Five Volumes of Blog Posts at Amazon.com

“Random Thoughts on Insurance Volume V: Digests from Barry Zalma’s Blog: ‘Zalma on Insurance’”

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

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

Available as a Kindle book.

Available as a paperback.

Information about all five volumes available at http://zalma.com/zalma-books/


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

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Assignment and Covenant Not To Execute Fails Again

Insurance Broker is Only Required to Sell the Policy Ordered

I have said before that much insurance litigation would be resolved by the persons insured, and their lawyers, actually reading the insurance policy. Failure to do so can be, and usually is, expensive.

Insureds, who did not get what they expected after a loss, must also understand the law relating to insurance agents, brokers and insurer’s obligations with regard to the acquisition of a policy of insurance. When they do not they find, as did the parties in Crossroads Convenience, LLC, as successor to TFL Associates, LLC, and assignee of Anderson Oil Company, Inc. v. First Casualty Insurance Group, Inc., Civil Action No.: 1:15-cv-02544-JMC, United States District Court For The District Of South Carolina Aiken Division (June 13, 2018) themselves up the creek without a paddle.

FACTS

Plaintiff Crossroads Convenience, LLC (“Crossroads”), as successor to TFL Associates, LLC (“TFL”), and assignee of Anderson Oil Company, Inc. (“Anderson Oil”), sued Defendant First Casualty Insurance Group, Inc. (“First Casualty”) alleging claims for breach of contract, negligence, negligent misrepresentation, promissory estoppel, constructive fraud, breach of fiduciary duties, equitable indemnity and quantum meruit in the context of an insured-insurer relationship.

Crossroads is the successor in interest to TFL, which owned premises located at 324 Main Street North in Allendale, South Carolina (the “premises”). TFL leased the premises to Anderson Oil, which operated a convenience store there. Beginning on August 1, 2007, Anderson Oil subleased the premises to Varni Enterprises, LLC (“Varni”).

The sublease provided that Varni would maintain insurance policies for the premises “in such amounts as are reasonably necessary to protect [Anderson Oil] and such amounts shall be at least for the fair market value of the buildings and equipment.”

Varni contracted with First Casualty, as an agent, to procure an insurance policy that would meet the requirements set forth in the sublease for policy period July 2009 to July 2010. Varni’s principal, P.J. Patel, gave First Casualty’s agent, Gary Kunce, explicit instructions that the limit of any insurance policy should be set at $400,000.00 for each insured location. Kunce was not provided a copy of the lease between Varni and Anderson Oil and “was never asked to interpret the lease or opine on Varni’s insurance obligations under the lease.”

As a result of Patel and Kunce’s interaction, First Casualty procured for Varni from Employers Mutual Casualty Company (“Employers Mutual”) an insurance policy on the premises for the period July 1, 2009 to July 1, 2010. In September 2009, Anderson Oil was added to the policy as an additional insured. Thereafter, “Varni purchased coverage from Employers Mutual in 2010-2011and 2011-2012, through First Casualty.” In 2011, Employers Mutual automatically increased to $420,000.00 the limit on the policy for the premises “and advised First Casualty that the limits increase was non-negotiable.”

Under the terms of the insurance policy, in the event of damage or loss to covered property, Employers Mutual agreed to “[p]ay the value of the lost or damaged property” or to take equivalent action. “The policy contained an 80% co-insurance clause under which the insured would be penalized if the property were not insured to at least 80% of its replacement value.” Kunce explained the co-insurance clause to P.J. Patel, who asked [] no questions and appeared to understand [][the] explanation.”

On October 29, 2011, the convenience store located on the premises was destroyed by fire. On January 13, 2012, Varni executed a Sworn Statement in Proof of Loss and submitted it to Employers Mutual, as required by the insurance policy. The proof of loss documents demonstrated that the estimated replacement cost of the convenience store building was $767,653.21, that the insurance coverage limit needed to meet the 80% mark was $614,122.57, that the coverage limit in the policy was $420,000.00, that the actual cash value (“ACV”) of the building was $498,974.59, that the total ACV of loss and damage was $317,027.71, and that, after its $35,000.00 deductible, Varni was owed $282,027.71 under the insurance policy. Employers Mutual paid Varni $282,027.21 on January 18, 2012 and stamped Varni’s Sworn Statement in Proof of Loss as having been received on January 19, 2012.

On October 20, 2014, Anderson Oil and TFL sued Varni, First Casualty and Employers Mutual. Anderson Oil and TFL alleged that Varni had placed a special trust and confidence in First Casualty to select the proper insurance policy to meet the requirements of the sublease; that Varni had informed First Casualty that the policy would need to protect Anderson Oil’s interest in the premises and cover an amount at least equal to the fair market value (“FMV”) of the premises; that First Casualty was aware that Anderson Oil had insured the premises for a replacement value of approximately $669,000; and that Varni had reasonably relied on First Casualty’s selection of insurance policy.

Anderson Oil and TFL further alleged that First Casualty’s selection of a policy with a coverage cap of $420,000.00 and a provision that covers less than the full amount of property loss or damage if the cap fails to meet the 80% percent mark rendered the premises “significantly underinsured.”

On May 14, 2015, Varni assigned to Anderson Oil any rights Varni may have had against First Casualty arising in connection with the insurance policy in exchange for Anderson Oil’s agreement not to execute any judgment against Varni arising from the pending litigation.

SUMMARY JUDGMENT

On March 4, 2016, First Casualty filed its first Motion for Summary Judgment. In its Motion, First Casualty advanced three arguments supporting judgment in its favor. First, it argued that all the claims asserted against it in the Second Amended Complaint are barred by the three-year statute of limitations. Second, First Casualty argued that, because all the claims against it are premised not only on its liability to Varni but also on Varni’s liability to Anderson Oil (which is in turn liable to Crossroads as TFL’s successor in interest) Varni’s dismissal from the action with prejudice extinguished any potential liability Varni could have to Crossroads, and, consequently, Crossroads could not plausibly allege a cognizable injury to Crossroads flowing from First Casualty’s actions allegedly injuring Varni. Third, First Casualty argued that all claims against it fail on their merits since it acquired the policy ordered and because there was no evidence that First Casualty breached its sole duty-to procure coverage per its customer’s request-or took on any additional duties.

ANALYSIS

The District Court agreed with First Casualty that the evidence of record – when viewed in the light most favorable to Crossroads as the nonmoving party – demonstrates without dispute that Varni, through its principal P.J. Patel, has not been exonerated from being at fault in causing its own damages and those suffered by Anderson Oil as it relates to the procurement of insurance coverage on the premises. Because of this evidence, First Casualty is entitled to summary judgment on Crossroads’ cause of action for equitable indemnity.

ZALMA OPINION

First Casualty did what it was asked to do – it acquired a policy with specific limits and an 80% co-insurance clause. The negligence, if any, was from Varni who ordered the policy. The error was letting Varni go so the insurer could be sued when the real wrong was done by the person the plaintiffs let go. A party should never let a viable defendant go in exchange for an assignment against a deep pocket unless they are sure to win.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

 

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“HEADS I WIN, TAILS YOU LOSE”

How Insurance Fraud Succeeds and Fails

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.

Now available as a Kindle book and a paperback at http://zalma.com/zalma-books/


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

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Conviction for Assault Not Enough to Deny Coverage

A Person Can Be Injured Both Intentionally and Accidentally

When trying to avoid the obligation to defend or indemnify an insured it is necessary to first conduct a thorough investigation and complete discovery to avoid all potential for coverage. Even when an insured is convicted of criminal conduct it is not enough of the suit alleges more than one cause of injury.

In State Farm Fire And Casualty Company v. Chauncey McCabe et al., and Rebekah Haschytz, 2018 NY Slip Op 04416, 525662, Appellate Division of the Supreme Court of the State of New York (June 14, 2018) the defendant Chancey McCabe appealed from an order of the trial court, Supreme Court (Hoye, J.), entered April 26, 2017 in Fulton County, which granted plaintiff’s motion for summary judgment.

FACTS

On August 9, 2014, defendant Rebekah Haschytz (hereinafter defendant) was visiting her then-boyfriend, defendant Chauncey McCabe (hereinafter McCabe), at a residence owned by his mother, defendant Rosemary McCabe. McCabe physically assaulted defendant, including strangling her with a rope and hitting her head. Based on allegations related to this incident, McCabe was convicted after a criminal jury trial of assault in the first degree, strangulation in the first degree and criminal possession of a weapon in the fourth degree.

Rebekah commenced a personal injury action against McCabe and his mother alleging, among other things, that McCabe negligently rendered defendant partially incapacitated and that, after she was in this state, she tripped and fell due to a defective condition on the property. Plaintiff, which had issued a homeowner’s insurance policy covering the residence and both McCabes as resident insureds, disclaimed coverage as to McCabe only because the injuries sustained by defendant did not arise out of an “occurrence,” which is defined in the policy as an accident, and because those injuries fell within an exclusion for intended injuries or willful and malicious acts.

To resolve the coverage dispute, plaintiff sued seeking a declaration that it owed no duty to defend or indemnify McCabe. The trial Court granted plaintiff’s motion, dismissed the counterclaims and declared that plaintiff has no duty to defend or indemnify McCabe in defendant’s underlying action.

ANALYSIS

Generally, when an insurer seeks to disclaim coverage on the basis of an exclusion, the insurer will be required to provide a defense unless it can demonstrate that the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations are subject to no other interpretation. An insurer may avoid coverage under a policy’s intentional acts exclusion only if the insurer establishes as a matter of law the absence of any possible legal or factual basis to support a finding that the bodily injury at issue was, from the insured’s point of view, unexpected and unintended. Plaintiff essentially argued that McCabe’s conviction made it entitled, based on collateral estoppel, to a declaration that the policy did not provide coverage in the underlying action.

Collateral estoppel is an equitable doctrine grounded on concepts of fairness. The two requirements of the doctrine are that the identical issue was necessarily decided in the prior action and is decisive in the present action, and that the party to be precluded from relitigating an issue must have had a full and fair opportunity to contest the prior determination. In appropriate situations, an issue decided in a criminal proceeding may be given preclusive effect in a subsequent civil action.

The jury’s verdict finding McCabe guilty of assault in the first degree and strangulation in the first degree necessarily included findings that McCabe intended to cause serious physical injury to defendant, intended to impede her breathing or circulation, applied pressure to her throat or neck and caused her serious physical injury by means of a deadly weapon or dangerous instrument. The intent required in the criminal action would be sufficient to establish the intent element of the insurance policy exclusion as long as they relate to the same conduct.

In the underlying action, defendant alleged, among other things, that McCabe permitted and failed to remedy a tripping hazard in a doorway and exacerbated the dangerous condition by obstructing the doorway with a couch and other items, and defendant tripped and fell into a cement wall, causing her serious injuries. Defendant also alleged that McCabe negligently engaged in an activity that rendered her partially incapacitated, then did not exercise reasonable care to obtain prompt medical attention, hold or support her as she attempted to walk through the doorway or warn her of the dangerous condition.

The appellate court concluded that McCabe’s intentional actions cannot be magically transformed into negligent ones merely by defendant’s allegations trying to recast them. McCabe’s conduct that rendered defendant partially incapacitated was his criminal, intentional actions, which cannot be downgraded to mere negligence through artful pleading.

On the other hand, some of defendant’s allegations address McCabe’s actions prior to the assault, such as failing to maintain the property by permitting a tripping hazard, and his alleged actions after the assault, such as failing to obtain medical care and allowing defendant to ambulate in an incapacitated state without adequate assistance.

To establish the convictions, it was unnecessary for the jury to have made findings regarding whether McCabe created a tripping hazard, allowed defendant to walk on her own after he had rendered her partially incapacitated or failed to seek medical help for her after the criminal assault. Hence, the issues as to insurance coverage and exclusions are not identical to the issues decided in McCabe’s criminal trial, and defendants here did not have a full and fair opportunity in the criminal trial to address some of the issues regarding McCabe’s negligence allegedly committed before and after the criminal assault.

Plaintiff failed to demonstrate that there was no possible factual or legal basis to support a finding that some of defendant’s injuries were unintended by McCabe, so as to bar coverage under the policy exclusion.

Accordingly, collateral estoppel does not apply here, except as to the more narrow issues necessarily decided in the criminal trial, and plaintiff was not entitled to summary judgment or a declaratory judgment at this early stage of this coverage action.

ZALMA OPINION

Contrary to the court’s intent the brilliant pleading inserting into an assault and battery a negligent cause of injury – a trip and fall hazard – magically changed the battery into a negligent action and forced an insurer to defend a vicious criminal.  They should have done discovery to establish the trip and fall hazard did not add to Rebekah’s injuries. The insurer did not and must now defend.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

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It’s Not Nice to Lie to Your Insurer — It’s Expensive

Rescission is an Equitable Remedy

The following was adapted from “Insurance Claims: A Comprehensive Guide” available in two volumes for only $75 (reduced from $196) from ClaimSchool, Inc. at http://www.zalma.com/zalma-books/

When facts essential to a decision to insure or not insure a particular risk are misrepresented or concealed there is no basis for a contract of insurance. It can be, and should be, rescinded at the option of the party deceived.

Rescission is an equitable remedy that allows an insurer that has been deceived to return to the status quo since it would be unfair to require it to insure a person it would not have insured had it known the truth. Similarly, if the insured is deceived, it can return the policy and obtain the premium it paid.

Insurance agents and brokers who place insurance for businesses in which they hold a financial interest may find that they are held to the duties of an agent for the insured rather than an agent for the insurer, even if the agent has an effective agency agreement with the insurer allowing it to bind insurance. In Mountain City Ford, LLC v. Owners Insurance Company and Auto-Owners Insurance Company, No. 2009-CA-002233-MR (Ky.App. 09/02/2011) the Kentucky Court of Appeal agreed that the misrepresentations made were material and that the agent – who was also an owner of the insured – acted as agent for the insured when it submitted an application for information that concealed and misrepresented material facts. The case was not approved for publication and its precedential value is limited.

This case is important because it shows how a third-party liability insurer – faced with a potential rescission – should deal with its insured by adequately reserving its rights and resolving the claim before seeking relief from the court and return of money paid.

Whether Mountain City Ford or Auto-Owners should bear the loss for $1,030,000.00 paid in settlement to the original plaintiffs for injuries, including the death of Joey Kirk. These injuries were incurred in a motor vehicle accident between a Mountain City Ford vehicle driven by Rick Gussler and another vehicle driven by Paul Justice.

Auto-Owners’ policy insuring Mountain City Ford was predicated upon an insurance application prepared by The Elite Agency, Inc. (Elite) and signed by Mountain City, but the policy did not list Gussler as a driver.

All parties agreed that Auto-Owners never knew of Gussler’s existence as a driver of Mountain City vehicles. It was undisputed that Gussler was not listed anywhere on Mountain City’s application to Auto-Owners and the proof at trial was undisputed that had Gussler been listed, Auto-Owners would never have issued the policy to Mountain City Ford.

Mountain City Ford and Mountain City Chevrolet are two small dealerships in Inez, Kentucky, that are owned by James Booth; his daughter, Angela Wilson; and Craig Preece. When they purchased the dealerships they had separate garage insurance policies with Universal Insurance.

Elite is an independent insurance agency founded in 1989 by Jim Booth, Craig Preece, and two other investors. Elite entered into an agency contract authorizing it to write insurance contracts for Auto-Owners.

Auto-Owners is a regional insurance carrier headquartered in Michigan. Auto-Owners writes property and casualty insurance as well as other lines. In 2007, Auto-Owners had a regional office in Lexington, Kentucky.

Marlena Lafferty was a young insurance agent who worked in the Inez, Kentucky, office of Elite. When she heard that Craig Preece, as co-owner of Elite and Mountain City, had suggested that Elite try to write insurance for the Mountain City dealerships, she began gathering information for an application to CarPac, another insurance company, to compare premium prices. Ultimately, she submitted the CarPac application on October 19, 2007, for both Mountain City dealerships. Page 12A of the CarPac application was an “employee/non-employee list.”

On the CarPac application, Lafferty identified all 27 dealership employees and clearly disclosed that Rick Gussler was a salesman who was “not licensed.” Lafferty testified that this information came from e-mails with Mountain City Ford in the first half of October. She also testified that in a telephone conversation with Wellman, he told her both Rick Crum at the Chevrolet dealership and Rick Gussler at the Ford dealership were prohibited from driving dealership vehicles because they did not have driver’s licenses.

The person who completed the Auto-Owners application for the Mountain City dealerships admitted that he only had one phone call with the dealership about the dealerships’ inventory but otherwise had no contact with the dealerships about the application. He testified that he never saw the revised page 12A of the final CarPac application that listed all 27 employees of the dealerships, their jobs, their driver’s license numbers, and whether they were furnished dealership vehicles. As a result, the list of 16 drivers Grim submitted to Auto-Owners was inaccurate, compared to the information the Mountain City dealerships had supplied to Lafferty for the CarPac application.

The Mountain City dealerships application was the first ever submitted to Auto-Owners. The broker at Elite calculated the premium for Auto-Owners based on total payroll for all employees except any clerical staff who never drove dealership vehicles. At the end of the year, Auto-Owners would audit the payroll and adjust the premium up or down. Even though Elite did not know who Gussler was, Gussler’s compensation was included as a salesman in the total payroll figures.

Abby Douglass worked as an underwriter in the Lexington, Kentucky, underwriting office of Auto-Owners until January 2008. Elite never disclosed Gussler as a salesman without a driver’s license, even though such information was disclosed to CarPac. Unbeknownst to Craig Preece, the Elite employee who submitted the application was uninformed about both Gussler being an employee and the Eligibility Guidelines of Auto-Owners.

At trial, Auto-Owners defended Mountain City Ford and Rick Gussler, but did so under a reservation of rights. Despite its misrepresentation coverage defense, Auto-Owners settled the claims for a total of $1,030,000.00 and then pursued this action to void the policy and seek reimbursement from Mountain City and Elite under theories of material misrepresentation and negligence.

Auto-Owners sought rescission and reimbursement from the dealerships for material misrepresentation because Gussler was not listed on the list of “drivers” in the application prepared by Elite. Elite knew of the existence of the unlicensed salesman and had disclosed him on an application to another insurance company, CarPac, but omitted to inform Auto-Owners of his existence.

The jury found against Mountain City but found that Elite was not liable for its failure to list Gussler on the drivers list on the application to Auto-Owners. Mountain City filed a motion for judgment notwithstanding the verdict, arguing that Elite was acting as Auto-Owners’ agent under Kentucky law and, thus, that the policy should not be voided ab initio.

