorney acts as director, officer, partner, trustee, manager, fiduciary, or otherwise exercises control over a for-profit business other than HFP. HFP disclosed the involvement of Hippo and Jeff Fleming (“Fleming”), another HFP attorney, in an outside entity named VIP Ventures, LLC (“VIP Ventures”), but did not disclose the pair’s involvement in two other entities—Templar Development, LLC and Templar Elmerton, LLC (collectively the “Templar Entities”). VIP Ventures held ownership shares in both of the Templar Entities.

Westport issued its Lawyers Professional Liability Insurance Policy based on the representations made in the application. The Policy covered HFP and its attorneys for certain professional liability claims from March 1, 2007, until March 1, 2008.

Section VII(C) of the Policy specifically excludes coverage for lawsuits arising from the outside business interests of the insured attorneys (the “Outside Business Exclusion”). The Outside Business Exclusion provides that the Policy does not apply to claims related to “any INSURED’S activities as an officer, director, partner, manager, or employee of any company, corporation, operation, organization, partnership, or association other than the NAMED INSURED or PRIOR firm.”

Defendants’ Representation of Morris and the Underlying Suit

Defendants had a “long-standing” attorney-client relationship with Morris and his business entities. Morris retained HFP and Hippo to assist Morris with various real-estate development projects. In early 2008, Morris threatened Defendants with litigation after a dispute arose in the development of a shopping center in Blair County, Pennsylvania. Morris alleged that Defendants used information from their representation of Morris to benefit real estate development projects that Defendants undertook through the Templar Entities, thereby harming Morris.

Hippo notified Westport of the threatened litigation. Later, Morris sent an unfiled draft complaint to an attorney for Hippo, which Hippo forwarded to Westport. Westport sent Hippo a letter on October 30, 2009, where Westport “reserved its rights” and noted that several exclusions in the Policy may bar coverage of Morris’s claim.

Morris’s Complaint against Defendants contains eleven counts all relating to a real estate development and the use by HFP and Hippo of confidential information to allow the non-legal businesses to profit.

Westport Refuses to Defend or Indemnify Defendants Against the Underlying Suit

Westport evaluated coverage for the Underlying Suit after Morris filed the Complaint against Defendants. Westport, after receipt of the suit, sent Defendants a letter stating that Westport was denying coverage for the Underlying Suit based on the Policy’s Outside Business Exclusion.

DISCUSSION

The general rules of contract interpretation apply to the interpretation of insurance policies. A contract of insurance like any other contract requires that the intention of the parties be determined from the words of the instrument.

Under Pennsylvania law, courts interpret unambiguous writings as a matter of law, while ambiguous writings are interpreted by the finder of fact. When the language of an insurance policy is clear and unambiguous, courts must give effect to the policy’s language.

Here, the language of the Policy is clear and unambiguous. While the language of the Outside Business Exclusion is broad, it is reasonably susceptible to only one interpretation. The Policy does not apply to any claim that arises from an HFP attorney’s involvement as an officer, director, partner, manager, or employee of any entity other than HFP. The broad language of the Outside Business Exclusion—that the Policy shall not apply to claims “based on, attributable to, or directly or indirectly resulting from”—clearly excludes coverage for any claim arising from an attorney’s outside business activities, regardless of the extent or degree that the claim involves an attorney’s outside business activities. Taken as a whole, the language of the Policy’s Outside Business Exclusion unambiguously indicates that the parties’ intention was to exclude coverage for any and all claims arising from the outside business activities of HFP attorneys.

There is no genuine dispute of material fact that the Templar Entities are uninsured outside business entities under the Policy. Hippo acted as an officer of the Templar Entities.

Hippo and Fleming acted as partners of the Templar Entities. Hippo and Fleming were partners of the Templar Entities because they jointly carried on business for profit through the Templar Entities. Hippo also acted as both a director and manager of the Templar Entities. There is no dispute that Hippo exercised some degree of control over the affairs of the Templar Entities. It is undisputed that Hippo performed significant work on behalf of the Templar Entities.

There is no genuine dispute of material fact that Hippo was an officer, director, and manager of the Templar Entities. Similarly, there is no dispute of material fact that both Hippo and Fleming were partners of the Templar Entities. Hippo and Fleming’s involvement with the Templar Entities triggered the Policy’s Outside Business Exclusion.

An insurer has no duty to defend where all the claims within a cause of action are clearly excluded from coverage under the policy. Westport had no duty to defend because each claim in the Underlying Suit falls unambiguously within the Policy’s Outside Business Exclusion. In order to find a duty to defend the court need only determine if any claims asserted are potentially covered. If any are, the insurer must defend until the suit is narrowed only to claims that are definitely not within that coverage.

A comparison of the unambiguous language of the Policy to the four corners of Morris’s Complaint in the Underlying Suit clearly leads to the conclusion that the Outside Business Exclusion applies to all counts in the Underlying Suit as a matter of law.

The Court found there is no genuine dispute of material fact that the Policy’s Outside Business Exclusion applies to Morris’s claims against Defendants in the Underlying Suit and Westport is entitled to judgment as a matter of law. Therefore, Westport has no duty to defend Defendants against the Underlying Suit.

ZALMA OPINION

This should not have been a difficult case needing two motions for summary judgment. It could have been avoided by Hippo and Flemming, acting for the outside businesses, purchasing liability, Errors and Omissions and Directors and Officers liability insurance policies. The claim for defense and indemnity was presented to the wrong insurer or the lawyers, representing themselves, failed to acquire proper insurance.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

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Fictionalized True Insurance Crime Books

Insurance Fraud for Fun & Profit

Most insurance fraud perpetrators believe that it is easy to steal from insurance companies, even when caught all you lose is the money you tried to steal, that you will never spend time in jail, and most people and judges will complement you for taking on the big bad insurance company. They are wrong.  As you read the books that follow you will learn how insurance fraud works, how it is defeated, and why it hurts the insurance buying public.

“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 Money

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

Product DetailsAvailable 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 Profit: How an Attempt to use Arson & Fraud to Fund Terrorism Failed”

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

Available as paperback.

Available as a Kindle Book.

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

 

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

Available as a paperback.

Available as a Kindle book.

Read about these and other insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Suit Filed After Appraisal Demand Must be Abated

Appraisal Determines Amount of Loss and Claim

It is not unusual for an insurer and insured to fail to agree on the amount of loss and claim. Every first party property policy contains an appraisal clause that allows for a binding award establishing the amount of loss and claim by three impartial appraisers. Most insureds prefer to litigate damages rather than submit to appraisal since jurors can be more generous than experienced insurance professionals sitting as appraisers.

In In Re Acceptance Indemnity Insurance Company, No. 04-18-00232-CV, Fourth Court of Appeals San Antonio, Texas (September 26, 2018) Acceptance Indemnity Insurance Company (“Acceptance Indemnity”), contends the trial court abused its discretion in denying its motion to compel appraisal and abate in the underlying dispute over the amount of loss sustained by the real party in interest, SA Villas I, LP (“the RPI”), with regard to overhead, profits, and taxes.

BACKGROUND

Acceptance Indemnity issued a commercial property insurance policy to the RPI (or its owner) for an apartment complex. The RPI submitted a claim under its policy to recover damages for property damage incurred after a wind/hail event that occurred in May 2015. The parties could not agree on the cost of repairs. The RPI continued to demand payment based on its contractor’s estimate, claiming the loss estimate used by Acceptance Indemnity failed to include overhead, profit, and taxes. Ultimately, the RPI completed repairs on the property and Acceptance Indemnity paid the RPI the undisputed amount of loss less the deductibles.

In April 2017, the RPI sent Acceptance Indemnity a demand letter that gave notice of alleged underpayment, violations of the DTPA and Texas Insurance Code, and breach of the common law duty of good faith and fair dealing. On August 1, 2017, Acceptance Indemnity made a written demand for appraisal, invoking the appraisal provision set out in the insurance policy. The RPI responded by letter, stating appraisal was not appropriate. It then filed suit against Acceptance Indemnity on August 14, 2017, alleging breach of contract and numerous extra-contractual claims. In response, Acceptance Indemnity filed a motion to compel appraisal and abate, seeking to compel appraisal under the policy and abate the proceedings pending the outcome of the appraisal. The trial court denied the motion to compel and request for abatement. Acceptance Indemnity filed a petition for writ of mandamus.

ANALYSIS

Acceptance Indemnity contends that absent a showing of illegality or waiver, which mandates a showing of prejudice, the appraisal clause must be enforced. There was no assertion of illegality, so Acceptance Indemnity contends the trial court erred in denying the motion to compel appraisal and abate because the RPI failed to establish waiver or prejudice.

An appraisal clause in an insurance policy binds the parties to have the extent or amount of the loss determined in a particular way. The purpose of an appraisal clause is to provide a means to resolve disputes about the amount of loss for a covered claim. A trial court has no discretion to ignore a valid appraisal clause.

