Everything Needed by the Insurance Claims Professional

The Insurance Claims Library

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

Fictionalized True Insurance Crime Books

“HEADS I WIN, TAILS YOU LOSE”

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

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

Available as a Kindle Book.

Available as a paperback.

“Candy and Abel: Murder for Insurance Money

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

Product DetailsAvailable as a Kindle Book.

Available as a paperback.

 

 

“Murder And Insurance Fraud Don’t Mix”

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

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

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

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

Available as a Kindle book.

Available as a paperback

“Murder & Old Lace: Solving Murders Performed for Insurance Money”

 

Product Details

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

Available as a Kindle book.

Available as a paperback.

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

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

Available as paperback.

Available as a Kindle Book.

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

 

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

Available as a paperback.

Available as a Kindle book.


New Books from Full Court Press

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

Barry Zalma practiced law in California for more than 44 years as an insurance coverage and claims-handling lawyer, and has spent more than 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law Deskbook Zalma

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

CalifCal Lawornia Insurance Law Deskbook

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

 

Insurance Bad Faith and Punitive Damages Deskbook

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

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

All available at fastcase.com.


Books from ClaimSchool, Inc.

“Insurance Law”

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

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

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

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

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

Mold Claims Coverage Guide

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

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

Construction Defects Coverage Guide

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

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

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

Insurance Claims: A Comprehensive Guide

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

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

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

Read more at http://zalma.com/blog


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Ignorance of the Law Creates Dangerous Falsehoods

Agents Who Lie to Insurers

Some years ago my solution to a mid-life crisis was to buy a custom made replica of the Studebaker Avanti, a fiberglass sports car powered by a 5 Liter V-8.

After I bought my dream car I found it was almost impossible to insure because the manufacturer only made 400 a year. My insurer cancelled me because it could not calculate an appropriate premium. I went to my neighborhood direct writer who had no problem insuring the car. The agent filled out a lengthy application form and handed it to me to sign.

Much to the agent’s surprise I actually read the application and found he had marked the form showing “no cancellations.” I had told him of the cancellation and asked why he had put a false statement in the application.

“It’s not important,” he responded “you weren’t cancelled for cause.”

The application only asked if I was cancelled so I insisted he correct the application. The insurance was issued. Had I allowed the application to go through as filled out and had a claim I would have faced a situation where I might have had no coverage. Of course, if I could prove that the agent of the direct writer had the knowledge of the prior cancelation, I could have defeated a claim of rescission, but with difficulty. If I did, the agent would have found himself liable to the insurer for any claim it paid to me.

In most states a mutual mistake of material fact, a unilateral mistake of material fact, the breach of a warranty, a material concealment, or a material misrepresentation can all be grounds for rescission. When an insurer is deceived, regardless of the intent of the deceiver, the remedy of rescission is available to the insurer. Rescission is an equitable remedy that was created by ancient ecclesiastical courts in England. When an insurance policy is rescinded it places the parties back in the position they were in before the contract date. The insured gets the premium back and the insurer gets back the policy as if there was never a contract.

Insurers usually use the remedy with care. As one court put it after agreeing that a rescission was proper:

Our conclusion here should not result in an assumption by insurers that policy liability can, with impunity, be avoided or delayed by assertion of a claim for rescission. That is a tactic which is fraught with peril. Where no valid ground for rescission exists, the threat or attempt to seek such relief may itself constitute a breach of the covenant of good faith and fair dealing which is implied in the policy.  (Emphasis Added) [Imperial Casualty & Indemnity Company v. Levon Sogomonian, 198 Cal. App. 3d 169 (1988)]

In a decision of the California Court of Appeal a man named Mitchell was the named insured of an insurance policy issued by United National Insurance Company whose commercial building was destroyed by an arson fire. The policy provided Mr. Mitchell with coverage for a commercial building in Los Angeles. During the policy period, the building was destroyed by arson. United National discovered several misrepresentations in Mitchell’s application for insurance, obtained the advice of counsel and rescinded the policy. Mitchell sued. The trial court granted summary judgment to the insurer because the application made material representations upon which United National’s underwriter relied in deciding to insure Mitchell which included matters that should have been learned by his agent and avoided. For example Mitchell misrepresented:

  • The property was not owned by Mr. Mitchell but by a family trust.
  • The property was vacant.
  • The property had been previously insured by the FAIR Plan, an insurer of last resort, who had cancelled.
  • The property had been condemned by the city. [James E. Mitchell, Individually and as Trustee of the Mitchell Family Trust v. United National Insurance Company, 127 Cal.App.4th 457, 25 Cal.Rptr.3d 627 (2005)]

The trial court granted summary judgment in United National’s favor and the Court of Appeal affirmed finding “as a matter of law on the undisputed facts that the information sought by United’s underwriter and denied to it by plaintiff’s false answers and omissions was material to United’s decision to provide insurance coverage.”

The investigation of the broker, and the broker’s actions can provide an insurer with an opportunity to recover losses due to fraud from a person with assets rather than a fraud perpetrator whose only source of income may have been the fraudulent claim. The Fourth District California Court of Appeal, in Century Sur. Co. v. Crosby Ins., Inc., 124 Cal. App. 4th 116 (2004), allowed an insurer to seek damages from the insurance broker who submitted to it a fraudulent and false application for insurance.

The case established that Crosby Insurance Inc. submitted to Century Surety Co. an insurance application for Baroco West Inc. The application classified Baroco as a “drywall” contractor. Century issued a policy in reliance upon the facts represented in the application. A construction defect action was filed against Baroco as the “general” contractor. Century undertook the defense but later withdrew after discovering Baroco’s insurance application contained false information. Century sued Crosby for losses caused by Crosby’s alleged fraud, negligence and negligent misrepresentation. The application incorrectly classified Baroco and was supported by a forged letter from Crosby’s office stating that Baroco had no losses for two years.

Crosby argued that Century’s exclusive remedy was against the insured, Baroco. The trial court agreed and sustained the demurrers without leave to amend. The Court of Appeal reversed the trial court decision. The Court of Appeal concluded that liability may be imposed on a broker in an insurer’s action to recover losses caused by a broker’s fraud in the application process. It also found that public policy supports imposing a duty on brokers to prepare applications with reasonable care. Failure to use reasonable care can result in the broker paying for the insurer’s loss.

The case established that Crosby Insurance Inc. submitted to Century Surety Co. an insurance application for Baroco West Inc. The application classified Baroco as a “drywall” contractor. Century issued a policy in reliance upon the facts represented in the application. A construction defect action was filed against Baroco as the “general” contractor. Century undertook the defense but later withdrew after discovering Baroco’s insurance application contained false information. Century sued Crosby for losses caused by Crosby’s alleged fraud, negligence and negligent misrepresentation. The application incorrectly classified Baroco and was supported by a forged letter from Crosby’s office stating that Baroco had no losses for two years.

Crosby argued that Century’s exclusive remedy was against the insured, Baroco. The trial court agreed and sustained the demurrers without leave to amend. The Court of Appeal reversed the trial court decision. The Court of Appeal concluded that liability may be imposed on a broker in an insurer’s action to recover losses caused by a broker’s fraud in the application process. It also found that public policy supports imposing a duty on brokers to prepare applications with reasonable care. Failure to use reasonable care can result in the broker paying for the insurer’s loss.

