Information Needed by Every Lawyer, Claims Person or Insurance Management

Books for Every Insurance Claims Professional 

For those who serve the insurance industry and its policyholders (whether as lawyers, adjusters, claims management, public insurance adjusters) to survive and perform their duties appropriately it is absolutely necessary that they maintain insurance professionalism. A staff of insurance claims professionals who can read, understand and apply the terms and conditions of the insurance policy, treat all insureds and claimants fairly and in good faith, and make sure the insurer keeps all of the promises made by the insurance policy. In addition the insurance claim professional must be able to recognize and defeat attempts at insurance fraud while dealing ethically and in good faith with all insureds and claimants with whom the insurance professional comes in contact.

The following books are a small taste of the insurance and insurance claims books written by Barry Zalma and available on amazon.com and at http://zalma.com/blog/insurance-claims-library/  A copy in each insurance law office, in each insurance company and independent adjuster claims office and in the offices of every public insurance adjusting firm, will provide an essential resource and will go a long way to create a staff of insurance claims professionals.

Barry Zalma, Esq., CFE has created a library of insurance claims books and other materials to make it possible to become an insurance claims professional. He has, over the last 51 years dedicated his life to insurance, insurance claims, insurance coverage and the need to defeat insurance fraud.

Books from the American Bar Association

The Commercial Property Insurance Policy Deskbook

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

By Barry Zalma

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

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

ABOUT THE AUTHOR

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

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

Mr. Zalma’s books are available as Kindle books or paperbacks at Amazon .com and from other publishers, 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.

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

The Insurance Fraud Deskbook

Author: Barry Zalma

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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.

ZALMA ON INSURANCE:  A BLOG

Go to Home Page

Write to Barry Zalma

Follow Zalma on Twitter at https://twitter.com/bzalma

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

Zalma on Insurance, a Blog is published five days a week.

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

Share
Posted in Zalma on Insurance | Leave a comment

Mutually Repugnant Clauses Cannot Be Enforced

Other Insurance Clauses that are Mutually Repugnant Require Pro Rata Sharing

Plaintiff Vermont Mutual Insurance Company sued Defendant Cincinnati Underwriters Specialty Insurance Company seeking a declaratory judgment as to which party is contractually obligated to provide primary coverage for a claim against Marcie and Scott Hawkins (the “Insureds”) arising out of the death of a foster child at their East Montpelier, Vermont home. The USDC, faced with two insurers litigating against each other had a difficult time since they cannot apply the unwritten rule that the insurance company is always wrong. Both couldn’t be wrong – or could they?

In Vermont Mutual Insurance Company v. Cincinnati Specialty Underwriters Insurance Company, Case No. 2:18-cv-76, United States District Court for the District of Vermont (February 13, 2019) plaintiff asked the court for a declaratory judgment compelling the parties to pay a pro rata share of the claim based on their policy limits. Defendant sought a declaratory judgment declaring Plaintiff’s insurance policy primary coverage and its own policy excess coverage. On this basis, Defendant seeks a further declaration that it has no duty to defend the Insureds.

THE UNDISPUTED FACTS

Plaintiff issued Homeowners Insurance Policy #HO17011903 (the “VMIC Policy”) effective from July 31, 2016 through July 31, 2017 to the Insureds. The VMIC Policy contains an excess insurance clause entitled “Other Insurance – Coverage E – Personal Liability” which states: “This insurance is excess over other valid and collectible insurance except insurance written specifically to cover as excess over the limits of liability that apply in this policy.”

Defendant issued “specialty lines” insurance policy #CSU0078301 (the “Cincinnati Policy”) to the State of Vermont’s Department for Children and Families, Family Services Division, (“DCF”) effective from December 31, 2016 through December 31, 2017. The Cincinnati Policy identified the named insured as “Licensed Foster Parents of Department for Children & Families, Family Services Division.” The Cincinnati Policy also contains an excess insurance clause entitled “Other Insurance” that provides: “If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach, each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.”

A child placed by DCF in the Insureds’ care died while at their home. Counsel for the child’s mother and sister placed Plaintiff and Defendant on notice of a claim arising from the death of the minor foster child.

CONCLUSIONS OF LAW AND ANALYSIS

Whether the VMIC Policy and the Cincinnati Policy Contain Mutually Repugnant Excess Insurance Clauses

It was undisputed that both the VMIC Policy and the Cincinnati Policy contain coincidental excess clauses. At oral argument, the parties also agreed that neither policy was a “true excess policy” requiring the policyholder to obtain primary insurance. Plaintiff contends that because the VMIC Policy and the Cincinnati Policy contain substantially similar coincidental excess insurance clauses, these clauses are mutually repugnant. On this basis, Plaintiff argues that it is entitled to judgment as a matter of law granting a declaratory judgment obligating Plaintiff and Defendant to pay a pro rata share of the claim based on their respective policy limits.

Defendant argues that the excess insurance clauses set forth in the two policies are not mutually repugnant and that under the terms of the policies Plaintiff is the primary insurer and Defendant is the excess insurer.

Courts must interpret insurance contracts according to their terms and the intent of the parties as expressed by the policies’ language. Other insurance clauses are used by insurers to limit an insurer’s liability where other insurance may cover the same loss.

Because Defendant’s policy does not disclaim any and all liability if other insurance is available, but instead provides that it will be “excess” of any other valid policy, it is properly characterized as an excess clause. Because Plaintiff’s policy contains fundamentally equivalent language, it requires the same conclusion. As the excess clauses in the two policies cannot be reconciled, they are “mutually repugnant” and thus the result is that neither is effective and each insurer shares primary coverage. Under Vermont law, a pro rata contribution by both insurers is therefore required.

For the reasons stated above, the court granted Plaintiff’s motion for summary judgment and denied Defendant’s cross-motion for summary judgment. The court hereby declares that Plaintiff and Defendant are each obligated to pay a pro rata share based on their policy limits of the claims arising from the death of the minor child in the Insureds’ care.

ZALMA OPINION

Other insurance clauses are seldom effective to prevent two “primary” insurers to convince a court that one is primary and the other is excess when they have similar other insurance clauses. This case provides a Solomon-like decision by requiring each insurer to share in the defense and indemnity of the insured foster parents in equally until both limits are exhausted. The court, therefore, concluded that both insurers were wrong and they needed to share equally the cost of defending and indemnifying the insured.


© 2019 – 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.

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.

THE HOMEOWNERS INSURANCE POLICY

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

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

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

Paperback Book    Kindle Book

Share
Posted in Zalma on Insurance | Leave a comment

A Copy in Each Law Office is Needed

Resources for the Claims Professional

For the insurance industry to survive and profit it is absolutely necessary that it maintains a staff of insurance claims professionals who can read, understand and apply the terms and conditions of the insurance policy, treat all insureds and claimants fairly and in good faith, and keep all of the promises made by the insurance policy. In addition the insurance claim professional must be able to recognize and defeat attempts at insurance fraud while dealing ethically and in good faith with all insureds and claimants with whom the insurance professional comes in contact.

The following books are a small taste of the insurance and insurance claims books written by Barry Zalma and available on amazon.com and http://zalma.com/blog/insurance-claims-library/ A copy in each claims office will provide an essential resource for each member of a claims staff and will go a long way to create a staff of insurance claims professionals.

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

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 insurance coverage and claims-handling lawyer, and has spent more than 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

Zalma on Property and Casualty Insurance:

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

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

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

Insurance Law Deskbook:Zalma

Learn the insurance basics that are essential to every civil practitioner.

CalifCal Lawornia 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.

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.

 

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


Share
Posted in Zalma on Insurance | Leave a comment

Court Required to Give Deferential Review to ERISA Claim

No Policy in Effect No Coverage

Employer provided life insurance under the Employee Retirement Income Security Act (“ERISA”) usually requires that the employee actually work for the employer before the employer provided life insurance benefit comes into effect. If you die before it comes into effect there is no policy and no coverage regardless of the hardship the lack of coverage places on the beneficiary.

In Pamela M. Morgan-Lapp v. Reliance Standard Life Insurance Co., Civil Action No. 18-1085, United States District Court for the Eastern District of Pennsylvania (February 14, 2019) Ms. Morgan-Lapp attempted to have the court compel coverage after the insurer refused to provide benefits because the deceased employee did not actually work before he died.

RELEVANT FACTUAL HISTORY

The Parties filed cross-motions for summary judgment requesting that the Court decide whether Plaintiff’s husband, Mr. Lapp, was covered by his employer-provided, ERISA-governed group life insurance policy (“Policy”) when he died. If Mr. Lapp was covered at the time he died, then Plaintiff is entitled to life insurance proceeds as the beneficiary of the Policy.

Thomas Jefferson University Hires Mr. Lapp; The Group Life Insurance Policy

On May 15, 2017, Thomas Jefferson University (“TJU”) hired Mr. Lapp. As a TJU employee, Mr. Lapp could receive certain employee benefits, including life insurance under a group life insurance policy issued by Defendant Reliance Standard Life Insurance Company.

Mr. Lapp’s Last Day In The Office; His Hospitalization and Death

On May 28, 2017, less than two weeks after TJU hired Mr. Lapp, Mr. Lapp fell ill and was admitted to Kennedy Hospital in New Jersey. Mr. Lapp remained at Kennedy Hospital and Thomas Jefferson Hospital until he died on July 13, 2017.

Plaintiff Mrs. Lapp Submits A Claim For Death Benefits Under The Policy; Defendant Denies Benefits; Defendant Affirms Decision On Appeal

After Mr. Lapp’s death, Plaintiff Mrs. Lapp filed a claim seeking death benefits under the Policy. Defendant denied Plaintiff’s claim. In denying Plaintiff’s claim, Defendant reasoned that Mr. Lapp was not covered by the Policy when he died on July 13, 2017 because he was not “actively at work” at any time after May 26, 2017, when Mr. Lapp was hospitalized.  As Mr. Lapp was not performing the material duties of his job in the place where and manner in which it would normally be performed, Mr. Lapp was not actively at work when he died and, therefore, was not a member of an eligible class.

DISCUSSION

In short, the Court concluded that while Mr. Lapp may have met the eligibility requirements under the Policy, the Policy did not take effect on June 1, 2017 because Mr. Lapp was not actively at work that day or any day thereafter.

Mr. Lapp Was Not Actively At Work On The Day His Coverage Was To Begin; Therefore, Mr. Lapp’s Coverage Did Not Take Effect

Setting aside the question of whether Mr. Lapp’s failure to report to the office at any time after his hospitalization on May 28, 2017 rendered Mr. Lapp not “actively at work” in connection with his eligibility for benefits, the Court concluded that the Policy did not take effect for Mr. Lapp at any time before his death because not only was he not “actively at work” — that is, actually performing work on the day his coverage was scheduled to begin in the place and manner that such work normally is performed — Mr. Lapp also never returned to active work at any time before he died on July 13, 2017.

TJU hired Mr. Lapp on May 15, 2017 as an eligible Class 3 full-time TJU employee. As Mr. Lapp was hired in the middle of May, his coverage under the Policy was set to begin on June 1, 2017, as the “first of the month . . . next following the date the person becomes eligible” for benefits.

On June 1, 2017, the day on which his life insurance coverage was scheduled to begin, Mr. Lapp was unable to report for work, having been hospitalized just days earlier. Even the evidence extrinsic to the administrative record submitted by Plaintiff supports the conclusion that Mr. Lapp was not actively at work on June 1, 2017.

The Court rejected Plaintiff’s argument to the extent that it suggests that the term “actively at work” as defined in the Policy and as interpreted by Defendant — an ERISA plan administrator — is unreasonable because it is vague and ambiguous.

Having addressed the merits of Plaintiff’s ERISA claims by affirming Defendant’s administrative decision as reasonable, the Court had no choice but to dismiss Plaintiff’s claim for breach of contract because the claim was preempted.

It is well-established that in cases alleging the improper denial of benefits under an ERISA plan, claims such as “breach of contract” and “breach of the implied covenant of good faith and fair dealing” that “relate to the improper denial of benefits . . . . under the plan” are “expressly preempted.” Menkes v. Prudential Ins. Co. of Am., 762 F.3d 285, 296 (3d Cir. 2014).

In view of the deferential standard of review that the Court is obligated to apply in this ERISA case, the Court concluded — though not without distress over the unfortunate results — that Defendant’s interpretation of the Policy is reasonable and, therefore, Defendant’s decision to deny Plaintiff any life insurance benefits for the death of her husband is affirmed.

ZALMA OPINION

Federal Courts apply ERISA type policy disputes, as they apply disputes over National Flood Insurance Program policies, strictly. Unless the plan administrator violates the terms and conditions of the policy wording or acts improperly, the decision of the administrator will be upheld. In this case the court applied the clear language of the policy that Mr. Lapp was hospitalized and died before the policy vested and therefore his beneficiary is entitled, unfortunately, to recover nothing.


© 2019 – 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.

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.

THE HOMEOWNERS INSURANCE POLICY

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

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

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

Paperback Book    Kindle Book

Share
Posted in Zalma on Insurance | Leave a comment

Needed in Every Claims Office

Resources for the Claims Professional

For the insurance industry to survive and profit it is absolutely necessary that it maintains a staff of insurance claims professionals who can read, understand and apply the terms and conditions of the insurance policy, treat all insureds and claimants fairly and in good faith, and keep all of the promises made by the insurance policy. In addition the insurance claim professional must be able to recognize and defeat attempts at insurance fraud while dealing ethically and in good faith with all insureds and claimants with whom the insurance professional comes in contact.

The following books are a small taste of the insurance and insurance claims books written by Barry Zalma and available on amazon.com and http://zalma.com/blog/insurance-claims-library/ A copy in each claims office and intranet will provide an essential resource for each member of a claims staff and will go a long way to create a staff of insurance claims professionals.

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

“Random Thoughts on Insurance”

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

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


Fictionalized True Insurance Crime Books

“HEADS I WIN, TAILS YOU LOSE”

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

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

Available as a Kindle Book.

Available as a paperback.

“Candy and Abel: Murder for Insurance 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/

Share
Posted in Zalma on Insurance | Leave a comment

Broker has no Obligation to Advise on Limits Without Special Relationship

Bad Faith Requires More than a Failure to Pay What the Insured Wants

People who select policy limits and insurance coverages based upon the premium offered then, after a loss, sue to get the coverages they should have bought rather than the coverage they actually bought.

In Purvi, LLC v. National Fire & Marine Insurance Company And KK Insurance Agency, Civil Action No. 18-822, United States District Court For The Eastern District Of Pennsylvania (February 12, 2019) following a fire that damaged Plaintiff Purvi LLC’s motel, Plaintiff filed suit against Defendants National Fire & Marine Insurance Company (“National”) and KK Insurance Agency (“KK”). Plaintiff alleged that National (1) breached its contract with Plaintiff, and (2) acted in bad faith toward Plaintiff. Separately, Plaintiff alleged that KK negligently failed to procure proper and adequate insurance coverage for Plaintiff.

BACKGROUND

Panwala is Plaintiff’s managing partner, is responsible for doing “almost everything to run the business,” and “was the sole and final decision maker with regard to insurance purchases for Purvi.”

In 2010 Plaintiff first used KK as its insurance broker. Each year, Panwala would receive insurance applications from KK, which she understood “would serve as the basis of the insurance.” She returned to KK the application for insurance for the 2016-17 policy term, just as she had done in years past. KK then provided Plaintiff several insurances quotes with varying policy limits for the 2016-17 term. Plaintiff selected the quote provided by National.

The Policy included the following language with respect to loss coverage: In the event of loss or damage, National would “not pay more for loss or damage on a replacement cost basis than the least of” (1) the applicable insurance limit; (2) the cost to replace with property “[o]f comparable material and quality” and “used for the same purpose;” or, (3) “[t]he amount actually spent that is necessary to repair or replace the lost or damaged property.”

In May 2016, while covered by National’s Policy, a fire damaged the motel. National ultimately paid Plaintiff on various claims related to the fire, including as relevant here $1,583,818.56 on the building claim and $4,160.09 on the office contents claim. Plaintiff, however, claims losses far beyond those sums in that it contracted with various firms to repair the motel for a cost that exceeded the Policy’s $2,250,000 building limit.

ANALYSIS

Claim Against National

Under Pennsylvania law, an insured can recover damages from an insurer in an action arising under an insurance policy if the court finds that the insurer has acted in bad faith toward the insured. To prevail in a bad faith insurance claim a plaintiff must demonstrate:

  • that the insurer did not have a reasonable basis for denying benefits under the policy and
  • that the insurer knew or recklessly disregarded its lack of a reasonable basis in denying the claim.

Pennsylvania courts interpret the term “bad faith” in the insurance context to mean:

“[A]ny frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith.” [Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. 1994) (quoting Black’s Law Dictionary 139 (6th ed. 1990)).]

Plaintiff’s argument is that, in essence, the Policy required National to compensate Plaintiff for any claimed losses covered by the Policy, and that because the Policy is so clear, a failure to do so could only be in bad faith. Plaintiff contends that because the fire loss was undisputedly covered by the policy, National’s failure to fully compensate Plaintiff demonstrates bad faith.

The Policy allows room for disagreement between the parties as to whether the invoices Plaintiff submitted were more than the “cost to replace” with property of “comparable material and quality” — and as a result National’s failure to fully compensate the claimed loss is not evidence of bad faith. Indeed, National points to estimates completed by third-party consultants and contractors that indicate the building could have been repaired and replaced for significantly less than the amount Plaintiff claimed.

Claim Against KK

Plaintiff argues that KK — Plaintiff’s insurance broker — negligently failed to procure adequate insurance for Plaintiff because Plaintiff’s losses in the fire exceeded the coverage limits on its Policy.

In Pennsylvania, insurance brokers are primarily in the business of acting as an intermediary between insurance companies and clients. Although brokers owe their clients a duty of good faith and fair dealing they have no obligation to advise the insured as to the type or amount of available coverage, or to obtain total/full coverage, or explain the policy and its coverages and/or exclusions, absent a special relationship.

KK also contends that the Policy was not “materially defective,” arguing that although Pennsylvania courts have not offered a practical definition of the term, by its plain meaning a materially defective policy would be faulty in some important way. KK notes that, at worst, the Policy covered nearly the entire cost of replacing a building that was completely destroyed, which should not rise to the level of materially defective.

Plaintiff has failed to raise a genuine dispute of material fact as to whether KK violated any duty — whether a duty to advise, or otherwise — and, thus, KK’s motion was granted.

ZALMA OPINION

Just because the insured did not get what it wanted is not evidence of bad faith. Paying a contractor is not evidence of replacing a structure with material of like kind and quality, it is nothing more than evidence of a payment. It is the obligation of the insured to prove to the insurer that it has complied with the policy. It failed in that duty. Similarly, the plaintiff failed to prove a special relationship with the broker or that the broker breached a non-existent duty to advise appropriate coverage. In fact the insured admitted that she “was the sole and final decision maker with regard to insurance purchases” not the broker, KK.


© 2019 – 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.

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.

THE HOMEOWNERS INSURANCE POLICY

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

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

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

Paperback Book    Kindle Book

 

Share
Posted in Zalma on Insurance | Leave a comment

How to Train Up Adjusters to Claims Professionals

Do You Want a Staff of Insurance Claims Professionals?

For the insurance industry to survive and profit it is absolutely necessary that it maintains a staff of insurance claims professionals who can read, understand and apply the terms and conditions of the insurance policy, treat all insureds and claimants fairly and in good faith, and keep all of the promises made by the insurance policy. In addition the insurance claim professional must be able to recognize and defeat attempts at insurance fraud while dealing ethically and in good faith with all insureds and claimants with whom the insurance professional comes in contact.

The following books are a small taste of the insurance and insurance claims books written by Barry Zalma and available on amazon.com and http://zalma.com/blog/insurance-claims-library/ A copy for each member of a claims staff or each claims office will go a long way to create a staff of insurance claims professionals.