Waiver requires the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.

Moreover, even after an impasse and the passage of an unreasonable amount of time, the appraisal challenger must also show any failure to demand the appraisal within a reasonable time after the impasse prejudiced it. It is difficult to meet this requirement.  It is difficult to see how prejudice could ever be shown when the policy, like the one here, gives both sides the same opportunity to demand an appraisal. If a party senses that impasse has been reached, it can avoid prejudice by demanding an appraisal itself.

Thus, to avoid appraisal, the RPI needed to prove waiver — and prejudice resulting from the waiver.

An “impasse” is the apparent breakdown of good-faith negotiations. Since the insured never notified the insurer that it refused to discuss the matter further, and knowledge that the insured disagreed with the insurer’s damage estimate was irrelevant because mere disagreement does not in itself establish an unwillingness to negotiate further. The RPI never advised Acceptance Indemnity of a refusal to further negotiate, and Acceptance Indemnity’s knowledge that the RPI disagreed with its position is insufficient to establish an impasse.

After the demand letter, no further action was taken until Acceptance Indemnity moved to compel appraisal on August 1, 2017. Two weeks later, the RPI filed suit.

There is nothing in the record to show Acceptance Indemnity was unwilling to negotiate further or reconsider its position. Thus, Acceptance Indemnity invoked the appraisal clause before an impasse was ever reached. It was only when the RPI filed suit that Acceptance Indemnity had notice of an impasse, and by that time, Acceptance Indemnity had invoked the appraisal clause. There no unreasonable delay in this case, in fact, there was no delay at all. Rather, Acceptance Indemnity invoked the appraisal clause before it had notice of an impasse with regard to negotiations. Accordingly the RPI failed to carry its burden to establish waiver, having failed to establish an unreasonable delay following an impasse. Because the RPI failed to establish waiver in the first instance there was no need for the appellate court to decide whether it proved prejudice as both are mandated.

The RPI contends appraisal is not required because Acceptance Indemnity improperly used the appraisal clause as a litigation tactic to extinguish the RPI’s constitutional right to a jury trial on the amount and damages and its statutory and common law claims. Moreover, the RPI contends the appraisal clause lacks “mutuality” and is illusory, and is therefore, unenforceable.

In the appraisal clause, it states the insured “will still retain [its] right to bring a legal action against us, subject to the Legal Action Against Us Commercial Property Condition.” That provision merely states no one may bring a legal action against Acceptance Indemnity under the policy unless there has been full compliance with the terms of coverage and the action is brought within two years and one day after the loss. Both Acceptance Indemnity and the RPI are bound by the valuation set by the appraisers, establishing mutuality, and Acceptance Indemnity retains the right to deny coverage and the RPI retains the right to sue.

Invocation of the appraisal clause denies the RPI a jury trial on the issue of valuation as a result of the right of the parties to contract for jury waivers.

CONCLUSION

The RPI failed to carry its burden to establish Acceptance Indemnity waived the appraisal clause and has presented no other viable argument that would have permitted the trial court to refuse to compel an appraisal. Accordingly, Acceptance Indemnity’s petition for writ of mandamus was granted and the trial court was directed to:

  1. vacate its order denying Acceptance Indemnity’s motion to compel appraisal and abate;
  2. order the parties to engage in the appraisal process pursuant to the terms of the appraisal clause; and
  3. abate the litigation pending the completion of the appraisal process.

ZALMA OPINION

Appraisal is a fair and reasonable method to resolve disputes concerning the amount of loss and avoid unnecessary litigation. The Real Party in Interest wanted a jury to decide the amount of loss which would require the court to ignore the clear and unambiguous language of the policy. Appraisal saves time and money for both parties. Both parties, when resolution is difficult, should use appraisal to avoid litigation.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

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The Insurance Claims Professional

To Be or Not to be an Insurance Claims Professional

Insurance is, and always has been, a business of utmost good faith. That means that every insurance claims person must deal with insureds and claimants fairly, professionally and ethically. The following three books – available on Amazon.com – are available to help everyone in the insurance claims business to become an insurance claims professional by explaining the ethical obligations of the claims person, how unethical behavior by the insured an insurer to void a policy and how the examination under oath allows the claims professional to complete the thorough investigation required by practice and law.

Ethics for the Insurance Professional

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

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

Available as a paperback.

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.

“The Insurance Examination Under Oath”

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

Available as a Kindle book.

Available as a paperback.

Read about these and other insurance books by Barry Zalma at the Insurance Claims Library.

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A Person Who Acts as her Own Attorney has a Fool for a Client

Without Evidence that an Insurer’s Breach Was Unreasonable, Frivolous, or Unfounded, Bad Faith Suit Fails

Representing herself in an appeal to the Ninth Circuit, Mary-Ann Bernadette Kerrigan failed to challenge the district court’s dismissal of her claim or the one year private limitation of action provision in the policy. As a result, in Mary-Ann Bernadette Kerrigan v. QBE Insurance Corporation, a foreign company, No. 18-35019, United States Court Of Appeals For The Ninth Circuit (September 18, 2018) her appeal failed summarily.

Mary-Ann Bernadette Kerrigan appealed pro se, acting as her own attorney as a lay person, from the district court’s summary judgment in her diversity action alleging state law claims arising from a homeowners insurance policy.

SUMMARY JUDGMENT GRANTED

The district court granted summary judgment on Kerrigan’s extra-contractual claims because Kerrigan failed to raise a genuine dispute of material fact as to whether defendant’s investigation of her insurance claim and the denial of benefits was reasonable. To establish bad faith, an insured is required to show the breach was unreasonable, frivolous, or unfounded.

THE APPEAL

In her opening brief, Kerrigan failed to challenge the district court’s dismissal of her claims premised on the insurance contract and specifically its ruling regarding the insurance policy’s one-year contractual limitations provision. As a result, she waived any such challenge. On appeal, arguments not raised by a party in its opening brief are deemed waived.

Kerrigan’s motions to supplement the record were denied because Kerrigan has not demonstrated “extraordinary circumstances.” Absent extraordinary circumstances, the Ninth Circuit generally does not permit parties to supplement the record on appeal.

ZALMA OPINION

The Ninth Circuit, like every appellate court, is offended when an appellant fails to do the very minimum to present the appeal in an appropriate manner. In this case, Ms. Kerrigan, proving the principle that a person who represents herself has a fool for a client and an even more foolish pro se lawyer, had her appeal dismissed.

Kerrigan, whether as a result of a lack of knowledge or a lack of a case, did everything possible to offend the court and tried to raise issues on appeal that were not raised in the trial court or in her opening brief. Attempting to prove insurer bad faith without evidence, or even a claim, that the insurer’s breach was unreasonable, frivolous, or unfounded or that her suit was timely filed, gave the court no option but to reject her appeal.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

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Every Insurer Must Comply With California Claims Regulations

Understand Fair Claims and SIU Regulations

California has imposed on every insurer that does business in the state fair claims settlement practice regulations and SIU regulations that micro-manage the insurance claims profession. Failure to fulfill the Regulations or annually train claims personnel can cause the insurers to be required to pay enormous fines to the state. Avoid the problem with the two books by Barry Zalma.

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.

Read about these and other insurance books written by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Public Adjuster Violates Statutory Fee Cap

Public Adjuster Contract Puts Insurer on Horns of a Dilemma

Public insurance adjusters serve a purpose – the represent insureds who are unable or unwilling to represent themselves in a first party property claim. They are entitled to a contingency fee based upon the amount they recover on behalf of the insured from the insurer. Florida, to protect its citizens, limit the fee that a public adjuster can charge to no more than 20% of the gross recovery from the insurer.

In Gables Insurance Recovery, Inc., etc. v. Citizens Property Insurance Corporation, No. 3D15-2320, No. 3D16-87, Third District Court of Appeal State of Florida (September 20, 2018) two homeowners suffered water damage to their homes, and after being unable to collect under their insurance policies, they assigned their claims against their insurance company to a public adjuster. The Florida Court of Appeal was asked to decide whether the insureds validly assigned their claims such that the public adjuster had standing to bring breach of insurance contract claims on their behalves. The trial court in each homeowner’s case granted summary judgment in favor of the insurance company, finding that the assignments could not confer standing because they violated state law (Florida Statutes section 626.854(11)(b) (2014)) prohibiting public adjusters from entering into a contract that charged the homeowners more than twenty percent of the payments made on the insurance claims.

FACTUAL BACKGROUND — Case Number 15-2320: Ethel Matusow

Ethel Matusow’s home suffered water damage.  Matusow hired Gables Insurance Recovery, Inc. as a public adjuster “to appraise, advise and assist” with her claim against Citizens. The public adjusting contract allowed Gables Recovery to “retain on [Matusow’s] behalf the professional services of appraisers, estimators, engineers and other experts reasonably needed to assist in this matter and to further [] pursue the claim and corresponding payments.” For its efforts, the contract called for Gables Recovery to be paid “20% of the gross amount of the collectible loss or damage recovered.”