The trial court denied Mountain City’s motion for judgment notwithstanding the verdict, holding that Elite was acting as the agent of Mountain City or as a dual agent for both Auto-Owners and the dealerships when it submitted the application for insurance coverage. The trial court concluded that the “jury has made the factual finding to the effect that Richard Gussler was in fact a driver of insured vehicles; that the omission was material to the risk; and that the Auto Owners would not have issued the policy of insurance had that fact been known.”  Those facts, coupled with the extraordinarily close relationship between Mountain City Ford, LLC, and the Elite Agency, persuaded the Court of Appeal that Elite was acting either as the agent for Mountain City, LLC, or at the very least, was acting in the capacity as a dual agent, for both Mountain City Ford, LLC, and Auto-Owners in preparing and submitting the application for insurance, and then issuing a binder.

Under Kentucky law, whether an insurance agency is an agent for the insured or the insurer when preparing and submitting an application, given alleged material misrepresentations in an application, no one factor is determinative. In Kentucky the fact of agency must be decided on a case by case basis.  The Court of Appeal noted that even if an agency was the insurer’s agent for binding purposes, it did not necessarily mean that it was the insurer’s agent during policy issuance.

The Court of Appeal concluded that Elite was the agent of the dealerships. Specifically, the proof was that Craig Preece, as CFO for Mountain City, signed and verified the application as required by Auto-Owners, and he had the full opportunity to review the application, even though he testified that he did not read the application.

The evidence also demonstrated extensive special circumstances to support a finding that Elite was acting as Mountain City’s agent during the application and policy issuance process. In fact, Mountain City and Elite had the long standing relationship where the companies shared common ownership. The Court of Appeal concluded that the special close relationship and circumstances between Elite and Mountain City Ford supported a finding that Elite was acting as Mountain City Ford’s agent when it bound coverage through Auto-Owners.

An insurance agent or insurance broker is professionally obligated to professionally represent its principal (whether the prospective insured, the insurer, or both) and be certain that the facts stated in the application for insurance are correct and complete. Failure to do so can place the agent or broker in a position of being held responsible for losses suffered by the insured. When the agent or broker is also an owner of the prospective insured it is imperative that the agent or broker read every word in the application – unlike Mr. Craig Preece – and ascertain that the application is totally accurate.

In this case the insurer acted with the utmost good faith – more than the insured was entitled to receive – by providing a defense and settling the case against the insured while reserving its right to recover from the insured. Since the agent was also an owner of the insured its negligence in not providing accurate information to the insurer was sufficient to allow the insurer to rescind and recover the money it paid for the defense of the insured and for the settlement with those suing the insured.

It would appear that the agent, Elite, may be sued by the dealer who is now faced with a judgment of more than $1 million and will probably seek indemnity from Elite for its negligence even though the jury found Elite was not liable to Auto Owners for failing to list the unlicensed driver it may be found liable to the insured for breach of its duty of care.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

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Insurance Policy Warranties

A Warranty in Insurance is a Special Type of Promise

The following was adapted from “Insurance Claims: A Comprehensive Guide” available in two volumes for only $75 (reduced from $196) from ClaimSchool, Inc. at http://www.zalma.com/zalma-books/

Promissory Warranty

A promissory warranty applies to the date of the application and the
future. It is a statement of a promise to keep a certain fact or set of facts
in existence throughout the period of a policy. Failure to comply during
the effective dates of the policy is a breach of a material warranty that
invalidates the policy.

Promissory warranties require certain action or non-action of the
insured after the policy has been entered into in order that its terms shall not
thereafter be breached. Some examples of promissory warranties include
the following statements:

• “I will keep my premises protected by a silent, central station
reporting fire alarm system.”

• “I will have a watchman on premises whenever my business is
closed.”

• “I will have a security guard on premises when I am open for
business.”

• “I will keep my safe locked at all times when I am closed.”

• “I will keep records sufficient to allow my insurer to determine
the exact amount of any loss without assistance or explanation
from me.”

The California Insurance Code does allow an excuse for failure to
fulfill a future warranty, but only as follows:

When, before the time arrives for the performance of a
warranty relating to the future, a loss insured against happens,
or performance becomes unlawful at the place of
the contract, or impossible, the omission to fulfill the warranty
does not avoid the policy. California Insurance Code
§ 446.
(d) Implied Warranty
An “implied warranty” is not specifically expressed in the
policy language but from the actions of the parties to the
contract a court (as trier of fact) finds it to be the basis of
the insurance contract. California Insurance Code § 440.

For example:

• There is an existing sprinkler system at the time of purchase of
insurance and at the time of inspection.

• At the time the insurer inspects the property there is an on-site
manager who tells the inspector he has worked there for 15 years.

• The insured, without being asked, provides the insurer a monthly
report of values.

The breach of a single warranty, at the time of the application, keeps
the policy from attaching to the risk. Nothing is or was insured because
the insurer and the insured never agreed on the terms of the contract of
insurance. The insurer was deceived and the contract is void or voidable.
Every warranty, at the inception of the policy, is material to the
decision of the insurer to insure, or not insure, the insured. The existence
of any false material warranty prevents the policy from attaching to the risk
even if the breach was innocent, unintentional, and without fraud.

A breach of warranty without fraud merely exonerates an
insurer from the time that it occurs, or where the warranty
is broken in its inception, prevents the policy from attaching
to the risk. California Insurance Code § 449.

It is the obligation of an insured to inform its insurer of every material
fact necessary to the decision of the insurer to insure or not insure a risk,
whether asked or not.

[A] statement or promise set forth in the policy, or by reference
incorporated therein, the untruth or nonfulfillment of
which in any respect, and without reference to whether the
insurer was in fact prejudiced by such untruth or nonfulfillment,
renders the policy voidable by the insurer, wholly
irrespective of the materiality of such statement or promise.
Vance, The Law of Insurance (Third edition, Anderson,
1951, at p. 408) as cited in Insurance Law, Keeton and
Widiss, supra.; Imperial v. Sogomonian, infra.; Fidelity Mut.
Life Ass’n of Philadelphia V. Ficklin, supra; and Monahan
v. Mutual Life Ins. Co. Of Baltimore, supra.

Since warranties are required to be literally true for the policy to attach
to the risk, the question of materiality is not an issue. An untrue answer,
even if it relates to an immaterial matter, could, at that point in time, if
warranted to be true, prevent recovery upon the policy. Therefore, if a
misstatement appeared as to a matter warranted to be true, it is no defense
that the insured acted innocently or in good faith in so doing, and there can
be no recovery, particularly where the matter that is warranted is material to
the risk. Appleman, Insurance Law and Practice, Vol. 12A (Rev. Ed. 1981)
§ 7354. The Ninth Circuit, in Certain Underwriters at Lloyds, London v.
Inlet Fisheries Inc. 06-35383 Feb. 11, 08, D.J. cite: 2008 DJDAR 2181
found that the doctrine of uberrimae fidei (utmost good faith) required a
marine insurance applicant to disclose all facts material to the calculation of
risk. Even if not asked, the insured had a good faith duty to reveal material
facts about its vessels in applying for insurance. Rescission by the insurer
was proper because it was deceived.

The California Insurance Code is quite clear on the subject of what
remedy is available to a party to an insurance contract when a warranty is
violated:

The violation of a material warranty or other material provision
of a policy, on the part of either party thereto, entitles
the other to rescind. California Insurance Code § 447.
Therefore, simply stated, a violation by the insured of any one material warranty is sufficient to void the insurance policy.

The Records Warranty

Many first party property policies, and almost all inland marine
policies, contain a records clause or warranty that requires the insured to
maintain sufficient records to prove the amount of his or her loss. All records
clauses are called “iron safe clauses” because they originally required that
the records be locked in a “fireproof iron safe.” The requirement for an iron
safe is disappearing because of the ability to store records electronically off
site. A common form of iron safe clause will provide:

1. The insured will take a complete itemized inventory of stock
on hand at least once in each calendar year and, unless
such inventory has been taken within twelve calendar
months prior to the date of this policy, one shall be taken in
detail within 30 days of issuance of this policy, or this policy
shall be null and void from such date, and upon demand of
the insured the unearned premium from such date shall be
returned.

2. The insured will keep a set of books, which shall clearly and
plainly present a complete record of business transacted,
including all purchases, sales and shipments, both for cash
and credit, from date of inventory, as provided for in the first
section of this clause, and during the continuance of this
policy

3. The insured will keep such books and inventory, and also
the last preceding inventory, if such has been taken, securely
locked in a fireproof safe at night, and at all times when
the building mentioned in this policy is not actually open for
business; or, failing in this, the insured will keep such books
and inventories in some place not exposed to a fire which
would destroy the aforesaid building.

In the event of failure to produce such set of books and
inventories for the inspection of this Company, this policy
shall become null and void, and such failure shall constitute
a perpetual bar to any recovery thereon. [As quoted
in Burchfield v. United States Fidelity & Guaranty Co., 238
Miss. 416 (Miss.03/14/1960).]

The Mississippi Supreme Court held that since the records required
were not protected in a fire proof iron safe:

The destruction or theft of books and papers required by
a policy of insurance to be kept or produced will excuse a
noncompliance with requirement if due to no fault or design
of the insured. If, however, the destruction of such papers is
due to the negligent failure of the insured to preserve them
as required by the policy, his failure to produce them in
accordance with the requirement of the policy will preclude
any recovery thereon. [In the footnote to this statement
there is again cited the said case of Joffe v. Niagara Fire
Insurance Company, supra.] Furthermore, if no such books
and inventories are kept as are required by a fire insurance
policy, the loss of those which were kept will not excuse the
failure of the insured to meet the requirement.

The Supreme Court of Washington found that:

the requirement [to maintain an inventory and books and
records] as a matter of law is not fulfilled when the books
present a record of values only that are added and taken
away. The object of having an itemized inventory and of
keeping in the course of business a record of property
added and taken away “was not to ascertain the gross
value of the property insured, but to ascertain the different
articles which went to make up the stock in order that the
insurance company might test the correctness of the claim”
of the assured. Georgian House of Interiors Inc. v. Glens
Falls Insurance Co., 21 Wash. 2d 470, 151 P. 2d 598 (Wa.
09/07/1944).

In Kentucky, the Court of Appeal, even though it found a waiver of the
condition, held:

When we resort to the decisions of other jurisdictions, however,
we find that virtually every court, state or federal, that
has considered this precise question has decided almost
without exception that the books and records themselves
must accurately supply the necessary information without
the aid of oral testimony except to explain the method of
keeping them. Westchester Fire Ins. Co. v. Gray, 240 S.W.
2d 825 (Ky. App. 06/19/1951).

Moreover, the Delaware Supreme Court has held that a bookkeeping
provision is a promissory warranty, and the insured must show at least a
substantial compliance to recover under the insurance policy.

The U.S. Supreme Court analyzed an iron safe clause as follows:

Turning now to the words of the policies in suit, what is the
better and more reasonable interpretation of those provisions
so far as they relate to the issues in this case? The
covenant and agreement “to keep a set of books showing
a complete record of business transacted, including all purchases
and sales, both for cash and credit, together with the
last inventory of said business,” should not be interpreted
to mean such books as would be kept by an expert bookkeeper
or accountant in a large business house in a great
city. That provision is satisfied if the books kept were such
as would fairly show, to a man of ordinary intelligence, “all
purchases and sales, both for cash and credit.” Liverpool &
London & Globe Insurance Co. v. Kearney, 180 U.S. 132,
21 S. Ct. 326, 45 L. Ed. 460.

Even if an insured is in business in a little country town, and his
books, kept in a most primitive style, are far from being what a good
accountant would consider a complete set of books, if the insured kept
a set of books which were as good as ordinarily kept in such a store
and business, and exercised good faith in the matter, his policy was not
avoided merely by the fact that the books were not what an expert would
consider a complete set of books. When the insured’s books are kept
in the manner customary with merchants like the insured, and are as
elaborate and complete as is usually the case in stores of like character,
it is sufficient.

In Louisiana, substantial compliance with the iron safe clause is
sufficient, but if that is lacking the policy is defeated. Gershon v. North
River Ins. Co., 177 La. 148, 148 So. 10, 92 A.L.R. 368. A proper inventory
was lacking in that case:

We find no Louisiana case holding that, in a retail store
where cash sales are made, a complete record of the cash
so received, though it does not indicate what particular
goods were sold, is not a substantial compliance as to such
sales. The “iron safe” clause does not expressly require
a record which will disclose the identity or the cost of the
goods sold.

The iron safe clauses found in most commercial and all inland marine
policies are important tools in the fight against insurance fraud. A person
who will perpetrate a fraudulent claim or who will burn down a business to
profit from an insurance policy may be an expert at fraud but know nothing
about insurance. If the books and records of the business do not comply
with the policy condition—and since the claims are fraudulent they seldom
will—an effective defense without the need to accuse the insured of fraud
will protect the assets of the insurer.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

Share
Posted in Zalma on Insurance | Leave a comment

Professional Insurance Adjusting

How to Make Adjusting a Profession

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

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

Incompetent or inadequate claims personnel force insureds and claimants to lawyers. Every study performed on claims establishes that claims with an insured or claimant represented by counsel cost more than those where counsel is not involved. Prompt, effective and professional claims handling saves money and fulfills the promises made when the insurer sold the policy.

Insurers who believe they can handle first or third-party claims with young, inexperienced and inexpensive claims handlers will be faced with the screams of angry stockholders. Profits, thin as they are, will move rapidly into negative territory. Punitive damages will deplete reserves. Insurers will quickly question why they are writing insurance. Those who stay in the business of insurance will either adopt a program requiring excellence in claims handling from every member of their claims staff, or they will fail.

Insurance is a business. It must change if it is to survive. It must rethink the firing of experienced claims staff and reductions in training to save “expense.”

Excellence in Claims Handling

Excellence in claims handling is a program that can help insurers avoid charges of bad faith in both first and third party claims. An insurer must understand that it cannot adequately fulfill the promises it makes to it insured and the Fair Claims Practices Act which exist in almost every state, when dealing with claimants without excellence in claims handling. An insurer must work intelligently and with vigor to create a professional claims department.

Insurance claims professionals are:

  • People who can read and understand the insurance policies issued by the insurer.
  • They understand the promises made by the policy and their obligation, as an insurer’s claims staff, to fulfill the promises made.
  • They are all competent investigators.
  • They have empathy and recognize the difference between empathy and sympathy.
  • They understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
  • They understand how to repair damage to real and personal property and the value of the repairs or the property.

An insurer whose claims staff is made up of people who are less than Insurance Claims Professionals, will be destroyed by expensive and counter-productive litigation.

A Proposal To Create Claims Professionals

To avoid claims of bad faith; to avoid punitive damages; to avoid losses; and to make a profit insurers must maintain claim staffs who are dedicated to excellence in claims handling. That means they will make sure every promise made in every policy is satisfied by the:

  • Insurers who only hire insurance claims professionals.
  • Insurers who train the claims staff to be insurance claims professionals.
  • Insurers who require that the claims staff treat every insured with good faith and fair dealing.
  • Insurers who demand excellence in claims handling from the claims staff.

The insurance industry for the last 15 years has decimated the number of insurance claims professionals for insurers to hire. If any experienced claims professionals exist in the insurer’s staff, the insurer must cherish and nurture them. If none are available, the insurer has no option but to train its people. Those who treat all insureds and claimants with good faith and fair dealing and provide excellence in claims handling must be honored with increases in earnings and perquisites. The insurer must immediately eliminate those who do not provide excellence in claims handling from the claims staff.

What Sources Are Available To Obtain Training?

Insurance training is available across the country by correspondence, in local colleges and universities and from law firms that will provide the training as a marketing tool. None of these sources are directed to producing insurance claims professionals. They do provide the basic background information necessary to begin the process of becoming an insurance claims professional. In that regard, I have written courses for Illumeo.com that can be a start to becoming an insurance claims professional.

An excellence in claims handling program can include a series of lectures supported by text materials. It must be supplemented by meetings between supervisors and claims staff on a regular basis to reinforce the information learned in the lectures. The insurer also must institute a regular program of auditing claims files to establish compliance with the subjects studied. There is no quick and easy solution. The training takes time. Learning takes longer. The insurer’s management must support and reinforce the training regularly.

The excellence in claims handling program requires a minimum of the following:

  • The insurance policy — how to read and understand the contract that is the basis of every adjustment.
  • The formation of the insurance policy.
  • Tort law including negligence, strict liability in tort, and intentional torts.
  • Contract law including the insurance contract, the lease agreement, the bill of lading, non-waiver agreements, proofs of loss, releases and other claims related contracts.
  • The duties and obligations of the insured in a personal injury claim.
  • The duties and obligations of the insurer in a personal injury claim.
  • The duties and obligations of the insured in a first-party property claim.
  • The duties and obligations of the insurer in a first-party property claim.
  • The Fair Claims Practices Act and the regulations to enforce it.
  • The thorough investigation.
  • Basic investigation of an auto accident claim.
  • Investigation of a construction defect claim.
  • Investigation of a non-auto negligence claim.
  • Investigation of a strict liability claim.
  • Investigation of the first-party property claim.
  • The recorded statement of the first-party property claimant.
  • The recorded statement or interview of a third-party claimant.
  • The recorded statement of the insured.
  • The red flags of fraud.
  • The SIU and the obligation of the claims representative when fraud is suspected.
  • Claims report writing.The evaluation and settlement of the personal injury claim.
  • How to retain coverage counsel to aid when a coverage issue is detected.
  • How to control coverage counsel.
  • How to retain an expert.
  • How to control the expert.
  • Dealing with a plaintiffs’ lawyer.
  • Dealing with personal injury defense counsel.
  • The evaluation and settlement of the property damage claim.
  • Arbitration and mediation and the claims representative.

© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

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The Examination Under Oath

The EUO Is a Serious and Important Part of the Insurer’s Investigation

The following is an excerpt from my new book available at Amazon.com: “The InsuranceProduct Details Examination Under Oath.”

Contrary to the Belief of Lawyers for the Insured, the EUO  Is Not an Adversary Proceeding like a Deposition in a Lawsuit.

The EUO is an investigative tool made available to the insurer. It allows the insurer to delve deeply and under oath into all aspects of the policy and the loss. The testimony to be elicited is not constrained by rules of discovery or the Codes of Civil Procedure.

The only restraint on the EUO is reasonableness. Unlimited questions are allowed. Only totally irrelevant and unreasonable questions dealing with facts completely outside the policy, its acquisition or the loss are not favored.

Irrelevant questions are tolerated if there is any possibility the question may lead to an inquiry about facts relevant to the policy or claim. In fact, there are no questions that are irrelevant in an EUO since each question may lead to more important information that could never have been learned about had not a foundation been laid by questions that appear, on their face, to be irrelevant. Since there are no rules for the taking of the EUO any question asked is important and must be answered.