To avoid litigation from the client of an insurance agent or broker when the clients’ policy is rescinded, the insurance agent or broker must, when obtaining an application for insurance, explain to the proposed insured the importance of truthful and accurate responses to the questions. The agent or broker should never make subjective decisions on the importance of facts to a particular insurer.

In that regard consider Century Sur. Co. v. Crosby Ins., Inc., held that policy reasons support imposing a duty on insurance brokers to exercise reasonable care in preparing insurance applications under the facts alleged in the cross-complaint. When the broker knows of actual misstatements, the broker may be held liable for transmitting those misrepresentations in an insurance application knowing the insurer will reasonably rely on them.

The prudent agent or broker should ask the proposed insured each and every question on the application for insurance. None should be skipped even if they seem to have no relevance to the particular insured. The agent or broker should also insist that the insured read the application and affirm that all of the answers are correct before it is signed. If the insured refuses, or cannot read English, the agent or broker should read the application to the insured or have it translated into a language the applicant understands. The application process should be noted in the agent or brokers log and the insured should be asked to sign the application.

Defense counsel, faced with grounds for rescission should always contact – if an agent is involved – the agent to determine if his records or memory establish that he knew (but did not disclose to the insurer) the facts that were misrepresented or concealed. If the facts were known to the agent the remedy of rescission is not available to the insurer and the claim should be paid. Claim must then be made to the agent for the amount paid.

Insurers whose agents – by misrepresentation or concealment – must consider the agent to be a source of indemnity for the costs of investigation and payment of claims on a policy that should never have been issued.

The agent who learns of a material fact that is not reported to the insurer faces suit from either the insurer or the insured, or both. The prudent insurance agent will always report to the insurer and its underwriter all facts he or she learns from the potential insured. If the agent is not prudent and hides material information from the insurer he or she represents should immediately give notice of a potential claim to his errors and omissions insurer.

The insurance adjuster, needing to complete a thorough investigation as required by fair claims practices statutes, work as a regular practice, asking each insured every question on the application for insurance. If there is a discrepancy between the statements made by the insured at the time of the investigation and those made by the application the adjuster must not assume the investigation is complete. The adjuster must go to the offices of the agent or broker and obtain a complete copy of the file and ask the agent or broker if he knew of the true facts as related by the insured.  The adjuster must collect the contract between the agent or broker and the insurer to clarify their relationship. Finally, the adjuster should submit the findings of the investigation to competent coverage counsel for advice on whether the remedy of rescission or voidance is available to the insurer.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

 

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The Ethical – Good Faith – Claims Professional

Everything Needed by the Insurance Claims Professional

Every insurance claim requires that the representatives of the insurer deal fairly and in good faith with the insured. To do so each insurance claims person needs to provide the services promised by the policy of insurance. To do so each claims person must understand how insurance policies are interpreted by the courts in his or her jurisdiction, the meaning of each promise made by the policy, and have the ability to work with an insured with empathy and in good faith.

With the assistance of “Ethics for the Insurance Professional,” “Rescission of Insurance,” “The Insurance Examination Under Oath,” and the four volumes of “Random Thoughts on Insurance,” an insurance claims person can work to become an honest, honorable, ethical adjuster who always works with insureds and claimants with the utmost good faith.

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

All of Mr. Zalma’s insurance books are available at http://zalma.com/blog/insurance-claims-library/

Ethics for the Insurance Professional

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

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

Available as a paperback.

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.

“The Insurance Examination Under Oath”

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

Available as a Kindle book.

Available as a paperback.

“Random Thoughts on Insurance”

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

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

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Refusing Defense on Pleadings Can Be Expensive

Where the Insured Defaults the Insurer is Bound to Prove the Pleadings are Untrue

Scottsdale insurance Company refused to defend its insureds based on an application of the policy wording to the allegations of the underlying suit. The defendant in the underlying suit, without a defense, allowed a default judgment to be entered. The insured assigned the rights against the insurer who was then ordered by the trial court to pay the policy’s limit plus interest.

FACTS

In Scottsdale Insurance Company v. Timothy L. Byrne, as Co-Chairman of the Board of Trustees for the Plumbers and Pipefitters Local 51 Pension and Annuity Funds; Robert Bolton, as Co-Chairman of the Board of Trustees for the Plumbers and Pipefitters Local 51 Pension and Annuity Funds, No. 18-1526, United States Court of Appeals For the First Circuit (January 16, 2019) Wellesley Advisory Reality Fund I, LLC (“WARF”) was sued.

Acting in their capacity as representatives of the Board of Trustees for the Plumbers and Pipefitters Local 51 Pension and Annuity Funds (the “Funds”), the suit alleged that WARF had mismanaged and squandered money that the Funds had invested in that entity.

Scottsdale brought an action against Appellees seeking a declaration that it did not owe WARF a duty to defend or indemnify under the policy and so owed the Funds nothing, and the Funds counterclaimed. The United States District Court for the District of Massachusetts ruled that the exclusions in Scottsdale’s policies did not relieve the insurer of its duty to defend WARF in the prior action.

In a subsequent order, the district court awarded the Funds $3 million, the full limits of the insurance policy, plus post-judgment interest.

THE POLICY

The dispute in this appeal stems from a “Business and Management Indemnity Policy” (the “Policy”) issued by Scottsdale to WARF, a real estate investment vehicle developed by Wellesley Advisors. The Policy covered the period from November 15, 2013, to December 15, 2014, and carries a coverage limit of $3 million.

The Policy contains a number of exclusions, three of which are claimed to be relevant to the present appeal. First, the Policy includes a “Professional Services Exclusion” which states:

Insurer is not liable for Loss . . . on account of any Claim[] alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving the rendering or failure to render Professional Services. . . .

Solely for purposes of this exclusion, Professional Services means services as a real estate broker or agent, multiple listing agent, real estate appraiser, title agent, title abstractor or searcher, escrow agent, real estate developer, real estate consultant, property manager, real estate inspector, or construction manager. Such services shall include, without limitation, the purchase, sale, rental, leasing or valuation of real property; the arrangement of financing on real property; or any advice proffered by an Insured in connection with any of the foregoing.

Second, the Policy provides an “ERISA Exclusion” which states that Scottsdale

shall not be liable for Loss . . . on account of any Claim . . . for any actual or alleged violation of the responsibilities, obligations or duties imposed by [the] Employee Retirement Income Security Act of 1974, as amended [“ERISA”], or any rules or regulations promulgated thereunder, or similar provisions of any federal, state or local statutory or common law[.]

Finally, the Policy provides a “Conduct Exclusion” which excludes coverage for

Loss . . . on account of any Claim . . . alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving: . . .

the gaining of any profit, remuneration or financial advantage to [which any] Management Insureds were not legally entitled; provided, however this exclusion [] shall not apply unless and until there is a final judgment against such Management Insureds as to such conduct.

THE UNDERLYING ACTION

The suit averred that WARF “squandered the entire [$5 million] investment,” and that “[t]he properties were either lost to foreclosure or written down to a zero value because of taxes or mortgages owed.”

Based on these allegations, the Funds brought two claims in state court against WARF for negligence and violations of ERISA, respectively. Under the first of these claims WARF was negligent in overleveraging the properties in excess of their value. The second, ERISA-based count claimed WARF took on and breached its fiduciary duties to the Funds.

Scottsdale refused to either defend or indemnify WARF as to the Funds’ claims. WARF went into receivership and did not contest the Underlying Action thereafter. On November 25, 2015, the district court entered default judgment in the Underlying Action of $5,005,422.12.