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

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Ethics for the Insurance Professional

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

Share
Posted in Zalma on Insurance | Leave a comment

Zalma’s Insurance Fraud Letter – February 15, 2019

Zalma’s Insurance Fraud Letter

 

Clear Insurance Policy Language Must Be Applied

Clear Insurance Policy Language Must Be Applied
The Need to be Able to Read and Understand the Wording of an Insurance Policy

Every Special Investigation Unit (SIU) investigator and claims adjuster, when dealing with a potentially fraudulent claim, must understand how to read, understand and apply the terms and conditions of the policy of insurance. Sometimes it is difficult and the insurer will seek the advice and assistance of a court in what is known as a declaratory judgment or declaratory relief action.

For example, an insurer sought a declaratory judgment that it was required to indemnify its insured for no more than 40 percent of a state court judgment because it had covered its insured for no more than 40 percent of the time in which the state court plaintiff was exposed to lead poisoning. The district court agreed that the insurer was responsible for only a portion of the judgment, notwithstanding the fact that its insured was held jointly and severally liable for the entire judgment in the underlying state proceeding. The state plaintiff (and the defendant in the federal declaratory action) appealed. The Fourth Circuit Court of Appeal was called upon to determine, in Pennsylvania National Mutual v. Lakia C. Roberts, 668 F.3d 106 (4th Cir. 02/03/2012) whether an insurance company can be held liable for periods of risk it never contracted to cover.

From her birth on January 17, 1991 until 1998, Lakia Roberts resided at a house on 1740 East Preston Street in Baltimore, Maryland. In September 1992, when she was 20 months old, Roberts was diagnosed with lead poisoning. A test indicated that she had an elevated blood lead level of 28 micrograms of lead per deciliter of blood (“mcg/dL”). She continued to exhibit elevated blood lead levels until August 1995.

On February 4, 2005, Roberts filed a complaint in Maryland state court against Attsgood Realty Company alleging that the injuries she sustained from the lead poisoning were the result of its negligent management of the East Preston Street property. Attsgood had owned, leased, and managed the property from Roberts’s birth until November 1, 1993, when it had sold the property to Gordon Gondrezick.

Attsgood then requested defense and indemnification from Pennsylvania National Mutual Casualty Insurance Company (“Penn National”) under the terms of its insurance contract. In 1992, Penn National had issued a liability insurance policy to Attsgood covering the period from January 13, 1992 to January 13, 1993. The policy was later renewed to extend coverage to January 13, 1994. According to the terms of the contract, Penn National promised Attsgood that it would provide liability insurance for “Premises You Own, Rent or Occupy,” including 1740 East Preston Street.

From Roberts’s birth in January 1991 until the coverage began in January 1992, Attsgood lacked liability insurance for the East Preston Street property. Under the contract, Penn National promised to “pay those sums that [Attsgood] becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies” as well as “defend any ‘suit’ seeking those damages.” This guarantee was in turn qualified by a provision stating that “this insurance applies to ‘bodily injury’ and ‘property damage’ only if . . . the ‘bodily injury’ or ‘property damage’ occurs during the policy period.”

The contract also made clear that Attsgood’s “rights and duties under this policy may not be transferred without [Penn National’s] written consent except in the case of death of an individual [n]amed [i]nsured.” In accordance with the policy, Penn National agreed to defend Attsgood subject to a reservation of its rights. Attsgood then filed a third party complaint against Gondrezick seeking contribution and indemnification in the event that Roberts prevailed. After Gondrezick failed to appear or otherwise defend himself, the Maryland court entered an order of default against him in favor of Attsgood.

Following discovery, the state case went to trial on May 4, 2009 on counts of negligence and unfair trade practices. To prove the property owners’ liability, Roberts’s mother and her expert witness provided testimony indicating that Roberts had been exposed to lead poisoning at the East Preston Street property since her infancy and that this exposure had resulted in permanent brain damage. Attsgood in turn challenged the contention that the presence of lead at its property was the actual source of Roberts’s injuries.

The jury returned a verdict in favor of Roberts for $2,000,000, which was reduced to $850,000 following an application of Maryland’s non-economic damages cap. It was undisputed that Attsgood and Gondrezick are jointly and severally liable for this amount.

Penn National filed a declaratory judgment action against Attsgood and Roberts in federal court on the basis of diversity jurisdiction. The insurer sought a determination that it was obligated to indemnify Attsgood for no more than 40 percent of the total judgment, or $340,000. Penn National filed a motion for default judgment against Attsgood after it failed to respond. Penn National also filed a motion for summary judgment against Roberts arguing that it should be liable for only 22 months of the entire period of Roberts’s exposure to the risk of lead poisoning. It calculated that while it had insured Attsgood for the 24 months from January 1992 to January 1994, Attsgood had sold the property to Gondrezick in November 1993, thereby resulting in a total of 22 months of coverage.

Roberts saw the matter differently. She argued that Penn National was responsible for paying the entire $850,000 judgment in light of the joint and several liability of its insured. She also contended that even if the district court decided to allocate liability, “virtually all” of her “lead exposure occurred during Penn National’s two policy periods,” beginning with the discovery of her elevated blood lead level in September 1992.

The district court largely agreed with Penn National. The trial court relied on “continuous trigger” cases such as that Maryland courts determine an insurer’s liability through a “pro-rata allocation by ‘time on the risk.'” The district court concluded that Roberts had been exposed to lead poisoning from January 17, 1991 to August 1995, for a total of 55 full months. The district court calculated Penn National’s period of coverage. It concluded that Penn National provided insurance to Attsgood from January 13, 1992 to January 13, 1994, for a total of 24 months. The court rejected Penn National’s argument that its period of coverage should be reduced to 22 months because Attsgood had sold the property to Gondrezick on November 1, 1993, concluding that while “under the terms of the insurance contract Penn National may be correct, the record is entirely barren of facts showing that Penn National’s coverage in fact was terminated.”

In its allocation of liability, the district court used the 24 months of coverage as the numerator and the 55 months of exposure to lead poisoning as the denominator to conclude that Penn National was responsible for 24/55, or approximately 43.6 percent, of the judgment. It then found that “Penn National is liable to Roberts for $370,600 (43.6% x $850,000), but no more.”

The plain language of the insurance contract limited coverage. Penn National did not contract to “pay those sums that [Attsgood] becomes legally obligated to pay as damages because of ‘bodily injury'” without qualification. Rather, it contracted to “pay those sums that [Attsgood] becomes legally obligated to pay as damages because of ‘bodily injury’ . . . to which this insurance applies.” The policy also clearly limited the insurer’s obligation to damage that “occurs during the policy period.”

The remainder of the article is available and can be Read along with the rest of ZIFL here.  

The Current Issue Contains the Following  

  • Clear Insurance Policy Language Must Be Applied
  • The Great Jewel Theft
  • Three Squares and a Cot – Arson Doesn’t Pay
  • Good News From the Coalition Against Insurance Fraud
  • Health Insurance Fraud Convictions
  • Other Insurance Fraud Convictions
  • Conviction for Auto Fraud Affirmed
  • The Insurance Claims Library

Books

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

The most recent posts to the daily blog, Zalma on Insurance, one of Feedspots top 50 insurance law blogs are available at http://zalma.com/blog.  Check in every day for a case summary at http://zalma.com/blog 

 

I have completed a video blog called Zalma’s Insurance 101 that consists 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.

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


Share
Posted in Zalma on Insurance | Leave a comment

Do You Want a Staff of Insurance Claims Professionals?

How to Train Up Adjusters to Claims Professionals

For the insurance industry to survive and profit it is absolutely necessary that it maintains a staff of insurance claims professionals who can read, understand and apply the terms and conditions of the insurance policy, treat all insureds and claimants fairly and in good faith, and keep all of the promises made by the insurance policy. In addition the insurance claim professional must be able to recognize and defeat attempts at insurance fraud while dealing ethically and in good faith with all insureds and claimants with whom the insurance professional comes in contact.

The following books are a small taste of the insurance and insurance claims books written by Barry Zalma and available on amazon.com and http://zalma.com/blog/insurance-claims-library/

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

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

Share
Posted in Zalma on Insurance | Leave a comment

Unjust Enrichment Requires Repayment of Life Insurance Benefit

Beneficiary Must Repay Overpayment as of Date of Notice

When a beneficiary makes a claim to a life insurer controlled by the U.S. Government he can usually assume that payments received are appropriate and the money is available to be spent as the beneficiary desires. However, after the beneficiary is told that he was paid in error it is necessary to preserve the assets available until the question of improper payment is resolved. Every person must recognize there is no such thing as a free lunch.

The USDCA for the District of Massachusetts, in Metropolitan Life Insurance Company v. Eric A. Beard, Civil Action No. 16-11782-PBS, United States District Court District of Massachusetts (February 7, 2019) Plaintiff Metropolitan Life Insurance Company (“MetLife”) sued pro se Defendant Eric A. Beard (“Eric Beard”) to recover benefits mistakenly paid to him as the son and sole beneficiary of decedent Paul K. Beard, who maintained life insurance under the Federal Employees’ Group Life Insurance Act (FEGLIA), during his employment with the United States Postal Service (“USPS”).

FINDINGS OF FACT

United States Office of Personnel Management (“OPM”), which has the authority to administer and regulate the benefits under FEGLIA, purchases master policies from private life insurance companies such as MetLife. MetLife issued Group Policy No. 17000-G, known as the Federal Employees’ Group Life Insurance Policy (the “FEGLI Policy”) to OPM. The Office of Federal Employees’ Group Life Insurance (“OFEGLI”) is the administrative unit of MetLife charged with administering claims for FEGLI benefits.

MetLife’s Claims Process

MetLife does not maintain or have access to a federal employee’s paperwork until the employee, or former employee, deceases. At that point someone from the employee’s family usually contacts OPM to report the death and OPM begins the death claim process. As part of that process, OPM sends MetLife a certification indicating what level of coverage the federal employee had at his time of death, his designation of beneficiary, and a claim form usually completed by the person who reported the death. It is standard practice for MetLife to receive a death certificate from OPM before a claim can be processed.

MetLife must “rely on all certifications by OPM and other Government Agencies issued to verify an Insured Person’s eligibility, Insurance in Force, and Annual Rate of Basic Pay.” MetLife must also attempt to collect any erroneous payments made under the contract.

Decedent Paul K. Beard

Paul Beard was an employee of the USPS for 45 years. Paul Beard had life insurance coverage under the FEGLI program through his employment with the USPS. Immediately prior to his retirement on October 1, 2015, Paul Beard’s life insurance coverage included $62,000 in Basic insurance (i.e., his $59,294 salary rounded to the next higher thousand and adding $2,000), Option A insurance in the standard amount of $10,000, and Option B insurance in the amount of $300,000 (i.e., five multiples of his salary rounded to the next higher thousand).

On October 29, 2015, after retiring from the USPS, Paul Beard signed a “Designation of Beneficiary” form designating his son, Eric Beard, his sole beneficiary to the FEGLI benefits. Eric’s wife Samantha Beard, and Samantha’s sister, Sarah Mauro, witnessed the designation. He was competent and not intoxicated at the time he signed this form.

Paul Beard passed away from natural causes on November 12, 2015. He died more than 31 days after his retirement from the USPS on October 1, 2015. Thus, at his time of death he was insured for Basic life insurance of $62,000 and Option A life insurance of $10,000.

The Claim

Eric Beard, as Paul Beard’s sole beneficiary, filed a claim for FEGLI benefits with MetLife. In the November Certification, OPM incorrectly stated that Paul Beard’s date of death was November 1, 2015, instead of November 12, 2015. The form mistakenly certified that Paul Beard had “died within 31 days of retirement” and thus had Basic life insurance at 75% reduction, Option A, and Option B coverage. OPM did not attach Paul Beard’s death certificate to the November Certification.

Based on the November Certification, MetLife paid Eric Beard $362,123.99. MetLife overpaid Beard $300,000 in Option B coverage based on the inaccurate certification from OPM, and mistakenly failed to pay him an additional $10,000 he was entitled to in Option A coverage – accordingly, Beard was overpaid by $290,000. Beard had no knowledge at that time that he was overpaid.

MetLife began attempting to recover the overpayment. As of mid-March 2016, Eric Beard had approximately $217,000 available in his Middlesex Savings Bank accounts. By September 2016, he had approximately $7,000 left in those accounts. Beard spent most of that money on ongoing renovations and improvements to his family home. To date, Eric Beard has not repaid MetLife for any of the benefits he received on December 7, 2015.

CONCLUSIONS OF LAW

Eric Beard asserted that his father lacked the mental capacity to execute insurance forms because of chronic and severe alcoholism. MetLife contends it has a contractual right to rely on OPM’s certifications and has a duty to pay in accordance with those certifications. While MetLife is correct on this point, the contract between MetLife and OPM does not strip a beneficiary of defenses recognized under federal law.

Analysis

Beard has not proven that Paul Beard’s alcoholism incapacitated him at the time he signed the form. While Paul Beard drank heavily, and saw a psychiatrist, there is no evidence that he was ever disciplined for his alcohol use or that it interfered with his work.

Unjust Enrichment

MetLife overpaid Eric Beard approximately $290,000.  Generally, if an insurer pays a loss as a result of fraud or a mistake as to facts which would have been a sufficient defense in an action by the insured upon the policy, the money so paid may be recovered. In this case, MetLife seeks restitution under an unjust enrichment theory, arguing that Eric Beard has been unjustly enriched by receiving $290,000 more in benefits than he was due under his father’s insurance plan.

Applicable Law

A claim for unjust enrichment does not require consideration, but there must be unjust enrichment of one party and unjust detriment to another party. A determination of unjust enrichment is one in which considerations of equity and morality play a large part.

Restitution is an equitable remedy by which a person who has been unjustly enriched at the expense of another is required to repay the injured party. Restitution is appropriate only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it.

Analysis

MetLife has conferred a benefit on Eric Beard, namely $290,000 that he was not entitled to based on his father’s insurance coverage at his time of death. The remaining question is whether Beard’s retention of the overpayment would be unjust.

Considering that Eric Beard was not at fault in applying for death benefits as his claim form listed the correct date of death. OPM made a significant error in its November Certification which was based on the wrong date of death. The primary blame for the overpayment rested with OPM.

For a while, Eric Beard was an innocent recipient in that he had no knowledge of the overpayment until he was contacted by MetLife in March 2016. Considering the good relationship he had with his father, he had no reason to believe there was an overpayment. In reliance on the payment, he made extraordinary improvements to his home that he could not have otherwise afforded. However, despite being notified in March that the money was not rightfully his, Eric Beard continued to spend down the proceeds throughout the summer of 2016.

Because unjust enrichment is an equitable doctrine, the Court determined that judgment should enter for MetLife in the approximate amount Eric Beard had remaining at the time he was notified of the overpayment which, according to bank records, was $217,000.

The Court entered judgment in favor of MetLife in the amount of $217,000.

ZALMA OPINION

The hard lesson learned by Mr. Beard is that once an insurer advised him that an error was made in the payment of life insurance benefits he should have immediately stopped spending the money. As a result he now owes MetLife $217,000 and may have to sell the house to pay the judgment.


© 2019 – 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.

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.

THE HOMEOWNERS INSURANCE POLICY

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

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

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

Paperback Book    Kindle Book

 

Share
Posted in Zalma on Insurance | Leave a comment

How to Create Insurance Claims Professionals

Everything Needed by the Insurance Claims Professional

For the insurance industry to survive and profit it is absolutely necessary that it maintains a staff of insurance claims professionals who can read, understand and apply the terms and conditions of the insurance policy, treat all insureds and claimants fairly and in good faith, and keep all of the promises made by the insurance policy. In addition the insurance claim professional must be able to recognize and defeat attempts at insurance fraud while dealing ethically and in good faith with all insureds and claimants with whom the insurance professional comes in contact.

The following books are a small taste of the insurance and insurance claims books written by Barry Zalma and available on amazon.com and http://zalma.com/blog/insurance-claims-library/

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

Construction Defects and Insurance

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

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

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

The Eight volumes include:


Mold Claims

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

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

Share
Posted in Zalma on Insurance | 1 Comment

Forum Shopping Fails

Presumption of Need for State Declaratory Relief Action Requires Federal Court to Refuse Jurisdiction

Like every lawyer who ever practiced law I would prefer the judge to be my favorite uncle and godfather, the jury to be made up of my wife, my mother, my brother, my sister and close friends. That is why some lawyers work hard to get litigation in a favorable jurisdiction with a judge whose proclivities and prejudices are known. The attempts work often. In that regard many lawyers and insurers believe federal courts are more favorable to insurers than policyholders.

In Penn Mutual Life Insurance Company v. Wells Fargo Bank, N.A., as Securities Intermediary, Civil Action No. 18-40, United States District Court For The Eastern District Of Pennsylvania (October 1, 2018) Penn Mutual Life Insurance Company sued in federal District Court seeking a determination that the life insurance policy it issued on the life of a Florida resident was void ab initio. Wells Fargo moved to dismiss the complaint, arguing that the Court should decline jurisdiction pursuant to the Declaratory Judgment Act (“DJA”) in favor of an action pending in Florida state court.

BACKGROUND

Penn Mutual sought a declaration regarding the validity of the $3 million life insurance policy (“the Policy”) it issued on the life of Sylvia Criden-Roebuck, a Florida resident. When the policy was issued in 2007, the original owner was the Sylvia Criden-Roebuck 2007 Insurance Trust. Shortly after the policy was issued and in force, Ms. Criden-Roebuck and the Family Trust that she formed sold the beneficial interest in the Insurance Trust that owned the Life Insurance Policy to the GIII Accumulation Trust. In 2015, GIII placed the Policy into a securities intermediary account with Wells Fargo. The Policy is presently owned by Wells Fargo as securities intermediary.

After Ms. Criden-Roebuck’s death on October 20, 2017, Wells Fargo and the insured’s son, Arthur Criden, both submitted a claim for the benefit payable under the Policy. During the claim review process, Penn Mutual “determined that the policy may have been an illegal wagering contract” procured by and paid for by investors through the GIII Accumulation Trust. Instead of formally denying the claim, Penn Mutual sued and requested a declaratory judgment that the Policy is void ab initio as “an illegal wagering contract” under Delaware law.

Wells Fargo filed an action in Florida state court against Penn Mutual, Arthur Criden as the personal representative of the Criden-Roebuck estate, and Penn Mutual’s Florida-based agent, Larry Schweiger. Wells Fargo asserts a claim for breach of contract against Penn Mutual for its failure to pay the death benefits as required under the policy. If Penn Mutual successfully avoids coverage under the Policy based on the allegation that Ms. Criden-Roebuck did not pay the initial premiums with her own funds, Wells Fargo seeks damages from Schweiger for fraud, negligent misrepresentation, and negligent procurement based on his actions in connection with the Policy.

DISCUSSION

Wells Fargo argued that the Court should decline to exercise jurisdiction pursuant to the DJA, which “authorizes district courts to ‘declare the rights and other legal relations of any interested party seeking such declaration'” but “does not itself create an independent basis for federal jurisdiction.” Instead, actions seeking only declaratory relief are discretionary and courts may therefore decline jurisdiction over such suits.

After determining whether there is a parallel state court proceeding, courts consider the following factors, to the extent they are relevant:

(1)               the likelihood that a federal court declaration will resolve the uncertainty of obligation which gave rise to the controversy;
(2)               the convenience of the parties;
(3)               the public interest in settlement of the uncertainty of obligation;
(4)               the availability and relative convenience of other remedies;
(5)               a general policy of restraint when the same issues are pending in a state court;
(6)               avoidance of duplicative litigation;
(7)               prevention of the use of the declaratory action as a method of procedural fencing or as a means to provide another forum in a race for res judicata; and
(8)               (in the insurance context), an inherent conflict of interest between an insurer’s duty to defend in a state court and its attempt to characterize that suit in federal court as falling within the scope of a policy exclusion.