In Ram v. Infinity Select Ins., 807 F.Supp.2d 843 (2011), during the investigation of the insured’s claim, the plaintiff produced limited records. Where an insurer has reason to suspect fraud in relation to a theft claim, inquiries into the insured’s financial status are relevant and material, and a refusal to answer questions on that subject constitutes a material breach of the insurance contract. Plaintiff refused to discuss his 2008 income at his EUO, and much of the income and employment information that he was willing to provide throughout the investigation of his claim is admittedly false. The Court found that Plaintiff’s failure to answer income questions constitutes a breach of the duty to cooperate, and no reasonable juror could find otherwise.

In Deguchi v. Allstate Ins. Co., Not Reported in F.Supp.2d, 2008 WL 1780271 (D.Hawai’I, 2008) a case where Plaintiffs’ testimony raised even more questions of possible motive, Plaintiffs prevented Allstate from further investigating and determining coverage under the Policy. Specifically, Deguchi refused to submit to a further EUO, and Plaintiffs’ attorney limited Scalas’ EUO to questions on the Princess Natasha, her loss, the two crew aboard her at the time of the loss, and her value. Under the specific circumstances of this case, the court found that Allstate’s requests for EUOs were reasonable as a matter of law. Deguchi, by refusing to allow a second EUO, and Scalas, by refusing to answer even basic questions, breached Plaintiffs’ duty under the Policy to “submit to examinations under oath” as reasonably required by Allstate. Because Plaintiffs’ refusal prevented Allstate from determining coverage under the Policy, Allstate had no duty to pay Plaintiffs under the Policy.

Similarly, in Powell v. United States Fid. & Guar. Co., 88 F.3d 271 (4th Cir.1996), the insureds’ home was destroyed by fire. Under their homeowners’ insurance policy, the insureds were required to “submit to questions under oath and sign and swear to them.” Powell, 88 F.3d at 272. During the EUO, the insureds refused to answer several questions and “to turn over financial and other documents,” claiming that an EUO did not permit the insurer to “delve into financial or other information relating to the [insureds’] possible motives to intentionally set the fire … but … [was] instead limited … to an examination relating to the existence and extent of loss under the policy.” The United States Court of Appeals for the Fourth Circuit disagreed, stating that an EUO “encompasses investigation into possible motives for suspected fraud.” Concluding that the EUO “is not restricted to amount of loss, but the insurer has the right to examine the insured and his witnesses as to any matter material to the insurer’s liability and the extent thereof.” Therefore, in Phillips v. Allstate Indemn. Co., 156 Md.App. 729, 848 A.2d 681 (2004) and Lindsey v. State Farm Fire and Cas. Co., Not Reported in F.Supp.2d, 2000 WL 1597763 (D.Md., 2000) under the facts and circumstances of the case, the refusal to answer questions about his financial circumstances during the EUO violated the terms of the policy and constituted a failure to cooperate.

In Michigan, in the context of a homeowner’s insurance policy, that the remedy for failing to comply with a requirement to submit to an EUO is dismissal of the insured’s action. Thomson v. State Farm Ins. Co., 232 Mich.App. 38, 45, 592 N.W.2d 82 (1998); Yeo v. State Farm Ins. Co., 219 Mich.App. 254, 257, 555 N.W.2d 893 (1996). The court saw no reason to distinguish between a valid EUO in a homeowner’s insurance policy and a valid EUO in a policy providing uninsured motorist benefits. An insurance policy is much the same as any other contract; it is an agreement between the parties. Because the no-fault statute does not require uninsured motorist benefits, there is no public policy against enforcing the EUO provision in this context, and we must honor the intent of the parties’ contract. [Cruz v. State Farm Mut. Auto. Ins. Co., 241 Mich.App. 159, 614 N.W.2d 689 (2000)].

The EUO  Should Be Required by an Insurer:

■          When the insured has insufficient documentary evidence to prove his loss.

■          When the insured refuses to cooperate in the investigation of the insurer.

■          When the insured is unable to present documentary evidence in support of his or her claim.

■          When the Insured needs help proving his or her loss.

■          When the insurer has no other means of “cross examining” the proof of loss  submitted by the insured.

■          When the insurer witnesses a fraudulent claim is being attempted.

The list of reasons for requiring an EUO are not the only reasons but a small list of potential reasons for an EUO.

When an insurance professional, whether an adjuster or a lawyer, finds a claim poses questions that cannot be answered by the usual and common methods of investigating a claim, it is important to consider the use of the EUO to get the answers not available anywhere else.

Now available as a Kindle book and a paperback at http://zalma.com/zalma-books/


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

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Zalma’s Insurance Fraud Letter – June 15, 2018

Arson for Profit So Obvious Insured Sentenced to 20 to 40 Months in Prison

A successful fraudulent claim will often encourage a new fraudulent claim. Julia Ann Calipo found that twice was not the charm and was convicted by a jury and sentence to time in prison.

In Commonwealth Of Pennsylvania v. Julia Ann Calipo, J-S21006-18, No. 1929 WDA 2016, Superior Court of Pennsylvania (MAY 31, 2018) appealed from the judgment of sentence entered on November 3, 2016 in the Criminal Division of the Court of Common Pleas of Erie County.

It does not pay to represent yourself. Ms. Calipo succeeded in a claim to Allstate and decided it was easy to cheat Allstate. She was proved wrong by setting fire to her house a few days before the cancellation became effective. Arson is a dangerous crime where people often are injured or die. Her sentence was fair and her appeal a waste of the court’s time.

The Current  Issue                                                                                                                   

In this issue are the following at http://zalma.com/zalmas-insurance-fraud-letter-2/:

  1. Arson for Profit So Obvious Insured Sentenced to 20 to 40 Months in Prison
  2. Become a Certified Expert in Corporate Property Insurance and a Certified Expert in Corporate Liability Insurance
  3. Chinese Fraud Conviction Appealed
  4. Barry Zalma Speaks at Your Request
  5. Small Fraud – Big Fraud – Any Fraud Eliminates Coverage
  6. Wisdom
  7. Good News From the Coalition Against Insurance Fraud
  8. Health Insurance Fraud Convictions & Fugitives
  9. Other Insurance Fraud Convictions
  10. Liar, Liar, Pants on Fire
  11. Books from Barry Zalma at Amazon.com
  12. My Physical Condition

Visit our Website at http://www.zalma.com


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

Share
Posted in Zalma on Insurance | Leave a comment

Insurer May Sue Lawyer Hired to Defend Insured for Malpractice

Insurer Must Prove Insured’s Malpractice of Defense Counsel by Clear and Convincing Evidence

The relationship between insurers and defense counsel they hire to defend an insured has always been difficult. Since the insurer pays the lawyer’s fees and gives counsel many cases to defend over the years, loyalty to the client – the insured – often conflicts with the loyalty to the insurer who pays the bills. When a defense counsel commits malpractice it appears the only person harmed is the client. However, a defense counsel’s malpractice will really damage the insurer who must pay a settlement or judgment rendered against the insured.

When I was a young adjuster the malpractice simply resulted in the lawyer being fired and never getting a new case from that insurer, a punishment greater than any malpractice verdict. Insurers considered the dozens of cases the lawyer saved them money and saw no reason to add insult to the injury of taking the lawyer off an approved list.

That common sense rule no longer exists. Insurers seek a pound of flesh from the lawyer who acted negligently in defending an insured.

In Sentry Select Insurance Company v. Maybank Law Firm, LLC, and Roy P. Maybank, Appellate Case No. 2016-001351, Opinion No. 27806, State Of South Carolina In The Supreme Court (May 30, 2018) Sentry Select Insurance Company brought a legal malpractice lawsuit in federal district court against the lawyer it hired to defend its insured in an automobile accident case. The trial court, unable to find precedent in the state asked the Supreme Court two questions:

  1. Whether an insurer may maintain a direct malpractice action against counsel hired to represent its insured where the insurance company has a duty to defend?
  2. Whether a legal malpractice claim may be assigned to a third-party who is responsible for payment of legal fees and any judgment incurred as a result of the litigation in which the alleged malpractice arose?

Background

Sentry Select hired Roy P. Maybank of the Maybank Law Firm to defend a trucking company Sentry Select insured in a personal injury lawsuit in state court. Maybank failed to timely answer requests to admit served by the plaintiff pursuant to Rule 36(a) of the South Carolina Rules of Civil Procedure. Seven months later, Maybank filed a motion seeking additional time to answer the requests, which the circuit court held under advisement until the parties completed mediation. Sentry Select claims that because of Maybank’s failure to timely answer the requests, and the likelihood the circuit court would deem them admitted, it settled the case for $900,000, when Maybank had previously represented to Sentry Select it could settle in a range of $75,000 to $125,000.

Sentry Select then filed this lawsuit in federal district court against Roy Maybank and Maybank Law Firm alleging a variety of theories, including negligence.

Analysis—Question One

When an insurer hires an attorney to represent its insured, an attorney-client relationship arises between the attorney and the insured—his client. Pursuant to that relationship, the attorney owes the client—not the insurer—a fiduciary duty.

An insurance company that hires an attorney to represent its insured is in a unique position in relation to the resulting attorney-client relationship. Pursuant to the insurance contract, the insurer has a duty to defend its insured, and must compensate the attorney for his time in defense of his client. If the insured settles or has judgment imposed against him, the insurance contract ordinarily requires the insurer to pay the settlement or judgment.

Because of the insurance company’s unique position the answer to question one is “yes,” an insurer may bring a direct malpractice action against counsel hired to represent its insured. The insurer may recover only for the attorney’s breach of his duty to his client, when the insurer proves the breach is the proximate cause of damages to the insurer. If the interests of the client are the slightest bit inconsistent with the insurer’s interests, there can be no liability of the attorney to the insurer. The attorney’s duty to the client may never be affected by the interests of the insurance company.

South Carolina decided to be consistent with the rule adopted by the majority of states that have considered the issue. Although the issue is relatively new to American jurisprudence, the majority of states permit a liability insurer to sue defense counsel for negligent representation in an underlying action.

When, pursuant to insurance policy obligations, an insurer hires and compensates counsel to defend an insured, provided that the interests of the insurer and insured are not in conflict, the retained attorney owes a duty of care to the insurer which will support its independent right to bring a legal malpractice action against the attorney for negligent acts committed in the representation of the insured.

It is the breach of the attorney’s duty to the client that is the actionable conduct in these cases. The duties an attorney owes his client are well-established according to law. The attorney owes no separate duty to the insurer. The court refused to recognize the dual attorney-client relationship.

A South Carolina lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.

As a final limitation on an insurer’s right to bring an action against the lawyer it hires to represent its insured, the insurer must prove its case by clear and convincing evidence.

In this case, there appears to be no risk that the decision will place the attorney in a conflict position or create any divided loyalty. The attorney’s duty to his client includes the obligation to timely respond to requests to admit. The fact that an insurance company may suffer financial loss from an attorney’s negligence in failing to timely respond to the requests, and the Court’s recognition that the insurer may sue the attorney to recover this loss after settling the underlying case to protect the interests of the insured, do not in any way affect the attorney’s duty to his client.

Question Two

As to question two—whether a legal malpractice claim may be assigned to a third party—we decline to answer the question. The court was satisfied that the answer to question one renders the second question not determinative of the cause then pending in the certifying court and thus it is not necessary for it to answer question two.

ZALMA OPINION

I have, since 1972, defended insureds at the request of their insurer.  I lost insurance company clients by rendering advice contrary to the insurer’s interest that was necessary to protect the client they hired me to defend. Although an insurer can sue the lawyer it hired to represent its insured for malpractice, I recommend against it. Few lawyers will be willing to take on cases from that insurer. If the lawyer commits malpractice he or she is not appropriate to defend insureds and should never be hired again.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

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Rescission of Insurance

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.

 


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

An annual subscription to secondary content on the Fastcase platform 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. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.

An annual subscription to secondary content on the Fastcase platform 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.

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

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

Legal Disclaimer:

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

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Ethics for the Insurance Professional

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.

© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

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U. S. Supreme Court Allows Minnesota to Change An Insurance Contract by Statute

Statute Causes Beneficiary Designation to be Voided by Divorce

Live insurance contracts contain – as their main purpose – a beneficiary designation advising the insurer who the insured wishes to be paid upon the insured’ death. The designation is an essential part of the insurance contract. The Contracts Clause of the U.S. Constitution categorically prohibits states from passing “any . . . Law impairing the Obligation of Contracts.” Art. I, §10, cl. 1 (emphasis added).  Minnesota law provides that “the dissolution or annulment of a marriage revokes any revocable . . . beneficiary designation . . . made by an individual to the individual’s former spouse,” Minn. Stat. 524.2–804. If an insurance policyholder does not want that result, he may rename the ex-spouse as beneficiary.

In Ashley Sveen, Et Al. v. Kaye Melin, No. 16-1432, Supreme Court Of The United States (June 11, 2018) a Contracts Clause argument arose because, in 2002, Minnesota enacted a statute establishing one a default rule that “the dissolution or annulment of a marriage revokes any revocable . . . beneficiary designation . . . made by an individual to the individual’s former spouse.” Minn. Stat. §524.2-804, subd. 1.

Under the statute, if one spouse has made the other the beneficiary of a life insurance policy or similar asset, their divorce automatically revokes that designation so that the insurance proceeds will instead go to the contingent beneficiary or the policyholder’s estate upon his death. The law does this on the theory that the policyholder would want that result. But if he does not, he may rename the ex-spouse as beneficiary.

FACTS

Mark Sveen and respondent Kaye Melin were married in 1997. The next year, Sveen purchased a life insurance policy, naming Melin as the primary beneficiary and designating his two children from a prior marriage, petitioners Ashley and Antone Sveen, as contingent beneficiaries. The Sveen-Melin marriage ended in 2007, but the divorce decree made no mention of the insurance policy and Sveen took no action to revise his beneficiary designations. After Sveen passed away in 2011, Melin and the Sveen children made competing claims to the insurance proceeds.

The Sveens argued that under Minnesota’s revocation-on-divorce law, their father’s divorce canceled Melin’s beneficiary designation, leaving them as the rightful recipients. Melin claimed that because the law did not exist when the policy was purchased and she was named as the primary beneficiary, applying the later-enacted law to the policy violates the Constitution’s Contracts Clause. The District Court awarded the insurance money to the Sveens, but the Eighth Circuit reversed, holding that the retroactive application of Minnesota’s law violates the Contracts Clause.

DECISION

The majority of the Supreme Court concluded that the retroactive application of Minnesota’s statute does not violate the Contracts Clause. That Clause restricts the power of States to disrupt contractual arrangements, but it does not prohibit all laws affecting pre-existing contracts. The two-step test for determining when such a law crosses the constitutional line first asks whether the state law has operated as a substantial impairment of a contractual relationship. In answering that question, the Court has considered the extent to which the law undermines the contractual bargain, interferes with a party’s reasonable expectations, and prevents the party from safeguarding or reinstating his rights. If such factors show a substantial impairment, the inquiry turns to whether the state law is drawn in an “appropriate” and “reasonable” way to advance “a significant and legitimate public purpose.”

Three aspects of Minnesota’s law, taken together, show that the law does not substantially impair pre-existing contractual arrangements. First, the law is designed to reflect a policyholder’s intent—and so to support, rather than impair, the contractual scheme. It applies a prevalent legislative presumption that a divorcee would not want his former partner to benefit from his life insurance policy and other will substitutes.

The Court made the assumption that the law often honors, not undermines, the intent of the only contracting party to care about the beneficiary term. Second, the law is unlikely to disturb any policyholder’s expectations at the time of contracting, because an insured cannot reasonably rely on a beneficiary designation staying in place after a divorce. If the law’s presumption about what an insured wants after divorcing is wrong, the insured may overthrow it simply by sending a change-of-beneficiary form to his insurer.

ANALYSIS

The Contracts Clause restricts the power of States to disrupt contractual arrangements. It provides that “[n]o state shall . . . pass any . . . Law impairing the Obligation of Contracts.” U. S. Const., Art. I, §10, cl. 1. The origins of the Clause lie in legislation enacted after the Revolutionary War to relieve debtors of their obligations to creditors.

The Minnesota statute furthers the policyholder’s intent. Legislative presumptions about divorce are now especially prevalent—probably because they accurately reflect the intent of most divorcing parties. Although there are exceptions, most divorcees do not aspire to enrich their former partners.

The Minnesota statute places no greater obligation on a contracting party—while imposing a lesser penalty for noncompliance. Even supposing an insured wants his life insurance to benefit his ex-spouse, filing a change-of-beneficiary form with an insurance company is as “easy” as, say, providing a landowner with notice or recording a deed.

JUSTICE GORSUCH, dissenting.

Although he was unable to convince other justices, Justice Gorsuch noted, logically, that Minnesota’s statute automatically alters life insurance policies upon divorce to remove a former spouse as beneficiary. Minnesota wants to apply its law retroactively to policies purchased before the statute’s adoption. The Court of Appeals held that this violated the Contracts Clause, which guarantees people the right to rely on the law as it existed when their contracts were made.

When it comes to legislation affecting contracts, the Constitution hardens the presumption of prospectivity into a mandate. The Contracts Clause categorically prohibits states from passing “any . . . Law impairing the Obligation of Contracts.” Art. I, §10, cl. 1 (emphasis added).

No one pays life insurance premiums for the joy of it. Or even for the pleasure of knowing that the insurance company will eventually have to cough up money to someone. As the Court concedes, the choice of beneficiary is the “‘whole point.'” So when a state alters life insurance contracts by undoing their beneficiary designations it surely “substantially impairs” them and changes the intent of a person unable to complain, the dead insured.

Kaye Melin testified that, despite their divorce, she and the decedent, Mark Sveen, agreed (repeatedly) to keep each other as the primary beneficiaries in their respective life insurance policies. Ms. Melin noted that they adopted this arrangement not only because they remained friends but because they paid the policy premiums from their joint checking account.

We must respect that line found in the text of the Constitution, not elide it. Indeed, our precedent teaches that if remedial changes are just disguised efforts at impairing obligations they will violate the Constitution too.

The judicial power to declare a law unconstitutional should never be lightly invoked. But the law before us cannot survive an encounter with even the breeziest of Contracts Clause tests. It substantially impairs life insurance contracts by retroactively revising their key term.