Ultimately, Gables Recovery was unable to reach a settlement with Citizens. Matusow, then, entered into a second contract with Gables Recovery, assigning the company her entire claim.

As to compensation, the agreement provided that Gables Recovery would “retain 20% of all amounts collected for the proceeds pertaining to the coverage set forth in the insurance policy.” Gables Recovery was also entitled to recover, collect, retain and otherwise [was] entitled to receive any attorney fees and costs.

Gables Recovery, as Matusow’s assignee, demanded that Citizens pay $21,130.63 under the policy to fix the water damage in Matusow’s home. When Citizens refused to pay, Gables Recovery sued for breach of the insurance policy. Citizens answered and asserted as an affirmative defense that Gables Recovery had no standing because the Matusow assignment violated section 626.854(11)(b) – the twenty percent statutory compensation cap for public adjusters.

The trial court granted Citizens’ summary judgment motion, denied rehearing, and entered judgment in its favor.

Case Number 16-87: Christopher Difilippi

Like Matusow, Christopher Difilippi filed an insurance claim with Citizens when his house suffered water damage. Other than the compensation amount, the contract was identical to the Matusow public adjuster contract.

The public adjuster sued based upon the Difilippi assignment. The two documents were identical to those signed by Matusow except for Difilippi’s personal information, and the amount of compensation owed to Gables Recovery. Under the Difilippi agreement, Gables Recovery retained ten percent of any insurance proceeds recovered from Citizens, plus fees and costs.

Gables Recovery, as Difilippi’s assignee, notified Citizens that the initial payment did not cover all the damage to Difilippi’s home. When Citizens refused to pay the additional claim, Gables Recovery sued for breach of the insurance policy.

The trial court granted Citizens’ summary judgment motion, and entered final judgment in favor of Citizens.

DISCUSSION

Because Gables Recovery was not a party to – or a third party beneficiary of – the insurance contracts between the insureds and Citizens, there is no dispute that the only way the company could have standing to sue on behalf of the homeowners was if the assignments were valid. If the assignments were not valid, then as a non-party to the insurance contracts Gables Recovery would have no right to sue.

In general, contracts are assignable unless forbidden by the terms of the contract, or an assignment would violate some rule of public policy or some statute, or unless they involve a question of personal trust and confidence.

Was Gables Recovery acting as a public adjuster?

Gables Recovery first argues that the Matusow and Difilippi agreements did not violate the twenty percent cap because the company was no longer acting as the homeowners’ public adjuster when the lawsuits were filed.

Here, the undisputed evidence was that the Matusow and Difilippi agreements met the statutory  definition of public adjuster.

Gables Recovery agreed to do much more than simply file and prosecute a lawsuit in exchange for a commission. The agreements gave Gables Recovery “full discretion and authority to proceed with all efforts to recover any and all amounts due, owing, and or payable, it deem[ed] necessary including the filing of the claim in court.” Gables Recovery agreed to use “all efforts” to recover money for Matusow and Difilippi. “[A]ll efforts” included litigation, but it also included continued negotiation and settlement with Citizens.

Based on the agreements and the affidavit of the company representative, there was no genuine dispute that Gables Recovery was acting as Matusow and Difilippi’s “public adjuster.

Was Gables Recovery a duly licensed attorney?

Gables Recovery was licensed as a section 626.854 public adjuster, and not a duly licensed attorney.

Did the Matusow and Difilippi agreements violate section 626.854(11)(b)?

Gables Recovery next argues that the trial court erred because there was a genuine issue of material fact regarding whether its agreements with Matusow and Difilippi violated the twenty percent cap. There is no dispute as to the Matusow agreement but there is as to Difilippi’s.

Under the Matusow agreement, the homeowner agreed to pay Gables Recovery twenty percent of any recovered insurance money plus any attorney fees and costs or any other applicable provision of state or federal law entitling the prevailing party to attorney fees and costs. This violated section 626.854 because the agreement would have her pay twenty percent of what was recovered in addition to prevailing party attorney’s fees and costs. Having Matusow “agree to” pay the attorney’s fees and costs in addition to the twenty percent was a “thing of value” in excess of the twenty percent cap, which is prohibited by the statute.

The Difilippi agreement, however, compensated Gables Recovery ten percent of any insurance proceeds and any applicable attorney fees and costs.

The attorney fees under the agreements are not being paid to attorneys. Only Gables Recovery is “entitled to . . . receive” this money under the contract. Together with the twenty percent contingency, Gables Recovery agreed to be paid in excess of what was allowed under section 626.854(11)(b).

The trial courts found that Gables Recovery did not have standing because the insureds assigned their insurance claims in violation of state law. The Court of Appeal affirmed that finding as to the Matusow claim – no more – and no less. Matusow violated state law when she assigned her insurance claim. Nothing in this opinion invalidates the insurance contracts between Citizens and their insureds, or the professional services agreements between the insureds and their public adjuster, Gables Recovery. Now, as before, Citizens is still Matusow’s insurer and Gables Recovery can represent her as her public adjustor.

CONCLUSION

Florida, as of now, allows for the assignment of claims on an insurance policy.

There is a genuine issue of material fact on whether the Difilippi assignment violated section 626.854(11)(b) and it is up to the trial court to determine whether the fees and costs would raise an amount in excess of 20%. If it does the Difilippi case can be dismissed. If not it can go through trial.

ZALMA OPINION

The public adjusters in these two cases are not attorneys. Although there is no law that a public adjuster cannot also be a lawyer, in this case they were not but they still insisted on receiving attorneys fees. They needed to hire lawyers to sue the insurer. Yet, their contract allows them to collect from the proceeds of the suit the fees they must pay the lawyers they hired. By so doing they clearly violated the limit set by the statute in one case and may – depending on how much the attorneys fees and costs add up to be – end up violating the statute. If the insurer litigates aggressively it may force the costs to the point where the case will be dismissed. Of course, doing so may exceed the cost of negotiating a settlement. The assignment causes the insurer to face the dilemma of paying its lawyers or the public adjuster.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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How to Adjust Claims

Primer’s for the Adjuster

Are you a new insurance adjuster? Do you wish you were thoroughly trained to be an adjuster? Do you need a refresher on how to investigate and adjust claims? Do you want to become a professional insurance adjuster? Do you employ inexperienced and poorly trained adjusters? Do you want to avoid claims of the tort of bad faith? If so, the Compact Book of Adjusting Property Insurance Claims and The Compact Book of Adjusting Liability Insurance Claims will provide what you need.

The Compact Book of Adjusting Property Insurance Claims”

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

Available as a Kindle book.

Available as a paperback.

“The Compact Book on Adjusting Liability Claims”

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.

Read about this and other insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Can’t Change an Appraisal Award

Appraisal Award Does Not Prevent Suit for Breach of Contract or Bad Faith

For more than a century appraisal has allowed insureds and insurers who cannot agree on the mount of a first party property loss to resolve the question. In Andres Trucking Company v. United Fire and Casualty Company, Court of Appeals No. 17CA1672, 2018 COA 144, Colorado Court Of Appeals (September 20, 2018) Plaintiff, Andres Trucking Company (Andres Trucking) was unhappy with the process and with the award issued by the appraisers.

The trial court dismissed the breach of contract and bad faith suit because the award resolved, in its opinion, all issues. Andres appealed the judgment entered on its breach of contract and statutory bad faith claims in favor of defendant, United Fire and Casualty Company (United).alled for in the parties’ policy necessarily resolved those claims.

The Court of Appeal was asked to determine whether Andres Trucking’s participation in the contractual appraisal process resolved its claims against United and effectively ended the litigation.

BACKGROUND

Andres Trucking operates a dump truck in Steamboat Springs, Colorado. The truck was insured by United under a policy that included a standard appraisal provision.

In June 2015, while covered by the insurance policy, the truck caught fire. Both parties agreed the truck was a total loss but disagreed about the truck’s value.

After the parties’ discussions failed to lead to an agreement, Andres Trucking sued United. The complaint alleged that United unreasonably refused to pay the value of the truck and related damages, including storage fees, and asserted claims for breach of contract and bad faith denial and delay of an insurance claim under state statutes.

United moved to compel appraisal and stay the proceedings; over Andres Trucking’s objection, the court granted the motion.

The parties proceeded to appraisal. Andres Trucking submitted an appraisal valuing the truck at $42,500, United submitted an appraisal of $33,454, and the umpire obtained an appraisal of $54,289. The umpire ultimately settled on a value of $39,507 plus $3907 in taxes, which United paid.