The Existence of a State Parallel Proceeding

Penn Mutual purposefully availed itself of the Florida forum in such a way that it could reasonably foresee being haled into a Florida court; its contacts with the state can in no way be considered “random,” “fortuitous,” or “attenuated.” It was reasonably foreseeable that Penn Mutual’s refusal to pay benefits under the life insurance policy it issued in Florida, on the life of a Florida resident, was likely to lead to litigation in a Florida court. The solicitation of life insurance products to Florida residents through an insurance agent in Florida further reinforces Penn Mutual’s deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there.

Fair Play and Substantial Justice

The Florida court has personal jurisdiction over Penn Mutual for Wells Fargo’s claims, and all matters in controversy between the parties in this case can be fully adjudicated in the state action. Therefore, the state breach of contract action is a parallel proceeding to this federal case.

That Penn Mutual filed this declaratory judgment action before Wells Fargo could file suit in state court is not indicative of procedural fencing, because it is irrelevant whether the state declaratory judgment action was filed after its counterpart in federal court.

Considered together, all factors weigh against exercising jurisdiction over this case, and do not outweigh the strong presumption against exercising jurisdiction in light of the pending state action. Consequently, the Court declined to exercise jurisdiction.

ZALMA OPINION

Forum shopping is a tried and true exercise of legal analysis. In this case it failed because, unlike the District Court in Pennsylvania, everything to do with the issuance of the policy, the contracts surrounding the policy and the claim were set in Florida. The District Court, even though the suit in Pennsylvania was filed first, exercised its discretion and refused to take jurisdiction when Florida was a better forum.


© 2019 – 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.

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.

THE HOMEOWNERS INSURANCE POLICY

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

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

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

Paperback Book    Kindle Book

 

 

 

Share
Posted in Zalma on Insurance | Leave a comment

Everything Needed by the Insurance Claims Professional

How to Create Insurance Claims Professionals

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

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.

For more information about Barry Zalma and his insurance law books go to http://www.zalma.com.

Share
Posted in Zalma on Insurance | Leave a comment

Don’t Demolish Damage Before Report to Insurer

Twelve Day Delay Sufficient to Eliminate Coverage

The key to every insurance policy and claims presented under a first party property insurance policy is to promptly report a loss to the insurer so it can investigate and evaluate the claim. When an insurance broker – who only represents the insured – detests insurers and hires, on behalf of his client, a public insurance adjuster to protect the insured against the insurer and then waits until the public adjuster and a repair company totally demolished the building, to only then, twelve days after the loss,  to report the claim to the insurer he prejudiced the rights of the insurer.

In South Fifth Towers, LLC v. Aspen Insurance UK, Ltd. and Tenco Services, Inc., No. 18-5440, United States Court of Appeals For The Sixth Circuit (February 8, 2019) South Fifth Towers, LLC owned an apartment building in Louisville, Kentucky. After the building suffered water damage in a rainstorm, South Fifth’s insurance carrier, Aspen Insurance UK, Ltd., declined to cover demolition and repair costs. South Fifth sued Aspen and Tenco Services, Inc., Aspen’s adjuster, for breach of contract (among other claims).

The District Court granted the insurer’s and adjuster’s summary judgment motions.   Thunderstorms caused 2.69 inches of rain in Louisville and during and after the storm there was about an inch of standing water in the second-floor hallways.

That same evening South Fifth contacted its New York insurance broker either that evening or the next day. The broker, Judah Perlstein, did not notify Aspen. Instead, Perlstein’s first move was to hire a public adjuster to inspect the damage and write a report. It was his practice to “put a PA on almost every loss.” He did this for several reasons: “to get our facts straight” and avoid reporting “erroneous information” to the insurer and “to protect” his “client,” as “insurance companies are always looking for a reason not to pay.” Finding a public adjuster in Louisville took Perlstein until June 28.

On July 2 or July 3, South Fifth hired a restoration contractor, The Drying Team. The Drying Team sent 18 people to Louisville. They arrived from Nashville on July 8 and began demolition the same day. They tore out “virtually all” of the second floor.

Perlstein finally told Aspen what had happened on July 8 — twelve days after the storm and the same day that The Drying Team began demolition. Aspen then sent its own adjusters (employed by co-defendant Tenco), and they arrived on July 10. By this time, almost all of the demolition was already done.

South Fifth eventually claimed a loss of $1,312,091.04. In September 2015, Aspen formally declined coverage.

ANALYSIS

The insurance policy required South Fifth to give Aspen “prompt notice of the loss or damage,” including, “[a]s soon as possible, . . . a description of how, when and where the loss or damage occurred.”  The Sixth Circuit concluded that there could be no genuine dispute that Aspen likely suffered substantial prejudice from this delay.

Aspen and Tenco are entitled to summary judgment if they can show that there is no genuine dispute as to any material fact and they are entitled to judgment as a matter of law. A material fact is one that might affect the outcome of the suit under the governing law. A factual dispute is genuine if the evidence is such that a reasonable jury could return a verdict for either party.

The policy does not define “prompt,” so the court gave the term its ordinary meaning. “Prompt” means “performed readily or immediately,” or “given without delay.” Webster’s Third New International Dictionary 1816 (2002). South Fifth could not give Aspen a description of the loss or damage until South Fifth had notified Aspen about the loss or damage in the first place. Thus, the policy required South Fifth to provide notice as soon as it could.

Here, South Fifth did not provide notice as soon as it could have — it notified Aspen eleven days after it notified its insurance broker, Perlstein. Indeed, when Perlstein was asked about this delay, he could not explain why Aspen had not been notified sooner. And on appeal, South Fifth fails to explain the delay. Given the undisputed facts of this case, the lapse of time was so long as to be obviously noncompliant with the policy. Hence South Fifth failed to give “prompt” notice.

Late notice of a loss lifts the insurer’s coverage obligations as long as it is reasonably probable that the insurance carrier suffered substantial prejudice from the delay in notice.

The late notice deprived Aspen of the chance to see the water damage before demolition began. This meant that Aspen had no way of assessing how much of the demolition was necessary or of objecting to needless or too-costly demolition before it happened. Had Aspen’s adjusters been present when the demolition contractor first arrived at Kentucky Towers, they could have watched and interjected as the contractor took moisture readings and mapped out which portions of the second floor to tear out.

Aspen had no chance to inspect the damage, view pre-demolition moisture readings (which the contractor did not retain), or ask the contractor to do anything different in such extensive — and expensive — demolition.

Even if all of the demolition was appropriate, the late notice made it impossible for Aspen to consult and coordinate with the demolition contractor and South Fifth.  The undisputed facts and the testimony of South Fifth’s own public adjuster and demolition contractor show a reasonable probability of substantial prejudice to Aspen.

As public adjuster Michelson put it, “the concern is that you get microbial growth, mold… The building doesn’t get any better while it’s sitting there wet, it only gets worse and degrades.” This was all the more reason not to wait twelve days before notifying Aspen. South Fifth knew that the damage was significant and would require extensive demolition. According to its insurance broker, Judah Perlstein, there was no downside to notifying Aspen the day of the rainfall. But South Fifth dawdled, presenting Aspen with a fait accompli.

South Fifth tries to get around this conclusion by claiming that it waited at most one day to notify Aspen, not twelve. Kentucky law and Perlstein’s testimony make clear that he was not Aspen’s agent. The general rule in Kentucky is that in the absence of statutory authority or some special indicia of authority, an insurance broker is the agent of the insured and not of the insurer.

Consequently, notice to this broker is not notice to the insurer.

Perlstein, in fact, boasted about his use of grandstanding and threats to get his clients better prices or better terms and conditions from insurance carriers. He admitted that he did not know why carriers ask or don’t ask for certain information in coverage applications, and he said that despite decades in the industry, carriers “surprise me every day.” These statements make clear that Perlstein was not Aspen’s agent.

The Sixth Circuit concluded that South Fifth breached the policy when it waited twelve days to give Aspen the required notice, and this undisputedly caused Aspen substantial prejudice. This relieved Aspen of liability under the policy, and Aspen and Tenco are entitled to summary judgment on this basis alone.

ZALMA OPINION

When a person insured or the insured’s representative incorrectly believes that “insurance companies are always looking for a reason not to pay” errors like those created by broker Perlstein cause a legitimate claim to be refused. South Fifth, of course, could have reported the loss directly rather than through a broker. It may not be without a remedy, it can always sue Perlstein who appears, because of his distrust of insurers, solely responsible for the late report and the denial of the claim.


© 2019 – 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.

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.

THE HOMEOWNERS INSURANCE POLICY

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

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

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

Paperback Book    Kindle Book

 

 

Share
Posted in Zalma on Insurance | Leave a comment

An Insurance Coverage Lawyer Provides Legal Advice

An Insurance Coverage Lawyer is Not an Adjuster

I was an insurance adjuster from 1967 until 1972 when I was admitted to the California Bar and became a practicing lawyer. Since my career as a lawyer was almost exclusively limited to representing insurers policyholder lawyers have claimed – to obtain privileged communications with my clients and my work product by claiming that I was acting as a super adjuster. Since I have been both an adjuster and a coverage lawyer I understand the difference and as a lawyer never acted as an adjuster.

In Ranger Construction Industries, Inc. v. Allied World National Assurance Company, Civil No. 17-81226-CIV-Marra/Matthewman, United States District Court Southern District Of Florida (February 5, 2019) the District Court considered a motion to disqualify plaintiff’s counsel because it reviewed privileged communications inadvertently produced in discovery.

The Court addressed a total of 10 attorney-client privileged documents produced by Defendant to Plaintiff in regard to the Motion for Disqualification.

FACTS

The facts underlying this disqualification motion establish that, unfortunately, lawyers on both sides of the litigation acted poorly.

At the heart of this dispute is a disappointing but obvious inability of opposing counsel in this case to talk and correspond with each other in good faith, to rely on each other’s representations, and to deal honestly and squarely with one another. From its inception, this case has been replete with numerous and extensive discovery disputes, myriad motions, lengthy hearings, and finger-pointing by opposing counsel against each other for various alleged bad acts. The Court does not know if this conduct and mistrust is based upon past dealings between counsel or due to other factors, but the attorneys should be aware that their conduct is not helping their respective clients’ positions in this litigation. In fact, it is downright unproductive and silly.

Defendant’s counsel inadvertently produced 10 attorney-client privileged documents out of a total of approximately 14,500 discovery documents produced. Plaintiff’s counsel advised Defendant’s counsel in writing that approximately 100 documents—which appeared to be attorney-client privileged documents between Fowler White and Defendant—had been produced by Defendant within that large production, but that Plaintiff would “assume” that those 100 or so documents were correctly produced and were, in fact, not privileged.

There was a level of gamesmanship exhibited by counsel on both sides, combined with the rush of the holidays—and the flu and illness of counsel on both sides—which affected the responses of both sides’ counsel and exacerbated and prolonged this dispute.

What the parties’ counsel seem to miss in all of this is that if opposing counsel would have just picked up the phone or met in person, honestly spoken to one another, jointly and immediately identified and specified the approximate 100 documents at issue, and acted in good faith with one another like professional attorneys are supposed to do, they could have quickly resolved this matter among themselves with a simple claw-back of the privileged documents by Defendant. That did not happen.

Issue One: Whether Defendant Met Its Burden of Establishing that the 10 Documents at Issue Were Attorney-Client Privileged Documents

The Court concluded that the 10 documents at issue are, in fact, covered by the attorney-client privilege. A corporate insurance company can claim the attorney-client privilege if counsel was retained or tasked with providing an opinion in his or her professional capacity as an attorney or if counsel’s investigation was undertaken in anticipation of litigation.

The statute does not require that a corporation—such as an insurance company—establish that it anticipated litigation at the time it retained counsel or received legal advice in order to invoke the attorney-client privilege. Where a lawyer is engaged to advise a person as to business matters as opposed to legal matters, or when he is employed to act simply as an agent to perform some non-legal activity for a client there is no privilege.

The Court held that requiring an insurance company to anticipate litigation in order for it to assert an attorney-client privilege would not only constitute a misreading of the applicable statute and case law, it would also partially, and improperly, eviscerate the attorney-client privilege for insurance companies who retain legal counsel for legal advice when litigation is not yet anticipated.

Moreover, it is clear that, in the insurance context, no privilege attaches when an attorney performs investigative work in the capacity of an insurance claims adjuster, rather than as a lawyer. Simply because the attorney’s assigned duties were investigative in nature does not, however, preclude an assertion of the attorney-client privilege. The relevant question is not whether the attorney was retained to conduct an investigation, but rather, whether this investigation was related to the rendition of legal services. If it was, the privilege is not waived.

Attorneys often perform legal services and render legal advice for corporate insurers before the corporate insurer reasonably anticipates litigation. To say that such legal advice and legal opinions are not covered by the attorney-client privilege would be nonsensical and would unfairly remove attorney-client protection for corporate insurers in such circumstances.

The attorney-client privilege should attach when the lawyer is rendering legal advice or legal services to a corporate insurer even if no litigation is reasonably anticipated by the insurer at the time counsel is retained or at the time the legal advice or legal service are rendered. Fowler White was not in-house counsel, but rather was outside coverage counsel for Defendant. Fowler White was not acting as a conduit, claims investigator, or claims handler. Fowler White was providing legal advice and legal services to Defendant in its capacity as outside coverage counsel, and it matters not whether Defendant anticipated litigation at the time Fowler White was retained or at the time Fowler White rendered its legal advice or legal services.

The Court found the content of the documents sufficiently establishes that Fowler White was rendering legal services and was acting in the capacity of legal counsel and not as a claim investigator, claims adjustor, monitor, or mere conduit.

Under the facts of this case, Defendant’s counsel’s disclosure of the 10 attorney-client privileged documents was clearly inadvertent. The holder of the privilege, Defendant and its counsel, took reasonable steps to prevent disclosure. Additionally, Defendant’s counsel took reasonable steps to rectify the error. The documents were inadvertently produced, and no waiver of the attorney-client privilege occurred.

Disqualification is Not Proper or Appropriate

Disqualification is an extreme sanction which is not justified in this case. Disqualification of Plaintiff’s counsel would severely prejudice Plaintiff and is wholly unnecessary under the facts of this case. Both sides share the blame for what occurred in this case and this militates against disqualification.

Plaintiff is not permitted to utilize any of the 10 attorney-client privileged documents at issue, or any of the specific information directly and exclusively obtained from the 10 documents, in this case or in any other case involving Defendant. Plaintiff’s counsel and Plaintiff shall ensure that they have destroyed all copies of the 10 documents and shall reaffirm and certify to the Court and opposing counsel that they have done so within seven (7) days of the date of this Order.

ZALMA OPINION

One of the reasons, after I turned 75-years-old that I had my license to practice law deemed inactive and stopped practicing law, was the number of cases like this one where some policyholder’s lawyers acted as if they were at war and had been instructed to “take no prisoners” and the lawyers, as in this case, acted poorly.  When the conduct of the lawyers fails to help their respective clients’ positions in the litigation that causes a trial judge to describe their actions as “downright unproductive and silly.” The privilege applies to the work of a lawyer acting as a lawyer, even if the lawyer conducts an investigation as part of his or her right and duty to provide legal advice to the insurer.


© 2019 – 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.

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.

THE HOMEOWNERS INSURANCE POLICY

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

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

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

Paperback Book    Kindle Book

 

 

Share
Posted in Zalma on Insurance | Leave a comment

Insurance Books for the Insurance Claims Professional

How to Create Insurance Claims Professionals

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 insurance coverage and claims-handling lawyer, and has spent more than 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

Zalma on Property and Casualty Insurance:

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

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

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

Insurance Law Deskbook: Zalma

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 United States, and few know more about California insurance law Cal Lawthan 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 Commercial Property Insurance Policy Deskbook

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

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

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

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

The Insurance Fraud Deskbook

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.

ABOUT THE AUTHOR

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

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

Mr. Zalma’s books are available as Kindle books or paperbacks at Amazon .com and from other publishers, 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.


Share
Posted in Zalma on Insurance | Leave a comment

Squirrel! It Was Not a Concurrent Cause of a Loss

Court Will Never Rewrite a Policy to Provide Coverage Not Purchased

The City of West Liberty owns and operates an electrical power plant. Employer’s Mutual Casualty Company (EMC) insured West Liberty’s power plant with coverage effective from April 1, 2014, through April 1, 2015. The squirrel came into contact with a bare cable clamp that was energized with 7200 volts of electricity. This contact created a conductive path between the high voltage clamp and the grounded frame. Once this path was established, the air between the energized and grounded surfaces became ionized and arcing resulted. The squirrel was killed, but more significantly the arcing caused $213,524.76 worth of damage to West Liberty’s transformer and other electrical equipment.

The case found its way to the Supreme Court of Iowa where the insured claimed it was entitled to coverage because the arcing was caused by the electrocution of an unfortunate squirrel who wandered into an electric facility and died as a result of electrocution. The electrical arcing that facilitated the sad death of the squirrel resulted in serious damage to the facility.

In City of West Liberty, Iowa v. Employers Mutual Casualty Company, No. 16-1972, Supreme Court Of Iowa (February 1, 2019) the city sued its insurer claiming an exclusion for damage caused by electrical arcing did not apply because the damage was really caused by the squirrel.

Background Facts

A squirrel found its way onto an electrical transformer owned by a municipality, triggering an electrical arc that killed the squirrel and caused substantial damage to the municipality’s property. The municipality sought coverage under its “all-risks” insurance policy. The insurer denied coverage based on the policy’s electrical-currents exclusion, which excludes “loss caused by arcing or by electrical currents other than lightning.” Disagreeing with this reading of the insurance policy, the municipality filed suit. The district court granted summary judgment to the insurer and the court of appeals affirmed.

West Liberty provided timely notice of a claim to EMC for the loss. EMC, however, denied coverage based on an “Electrical Currents” exclusion in the policy. The policy excluded:

PERILS EXCLUDED

“We” do not pay for loss or damage caused directly or indirectly by one or more of the following excluded causes or events. Such loss or damage is excluded regardless of other causes or events that contribute to or aggravate the loss, whether such causes or events act to produce the loss before, at the same time as, or after the excluded causes or events.

“We” do not pay for loss or damage that is caused by or results from one or more of the following excluded causes or events:

Electrical Currents — “We” do not pay for loss caused by arcing or by electrical currents other than lightning. But if arcing or electrical currents other than lightning result in fire, “we” cover the loss or damage caused by that fire.

In its summary judgment memorandum, West Liberty argued a theory of concurrent causation and landed on efficient proximate cause as its theory of choice.

The trial court granted EMC’s motion for summary judgment and denied West Liberty’s motion. The district court found that the only event that caused damages was the electrical arc, noting the squirrel did no damage to West Liberty’s property. The court held “The Court cannot conclude that the ‘squirrel’s actions’ were a cause of the damages because the squirrel did not actually do anything to cause damages; it merely touched some things it should not have touched. The arc caused all of the damages. ”

Analysis

Policy interpretation is always an issue for the court unless it is required to rely upon extrinsic evidence or choose between reasonable inferences from extrinsic evidence. The plain meaning of the insurance contract generally prevails. The court will not strain the words or phrases of the policy in order to find liability that the policy did not intend and the insured did not purchase

The “Electrical Currents” exclusion language is straightforward. If arcing caused the loss, the loss is excluded, unless the arcing led to fire. Because arcing caused the loss and the arcing didn’t lead to a fire, West Liberty’s claim appears to be foreclosed by the express terms of the policy.

West Liberty maintains that the squirrel was an efficient proximate cause of its loss. The efficient proximate cause doctrine can apply when two or more causes, at least one covered by an insurance policy and at least one excluded, contribute to a loss. In insurance law it is generally understood that where the peril insured against sets other causes in motion which, in an unbroken sequence and connection between the act and final loss, produces the result for which recovery is sought, the insured peril is regarded as the proximate cause of the entire loss.