ANALYSIS

The insurer’s duty to defend is independent from, and broader than, its duty to indemnify. Insurers owe a duty to defend their insured if the allegations in the underlying lawsuit are reasonably susceptible to an interpretation that they state a claim covered by the policy. For the duty of defense to arise, the underlying complaint need only show, through general allegations, a possibility that the liability claim falls within the insurance coverage.

Where an insurer asserts that it is not obligated to defend due to some policy exclusion or exclusions it bears the initial burden of demonstrating that the exclusion applies.  In order to meet this requirement, the facts alleged in the third-party complaint must establish that the exclusion applies to all potential liability as matter of law. If even one of the counts in either of the complaints falls within the coverage provisions but outside any exclusion, the insurer would have a duty to defend the entire lawsuit.

THE PROFESSIONAL SERVICES EXCLUSION

Scottsdale first contends that all of the allegations in the Underlying Action fall within the purview of the Professional Services Exclusion. In particular, it contends that all of the allegations in that case “arose out of” or “involved” “real estate development, property management, the purchase of real property, or the arrangement of financing on real property,” all of which Scottsdale argues fall “within the plain meaning of the Professional Services Exclusion.”

Scottsdale’s argument fails to account for all of the claims raised in the Underlying Action. The Underlying Action concerned losses stemming from WARF’s investment in three properties. Were those allegations limited to claims regarding the mismanagement of The Stone House, we might agree: claims stemming from WARF’s renovation of that property and retention of revenues from its operation of the hotel as a “management” fee fit seemingly well within the exclusion for actions taken “as a . . . real estate developer [or] . . . property manager.” As the district court observed, “[a]t the very least, it is ambiguous whether in fact all of WARF’s purported misconduct stemmed from” WARF’s provision of professional services. Thus, the allegations concerning the Newport and North Attleboro properties are not clearly within the Professional Services Exclusion, and, where there is ambiguity, there is a duty to defend.

THE ERISA EXCLUSION

The Underlying Action asserted both a negligence claim and, separately, a claim that WARF’s actions violated duties imposed by ERISA. The parties do not dispute that the latter of these claims falls outside of the Policy’s coverage, and that count is not at issue here.

Scottsdale has the burden of demonstrating the exclusion’s application to the Underlying Action, and all ambiguities must be read against the insurer. Accordingly, there was no basis for excusing Scottsdale from its duty to defend based on the ERISA Exclusion.

THE CONDUCT EXCLUSION

Where the insured defendant defaults, the factual allegations in the complaint as to liability are deemed to be admitted and treated as if they are true as to both the defendant and those insurers who wrongfully decline to defend the case.

Subject to these provisos, an insurer that wrongfully declines to defend a claim where some of the claims fall within a policy’s coverage and others do not, an insurer that breaches its duty to defend bears the burden of allocating a judgment against its insured between covered and noncovered claims.

ZALMA OPINION

Most fair claims practices regulations require an insurer to do a thorough investigation of a claim before making a decision. Relying on an interpretation of the allegations of a suit as it applies to an insurance policy’s exclusions is fraught with danger. When a default is entered every allegation is treated as if proved. Scottsdale found out its interpretation was wrong and the error cost them more than $3 million. That loss could have been avoided by defending under a reservation and, if the evidence at trial proved no coverage, they could seek return of the cost of defense and any indemnity required to be paid.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

 

 

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How to Create a Team of Professional Claims People

Everything Needed by the Insurance Claims Professional

Every insurance claim requires that the representatives of the insurer deal fairly and in good faith with the insured. To do so each insurance claims person needs to provide the services promised by the policy of insurance. To do so each claims person must understand how insurance policies are interpreted by the courts in his or her jurisdiction, the meaning of each promise made by the policy, and have the ability to work with an insured with empathy and in good faith.

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

Basic first party property insurance adjusting and basic third party liability adjusting are provided by the compact books on adjusting. In addition, every adjuster must be aware of the fair claims settlement practices regulations and SIU Regulations. The two books on California Regulations are useful to everyone involved in insurance claims any where because of how strict are the California Regulations.

“The Compact Book of Adjusting Property Insurance Claims”

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

Available as a Kindle book.

Available as a paperback.

“The Compact Book on Adjusting Liability Claims”

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Read about these and other insurance books by Barry Zalma at http://zalma.com/blog/wp-admin/post-new.php

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Failure to Fulfill Statutory Conditions for Uninsured Motorist Claim Fatal

U.M. Claim Dies Because Insured did not Sue Uninsured Motorist or Demand Arbitration Timely

Jerry Pikover, relying on his lawyer, carried on extensive negotiations and efforts to collect on an Uninsured or Underinsured Motorist Claim (UM/UIM) only to have the claim denied for failure to fulfill the basic conditions precedent to collecting UM/UIM coverage under the California uninsured motorist and underinsured motorist statute.

In Jerry Pikover v. Liberty Mutual Fire Insurance Company et al., B283206, Court Of Appeal Of The State Of California Second Appellate District Division Seven (January 14, 2019) Jerry Pikover was injured when the sports utility vehicle in which he was a passenger was struck by a second vehicle that had just collided with a big rig truck on the eastbound Interstate 210 freeway.

After the SUV owner’s insurance carrier, United Financial Casualty Company (UFCC), and Pikover’s automobile insurer, Liberty Mutual Fire Insurance Company, denied his claims, Pikover sued both insurers for breach of contract and breach of the implied covenant of good faith and fair dealing. The trial court granted UFCC’s and Liberty Mutual’s motions for summary judgment and entered judgments in their favor, ruling the undisputed facts established that Pikover had failed to comply with the statute, Insurance Code section 11580.2, subdivision (i), which sets forth three alternative prerequisites for bringing an action under the uninsured motorist provision of an insurance policy.

FACTUAL BACKGROUND

The Accident

Pikover was riding in an SUV being driven by his friend Stanislav Krakovsky on Friday morning, January 11, 2013, heading eastbound on Interstate 210, when the SUV was struck by Hannah Maisel’s vehicle. The CHP report concluded Maisel was the cause of the collision when she engaged in an unsafe lane change.

Maisel was insured by Wawanesa General Insurance Company. Wawanesa denied Pikover’s claim, asserting the truck driver had been solely responsible for the collision.

The SUV was insured by a commercial automobile insurance policy underwritten by UFCC, an entity affiliated with Progressive Casualty Insurance Company. Krakovsky was a rated driver under the policy.

The UFCC policy for the SUV included an uninsured/underinsured (UM/UIM) motorist bodily injury coverage endorsement providing coverage of $30,000 per person and $60,000 per accident. On March 7, 2013 Freiberg, Pikover’s lawyer, submitted a letter to UFCC advising “that a claim for injuries and damages is hereby made on behalf of [Pikover].” On January 20, 2014 Freiberg submitted Pikover’s settlement demand for $475,000 to UFCC.

Pikover had his own automobile insurance policy with Liberty Mutual at the time of the accident, which included uninsured motorist coverage of $1,000,000 per accident. UFCC responded to Freiberg’s demand for arbitration stating UFCC’s position “that there is no uninsured motorist coverage available to your client as you have neither timely demanded arbitration, nor timely filed a complaint against the uninsured driver,” as required by section 11580.2, subdivision (i).

Freiberg’s office and Liberty Mutual continued communicating more than two years after the January 2013 accident.