In January 2017, after United paid Andres Trucking the appraised value of the truck, it moved for entry of judgment contending that, as a matter of law, the completion of the appraisal process had resolved Andres Trucking’s claims. Andres Trucking objected, contending that “several issues” required determination by a jury, including whether United had unreasonably denied or delayed paying the claim and whether United had breached the insurance contract by failing to pay all of Andres Trucking’s damages.

The trial court reasoned that, upon completion of the appraisal process, “the issues before the court were concluded,” and that “[a]ll that remains is for judgment to enter.” The court then entered judgment in favor of United on Andres Trucking’s breach of contract and statutory bad faith claims.

ANALYSIS

The district court did not reach any conclusions about the sufficiency of the complaint’s allegations or the plausibility of the claims for relief. An appraisal is an act of estimating or a valuation of property by the estimate of an authorized person. By its own terms, the appraisal provision in United’s policy was triggered only when the parties disagreed “on the amount of ‘loss,'” and the provision allowed either party to “demand an appraisal of the ‘loss.'” (Emphasis added.)

The provision did not purport to be a mechanism for resolving any other disagreements between the parties. Indeed, the provision expressly reserved to United the right to contest liability, notwithstanding the parties’ participation in the appraisal process. Unlike arbitration, appraisal “establishes only the amount of a loss,” and not other issues including liability and coverage. An appraisal does not resolve issues such as whether the insurer is liable under the policy.

In concluding that an appraisal necessarily precludes further litigation, the district court appears to have relied on its determination that the appraisal process cannot be a violation of an insurance company’s contractual or statutory duty to adjust a claim. The Court of Appeal did not disagree with these general propositions, but it held they miss the point of Andres Trucking’s allegations. The crux of its complaint is that United unreasonably delayed paying the claim; attempted to pressure Andres Trucking into accepting less than the full value of the insured property; refused to pay additional damages related to the loss; did not invoke the appraisal provision until months after submission of the claim; and then, during the appraisal process, valued the claim at a lower amount than it had offered during earlier negotiations.

The insurer’s mere invocation of the appraisal provision, at some point during the dispute, does not immunize it from liability for a claim of bad faith. “Bad faith conduct may occur before, during, and after the appraisal process.”

The Court of Appeal rejected United’s contention that any error by the district court in dismissing the claims based on its misapprehension of the appraisal process was harmless.

When the court granted United’s motion, United had not yet answered the complaint, the parties had not engaged in discovery, neither party had filed a motion for summary judgment, and the court did not tell the parties in advance that it would treat the motion as one for summary judgment. Accordingly, the claims were not susceptible of resolution. As a result the district court erred in determining that appraisal necessarily precluded Andres Trucking from pursuing its breach of contract and statutory bad faith claims. The judgment was reversed.

The Appraisal Award is a Binding Determination of the Value of the Insured Property

Having determined that the appraisal process does not, as a matter of law, preclude Andres Trucking from litigating its claims, the Court of Appeal addressed its various challenges to the appraisal process itself. The appraisal award is a binding determination of the value of the insured property, and thus Andres Trucking may not further litigate that issue.

The Appraisal Provision is Enforceable

For nearly 100 years, appraisal provisions like the one in Andres Trucking’s policy have been held enforceable under Colorado law and the law of almost every U.S. state. At this point, most, if not all, property insurance policy contracts include an appraisal clause which may be invoked if there is a dispute between the insured and the insurer over the amount of loss. As courts have uniformly recognized, these provisions provide a plain, speedy, inexpensive and just determination of the extent of the loss. Accordingly, the Court of Appeal concluded that the district court did not err in enforcing the appraisal provision.

The Appraisal Process Produced a Valid Loss Amount

The Court of Appeal concluded that it may not rewrite clear and unambiguous contract provisions, may not write that phrase into the contract. Andres Trucking counters that the district court, in clarifying the appraisal provision, instructed the parties that if the appraisers could not agree on a value, the umpire previously selected by them will offer his/her opinion of value, and that if two of the three do not match in their opinions, the appraisal process is completed.

The district court recognized as much in a later order, in which it construed the appraisal provision and determined that the loss amount agreed to by the umpire and United’s appraiser satisfied the provision, resulting in a binding loss determination.

The appraisal award issued under an insurance policy is binding so long as the appraisers (including the umpire) have performed the duties required of them by the policy. As a general matter, an appraisal award entered by an umpire may be disregarded only if the award was made without authority or was made as a result of fraud, accident, or mistake. The Court of Appeal is in no position to second-guess the mathematical process adopted by an umpire whose competence and impartiality were never challenged.  Under the circumstances, Andres Trucking failed to carry its burden to establish a “manifest mistake” in the umpire’s valuation.

The order approving the appraisal value is affirmed but the judgment is reversed and the case is remanded to the district court for reinstatement of Andres Trucking’s complaint.

ZALMA OPINION

The decision is based on the fact that United moved too quickly to dismiss the suit since it neither answered the complaint nor did it do any discovery. Clearly the appraisal award was more than United wanted to pay and less than Andres claimed. That proved that the reason for appraisal was appropriate and that there was a good faith dispute between Andres and United so that there will be proof at trial, or a motion for summary judgment, because of the genuine dispute between the parties making it difficult for Andres to prove that there was a breach of contract or an act of bad faith.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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Bad Faith & Insurance Fraud

Available as Kindle or Paperback Books

The tort of bad faith has, in my opinion, run its course. It is now a method used to bludgeon insurers to pay claims they do not owe for fear of tort and punitive damages for which no premium was charged. It also helps fraud perpetrators succeed by giving them a weapon to convince insurers to pay rather than fight.

In my books “Time to Rescind the Tort of Bad Faith” and “Insurance Fraud and Weapons to Defeat Fraud” are essential tools for those involved in insurance and insurance claims.

Time to Rescind the Tort of Bad Faith

Insurance and the Law of Unintended Consequences Paperback 

Insurance is, and always will be, a business of the utmost good faith. Time to Rescind the Tort of Bad Faith: Insurance and the Law of Unintended ConsequencesAll parties to the insurance contract agree, in good faith and fair dealing, to do nothing to deprive the other the benefits of the contract. Insurance is, and always be, nothing more than a contract.

The insurer makes a promise to the insured that if a contingent or unknown loss occurs caused by a peril or risk insured against and not excluded, to pay the insured indemnity as promised by the contract up to the limits provided.

The insured promises to truthfully disclose the risks of loss faced by the insured, property owned by the insured, the business of the insured and/or the insured’s liability exposures. The insured also promises to honestly present a claim, prove the claim, and cooperate with the insurer in its investigation. If the parties to the insurance contract deal with each other fairly and in good faith the policy remains viable, claims are paid promptly and to the satisfaction of the insurer and the insured.

Only if a true tort occurs can the insured waive the contract action and sue in tort. Breach of contract, by centuries old tradition, is not a tort and cannot and should not be considered a tort. The Tort of Bad Faith has served its purpose and is now causing more problems than it solves. It is time the courts and state legislatures rescind the tort and return to common law contract damages.


“Insurance Fraud & Weapons to Defeat Insurance Fraud”

In Two Volumes

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

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.

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

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

Insurance Fraud & Weapons to Defeat Fraud - Volume Two: A Manual for Those Working to Defeat Insurance Fraud by [Zalma, Barry]This book contains appellate decisions regarding insurance fraud from federal and state appellate courts across the country and full text of many insurance fraud statutes.

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

Read about this and more insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Zalma’s Insurance Fraud Letter – October 1, 2018

October 1, 1979 – 2018 Another Anniversary

 Zalma’s Insurance Fraud Letter, Volume 22, No. 19     

 
Thirty nine years ago today I left the world of the employed and became an entrepreneur by opening my own law firm. The law practice was incorporated shortly thereafter as Barry Zalma, Inc. When I opened for business on October 1, 1979, I had no clients and no certainty that I would have any in the future. I had borrowed money from the bank to carry me through the first six months and was concerned about my ability to pay the loan with my second child about to be born.
 
Much to my surprise and pleasure, on October 1, 1979, at 8:10 a.m., my friend Alan Warboys called from London and provided me with my first case as an independent lawyer to represent Certain Underwriters at Lloyd’s, London.  
He, and the Lloyd’s Underwriters he represented, showed faith in me as a lawyer and insurance expert. Alan is now, and will forever be, my law firm’s first client and a good friend.

 A Means to Avoid the Tort of Bad Faith 

I will be speaking on the subject at the Pacific Claim Executive Association (PCEA) fall meeting on Thursday, October 11, 2018 at  the Laguna Cliffs Marriott Resort & Spa, 25135 Park Lantern, Dana Point, California 92629, Phone: 800-533-9748 on the need for professional insurance claims handlers as a means to avoid the tort of bad faith. Please come by and say hello if you can attend the conference.