The Supreme Court concluded that this is not a case of two independent causes, one of which was covered and one excluded. The efficient proximate cause doctrine is only applicable where the causes are independent. When the evidence shows the loss was in fact caused by only a single cause, even if susceptible to various characterizations, the efficient proximate cause analysis does not apply.

The squirrel did not independently contribute to the $213,524.76 loss, i.e., other than through the arcing. As the district court put it, “The squirrel by itself did not cause any damage.”

Electrical arcing is always going to have some cause. Policy language excluding an event would be meaningless if an insured could avoid the exclusion simply by pointing out that the event itself had a cause.

An insured may not avoid a contractual exclusion merely by affixing an additional label or separate characterization to the act or event causing the loss.

The efficient-proximate-cause doctrine applies only where two or more distinct actions, events, or forces combined to create the loss. In this case there are not two independent causes of the plaintiffs’ damages at play.

The electrical-currents exclusion has an express carve-out where “lightning” is the source of the electrical currents or arcing. In that event, the exclusion does not apply. But if an insured could always avoid the electrical-currents exclusion by arguing that something else was the efficient proximate cause of the electrical current or arcing, the lightning exception would seem unnecessary.

The decision of the court of appeals and the judgment of the district court was affirmed.

ZALMA OPINION

Although the arcing would not have happened without the intercession of the suicidal squirrel the damage was caused solely by the arcing. Since the exclusion was clear and unambiguous the exclusion must be enforced and the city recovers nothing. The argument that there were two concurrent causes was imaginative, however, the city was unable to turn the squirrel into a cause of the damage because it could have been electrocuted, died, and but for the arcing there would be no damage to the city’s facility.


© 2019 – 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.

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.

THE HOMEOWNERS INSURANCE POLICY

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

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

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

Paperback Book    Kindle Book

Share
Posted in Zalma on Insurance | 1 Comment

How to Create Insurance Claims Professionals

Insurance Books for the Insurance Claims Professional

“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.

“Random Thoughts on Insurance”

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

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


Fictionalized True Insurance Crime Books

“HEADS I WIN, TAILS YOU LOSE”

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

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

Available as a Kindle Book.

Available as a paperback.

“Candy and Abel: Murder for Insurance 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.

 

Share
Posted in Zalma on Insurance | Leave a comment

Three Squares and a Cot – Arson Doesn’t Pay

Arson Scheme Finally Stopped

Elbert Walker, Jr., and his relatives, Shirley and Darryl Burk, were convicted of one count of conspiracy to commit multiple objects, including arson, bank fraud, mail fraud, wire fraud, bankruptcy fraud, possession of a forged security, and making false declarations in court. Defendant was also charged separately with two counts of possession of a firearm by a convicted felon and one count of possession of a firearm with an obliterated serial. .

In United States Of America v. Elbert Walker, Jr., No. 16-13642, United States Court Of Appeals For The Eleventh Circuit (February 1, 2019) Walker was convicted after a jury found him guilty of:

  • conspiracy to commit arson,
  • bank fraud,
  • mail fraud,
  • wire fraud,
  • bankruptcy fraud,
  • possession of a forged security,
  • making false declarations in court,
  • two counts of being a felon in possession of a firearm, and
  • possession of a firearm with an obliterated serial number.

BACKGROUND

Conspiracy to Commit Arson

During its case-in-chief, the Government presented evidence of a scheme spanning more than a decade in which Defendant, the Burks, and others conspired to acquire various properties and transfer them among each other, to obtain insurance coverage on the properties, to set fire to the properties, and then to fraudulently make insurance claims and collect money for the fire losses. The evidence indicated that the conspiracy involved five properties, nearly all of which Defendant owned or managed, in Georgia.

Verdict and Post-Trial Motions

Following the Government’s case-in-chief, Defendant moved for a judgment of acquittal on all counts, arguing that insufficient evidence showed that the alleged co-conspirators entered into an agreement, that he was the same individual who was convicted in New Jersey, and that the gun with an obliterated serial number belonged to him.

After the guilty verdict Defendant renewed his motion for a judgment of acquittal. The district court denied the motion in a written order, concluding that the Government’s evidence was sufficient to support the jury’s finding that there was a common purpose among Defendant and the Burks to set fires and fraudulently collect insurance money. The court noted that all of the fires alleged in the indictment followed the same pattern: the owner or tenant obtained insurance; shortly thereafter a fire occurred; and then an insurance loss claim was filed, usually with the same form used in previous fire incidents. The court also found the evidence sufficient to support Defendant’s convictions on the firearms charges.

At sentencing, the court imposed concurrent prison terms of 121 months for the conspiracy charge, 120 months for each of the firearm charges, and 60 months for possession of a firearm with an obliterated serial number.

DISCUSSION

Under Federal Rule of Criminal Procedure 29, a district court “must enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction.” Fed. R. Crim. P. 29(a).

To support a conviction for conspiracy to commit arson, the Government must prove that the defendant conspired to

  1. maliciously damage or destroy
  2. by means of a fire or explosive
  3. a building, vehicle, or other real or personal property, and
  4. that the property was used in interstate commerce or in an activity affecting interstate commerce.

A conspiracy occurs when two or more individuals agree to commit a crime and the defendant knowingly and voluntarily joins the agreement. The Government may establish a conspiracy through circumstantial evidence.

Specifically, the evidence showed a pattern of conduct between 1996 and 2006, where Defendant, the Burks, or a third party would acquire insurance coverage on a property owned, or recently sold, by Defendant. Shortly thereafter, the property would experience a fire, and Defendant, the Burks, or an insured third party would submit an insurance claim for alleged losses. Expert testimony established that several of these fires were intentionally set, and at least one insurance company denied a claim after reaching the same conclusion.

Given that Defendant and his associates repeatedly employed the same method of defrauding insurance companies the jury reasonably could infer Defendant’s knowing and voluntary participation in an agreement to commit arson.

Because sufficient evidence supported the jury’s finding that Defendant conspired to commit arson, the judgment and sentence were affirmed.

ZALMA OPINION

It takes a certain amount of unmitigated gall to appeal a conviction after the state proved multiple acts of arson for profit and insurance fraud and claim that it never happened. What should be amazing to anyone reading about this crime is why it took so long to catch Walker and his co-conspirators who were not even smart enough to try a different method to defraud insurers. They concluded if it worked once it would work again. They were right for at least five different acts of arson for profit and only got caught on the last try because they were greedy. Mrs. Gump was proved right again: “stupid is as stupid does.”


© 2019 – 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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law 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.

 

Share
Posted in Zalma on Insurance | Leave a comment

Privity – Protection for Insurance Defense Counsel

Defense Lawyer: Always Create Contract With Insured you are Asked to Defend

When I was an insurance defense lawyer I always understood – and explained to the insured – that I was retained to represent the insured by the insurer who would pay my bills but who was not my client. In fact, when the insurer refused to settle a case against my advice I felt compelled to make demands on the insurer and threaten them with the tort of bad faith because that was what the insurer paid me to do. I never got another referral from that insurer but I was never sued for malpractice. Today, some insurers have decided to sue lawyers they hired to defend an insured if the results are different than the insurer believed should have resulted.

Wise and prudent defense lawyers – when assigned the defense of an insured by an insurer – enter into a contract with the insured advising the insured that the lawyers were retained to represent the insured and only the insured and setting out the terms and conditions of the agreement.

In Arch Insurance Company v. Kubicki Draper, LLP, a law firm, No. 4D17-2889, District Court Of Appeal Of The State Of Florida Fourth District (January 23, 2019) Arch Insurance Company (“Arch”) appealed from the circuit court’s final judgment granting the Kubicki Draper law firm’s motion for summary judgment, which argued that the insurer lacked standing to sue the law firm and because its representation was only of Arch’s insured.

FACTS

Arch hired the law firm to defend the insured in a separate suit. After the separate suit settled within the insured’s policy limits, the insurer sued the law firm for professional negligence. The insurer’s negligence suit alleged, in pertinent part, that the law firm’s delayed filing of the insured’s statute of limitations defense resulted in a large settlement, using the insurer’s funds, which would have been avoided, in whole or in part, if the law firm had raised the insured’s statute of limitations defense earlier in the separate suit.

The law firm’s motion for summary judgment alleged, in pertinent part, that the insurer lacked standing to sue the law firm because the insurer and the law firm were not in privity with each other.

The Florida Supreme Court has held that an attorney’s liability for negligence in the performance of his or her professional duties is limited to clients with whom the attorney shares privity of contract. To bring a legal malpractice action, the plaintiff must either be in privity with the attorney, wherein one party has a direct obligation to another, or, alternatively, the plaintiff must be an intended third-party beneficiary. Florida courts have refused to expand this exception to include incidental third-party beneficiaries.

No Florida case law recognizes an attorney-client duty owed by defense counsel to an insurance carrier where the attorney is hired to defend an insured with respect to a liability claim filed under the carrier’s policy. There is no agreement to the effect that the lawyers represented both the insured and the insurer.

ANALYSIS

The law firm was in privity of contract with the insured and the insurer’s role was that of a third party paying the law firm to represent the insured. Since the underlying lawsuit was settled within the policy limits the insured suffered no damages as a result of any alleged actions or inactions on the part of the law firm.

After careful review, the court determined that the insurer lacked standing to directly pursue the claims against the law firm. Attached to the retention letter sent to the insured by the law firm was a Statement of Client’s Rights demonstrating that the insured was in privity with the law firm as the law firm’s client.

The circuit court’s conclusion that the law firm was in privity with the insured as the client was accepted by the appellate court. There was nothing in the record to indicate that the law firm was in privity with the insurer. There was no evidence that indicated that the insurer was an intended third-party beneficiary of the relationship between the law firm and the insured.

According to Arch, precluding an insurer from bringing a malpractice action against the law firm retained for its insured would have dire consequences. Essentially, law firms would be shielded from liability resulting from their malpractice as long as the insured is not personally harmed.

Following the law as it exists, not as the insurer argues it ought to be, is required of a court of appeal. The Florida supreme court has recognized only two situations in which a third party was permitted to pursue a legal malpractice claim against counsel who was not in privity with the third party, neither of which applies here: (1) a will drafting situation. (2) Lawyers preparing private placement memoranda, like independent auditors, owe a duty to those who rely on statements contained in their published documents, parties may assign claims for legal malpractice committed in preparing them.

Since nothing indicated that the law firm was in privity with the insurer, or that the insurer was an intended third-party beneficiary of the relationship between the law firm and the insured, the court of appeal was unwilling to expand the field of privity exceptions to apply to this case.

ZALMA OPINION

This case presents an important lesson to all insurance defense lawyers – they must, when asked to defend an insured by an insurer – obtain a retention letter from the insured that makes clear that the lawyer only represents the interest of the insured, not the insurer, who will pay the lawyers bills in accordance with its contractual obligation to the insured.


© 2019 – 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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law 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.

 

 

 

 

Share
Posted in Zalma on Insurance | 1 Comment

Insurance Books for the Insurance Claims Professional

How to Create Insurance Claims Professionals

For the insurance industry to survive and profit it is absolutely necessary that it maintains a staff of insurance claims professionals who can read, understand and apply the terms and conditions of the insurance policy, treat all insureds and claimants fairly and in good faith, and keep all of the promises made by the insurance policy. In addition the insurance claim professional must be able to recognize and defeat attempts at insurance fraud while dealing ethically and in good faith with all insureds and claimants with whom the insurance professional comes in contact.

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

The following books are a small taste of the insurance and insurance claims books written by Barry Zalma and available on amazon.com and http://zalma.com/blog/insurance-claims-library/

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Ethics for the Insurance Professional

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

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

Share
Posted in Zalma on Insurance | Leave a comment

Just Fat Not Sufficient for Bariatric Weight Loss Surgery

ERISA Fiduciary only Needs a Scintilla of Evidence to Support Denial of Health Insurance Claim

Health insurance plans governed by ERISA are not bound by the same rules as insurance claims. They are bound only by the federal statute that created and controls the benefits. It is prudent, therefore, for the patient to consider the terms and conditions of the plan before allowing a voluntary surgery.

In Karen A. Rittinger v. Healthy Alliance Life Insurance Company, doing business as Anthem Blue Cross and Blue Shield; Anthem UM Services, Incorporated, No. 17-20646, United States Court Of Appeals For The Fifth Circuit (January 31, 2019) Karen Rittinger learned the lesson after having a bariatric surgery that went wrong. After the surgery she clashed over insurance coverage. Rittinger was the beneficiary of an ERISA-covered plan. Healthy Alliance Life Insurance Company offered the plan and Anthem Blue Cross Blue Shield (Anthem) administered it.

FACTS

In October 2014, Rittinger underwent bariatric surgery. Complications arose requiring follow-up surgery and intensive care. Anthem denied preauthorization for both the bariatric surgery and the follow-up surgery, writing, “We cannot approve coverage for weight loss surgery (bariatric surgery) or hospital care after this surgery. Bariatric or weight loss surgery is an exclusion in your health plan contract.”

Paragraph 33 of the Health Certificate of Coverage (Certificate) deals with bariatric surgery:

[The plan does not cover] bariatric surgery, regardless of the purpose it is proposed or performed. This includes but is not limited to Roux-en-Y (RNY), Laparoscopic gastric bypass surgery or other gastric bypass surgery . . . . Complications directly related to bariatric surgery that result in an Inpatient stay or an extended Inpatient stay for the bariatric surgery, as determined by Us, are not covered.

There is an exception at the end of Paragraph 33: “This exclusion does not apply to conditions including but not limited to . . . excessive nausea/vomiting.” Anthem cited Paragraph 33’s exclusion and denied coverage.

For Rittinger to have coverage, Paragraph 33’s “excessive nausea/vomiting” exception must kick in. Davis Clinic’s intake report from September 15—one month before Rittinger’s surgery—notes that Rittinger’s “chief complaint[s]” were “morbid obesity and abdominal pain.” And that same report noted “no vomiting” and “no nausea.” Rittinger’s medical records up to the time of her surgery—records Rittinger herself attached to her preauthorization evaluation—do not reflect treatment for nausea and vomiting. Moreover, Rittinger’s preauthorization documentation requests treatment for “morbid obesity” and was coded for obesity “due to excess calories,” but does not indicate any excessive nausea or vomiting.

After the denial Rittinger’s husband emailed Anthem. He explained that he “would like to file an appeal for her hospitalizations which began on 10/15/2014.” Anthem treated this as an official first-level appeal. After gathering more information from Rittinger and her surgeons and obtaining an independent peer review, Anthem again denied coverage.

In April 2015, Rittinger hired counsel and filed a second-level internal appeal. She submitted materials about her medical history and the surgery. Emphasizing Paragraph 33’s exception for bariatric surgery where there is “excessive nausea/vomiting,” Rittinger provided records showing: (1) she suffered from Gastroesophageal Reflux Disease (GERD) and esophagitis, (2) GERD/esophagitis is linked to nausea and vomiting, and (3) she underwent surgery to address these problems.

Anthem convened a five-person “Grievance Advisory Panel” (GAP) to evaluate Rittinger’s second-level appeal. The GAP quoted Paragraph 33, concluded it excluded Rittinger’s bariatric surgery, and affirmed the denial of coverage.

Having exhausted her internal remedies, Rittinger sued.

ANALYSIS

The Fifth Circuit reviewed the grant of summary judgment as if it was presented directly to them.

A plan administrator abuses its discretion where the decision is not based on evidence, even if disputable, that clearly supports the basis for its denial. Yet if the plan fiduciary’s decision is supported by substantial evidence and is not arbitrary or capricious, it must prevail.  Substantial evidence is evidence that is more than a scintilla, less than a preponderance, and is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.

The district court disagreed with Anthem’s interpretation of plan terms and procedures. But the district court also understood Anthem’s need to “respond quickly to a customer’s request,” and not “shut out customers who do not dot every ‘i’ and cross every ‘t’ in a complex submission process.”

The Fifth Circuit questioned whether the GAP’s denial of coverage in the second-level appeal was an abuse of discretion.  Rittinger contends it was. She claims the GAP ignored her relevant evidence and failed to analyze Paragraph 33’s “excessive nausea/vomiting” exception. Anthem responded that the administrative record contained more than a scintilla of evidence that Rittinger’s surgery was for weight loss purposes and that she had no vomiting or nausea.

On appeal, Rittinger challenges Anthem’s application of the plan terms, but not Anthem’s interpretation. The district court reasoned that Anthem’s distinction between GERD/esophagitis and nausea/vomiting was “sophistic” and rendered Paragraph 33’s exclusion “meaningless.” And a construction that renders terms superfluous is “contrary to the provision’s plain meaning.”

Paragraph 33 specifically contemplates particular exceptions to its exclusion of bariatric and weight loss surgeries. It is wrong for a court to rewrite Paragraph 33 and insert a new exception for GERD/esophagitis—expressio unius est exclusio alterius. Anthem’s construction makes sense. It fits with the plan’s plain language. We ordinarily think of GERD/esophagitis and nausea/vomiting as two different things. In fairness, the district court had a point too: These could be partially overlapping categories.

Perhaps Paragraph 33 is best interpreted as creating a Venn diagram [overlapping circles or other shapes to illustrate the logical relationships between two or more sets of items] of categories where GERD/esophagitis and excessive nausea/vomiting have some overlap. However, the Fifth Circuit was only required to ask whether Anthem’s construction was so egregiously wrong that it flouts the plan’s plain language and constitutes an abuse of discretion. Since Anthem’s interpretation of Paragraph 33 was not so off-kilter as to be an abuse of discretion.

If “substantial evidence” supports Anthem’s decision, then there was no abuse of discretion. Abuse of discretion review is the functional equivalent of arbitrary and capricious review. A decision is arbitrary if it is made without a rational connection between the known facts and the decision. This review is deferential. The appellate court only needs assurance that the administrator’s decision falls somewhere on a continuum of reasonableness—even if on the low end.

References to nausea and vomiting do not appear in the administrative record until after this coverage dispute began. And even when those terms turn up, two of Rittinger’s prior medical providers do not mention nausea or vomiting per se but rather GERD and esophagitis. In fact, claims that Rittinger has submitted to Anthem since early 2014—part of the GAP’s administrative record—do not reflect treatment for nausea or vomiting.

The district court was only supposed to review for abuse of discretion—i.e., did Anthem have more than a scintilla of evidence to support its decision? The district court was not supposed to weigh and balance the evidence. Anthem did not need to supply original evidence or expert witnesses: It only needed to clear the low, more-than-a-scintilla threshold. The five GAP members reviewed the evidence and determined Rittinger’s initial surgery was “for weight loss and acid reflux,” and not “excessive nausea/vomiting.” As a result the Fifth Circuit concluded that Anthem’s decision is rational and that, therefore,  Paragraph 33’s exception did not apply.

Multiple “scintillas” of evidence—Rittinger’s medical record, her preauthorization report, Anthem’s consulting physician’s review, and the coding of Rittinger’s other claims to Anthem—support the GAP’s decision, even if other evidence is stronger or more “persuasive.”

The Fifth Circuit, concluded that Anthem did not abuse its discretion in either the first- or second-level appeal. Although not the paragon of procedural propriety, Anthem satisfied the very low, very deferential abuse-of-discretion standard. Rittinger is not entitled to any damages.

ZALMA OPINION

The Fifth Circuit, although it refused Rittinger’s claim, was kind to her since it noted that the only evidence of vomiting came after the claim was refused and even then, it was inadequate. She was fat. She wanted bariatric surgery to lose weight. She had it and it went wrong causing more surgery. Regardless, the plan did not provide coverage for bariatric surgery.  Presenting the new information could have been construed as an attempt at fraud but since it was inadequate to get past the exclusion the court simply refused her any of the benefits of the policy and any damages.


© 2019 – 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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law 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.