ZALMA OPINION

Although the Supreme Court has ruled that the people of Minnesota are too ignorant to change beneficiaries on their life insurance policies after a divorce – rather than smart enough to care for the ex-spouse – the contract of insurance is changed retroactively by statute which, to me, and Justice Gorsuch, clearly violates the Contracts clause. The statute should be changed and the state should recognize the wisdom of their citizens.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

 

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California Insurance Claims Regulations

California Fair Claims Settlement Practices Regulations

A Guide for 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.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

Share
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Lawyer Who Represents Himself Has an Idiot for a Client

Incorporeal Damages – Not Damages

Lawyers often dislike insurers. Many believe all that is needed to make a small fortune is to sue an insurance company since jurors seem to dislike insurers as much as lawyers do. However, when a lawyer sues in pro se, acting as both plaintiff and lawyer, it is important that he plead a real cause of action where he can prove actual damages. If not there is a serious question who is the true fool or idiot, the lawyer or the client.

In Alfred Degennaro v. American Bankers Insurance Company Of Florida; Government Employees Insurance Company; Assurant Specialty Property, No. 17-2539, United States Court Of Appeals For The Third Circuit (June 8, 2018) Alfred DeGennaro, a member of the New Jersey bar proceeding pro se, appeals from the District Court’s dismissal of his complaint alleging various statutory, contract, and tort claims against Defendants Government Employees Insurance Company (“GEICO”), Assurant Specialty Property, and American Bankers Insurance Company of Florida (“ABIC”).

FACTS

In late 2013, DeGennaro contacted GEICO, his auto insurance carrier, seeking to obtain a $1 million umbrella liability policy. GEICO informed DeGennaro that he first needed to secure a renter’s insurance policy for his home with a minimum personal liability coverage limit of $300,000 per occurrence. DeGennaro then sought and obtained such a renter’s policy—issued by ABIC—with $300,000 of personal liability coverage per occurrence, which allowed him to obtain the umbrella policy through GEICO.

DeGennaro later received a letter from GEICO about his umbrella policy, stating that he “may not meet the required underlying liability limit of $300,000,” and that he should review his policy to ensure he was “carrying the adequate limit” to avoid a “gap of coverage.” At the time, the declaration page accompanying DeGennaro’s renter’s policy with ABIC listed his personal liability coverage limit as $300,000 per occurrence.

Less than a month later, however, DeGennaro received an amended declaration page from ABIC stating that his personal liability coverage limit had been reduced to $100,000 per occurrence. DeGennaro acknowledges receiving this amended declaration, which stated in bold lettering that it superseded the previous declaration page. To account for the reduction in coverage, DeGennaro’s annual insurance premiums were correspondingly lowered from $24 to $8, and his credit card was refunded $16.

DeGennaro renewed his one-year renter’s policy with ABIC on two occasions—each time the renewal declaration pages listed his personal liability coverage limit as only $100,000 per occurrence.  Because ABIC’s underwriting policies had since changed, however, ABIC agreed to increase his liability limit $300,000 and charge him a new premium of $16.78 per year.

Not satisfied with this result, DeGennaro filed a consumer complaint with the New Jersey Department of Banking and Insurance (“NJDOBI”) “to address the reduction of his comprehensive personal liability coverage from $300,000 to $100,000.” Because ABIC made an offer to increase coverage to $300,000 back to the inception date, NJDOBI determined that the “matter has been favorably resolved,” and it closed the matter.

Instead of paying the increased premium to have his renter’s liability coverage increased retroactive to the inception date of the policy, DeGennaro cancelled his ABIC renter’s insurance policy and his GEICO auto and umbrella policies. And although DeGennaro never made a claim under these policies while they were in effect, he filed a complaint in the District Court alleging various statutory, contract, and tort claims against Defendants, seeking $172.8 million in damages.  The Defendants each filed motions to dismiss the complaint under Rule 12(b)(6), which the District Court granted. DeGennaro appealed.

ANALYSIS

DeGennaro’s claims alleging fraud, including his claims under New Jersey’s Consumer Fraud Act (the “CFA”), N.J.S.A. § 56:8-1 et seq., are subject to the heightened pleading standard imposed by Federal Rule of Civil Procedure 9(b). This requires a plaintiff to “state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the ‘precise misconduct with which [it is] charged.'”

DeGennaro alleges: (A) nine counts under the CFA; (B) a tortious interference with prospective economic advantage claim; (C) a common law fraud claim; (D) a breach of fiduciary duty claim; and (E) two breach of contract claims.

To state a claim under the CFA, a plaintiff needs to allege: “1) unlawful conduct by defendant; 2) an ascertainable loss by plaintiff; and 3) a causal relationship between the unlawful conduct and the ascertainable loss.” The District Court held that DeGennaro failed to sufficiently plead these elements.

Even assuming any of Defendants’ conduct was “unlawful,” DeGennaro’s claims still fail because he fails to sufficiently plead an “ascertainable loss,” which he frames as the loss associated with carrying additional risk.

The Supreme Court of New Jersey has stated that, in the CFA context, an ascertainable loss is “a definite, certain and measurable loss, rather than one that is merely theoretical.” An ascertainable loss “need not yet have been experienced as an out-of-pocket loss to the plaintiff,” but it cannot be “hypothetical or illusory”—”[t]he certainty implicit in the concept of an ‘ascertainable’ loss is that it is quantifiable or measurable.”

DeGennaro admits that his theory of loss—having to carry the “risk” associated with the gap in his coverage—”is a damage of an incorporeal nature.” DeGennaro has not suffered any out-of-pocket costs, because he never made a claim under his policy, he never had to cover the gap in his coverage, and the $16 additional premium was returned to his account.

Courts adjudicating CFA claims have dismissed complaints for lack of ascertainable loss where a “defendant . . . takes action to ensure that the plaintiff sustains no out-of-pocket loss or loss of value prior to litigation.” Here, ABIC offered to increase DeGennaro’s coverage limit—prior to any litigation—retroactive to the inception date of the policy.

DeGennaro does not allege what economic benefit he lost as a result of Defendants’ alleged actions, nor any facts suggesting that any alleged actions were done intentionally or with malice. Moreover he has failed to properly allege any damages whatsoever—let alone damages resulting from the alleged “interference.”

DeGennaro’s complaint contains no specific facts supporting his bare allegations of fraud. DeGennaro also admits that he received a revised declaration page indicating that his limit had been reduced. This fraud claim—which is subject to Rule 9(b)’s stringent pleading standard—would not survive a Motion to Dismiss even under the normal pleading standard.

Even assuming ABIC breached the insurance contract, it offered to increase DeGennaro’s coverage limit retroactive to the inception of the contract—thereby putting him in “as good a position as . . . if performance had been rendered.”

DeGennaro has failed to plead anything to suggest a fiduciary duty exists, let alone that Defendants breached such a duty.

ZALMA OPINION

How this case survived to the appellate court is amazing. The suit was so obviously without merit and the plaintiff – a lawyer representing himself – could not even allege, let alone prove, that he was damaged by the acts of the insurers. DeGennaro should consider himself lucky that the court did not sanction him for his frivolous suit but took seriously his claims and wrote a long opinion explaining why he had a very foolish client.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

 

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Cosby Must be Defended for Defamation

Sexual Misconduct Exclusion Ambiguous

When an insurer fails to be clear and unambiguous it finds it must defend an insured it never intended to insure. In AIG Property Casualty Company v. William H. Cosby, Jr., Barbara Bowman, Tamara Green, Angela Leslie, Katherine Mae Mckee, Louisa Moritz, Kristina Ruehli, Therese Serignese, Joan Tarshis, Linda Traitz, No. 17-1505, United States Court of Appeals For the First Circuit (June 7, 2018) Bill Cosby, even after being convicted in a criminal court of sexual abuse was still allowed a defense of defamation suits brought by women who accused him of sexual misconduct.

The First Circuit affirmed the judgment of the district court declaring that AIG Property Casualty Company had a duty to defend William H. Cosby, Jr. In 2014 and 2015, nine of the women who had, over the past decade, accused Cosby of sexual assault, filed three separate actions claiming that Cosby had defamed them by publicly denying their accusations.

AIG had a duty to defend lawsuits alleging defamation. AIG sought a declaration that the policies’ “sexual misconduct” exclusions barred coverage because the underlying defamation claims “arose out of” Cosby’s alleged sexual assaults. The First Circuit affirmed and held the “arising out of” language in the policies rendered the pertinent sexual-misconduct exclusions ambiguous as to the question in this case.

The opinion, written by Retired Supreme Court Justice, Souter.  Cosby argued that plaintiff AIG Property Casualty Company’s appeal from a judgment that it has a duty to defend the policyholder, defendant William H. Cosby, Jr. should fail.

FACTS

Over the past decade, a number of women have accused Cosby of sexual assault. In 2014 and 2015, nine of them, also defendants here, filed three separate actions claiming that Cosby had defamed them by publicly denying their accusations. At relevant times, Cosby held two insurance policies issued by AIG: a homeowners policy and a personal excess liability policy (the “umbrella policy”). Under each, AIG has a duty to “pay damages [Cosby] is legally obligated to pay [due to] personal injury or property damage caused by an occurrence covered[] by this policy anywhere in the world . . . .” Both policies define “personal injury” to include “[d]efamation,” and oblige AIG to pay the cost of defending against suits seeking covered damages.

When Cosby notified AIG of the underlying defamation suits, AIG initially agreed to defend him, subject to a reservation of rights that permitted the company to bring this action, seeking a declaration that the policies’ “sexual misconduct” exclusions barred coverage. The cited exclusion in the homeowners policy bars coverage for liability or defense costs “arising out of any actual, alleged[,] or threatened . . . [s]exual molestation, misconduct or harassment[,] . . . or . . . [s]exual, physical or mental abuse.” And the umbrella policy similarly excludes coverage for liability or defense costs “[a]rising out of any actual, alleged[,] or threatened . . . [s]exual misconduct, molestation or harassment[,] . . . or . . . [s]exual, physical or mental abuse.”

Contending that the underlying defamation claims arose out of Cosby’s alleged sexual assaults, AIG moved for summary judgment on its declaratory judgment claim. Cosby, for his part, moved to dismiss or, in the alternative, for judgment on the pleadings. The district court treated his motion as one for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) and held that the sexual-misconduct exclusions were at least ambiguous and consequently granted Cosby’s motion insofar as it sought a judgment that AIG had a duty to defend.

ANALYSIS

Under Massachusetts law, a court must construe an insurance policy under the general rules of contract interpretation, beginning with the actual language of the policies, given its plain and ordinary meaning. The insurer bears the burden of demonstrating that an exclusion exists that precludes coverage, however, and any ambiguities in the exclusion provision are strictly construed against the insurer. Ambiguity exists when the policy language is susceptible to more than one meaning.

There is no single definition of “arising out of” under Massachusetts law. The Massachusetts Supreme Judicial Court has said that the term indicates a wider range of causation than the concept of proximate causation in tort law,

Here, AIG says that because Cosby’s allegedly defamatory denials were prompted by the women’s sexual-assault allegations, the defamation injury and the excluded conduct are so “inextricably intertwined” as to trigger the sexual-misconduct exclusions. Cosby counters that the source of the women’s claimed injuries is not any alleged sexual misconduct, but rather the allegedly defamatory statements.

As the district court observed, the presence of another, more broadly worded sexual-misconduct exclusion in the umbrella policy tips the scales in favor of finding ambiguity. That policy’s coverage for “Limited Charitable Board Directors and Trustees Liability” is subject to an exclusion that applies to claims for damages “[a]rising out of, or in any way involving, directly or indirectly, any alleged sexual misconduct.” (emphasis added).

To be clear, the First Circuit did not hold that “arising out of” is an inherently ambiguous term under Massachusetts law or that discrepancies in insurance provisions always give rise to ambiguity. Rather, the holding is confined to this case where the ambiguity question is close to begin with and where another sexual-misconduct exclusion is worded more broadly.

Out of caution, Justice Souter also notes that this appeal decides only the question of coverage in providing defense to the policyholder. Coverage for any damages that may be awarded if the defense is unsuccessful could turn on facts beyond those pertinent here, requiring independent analysis.

ZALMA OPINION

The most difficult of all writing is to compose – using easy to read language – a clear and unambiguous exclusion. AIG tried to use the sexual misconduct exclusion to defeat a defamation claim and failed because the umbrella policy also issued to Cosby was more clear. Had both policies excluded losses “[a]rising out of, or in any way involving, directly or indirectly, any alleged sexual misconduct” it would have saved the defense costs. As usual, difficult facts make for a difficult decision, and AIG must defend Bill Cosby even after he was found criminally guilty by a jury.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

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Adjusting Property & Liability Claims

Two New Books on How to Adjust Claims

From the introduction:

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

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.

What Is an Adjuster?

An “adjuster” or “insurance adjuster” is by statutory definition, a person, co-partnership or corporation who undertakes to ascertain and report the actual loss to the subject-matter of insurance due to the hazard insured against. Insurance companies create, by issuing an insurance policy, a contractual obligation to pay its insureds’ valid claim. To do so insurers understand that the person insured is not able to prove the cause and extent of loss without assistance. Therefore, insurers dispatch a person with special knowledge – the adjuster – to separate fact from fiction, to establish cause and origin of the claimed loss, and determine sufficient information to enable the insurance company determine the amounts necessary to indemnify the insured as the policy promised. The adjuster is also present to distinguish the valid claim from a claim for which the insurance company is not liable under its policy.

Some policies specifically state that the claimant must use his own judgment in estimating the amount of loss and that the assistance of an insurance adjuster is a “courtesy only” — the claimant must still send a proof of loss within 60 days after the loss even if the adjuster does not furnish the form or help you complete it. As a general rule, “[w]hen an insurer gives its insured written notice of its desire that proof of loss under a policy of fire insurance be furnished and provides a suitable form for such proof, failure of the insured to file proof of loss within 60 days after receipt of such notice, or within any longer period specified in the notice, is an absolute defense to an action on the policy” [Stopani v. Allegany Co–op Ins. Co., 83 A.D.3d 1446, 920 N.Y.S.2d 559, 2011 N.Y. Slip Op. 2588 (N.Y. App. Div., 2011)]

Since the invention of the adjuster more than a century ago, the first person from the insurer that the insured meets when he or she suffers a first party property loss is the adjuster. The claim adjuster was invented to smooth the claims process and be certain that the insured receives the indemnity promised and performs a complete and thorough investigation to avoid fraudulent claims.

Every modern claim adjuster should know that it is his or her duty to aid the insurer in its obligation to fulfill the promises made by the policy of insurance and assist the insured in presenting his or her claim to the insurer.

An insurance adjuster is a person engaged in the business of insurance. The first party property insurance adjuster limits his or her activities to the investigation and adjustment of first party property claims like fire, lightning, windstorm, hail, theft, etc.

Statutes define an adjuster as one who investigates losses on behalf of an insurer as an independent contractor or an employee of an independent contractor. An insurance adjuster is an agent of the company and his powers and authority are prima facie coextensive with the business entrusted to his or her care. The duty of the adjuster is to ascertain and determine the amount of any claim, loss or damage payable under an insurance contract, and/or effecting settlement of such claim, loss or damage. The acts of an adjuster within the apparent scope of his authority are binding on the company without notice to the insured of limitations on his powers. [Old Republic Ins. Co. v. Von Onweller Const. Co., 239 So.2d 503 (Fla.App. 2 Dist., 1970)]

The Duties & Obligations of the Property Adjuster

Although a special relationship exists between an insurer and insured because they are in privity of contract as an individual, the individual insurance adjuster is not in privity with the insureds based on their insurance policy wording. Thus, although the employee adjuster does not owe a special duty to the insureds on which the bad faith tort could be based against the adjuster he or she owes the duty to the insurer employer although actions of the adjuster can support a claim of bad faith against the insurer for whom the adjuster works. [Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032] In the absence of privity of contract, an insurance adjuster is not individually liable to an insured for a failure to settle a claim against an insured. [Dumas v. ACCC Ins. Co., 349 Fed.Appx. 489, 2009 WL 3358479 (C.A.11 (Ga.), 2009)] However, the actions of the adjuster can cause the insurer that employed him or her to face charges of breach of the insurance contract and liability for breach of the tort of bad faith.


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.

“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.

Available from Amazon.com with details at http://zalma.com/zalma-books/

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Insurance Fraud New Books

“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


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

Share
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Extrinsic Evidence Disallowed in Dispute Over Duty to Defend

Four Corners Rule Deprives Contractor of Defense

In states that apply the four-corners or eight-corners rule the determination of the duty to defend is limited to the allegations of the suit rather than the actual facts that brought about the suit. As a result an artful pleader can either cause coverage to be applied or refused. Other states allow the court to consider extrinsic evidence when determining the duty to defend.

In Lenick Construction, Inc. v. Selective Way Insurance Company, No. 16-1891, United States Court Of Appeals For The Third Circuit (June 6, 2018) Lenick Construction, Inc. appealed a summary judgment in favor of Selective Way Insurance Company on Lenick’s declaratory judgment action for insurance coverage. The District Court held that Selective had no duty to defend or indemnify Lenick in state-court litigation that arose out of problems experienced by a condominium development in South Philadelphia, Pennsylvania applying the law of the state.

FACTS

The dispute underlying this coverage action began between The Villas at Packer Park Condominium Association and various entities collectively referred to as Westrum. Westrum was hired as the general contractor for the 92-unit development, and it subcontracted with Lenick to perform rough and finish carpentry and to install paneling, windows, and doors provided by the developer. Upon completion of the project, it was discovered that some units experienced water infiltration, leaks, and cracked drywall.

In February 2013, the Villas sued Westrum in the Philadelphia County Court of Common Pleas, alleging contract and warranty claims. Westrum impleaded Lenick (and others), asserting claims for breach of contract and indemnification.

Soon after it had been joined as a defendant, Lenick notified its insurer (Selective) of the claims, stating that the commercial general liability (CGL) policy in effect when the defects were discovered entitled Lenick to defense and indemnification. Selective initially denied Lenick’s request, but eventually agreed to defend Lenick, subject to a reservation of rights.

In response to Selective’s reservation of rights letter, Lenick filed an action in the Court of Common Pleas seeking a declaration that Selective was obliged to defend and indemnify Lenick. After Selective removed the action to federal court, the parties filed cross-motions for summary judgment regarding Selective’s duty to defend, and Selective also filed a motion for summary judgment on its duty to indemnify.

For its part, Lenick sought reimbursement for fees that it incurred in the time period between its demand for a defense and Selective’s agreement to provide one. The District Court concluded that the allegations against Lenick were not covered under its CGL policy, so Selective had no duty either to defend or indemnify Lenick.

ANALYSIS

If the complaint filed against the insured avers facts which would support a recovery that is covered by the policy, it is the duty of the insurer to defend until such time as the claim is confined to a recovery that the policy does not cover.

An insurer’s duty to defend and indemnify is determined solely in a four-corners state like Pennsylvania from the language of the complaint against the insured.