  Inflated No Fault Insurance Claims Disallowed 

No fault insurance – a system designed to save insureds and insurance companies
money from unnecessary litigation seems to have the opposite result. Instead of helping
the injured no fault insurance has encouraged staged accidents, claims of injury in
accidents that never occurred, and over-treatment of injuries or billing for treatment
never provided. Some insurance companies have begun to fight back and require
examinations under oath and refusal to pay inflated and exaggerated medical bills.
ACE Insurance should be commended for taking the time, expense and effort to defeat
a fraudulent claim and the New York Court for refusing to allow the allegedly injured
and their medical providers – none of whom were willing to appear – to collect
anything from the insurer.
This case gives us hope that fraudulent insurance claims can be defeated.

The Current Issue Contains the Following 

  • October 1, 1979 – 2018 Another Anniversary
  • A Means to Avoid the Tort of Bad Faith
  • Inflated No Fault Insurance Claims Disallowed
  • Barry Zalma Speaks at Your Request
  • Insurance Fraud in the U.K. Results in Two Year Sentence
  • Wisdom
  • Public Adjuster’s Fraud Imputed to Insured
  • Barry Zalma
  • Court Upholds Fines Under California Fair Claims Settlement Practices Regulations
  • Only in California “Wilfull” is also “Unintentional” or “Accidental
  • Good News From the Coalition Against Insurance Fraud
  • Zalma’s Flat Rate Opinions
  • Health Insurance Fraud Convictions
  • Become a Certified Expert in Corporate Property Insurance and a Certified Expert in Corporate Liability Insurance
  • Other Insurance Fraud Convictions
  • Books from Barry Zalma

Go to Zalma Books – Paperbacks and Kindle Books  by Barry Zalma at the Insurance Claims Library

Zalma on Insurance – A Blog

Zalma’s Insurance 101

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

If you start at Volume 1 at the bottom of the blog’s first page and view one or two videos a day you will have approximately 12 to 24 hours of training a year until you get to the last video.

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Zalma on Insurance Claims

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

Zalma on Insurance Claims Volume 101

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

This series of ten 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.

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

  • Property insurance claims;
  • Third-party liability claims;
  • Casualty claims; and
  • Insurance Fraud

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. As you read through the various volumes of Zalma on Insurance Claims, you will find comprehensive—yet comprehensible—coverage of key topics, including:

  • What is Insurance?
  • The History of Insurance
  • The covenant of good faith and fair dealing.
  • The tort of Bad faith
  • Conditions,
  • Warranties,
  • Exclusions
  • Declaring a policy void
  • Duties of insured and insurer
  • Evaluation and settlement
  • Identifying insurance fraud
  • Investigation
  • Kinds of insurance policies
  • Other insurance clauses
  • Preparing a case for trial
  • Processing a claim
  • Responses to fraud
  • Subrogation and salvage
  • Underwriting and
  • Many more property and casualty insurance matters.

Zalma on Insurance Claims Part 102

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

  • Other Insurance Clauses
  • Underwriting
  • Conditions, Warranties and Exclusions

 

Zalma on Insurance Claims Part 103

This is part 103 of Zalma on Insurance Claims and will deal with:

1.Duties of the Insured and the Insurer
2.Declaring a Policy Void
3.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.

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.

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.

Zalma on Insurance Claims Part 106

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

Chapter 1 Property Insurance & the Tort of Bad Faith
Chapter 2 Grounds for Finding Bad Faith
Chapter 3 Avoiding Charges of Bad Faith
Chapter 4. Punitive Damages
Chapter 5.Bad Faith & Liability Insurance
Chapter 6.Defenses to the Tort of Bad Faith
Appendix 1 – California Civil Code Section 3294

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

Zalma on Insurance Claims Part 107:

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

Zalma on Insurance Claims Part 108

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

Zalma on Insurance Claims Part 109 

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

Zalma on Insurance Claims Part 110

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

Read about these and other insurance books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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SEC Disgorgement Order is a Penalty & a Public Wrong

No Insurance Protection for Knowingly Facilitating Deception & Market Timing

In 2003, the SEC began an investigation to determine whether Bear Stearns violated securities laws between 1999 and September 2003 by knowingly facilitating “late trading” and deceptive “market timing” for certain hedge fund customers, and affirmatively assisting those customers in evading detection, thereby enabling them to earn hundreds of millions of dollars in profits at the expense of mutual fund shareholders. In 2006, the SEC notified Bear Stearns that it intended to institute civil proceedings against it seeking monetary sanctions of $720 million. Bear Stearns settled with the SEC and sought indemnity from its insurer.

In J.P. Morgan Securities, Inc., et al. v. Vigilant Insurance Company, et al, 600979/09 6735, 2018 NY Slip Op 06146, Supreme Court, Appellate Division First Judicial Department (September 20, 2018 ) Vigilant Insurance Company and other defendants appealed from a judgment of the trial court awarding plaintiffs sums of money, including prejudgment interest, as against defendant insurers Vigilant Insurance Company, The Travelers Indemnity Company and Federal Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., and Liberty Mutual Insurance Company  (Vigilant).

FACTS

In March 2006, after Bear Stearns made a formal offer of settlement, the SEC issued an “Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions” in which Bear Stearns, “without admitting or denying the findings [made pursuant to its offer of settlement],” agreed to pay “disgorgement in the total amount of $160,000,000” and “civil money penalties in the amount of $90,000,000.”

After the Vigilant defendants refused to indemnify Bear Stearns, plaintiffs commenced this action for breach of contract and a declaration that defendants have a duty to indemnify Bear Stearns, asserting that all the claims fall within the definition of “Loss” under the subject insurance policies.

The motion court granted plaintiffs’ motions for summary judgment and denied the defendants’ motions for summary judgment. The Court found that

  1. based on the broad definition in the policy, the $140 million disgorgement payment at issue constituted a covered loss because it represented third-party gains;
  2. the public policy exception for loss arising out of intentionally harmful conduct did not bar coverage because nothing indicated that Bear Stearns deliberately intended to cause injury to mutual fund investors, and the hearsay statements by Bear Stearns’s employees that customers’ late trading and market timing transactions harmed mutual fund investors were insufficient to raise a triable issue of fact;
  3. the personal profit exclusion did not bar coverage because it applied to claims based upon or arising out of the insured “gaining in fact any personal profit or advantage” to which the insured was not legally entitled and here the profit accrued to third parties and Bear Stearns did not derive any greater compensation for late trading and market timing transactions than it did for other mutual fund trades that it cleared;
  4. the prior knowledge exclusion did not bar coverage because, construing the ambiguous clause in favor of the insured, the term “officer” did not refer to all employees whose job title included the term “officer,” but was limited to employees with important executive and managerial duties; and
  5. the $140 million settlement, after defendants denied coverage, was reasonable in view of Bear Stearns’s exposure and the probability that the SEC would prove its claims.

THE POLICY

The primary professional liability policy, to which the excess policies follow form, provides that the Insurers are to “pay on behalf of [Bear Stearns] all Loss which [Bear Stearns] shall become legally obligated to pay as a result of any Claim “. . . for any Wrongful Act of [Bear Stearns].”

“Loss” is defined as: “(1) compensatory damages, multiplied damages, punitive damages where insurable by law, judgments, settlements, costs, charges and expenses or other sums [Bear Stearns] shall legally become obligated to pay as damages resulting from any Claim or Claim(s); “(2) costs, charges and expenses or other damages incurred in connection with any investigation by any governmental body or self-regulatory organization (SRO), provided however, Loss shall not include: “(i) fines or penalties imposed by law; or . . . “(v) matters which are uninsurable under the law pursuant to which this policy shall be construed.”

ANALYSIS

Vigilant argues that there is no coverage because the United States Supreme Court in Kokesh v Securities and Exchange Commission (_ US_, 137 S Ct 1635 [2017]) conclusively defined the nature of the SEC disgorgement remedy as a penalty, not a loss.

In Kokesh, decided after the Court of Appeals’ prior decision reinstating the complaint, the United States Supreme Court held that SEC disgorgement constitutes a penalty. In so ruling, the Supreme Court reasoned that SEC disgorgement

  1. is imposed as a consequence for a wrong committed against the public, rather than a wrong against particular individuals;
  2. is meant to punish the violator and deter others from similar violations; and
  3. in many cases, does not compensate the victims of securities violations; rather, the wrongdoer pays disgorged profits to the district court, which has discretion to determine how and to whom to distribute the money.

The United States Supreme Court’s decision in Kokesh, characterizing SEC disgorgement as a penalty, represents a change of law.

Because the SEC’s findings conclusively linked the disgorgement payment to improperly acquired funds in the hands of the insured that directly implicated the policy rationale for precluding indemnity for disgorgement to prevent the unjust enrichment of the insured by allowing it to, in effect, retain the ill-gotten gains by transferring the loss to its insurer.

Kokesh provides the needed precedent, establishing that disgorgement is a penalty, whether it is linked to the wrongdoer’s gains or gains that went to others.