 

 

Share
Posted in Zalma on Insurance | Leave a comment

Books to Help You Grow a Staff of Insurance Claims Professionals

Insurance Books for the Insurance Claims Professional

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

The following books are a small taste of the insurance and insurance claims books written by Barry Zalma and available on amazon.com and http://zalma.com/blog/insurance-claims-library/


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

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.

Share
Posted in Zalma on Insurance | Leave a comment

Arbitration of Insurance Disputes Must Be Taken Seriously

Defending Crop Claim Requires Presentation of Evidence of Basis of Refusal to Pay

Crop insurance is a creature of the U.S. Government whose terms and conditions are mandated by federal statutes. Disputes over coverage, based on the statutes, are required to be resolved by arbitration. Arbitration awards are difficult, if not impossible, to overturn and will almost invariably be upheld by federal courts. Therefore, it is the obligation of the insurer refusing to pay a crop insurance claim, to come to the arbitration thoroughly prepared with evidence and witnesses to counter the presentation of the insured farmer and be ready to challenge the testimony and calculations of the farmer’s expert.

In Great American Insurance Company v. Jonathan L. Russell, No. 17-2441, United States Court of Appeals For the Eighth Circuit (January 31, 2019) the insurer convinced the District Court to vacate an arbitration award because the arbitrators failed to break down how they arrived at the amount of the award.

Jonathan Russell appealed the district court’s vacatur of the arbitration award he received against his insurer, Great American Insurance Company, for wrongfully denying his claim for damage to his 2013 corn crop.

FACTS

Russell submitted claims to Great American for damage to his 2013 corn and soybean crops in Atchison, Holt, and Nodaway counties in Missouri. Russell’s crop insurance policy is governed by federal regulations that form the policy’s essential terms. After Great American denied his claims, Russell invoked the arbitration provision. Although the regulations impose certain limitations on the powers of arbitrators assessing federally-reinsured crop insurance claims like Russell’s, arbitral awards are still governed by the Federal Arbitration Act.

Following an evidentiary hearing, the three-arbitrator panel awarded Russell $1,433,008 for damage to his corn crop in the three counties but denied his soybean claim. The panel found that Great American’s denial of Russell’s corn claim—based on (1) Great American’s inability to substantiate an insurable cause of loss and (2) Russell’s failure to provide adequate records to establish production “by unit”—was erroneous. After reviewing the evidence, the panel concluded that Russell’s accounts of insurable crop damage were independently verified but that Great American had failed to conduct a timely on-site inspection until after harvest was completed. The arbitrators credited testimony of witnesses that the crops in question experienced significant damage from drought, rootworm, and heavy winds. The panel accepted the analysis of Russell’s damages expert, who calculated the total damage to the corn crop as $1,433,008. Great American did not challenge this calculation or offer a different calculation.

Great American then appealed the award to the district court. Great American argued that the arbitrators “imperfectly executed” their powers because they failed to comply with the regulations governing the arbitration proceeding. The applicable regulations required the panel to provide “a written statement describing the issues in dispute, the factual findings, the determinations and the amount and basis for any award and breakdown by claim for any award.”

The district court agreed that the panel had failed to properly break down the award “by claim,” nullifying the entire award. The court based its decision on § 457.113 ¶ 11(a), which states in part that the insurer “will determine [the insured’s] loss on a unit basis,” and on § 457.8 ¶ 1, which defines an enterprise unit as “[a]ll insurable acreage of the same insured crop . . . in the county in which you have a share on the date coverage begins for the crop year.”

Relying on this statutory and regulatory language, the district court concluded that the arbitration panel was required to break down the award into separate awards for each of the three counties to provide the required “breakdown by claim.” It vacated the award and did not address Great American’s argument that the panel made improper interpretations of the regulations.

ANALYSIS

The Federal Arbitration Act is a congressional declaration of a liberal federal policy favoring arbitration agreements.

The arbitration award needed only to describe the issues in dispute, the factual findings, the determinations and the amount and basis for any award and breakdown by claim for any award.  A Claim for indemnity is defined as a claim made on the insurer’s form that contains the information necessary to pay the indemnity. Russell submitted a single claim covering both his corn and soybean crops, and Great American assigned it a single claim number. Nothing in the regulations required the panel to segregate this claim into multiple separate claims.

Although the insurer was required to make conclusions by county unit the arbitration panel was obligated to break down its award only by claim, not by unit.  Moreover, the arbitration panel concluded that Great American had “collaps[ed] all acres farmed by Russell into a single unit pursuant to policy provisions.” As a result there appeared to the Eighth Circuit to be no reason why the arbitration panel could not accept Great American’s decision to treat Russell’s claim as singular when rendering its decision. Indeed, it appears that Great American raised no objection to this approach until its motion to vacate or modify the award.

The Eighth Circuit concluded that the panel’s written explanation for the award amount was adequate. Although the panel simply adopted the calculation of Russell’s expert, Great American failed to contest this calculation or provide its own alternative at the evidentiary hearing.

Since there is no requirement in the statutory and regulatory policy that the arbitrator’s decision be particularly detailed if  it adequately explained the disposition of each claim at issue, it should be upheld.

Accordingly, the Eighth Circuit vacated the district court’s order vacating the arbitration award.

However, since Great American’s alternative argument that the arbitration panel’s decision rests on improper interpretations of the applicable regulations, which the district court did not address, the Eighth Circuit sent the case back to the district court to determine whether the arbitrators used improper interpretations of the applicable regulations.

ZALMA OPINION

The Eighth Circuit gave the insurer a gift – the right to argue more in the district court – even though they made sure they understood that the insurer failed to protect its rights, failed to present evidence to counter the opinions of the farmer’s expert, and simply allowed the district court to err. Had they been properly prepared with their own expert during the arbitration they might have avoided the trial and appeal. Arbitrations seem to be informal and easy but they must be prepared for in the same manner and with the same effort as any jury trial, recognizing that the trial is before three knowledgeable jurors.


© 2019 – 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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law 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.

 

 

 

Share
Posted in Zalma on Insurance | Leave a comment

More Books to Grow a Staff of Insurance Claims Professionals

Insurance Books to Help Create the Insurance Claims Professional

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

COIL Commentary on Insurance Law Volume 1 through volume 5.

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

All five issues available here.

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

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.


Construction Defects and Insurance

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

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

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

The Eight volumes include:


Mold Claims

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

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 books by Barry Zalma available as a paperback or a Kindle book at http://zalma.com/blog/insurance-claims-library/

Share
Posted in Zalma on Insurance | Leave a comment

Splitting Cause – Duplicative Suits – Dismissed

Insurer Must Defend Itself When Prosecutors Arrest and Fail to Convict Fraud Perpetrator

Insurance companies are compelled by state law to investigate suspicions of insurance fraud and to turn over to the authorities any facts when they believe a fraud is being attempted or that it occurred. When the authorities file criminal charges only to have the charge dismissed by a court the insurer is subject to litigation from the person arrested even though the report of the suspicion of fraud provides the reporting insurer with immunity from suit.

In Maher Waad; Marks One Car Rental, Incorporated; Marks One Collision v. Farmers Insurance Exchange, a California Corporation; Allen Keller; Thomas Berry, No. 18-1588, United States Court Of Appeals For The Sixth Circuit (January 30, 2019) Maher Waad, Marks One Car Rental, Inc., and Marks One Collision (collectively, “Plaintiffs”) sued Farmers Insurance Exchange (“Farmers”) after Farmers accused Plaintiffs of insurance fraud. The district court dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6) because Plaintiffs improperly split their claims among the three lawsuits and engaged in duplicative litigation.

FACTS

Waad owns Marks One Car Rental and Marks One Collision. Marks One Collision is an automobile collision repair business that specializes in repairing cars covered by insurance, including Farmers. After repairing a damaged vehicle, Plaintiffs would submit the repair bill directly to Farmers. Farmers employees Allen Keller and Scott Wood investigated Plaintiffs’ businesses for insurance fraud in late 2013.  Keller and Wood produced a report concluding that Plaintiffs were indeed engaging in insurance fraud by submitting receipts for repair work not actually performed. Farmers sent the report to law enforcement. Law enforcement then conducted its own investigation, raided Plaintiffs’ businesses on April 23, 2014, and arrested Waad four days later. Waad was bound over for trial by the Macomb County district court, finding probable cause for the arrest, but eventually quashed the criminal information for lack of probable cause.

According to Plaintiffs, the investigation and report were merely an excuse to harm Waad—an Arab-American—and his businesses because of racial animus. Plaintiffs reacted to the Farmers investigation and Farmers’ coordination with Macomb County law enforcement by filing lawsuits in 2013, 2016, and 2017.

WAAD SUES FARMERS

Suit Number One

In the “2013 Case” Plaintiffs sued Farmers and six other insurance companies for tortious interference, defamation, violation of Michigan’s consumer protection act, civil conspiracy, and racial discrimination.  On May 28, 2014, Plaintiffs filed a second amended complaint, adding factual allegations that Farmers and its employees, including Tom Berry, were cooperating with Macomb County law enforcement. Curiously, however, Plaintiffs’ second amended complaint did not include any claims regarding the raid or Waad’s arrest.

The district court barred the filing of any further changes to the second amended complaint. The district court eventually dismissed the claims against the other insurance companies. Plaintiffs’ counsel, Steven Haney, withdrew after the insurance companies filed numerous motions to disqualify him because he formerly served as legal counsel to Farmers. Finally, the district court granted Farmers’ summary judgment motion, holding that Plaintiffs failed to establish any damages to their business or harm to their reputation due to Farmers’ actions.

Suit Number Two

The Michigan Court of Appeals affirmed the circuit court’s ruling dismissing the criminal action. See People v. Waad, No. 326568, 2016 WL 3088182 (Mich. Ct. App. May 31, 2016).

The dismissal of the criminal case led to the “2016 Case” where Plaintiffs sued Farmers again for false arrest, false imprisonment, and malicious prosecution, and other assorted state law charges based on the April 23, 2014 raid on Plaintiffs’ businesses and Waad’s arrest. This time, Plaintiffs added as defendants Farmers’ employee Allen Keller and various Macomb County law enforcement officials and alleged that Farmers and its employees were acting in concert with Macomb County law enforcement.

The district court dismissed Farmers and Keller sua sponte because Plaintiffs did not allege that Farmers and Keller were state actors or that they acted in concert with state actors, so Plaintiffs did not plead plausible claims against them under § 1983.

The Third Suit

Seven-and-a-half months after Farmers and Keller were dismissed from the 2016 Case, Plaintiffs filed a third lawsuit, the “2017 Case.” In this action, Plaintiffs again brought claims tracing back to the raid and Waad’s arrest. This time, Plaintiffs corrected their earlier failure.

Farmers, Keller, and Berry moved to dismiss the 2017 complaint for improper claim splitting, duplicative litigation, and res judicata. The district court granted the motion on claim-splitting and duplicative-litigation grounds and dismissed the 2017 Case in its entirety. Specifically, the district court held that the allegations in the 2013, 2016, and 2017 Cases were all based upon the same set of allegations.

The district court also held that the 2016 and 2017 Cases were duplicative litigation.

ANALYSIS

Claim-splitting and duplicative litigation are variations of res judicata. Res judicata—more specifically here, claim preclusion—bars subsequent litigation of causes of action where a court has already issued a final decision on the merits in an earlier case and the causes of action were, or should have been, litigated in the earlier case between the same parties.

The test for claim splitting is not whether there is finality of judgment, but whether the first suit, assuming it were final, would preclude the second suit. Essentially, claim splitting is the same as res judicata, but with a presumption of a final judgment instead of an actual final judgment. In a similar vein, the doctrine of duplicative litigation allows a district court to stay or dismiss a suit that is duplicative of another federal court suit using its general power to administer its docket. The difference between claim splitting and duplicative litigation is in name only and the terms are used interchangeably.

Plaintiffs could have petitioned the district court for leave to file a third amended complaint. They did not.

The district court correctly held that the 2016 and 2017 Cases were improperly split and duplicative. Duplicative litigation allows district courts to dismiss later-filed cases because of the preclusive effects that the earlier cases would have on the litigation. Plaintiffs alleged that the search warrants for Plaintiffs’ businesses and the arrest warrant for Waad were based on the “Defendant Farmers Insurance Allen Keller investigative report as well as the willfully fabricated investigative findings of Detective David Kriss.

Plaintiffs failed to plead state action between private and state actors, a basic element of any § 1983 claim. Indeed, Farmers and Keller listed failure to state a claim as one of their affirmative defenses. Plaintiffs could have amended their complaint by right to allege state action in response. They did not. As a result, the district court dismissed Farmers and Keller.

Plaintiffs’ claims in the 2017 Case were duplicative of and improperly split from the 2016 Case.

The district court could have consolidated the 2016 Case with the 2013 Case. Plaintiffs could have properly pled their § 1983 claim in the 2016 Case in the first instance or moved to amend after the district court pointed out the error. None of these prudent and practical moves occurred, however. Instead, Plaintiffs filed the 2017 Case, which was duplicative of the 2016 Case, and the district court did not abuse its discretion by dismissing it.

It is well-settled that a plaintiff may not use the tactic of filing substantially identical complaints to expand the procedural rights he would have otherwise enjoyed. Because Plaintiffs’ 2017 case would thus be subject to claim preclusion presuming a final judgment in the 2016 case, the 2017 case constitutes improper claim splitting.

ZALMA OPINION

Because it followed the law, investigated Waad, turned that investigation to the proper authorities only to have him arrested, bound over for trial, and then dismissed without the presentation of evidence, Farmers was forced to defend three lawsuits. Because of the failure of Waad’s counsel to act prudently and, instead, filing duplicative lawsuits, Waad’s case was dismissed. If he did not commit fraud and had a viable case against Farmers and the state, he is not without a remedy, he can always sue his lawyers.


© 2019 – 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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law 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.

 

Share
Posted in Zalma on Insurance | Leave a comment

Books to Grow a Staff of Insurance Claims Professionals

Insurance Books to Help Create the Insurance Claims Professional

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


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 insurance coverage and claims-handling lawyer, and has spent more than 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

Zalma on Property and Casualty Insurance:

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

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

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

Insurance Law Deskbook: Zalma

Learn the insurance basics that are essential to every civil practitioner.

CalifCal Lawornia 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.

 

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 Commercial Property Insurance Policy Deskbook

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

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

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

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

The Insurance Fraud Deskbook

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 books by Barry Zalma at http://zalma.com/blog/insurance-claims-library/
Created by Barry Zalma, http://www.zalma.com

Share
Posted in Zalma on Insurance | 2 Comments

Zalma’s Insurance Fraud Letter – February 1, 2019

Zalma’s Insurance Fraud Letter

 Zalma’s Insurance Fraud Letter, Volume 23, No. 3      

Insurance Fraud Takes Many Different Forms 

Falsely Promising a Customer That a Shipment is Insured Is Criminal 

Insurance fraud is usually a crime by an individual against an insurer. However, since insurance fraud seems to be ubiquitous, it can also be an insurance fraud act to promise to a customer that a shipment is insured when it is not.
In United States of America v. Melinda J. Campbell (No. 17-5642); Elliot Campbell (No. 17-5973), No. 17-5642, No. 17-5973, United States Court of Appeals for The Sixth Circuit (January 15, 2019) Justice Nalbandian, writing for a unanimous Sixth Circuit wrote: “When it comes to Melinda and Elliot Campbell-think Bonnie and Clyde. But rather than rob banks, the Campbells targeted the trucking industry.”
FACTS
The Campbells created fake shipping companies, persuaded third parties to hire them to deliver cargo, and then held the shipments as hostage until the third parties paid ransom for the deliveries. The government charged the Campbells with six counts of wire fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit extortion. After a five-day trial, a jury convicted the Campbells.
The Campbells operated various trucking companies in Kentucky. Bryan Napier worked for the Campbells as a dispatcher. This meant that Napier found cargo for the Campbells’ trucks to deliver from point A to point B. And then the Campbells (with Napier’s help) entered into contracts with various shipping companies to deliver the cargo.
But to induce the shippers to enter into these contracts, the Campbells made “false representations and/or promises” which they “never actually intended to comply [with].” For example, the Campbells agreed to meet certain conditions, such as providing proof of a trucking license, insurance, and tax forms; using several drivers to make deliveries within a specific time frame; and covering the cargo with a tarp. The Campbells also promised to deliver the cargo before getting paid. But once the shippers were duped, the Campbells failed to follow these conditions.
The government identified at least 69 victims who lost money under the Campbells’ scheme. The Campbells also instructed the drivers to “rejigger” loads. This meant that shippers would pay the Campbells extra to deliver cargo exclusively with no other cargo on the truck. But after agreeing to this condition, the Campbells instructed their drivers to comingle other cargo on the truck-and deliver the additional cargo first to “make it look like they had complied with that requirement.”
The Campbells prolonged their con by creating fake company names and fake employee names. The Campbells then used these fake names to falsify government forms and insurance documents.
The Campbells went to trial and tried to explain their conduct. The Campbells’ defense relied on the general rule that a trucking company retains a “carrier’s lien” on a shipment-which allows the carrier to keep the shipment until the customer pays. According to the Campbells, they lawfully refused to deliver cargo-under these default carrier’s liens-until their customers paid. And Napier and Elliot each testified that, if a dispute arose, he believed he had a legal right to withhold delivery.
In their contracts, the Campbells explicitly waived any carrier’s lien and promised to demand payment “within twenty days from the receipt [of cargo].” The district court found that “[a]s a result of these contractual terms, the default rules . . . no longer applied . . . [and] the Campbells had no legal right to demand payment from their customers up front.” Once the Campbells gave up their right to a carrier’s lien, it became unlawful for them to refuse to deliver cargo until their customers paid.
Melinda argued that these losses stemmed from an unrelated trucking accident (and insurance dispute)-and not from the fraudulent trucking scheme itself. The district court disagreed, explaining that “it is clear to the Court that insurance was part of the Campbells’ criminal activity and that these insurance losses-even if they resulted from an accident-were reasonably foreseeable, because one of the ways that the Campbells tricked customers into doing business with them was by claiming that they had insurance when they, in fact, did not.”
The district court sentenced Elliot and Melinda to fifty-six months in prison.

 The Current Issue Contains the Following

  • Insurance Fraud Takes Many Different Forms
  • Investigating the Fraudulent Claim
  • Fraud Investigation Methods s
  • Good News From the Coalition Against Insurance Fraud
  • Health Insurance Fraud Convictions
  • Other Insurance Fraud Convictions
  • Arson-for-Profit Fires
  • The Insurance Claims Library

Books

The most recent posts to the daily blog, Zalma on Insurance, one of Feedspots top 50 insurance law blogs are available at http://zalma.com/blog.Check in every day for a case summary at http://zalma.com/blog

The most recent posts to the daily blog, Zalma on Insurance, one of Feedspots top 50 insurance law blogs are available at http://zalma.com/blog.Check in every day for a case summary at http://zalma.com/blog

 

 


Zalma’s Insurance 101

I have completed a video blog calledZalma’s Insurance 101 that consists 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.

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

Loading

Share
Posted in Zalma on Insurance | Leave a comment

Everything Needed by the Insurance Claims Professional

Insurance Books to Help Create the Insurance Claims Professional

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

Read about Random Thoughts on Insurance and True Crime stories of insurance fraud that was both convicted and successful, and other insurance books by Barry Zalma, at http://zalma.com/blog/insurance-claims-library/

“Random Thoughts on Insurance”

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

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


Fictionalized True Insurance Crime Books

“HEADS I WIN, TAILS YOU LOSE”

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

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

Available as a Kindle Book.

Available as a paperback.

“Candy and Abel: Murder for Insurance 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 Barry Zalma at http://www.zalma.com.

Share
Posted in Zalma on Insurance | Leave a comment

Never Sue a Defendant Who Is Broke

Is Lawyer’s Failure to Determine Insurance and Assets of Defendant Malpractice?