The Instant Lawsuit

Pikover filed his complaint against Liberty and UFCC.  UFCC moved for summary judgment or, in the alternative, summary adjudication, arguing the undisputed facts established Pikover had not satisfied the requirements of section 11580.2, subdivision (i), for accrual of a cause of action under the uninsured motorist provisions in an automobile insurance policy and the cause of action for breach of the implied covenant of good faith and fair dealing was an action on the policy and subject to the same requirements. On March 17, 2017 Liberty Mutual also moved for summary judgment or, in the alternative, summary adjudication on essentially the same grounds.

The trial court granted both motions, issuing a separate ruling for each one.

DISCUSSION

Section 11580.2 requires bodily injury liability policies in California to include insurance for sums recoverable from the owner or operator of an uninsured motor vehicle. With respect to a dispute concerning an uninsured motorist claim, section 11580.2, subdivision (i)(1), provides:

“No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless one of the following actions have been taken within two years from the date of the accident: [¶] (A) Suit for bodily injury has been filed against the uninsured motorist, in a court of competent jurisdiction. [¶] (B) Agreement as to the amount due under the policy has been concluded. [¶] (C) The insured has formally instituted arbitration proceedings by notifying the insurer in writing sent by certified mail, return receipt requested.”

No evidence suggests, despite Pikover’s contention otherwise, that UFCC indicated a settlement was imminent or even that it would make a settlement offer. Indeed, Freiberg’s office on July 14, 2014 acknowledged to UFCC it was awaiting a settlement offer from Liberty Mutual. In addition, there is no evidence UFCC made any representation Pikover’s instituting arbitration or otherwise complying with the statutory requirements was unnecessary or would have any negative impact on ongoing discussions. Nor did UFCC advise Pikover it was waiving any of its coverage defenses.

Pikover contends there are “numerous” issues of disputed material fact precluding the grant of summary judgment but failed to identify any with reasoned discussion or citation to the record. As a result, Pikover forfeited the issue.

Viewing all the evidence most favorably to Pikover, neither UFCC nor Liberty did or said anything upon which Pikover could reasonably have relied in deciding to delay or refrain from complying with the requirement to timely demand arbitration.

The circumstances of the parties’ settlement negotiations, including negotiations between UFCC and Liberty Mutual, do not support a claim of estoppel. Pikover was represented by an attorney at all times. There is no evidence that the insurers ever requested Pikover delay or refrain from formally instituting arbitration proceedings, filing suit against the uninsured motorist(s) or otherwise acting to ensure compliance with section 11580.2.

The appellate court concluded that as a matter of law, it was not reasonable for Pikover, who was represented by counsel, to refrain from demanding arbitration or seeking agreement to extend section 11580.2, subdivision (i)’s two-year limitations period in purported reliance on the superseded August 21, 2014 promised settlement offer after September 12, 2014.

Equitable tolling is not available to Pikover to excuse his failure to comply with section 11580.2, subdivision (i), by initiating arbitration proceedings within two years from the accident. The complaint also fails to allege Pikover pursued an action against Maisel, obtained settlement with or judgment against Maisel, or submitted proof of any payment made on behalf of Maisel to Liberty Mutual, all requirements for an underinsured motorist claim. Nor does Pikover suggest, let alone present evidence, that he could satisfy the requirements.

In sum, Pikover has not merely failed to plead facts essential to support a theory of underinsured motorist coverage; he is unable to do so. Pikover’s action against Liberty Mutual does not, and cannot, arise from a claim of underinsured motorist coverage.

The trial court did not err in ruling in favor of the insurers on Pikover’s bad faith cause of action. As discussed, in his January 2014 settlement demand to UFCC, Pikover claimed damages of at least $475,000. Separate from issues of liability and coverage, neither UFCC nor Liberty Mutual agreed with Pikover as to the amount of his loss. A denial of coverage, therefore, was not necessary for Pikover to demand arbitration during the statutory two-year period to determine the amount of damages to which he might be entitled for his injuries.

Because Pikover’s cause of action for breach of the implied covenant of good faith and fair dealing arises under UFCC’s and Liberty Mutual’s uninsured motorist policies, the requirements of section 11580.2, subdivision (i), applied to his second cause of action, as well as to his first. Because he failed to satisfy those requirements, summary judgment was properly granted in favor of UFCC and Liberty Mutual.

ZALMA OPINION

Pikover was really injured by an uninsured motorist and an underinsured motorist. He put his claim in the hands of a lawyer who made demands upon the insurers but never did what was necessary to toll the two year limitation period or comply with the conditions that the statutory policy required. He gets nothing from the insurers as a result. Jerry Pikover is not, however, without a remedy – he can seek damages from his attorney.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

 

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Insurance Claims Library

Everything Needed by the Insurance Claims Professional

Every insurance claim requires that the representatives of the insurer deal fairly and in good faith with the insured. To do so each insurance claims person needs to provide the services promised by the policy of insurance. To do so each claims person must understand how insurance policies are interpreted by the courts in his or her jurisdiction, the meaning of each promise made by the policy, and have the ability to work with an insured with empathy and in good faith.

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

Doing away with the tort of bad faith and insurance fraud are essential elements of the claims professional’s job. Read about them and more insurance related books by Barry Zalma are now available at http://zalma.com/blog/insurance-claims-library/

Time to Rescind the Tort of Bad Faith

Insurance and the Law of Unintended Consequences Paperback 

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

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

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

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


“Insurance Fraud & Weapons to Defeat Insurance Fraud”

In Two Volumes

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

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do

so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

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The Principal Location of the Insured Risk Governs Coverage

Violation of an Intellectual Property Law or Right is Not Covered Defamation

Various states apply the law interpreting insurance contracts differently. Some apply coverage decisions to the four corners of the policy and the four corners of the suit while others allow extrinsic evidence to make a determination of coverage for defense or indemnity. The difference becomes important when one state’s law will allow for coverage and another will not.

In Tela Bio, Inc., a Delaware corporation; Antony Koblish; Maarteen Persenaire, an Individual v. Federal Insurance Company, an Indiana Corporation, No. 18-1717, United States Court Of Appeals For The Third Circuit (January 16, 2019) TELA Bio, Inc. and its founders sued Federal after TELA was sued by its competitor LifeCell Corporation. In the District Court, the parties vigorously disputed which substantive law should apply, with TELA advocating for New Jersey law and Federal arguing for Pennsylvania law. After applying New Jersey’s choice-of-law rules, the District Court agreed with Federal that Pennsylvania substantive law applied, which led to the conclusion that Federal had no duty to defend TELA.

CHOICE OF LAW

This case originated in federal court in New Jersey and was transferred to the United States District Court for the Eastern District of Pennsylvania. Accordingly, the District Court applied New Jersey’s choice-of-law rules. Because the laws of the two states presented a true conflict, the District Court assessed “the interests each state has in applying its own law” to determine “which state has the most significant relationship to the parties and the event.”

When a dispute involves insurance coverage courts first look to “the place that the parties understood . . . to be the principal location of the insured risk” and apply that state’s law “unless some other state has a more significant relationship . . . to the transaction and the parties.” [Pfizer Inc. v. Emp’rs Ins. of Wausau, 712 A.2d 634, 638 (N.J. 1998)] The District Court applied Pennsylvania law because the principal location of the risk insured by the policy appears to be Pennsylvania and New Jersey does not bear a more significant relationship to the parties or the matter.