As an initial matter, it is not clear that disgorgement, as courts have applied it in the SEC enforcement context, simply returns the defendant to the place he would have occupied had he not broken the law. SEC disgorgement sometimes exceeds the profits gained as a result of the violation. Disgorgement in this context is a punitive, rather than a remedial, sanction. Disgorgement is intended not only to prevent the wrongdoer’s unjust enrichment but also to deter others’ violations of the securities laws.

The United States Supreme Court has made clear that SEC disgorgement is a penalty because it punishes a public wrong. Its purpose is deterrence, whether you are remitting your own ill gotten gains or those you generated for your customers through violations of the securities law, even if you did not directly share in those profits.

In this insurance dispute arising out of the insured’s monetary settlement of a Securities and Exchange Commission proceeding and related private litigation predicated on the insured’s violations of federal securities laws, the appellate court concluded that defendant insurers should be granted summary judgment declaring that plaintiffs are not entitled to coverage for the portion of the SEC disgorgement payment, $140 million, allegedly representing the improper profits acquired by third-party hedge fund customers, at issue in this appeal.

ZALMA OPINION

Insurance is only intended to provide indemnity for losses that are fortuitous – accidental – and should never be intended to provide indemnity for intentional, criminal or quasi criminal acts. When an insured, Bear Stearns in this case, is found to have violated the law and is assessed punishment damages, the reason for the damage assessment were not fortuitous but were intentional and resulted from an intentional violation of federal securities law.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

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A Review From Bill Wilson

Zalma on Insurance Claims

A Review by Bill Wilson

“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. I have been a user of the original “Insurance Claims: A Comprehensive Claims Guide” since 2007. There is nothing in the claims community I’ve seen that remotely approaches the comprehensiveness and relevancy of this indispensable resource.

Comprising over 2,000 pages, this definitive work is necessarily broken down into ten (10) parts and structured in a way that makes it an ideal foundation for an entire claims training program in addition to its value as a reference guide. These parts consist of:

Part 101                This part includes a discussion of industry basics, rules of contract interpretation (with a special application to the 9/11 World Trade Center loss), and policy basics by type of insurance contract. The rules of contract interpretation alone make this part an essential educational tool, not only for claims personnel, but also for any insurance professional, including underwriters, agents, attorneys, consultants, and risk managers.

Part 102                This part focuses on coordinating claims where multiple insurers are involved. Beginning with a discussion of Other Insurance clauses, it details the critical considerations, including allocating defense costs. It also examines relevant policy conditions, exclusions, and warranties.

Part 103                This part lays out the duties of all involved parties, particularly insurer and insured, and examines the processing steps involved in resolving claims. It also enumerates common mistakes that occur in the process.

Part 104                This part addresses specific issues dealing with property claims, such as mortgagees and valuation approaches.

Part 105                This part details investigative procedures, especially with regard to liability claims, and the determination of when the duty to defend exists.

Part 106                This part is largely devoted to bad faith claims against insurers, how to examine their merit, and how insurers can avoid such claims.

Part 107                This part provides additional detail on how to evaluate and settle property and liability claims, including the critical issue of when it is appropriate to settle early.

Part 108                While a minority of claims ever reach the trial level, understanding how to proceed effectively is critical, so this part focuses on trial preparation, including interviewing applicable parties.

Part 109                Mr. Zalma is recognized internationally as one of the foremost authorities on fraud and this part demonstrates why that recognition is well deserved. All aspects of fraud are examined, with notable attention to “red flags” to be aware of.

Part 110                This final part continues the fraud discussion and introduces considerations for unfair claims settlement practices and contract rescission by type of claim, concluding with tips on how to prepare the case, including procuring relevant expert testimony.

As I mentioned at the outset of this review, I’ve been using the original source of this updated work for over a decade. Much of my consulting work has involved assisting independent insurance agents and their customers in resolving claim dispute with insurers. I have used the material in Part 101 alone of this guide to assist in the resolution of literally thousands of claims. That resolution was not always in favor of the insured, illustrating the value of this guide regardless of which side of the dispute you may take. The bottom line is to efficiently and equitably resolve claims in a consistent manner and this guide, in its entirety, enables that process.

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. In particular, Part 101 should be required reading for every insurance professional in the industry.

Bill Wilson, CPCU, ARM, AIM, AAM,
Founder and CEO of InsuranceCommentary.com,
Author of “When Words Collide: Resolving Insurance Coverage and Claims Disputes”

Welcome to My Gigantic Email Signature
Bill Wilson, CPCU, ARM, AIM, AAM
Founder & CEO, InsuranceCommentary.com
Bill@InsuranceCommentary.com or InsuranceCommentary@outlook.com
Com•men•tar•y … an expression of opinions or offering of explanations

Details about the ten books are available at http://zalma.com/insurance-claims-library/

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Construction Defects and Insurance

A Resource for the Insurance Professional

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

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

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

The Eight volumes include:

Read about these and other insurance materials from Barry Zalma at the Insurance Law Library at http://zalma.com/insurance-claims-library/

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Failure to Fulfill Notice Requirement Fatal to Claim

Good Cause for Denial Defeats Bad Faith Claim

No one likes to have an insurance claim denied. More often than not when a claim is denied – no matter how good the reason – the insured sues for breach of contract and bad faith. They hope, by filing suit, the insurance company will pay rather than take a chance of being hit with punitive damages.

In Taylor et al. v. State Farm Fire & Casualty Co., A18A1398, Court of Appeals of Georgia (September 18, 2018) State Farm refused to fold, refused to pay tribute to avoid a bad faith suit, and took the case successfully to trial and the Court of Appeals. Charles and Alberta Taylor (collectively, the Taylors) appealed from a trial court’s order granting State Farm Fire and Casualty Company’s motion for summary judgment. The Taylors contend the trial court erred in finding that they failed to provide timely notice of their claim to State Farm, and that State Farm had reasonable grounds for denying their claim and therefore was not motivated by bad faith.

FACTS

The record reflects that the Taylors own a home in Fulton County that is subject to certain protective covenants governed by Regency Oaks Neighborhood Association, Inc. (the Association). From 2011 until February 2014, Alberta Taylor served on the Regency Oaks Advisory Committee (the Committee) and held a treasurer position within the Committee. As part of her service to the Committee, Alberta Taylor would send mass email bulletins to the entire community using an email address she created as a sub-account connected to her personal email address. In 2014 the board of directors formally transitioned from a developer-managed board to a board managed entirely by homeowners in the community (hereinafter “the Board”). The Committee was dissolved upon the formation of the Board, and Alberta resigned from the Committee and elected not to run for a position on the newly formed Board.

The Board asked that Alberta provide them with the login credentials for the email account she previously used as a member of the Committee to communicate with homeowners.  Alberta informed the Board that she deactivated the email account shortly after the Board was formed and her service on the Committee had ended. In response, the Board suspended the Taylors’ voting rights and access cards to community amenities, and it levied a $25 per day fine against the Taylors that constituted a lien on their property.

The Taylors sued the Association and the Association replied with a cross-claim.

THE POLICY

Three months after the Board was established and Alberta resigned from the Committee, State Farm Fire and Casualty Company issued a business owners policy with an effective period of May 2014 to May 2015 to the Association (“Policy”). The Policy included a directors and officers liability endorsement providing State Farm would “pay those sums the insured becomes legally obligated to pay as damages because of a wrongful act to which this endorsement provides.” As a general condition under the Policy, Section II, Para 3 (b) – (c) provide that “if a claim or suit is brought against an insured,” the insured is obligated to notify State Farm “as soon as practicable” with copies of any “demands, notices, summonses or legal papers received in connection with the claim or suit[.]”

Having learned about the Policy after filing suit, in January 2015 the Taylors sent a letter to State Farm notifying it of their lawsuit against the Association. Shortly thereafter, State Farm provided defense counsel to the Association pursuant to a reservation of rights, but did not respond to the Taylors’ letter. In July 2016, the Taylors stated in part that under the Policy’s definition of the insured, Alberta Taylor, as an officer of the Committee, was entitled to reimbursement of costs and attorney fees associated with defending the Association’s counterclaims against them.

After a jury trial, the trial court entered judgment in favor of the Taylors for their breach of contract and fiduciary duty claims against the Association and awarded damages and attorney fees. The Taylors sent a third letter to State Farm once again demanding coverage under the Policy and reimbursement for defending the counterclaims. Counsel for State Farm responded to the third letter and denied coverage to the Taylors on the ground that the Taylors were not considered an insured under the Policy.

COVERAGE LAWSUIT

The Taylors then filed suit against State Farm.  After hearing oral arguments on the cross motions, the trial court issued a final order granting State Farm’s motion. Specifically, the trial court held that the Taylors failed to fulfill their notice obligations under the Policy and that State Farm was entitled to judgment as a matter of law.