One of the most important things a plaintiff’s lawyer does when he or she takes on a case is determine if the defendant has liability insurance or assets sufficient to pay any judgment that may be obtained. If the defendant is judgment proof no matter how successful the trial the case is not worth the time of the plaintiff or the lawyer.

In Patric J. LeHouillier and LeHouillier & Associates, P.C., v. Della Gallegos, 2019 CO 8, Supreme Court Case No. 17SC312, Supreme Court of the State of Colorado, (January 28, 2019) an attorney malpractice case was founded on professional negligence and asked the supreme court to decide who—the client or the attorney—bears the burden to prove that any judgment that could have been obtained against the underlying defendant would or would not have been collectible.

FACTS

Della Gallegos had to undergo three cranial surgeries after her radiologist, Dr. Steven Hughes, failed to detect an obvious brain tumor on an MRI scan three years earlier. Had Dr. Hughes discovered the tumor in 2006, Gallegos could have treated it with cheaper, and less invasive, radiosurgery. The highly invasive cranial surgeries damaged Gallegos’s vision, hearing, and memory.

Gallegos retained an attorney, Patric LeHouillier, to sue Dr. Hughes for medical malpractice. But LeHouillier later decided not to proceed with the suit, concluding it did not make economic sense. He and Gallegos disagree over whether he actually informed her of this decision. In any event, the statute of limitations lapsed on the claims Gallegos could have brought against Dr. Hughes.

Gallegos then sued attorney LeHouillier and his firm, claiming that LeHouillier’s negligence prevented her from successfully suing Dr. Hughes for medical malpractice.

LeHouillier claims that he met with Gallegos and informed her of his decision to end his representation of her, but he kept no written records memorializing the meeting or his decision. Gallegos contends that the alleged conversation never took place and that she was not aware that LeHouillier had dropped her case. The statute of limitations lapsed on the medical malpractice claims that Gallegos could have brought against Dr. Hughes.

The trial court agreed with LeHouillier that Gallegos bore the burden of proving collectibility. But it ruled that Gallegos had provided sufficient evidence to permit the jury to decide whether the judgment against Dr. Hughes was collectible. The jury ultimately found that Dr. Hughes had committed medical malpractice by failing to diagnose Gallegos’s brain tumor in 2006. It also found that LeHouillier and his firm had breached their professional duty of care by not pursuing the case against Dr. Hughes. Finally, the jury found that Gallegos suffered over $1.6 million in present and future damages.

In a 2-1 decision, the court of appeals reversed and remanded for a new trial.

ANALYSIS

Determining which party bears the burden of proof is a question of law. A legal malpractice claim founded on professional negligence asserts that an attorney breached his or her professional duty of care in a way that proximately injured a client. In cases such as this one, the client claims that her attorney’s malpractice prevented her from prevailing in a lawsuit. To prevail on this type of attorney malpractice claim, the client must prove that but for the attorney’s negligence, she would have won a favorable judgment against the underlying defendant. This requirement is often referred to as proving the “case within a case.”

Over ninety years ago, in Lawson v. Sigfrid, 262 P. 1018 (Colo. 1927), the Supreme Court recognized that if an attorney malpractice plaintiff could not have collected a judgment from the defendant in the underlying case because that defendant was insolvent, then the plaintiff was not entitled to damages in the attorney malpractice case. It has long been clear that proving the case within a case in an attorney malpractice suit includes resolving the question of whether the judgment in the underlying case would have been collectible.

Because the collectibility of the underlying judgment is essential to the causation and damages elements of a client’s professional negligence claim against her attorney, we now expressly hold that the client-plaintiff bears the burden to prove that the underlying judgment was collectible.

Requiring Plaintiff to Prove Collectibility Aligns with Tort Theory

Where, as here, a legal malpractice claim is founded on professional negligence, the plaintiff must prove duty, breach, causation, and damages (as in every negligence case).

Proving collectibility, therefore, necessarily follows from the rule that plaintiffs must prove causation.

Relatedly, in a legal malpractice claim alleging that an attorney mishandled an underlying case, the measure of a client-plaintiff’s damages is the amount of the underlying judgment that could have been collected. A plaintiff must prove by a preponderance of the evidence that she has in fact suffered damage. Such damages must be actual, not mere speculation or conjecture. If the lost judgment was uncollectible, then the client-plaintiff has not incurred any legally cognizable damages.

Requiring Plaintiff to Prove Collectibility Is Not Unfair or Unduly Onerous

Evidence concerning a defendant’s insurance or lack thereof is usually precluded because such evidence might improperly influence the jury’s determination of liability. The policy concerns underlying the rule do not apply in a legal malpractice case because the coverage question pertains not to the attorney, but to the defendant in the underlying action. So, the risk that a jury would conflate coverage of the underlying defendant and liability of the attorney is low. Moreover, to avoid jury confusion, courts could bifurcate the trial on the collectibility issue.

Alternatively, a client-plaintiff could depose the underlying defendant to explore his or her net worth. In fact, a plaintiff could also satisfactorily prove collectibility by showing sufficient unencumbered assets—such as titled assets or real estate—information available through public records.

Placing the burden with the attorney-defendant to prove uncollectibility forces the attorney to “prov[e] a negative,” which is a much more onerous burden than requiring the client-plaintiff to prove collectibility. The attorney-defendant must first negate the underlying defendant’s insurance coverage, a task arguably no more difficult than proving it. But then, to prove insolvency, the attorney must reconstruct the underlying defendant’s entire financial position, accounting for all of his or her assets and liabilities. This presents a much more onerous burden.

Here, Gallegos failed to prove that the underlying judgment against Dr. Hughes would have been collectible. Gallegos introduced the 2010 letter that LeHouillier wrote to Dr. Hughes recommending that the doctor put “[his] professional liability carrier on notice.” Gallegos argues that because Dr. Hughes never responded to the letter that he lacked insurance, it can be reasonably inferred that he must have had insurance, thus evincing the collectibility of the underlying judgment.  Although Dr. Hughes did not inform LeHouillier that he did not have liability coverage, he also did not inform LeHouillier that he did have liability coverage. Dr. Hughes simply did not respond at all.

Despite a statutory mandate that a physician must carry insurance, there is no evidence that Dr. Hughes actually complied. The jury had no evidentiary basis from which to infer that Dr. Hughes carried professional liability insurance or that any judgment against him would have been collectible.

The Supreme Court held that because the collectibility of the underlying judgment is essential to the causation and damages elements of a client’s negligence claim against an attorney, the client-plaintiff bears the burden of proving that the lost judgment in the underlying case was collectible and that the court of appeals erred in concluding that in an attorney malpractice case, the attorney-defendant should bear the burden of proving that any underlying judgment would have not been collectible. The judgment was reversed and remanded for a new trial.

ZALMA OPINION

At the moment, the lawyer is protected against a judgment of more than $1 million. If the plaintiff can prove the doctor had insurance, owned real property or had a bank account he will lose. The suit could have been avoided if he determined the assets and insurance of the doctor before he dropped the case and if he had simply sent a letter to the plaintiff telling her that he would not pursue the case and that if she wished to proceed she needed a new lawyer. He did not. He did not even memorialize the conversation he claimed to have had with the plaintiff advising her he dropped the case. If he gave the client evidence the doctor was broke there would have been no litigation.


© 2019 – 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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law 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.

 

 

Share
Posted in Zalma on Insurance | Leave a comment

California Claims and SIU Regulations, Ethics and Rescission

Everything Needed by the Insurance Claims Professional

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

Read about California Claims and SIU Regulations, Ethics and Rescission  and other insurance books by Barry Zalma, at http://zalma.com/blog/insurance-claims-library/

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Ethics for the Insurance Professional

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.

Read more at http://www.zalma.com or here.

Share
Posted in Zalma on Insurance | Leave a comment

If you do the Crime You Must Do the Time

Arson Conviction Upheld

As I have written often, arson for profit is a stupid crime. It leaves physical evidence. Lies about the cause can usually be countered by physical evidence. Fire never totally destroys a property in a large city with a professional fire department. In this case an attempted arson for profit resulted in a sentence of more than twenty seven years with the perpetrator getting nothing more three squares and a cot at the discretion of the state of Wisconsin.

In State of Wisconsin v. Colin J. Habram, Appeal No. 2017AP2399-CR, Appeal No. 2017AP2400-CR, State Of Wisconsin In Court Of Appeals District II (January 16, 2019) Colin Habram found himself pleading to various crimes that resulted in convictions for maintaining a drug-trafficking place, arson, and intentional mistreatment of animals. After his sentence he moved for an order for postconviction relief which was denied.

FACTS

Habram’s troubles stem from several cases, two consolidated for his appeal. The first arose after and incident to a search warrant of Habram’s residence where police found drugs and drug paraphernalia. He was charged with maintaining a drug-trafficking place, possession of an illegally obtained prescription, and possession of drug paraphernalia, all as a repeater.

In the second case, Habram called 911 at about 3:30 a.m. saying his house was on fire. He told responding officers that he came home to find a door pried open, his kitchen “slightly trashed” with broken glasses and a bathroom cabinet door on the floor, his bedroom dresser ransacked, and “black, thick, heavy smoke” pouring from a spare bedroom he rented out. Habram denied any involvement.

A few hours later, Fond du Lac Police Department Detective Lee Mikulec, who responded to the scene, and Brian Liethen, a special agent assigned to the Office of the State Fire Marshal, contacted Habram. Both Mikulec and Liethen are trained in fire inspection.

After delays allowed by the officers, Habram was seated in an unlocked interview room. He was not handcuffed or frisked. Liethen told Habram he was “not going to arrest [him] or anything like that,” and that Habram could take bathroom or cigarette breaks, although he would be accompanied to smoke so he could get back inside the building. He also was offered food and beverages.

The total interview lasted just under three hours, most of it gathering factual information such as the timeline of events, the layout of the house and its contents, and Habram’s home ownership and insurance coverage. Mikulec testified that the overall tone was “extremely mellow” and conversational.

About eighty minutes in, Habram asked, “I don’t mean to sound rude or anything, but do you know how much longer we’ll be?”  Habram asked, “Am I good to go then or what?” Liethen replied, “I don’t think you’ll be much longer here. We’ll get you right back.”

In the last approximately forty minutes, the tone changed. Liethen told Habram he did not believe Habram’s story because, based on the fire specialists’ many-hours inspection of the scene, he believed the fire was deliberately set and that the evidence pointed only to Habram. Habram at first denied it, but ultimately admitted that, depressed over his heroin addiction, precarious financial situation, and a failed love relationship, he decided to end his life, and set the fire using lighter fluid as an accelerant. His dog and cat perished. After signing a written statement, Habram was allowed to leave the police station. At no point was Habram given warnings required by Miranda v. Arizona, 384 U.S. 436 (1966).

THE ARREST

Habram was arrested the next day. He was charged with arson of a building, arson of a building with intent to defraud, first-degree recklessly endangering safety of police and fire personnel, and intentionally mistreating animals, all with the repeater enhancer. He faced over 123 years’ imprisonment.

Habram, as part of an agreement with the prosecutor, pled no contest to the arson, animal mistreatment, and drug-trafficking-place charges, cutting his exposure to fifty-five years and six months.  He was sentenced to an aggregate twenty-seven years’ imprisonment.

DEFENSE COUNSEL’S ADVICE

At the hearing on the postconviction motion, Habram’s counsel, Haase testified that he reviewed the recording of Habram’s police-station interview, that he was aware that Habram had not received Miranda warnings, and that whether to seek the statement’s suppression was one of the first issues he considered. He testified that he discussed with Habram the possibility of seeking to suppress it on both involuntariness, due to heroin intoxication, and Miranda grounds and that he told Habram the Miranda claim was the stronger argument.

Noting that the State’s offer reduced Habram’s sentencing exposure by about seventy years, Haase said he explained the risk of being convicted of all the charged offenses at trial but whether to plead was solely Habram’s decision and Haase would have abided by it.

Contrary to Haase’s testimony, Habram testified that Haase did not discuss with him the option of moving to suppress his arson confession based on a Miranda violation. The circuit court concluded that Habram was not in custody during the interview, finding that most of the questioning was “relatively benign, informational,” that Habram’s “vague and nebulous” queries about the length of the interview were not requests to terminate it, and that a reasonable person in similar circumstances would have felt free to leave.

The trial court found that Habram failed to prove that Haase was ineffective because of the speculative nature of the claim about failure to use Miranda.

ANALYSIS

To withdraw a plea post-sentencing, a defendant must establish by clear and convincing evidence that plea withdrawal is necessary to correct a manifest injustice.

To prevail on an ineffective-assistance claim, the defendant must show that counsel’s representation fell below an objective standard of reasonableness and that a reasonable probability exists that, but for those unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.

The court of appeal noted that Miranda warnings are required only in the context of a custodial interrogation. It is undisputed they were not given to Habram.

In determining whether an individual was “in custody” for Miranda purposes, the Court of Appeal considers the totality of the circumstances, including the individual’s freedom to leave; the purpose, place, and length of the interrogation; and the degree of restraint. Degree-of-restraint factors include whether: the individual was handcuffed or otherwise restrained; a weapon was drawn; a frisk was performed; the individual was moved to another location; questioning took place in a police vehicle; and multiple officers were involved. A person is in custody if a reasonable person in the same circumstances would not feel free to terminate the interview and leave the scene.

Habram voluntarily rode with Mikulec from his hotel room to the police station.

The interview room door there was closed but not locked. Habram was not frisked, handcuffed, or otherwise restrained, and was allowed four breaks.

The roughly three-hour interview was not “excessively long.” The bulk of it was conversational information gathering necessary to a fire investigation. Even after the tone turned accusatory and Habram gave his statement, he was not arrested. Instead, Mikulec offered to “help you out today … if we took you to the hospital to try to … help you get rid of this dope sick right now.” When Habram declined, they drove him back to his hotel.

A witness told police that Habram talked to her several times about burning his house down just days before the fire. Haase also explained to Habram that going to trial would take the State’s offer off the table, and posed the risk of being convicted of all the charged offenses, vastly increasing his sentence exposure.

Even if a defendant shows that particular errors of counsel were unreasonable, therefore, the defendant must show that they actually had an adverse effect on the defense.

A showing of prejudice requires more than speculation; the defendant must affirmatively prove prejudice. Because Habram failed to establish that he was prejudiced by any of the claimed deficiencies on the part of his defense counsel, the court of appeal affirmed the judgments and Habram will be required to serve the sentence imposed by the trial court.

ZALMA OPINION

Habram attempted an arson for profit. He told a girlfriend of his intent days before the fire. The physical evidence at the fire scene contradicted his factual claims. Facing more than 100 years in prison Habram pleaded guilty to many of the charges and in so doing reduced his exposure to over 80 years of imprisonment. Regardless, the sentence required he serve many years in prison so he attempted to get it reversed by claiming incompetent representation by his lawyer. The argument, as justice required, failed.


© 2019 – 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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law 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.

Share
Posted in Zalma on Insurance | Leave a comment

Recognizing Insurance Fraud

Investigating Fraud

The purpose of an insurance fraud investigation is to gather evidence to establish whether a suspected fraudulent claim is legitimate or a fraud. If the facts revealed by the investigation establish that the claim is legitimate the fraud investigation stops and the claim is paid. If the facts revealed by the investigation support the suspicion, then further evidence must be gathered to allow the insurer to determine whether it should deny the claim and refuse to pay.

Go to the Insurance Claims Library – E-Books and Articles by Barry Zalma –

Insurance Claims Library

Go to my blog: Zalma On Insurance at http://zalma.com/blog

Subscribe to e-mail Version of Zalma’s Insurance Fraud Letter, it’s Free! –
http://zalma.com/zalmas-insurance-fraud-letter-2/

Share
Posted in Zalma on Insurance | Leave a comment

Weapons to Defeat Insurance Fraud & Claims Handling

Everything Needed by the Insurance Claims Professional

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

Read about insurance fraud and weapons to defeat insurance fraud, the compact books on property insurance claims adjusting and liability claims adjusting, and other insurance books by Barry Zalma, at at http://zalma.com/blog/insurance-claims-library/

“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

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.

Learn about more information for the insurance professional available at http://zalma.com.

Share
Posted in Zalma on Insurance | Leave a comment

A Reinsurance Participation Agreement is Insurance

When an RPA and Workers’ Compensation are Jointly Issued they become an Integrated Insurance Contract

Creative people create creative schemes to save customers money when dealing with insurance. When the scheme did not work and premiums increased exponentially the insurer attempted to enforce the higher premiums by arbitration and the insured tried to avoid the contracts requirements because of a state statute that prohibits arbitration relating to insurance contracts. Litigation ensued seriously and went up to the Fourth Circuit twice.

In Minnieland Private Day School, Inc., a Virginia corporation v. Applied Underwriters Captive Risk Assurance Company, Inc., No. 17-2385, United States Court Of Appeals For The Fourth Circuit (January 14, 2019) Applied Underwriters Captive Risk Assurance Company, Inc. (“AUCRA”)  appealed to the Fourth Circuit the district court’s determination that a Reinsurance Participation Agreement (“RPA”) executed by it and Minnieland Private Day School is an insurance contract under Virginia law. Minnieland asserted that the RPA is an insurance contract which, by state statute that renders void arbitration clauses contained in insurance contracts. The district court held that the RPA is an insurance contract and that the RPA’s arbitration clause is void as a matter of law.

FACTS

This case involves a workers’ compensation insurance program that Minnieland purchased from AUCRA and its affiliated entities. Applied Underwriters, Inc.’s EquityComp program, is an innovative program of workers’ compensation insurance that offers small and mid-sized employers the benefits of both a guaranteed cost policy and a retrospective rating plan in one insurance program. The program is so novel that it has been patented.

The pooled companies provide workers’ compensation insurance coverage to employers and also mutually reinsure each other’s insurance business. Minnieland was unable to reap the benefit of the program.

Minnieland bought into the EquityComp program. At the same time, Minnieland executed an RPA. The RPA had a term of three years and provided that one or more “Issuing Insurers”—all of which were entities affiliated with Applied Underwriters, Inc.—would issue workers’ compensation insurance policies to Minnieland. The RPA also established that Minnieland would share in the profits and losses associated with its policies through its “segregated protected cell.”

For the first 33 of the 36 months during which the RPA was active, AUCRA charged, and Minnieland paid, an average of $58,810 per month in premiums. In November 2015, however, the premium charged to Minnieland increased drastically to $471,213, a 1167% increase from the October 2015 premium and a 801% increase over the first 33 months’ average.

Minnieland filed suit against AUCRA in the Eastern District of Virginia. Minnieland alleged that AUCRA is not authorized or licensed to act as an insurance company under Virginia law; that the RPA is an “insurance contract” and not a “reinsurance” agreement; and that AUCRA misrepresented the EquityComp program, and the RPA specifically, to circumvent Virginia insurance and workers’ compensation laws. Minnieland sought (1) a declaration that the RPA constitutes an insurance contract and is void because of AUCRA’s failure to comply with Virginia law; (2) a declaration of the amount, if any, that Minnieland owes under the RPA; and (3) a declaration that the premiums, deposits, and charges assessed to Minnieland by AUCRA were excessive. Minnieland also sought damages for fraud and breach of contract.

The district court ruled in an oral opinion that the RPA is an insurance contract.

ANALYSIS

In determining whether a dispute is arbitrable, the Fourth Circuit must apply ordinary state-law principles that govern the formation of contracts and the federal substantive law of arbitrability. Because this matter involves the question of whether the RPA is an insurance contract for purposes of the Virginia Code, the Fourth Circuit applied Virginia law.

Under Virginia law, where two papers are executed at the same time or contemporaneously between the same parties, in reference to the same subject matter, they must be regarded as parts of one transaction, and receive the same construction as if their several provisions were in one and the same instrument. To construe two instruments as one, reference in one instrument to the other need not be explicit; ‘it is sufficient if it is fairly traceable.