Federal’s principal place of business is in New Jersey, and the alleged acts triggering coverage happened in New Jersey. Even though the policyholders are Pennsylvania residents, Appellants insist Pennsylvania does not have an interest in applying its law to acts and injuries that did not occur within its borders. Applying New Jersey law would conform more closely to the interests of the parties and aid judicial administration.

In determining which state has the most significant relationship to the parties and claim, courts must consider four factors:

  • the competing interests of the relevant states;
  • the national interests of commerce among the several states;
  • the interests of the parties; and
  • the interests of judicial administration.

The District Court explained that because the policy was issued to Pennsylvania insureds through a Pennsylvania broker, New Jersey does not have a significant interest in its law applying to TELA’s duty to defend claim.

In response, TELA emphasizes LifeCell’s connections to New Jersey in the underlying case. But those connections are irrelevant here because this case is concerned with the Pennsylvania insureds (Appellants) and the policy Federal issued to them in Pennsylvania. Since the insureds are not New Jersey residents, the application of Pennsylvania law does not frustrate New Jersey’s interests.

Finally, applying New Jersey law would not aid judicial administration as TELA suggests because the site of the litigation of the underlying case, is not pertinent to adjudicating this coverage dispute.

For these reasons, the Third Circuit agreed with the District Court that Pennsylvania law applies because it is the principal location of the insured risk and has the most significant relationship to the parties and their dispute.

ANALYSIS

POLICY COVERAGES

Coverage was claimed under the policy’s “Advertising Injury and Personal Injury Liability Coverage” provision. That provision covers, in relevant part, “damages and claimant costs that the insured becomes legally obligated to pay . . . for . . . personal injury that is caused by an offense to which the coverage applies.” The policy provides coverage for several offenses, including libel and slander, defined as “electronic, oral, written or other publication of material that . . . libels or slanders a person

LifeCell did not sue for libel or slander. Nevertheless, Appellants contend that the underlying suit involves defamation because LifeCell alleged that TELA:

  • marketed its product as an improvement on LifeCell’s product;
  • exploited LifeCell’s reputation and Good will; and
  • induced several LifeCell employees to work for TELA by making negative statements about LifeCell.

The Third Circuit agreed with the District Court that the policy does not provide TELA with coverage under the libel and slander provision because LifeCell’s complaint in the underlying case does not implicate either tort. Under Pennsylvania law, the insurer has a duty to defend the insured only if the factual allegations of the complaint against the insured state a claim which would potentially fall within the coverage of the policy.

Libel and slander require defamatory statements which tend to harm a person’s reputation. Yet none of the allegations Appellants cite from LifeCell’s complaint are defamatory because they do not involve harm to LifeCell’s reputation. In fact, LifeCell’s complaint alleges that TELA sought to benefit from LifeCell’s good reputation. The Third Circuit concluded that the District Court rightly concluded that LifeCell’s allegations pertain to a business dispute over stolen employees and confidential trade secrets and, as a result, coverage under the libel and slander provision of the policy was not triggered.

The District Court also held that even if LifeCell’s allegations triggered coverage under the libel and slander provision, Federal still would have no duty to defend because the underlying suit falls under the intellectual property rights exclusion.

The Exclusion

As the Court noted, the broad language of this exclusion’s paragraph B states: “[T]his insurance does not apply to the entirety of all allegations in any claim or suit, if such claim or suit includes an allegation of or a reference to an infringement or violation of an intellectual property law or right, even if this insurance would otherwise apply to any part of the allegations in the claim or suit.” (emphasis added)

CONCLUSION

The expansive language just quoted clearly and unambiguously excludes from coverage all allegations within a suit, if that suit contains any allegations of intellectual property rights violations. This exclusion plainly applies to LifeCell’s suit, which asserts that TELA misappropriated its trade secrets and proprietary information.

ZALMA OPINION

Applying the law of Pennsylvania and reading the clear and unambiguous language of the exclusion and the failure of the underlying action to seek damages for defamation, there could be no coverage for the suit against TELA because it alleged intellectual property rights violations.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

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If You Want a Staff of Insurance Claims Professionals go to The Insurance Claims Library

Everything Needed by the Insurance Claims Professional

Every insurance claim requires that the representatives of the insurer deal fairly and in good faith with the insured. To do so each insurance claims person needs to provide the services promised by the policy of insurance. To do so each claims person must understand how insurance policies are interpreted by the courts in his or her jurisdiction, the meaning of each promise made by the policy, and have the ability to work with an insured with empathy and in good faith.

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

Construction defects and mold claims are covered below. More insurance related books by Barry Zalma are now available at http://zalma.com/blog/insurance-claims-library/

Construction Defects and Insurance

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

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

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

The Eight volumes include:


Mold Claims

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

Mold Claims Volume One: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.Written by nationally-renowned insurance coverage expert Barry Zalma, a semi-retired insurance coverage attorney, consultant, expert witness and blogger, Mold Claims provides in-depth explanations, analysis, examples, and detailed discussion of:

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

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

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

TMold Claims Volume Four: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.he author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.

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Insurance Fraud Takes Many Different Forms

Falsely Promising a Customer That a Shipment is Insured Is Criminal

Insurance fraud is usually a crime by an individual against an insurer. However, since insurance fraud seems to be ubiquitous, it can also be an insurance fraud act to promise to a customer that a shipment is insured when it is not.

In United States Of America v. Melinda J. Campbell (No. 17-5642); Elliot Campbell (No. 17-5973), No. 17-5642, No. 17-5973, United States Court Of Appeals For The Sixth Circuit (January 15, 2019) Justice Nalbandian, writing for a unanimous Sixth Circuit wrote: “When it comes to Melinda and Elliot Campbell—think Bonnie and Clyde. But rather than rob banks, the Campbells targeted the trucking industry.”

FACTS

The Campbells created fake shipping companies, persuaded third parties to hire them to deliver cargo, and then held the shipments as hostage until the third parties paid ransom for the deliveries. The government charged the Campbells with six counts of wire fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit extortion. After a five-day trial, a jury convicted the Campbells.

The Campbells operated various trucking companies in Kentucky. Bryan Napier worked for the Campbells as a dispatcher. This meant that Napier found cargo for the Campbells’ trucks to deliver from point A to point B. And then the Campbells (with Napier’s help) entered into contracts with various shipping companies to deliver the cargo.

But to induce the shippers to enter into these contracts, the Campbells made “false representations and/or promises” which they “never actually intended to comply [with].” For example, the Campbells agreed to meet certain conditions, such as providing proof of a trucking license, insurance, and tax forms; using several drivers to make deliveries within a specific time frame; and covering the cargo with a tarp. The Campbells also promised to deliver the cargo before getting paid. But once the shippers were duped, the Campbells failed to follow these conditions.

The government identified at least 69 victims who lost money under the Campbells’ scheme. The Campbells also instructed the drivers to “rejigger” loads. This meant that shippers would pay the Campbells extra to deliver cargo exclusively with no other cargo on the truck. But after agreeing to this condition, the Campbells instructed their drivers to comingle other cargo on the truck—and deliver the additional cargo first to “make it look like they had complied with that requirement.”

The Campbells prolonged their con by creating fake company names and fake employee names. The Campbells then used these fake names to falsify government forms and insurance documents.