It is well established under Georgia law that those seeking recourse under an insurance policy are bound by its plain and unambiguous terms and that courts will enforce the provisions of the policy as written. Here, the record shows that the Taylors’ first letter to State Farm in January 2015 failed to mention the counterclaims raised against the Taylors, to demand coverage as an insured under the Policy, and to include a copy of the counterclaims as an attachment to the letter. The record further demonstrates that the Taylors did not demand coverage under the Policy until July 2016, eighteen months later. The record additionally reflects that at the time the July 2016 demand letter was sent to State Farm, discovery in the underlying case had been completed, dispositive motions had been filed, argued, and denied, and a September trial date had been scheduled.

A notice provision expressly made a condition precedent to insurance coverage is valid and must be complied with, absent a showing of justification.  Unexcused significant delay may be unreasonable as a matter of law.

DECISION

The Court of Appeal found that the trial court properly concluded that timely notice was a condition precedent to coverage and the January 2015 letter from the Taylors cannot be considered timely notice under the Policy. Even assuming that State Farm became aware of the existence of the counterclaims prior to the July 2016 letter, the Taylors provide no sound basis in law or the language contained within the four corners of the Policy as to how this alleged knowledge would relieve the Taylors of their affirmative obligation under the Policy to provide notice of their claim and forward a copy of the counterclaims to State Farm.

The Taylors next argue that the trial court erred by granting State Farm’s motion for summary judgment as to the Taylors’ claim that State Farm’s decision to deny coverage was made in bad faith. To support a cause of action under Georgia statutory law the insured bears the burden of proving that the refusal to pay the claim was made in bad faith. To do so, the insured must prove:

  1. that the claim is covered under the policy,
  2. that a demand for payment was made against the insurer within 60 days prior to filing suit, and
  3. that the insurer’s failure to pay was motivated by bad faith.

A defense that shows reasonable and probable cause for making it would vindicate the good faith of the company as effectually as would a complete defense to the action.

Penalties for bad faith are not authorized where the insurance company has any reasonable ground to contest the claim and where there is a disputed question of fact.

State Farm was not provided with notice of the Taylors’ claim under the Policy until July 2016. The January 2015 letter did not mention the Association’s counterclaim, did not request coverage under the Policy, and only forwarded a copy of the Taylors’ complaint. Moreover, the record reflects that the Policy did not become effective until three months after Alberta Taylor’s term on the Committee had ended. Thus State Farm had reasonable factual and legal grounds for denying coverage and was entitled to summary judgment on the Taylors’ bad faith claim.

ZALMA OPINION

The Taylor’s suit against State Farm should never have been filed. She was not an officer when the policy was acquired – and, therefore, not an insured – and she failed to promptly report the claim. Even if she reported her claim promptly there would have been no coverage. A waste of the time of a trial and appellate court.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

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Three Important Insurance Books

The Insurance Fraud Deskbook

Author: Barry Zalma

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

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

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

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

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

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

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

Property Investigation Checklists

Uncovering Insurance Fraud, 12th Edition


Author(s):

$254.00

Property Investigation Checklists: Uncovering Insurance Fraud, 12th

Property Investigation Checklists: Uncovering Insurance Fraud provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims:

• Recognizing suspicious claims

• Proper investigation procedures

• Analysis of laws concerning fraudulent personal and real property claims

• Evaluating and settling claims

The book also examines recent developments in areas such as arson investigation procedures, bad faith, and extracontractual damages. The appendix includes the NAIC Insurance Information and Privacy Protection Model Act.

Diminution in Value Damages: How to Determine the Proper Measure of Damage to Real and Personal Property

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

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

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

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

Read about these and other insurance books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library/

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The Danger of Retaining an Unlicensed and Dishonest Public Adjusters

Public Adjuster’s Fraud Imputed to Insured

Most public insurance adjusters are honorable professionals and members of the National Association of Public Insurance Adjusters (NAPIA). Unfortunately, it is not unusual that a person pretends to be a competent public adjuster and causes severe damage to the insurer and the insured the dishonest public adjuster sought to represent.

In Reverse Now VII, LLC v. Oregon Mutual Insurance Company, Case No. C16-209-MJP, United States District Court Western District Of Washington At Seattle (September 20, 2018) the danger faced by an insured who retains an unlicensed and dishonest public adjuster became clear and expensive.

BACKGROUND

This case arises out of an insurance claim filed by Reverse Now VII, LLC (“Reverse Now”) with its insurer, Oregon Mutual Insurance Company (“Oregon Mutual”) regarding the extent of coverage provided under its insurance policy (the “Policy”).

Reverse Retains HMA and Mr. Moreland

In February 2014, an apartment complex owned by Reverse Now and insured by Oregon Mutual was damaged by fire. Oregon Mutual accepted coverage and retained independent adjuster John Colvard to investigate the scope of repairs and adjust the loss.

In March 2014, Reverse Now retained public adjusters HMA Loss Consultants, Inc. (“HMA”) and Paul Moreland to represent it in its insurance claim. Oregon Mutual and Mr. Colvard were instructed to direct all further correspondence regarding the claim to HMA. Over the following months, Mr. Colvard and Mr. Moreland communicated concerning repairs to the apartment, and in particular, whether the exterior siding could be repaired or whether it required complete replacement.

Mr. Moreland Selects Mr. Gower as an Impartial Appraiser

In December 2015, Mr. Moreland informed Mr. Colvard that Reverse Now intended to enter the appraisal process provided under the Policy.  Reverse Now selected Randy Gower as its impartial appraiser.  Oregon Mutual selected Gary Halpin as its impartial appraiser. The appraisal panel found that Oregon Mutual owed an additional $188,544.23 for repairs. Oregon Mutual paid the balance shortly thereafter.

While the appraisal was ongoing, Reverse Now sued Oregon Mutual asserting claims for breach of contract; bad faith; and violations of the Insurance Fair Conduct Act (“IFCA”) and the Washington Administrative Code.

Mr. Moreland’s Alleged Misrepresentation and Concealment

In April 2018, Oregon Mutual learned that Mr. Moreland was not licensed as a public adjuster in the State of Washington during his representation of Reverse Now.  Nevertheless, Mr. Moreland held himself out as a public adjuster and performed the responsibilities of a public adjuster on behalf of Reverse Now for more than two and a half years in violation of RCW 48.17.060.  A knowing violation of RCW 48.17.060 constitutes a Class B felony.

Oregon Mutual also learned that Mr. Gower was not impartial, but instead had been “best friends” with Mr. Moreland for decades, that Mr. Gower and Mr. Moreland were former business partners, and that they often “worked the same claims together.”

These facts were never disclosed but were instead discovered by Oregon Mutual in its review of deposition transcripts in several cases pending in state court.

In May 2018, the Court granted Oregon Mutual leave to amend its answer to include affirmative defenses of misrepresentation and concealment, which it contends voided the Policy who then moved for summary judgment.

DISCUSSION

Oregon Mutual’s Motion for Summary Judgment

In the interests of discouraging insurance fraud, courts in Washington state have long upheld policy provisions stating that misrepresentation, concealment, or fraud in the claims process will void coverage. Courts will enforce such provisions regardless of whether the misstatements prejudiced the insurance company, and an insured need only make one material misrepresentation to void all coverage under the entire policy.

A misrepresentation is material if it involves a fact that is relevant to the claim or the investigation of a claim. While materiality is generally a mixed question of law and fact, it may be decided as a matter of law if reasonable minds could not differ on the question.

Oregon Mutual contends that there is no dispute that Reverse Now misrepresented and concealed material facts concerning:

  1. the extent of loss, and in particular, whether the exterior siding required partial or complete replacement;
  2. Mr. Moreland’s lack of a valid public adjusters’ license; and
  3. Mr. Gower’s lack of impartiality.

The Court concluded that summary judgment is appropriate as to claims where there can be no reasonable dispute that Mr. Moreland materially and knowingly misrepresented and concealed facts concerning his licensure and his pre-existing relationship with Mr. Gower, and that these misrepresentations can be imputed to Reverse Now.

Because the violation of RCW 48.17.060 constitutes a Class B felony indicates the legislature’s intent that public adjusters scrupulously comply with licensure requirements,  Mr. Moreland’s failure to maintain a license—and his failure to disclose that he was unlicensed—are far from “irrelevant.”

Further, Mr. Moreland failed to disclose his long-term relationship with Mr. Gower, another fact that is undoubtedly material. The Policy requires the appointment of an impartial appraiser and there can be no reasonable dispute that Mr. Gower was not impartial.

That Mr. Moreland’s misrepresentation and concealment is relevant to the claim or the investigation of a claim cannot reasonably be disputed. The Court concluded that the materiality requirement was satisfied.

Insured’s Knowledge of Misrepresentation and Concealment

The Court also concluded that Mr. Moreland and Reverse Now knowingly misrepresented material information.