The Virginia Supreme Court held that multiple documents constitute a single transaction despite the fact that each of the contracts was not signed by all three parties because all the parties knew about the agreements and executed them at the same time as part of a single transaction to accomplish an agreed purpose. The court was also persuaded by the fact that some of the agreements contained explicit references to the other agreements.

Both the RPA and the first CNI policy went into effect on the same day, one day after Minnieland executed the Binder and RPA. Issuance of the policy was expressly conditioned on Minnieland’s prior execution of the RPA. Therefore, as contemplated by the parties, execution of the RPA would temporally precede issuance of the insurance policy. The subject matter of the documents is also the same: the workers’ compensation insurance issued to Minnieland, including the manner in which the payroll, premiums, and losses in connection with the insurance coverage would be calculated and how the risk would be distributed. The RPA also discusses the insurance coverage; it notes that workers’ compensation insurance coverage “will be provided” to Minnieland by “one or more of the Issuing Insurers,” defined as affiliates of Applied Underwriters, Inc.

The documents also internally reference each other and set forth each other’s terms. The RPA and insurance policies are linked. The RPA provides that its early cancellation terms apply if any one of the insurance policies is cancelled prior to the end of the RPA’s three-year term. The RPA also provides that Minnieland and AUCRA’s obligations under the RPA survive the active term of the RPA “and shall be extinguished only when [AUCRA] no longer has any potential or actual liability to the Issuing Insurers with respect to the [workers’ compensation insurance] Policies.”

The explicit internal references, interrelated terms, and shared subject matter are strong evidence that the parties intended these documents to be part of one integrated transaction. To be sure, the documents were not executed by the same parties. The Binder was signed by Minnieland as an acceptance of the EquityComp program proposal apparently drafted by ARS, a subsidiary of Applied Underwriters, Inc., to whom the EquityComp trademark is registered. The RPA was executed between Minnieland and AUCRA, another subsidiary of Applied Underwriters, Inc. and the insurance policies were produced by Applied Risk Services, Inc., another subsidiary of Applied Underwriters, Inc., with CNI, yet another Applied Underwriters, Inc. subsidiary, as the insuring entity.

The EquityComp program is promoted and sold as “[o]ne unified program for your business needs across all states” provided by Applied Underwriters, Inc., “a premier financial services group of companies with leading experience in the casualty insurance, reinsurance and business services disciplines.” (emphases added).

In sum, the documents, considered together, show that the purpose of the Binder, RPA, and CNI policies was one: to provide Minnieland with workers’ compensation insurance coverage while allowing Minnieland the opportunity to keep its insurance costs low by sharing in the underwriting risk. We need not determine specifically whether the RPA constitutes a policy endorsement or rider. Regardless of the label that may attach, the RPA and insurance policies constitute an integrated transaction and must be read as one contract.

The general consensus across the country has consistently been that the RPA is subject to insurance regulations. We join that consensus in holding that the RPA at issue here is an insurance contract under Virginia law. Because arbitration provisions in insurance contracts are void under Virginia law, Va. Code § 38.2-312, AUCRA must face Minnieland’s claims in court.

ZALMA OPINION

The parties, working in Virginia knew, or should have known, about the statute prohibiting arbitration with regard to an insurance contract. The integrated agreements contained such an agreement and, as a result of Virginia statutory law the group of contracts were all part of an integrated insurance contract and, as a result, the arbitration clause is void. An insurer, working together with other insurers, to create an insurance contract – whether in a single document or in a group of integrated contracts – is an insurance contract and any arbitration clause in such a group of contracts is unenforceable.


© 2019 – 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

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law 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.

 

Share
Posted in Zalma on Insurance | Leave a comment

Construction Defect claims, Mold and Fungi Claims and Why to Rescind the Tort of Bad Faith

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.

Read about Construction Defect claims, Mold and Fungi claims and a reason to rescind the tort of bad faith, and other insurance books by Barry Zalma, at at http://zalma.com/blog/insurance-claims-library/

Construction Defects and Insurance

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

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

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

The Eight volumes include:


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

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.

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 more at http://www.zalma.com.

Share
Posted in Zalma on Insurance | Leave a comment

An Ambiguity in Contract Terms Can Only Exist if the Differences are Reasonable

The Entire Policy Must Be Read in Context to Interpret its Meaning

The most difficult task faced by an insurer is to write a clear, unambiguous and easy to read contract of insurance. Because rules of insurance contract interpretation require that any ambiguity a court finds in the language of the policy must be construed against the needs of the drafter of the policy.

In Erie Insurance Exchange v. EPC MD 15, LLC, Record No. 180120, Supreme Court of Appeals of Virginia (January 17, 2019) EPC MD 15, LLC (“EPC”) insurance policy interpretation needed the assistance of the Virginia Supreme Court. EPC was a named insured on a commercial property policy issued by Erie Insurance Exchange (“Erie”). EPC sued Erie and claimed coverage for fire damage to a building owned by a subsidiary of EPC.

The subsidiary, however, was not a named insured, and no provision of the policy identified the subsidiary as an additional insured. On cross-motions for summary judgment, the circuit court held that EPC’s ability to control its subsidiary meant that, for insurance-coverage purposes, EPC thereby acquired all of the subsidiary’s property under a coverage-extension provision in the policy.

FACTS

The Policy

EPC is a limited liability company organized under Maryland law. EPC purchased an insurance policy from Erie that was issued for one year beginning on June 15, 2013. At the time of the purchase, EPC owned real property in Maryland. The policy identified EPC as the named insured and covered fire damage among other losses. No policy provision defined the term “named insured” to include EPC’s subsidiaries. The Declarations pages identified EPC as the named insured and described the property interest that the policy covered as the “interest of named insured in such premises — owner.”

The policy included various “Extensions of Coverage.” One such provision covered buildings newly “acquired” by EPC after the issuance of the policy. Another coverage-extension provision applied to “Business Personal Property” newly acquired by EPC and to “Personal Property of Others” located in a building newly “acquired or leased” by EPC. None of the extension of coverage provisions, however, expressly extended coverage to the buildings of others.

The Declarations pages of the policy listed EPC’s Maryland property and no other. Approximately nine months after Erie had issued the policy, EPC acquired the sole membership interest in Cyrus Square, LLC (“Cyrus Square”), a limited liability company organized under Virginia law. Cyrus Square owned a building located in Winchester, Virginia.

The Fire Loss

Within 90 days of EPC acquiring this membership interest in Cyrus Square, a fire damaged the building that Cyrus Square owned in Winchester. On cross-motions for summary judgment based upon stipulated facts, the circuit court agreed with EPC by holding that the word “acquired” is ambiguous and hence should be construed against Erie as the drafter. The court entered final judgment in favor of EPC against Erie.

ANALYSIS

On appeal, Erie argues that the circuit court misread the policy language and found an ambiguity where none existed. In context, Erie contends, the coverage-extension provision for newly acquired buildings cannot be fairly read to apply to property of a newly acquired subsidiary that is neither a named nor an additional insured on the parent company’s policy. Nor can this provision be reasonably read to mean that a parent company “acquires” the real property of a subsidiary merely by virtue of the creation of a parent-subsidiary relationship after issuance of the policy at issue.

Insurance Policy Interpretation

Virginia courts interpret insurance policies, like other contracts, in accordance with the intention of the parties gleaned from the words they have used in the document. If the terms of an insurance policy do not conflict with any provision of law, the terms of the contract, as written, will govern and limit the extent of recovery under the policy.

The search for this plain meaning looks at a word in the context of a sentence, a sentence in the context of a paragraph, and a paragraph in the context of the entire agreement. Every word, clause, and provision of the policy should be considered and construed together and seemingly conflicting provisions harmonized when that can be reasonably done, so as to effectuate the intention of the parties as expressed therein.

If the plain meaning is undiscoverable, Virginia courts apply the contra proferentem canon, which construes ambiguities against the drafter of the ambiguous language. Under Virginia law, conflicting interpretations reveal an ambiguity only where they are reasonable. A “reasonable” or “fairly claimed” interpretation is one arising from two competing interpretations that are “equally possible” given the text and context of the disputed provision.

The fact that one may hypothesize “opposing interpretations” of the same contractual provision does not necessarily render the contract ambiguous because a contract is not ambiguous simply because the parties to the contract disagree about the meaning of its language. Instead, in the search for plain meaning of any part of a contract, the court will construe the contract as a whole, striving not to place emphasis on isolated terms wrenched from the larger contractual context.

What is an LLC?

Created to amalgamate characteristics of both partnerships and incorporated entities, an LLC is a legal entity entirely separate and distinct from the members who compose it. Consequently, a transfer of property from a member to the LLC is more than a change in the form of ownership; it is a transfer from one entity or person to another.

Conclusion

The Supreme Court found that the District court incorrectly concluded that this indirect control was tantamount to EPC acquiring all of Cyrus Square’s real property. If control of a mere membership interest were enough, every named insured owning a controlling interest in an LLC could be said to have acquired the controlee’s property for purposes of a similar coverage-extension provision — even though the insurer had no underwriting information necessary to make a risk assessment and established no premium rating on the de facto insured that actually owned the newly acquired property.

The pertinent coverage-extension provision states that “you” may extend coverage for “[n]ewly acquired buildings.” The Declarations pages not only identify EPC (not Cyrus Square or any other entity) as the named insured but also imply that the “interest” of the named insured is its ownership interest in the premises covered by the policy. of others that is in your care,

Under EPC’s interpretation, after Erie had paid EPC for the loss, EPC would be obligated to assist Erie in recovering those very payments from the disgruntled employee of EPC’s own subsidiary and, if respondeat superior principles permitted it, directly from the subsidiary itself.

In short, the Declarations in the policy, the language in the coverage and coverage-extension provisions, and the language in the subrogation and exclusion provisions all undermine the reasonableness of EPC’s argument that, merely because it had “control” over Cyrus Square, EPC “acquired” the real property of Cyrus Square.

Because the Erie policy did not cover the damaged property of Cyrus Square, the circuit court erred in granting EPC’s motion for summary judgment and in denying Erie’s motion for summary judgment. The Supreme Court, therefore, issued final judgment in favor of Erie and dismissed EPC’s claim with prejudice.

ZALMA OPINION

Much to the disdain of EPC an insurance contract is nothing more than a contract and must be interpreted in accordance with the terms and conditions of the policy. The District Court found an ambiguity that did not exist since EPC was a totally different entity than its newly acquired subsidiary, Cyrus Square. Since an insurer has an unquestioned right to decide who it will insure and who it will not insure, the property that belonged to Cyrus Square, LLC (an entity not named on the policy) was not insured nor was the insurer given the opportunity to underwrite the risk. The problem could have been resolved by purchasing a policy in the name of Cyrus Square or by asking Erie to insure it against the risk of loss of the property. Since it did not do so EPC purchased an LLC that owned an uninsured property.


© 2019 – 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.

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

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.

Share
Posted in Zalma on Insurance | Leave a comment

COIL, The Homeowners Policy and Zalma on Insurance Claims

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.  Read about COIL, the Homeowners Policy and Zalma on Insurance Claims. Mr. Zalma’s books on insurance, insurance claims handling, and insurance fraud are available at http://zalma.com/blog/insurance-claims-library/

Commentary on Insurance Law

Volume 1, Number One, Number Two &  Number Three and COIL, Commentary on Insurance Law Volume One, Number Four

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

Articles included:

Appraisal; Ethics for Independent Insurance Adjusters; A Reason to Do Away with the Tort of Bad Faith; Duty to Defend Only Applies to Person Sued; Suit Must Allege Facts Giving Rise to a Potential for Coverage; Facts Ultimately Proven In The Underlying Litigation Have No Bearing On An Insurer’s Duty To Defend; Coulda, Shoulda, Woulda – Divorce is Expensive; Divorce Effects Cancellation Of Dependent Life Insurance Coverage; Proof of Materiality of a Representation; Rescission by Breach of Warranty; Bad Faith & Punitive Damages; A Method to Defeat Bad Faith Suits; Use of The Fair Claims Settlement Practices Regulations in Trial; “Post Loss Underwriting” is an Oxymoron; BAD FAITH SET-UPS; The Great Jewel Theft; Life Insurance Can Be Hazardous to Your Health; Negligent Supervision Does Not Eliminate Auto Use Exclusion; Crashing An ATV On Public Roads Not A Homeowners Policy Loss; The Pot Called the Kettle Black; Insured Suspected Of Fraud Unsuccessfully Charges Insurer With Fraud; and Duty to Defend Only Applies to Person Sued.

Kindle version Paperback version

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

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.

(c) 2019 by Barry Zalma & ClaimSchool, Inc. at http://www.zalma.com

 

Share
Posted in Zalma on Insurance | 1 Comment

Comedy of Errors by Everyone Involved Causes Multiple Appeals

Settlement Without Knowledge of All Available Insurance is Dangerous

When a person is injured in an automobile accident, even one involving a moped and an auto, it is the obligation of the injured person and the injured person’s lawyer, to determine all insurance available to provide indemnity to the injured person. That means all third party liability insurance and uninsured or underinsured motorist (UM/UIM) insurance. Failure on the part of the injured person or the injured person’s lawyer results in litigation and multiple appeals.

In Auto-Owners Insurance Company v. Sharon Spalding, NO. 2017-CA-001474-MR, Commonwealth of Kentucky Court of Appeals (January 18, 2019) the Kentucky Court of Appeals was faced with a dispute over available insurance coverages where the injured person Sharon Spalding and her lawyer failed to discover all coverage before a settlement was reached with the responsible party.

FACTS

On April 19, 2011, a vehicle operated by Bashia Robinson struck a moped operated by Spalding. There is no dispute that Robinson was at fault in causing the accident. As a result, Spalding suffered a badly broken arm that required surgery, and she incurred substantial medical bills. According to the record, Spalding suffers from some degree of dementia and memory loss, which pre-existed the accident.

Spalding subsequently retained attorney Dallas George to represent her in any claims arising from the accident. George investigated the matter and determined that Robinson had automobile insurance through Kentucky Farm Bureau with statutory limits of $25,000/$50,000. In addition, George learned that Spalding had motor vehicle insurance that had been purchased through Energy Insurance Agency of Lebanon (“Energy Insurance”). Spalding’s moped was insured under a policy issued by Progressive Insurance Company that did not provide Underinsured Motorist Coverage (“UIM”).

Spalding advised her lawyer’s paralegal that she did not have such coverage. Based upon that information, George secured a $25,000 settlement with Kentucky Farm Bureau on the liability claim against Robinson. Spalding signed a release in favor of Robinson in exchange for Kentucky Farm Bureau’s policy limits.

Six months after the release was signed it was discovered that Spalding had another policy issued by Auto Owners that provided UIM coverage limits of $100,000/$300,000.

Auto Owners concluded after completing an investigation that there would be coverage for a policyholder injured in a motor vehicle accident while occupying the moped because the operator of the moped would be considered a pedestrian. Regardless, Auto Owners denied Spalding coverage on the grounds that upon reaching the settlement with Kentucky Farm Bureau, Spalding failed to give the required notice to Auto Owners as her UIM carrier.

The trial court granted summary judgment in favor of Auto Owners finding that “the notice requirements of the statute are mandatory” and that Appellant did not owe Spalding coverage. In Spalding v. Auto-Owners Insurance Company, 2014-CA-001737, 2016 WL 361653, *2-3 (January 29, 2016) the court of appeal reversed the trial court decision and sent it back to the trial court.

According to her lawyer, George’s deposition, she never informed him that she owned a Ford Focus, and he learned of it only after securing the settlement with Kentucky Farm Bureau on the liability claim against Robinson. The trial court again ruled in favor of the insurer.

ANALYSIS

Summary judgment is an extraordinary remedy that should be cautiously applied and should not be used as a substitute for trial.

It was clear to the appellate court that a factual issue existed as to whether the conversation between Gloria and Spalding occurred. Gloria testified in her deposition that she called the insurance agency to inquire as to whether Spalding had UIM coverage. It is the agency’s policy to provide insurance information only in response to a written request and that she would not have provided any information over the phone.

The required notice is designed to give the UIM carrier the opportunity to protect its subrogation rights against the tortfeasor and the tortfeasor’s insurer. If an underinsured motorist insurer chooses to preserve its subrogation rights by refusing to consent to settle, the underinsured motorist insurer must, within thirty (30) days after receipt of the notice of the proposed settlement, pay to the injured party the amount of the written offer from the underinsured motorist’s liability insurer. Thereafter, upon final resolution of the underinsured motorist claim, the underinsured motorist insurer is entitled to seek subrogation against the liability insurer to the extent of its limits of liability insurance, and the underinsured motorist for the amounts paid to the injured party.

Although not specifically addressed in Kentucky with respect to UIM coverage, a multitude of jurisdictions have held that an insurer, through action or inaction, can waive or be estopped from asserting a defense to liability under the policy based upon the insured’s unauthorized settlement with a third-party tortfeasor. The Insurer, through the agent, did not make a coverage determination and decline coverage or fail to act. However, the effect of the alleged misstatement of coverage, if indeed such occurred, had the same result as it essentially led George to believe there was no other insurance coverage and that he needed to go ahead and settle Spalding’s claim with Robinson.

Where an insurer has initially denied coverage, whether the denial is based upon an erroneous coverage determination or, as in this case, a misrepresentation that a policy providing coverage even exists, the insurer cannot be allowed to subsequently assert a defense to liability based upon a provision requiring the insured to notify it prior to settlement, regardless of whether that provision is statutory or contractual. To hold otherwise would lead to an untenable result.

There is no question in this case that Spalding had a policy containing uninsured motorist coverage. Regardless of whether the notice requirement was contractual or statutory, we cannot conclude that Spalding should be penalized for the failure to fulfill a requirement that she was unaware was applicable to her. As the trial court noted, Spalding could not have given the required notice where the underlying existence of a UIM policy was denied or misstated.

Under the specific facts presented herein, the court of appeal believed it would be unjust to hold as a matter of law that Spalding is precluded from recovering UIM benefits. That is not to say that a jury could not find that the oversight in informing lawyer George of another policy contributed to the failure to provide the required notice. Indeed, the appellate court believed that is yet another factual issue that should have precluded summary judgment. As a result the case was returned to the trial court to take the case to trial.

ZALMA OPINION

Summary judgment often resolves a case quickly. However, if not properly granted, it causes unnecessary delay and expense. In this case summary judgment decisions were reversed twice and the case must go to trial. The problems would have been avoided had the insured, her lawyer and her agent had properly obtained the coverages available and not relied on the plaintiff – who suffered from dementia – to reach a quick settlement. Counsel, plaintiff, the agent and the insurer were abused by a failure to properly advise everyone who insured the risk faced by the injured party.

© 2019 – 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.

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

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.

 

 

Share
Posted in Zalma on Insurance | Leave a comment

Construction Defects and Insurance Claims

Investigation of the Construction Defect Claim

Construction defect suits are now flooding the courts of North America in greater numbers every year. Construction Defects and Insurance is a series of books available at Amazon.com designed to help the property owner, builder, construction professional, insurer, insurance professional, construction defect plaintiffs’ lawyer, construction defect defense lawyer, and those who support them faced with construction defect issues to effectively avoid or resolve claims of such defects. It covers identification of construction defects, and explains how to insure, investigate, prosecute, or defend litigation that results from claims of construction defect.

Construction Defects and Insurance addresses a wide audience about this escalating, expensive and excessive problem that makes it hazardous to build any structure without sufficient and broad insurance protection. The attorney representing a defendant or plaintiff in a construction defect suit will find this manual a useful resource to help counsel understand the claims of multiple parties, insurers, and experts involved. The party against whom a claim is being made will find this manual valuable in efforts to use the insurance protection for which the  party paid. The uninsured or underinsured will also find this manual a resource that will help the party and his/her/or its attorneys assert appropriate defenses that may avoid a major money judgment.  If the property has construction defects this manual will serve as a practical tool to help evaluate the facts and determine whether counsel is required to protect the rights of the owner, occupier, lessor or lessee of the property.