The Campbells went to trial and tried to explain their conduct. The Campbells’ defense relied on the general rule that a trucking company retains a “carrier’s lien” on a shipment—which allows the carrier to keep the shipment until the customer pays. According to the Campbells, they lawfully refused to deliver cargo—under these default carrier’s liens—until their customers paid. And Napier and Elliot each testified that, if a dispute arose, he believed he had a legal right to withhold delivery.

In their contracts, the Campbells explicitly waived any carrier’s lien and promised to demand payment “within twenty days from the receipt [of cargo].” The district court found that “[a]s a result of these contractual terms, the default rules . . . no longer applied . . . [and] the Campbells had no legal right to demand payment from their customers up front.” Once the Campbells gave up their right to a carrier’s lien, it became unlawful for them to refuse to deliver cargo until their customers paid.

Melinda argued that these losses stemmed from an unrelated trucking accident (and insurance dispute)—and not from the fraudulent trucking scheme itself. The district court disagreed, explaining that “it is clear to the Court that insurance was part of the Campbells’ criminal activity and that these insurance losses—even if they resulted from an accident—were reasonably foreseeable, because one of the ways that the Campbells tricked customers into doing business with them was by claiming that they had insurance when they, in fact, did not.

The district court sentenced Elliot and Melinda to fifty-six months in prison.

ANALYSIS

Circumstantial evidence alone is sufficient to sustain a conviction and such evidence need not remove every reasonable hypothesis except that of guilt. Melinda cannot overcome this considerable burden.

The Hobbs Act makes it unlawful for anyone to conspire to “obstruct[], delay[], or affect[] commerce” by “robbery or extortion.” 18 U.S.C. § 1951(a). “Extortion” means “the obtaining of property from another, with his consent, induced by the wrongful use of actual or threatened force, violence, or fear.”  And “fear” includes the “fear of economic harm”—which means that “the victim believes that the defendant can exercise his or her power to the victim’s economic detriment.” United States v. Kelley, 461 F.3d 817, 826 (6th Cir. 2006). In sum, to convict Melinda for conspiracy to commit extortion, the government needed to prove that Melinda agreed to take money from the victims by wrongfully making them fear economic loss.

The Campbells knew that their conduct was unlawful, and Melinda joined the conspiracy. Sufficient evidence showed that she participated in the conspiracy. Melinda handled the financial information, paid drivers, and provided administrative support for the scheme. Melinda also filled out fraudulent forms, used fake names and aliases, opened bank accounts, and filed articles of incorporation for some of the fake companies. Indeed, testimony confirmed that “Melinda handled most of the finances and the paperwork” in the conspiracy.

The Campbells knew their conduct was unlawful.  The Campbells also lied about trucking insurance, the conditions of delivery, and why the deliveries were late.

When the crime charged is a conspiracy, the general rule is that a single agreement to commit several crimes constitutes one conspiracy. But where there are multiple agreements to commit separate crimes, then there are several conspiracies. The ultimate question is whether the evidence shows one agreement or more than one agreement.

The evidence established one overall agreement: Elliot used the internet to “search for loads for his drivers;” using one of the Campbells’ various fake companies, Elliot would arrange for a driver to deliver cargo’ 75 to 80 percent of the time, Elliot would provide the driver instructions to delay a delivery until payment was received. Meanwhile, Melinda was responsible for handling the financial and administrative aspects of the conspiracy. This included creating the fake names, paying the drivers, establishing bank accounts, and filing paperwork for the various aliases. None of this conduct was victim-specific.

The Campbells did not engage in a separate conspiracy for each trucking victim. Instead, the Campbells’ overall scheme to use fake companies and false promises to secure contracts and defraud shippers was one continual conspiracy.

The district court explained the connection between Melinda’s fraud and the insurance losses: “it is clear to the Court that insurance was part of the Campbell[s’] criminal activity. One of the ways that they tricked customers into doing business with them was by claiming that they had insurance when they, in fact, did not.” Thus, the Campbells knew (or should have known) “that since they did not have insurance the customer would have to pay for whatever the Campbells’ drivers damaged.”

In sum, the district court made specific factual findings (including causation) about Melinda and her loss amount.

The Campbells induced customers to contract with them by, among other things, claiming they had insurance. Yet they shipped goods in an uninsured truck, and when the goods became damaged, the customer became responsible for the damage.

ZALMA OPINION

The Campbells engaged in a unique form of insurance fraud – claiming the existence of insurance as a condition of a cartage contract – when there was no insurance and the shipper was stuck with the risk of loss to cargo hauled by unlicensed and incompetent truckers. Unlike Bonnie and Clyde they did not physically harm their victims but they seriously hurt them financially and deserved the long sentence imposed.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

 

 

 

 

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How to Create a Staff of Professional Insurance Claims Handlers

Everything Needed by the Insurance Claims Professional

Every insurance claim requires that the representatives of the insurer deal fairly and in good faith with the insured. To do so each insurance claims person needs to provide the services promised by the policy of insurance. To do so each claims person must understand how insurance policies are interpreted by the courts in his or her jurisdiction, the meaning of each promise made by the policy, and have the ability to work empathetically and in good faith with the insured.

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

Some of the books include:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

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

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

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

Zalma on Insurance Claims Volume 101

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

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

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

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

Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the ten volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law. As you read through the various volumes of Zalma on Insurance Claims, you will find comprehensive—yet comprehensible—coverage of key topics, including:

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

Zalma on Insurance Claims Part 102

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

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

Zalma on Insurance Claims Part 103

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

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

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

Zalma on Insurance Claims Part 104

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

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

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

Zalma on Insurance Claims Part 105

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

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

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

Zalma on Insurance Claims Part 106

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

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

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

Zalma on Insurance Claims Part 107:

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

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

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

Zalma on Insurance Claims Part 108

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

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

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

Zalma on Insurance Claims Part 109 

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

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

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

Zalma on Insurance Claims Part 110

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

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

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

AMAZON.COM

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Insurance is Essential Condition to a Lease

Summary Judgment for Landlord Appropriate

Almost, if not every, commercial lease contains a requirement that the tenant acquire insurance protecting the property and liability interests of the landlord. Failure to fulfill the condition breaches the lease and allows the landlord to evict the tentant.

In Copley Mini Mart, Inc. v. Copley Properties, LLC, C.A. No. 28942, 2019 Ohio 33, State Of Ohio County Of Summit In The Court Of Appeals Ninth Judicial District (January 9, 2019) Copley Mini Mart, Inc., appealed from the judgment of the Akron Municipal Court in favor of Copley Properties, LLC.

FACTUAL BACKGROUND

This case involves a commercial lease of a convenience store. Copley Mini Mart, Inc. (“Tenant”) entered into a five-year lease with Copley Properties, LLC (“Landlord”) that commenced on November 1, 2011 and terminated on October 31, 2016. The lease contained provisions regarding insurance coverage, among others.

Tenant and Landlord had a discussion regarding renewing the lease. After this conversation, Tenant made improvements to the premises and hired a consultant to conduct a local-option election campaign to sell beer and wine at the store. Tenant sent a written notice of its intent to renew the lease to Landlord and a week later, Landlord refused Tenant’s request to renew the lease because it was untimely.

Landlord advised the Tenant that it was in n default of the lease due to alleged deficiencies with the insurance coverage it maintained for the premises and that the lease would expire on a date certain and requested assurances from Tenant that it would vacate the premises by that date. Tenant refused to vacate the premises.