It is undisputed that Vance Kemege, the principal of Reverse Now, had knowledge of Mr. Moreland’s failure to maintain a valid public adjusters’ license in October 2016, yet failed to disclose this information to Oregon Mutual. Reverse Now conceded that Mr. Moreland acted as its agent in the adjustment of the claim. There can be no dispute that Mr. Moreland’s communications—and lack thereof—with Oregon Mutual fell within the scope of that authority. Reverse Now retained Mr. Moreland and HMA to represent him in his claim, and HMA’s letter to Oregon Mutual specifically instructs that “[a]ll verbal and/or written communication should be directed to HMA.”

It is well-settled that an agent’s knowledge is imputed to his principal, and that a principal is liable for fraud or misrepresentations of his agent. If an agent has actual knowledge of a fact, the principal is charged with the legal consequences of having actual knowledge of the fact. If the agent has reason to know a fact, the principal is charged with the legal consequences of having reason to know the fact.

Although the issue of whether a misrepresentations by a public adjuster can be imputed to an insured appears to be a matter of first impression on the facts of this case, the Court concluded that they are. As a matter of public policy, an insured cannot be permitted to adopt a public adjuster’s acts when they benefit him, and disclaim them where they do not. By charging a principal with notice of material facts that an agent knows or has reason to know, imputation reduces incentives to deal through agents as a way to avoid the legal consequences of facts that a principal might prefer not to know.

The Court concluded that the knowledge requirement was satisfied, at least with regard to Mr. Moreland’s failure to appoint an impartial appraiser, and the court, therefore, granted Oregon Mutual’s Motion for Summary Judgment with respect to misrepresentation and concealment.

When an insured intentionally makes material misrepresentations regarding a claim for insurance coverage, any claim by the insured against the insurance company for bad faith  must fail since the purpose would not be served by providing a windfall to an insured guilty of fraud. Reverse Now’s misrepresentation and concealment were dispositive as to both of these claims.

ZALMA OPINION

The actions of the putative public adjuster and his close friend, pretending to be an impartial appraiser, deprived the insured of its right to the benefits of the policy. Adding expense and insult to the injury the court will require Reverse Now to repay Oregon Mutual the benefits it paid when it was unaware of the fraud. The insured, Reverse Now, made the mistake after receiving a favorable appraisal award to sue Oregon Mutual who then learned of the fraud. Not only did the fraud not pay it cost Reverse Now a great deal of money that it may only try to regain from its putative and dishonest public adjuster.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

 

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True Insurance Crime Fiction

“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 Money”Product 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 Profit: How an Attempt to use Arson & Fraud to Fund Terrorism Failed”

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

Available as paperback.

Available as a Kindle Book.

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

 

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

 

Available as a paperback.

Available as a Kindle book.

Read about these and other insurance books by Barry Zalma at zalma.com/zalma-books/

 

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Staged Accident Claims Defeated in New York

Inflated No Fault Insurance Claims Disallowed

No fault insurance – a system designed to save insureds and insurance companies money from unnecessary litigation seems to have the opposite result. Instead of helping the injured no fault insurance has encouraged staged accidents, claims of injury in accidents that never occurred, and over-treatment of injuries or billing for treatment never provided. Some insurance companies have begun to fight back and require examinations under oath and refusal to pay inflated and exaggerated medical bills.

In ACE American Insurance Company v.  Myrline Lapaix, Jacques Augustin, Rameek Davis,  AB Quality Health Supply Corp, Ach Chiropractic, P.C., The Brookdale Hospital Medical Center, Charles Deng Acupuncture, P.C., Energy Chiropractic, P.C., FJL Medical Services P.C., JFL Medical Care P.C., Ksenia Pavlova D.O., MSB Physical Therapy, P.C., Quality Custom Medical Supply, Inc., Ready Medical Serve, P.C., and William L. King M.D., P.C. Index No. 652097/2017, 2018 NY Slip Op 32257(U), Supreme Court Of The State Of New York New York County Part Ias Motion 42EFM (September 12, 2018) the plaintiff moved for leave to enter a default judgment against the defendants Jacques Augustin and Rameek Davis, as well as the defendants AB Quality Health Supply Corp, Ach Chiropractic, P.C., The Brookdale Hospital Medical Center, Charles Deng Acupuncture, P.C., Energy Chiropractic, P.C., FJL Medical Services, P.C., JFL Medical Care, P.C., Ksenia Pavlova, D.O., MSB Physical Therapy, P.C., and Quality Custom Medical Supply, Inc. (collectively, the “non-answering provider defendants”). The motion sought a declaration that it is not obligated to pay no-fault benefits to Augustin and Davis in connection with injuries that they sustained in a motor vehicle accident, or to reimburse the non-answering provider defendants for treatment they rendered or equipment and supplies they provided to the individual defendants for those injuries. The plaintiff also moved to permanently stay any arbitrations or court hearings brought by the defaulting defendants to recover no-fault benefits stemming from the alleged occurrence involving the Augustin, Davis, and the defendant Myrline Lapaix.

FACTS

Augustin, Davis, and the defendant Myrline Lapaix (collectively, the individual defendants) allege that they were injured in a motor vehicle accident on October 19, 2016, involving a motor vehicle owned by Hertz Vehicles, LLC, and insured by the plaintiff, and that they thereafter obtained medical treatment or equipment and supplies from the non-answering provider defendants. Augustin and Davis submitted claims for no-fault benefits to the plaintiff dated October 20, 2016. Although the plaintiff’s submissions do not indicate when Augustin’s and Davis’s no fault claim forms were received, the plaintiff sent requests for examinations under oath (EUOs) of Augustin and Davis dated December 20, 2016. Augustin and Davis failed to appear for their scheduled EUOs on two occasions.

Specifically, the plaintiff’s submissions show that:

(a) in spite of the individual defendants receiving over $72,000.00 in medical treating for injuries allegedly arising from the collision, the damage to the individual defendants’ vehicle was minor and the vehicle was drivable after the collision, requiring only minor repair

(b) Davis was not listed on the police report as a person injured in the subject accident,

(c) the accident involved a “phantom” vehicle, and

(d) the individual defendants received excessive and mirror treatment from the same medical facilities.

Moreover, having failed to answer or oppose this motion, Augustin, Davis, and the non-answering provider defendants have admitted as a matter of law all factual allegations in the complaint and all reasonable inferences that flow from them.

DISCUSSION

The non-answering provider defendants allegedly sought payment, as assignees of Augustin and Davis and the plaintiff denied those claims. The plaintiff avers that by failing to appear for their EUOs, Augustin and Davis breached a condition precedent to the effectiveness of no-fault insurance coverage, thus vitiating that coverage. The plaintiff further asserts that it properly requested EUOs and subsequently denied coverage because it had evidence that the subject motor vehicle collision in which Augustin and Davis claimed to have been injured was not accidental, but rather was intentional or staged, and thus not a covered incident under the subject no-fault policy.

Some proof of liability is also required to satisfy the court as to the prima facie validity of the uncontested cause of action.

As to the plaintiff’s second argument that it properly denied coverage on the basis that the subject motor vehicle collision was intentional or staged, it is true that an intentional and staged collision caused in the furtherance of an insurance fraud scheme is not a covered accident under a policy of insurance. The plaintiff’s submissions establish that the individual defendants could not have sustained injuries as serious as those claimed by the individual defendants as a result of the minor collision, that alleged collision was likely intentionally caused by the individual defendants, and that no-fault coverage was thereby vitiated.

The court ordered, therefore, that the plaintiff is not obligated to pay no-fault benefits to the defendants Jacques Augustin and Rameek Davis in connection with claims made for injuries that they sustained in a motor vehicle accident or to reimburse the defendants: The Brookdale Hospital Medical Center and Quality Custom Medical Supply, Inc. (the “non-answering provider defendants”) for treatment they rendered or equipment and supplies they provided to Augustin and Davis for those injuries; and it is further,

All actions, proceedings or arbitrations commenced by the Augustin, Davis, or the non-answering provider defendants arising from injuries alleged to have been sustained by the individual defendants as a result of the October 19, 2016 accident are permanently stayed, and that Augustin, Davis, and the non-answering provider defendants are enjoined from commencing any such further actions, proceedings or arbitrations; and it is further,

ZALMA OPINION

ACE should be commended for taking the time, expense and effort to defeat a fraudulent claim and the New York Court for refusing to allow the allegedly injured and their medical providers – none of whom were willing to appear – to collect anything from the insurer. This case gives us hope that fraudulent insurance claims can be defeated.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The 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 or 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.

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 Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.

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. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.

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

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

Legal Disclaimer:

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

 

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Rescission and the Examination Under Oath

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.

“The Insurance Examination Under Oath”

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

Available as a Kindle book.

Available as a paperback.

Read about these and other insurance books by Barry Zalma at http://zalma.com/zalma-books/

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