In this case, Lenick’s CGL policy insured it against bodily injury and property damage caused by an “occurrence,” which an endorsement to the policy defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  Lenick contends that the pleadings established occurrences under Pennsylvania law in three ways: (1) the damage occurred to areas of the property on which Lenick did not work, (2) the damage was caused by work performed by other subcontractors, and (3) the damage was caused by defects in the materials that Lenick used rather than by its own faulty workmanship. Selective counters that Lenick’s liability arises from its own faulty workmanship, which is not covered as an occurrence under the policy.

Lenick points only to extrinsic evidence to support this argument. Because the pleadings do not contain allegations sufficient to support a claim that the windows, doors, and/or panels used by Lenick “actively malfunctioned, directly and proximately causing” the property damage to the project, this argument fails.

ZALMA OPINION

Coverage would have been found if the plaintiff alleged that the windows, doors and/or panels actively malfunctioned. It did not and Lenick received no coverage for defense or indemnity. Many states allow extrinsic evidence to allow a court to fairly determine the duty to defend. Pennsylvania does not and contractors like Lenick will lose coverage it should be entitled to until the law is changed.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

 

 

 

 

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Insurance Law Books Discounted

Four Insurance Texts Price Reduced Two Thirds

“Insurance Law”

Quick Overview

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.

 


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

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Assault & Battery Excluded Regardless of Who Is the Agressor

Assault or Battery Can Never be Fortuitous

By definition liability insurance can only indemnify an insured against a contingent or unknown event, an accident, injury that is fortuitous. By definition assault or battery are intentional acts, not accidental, and not fortuitous.

In Ronald P. Guste Husband Of/And Betty Anne Guste v. Earl Albert Lirette III, President Of/And Tiger Audio, L.L.C., And Earl Albert Lirette Jr., NO. 2017 CA 1248, State of Louisiana Court of Appeal First Circuit (June 4, 2018) coverage was refused and the insured and injured person sued the insurer seeking indemnity for injuries resulting from a battery because negligence was alleged in the suit.

FACTS

An altercation between Ronald P. Guste and Earl Albert Lirette III resulted in litigation at Lirette’s business, Tiger Audio, L.L.C. Guste and his wife, Betty Anne Guste, sued Lirette and Tiger Audio seek damages for injuries allegedly sustained in the incident. According to the suit Guste entered the customer showroom of Tiger Audio to speak with Lirette about wages owed to Guste’s grandson. As Guste approached Lirette, who was standing behind a counter, Earl Lirette, III, came from behind the counter and violently assaulted and battered Ronald Guste, throwing him to the ground, causing severe injuries to his mind and body, including but not limited to a fractured hip, which rendered Ronald Guste bed-ridden and a permanent injury.

Lirette and Tiger Audio filed a third-party demand against their general liability insurer, Montpelier U.S. Insurance Company, contending Montpelier’s policy covered the alleged liability of Lirette and Tiger Audio and obligated Montpelier to defend them in the litigation. Guste also amended his petition to assert a direct claim against Montpelier as the alleged liability insurer for Lirette and Tiger Audio.

Montpelier filed a motion for summary judgment seeking dismissal of all claims against it, relying in relevant part on a policy exclusion applicable to bodily injury “arising out of assault and/or battery.” The trial court granted the motion.

DISCUSSION

The summary judgment procedure is favored and shall be construed to secure the just, speedy, and inexpensive determination of every action. In determining whether summary judgment is appropriate, appellate courts review evidence de novo under the same criteria governing the trial court’s determination of whether summary judgment is appropriate.

Insurance Coverage under Montpelier’s Policy

Summary judgment may be rendered on the issue of insurance coverage alone, although there is a genuine issue as to liability or damages.

Montpelier relies, in relevant part, on the following exclusion added to the policy by an endorsement:

ASSAULT AND BATTERY EXCLUSION; This policy does not apply to “bodily injury,” “personal injury” or “property damage” arising out of assault and/or battery or out of any act or omission in connection with the prevention or suppression of such acts, including the failure to warn, train or supervise, whether caused by or at the instigation or direction of the Insured, his employees, patrons or any other person.”

In his trial testimony, Guste testified he went to Tiger Audio to talk to Lirette about why Guste’s grandson had not been paid for work performed at the store. After exchanging words, Guste turned and began walking to the exit when the following occurred: “I was walking out the door . . . and I stopped four or five feet from the door. And I told those two men that were in there, all I’m asking is why he didn’t pay my grandson. And [Lirette] came up to me before I knew it and threw me down.”

Lirette agreed an altercation occurred but claimed Guste was the aggressor. According to Lirette’s trial testimony, Guste was “fussing” about wages owed to Guste’s grandson, and Lirette repeatedly tried to get Guste to leave.  According to Lirette, Guste made a movement with his hand “like he was going to punch me,” and Lirette “deflected” it with his hands. Lirette felt “threatened” and believed Guste was about to hit him.

The uncontradicted evidence establishes Guste was injured during a physical altercation with Lirette. The only conflict in the evidence concerns who was the aggressor, Lirette or Guste. However, that factual issue is not material to the application of the exclusion, which applies to bodily injury “arising out of assault and/or battery . . . caused by or at the instigation or direction of the Insured, his employees, patrons or any other person.” (Emphasis added.)

The exclusion does not depend on the identity of the person who committed the assault or battery but extends to acts committed by any person.

The exclusion in this policy is clear. The insurance does not apply to bodily injury arising out of 1) assault and battery or 2) out of any act or omission in connection with the prevention or suppression of an assault and battery. This is so regardless of who precipitated the incident, whether an employee or a customer or anyone else.

There is a difference between the versions of plaintiff and [the employee], but there is no issue of material fact. If plaintiff’s version is believed, his injuries arose out of an assault and battery perpetrated by [the employee]. If [the employee’s] version is believed, plaintiff’s injuries arose out of [the employee’s] attempt to prevent or suppress plaintiff’s assault and battery on him. In either case there is no insurance coverage.

Regardless of who was the aggressor, the evidence establishes Guste’s injuries arose out of either an assault or battery. That undisputed fact, alone, makes the subject exclusion applicable.

There is simply no coverage for the insured’s potential liability resulting from a battery, whatever the theory or theories of law the tort claimant advances in a potential action against the insured. To find otherwise defies logic.

ZALMA OPINION

The insurer who wishes to avoid the risk of loss by assault and/or battery can do so as long as its exclusion is clear, unambiguous and sufficiently broad to exclude any assault or battery by any person. This exclusion was sufficient and it did not matter who hit whom, who was the aggressor, and who was the victim. There is no coverage for defense or indemnity.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

 

 

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New Books from Full Court Press:

Insurance Books from Barry Zalma

Full Court Press (fastcase.com) continues to publish expert secondary content. This time it’s a new collection of new 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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Failure to Read Policy Expensive

Insurer’s Duty Limited to Provide the Insurance Ordered

Insurance is nothing more than a contract between an insured and an insurer. The insured submits an application to the insurer seeking an offer of insurance. When the insurer offers the insurance requested by the application the insured can either accept or reject the offer. If the offer is accepted the insurance is issued in accordance with the offer. It is the obligation of the insured to make sure the insurance issued is the insurance ordered. When the insured fails to protect him or herself they will try to get the coverage needed by accusing the insurer of negligence.

In AgCountry Farm Credit Services, ACA v. Richard Steven Elbert, A17-1413, State Of Minnesota In Court Of Appeals (May 7, 2018) Richard Steven Elbert unsuccessfully tried to compel an insurer to provide coverage not originally requested. He lost and challenged the district court’s grant of summary judgment in respondent-insurer AgCountry Farm Credit Services, ACA’s (AgCountry) favor on his negligence counterclaim arising out of a breach-of-contract action.

FACTS

Elbert is a farmer in Olivia, Minnesota. Elbert purchased multi-peril crop insurance and hail insurance from AgCountry, successor-in-interest to United FCS, for his 2015 farming operation. When Elbert failed to make his crop insurance premium payment by the contractual deadline, AgCountry filed a civil action for payment of the crop insurance premium. Elbert filed an answer conceding that the insurance premium was due and owing but counterclaiming that AgCountry’s damages were the result of its own negligence. Specifically, Elbert asserted that AgCountry failed to include a 118.8-acre tract of Elbert’s crop land in the insurance policy. Elbert was unable to harvest the crop grown on the 118.8-acre tract and claimed that, if the land had been properly covered under his insurance policy, he would have received an insurance reimbursement.

The district court granted summary judgment to AgCountry on its breach-of-contract claim and on Elbert’s counterclaim. The district court found that Elbert submitted a crop-insurance application to his insurer in May 2015, detailing the acreage to be covered, which did not include the 118.8-acre tract of land. In July 2015, the insurance company sent Elbert an insurance letter listing the identical acreage requested in the application. The insurance letter urged Elbert to carefully review the information and notify the insurer immediately of any errors. Elbert did not alert his insurer as to any unlisted acreage and, as a result, Elbert’s 2015 crop-insurance policy did not include the 118.8-acre tract of land.

DECISION

The district court did not err in granting summary judgment on appellant’s negligence counterclaim.

Summary judgment is properly rendered when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law. The evidence is viewed in the light most favorable to the party against whom judgment was granted.

Elbert argued that AgCountry is vicariously liable for the actions of his insurance agent under a principle-agent relationship. To establish a negligence claim against an insurer, a party must show (1) the existence of a duty; (2) a breach of the duty; (3) causation; and (4) damages. Absent an agreement to the contrary, the scope of this duty is limited to acting in good faith and following the insured’s instructions. Thus, an insurer is under no affirmative duty to take other actions on behalf of the client if the typical principal-agency relationship exists

The district court determined that there were no genuine issues of material fact pertaining to Elbert’s negligence counterclaim because AgCountry satisfied its general duty of care to Elbert by providing the insurance requested. AgCountry satisfied its duty of care by acting in good faith and by following Elbert’s express instructions regarding his insurance coverage.

The District Court Did Not Err By Declining To Impose A Heightened Duty Of Care Based On Special Circumstances.

Insurance consumers are responsible for educating themselves in matters concerning their insurance coverage. However, under special circumstances an insurer may have a duty to take some sort of affirmative action, rather than just follow the instructions of the client. Factors to consider in determining whether special circumstances exist include whether: (1) the insurer knew the insured was unsophisticated in insurance matters; (2) the insurer knew the insured relied upon the insurer to provide appropriate coverage; and (3) the insurer knew the insured needed protection from a specific threat.

Elbert argued that he relied on AgCountry to provide appropriate crop insurance coverage. To create a special circumstance the record would have to reflect that Elbert delegated decision-making authority to AgCountry for his insurance needs. Here, the record shows that AgCountry does not offer common insurance policies such as auto insurance, health insurance, or homeowner’s insurance. Thus, Elbert could not have placed all of his insurance needs into AgCountry’s hands. Moreover, Elbert has not presented sufficient evidence demonstrating that he was “unsophisticated in insurance matters” or needed protection from a “specific threat.”

The district court did not err by declining to recognize a special circumstance.

ZALMA OPINION

It is time that insured’s take responsibility for their own errors and stop bringing this type of action to the court to try to impose on an insurer or insurance broker the obligation to read the policy to make sure it provides the coverage ordered. Elbert received the insurance he ordered and could not compel the insurer to provide the coverage he needed instead of the coverage he ordered. His attempt to make his insurer cure his error failed.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

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Small Fraud – Big Fraud – Any Fraud Eliminates Coverage

Failure of Insured to Deal Fairly With Insurer Eliminates Coverage

New York appellate courts are noted for their concise opinions. In Otsego Mutual Fire Insurance Company v. Sally Dinerman, et al., Tower Insurance Company of New York, et al., 158600/15, 6408, 6407, 2018 NY Slip Op 03101, Appellate Division of the Supreme Court of the State of New York (May 1, 2018) the Appellate Division of the Supreme Court took a complex insurance fraud situation and disposed of it with alacrity and clarity.

FACTS

The trial court granted plaintiff’s motion for summary judgment declaring that defendant Sally Dinerman violated the “Misrepresentation, Concealment or Fraud” condition of the homeowners’ insurance policy issued by plaintiff, rendering the policy void in its entirety as to her and, other than as to fire insurance coverage, as to her husband, defendant Ira Dinerman.  The trial court also declared that Ira Dinerman’s failure to file a timely proof of loss is an absolute defense to his claim for fire insurance coverage; declaring that plaintiff has no obligation to defend or indemnify Sally Dinerman or Ira Dinerman under the policy in connection with pending or future subrogation actions; and awarding plaintiff a sum of money as against Sally Dinerman; and denied Ira Dinerman’s motion for summary judgment, for leave to amend his answer, and to reform the policy, except to make it comply with Insurance Law § 3404(e).

Plaintiff established prima facie that defendant Sally Dinerman (Sally) violated the misrepresentation, fraud and concealment provision of the homeowner’s insurance policy it issued to her, that her violation was willful and intentional, and that, accordingly, the policy was properly voided as to her and she is liable to plaintiff for amounts paid thereunder.

Sally argued that any misrepresentations were not material given the de minimus amount at issue. However, that she managed to defraud plaintiff of only a relatively small amount of money before her wrongful conduct came to light does not lend itself to the conclusion that she otherwise intended to stop submitting receipts for “reimbursement” of living expenses that she did not incur.

ANALYSIS

The appellate division concluded that the plaintiff should not be penalized for its diligent detection of Sally’s fraudulent scheme, whether dealing with small amounts or not.

Defendant Ira Dinerman’s (Ira) motion to reform the policy was properly determined. Under Insurance Law § 3404(e), Ira’s fire insurance coverage was not voided by his wife Sally’s fraudulent acts. However, as to liability coverage, the policy was properly enforced against him as written. Contrary to his argument, the policy is not ambiguous; its language has a definite and precise meaning, unattended by danger of misconception. He was required to submit a proof of loss in a timely fashion.

Ira’s failure to file proof of loss, either within the time specified in plaintiff’s demand or otherwise, is a complete defense to any claim for coverage. Sally’s two proofs of loss cannot be deemed to have been submitted “for the benefit of all” given her sworn statement in each that no person other than she had a right, title, claim to, or interest in the lost property or insurance proceeds and were false and fraudulent.

ZALMA OPINION

When an insured lies to an insurer when presenting a sworn proof of loss that insured commits both perjury and fraud. Either is sufficient to void coverage. An insured cannot, as Sally tried, claim that most of the claim is honest and the insurer’s remedy is only to save that part of her claim that is fraudulent. Insurance fraud voids coverage and one cannot commit a small fraud any more than one can be a little bit dead.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

 

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Liar, Liar, Pants on Fire

False Claim on Proof of Loss Voids Coverage

As I have said until I was blue in the face the covenant of good faith and fair dealing applies equally to the insured as it does to the insurer. Failure to honestly present a claim to an insurer voids coverage if the facts misrepresented or concealed are material.

In Z George Management Corporation, Inc., v. Indian Harbor Insurance Company, No. 1-15-2438, 2018 IL App (1st) 152438-U, Appellate Court of Illinois First Judicial District Fourth Division (May 31, 2018) Z George Management Corporation, Inc. appealed the grant of summary judgment in favor of defendant Indian Harbor Insurance Company.

BACKGROUND

Z George Management Corporation, Inc. (Z George) owns and rents residential property in Chicago Heights (the Property). Zachariah George (Mr. George) is the sole shareholder and owner of Z George. Z George procured an insurance policy with Indian Harbor Insurance Company (Indian Harbor) to cover physical damage and lost rental income at the Property.

On December 20, 2007, the Chicago Heights fire department was called to the Property after a tenant reported smelling gas. The fire department traced the smell to a stove in a vacant unit that vagrants were using for heat. The responders also indicated that other units had been broken into, and that vagrants were using the vacant units as a “flophouse.” The next day, Don Garcia (Garcia), a building inspector for Chicago Heights, inspected the building. Based on the condition of the Property, Chicago Heights posted a notice that the Property was “uninhabitable,” and Garcia told Mr. George that he needed to post security guards. Due to the Property being “uninhabitable,” the remaining tenants were required to move out (though a handful did not).

On December 28, unknown individuals broke into and vandalized the Property. It is unknown how they entered the Property, but they did considerable damage, including spraying gang graffiti, putting holes in walls, and splashing paint on the carpet. There is some evidence in the record that indicates that vandals also ripped out the fire alarm system on that date, though Mr. George provided conflicting statements about when the fire system was damaged. This second incident caused Chicago Heights to post a notice that the Property was “condemned.” The remaining tenants were ordered to vacate, and the city boarded up the Property.

Approximately a week later—the parties generally fix on the date of January 3—unknown vandals climbed through air conditioning vents and stole copper piping installed throughout the Property. The cutting of the pipes caused significant water damage to the basement of the Property. At some point in February, Mr. George was told that he had to gut the entire Property and allow city inspectors to view all of the electrical and plumbing, if he wanted to repair the building and bring it up to code.

On January 7, 2008, Mr. George initiated a claim the Property Loss Notice does not indicate the probable amount of loss—and it made no mention of any incidents of vandalism on December 20 or in early January. On June 20, Z George and Mr. George’s attorney, David L. Yanoff, responded to the April letter and provided documents relevant to the claim, including a sworn Proof of Loss.

The sworn Proof of Loss stated that “a vandalism loss occurred about 12:01 o’clock a.m. on the 28th day of December 2007.” The proof of loss indicated that the “full cost of repair or replacement” was $603,065. This amount was marked as the “actual case value loss” and “replacement cost loss.” The Proof of Loss was signed by Mr. George, as president, and notarized by David L. Yanoff, on June 19th. The $603,065.00 includes: a $7,845 board-up fee charged by the city, the $500,000 repair estimate, and $95,220 in lost rent.

Indian Harbor conducted an investigation. Based on the results of its investigation, Indian Harbor exercised its right to an examination under oath and deposed Mr. George in December. During the examination under oath, Mr. George gave a number of statements that Indian Harbor contends are material misrepresentations.

On April 20, 2009, Indian Harbor denied Z George’s claim regarding the December 28 vandalism. Indian Harbor cited the “concealment, misrepresentation or fraud” and, alternatively, the “duties in the event of loss” provisions of the policy.

With regard to the misrepresentation provision, Indian Harbor determined that “the misrepresentations in your Proof, at your [examination under oath], and your attempted concealment of the code violations all constitute breaches of the above quoted policy provisions. Consequentially, Indian Harbor considers your policy void, and denies any and all liability to you for the claimed loss or any amounts whatsoever.”