The majority of construction defect suits and appellate decisions arise in a few litigious jurisdictions but are spreading across the country like Kudzu.[1] The courts of Texas, Florida, New York, Colorado, and California have generated a great deal of the law on the subject that is then applied or adopted by other states whose courts have not seen the same volume of construction defects litigation. The author has attempted to obtain and cite authorities from across North America to be as helpful as possible to the wide audience this book is designed to serve.

Appendices including forms, checklists, and samples are provided to assist in the prosecution or defense of a construction defect case.

What Is Involved?

All buildings have an expected life span. None, except Egyptian Pyramids, were designed to last eons. Yet, even the pyramids in Egypt will erode to a mound of sand given enough time, wind, water and the movement of tectonic plates. Their demise will be an expected result of age and erosion rather than a construction defect. Venerable, well constructed, structures seldom fail because of their advanced age. Usually, they are torn down and replaced with new structures before they have time to waste away.

Regardless of the methods or materials used, all structures can fail before the end of their useful life. Such a failure can cause damage to people or property. The failure of a component part of a structure that causes damage to a person or property can be considered a construction defect. If the component was not installed correctly, was not appropriate for the structure, or was defectively constructed, the manufacturer, seller, and/or installer of the component may be held responsible for the damages caused.

When structures fail, the damages can include, among other things:

  • a total collapse of the structure and injury to its occupants;
  • an inability to keep rain water out of the structure;
  • cracking, settling, or subsidence of concrete flatwork;
  • cracking, settling, or tilting of walls;
  • doors that do not fit;
  • windows that do not operate;
  • walls out of plumb;
  • walls, doors, and windows that leak;
  • foundations that settle, crack, or subside as a result of subsidence or hydroconsolidation of the soils on which the foundation is placed;
  • mold growth on floors, walls, and ceilings;
  • acidic emissions from Chinese-manufactured drywall; or
  • damage to the property or persons of third parties.

Who is Involved?

Construction defect claims and suits are proliferating. Courts across North America are overflowing with multi-party lawsuits brought by condominium associations, Canadian Strata Organizations, owners of tract homes, and commercial property owners. As construction defect claims proliferate it has become increasingly likely that most people will either pursue or defend a construction defect claim at some point in their lifetime.

The dollars involved in construction defect litigation have grown exponentially. If a problem exists in a multiple unit condominium association or a housing tract, minor repairs of the defects multiply over the various units to millions of dollars. In addition, the complexity of a construction defect suit usually results in hundreds of hours of work for attorneys, the need for separate counsel for each party defendant like the owner, architect, general contractor and each subcontractor. The attorneys fees generated in such a case with multiple parties are high and settlements and judgments are often extremely large.

The targets of construction defect litigation are many and varied. Construction defect claims can be presented to any of the following:

  • property owners,
  • builders and contractors,
  • buyers,
  • sellers,
  • part manufacturers,
  • suppliers of materials used in original construction or repairs,
  • designers,
  • property managers,
  • architects,
  • engineers,
  • geotechnical engineers and geologists,
  • surveyors,
  • subcontractors,
  • real estate inspectors,
  • real estate brokers and sales people, or
  • real estate investors or developers.

Property Owners

The property owner who is faced with any of the construction defects detailed in Chapter I-5 has several avenues of recourse based upon legal remedies available in the U.S. The remedies available to a person who has been damaged by a construction defect are described by the legal concepts explained below.

Negligence

Negligence has the same definitions regardless of the state where it is alleged. It has been defined as: “a legal duty owed to the Plaintiff by the Defendant; a breach of that duty; an actual injury to the Plaintiff; and a showing that the breach was a proximate cause of the injury.”[2] “A breach of duty exists when it is foreseeable that one’s conduct may likely injure the person to whom the duty is owed.”[3]

The California Supreme Court upheld a judgment for property damage caused by negligent residential construction in Sabella v. Wisler, 59 Cal.2d 21, 27-30 (1963). The defendant had built a house and offered it for sale to the general public. As it turned out, the defendant’s negligent preparation of the lot, in combination with a subcontractor’s careless plumbing work, later caused leaks, subsidence, and damage to the house. The purchasers sued for negligence. The builder, arguing unsuccessfully against the imposition of tort liability, held that “the liability of a contractor should be determined by the consideration and weighing of the various factors bearing upon liability.” It was held that the builder was responsible for the ensuing damage.

The Nevada Supreme Court, in answer to a question posed by a federal district court, concluded that, in a commercial property construction defect action in which the plaintiffs seek to recover purely economic losses through negligence-based claims, the economic loss doctrine applies to bar such claims against design professionals who have provided professional services in the commercial property development or improvement process.[4]

Formerly, once a builder had completed a structure and the purchaser had accepted it, the builder was not liable to a third party for damages suffered because of the work’s condition, even if the builder was negligent.[5] The purchaser had remedies against the builder in contract and warranty. Injured third parties had no clear remedy until the Supreme Court, following the trend that began with MacPherson v. Buick Motor Co., 111 N.E. 1050 (N.Y. 1916), qualified the general rule exonerating manufacturers from third party claims with an exception applicable whenever “the nature of a [manufactured] thing is such that it is reasonably certain to place life and limb in peril when negligently made.”[6] The Supreme Court had already held that the manufacturers of defective ladders, elevators, and tires could be liable to persons not in contractual privity with them yet foreseeably injured by their products; the Supreme Court had no trouble applying the same rule to someone responsible for a defective railing in Hale v. Depaoli (1948) 33 C2d 228.

On the other hand, in Arizona, the Court of Appeal in Carstens v. City of Phoenix, 75 P.3d 1081, 206 Ariz. 123 (Ariz. App.Div.1 09/09/2003) refused to allow plaintiffs to sue the building inspectors for negligence because there was no bodily injury or property damage suffered. The Court of Appeal justified its holding by expounding on the history of the legal theories requiring actual damage:

In Arizona, it is well-established that a homeowner may not recover in tort against a contractor for economic losses attributable to defective construction when the negligence has not caused personal injury or damage to property other than the defective structure itself. Our Supreme Court first recognized the applicability of the economic loss rule in construction defect litigation in Woodward v. Chirco Constr. Co., 141 Ariz. 514, 687 P.2d 1269 (1984). In Woodward, homeowners sued the builder of their house for both breach of the implied warranty of workmanlike performance and habitability and negligence after large cracks developed in the house walls and foundation, the fireplace separated from the wall, a family room wall shifted forward, the kitchen ceiling began to bow, and the floor warped. … On appeal, this court affirmed the dismissal of the negligence claim, but reversed the court’s ruling on the implied warranty claim because the six-year statute of limitation on that claim had not expired.

A plumbing contractor had a general duty under tort law, separate from any contractually assumed obligation, to exercise reasonable care in any work undertaken, including taking precautions to avoid dangerous gas explosions.[7]

In a California case, a contractor who was renovating the insureds’ bathroom accidentally drove a nail through a pipe while hanging new drywall. The nail caused no leak at the time and went unnoticed until years later, when corrosion around the nail caused a leak as well as extensive water and mold damage. The insurer denied coverage on the ground that damage arising from third-party negligence was excluded whenever it interacted with an excluded peril, including corrosion or leakage of water. The insureds filed suit, arguing that the contractor’s negligence in driving the nail through the pipe was a covered peril and was the efficient proximate cause of their loss. Under the efficient proximate cause doctrine, when a loss is caused by a combination of covered and excluded risks, the loss is covered if the covered risk was the efficient proximate cause of the loss. On appeal, the court noted that the efficient proximate cause doctrine was superseded by the California Supreme Court’s analysis in Julian v. Hartford Underwriters Ins. Co., 110 P.3d 90 (Cal. 2005). In Julian, the court held that an insurer is not prohibited from drafting and enforcing policy provisions that provide coverage for some, but not all, manifestations of a particular peril. The court held that the homeowners policy effectively excluded coverage for consequential damage arising from a contractor’s negligence (a covered peril) whenever it interacted with an excluded peril, such as corrosion or water leakage.[8]

When a loss was not excluded under the policy, coverage exists under the ensuing loss provision because there is no rule of law excluding coverage under an efficient proximate cause analysis, and the insurer is precluded from changing the ground for its denial of coverage, there is no basis for a jury to determine the efficient proximate cause of the loss. The dispositive question in analyzing ensuing loss clauses is whether the loss that ensues from the excluded event is covered or excluded. If the ensuing loss is also an excluded peril or an excluded loss under the policy, there is no coverage. But if the policy covers the peril or loss that results from the excluded event, then the ensuing loss clause provides coverage.[9]

Strict Products Liability

Strict products liability is a tort concept that is different than the tort of negligence by judicial fiat, eliminating the element of duty. To prove a manufacturer of a product is strictly liable, all that the plaintiff need prove is that the product was manufactured by the defendant, that the product was defective, and that the defect was the proximate or legal cause of the damage. By eliminating the obligation of the plaintiff to prove the duty to protect against harm, which is assumed to exist whenever a product is manufactured, the individual plaintiff—who does not have the power of a manufacturer—is placed on an equal footing with the manufacturer and has a better chance to recover for injuries.

California was the first state to embrace the doctrine of strict products liability in Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57 (1963). In Kriegler v. Eichler Homes, Inc., 269 Cal. App.2d 224, 74 Cal.Rptr. 749 (1969), the Court of Appeals applied the new tort to mass-produced homes, reasoning that in “today’s society, there are no meaningful distinctions between [the] mass production and sale of homes and the mass production and sale of automobiles and that the pertinent overriding policy considerations are the same.” The relevant policy considerations, the Kriegler court explained, were the average homebuyer’s reliance on the builder’s skill and implied representations of fitness, and the public interest in assigning the cost of foreseeable injuries to the developer who created the danger. Since Kriegler, owners of mass-produced homes have been able to sue the builders under the doctrine of strict products liability, thereby avoiding the need to prove that the builder had a duty to protect the homeowner against loss. The basic requirement for strict product liability is that one who sells or leases a defective product which is dangerous to the user or consumer or to his property is subject to liability for physical harm caused by the defective product to the ultimate user or consumer, or to his property, if the seller or lessor is engaged in the business of selling or leasing such product, and the product is expected to and does reach the user or consumer without substantial change in its condition after it is sold or leased.[10]Over time, the concept of recoverable physical injury or property damage expanded to include damage to one part of a product caused by another, defective part. Examples include cases in which poorly prepared lots subsided, damaging the houses built thereon.[11] To date the theory of strict liability has only been extended to a defendant developer/contractor that is a mass producer of residential housing units. None of the cases have specified the number of housing units required to deem a builder a mass-producer of residential housing for purposes of imposing strict liability.[12]

Plaintiffs, attempting to go further, sought damages from a developer who had failed to properly install shear walls in dwellings and exposed the dwellings to future damage from wind or earthquake. None of the dwellings had yet been damaged, but the plaintiffs claimed the damage would certainly occur in the future.

The California Supreme Court explained in Aas v. Superior Court of San Diego County, 24 Cal.4th 627, 12 P.3d 1125, 101 Cal.Rptr.2d 718 (Cal. 2000), why it refused to decide that homeowners and a homeowners’ association might recover speculative damages in negligence from the developer, contractor, and subcontractors. Applying what the Supreme Court called “settled law,” it limited the recovery to economic losses in tort actions. It concluded:

Home buyers in California already enjoy protection under contract and warranty law for enforcement of builders’ and sellers’ obligations; under the law of negligence and strict liability for acts and omissions that cause property damage or personal injury; under the law of fraud for misrepresentations about the property’s condition; and an exceptionally long 10-year statute of limitations for latent construction defects (Civil Code, § 337.15). While the Legislature may add whatever additional protections it deems appropriate, the facts of this case do not present a sufficiently compelling reason to preempt the legislative process with a judicially created rule of tort liability.

Breach of Contract

Owners may sue the builder or developer and the builder or developer may sue the owners under theories based upon breach of the original construction contract. When any party to the contract fails to comply with any obligation set forth in the purchase and sale documentation, and the escrow instructions. Typically, this is something that goes beyond a failure of the builder to build the project in accordance with the plans and specifications.

In Whitecotton v. Silverlake Homes, L.L.C., 2009 WL 2045224 (Tex. App.—Beaumont March 2,Page 9 2009, no pet.) (Tex. App. Dist.9 07/16/2009), the Texas Court of Appeal found that the trial court reasonably concluded the plaintiffs, who refused to allow the contractor to repair, did not prove a failure by the defendant to perform the contract without legal excuse, or prove that any damages were a result of defendant’s breach. Whenever a builder is sued for breach of contract, it is essential that the plaintiff has evidence that the contract was breached.

When such claims are made, courts often invoke the doctrine of substantial performance, which typically provides that the builder be required to pay the contract price with the deduction for the reduced market value of the home/unit, caused by the failure of the builder to strictly comply with the plans and specifications.[13]

Breach of Express Warranty

Similar to breach of contract theories, the purchase documentation between the developer and the homeowner often expresses warranties regarding the condition of the property. If there is an issue as to breach of an express warranty, the principles of contract law apply and the party harmed is entitled to damages necessary to fulfill the contract.

Breach of Implied Warranty

Courts hold builders and sellers of new construction to an implied promise that the completed structure was designed and constructed in a reasonable and workmanlike manner. A builder or seller of real property is subject to the theory that a home built for sale to the public is intended to be used for a specific purpose. Privity of contract, that is actual contact between the person harmed and the defendant, is not always required under this particular theory of liability.[14]

Fraud

Homeowners who sue because of construction defects often allege fraud on the grounds that the developer intentionally misrepresented the quality of construction in advertisements or other representations made at the time of sale. For example, the allegations may include a claim that the developer had no intention of following certain design specifications or providing the promised quality and materials.

Fraud generally requires an intentional misrepresentation of a material fact or the intentional concealment of a material fact, which causes the other party to  act to their detriment as a result of the misrepresentation or concealment.

If fraud can be proved damages include all available tort damages and may often include punitive or exemplary damages.Claims of fraud or other forms of intentional conduct carry with them difficult insurance issues since intentional acts are universally excluded from liability insurance policies and many states make insurance for fraud against the public policy of the state.

Negligent Misrepresentation

Negligent misrepresentation is an assertion of a fact that is not true, by one who has no reasonable ground for believing it to be true. Typically, whenever claims of fraud or intentional misrepresentation are pleaded, lesser offenses such as negligent misrepresentation are usually included as one of many causes of action alleged in the construction defect suit. Even when the misrepresentation is only negligent, rather than intentional, if the plaintiff honestly relied upon the misrepresentation to his detriment, the plaintiff will be entitled to tort damages for the misrepresentation.

Breach of Fiduciary Duty

When a condominium or Strata Association is first constructed, the directors and officers of the initial association are employees or officers of the developer until the units are sold to members of the public who take over the control of the homeowners’ association.

A developer and its employees may be liable to a condominium or Strata homeowners’ association for actions taken by some or all of the members of the governing board, when the board is controlled by developer employees. This is generally the case during initial construction and until the common areas have been accepted by the association.[15]

Directors of homeowners’ associations have become increasingly frequent targets of construction defect claims based upon alleged breaches of fiduciary duty during their term of responsibility. The standard of care is usually referred to as the business judgment rule. The rule shields homeowner association directors from liability for mistakes in business judgments that are made in good faith and believed to be in the best interest of the corporation. For example, the California Corporations Code provides, in part:

(a) A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. (b) In performing the duties of a director, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following: (1) One or more officers or employees of the corporation whom the director believes to be reliable and competent in the matters presented. (2) Counsel, independent accountants or other persons as to matters which the director believes to be within such person’s professional or expert competence. (3) A committee of the board upon which the director does not serve, as to matters within its designated authority, which committee the director believes to merit confidence, so long as, in any such case, the director acts in good faith, after reasonable inquiry when the need therefore is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted. (c) A person who performs the duties of a director in accordance with subdivisions (a) and (b) shall have no liability based upon any alleged failure to discharge the person’s obligations as a director. (Emphasis added.)[16]

Before beginning the prosecution or defense of a construction defect suit it is imperative that a thorough investigation be completed to determine which of the various theories of liability are available and what defenses can be asserted to those theories.

It is within the province of the trier of fact to determine after hearing the evidence whether a fiduciary duty exists between the parties based on a position of trust, for the material breach of which the victim was defrauded of the entitlement to honest services by the defendants. “Fiduciary” does not mean a “formal, or classic, fiduciary duty.” Rather a fiduciary duty is not limited to a formal “fiduciary” relationship well-known in the law, but also extends to a trusting relationship in which one party acts for the benefit of another and induces the trusting party to relax the care and vigilance which it would ordinarily exercise. [17] This interpretation of fiduciary duty for the purposes of the criminal law can also expose builders, contractors, sub-contractors, owners and designers to damage for breach of fiduciary duty.

ENDNOTES

[1] Kudzu spreads by vegetative expansion and by seeds, which are contained in pods and mature in the autumn. It spreads rapidly and is difficult to eradicate. When left uncontrolled will eventually grow over almost any fixed object in its proximity including other vegetation.

[2]               Bartley v. Euclid, 158 F.3d 261 (5th Cir. 11/03/1998); Morris v. Wal-Mart Stores, Inc., 330 F.3d 854, 2003 Fed.App. 0175 (6th Cir. 06/04/2003).

[3]               Horne v. Beason, 331 S.E.2d 342, 344 (S.C. 1985; Vinson v. Hartley, 477 S.E.2d 715, 720 (S.C. Ct. App. 1996).

[4]               Terracon Consultants Western, Inc. v. Mandalay Resort Group, 206 P.3d 81 (Nev. 03/26/2009).

[5]               Fanjoy v. Seales, 29 Cal. 243, 249-250 and Hale v. Depaoli (1948) 33 Cal.2d 228, 230–232 (1865).

[6]               Kalash v. Los Angeles Ladder Co., 1 Cal.2d 229, 231-232 (1934).

[7]       Valley Forge Insurance Co. v. Sam’s Plumbing, LLC, 207 P.3d 765, 220 Ariz. 512 (Ariz. App.Div.2 03/19/2009) U.S. Fid. & Guar. Co. v. Davis, 3 Ariz. App. 259, 263, 413 P.2d 590, 594 (1966).

[8] Freedman v. State Farm Insurance Co., 93 Cal.Rptr.3d 296, 173 Cal. App.4th 957 (Cal. App. Dist.2 05/05/2009).

[9] Vision One, LLC; and Vision Tacoma, Inc v. Philadelphia Indemnity Insurance Company, and RSUI, 276 P.3d 300, 2012.WA.0000622< http://www.versuslaw.com, (Wash. 05/17/2012)

[10]  Rosalinda Iturralde, Individually and In Her Capacity As Personal v. Hilo Medical Center, A Hawaii Non-Profit Corporation, No. 28792, 2012.HI.0000204< http://www.versuslaw.com> (Haw.App. 03/30/2012)

[11]  Stearman v. Centex Homes, 78 Cal. App.4th 611, 613 (2000).

[12]  Kriegler v. Eichler Homes, Inc., 269 Cal. App.2d 224, 74 Cal.Rptr. 749 (1969).

[13]  Martin v. Karsh, 142 Cal. App.2d 468, 298 P.2d 635 (1956).

[14]  Id.

[15]  Raven’s Cove Townhomes v. Knuppe Dev. Co., 114 Cal. App.3d 783, 171 Cal.Rptr. 334 (1981).

[16]  California Corporations Code § 309.

[17]  United States of America v. Brano Milovanovic; Tony Gene, No. 08-30381 (9th Cir. 04/24/2012)


© 2019 – 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.

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

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.

 

Share
Posted in Zalma on Insurance | Leave a comment