Six weeks prior to the lease expiring, Tenant filed a complaint for declaratory judgment as to the parties’ rights and obligations under the lease and the option to renew. Landlord filed a counterclaim also seeking declaratory judgment as to the parties’ rights and obligations under the lease and the option to renew, in addition to claims for forcible entry and detainer and money damages. Tenant amended its complaint to add a claim for intentional interference with its business.

The trial court granted summary judgment in favor of Landlord and a judgment for a writ of restitution. The next day Landlord evicted Tenant and repossessed the premises pursuant to the self-help provision in the lease by installing new locks and a new security system at the premises.

MOTION TO DISMISS

In a commercial lease, a landlord can evict a tenant by judicial process or pursuant to a self-help provision contained in a lease that waives judicial process. In this case, Landlord proceeded with an eviction via judicial process by filing a counterclaim and obtaining a judgment for forcible entry and detainer, but then promptly exercised the self-help provision in the lease to evict Tenant.  Tenant was not evicted by judicial process because the court did not issue an actual writ of restitution. Because Tenant was not evicted by judicial process, all of Tenant’s arguments premised upon the trial court granting Landlord a judgment for a writ of restitution are moot.

Summary judgment is proper when:

  1. no genuine issue as to any material fact exists;
  2. the party moving for summary judgment is entitled to judgment as a matter of law; and
  3. viewing the evidence most strongly in favor of the nonmoving party, reasonable minds can only reach one conclusion, and that conclusion is adverse to the nonmoving party.

Summary judgment consists of a burden-shifting framework. The movant bears the initial burden of demonstrating the absence of genuine issues of material fact concerning the essential elements of the nonmoving party’s case.  Once the moving party satisfies this burden, the nonmoving party has a “reciprocal burden” to set forth specific facts showing that there is a genuine issue for trial.

In this case the parties sought summary judgment as to their declaratory judgment claims regarding the parties’ rights and obligations under the lease relative to the option to renew the lease. Landlord argued that Tenant was not entitled to exercise the option to renew the lease because Tenant failed to comply with the conditions and requirements of the lease; namely, Tenant failed to maintain insurance coverage naming Landlord as an insured and Tenant operated illegal gambling machines on the premises.

In its combined response to Landlord’s motion for summary judgment and in support of its own summary judgment motion, Tenant presented only one argument: that Landlord had waived the lease provision requiring written notice of renewal and was equitably estopped from refusing Tenant’s notice of renewal of the lease. Tenant presented an affidavit from Mr. Singh, the owner of Copley Mini Mart, Inc., which averred that “[Landlord] has at all times been insured by [Tenant] pursuant to the lease.” This averment, however, contradicts, without explanation, Mr. Singh’s deposition testimony, wherein he conceded that the May 2016 insurance policy did not list Landlord as an insured and Landlord was not added to the policy until six months later, which was after the lease expired. An affidavit of a party opposing summary judgment that contradicts former deposition testimony of that party may not create a genuine issue of material fact to defeat the motion for summary judgment.

Tenant failed to meet its reciprocal burden to present evidence creating a genuine issue of material fact regarding the lease violations. The trial court applied the doctrine of equitable relief and declared Tenant’s four-month written notice sufficient and thus timely.

Tenant contended that equitable considerations precluded the forfeiture of the lease. Tenant argued and the trial court applied the principals of equity to declare that Tenant complied with the written notice requirement of the option to renew. On appeal, Tenant attempts to extend the equity argument to also excuse its violations of various lease terms. Since, Tenant did not make this argument to the trial court, the appellate Court properly declined to address this equity argument for the first time.

The trial court also found that Tenant failed to maintain insurance coverage in accordance with the terms of the lease and conducted unlawful activities on the premises. As to the insurance policy, Tenant on appeal states that it “did attest that it had maintained insurance on the property” and refers to the affidavit of Mr. Singh. The affidavit of Mr. Singh did not create a genuine issue of material fact as to whether there was a lease violation arising from the insurance provision. Summary judgment in favor of Landlord was appropriate on this basis.

ZALMA OPINION

When the Tenant lied – either in an affidavit or in his deposition – about the acquisition of the insurance and naming the landlord as an insured, he raised the ire of the court and defeated the impact of his affidavit. Providing insurance in the name of the landlord was a condition precedent to the lease agreement. Failure to provide the insurance, alone was sufficient to void the lease and allow the eviction under its terms. Insurance is one of the most important conditions of a lease and failure to provide it – along with other breaches – made the eviction automatic.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

 

 

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How an Insurer Can Provide Good Faith & Fair Dealing to All Insureds

Insurance is a Service Business

Every insurance claim requires that the representatives of the insurer deal fairly and in good faith with the insured. To do so each insurance claims person needs to provide the services promised by the policy of insurance. To do so each claims person must understand how insurance policies are interpreted by the courts in his or her jurisdiction, the meaning of each promise made by the policy, and have the ability to work empathetically and in good faith with the insured.

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

Some of the books include:

New Books from Full Court Press

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

Barry Zalma practiced law in California for more than 44 years as an insurance coverage and claims-handling lawyer, and has spent more than 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

Zalma on Property and Casualty Insurance

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

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

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

Insurance Law Deskbook Zalma

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

CalifCal Lawornia Insurance Law Deskbook

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

 

Insurance Bad Faith and Punitive Damages Deskbook

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

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

All available at fastcase.com.


Books from ClaimSchool, Inc.

“Insurance Law”

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

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

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

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

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

Mold Claims Coverage Guide

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

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

Construction Defects Coverage Guide

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

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

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

Insurance Claims: A Comprehensive Guide

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

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

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


Books from the American Bar Association

The Commercial Property Insurance Policy Deskbook

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

By Barry Zalma

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

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

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

The Insurance Fraud Deskbook

Author: Barry Zalma

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

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

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

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

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

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

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

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

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

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

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

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


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

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

© 2019 – Barry Zalma

This blog posts and ZIFL is written by Barry Zalma, Esq., CFE, who 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.


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Zalma’s Insurance Fraud Letter – January 15, 2019