The consistent theme running through Indian Harbor’s various arguments was that Z George lied to Indian Harbor about the amount of lost rent by inflating the number of people who resided there; lied to Indian Harbor about the number of vandalism incidents, to avoid multiple per-incident deductibles, to avoid the duty of mitigation that would have been triggered each time, and to thwart its investigative efforts; and allowed the property to be vandalized repeatedly so the property would fall into disrepair, all to the end of getting Indian Harbor to indemnify Z George for a rehab of the building that Z George had been planning to undertake, anyway, to correct numerous code violations.

The trial judge stated in open court: “This is not—I mean, this thing is—the facts aren’t going to change at trial. There’s so much in the record here. There’s no genuine issue of material fact, and I don’t do this very often, but this is—I’m granting defendant’s motion for summary judgment based on fraud, the false statements, the late notice, not protecting property, having the Village pay to protect his property, and for the whole laundry list of things that Mr. Shukis argued. I’m not going to take them in order, but any one of them I think the Court finds that there’s no genuine issue of material fact.”

ANALYSIS

Summary judgment is appropriate when the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there are no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Indian Harbor cited four independent reasons why summary judgment was proper. The trial court found all of them meritorious.

While the concept of an “intentional misrepresentation of material fact” suggests the doctrine of common-law fraud, that concept “is quite different in the realm of insurance law” and has been “broadly defined” in that context. The phrase does not incorporate the elements of common-law fraud and does not require a showing of such things as reliance or prejudice. Illinois courts cite a body of case law dating back to the U.S. Supreme Court’s decision in Claflin v. Commonwealth Insurance Co., 110 U.S. 81, 96-97 (1884), for the proposition that false sworn answers to an insurer are material if they might have affected the insurer’s action or attitude, or if they may be said to have been calculated to discourage, mislead, or deflect the insurer’s investigation in any area that might have seemed to it, at the time, a relevant area to investigate.

It is not necessary that an insurer rely on the misrepresentation. It makes no difference that the insurer discovered the misrepresentation in time, before paying out on the claim. If the misrepresentation was calculated to discourage, mislead or deflect the insurer’s investigation on a topic on which a reasonable insurer would undeniably attach importance, the misrepresentation is material.

Mr. George’s statements were material misrepresentations for the purposes of the policy exclusion. There are no disputed questions of fact here. The Notice of Claim and Proof of Loss indicated only one act of vandalism on December 28, 2007. Mr. George ultimately admitted, when confronted at his sworn examination, that in fact there were three separate incidents of vandalism.

Most importantly, it is undisputed that the bulk of the damages claimed by Z George—$500,000 of the roughly $600,000, or over 80 percent—was caused by water damage that occurred as a result of the January 3 incident. Any reasonable insurer would be keenly interested in the circumstances surrounding an incident that led to a half-million-dollar claim at a residential apartment building.

Indian Harbor could not conduct any investigation without knowing that there was an incident on January 3. By omitting any reference to an incident that was responsible for the vast bulk of the insurance coverage claimed, Z George prevented Indian Harbor from conducting any investigation whatsoever on an incident of critical importance to it.

As a matter of law, Z George’s statement attributing all of the damage to its property to a single incident of vandalism on December 28 was an intentional misrepresentation of material fact that voided its insurance coverage. Summary judgment in Indian Harbor’s favor was proper.

ZALMA OPINION

When an insured lies to the insurer about the date of loss, the number of losses, the causes of loss and the amount of loss – all of which facts are material to any insurance investigation and because Z George lied the insurer was not allowed to conduct its investigation. The multiple lies made the contract void.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

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Arson for Profit So Obvious Insured Sentenced to 20 to 40 Months in Prison

It Takes Skill to Succeed at Arson for Profit

A successful fraudulent claim will often encourage a new fraudulent claim. Julia Ann Calipo found that twice was not the charm and was convicted by a jury and sentence to time in prison.

In Commonwealth Of Pennsylvania v. Julia Ann Calipo, J-S21006-18, No. 1929 WDA 2016, Superior Court of Pennsylvania (MAY 31, 2018) appealed from the judgment of sentence entered on November 3, 2016 in the Criminal Division of the Court of Common Pleas of Erie County.

FACTS

Appellant’s conviction in this case arose from an intentional fire that destroyed her residence on February 18, 2015 and a related insurance claim that Appellant submitted to Allstate Insurance Company (Allstate) for loss of dwelling and contents. On November 20, 2014, Appellant applied to Allstate for homeowners’ insurance coverage. Based upon information provided by Appellant, Allstate issued a policy that became effective on December 3, 2014.

Allstate commissioned a home inspection that was scheduled for December 1, 2014. The inspection revealed material misrepresentations by Appellant regarding the condition of the property and the age of improvements to the structure. Based upon the findings of the inspection, Allstate cancelled its policy on the residence effective February 26, 2015.

On February 18, 2015, eight days before the scheduled termination of Appellant’s homeowners’ coverage, a fire broke out at the East 32nd Street residence. The evidence at trial showed that Appellant, and possibly an adult child, were the only individuals who had keys or access to the premises and that Appellant was the last person to leave the residence that evening. Allstate hired a private investigator, Robert Rice, to determine the cause of the fire. Rice determined that the fire was set intentionally and that it was caused by the ignition of a stove that contained an aerosol can and clothing. Guy Santone, Fire Chief for the City of Erie Fire Department, also investigated the fire and agreed with Rice that the fire at the East 32nd Street residence was set intentionally.

Appellant submitted an insurance claim to Allstate on February 18, 2015. The claim was referred to Allstate’s Special Investigative Unit given its suspicious circumstances, including the 2011 fire and the fact that the fire occurred while Appellant’s homeowners’ policy was in cancellation status. While the investigation was ongoing, Allstate paid certain sums to Appellant. On November 17, 2015, however, Allstate denied coverage for Appellant’s claimed losses due to Appellant’s failure to cooperate, misrepresentations in Appellant’s list of contents and her statement under oath, and Allstate’s determination that the fire was set intentionally.

Criminal Charges

The Commonwealth filed an amended criminal information on September 13, 2016 charging Appellant with arson – endangering persons, arson – endangering property, risking catastrophe, three counts of recklessly endangering another person, and two counts of insurance fraud. Following a three-day trial that concluded on September 21, 2016, a jury found Appellant guilty of all charges. On November 3, 2016, Appellant received an aggregate sentence of 20 to 40 months’ incarceration, followed by seven years’ state probation.

The Appeal

In her brief to this Court, acting as her own lawyer, Appellant lists 25 issues for review. Many of Appellant’s claims were not included within her January 6, 2017 concise statement, others are repetitive, several assert the ineffectiveness of trial counsel, and still others incoherently allege corruption and misconduct on the part of the trial judge and prosecuting attorneys. For these reasons, we have confined our review of this appeal to the issues addressed in the trial court’s April 13, 2013 opinion.

After careful review of the parties’ submissions, the opinion of the trial court, the certified record, and pertinent case law, the appellate court concluded that Appellant is not entitled to relief. Moreover, in light of its determination that the trial court’s opinion adequately and accurately addresses the issues that were properly raised and preserved in this appeal, it adopted the court’s April 13, 2017 opinion as its own.

ZALMA OPINION

It does not pay to represent yourself. Ms. Calipo succeeded in a claim to Allstate and decided it was easy to cheat Allstate. She was proved wrong by setting fire to her house a few days before the cancellation became effective. Arson is a dangerous crime where people often are injured or die. Her sentence was fair and her appeal a waste of the court’s time.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

 

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Zalma’s Insurance Fraud Letter – June 1, 2018

My Present Condition

I am now four and a half weeks post open heart surgery and taking some time in the office to see how well I am recovering. I was able to walk – albeit slowly – more than two miles yesterday and only needed a nap to recover after lunch.

When all the problems with my arteries started in July 2017 I weighed 272 lbs. With exercise, before the surgery I got my weight down to 212 and was in fairly good shape before the surgery became necessary. I now weigh 199 lbs, a weight I have not had for fifty years.

I feel good but not as strong as I wish.

I am being taken care of by an exceptional cardiologist and a masterful cardiologist surgeon and their staffs at St. John’s hospital and the loving care of my wife and eldest daughter without whom my current move toward full recovery would be impossible.

The zipper scar down the middle of my chest is healing well and will be hard to see soon.

I should be operational in about a month as both a writer and expert witness. The recovery has been slow and steady and not nearly as fast as I wished.


In this short issue are the following at http://zalma.com/zalmas-insurance-fraud-letter-2/:

  1. New Books from Full Court Press
  2. Valeant Pharmaceuticals, Inc. Agrees to $1.875 Million Settlement
  3. Become a Certified Expert in Corporate Property Insurance and a Certified Expert in Corporate Liability Insurance
  4. Barry Zalma Speaks at Your Request
  5. Wisdom
  6. Good News From the Coalition Against Insurance Fraud
  7. Health Insurance Fraud Convictions & Fugitives
  8. Zalma’s Flat Rate Opinions
  9. Other Insurance Fraud Convictions
  10. Books from Barry Zalma at Amazon.com

Visit our Website at http://www.zalma.com


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

Share
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Borrowed Psycho Swing Injury Not Covered

Insured’s Failure to Fulfill Policy Condition Fatal to Coverage

It seems that the insurance contract is the only contract that the parties don’t read. Failure to read and understand an insurance contract can be, and often is, expensive to the insured who fails to read and comply with the policy contract.

In Steadfast Insurance Company v. The Celebration Source, Inc., a Florida corporation, Michael J. Campi, Paul M. Campi, David L. Campi, E.F., a minor, by and through her parents and natural guardians, Robert Frank and Terri Frank, Robert Frank, individually, Terri Frank, individually, Jeremy J. Soto, et al., No. 17-11115, United States Court Of Appeals For The Eleventh Circuit (May 7, 2018) the Defendants appealed the district court’s grant of summary judgment in favor of Steadfast Insurance Company (“Steadfast”). The district court concluded that Steadfast owed no duty to defend or to indemnify its insured, The Celebration Source, Inc. (“Celebration”), in an underlying state court tort lawsuit.

FACTS

Celebration is an event planning company that provides games and rides for special events. On 17 December 2011, E.F. was injured while riding on a piece of recreational equipment — called the “Psycho Swing” — operated by Celebration. At their client’s request, Celebration had borrowed the “Psycho Swing” from another vendor for use at the 17 December event.

Robert and Terri Frank, individually and on behalf of E.F., filed the underlying tort lawsuit against the Celebration Defendants in Florida state court. The lawsuit alleges injuries stemming only from the “Psycho Swing.”

At the time of the 17 December incident, Celebration was covered under a Commercial General Liability insurance policy issued by Steadfast (“Policy”). Steadfast undertook to defend the Celebration Defendants in the underlying lawsuit under a complete reservation of rights. Then, Steadfast filed this declaratory judgment action, seeking a declaration that it, in reality, owes no duty to defend or to indemnify the Celebration Defendants in the underlying suit. The district court granted summary judgment in favor of Steadfast.

ANALYSIS

Under Florida law, an insurer owes a duty to defend its insured when the complaint alleges facts that fairly and potentially bring the suit within policy coverage. Any doubts regarding the duty to defend must be resolved in favor of the insured. Where there exists no duty to defend, an insurer has no duty to indemnify.

When an insurance policy’s language is “clear and unambiguous,” it is construed according to its plain language. In other words, if the language of an insurance policy is clear, it must be construed to mean what it says and nothing more.

Courts have no power to create insurance coverage, if it does not otherwise exist by the terms of the policy. If the policy language is ambiguous, however, the policy is interpreted liberally in favor of the insured and strictly against the drafter who prepared the policy. When construing insurance policies courts should read each policy as a whole, endeavoring to give every provision its full meaning and operative effect.

The Policy includes an “Equipment Schedule” which identifies each piece of equipment covered under the Policy. The “Equipment Schedule” says expressly, “Please note that there is no coverage for any equipment not indicated.”

The Policy also includes a Newly Acquired Recreational Apparatus (“NARA”) Endorsement. The NARA Endorsement establishes a “limitation of coverage” for newly acquired equipment. In pertinent part, the NARA Endorsement includes this language: “Coverage for ‘bodily injury’ and ‘property damage’ arising out of the ownership, ‘maintenance,’ or use of recreational apparatus you ‘acquire’ after the effective date of this policy, shall apply only if the following conditions are met: . . . 3. You tell us within 30 days after you ‘acquire’ the amusement device and/or recreational apparatus that you want us to cover it for Commercial General Liability.”

The plain language of the Policy provides unambiguously that no coverage exists for equipment not listed in the Equipment Schedule. Consistent with the express terms of the Policy, the NARA Endorsement then sets forth the means by which newly acquired equipment may be added to the Policy. Under the clear and unambiguous terms of the NARA Endorsement, coverage for newly acquired equipment applies “only if” (among other things) the insured notifies Steadfast within 30 days that it seeks coverage for a new piece of equipment.

Because the insured failed to comply with the “clear and unambiguous” 30-day notice requirement, the newly acquired equipment was never covered under the policy.

The 30-day notice provision at issue here contains no ambiguity. That the “Psycho Swing” was not listed in the Policy’s Equipment Schedule is undisputed. Celebration also concedes that it provided no notice to Steadfast within the 30-day period that it wanted Steadfast to provide coverage under the Policy for the “Psycho Swing.” Because Celebration failed to satisfy the conditions set forth in the NARA Endorsement for adding newly acquired equipment, no coverage existed under the Policy for bodily injuries arising out of ownership, maintenance, or use of the “Psycho Swing.” The allegations in the underlying state court lawsuit thus fall outside the Policy’s coverage.

The district court concluded correctly — as a matter of Florida law — that Steadfast owes no duty to defend or to indemnify the Celebration Defendants in the underlying state

ZALMA OPINION

All the insured needed to do to get coverage for injuries caused by the Psycho Swing was to advise the insurer it was acquired and it wanted it insured. It did not. Failure to read the policy and comply with the condition was fatal to the claim.

 


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

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Cannot Create Coverage by Claiming Ambiguity

No Cover for Diver Who Drowned

Liability insurance policies are created with a broad grant of coverage that is then chipped away with limitations and exclusions to cover on the risks of loss that the insured intended to cover. No insurance policy, regardless of the desires of those insured, covers every possible risk of loss faced by the insured.

In Travelers Property Casualty Company of America v. Salt ‘N Blue LLC, Robert Wranovics, Douglas Barkley, Glenn Grosso, et al., No. 17-14235, United States Court Of Appeals For The Eleventh Circuit (May 7, 2018) the difference between actuality and desire became clear when Joseph Grasso drowned while diving for a lobster.

Douglas Barkley appeals the district court’s order granting summary judgment in favor of Travelers Property Casualty Company of America (Travelers) in this action regarding the scope of Travelers’ duty to defend and indemnify Barkley and his assignee, certain underwriters at Lloyd’s of London, Syndicate 4020, Ark Underwriting, Inc. (Lloyds). The district court concluded Travelers had no duty to defend or indemnify.

BACKGROUND

On July 30, 2014, Joseph Grosso and his brother Nicholas Grosso boarded the M/V Scubatyme III (the Vessel) for a lobster dive off the coast of Pompano Beach, Florida. Salt ‘N Blue LLC owned the Vessel, which was operated by Robert Wranovics, its captain, and Douglas Barkley, a mate and divemaster.

The Vessel proceeded to the intended dive site. After completing their dives, Joseph and Nicholas returned to the Vessel. Nicholas had exhausted his air supply, but Joseph wanted to re-enter the water to retrieve a lobster he had marked with a buoy. Although no one had checked the amount of air remaining in his tank, Joseph was allowed to re-enter the water without a dive buddy.

During Joseph’s second dive, Wranovics steered the Vessel away to pick up other divers. When Wranovics returned to Joseph’s location, Wranovics found Joseph unresponsive in approximately fifteen feet of water. Joseph’s body was tangled in a line with a buoy attached to it—a line given to him by a crewmember on the Vessel. He had drowned.

ANALYSIS

This appeal concerns the duty to defend and the duty to indemnify. The duty to defend is distinct from, and broader than, the duty to indemnify. Under Florida law, an insurer’s duty to defend depends solely on the allegations in the complaint filed against the insured. Therefore, for purposes of the analysis, the court looks to the complaint filed in the Underlying Litigation (Underlying Complaint) and assume all facts contained therein are accurate.

There is no duty to defend only if there is no doubt that the allegations of the complaint do not fall within the policy’s coverage.

The general coverage grant obligates Travelers to “pay sums . . . a covered person under this policy become[s] legally obligated to pay as a result of the ownership, operation or maintenance of the insured vessel because of . . . bodily injury or loss of life.” But the district court did not decide whether Joseph’s death occurred “as a result of” the operation of the Vessel. Instead, the district court granted summary judgment for Travelers because, even assuming Jospeh’s death occurred as a result of the operation of the Vessel, the facts alleged in the Underlying Complaint fall within the Diveboat Limitation Endorsement.

As Florida courts have repeated time and again, insurance contracts must be construed in accordance with the plain language of the policy. If the relevant policy language is susceptible to more than one reasonable interpretation, one providing coverage and the [other] limiting coverage, the insurance policy is considered ambiguous.

Courts should not strain to find ambiguity. If there is no genuine ambiguity, there is no reason to bypass the policy’s plain meaning.

The Diveboat Limitation Endorsement excludes “[b]odily injury, loss of life, or illness of any person while in the water or arising as a consequence of being in the water” from coverage. The facts alleged in the Underlying Complaint show that Joseph drowned after re-entering the water to retrieve a lobster. His drowning death is a “loss of life” that occurred “while in the water.” Even if Barkley’s argument were not waived, the standalone text of the Diveboat Limitation Endorsement is unambiguous: loss of life while in the water is not covered.

Simply because one provision gives a general grant of coverage and another provision limits this coverage does not mean there is an ambiguity. On the contrary, this is the very nature of an insurance contract; exclusions in coverage are expressly intended to modify coverage clauses and to limit their scope.

The Divemaster Limitation Endorsement provides that the Diveboat Limitation Endorsement is disregarded where “liability to a Certified Divemaster and/or Dive Instructor” is concerned. Liability to a certified divemaster or dive instructor is simply not at issue. However, Barkley nonetheless emphasizes that “Travelers relied upon this endorsement to try to bolster its position that no coverage exists.” The fact that Travelers quoted the Divemaster Limitation Endorsement in a letter recounting “many of the pertinent sections of the [Travelers’] Policy” does not demonstrate a conflict between the Divemaster Limitation Endorsement and the Diveboat Limitation Endorsement, particularly where the letter simultaneously “urge[d] [Barkley] to review the full Policy for a complete listing of all applicable terms, conditions, exclusions and endorsements.”

Barkley argued that the coverage was illusory. However, insurance coverage becomes illusory when limitations or exclusions completely contradict the insuring provisions. The Diveboat Limitation Endorsement excludes “[b]odily injury, loss of life, or illness of any person while in the water or arising as a consequence of being in the water.”

The Diveboat Limitation Endorsement would not apply to bodily injury, loss of life, or illness occurring onboard the Vessel as a result of negligence in the Vessel’s operation. Therefore, the Travelers’ Policy does not grant a right in one paragraph and then retract the very same right in a later one. Instead, the Diveboat Limitation Endorsement excludes coverage for a subset of claims that would ordinarily fall within the policy’s insuring provisions. The district court did not err.

ZALMA OPINION

Insurance contracts are interpreted according to the plain language of the policy except when a genuine inconsistency, uncertainty, or ambiguity in meaning remains after resort to the ordinary rules of construction. When an exclusion is clear and unambiguous the court has no choice but to apply the language as written.


© 2018 – Barry Zalma

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

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

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

New Books From Full Court Press

Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew 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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.

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

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

Legal Disclaimer:

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

 

 

 

 

 

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To Prove Exclusion the Injury Must Flow Directly and Immediately from Intentional Act

Release After Payment of Limits Protects Insurers

Major losses with insufficient insurance will invariably draw insurance coverage litigation. When insurers paid their limits less than a $200 million train accident loss where twenty-four passengers were killed and scores more were injured brought about coverage litigation.

In Those Certain Underwriters At Lloyd’s, London et al. v. Connex Railroad LLC et al., B276373, Court Of Appeal Of The State Of California Second Appellate District Division Five (April 19, 2018) an aftermath of the fatal September 12, 2008 Chatsworth, California head-on collision between a Metrolink commuter train and a Union Pacific freight train. Plaintiffs are all insurers. They insured Metrolink, Connex Railroad LLC and Connex’s parent, Veolia Transportation, Inc. Insurers interpleaded their policy limits and then sued for reimbursement, unjust enrichment and a judicial determination that an express policy exclusion precluded coverage for the accident. Connex and Veolia (collectively, Insureds) cross-complained, alleging breach of contract, bad faith, coverage estoppel, and fraud.

Connex and Veolia moved separately for summary judgment on the first amended complaint, contending the express policy exclusion did not apply as a matter of law. The trial court agreed and granted the motions. Insurers moved for summary judgment on the cross-complaint, contending it failed as a matter of law based on Insureds’ release of all claims against them. The trial court also agreed and granted the motion.

FACTUAL  BACKGROUND

Twenty-four passengers were killed and scores more were injured in the Chatsworth accident. Metrolink engineer Robert Sanchez also died. The wrongful death and personal injury claims and lawsuits (Chatsworth claims) settled for $200 million, the maximum allowable recovery under federal law for a single rail collision.

No lawsuit arising out of the accident went to verdict, so there was no judicial determination as to the cause of the collision. The Metrolink train, however, ran a red light and began traveling on a single set of tracks designated for traffic in both directions. The National Transportation Safety Board (NTSB) investigated the crash and found the Metrolink engineer “was actively, if intermittently, using his wireless device shortly after his train departed Chatsworth station, and his text messaging activity during this time compromised his ability to observe and appropriately respond to the stop signal at Control Point Topanga.”

The insurers interpleaded $146 million for settlement of the Chatsworth claims. In exchange for contributing their aggregate policy limits, Insurers and Insureds entered into a “Policy Release and Agreement” (Agreement). Insurers retained the right, “if any, to seek contribution and/or subrogation, or to assert policy defenses with respect to Connex [and] Veolia . . . .” Except for the right to assert a setoff in the event Insurers did sue, Insureds “release[d] and forever discharge[d]” Insurers for all liability arising out of the Chatsworth collision.

Insurers then sued the Insureds based on exclusion 3, which excluded coverage for “Bodily Injury, Personal Injury, Property Damage and/or Advertising Injury which the Insured intended or expected or reasonably could have expected.”

Motions for summary judgment followed. Insureds maintained the exclusion precluded coverage only for losses that flowed directly and immediately from Insureds’ alleged intentional conduct and asserted that, as a matter of law, the exclusion did not defeat coverage for the Chatsworth accident.

Viewing the evidence and reasonable inferences from the evidence produced in discovery in the light most favorable to Insurers, the trial court concluded there was evidence Metrolink engineers used handheld electronic devices while on duty, in violation of Connex’s policies, and Connex executives knew corporate rules were being violated and accidents could result if engineers were distracted by their cell phones. The trial court also concluded this evidence failed to raise a triable issue of material fact and granted Connex’s motion for summary judgment on the first amended complaint, finding as a matter of law the policy exclusion did not apply.

The trial court also granted Insurers’ motion for summary judgment on the cross-complaint. Insurers paid the policy limits and expressly reserved the right to seek contribution from Insureds. Insureds expressly released Insurers for breach of the duty of good faith and fair dealing or any other contractual or extra-contractual duties that existed as of the date of the execution of this agreement.”

Policy Language

The “reasonably could have expected” exclusion does not apply unless a reasonable person would conclude the injury and damage “flow[ed] directly and immediately from an insured’s alleged intentional act.” This is a reasonable interpretation of the policy’s exclusionary language, and Insurers failed to demonstrate otherwise.

Analysis

Insureds’ summary judgment motion was filed after the trial court interpreted the exclusion under New York law. The motion shifted the burden to Insurers to present evidence that raised a triable issue of material fact that would lead a reasonable person to conclude the losses in the Chatsworth collision flowed directly and immediately from Insureds’ conduct. The evidence required was to show the Chatsworth collision flowed directly and immediately from an insured’s alleged intentional act. They did not meet their burden. Clearly the engineer was negligent by sending text messages and missing a stop sign but the insurers could not prove that his actions were an intentional act that directly and immediately caused the deaths.

Insurers’ lawsuit “released” Insureds from the strictures of the Agreement only to extent their claims for breach of contract, breach of the covenant of good faith and fair dealing/bad faith, and fraud would offset any award to Insurers’ on the first amended complaint. Once the Insureds obtained judgment in their favor on the Insurers’ first amended complaint, there was no potential award to offset. Accordingly, Insureds at that point were bound by the terms of the Agreement.

Insurers had already interpleaded their aggregate policy limits by the time the Agreement was signed, suggesting no claims against them.  Insureds did not present any evidence to raise a triable issue of fact concerning the Insurers’ conduct that fell outside the Agreement.

Insureds expressly agreed they were releasing all claims based on contract and breach of the duty of good faith and fair dealing. Fraud was not expressly referenced in the Agreement, but conduct based on the breach of a fiduciary duty, i.e., “extra-contractual duties,” was.

Insureds’ claim that they were fraudulently induced to enter into the Agreement was not supported by any evidence and was belied by the language in the Agreement. Insureds contend another indicia of fraud was Insurers’ decision to attribute the entire interpleaded sum to Insureds, rather than allocating any to Metrolink. This determination was apparent on the face of the Agreement, however, as Insurers reserved the right to sue Insureds, but not Metrolink. Summary judgment was properly granted on the cross-complaint.

ZALMA OPINION

Interesting because of the sums and injuries involved. The question of proof should have been simple. However, since the engineer died in the accident his intent and that of his employers was difficult – and as the case established – impossible to prove.

 


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

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Thank You St. Johns

Thank You St. Johns

Zalma’s Insurance Fraud Letter

The Essential Resource For The Insurance Fraud Professional

Since I started ZIFL twenty two years ago all I have discussed is the evil people who are involved in insurance fraud who kill people in arson-for-profit schemes, commit all types of insurance fraud from agricultural insurance claims fraud to medical claims fraud; from auto fraud to fake thefts and burglaries; from murder for insurance money to surgeries performed on people who don’t need it; from auto accident schemes that are really ways to feed oxycodone habits; and from crooked medical providers who steal from Medicare and Medicaid to lawyers who forgot their oaths to protect the Constitution of the United States. I’ve dealt with bad people for the last fifty years over a lengthy career in insurance claims and insurance law. I have put a few away in jail, defeated many fraudulent claims, and lost out to devious claimants and lawyers. I never stopped trying and I believe I was more successful at what I do than not.

I write ZIFL, my blog and books to pass on what I learned over the last fifty years so that it is now more difficult for the insurance criminals to succeed in their task.

On May 1, 2018 I published the issue of ZIFL and then went to visit my cardiologist, Richard F. Wright, who gave me a very fancy stress test that showed, with serious technology that my arteries were not passing sufficient blood to my heart to keep me alive and active. He scheduled an angiogram that sent a video camera up my arm into my heart to see if a balloon and stent could be used to clear the arteries. I was the one in 1000 patients where that wouldn’t work since putting a balloon at the location of the blockage would simply turn off my heart.

Since I was on blood thinners already, I was required to stay in a cardiac care unit for three days doing absolutely nothing except get to know some truly kind, efficient, beautiful, handsome, and almost perfect nurses and certified nurse assistants who were kind enough to laugh at my bad jokes.

I met with the surgeon who heads St. John’s cardiac surgery who would do a by-pass operation taking material from my chest and leg to take the place of those that had been plugged. Dr. John Robertson and his team of surgeons, pulmonary specialists, nurses, etc worked to get me ready. I have worn a beard since 1982 but was shaved from head to toe in places I never expected to shave. I could have worn a bikini without any trouble.
Last week I was wheeled into a surgical theater where Dr. Robertson and his team were introduced to me. The anathesiologist said: “I’m giving you a cocktail.” I saw no drink and – in fact saw nothing until five next morning – when ICU nurse Dorothy pulled the intubation tubes from my throat.

I was wired up to tubes and electronics and looked like a really weak and pale Borg Queen from the old Star Trek T.V. series. What surprised me was that, although my chest had been opened and my ribs jacked apart, there was little pain. I was given pain medication but I insisted on less than the amounts prescribed.

I was in the Intensive Care Unit (ICU) for only two days cared for with skill, wisdom, empathy, and absolute professionalism by nurses for whom, although I love my wife of 50 years, with absolute love for Dororthy, Vickie, Angela and others whose names the drugs keep me from remembering but who were no less professional and expert care. The doctors from the team visited me often and as my condition approved and I was able to walk around the ward, tubes, injections, drips and electronics were removed from me in bits and pieces with each removal making me more comfortable even when I was a less than perfect patient.

I went back to a cardiac care unit where I spent two days complaining about having to sit still and only walk a few laps around the ward in a “gown” that hid little and exposed more than I wished to those in the hospital who had seen it all before and reminded me that ICU really stands for “I see You.”

They sent me home Thursday and I am in the loving care of a perfect wife and my eldest daughter who make me feel like Sally Field: “They really like me.”

I am only allowed a short amount of time on a computer, as I heal, so I wish to take this opportunity to thank everyone at St. John’s Hospital in Santa Monica, California who have me successfully home and on the way to a full recovery. I write because it is important to me to tell everyone who hears what I say or write that I am totally impressed, awed and thank G_d that I was cared for by Dr. Robertson, Dr. Wright and the entire staff at St. John’s from the surgeons, the technicians, the nurses, the Certified Nursing Assistants and the people who drove the gurneys and wheelchairs that moved me around the hospital.

The next issue of ZIFL should be back in full force by the 1st since I feel very strong today, five days post surgery.

As a bonus to my recovery, Fastcase.com and Full Court Press announced last week – while I was less than mobile – that they have selected three of my books as their first published works. That news was better than any drug. Their Press Release follows:


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 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the 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 platform 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.


A ClaimSchool ™ Publication, Written by Barry Zalma, Esq., CFE, © 2018 ClaimSchool, Inc. & Barry Zalma

Volume 22, No. 10
May 15 2018

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

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


 

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Zalma’s Insurance Fraud Letter – May 1, 2018

 Zalma’s Insurance Fraud Letter

 May 1, 2018

How Much Does Fraud Cost? 

In the 2018 Report to the Nation published by the Association of Certified Fraud Examiners an attempt is made to quantify the cost of fraud in the world which is available for free download.

The report starts with a projection of total fraud losses.

In doing so the ACFE recognizes that its decision is based on imperfect data. Even with these limitations on projecting the total amounts lost to fraud, however, we know that such a projection has an important place in the fight against fraud. Consequently, the ACFE asked survey participants, based on their professional experience, what percentage of revenues they believe a typical organization loses to fraud each year. The median response provided by these CFEs is that organizations lose 5% of their annual revenues to fraud. While this number is only a general estimate based on the opinions of the CFEs who took part in our study, it represents the collective observations of more than 2,000 anti-fraud experts who together have investigated hundreds of thousands of fraud cases. To place their estimate in context, if the 5% loss estimate were applied to the 2017 estimated Gross World Product of USD 79.6 trillion, it would result in a projected total global fraud loss of nearly USD 4 trillion. To be clear, this number is only an estimate and, given the limitations it is unlikely anyone will ever be able to calculate the true cost of fraud on a global scale. But we can be certain that the amount of damage is incredibly large, and this estimate, provided by anti-fraud professionals who work to prevent and detect fraud on a daily basis, helps give  us some insight into just how big the problem may be.

The Current Issue Contains the Following

  • The Burning Bed
  • May 1 is Law Day In the U.S.A.
  • How Much Does Fraud Cost?
  • The Third Largest Insurance Market in the World Also the Market for Insurance Fraud Perpetrators
  • Florida CFO Releases List of Top 10 Most Wanted Insurance Fraudsters
  • Good News From the Coalition Against Insurance Fraud
  • Physician Heal Thyself – in Prison
  • Health Insurance Fraud Convictions
  • Chutzpah” by an Arsonist
  • Other Insurance Fraud Convictions
  • Zalma Books

New Insurance Books by Barry Zalma

  • The Compact Book on the Commercial Property Insurance Policy
  • Insurance Fraud & Weapons to Defeat Insurance Fraud – Volumes One and Two
  • Rescission of Insurance
  • Ethics for the Insurance Professional
  • Random Thoughts on Insurance – A Collection of Blog Posts from Zalma on Insurance)
  • The Insurance Examination Under Oath
  • The Compact Book on Adjusting Liability Claims
  • The Compact Book on Adjusting Property Claims
  • The California Fair Claims Settlement Practices Regulations.
  • The California SIU Regulations.
  • Passover Seder for Americans” An All English – Easy to Perform – Passover Seder Paperback

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

  • Heads I Win, Tails You Lose
  • Arson for Profit
  • Murder & Old Lace
  • Murder and Insurance Fraud Don’t Mix
  • Candy & Able – Murder for Insurance Money
  • The Runt – a short story
 The most recent posts to the daily blog, Zalma on Insurance, are available at  http://zalma.com/blog.

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

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

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

    Regards,

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

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    Two Books Needed by Every Insurance Adjuster

    Being a Professional Adjuster

    Insurance adjusting is a profession where individual provide service to people who are insured when a contingent or unexpected loss occurs. It requires skill, intelligence, expertise and empathy to do the job properly. The two new books that follow will provide every adjuster the basics needed to perform the job of the adjuster professionally, thoroughly and with good faith.

    “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.

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

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

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

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

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

    Available as a Kindle book.

    Available as a paperback.


     

    Barry Zalma, Inc.

    © 2018 – Barry Zalma

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

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

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

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

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

    Legal Disclaimer:

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

    Share
    Posted in Zalma on Insurance | Comments Off on Two Books Needed by Every Insurance Adjuster

    Imputed Negligence of Auto Owner Dead in Maryland

    Innocent Owner Not Deprived of Coverage Because of Negligence of Permissive Driver

    Maryland still allows contributory negligence as a defense to a tort action thereby depriving recovery for damages incurred by a person contributarily negligent. Most states assess liability on a comparative negligence basis. In Maryland, until April 20, 2018 when an owner of a vehicle is injured because the permissive driver of the vehicle was negligent, the doctrine of imputed negligence prevented the innocent owner of the right to damages.

    In Victoria Seaborne-Worsley v. Jeffrey Mintiens, No. 26, Court of Appeals of Maryland (April 20, 2018) the doctrine of imputed negligence was done away with in Maryland for auto accidents.

    HISTORY

    In the past, the doctrine functioned to ensure that individuals injured in automobile accidents would be able to obtain compensation from the party most likely to be financially responsible – the car’s owner. However, developments in the law and in insurance coverage make reliance on the fiction of owner control less compelling. Moreover, in situations where an owner-passenger is injured and innocent of any negligence, application of the doctrine, in conjunction with a defense of contributory negligence, can have the perverse effect of foreclosing compensation to an injured party who was not personally at fault. As a result, courts in many states have abrogated or limited the doctrine of imputed negligence.

    FACTS

    This case grew out of an accident in a restaurant parking lot when Respondent Jeffrey Mintiens backed his truck out of a parking space and struck a car in which Petitioner Victoria Worsley (“Ms. Worsley”) was seated. Ms. Worsley’s husband had driven the couple to the restaurant and left the car and his wife stopped in a travel lane perpendicular to Mr. Mintiens’ parking space while he retrieved the couple’s take-out order from the restaurant.

    Ms. Worsley sued  Mr. Mintiens alleging that Mr. Mintiens was negligent and seeking various damages. At trial, Mr. Mintiens raised the defense of contributory negligence. The District Court concluded that Ms. Worsley’s husband had himself been negligent. It also concluded that his negligence should be imputed to Ms. Worsley under the imputed negligence doctrine because, though a passenger, she was the sole owner of the car at the time of the accident. Accordingly, the District Court entered a judgment in favor of Mr. Mintiens.

    At the restaurant, there was a window facing the parking lot where customers could pick up take-out orders. Adjacent to this window were at least two handicapped parking spaces. Ms. Worsley’s husband stopped the car perpendicular to the handicapped parking spaces, placed it in park, got out of the car, and walked to the carry out window, leaving Ms. Worsley alone in the car. According to Ms. Worsley, she was supposed to take her husband’s place in the driver’s seat and park the car while he retrieved their food.

    In the meantime, Mr. Mintiens had been at the restaurant since 5 p.m., during which time he met a friend and drank three beers. Shortly before 6:30 p.m., he obtained a take-out order for his family’s dinner and set out for the parking lot, where he had parked his truck opposite the handicapped spaces.

    Ms. Worsley testified that she was about to unbuckle her seat belt to get out and move her car when she saw the truck backing towards her. She braced herself against the window with her right hand, also hoping to catch Mr. Mintiens’ attention. This was apparently to no avail. The back of Mr. Mintiens truck hit the back passenger-side door of Ms. Worsley’s car.

    A little over nine months after the accident Ms. Worsley sued Mr. Mintiens alleging negligence and seeking compensation for her injuries. The District Court stated that it would likely find that Mr. Mintiens was negligent and liable, except that the defense of contributory negligence applied to relieve him of liability.

    Because the negligence of Ms. Worsley’s husband was therefore imputed to her, Ms. Worsley was deemed to be contributorily negligent. Accordingly, the court entered judgment in favor of Mr. Mintiens.

    Discussion

    In this case, the District Court found that Ms. Worsley’s claim was barred by the defense of contributory negligence. It did so without making any finding as to whether Ms. Worsley herself was negligent. Instead, the trial court found that her husband was negligent in his operation of the car and imputed that negligence to Ms. Worsley because she asserted that she was the sole owner of that car.

    Assuming for the sake of argument that Ms. Worsley’s husband was negligent in how he parked the car, the question is thus whether the doctrine of imputed negligence applies here to defeat Ms. Worsley’s claim on the basis of contributory negligence.

    The Doctrine of Imputed Negligence

    Under the classic formulation of the doctrine of imputed negligence, when the owner of a vehicle is a passenger in that vehicle and allows another person to drive, any negligence of the operator of the vehicle may be attributed to the owner.

    The doctrine of imputed negligence is not based on any negligence of the owner-passenger. Rather, it is a form of vicarious liability.  It is a form of direct negligence and is not a theory of vicarious liability.

    Where the car owner (Ms. Worsley) is a passenger in that car while a permissive driver (her husband) is negligent in parking or operating the car, and where there is no showing that she was asleep or otherwise incapable of exercising control, her husband’s negligence is attributed to her. If that negligence was a proximate cause of an accident that injured her, the doctrine of imputed negligence, under the “both ways” theory, deems her to be contributorily negligent and defeats a negligence claim by her against a third party such as Mr. Mintiens.

    The Fiction of Owner Control

    The fiction underlying the “controversial doctrine of imputed negligence” is divorced from reality according to Slutter v. Homer, 244 Md. at 139-40; Nationwide Mut. Ins. Co. v. Stroh, 314 Md. 176, 179-80 (1988). In Slutter, the Court observed that the doctrine “has been criticized as unrealistic and fictitious. The criticism rests on the practical consideration that, while back-seat driving is generally an annoyance, and sometimes a danger, it is almost never a physical fact.”

    While an owner-passenger may have the right to control the vehicle when present as a passenger, the owner’s ability to control the vehicle is quite another thing. Indeed, an owner-passenger’s attempt to take control of a car, especially while the car is moving, is both inadvisable and likely ineffective in preventing the driver from driving negligently.

    The primary policy aim undergirding the doctrine of imputed negligence was to locate a source for compensating an innocent victim for another’s negligence.

    When dealing with the doctrine of imputed negligence, Maryland appellate courts have recognized that its premise – owner control – is entirely fictional in the context of automobile torts, noted that certain applications of the doctrine lead to results at odds with its original purpose, and have circumscribed its reach by creating an exception (does not apply to a co-owner) and enlarging the breadth of that exception (need not be on the title to be a co-owner).

    Summary and Application to this Case

    Because the courts below based their decisions on application of the doctrine of imputed negligence to hold that Ms. Worsley was contributorily negligent, the appellate court concluded it must vacate the judgment in this case.

    There may be occasions when the doctrine still serves its original purpose of spreading risk and compensating an innocent injured party. Nor, in an era in which it is anticipated that many motor vehicles will soon operate autonomously without human drivers, can the court anticipate the felt necessities of the future.

    The doctrine of imputed negligence does not apply to deem an owner-passenger of a motor vehicle contributorily negligent based on the negligence of a permissive driver of the owner-passenger’s vehicle and bar the owner-passenger from recovering compensation from a negligent third party.

    ZALMA OPINION

    It is good to see, in the 21st Century, that Maryland Courts have moved to join the 20th Century. Imputed negligence has lost its purpose many years ago, especially with regard to the operation of an automobile and deserved the quick, painless and effective death of the doctrine of imputed negligence by this decision. It’s about time.


    © 2018 – Barry Zalma

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

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

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

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

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

    Legal Disclaimer:

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

     

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    How to Avoid & Defeat Insurance Fraud

    “Insurance Fraud & Weapons to Defeat Insurance Fraud” In Two Volumes

    Product Details

    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. The two volumes provide anyone in the business of insurance the ability to find and use the multiple weapons available to defeat insurance fraud.

    Insurance 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


     

    Barry Zalma, Inc.

    © 2018 – Barry Zalma

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

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

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

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

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

    Legal Disclaimer:

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

    Share
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    Who’s on First or Which Insurer Owes a Defense and Indemnity

    Risk Transfer Device Works for City of New York

    When insurers dispute over which one owes defense and indemnity to an insured they both insured the result is almost always disappointing. Litigation between insurers should never reach the court of appeal since they are both professional insurers with supposedly knowledgeable staff and management who should be able to amicably resolve the dispute.

    In Valley Forge Insurance Company, et al. v. ACE American Insurance Company, 2015-08959, 2018 NY Slip Op 02665, Supreme Court Of The State Of New York Appellate Division, Second Judicial Department (April 18, 2018) the rule was proved in its breach and two insurers fought through trial and appeal.

    THE DISPUTE

    In an action for a judgment declaring, among other things, that the defendant ACE American Insurance Company is obligated to reimburse the plaintiff Valley Forge Insurance Company for costs expended in defending and settling an underlying personal injury action entitled Cunha v City of New York, the plaintiffs appeal.

    Defendant ACE American Insurance Company appealed the order that declared that it was obligated to reimburse the plaintiffs for costs expended in defending and settling the underlying personal injury action.

    FACTS

    Severino Cunha was injured while working on a roadway excavation project in Brooklyn. The City of New York had hired Cunha’s employer, JLJ Enterprises, Inc., as the prime contractor, and HAKS Engineers, P.C. (hereinafter HAKS), to perform engineering inspection services in connection with the project. Cunha commenced an action to recover damages for personal injuries against the City, and the City commenced a third-party action for contractual and common-law indemnification against HAKS. The City and HAKS settled with Cunha, but proceeded to trial in the third-party action. After a trial eventually the Court of Appeals determined that the City was entitled to 100% indemnification from HAKS.

    INSURANCE

    HAKS had a primary commercial general liability policy with the plaintiff Valley Forge Insurance Company (hereinafter Valley Forge), an excess commercial general liability policy with the plaintiff Transportation Insurance Company (hereinafter Transportation), and a professional liability for design professionals policy with the defendant ACE American Insurance Company (hereinafter ACE). Valley Forge and Transportation sued  ACE, HAKS, and the City, seeking a declaration that the plaintiffs were not obligated to defend or indemnify HAKS, and that ACE was obligated to reimburse Valley Forge for the costs that it expended in defending and settling the underlying action on behalf of HAKS.

    MOTIONS FOR SUMMARY JUDGMENT

    ACE sought reimbursement of the payments that it made to settle the underlying action on behalf of HAKS. HAKS then moved for summary judgment against ACE, seeking a declaration that ACE was obligated to defend and indemnify HAKS. In April 2009, the Supreme Court (trial court) issued an order granting HAKS’s motion.

    ACE thereafter moved for summary judgment dismissing the complaint and granting its counterclaim for contribution from Valley Forge, and the plaintiffs cross-moved for summary judgment dismissing ACE’s counterclaim and for a declaration that ACE was obligated to reimburse Valley Forge for the costs that it expended in defending and settling the underlying action.

    TRIAL COURT DECISION

    The Supreme Court (trial court) denied ACE’s motion, and granted the plaintiffs’ cross motion. On December 19, 2016, the court entered a judgment declaring that ACE was required to reimburse the plaintiffs for costs expended in defending and settling the underlying action.

    ANALYSIS

    In an insurance coverage case, the insurer bears the burden of establishing that the claimed policy exclusion defeats the insured’s claim to coverage by demonstrating that the exclusion relied upon is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case.

    Here, the plaintiffs established that there was no coverage under the Valley Forge policy since the “professional services” exclusion was applicable to the claims asserted in the underlying action. The claims asserted by Cunha in the underlying action arise out of HAKS’s “supervisory, inspection, architectural or engineering activities,” and, thus, fall within the professional services exclusion under the Valley Forge policy and the E&O coverages provided by ACE.

    Accordingly, the Supreme Court properly awarded judgment in favor of the plaintiffs, declaring that ACE was obligated to reimburse Valley Forge for costs expended in defending and settling the underlying action.

    Further, the Supreme Court providently exercised its discretion in declining to award prejudgment interest to the plaintiffs.

    ZALMA OPINION

    Exclusions are designed to limit the exposure of an insurer to its insured. In this case the insurer Valley Forge proved that its “professional services” exclusion applied without question and that it owed nothing to its insured and ACE, the E&O insurer did. Why the two insurers did not resolve the dispute and insisted on summary judgment and appeals is beyond reason and a waste of litigation expenses.


    © 2018 – Barry Zalma

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

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

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

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

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

    Legal Disclaimer:

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

    Share
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    Become a Certified Expert in Corporate Property Insurance and a Certified Expert in Corporate Liability Insurance

    Certifications to Become an Insurance Professional

    Now available from Illumeo and Barry Zalma

    Everyone involved in insurance – either as an insurer or as an insured – requires excellence in claims handling. Businesses need to deal with insurers who have an excellence in claims-handling mandate. Insurers who wish to profit need an excellence in property and/or liability claims-handling program. Everyone in business needs an insurer who has an excellence in property or liability claims-handling program in effect.

    I have created two comprehensive video programs enabling anyone to become an insurance professional and Certified as an Expert in Corporate Property Insurance and/or as a Certified Expert in Corporate Liability Insurance. Both programs are available from Illumeo.com.

    The programs are complete courses of study providing education and training to allow insurance professionals, after completing the individual classes, to become a Certified Expert. The programs cover everything an employee, an officer or a director of a corporation, an insurance agent or broker, an insurance adjuster or underwriter, need to know about how to acquire proper insurance, how to present a claim to an insurer, how to cooperate in the investigation of the insurer and to resolve any claim presented by the corporation to the insurer.

    Major topics of study include, but are not limited to:

    1. That insurance is a contract and how to understand the basic rules of interpretation of contracts.
    2. The application for insurance and how it is used by the applicant and the insurer.
    3. The need for offer, acceptance, and consideration to form an insurance contract.
    4. How to read and understand the insurance contract.
    5. The first party property insurance contract and how it is formed and made effective.
    6. The importance of conditions and limitations in a first party property policy.
    7. The rules of insurance contract interpretation.
    8. The “contra preferentum” rule.
    9. The standard fire policy.
    10. The auto material damage policy.
    11. The need for a thorough claims investigation.
    12. How to conduct a thorough claims investigation.
    13. Understanding the damages available to a claimant who believes he or she was injured by the insured’s negligence.
    14. What is required to complete a thorough investigation.
    15. Why the insured is required to assist the insurer in completing a thorough investigation.
    16. Why it is essential that the claims person evaluates the potential liability of the insured.
    17. Understanding the various types of special and general damages.
    18. Liability and comparative negligence.
    19. The importance of venue and jurisdiction.
    20. Understanding the importance of the plaintiff and defendant and their lawyers.
    21. Dealing with the importance of the nature of the injuries.
    22. Understanding the importance of judicial review.
    23. Consideration for an early settlement.
    24. The duty owed by the insurer to the insured.
    25. The duty of the insured to the insurer.
    26. Use of experts.
    27. The Independent Medical Exam.
    28. Settlement Negotiations.
    29. Alternative dispute resolution.

    The full curriculum of the courses and other courses from Barry Zalma are available at http://www.ilumeo.com by entering in the search bar the word “zalma.”


     

    Barry Zalma, Inc.

    © 2018 – Barry Zalma

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

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

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

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

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

    Legal Disclaimer:

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

     

    Share
    Posted in Zalma on Insurance | Comments Off on Become a Certified Expert in Corporate Property Insurance and a Certified Expert in Corporate Liability Insurance

    The Compact Book on Commercial Property Insurance Policy

    How to Obtain, Read, Understand and Make Claims on a Commercial Property Policy

    The Means to Effectively Acquire a Commercial Property Policy and Present and Collect a First Party Property Insurance Claim Paperback – March 22, 2018

    The Compact Book on Commercial Property Insurance Policy : The Means to  Effectively Acquire a Commercial Property Policy and Present and Collect a First Party Property Insurance Claim by [Zalma, Barry]Insurance is a contract that requires an offer to provide insurance to a person or entity, acceptance of the offer and payment of consideration called a premium. Insurance is defined by California Insurance Code Section 22, as: “a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.” As such it is a special type of contract because it is limited to provide protection only from a contingent or unknown event. Any loss to be covered must be fortuitous, accidental, contingent or unknown. An intentional act can never be insured.

    The book explains what insurance is, how it is acquired, how to read and understand it, what to do when a loss occurs and how to successfully present and collect a claim to indemnify the insured from all losses incurred.


     

    Barry Zalma, Inc.

    © 2018 – Barry Zalma

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

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

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

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

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

    Legal Disclaimer:

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

    Share
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    Delivering Anything For Compensation Excluded by Auto Policy

    Vehicle While Used to Carry Sandwiches for a Charge Excluded

    Auto insurance polices provide a great deal of liability insurance for a small premium. It is, usually, a bargain for the purchaser. However, like every insurance policy, the automobile liability insurance policy does not cover every eventuality.

    In Cox III, LLC, and Andre Leon Queen v. Farmers Insurance Company, Inc. and Farmers Insurance Exchange, No. 336777, State Of Michigan Court Of Appeals (April 12, 2018) the insurers appealed an order granting damages to plaintiffs, Cox III, LLC, and Andre Leon Queen.

    FACTS

    The suit arsoe after a car accident involving plaintiff, Andre Leon Queen (“Queen”), while he was delivering sandwiches for plaintiff, Cox III, LLC (“Cox III”), a Jimmy John’s franchisee. Queen hit another driver with his car, and the driver filed a personal injury lawsuit against plaintiffs. Queen’s vehicle was insured by the Farmers defendants through a policy that was issued to Queen’s father. Plaintiffs sought coverage and indemnification through the automobile insurance that Queen retained through defendant. Defendant declined to defend or indemnify plaintiffs based on exclusions in Queen’s automobile insurance policy. The exclusions essential exclusion follows:

    This coverage does not apply to:

    1. Bodily injury or property damage arising out of the ownership, maintenance or use of a vehicle while used to carry persons or property for a charge.

    Plaintiffs alleged two causes of action in their initial complaint. The trial court found that defendant breached its insurance contract with plaintiffs.

    Defendant argues that the trial court erred in granting summary disposition in favor of plaintiffs because both Exclusion #1 and Exclusion #6 preclude coverage of plaintiffs for the lawsuit that arose out of Queen’s car accident.

    ANALYSIS

    Defendant first argues that Exclusion #1, which excludes coverage for vehicles that are used “to carry persons or property for a charge,” is not an ambiguous provision, and that it precludes coverage of plaintiffs because the delivery of sandwiches amounts to carrying property for a charge.

    The language of an insurance policy is construed and interpreted in accordance with ordinary contract construction principles. The trial court found that the language of Exclusion #1 was ambiguous because the exclusion did not appropriately define what “carrying a person or property for a charge” included, or indicate whether delivering sandwiches constituted carrying property for a charge.

    The Court of Appeal has found that a similar arrangement, where an individual was paid a wage to deliver pizzas using his personal car, amounted to carrying property for a charge. Amerisure Ins Co v Graff Chevrolet, Inc, 257 Mich App 585, 596; 669 NW2d 304 (2003). In Amerisure, an employee of a company insured by the plaintiff got into a car accident while delivering pizzas. The employee’s fiancée had rented the car and placed the employee on the rental contract as a permissive user of the car. The employee was sued by the other driver.

    The plaintiff and the defendant both contributed $90,000 to the settlement of the case against the employee, and the plaintiff then sued the defendant, seeking a declaratory judgment that the defendant was responsible for the payment of the entire settlement. The rental contract in Amerisure contained an exclusion that precluded insurance coverage where the car was used “to carry . . . property for consideration . . . .”

    The plaintiff argued that, because the employee was “paid a wage for whatever work he did and did not receive a special wage or mileage reimbursement for carrying pizzas, he did not carry property for consideration.”  The Court found that the employee’s hourly wage constituted consideration within the meaning of the insurance policy, and “because [the employee] was hired for the purpose of delivering pizzas, his transportation of those pizzas was for consideration.”

    In this case, Queen was an employee of Cox III’s Jimmy John’s franchise and delivered sandwiches in return for hourly compensation, as well as tips. With the exception of the type of food being delivered, the arrangement between plaintiffs is the same as the arrangement between the employee and employer in Amerisure.

    Therefore, the language in Exclusion #1 is not ambiguous and plaintiffs are precluded from coverage because the accident occurred while Queen used the vehicle to carry property for a charge.

    Accordingly, plaintiffs should not have been granted summary disposition because Exclusion #1 precludes insurance coverage for the car accident that Queen was involved in and that judgment was reversed.

    ZALMA OPINION

    This case teaches that businesses that allow employees to use their private cars to deliver product, whether sandwiches, pizza, widgets, or people (Uber or Lyft) should have them insured under a commercial insurance policy. Delivery people, using personal cars, if the employer will not insure them, must speak to their insurer about amending the policy to cover the delivery operations. Unfortunately no one reads an insurance policy until after a loss so Mr. Queen and his employer had no available coverage from Farmers.

     


    © 2018 – Barry Zalma

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

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

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

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

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

    Legal Disclaimer:

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

     

     

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    Posted in Zalma on Insurance | Comments Off on Delivering Anything For Compensation Excluded by Auto Policy

    Five True Crime Insurance Fraud Books

    Fiction from an Insurance Lawyer’s Fifty Years Dealing with Insurance Fraud

    After fifty years acting as a claims adjuster and insurance coverage lawyer I have seen and heard just about every possible way for an insurer to be defrauded. The five books below are short novels on how some people attempted insurance fraud and failed because of a thorough investigation by knowledgeable and experienced adjusters, investigators and lawyers. The names and locations were changed to protect the guilty.

    Candy and Abel: Murder for Insurance MonProduct Detailsey

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

    Available as a Kindle Book.

    Available as a paperback.

    Murder And Insurance Fraud Don’t Mix

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

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

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

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

    Available as a Kindle book.

    Available as a paperback

    Murder & Old Lace: Solving Murders Performed for Insurance Money

     

    Product Details

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

    Available as a Kindle book.

    Available as a paperback.

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

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

    Available as paperback.

    Available as a Kindle Book.

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

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

    Available as a paperback.

    Available as a Kindle book.


     

    Barry Zalma, Inc.

    © 2018 – Barry Zalma

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

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

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

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

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

    Legal Disclaimer:

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

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    Posted in Zalma on Insurance | Comments Off on Five True Crime Insurance Fraud Books