  Zalma’s Insurance Fraud Letter  

Fraud About Need for Health Insurance Results in Wire Fraud Conviction

Zalma’s Insurance Fraud Letter, Volume 23, No. 2

Fraud About Need for Health Insurance Results in Wire Fraud Conviction
In United States of America v. William D. Corrigan, No. 17-3642, United States Court of Appeals for the Seventh Circuit (January 3, 2019), following a bench trial, defendant William D. Corrigan (“Corrigan”) was found guilty of four counts of wire fraud in violation of 18 U.S.C. § 1343. Corrigan appeals his conviction, arguing that the indictment failed to properly set out a scheme for wire fraud, and the evidence at trial was insufficient to sustain a conviction. Corrigan also contends that the district court erred when it ordered restitution in the full amount of the investments.
BACKGROUND
Corrigan served as the President and Chief Executive Officer of Embedded Control Systems (“ECS”), a company that developed a process for replacing copper wiring in airplanes with fiber optics. Beginning in 2007, ECS began soliciting capital from various investment groups. Among the investors were Jason Neilitz who purchased $125,000 worth of ECS stock, and Rawah Partners which purchased $350,000 worth of stock.
By June 2008, Corrigan had negotiated a prospective sale of ECS to a third party. However, due to the worldwide financial downturn the sale fell through. Shortly thereafter, through a Board resolution, ECS authorized Corrigan to manage ECS in whatever capacity he saw fit. At the same time, Corrigan was negotiating a sale to another third party when ECS began to suffer from cash flow problems.
ECS had difficulty paying its expenses and its officers’ compensation. It closed its bank account with Chase Bank because it was frequently overdrawn, and opened a new account with LaSalle Bank.
By March 2009, Corrigan had begun soliciting Jason Neilitz and Rawah Partners for additional investments announcing that ECS was close to closing a sale but needed additional funds to cover ECS’s healthcare insurance premiums. On March 22, 2009, and again on April 22, 2009, Corrigan emailed Jason Neilitz stating that the company was close to being dropped by its health insurance provider and that such a result would be “catastrophic” to its employees and the pending sale. Based on Corrigan’s representations, Neilitz agreed to purchase an additional $50,000 worth of ECS stock. Per Corrigan’s instructions Neilitz wired $50,000 to the specified account which, unbeknownst to Neilitz, was Corrigan’s personal account.
In March 2009, Rawah Partners purchased an additional $50,000 worth of ECS stock. Per Corrigan’s instructions, Rawah Partners wired $50,000 to the specified account, which unbeknownst to Rawah Partners, was Corrigan’s personal account. In April 2009, Rawah Partners purchased an additional $10,000 worth of ECS stock.
After Corrigan received the funds at the end of March 2009, he began to spend the money on myriad expenses, unrelated to ECS’s legitimate expenses. For example, Corrigan: wired money to his girlfriend and her translator; wired money to Flight Test Labs, an associate’s company which did not do any work for ECS; retained an immigration attorney; took vacations; subscribed to dating websites; and covered moving expenses. Corrigan also withdrew $30,000 in cash.
Ultimately, Corrigan was terminated from ECS on July 2, 2011, after ECS’s Chief Financial Officer discovered Corrigan had received investor money in his personal account and made no record of the payments.

INDICTMENT AND TRIAL
On November 20, 2013, Corrigan was indicted on four counts of wire fraud, in violation of 18 U.S.C. § 1343. The indictment alleged that Corrigan orchestrated a scheme to defraud ECS’s investors by providing them false statements and material misinformation. On December 15, 2015, the case proceeded to a bench trial. At trial the government proved that Corrigan solicited funds from Neilitz and Rawah Partners based on false statements about the status of the company and the need for the funds, and that once he secured the funds, he used them for non-business related expenses and continued to provide the investors with false and misleading information about the usage of the funds.
The district court concluded that Corrigan “engaged in a scheme to defraud Neilitz and Rawah Partners by making false statements and material misrepresentations and by concealing material facts. [Corrigan’s] scheme was to obtain additional money from Neilitz and Rawah Partners by falsely representing that the money was needed to pay for and would be used to pay for health insurance premiums for ECS employees.” United States v. Corrigan, No. 1:13-cr-915, 2016 WL 4945013, at *13 (N.D. Ill. Sept. 15, 2016).
Corrigan was sentenced to a below Guidelines sentence of 144 days (time served) and ordered to pay restitution in the full amount of Neilitz’s and Rawah Partners’ investments-$110,000.

 Read the entire article and the rest of ZIFL here. 


 The Current Issue Contains the Following  

  • Fraud About Need for Health Insurance Results in Wire Fraud Conviction
  • Death Master File Investigation Leads to Nearly $10 Billion Paid to Beneficiaries
  • OIG Report to Congress- 2018k
  • Supreme Court Denies Review of Decision Upholding California Insurance Commissioner’s Fair Claims Settlement Practices Regulations
  • Good News From the Coalition Against Insurance Fraud
  • Health Insurance Fraud Convictions
  • Other Insurance Fraud Convictions
  • New York’s 9 Worst Insurance Fraudsters of 2018
  • Love is Not Enough to Save Murderer from Jail
  • Books from Barry Zalma – All Available at the Insurance Claims Library
  • New From Barry Zalma, Zalma on Property and Casualty Insurance and four volumes of Commentary on Insurance Law

Books

THE “ZALMA ON INSURANCE” BLOG 

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

 

 Zalma’s Insurance 101

I have completed a video blog calledZalma’s Insurance 101 that consists of 1022 three to four minute videos starting with “What is Insurance” and moving forward to insurance fraud investigations explaining the basics of insurance and insurance claims handling in a painless fashion that can be viewed every morning with the first cup of coffee at  Zalma’s Insurance 101.
If you start at Volume 1 at the bottom of the blog’s first page and view one or two videos a day you will have approximately 12 to 24 hours of training a year until you get to the last video.
The videoblog is adapted from my book, Insurance Claims: A Comprehensive Guide available at the Zalma Insurance Claims Library

Barry Zalma, Inc.

 


© 2019 – Barry Zalma

This blog posts and ZIFL is written by Barry Zalma, Esq., CFE, who 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.



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How to Create a Staff of Insurance Claims Professionals

Everything Needed by the Insurance Claims Professional

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

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

New Books from Full Court Press

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

Barry Zalma practiced law in California for more than 44 years as an insurance coverage and claims-handling lawyer, and has spent more than 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

Zalma on Property and Casualty Insurance:

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

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

Insurance Law Deskbook:

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

CalifCal Lawornia Insurance Law Deskbook:

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

Insurance Bad Faith and Punitive Damages Deskbook:

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

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

All available at fastcase.com.

Fictionalized True Insurance Crime Books

“HEADS I WIN, TAILS YOU LOSE”

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

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

Available as a Kindle Book.

Available as a paperback.

“Candy and Abel: Murder for Insurance Money

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

Product DetailsAvailable as a Kindle Book.

Available as a paperback.

 

“Murder And Insurance Fraud Don’t Mix”

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

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

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

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

Available as a Kindle book.

Available as a paperback

“Murder & Old Lace: Solving Murders Performed for Insurance Money”

 

Product Details

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

Available as a Kindle book.

Available as a paperback.

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

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

Available as paperback.

Available as a Kindle Book.

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

 

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

Available as a paperback.

Available as a Kindle book.

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

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Purchase of Insurance is a Waiver of Sovereign Immunity

Ambiguous Policy Wording Construed Against the Drafter

Cities, and other governmental entities are protected by the doctrine of sovereign immunity from suits for its negligence unless it actually waives the immunity. One way a city can waive its sovereign immunity by purchasing insurance that covers the obligation up to the limits of the policy.

In Joan A. Meinck v. City Of Gastonia, a North Carolina Municipal Corporation, No. COA16-892-2, Court Of Appeals Of North Carolina (January 2, 2019) because the Court of Appeals was called upon by the North Carolina Supreme Court to address whether the trial court correctly ruled that defendant did not waive governmental immunity by purchasing liability insurance.

BACKGROUND

The Defendant City of Gastonia is a local body politic, chartered as a public municipal corporation by the General Assembly in 1877. The City and surrounding Gaston County are named for the Honorable William Joseph Gaston, a former Justice of the Supreme Court of North Carolina, who also served as a United States Congressman.

The City acquired and owns an historic commercial building in Gastonia. In 2013, Defendant leased the building to the Gaston County Art Guild (“the Art Guild”) which is a private not-for-profit entity. As owner, Defendant remained responsible under the lease for maintaining the exterior of the premises and the right to inspect the building at any time.

The Art Guild utilized and subleased the building to attract artists’ studios, and for use as an art gallery and gift shop. The lease agreement provided the Art Guild was empowered to sublease portions of the building to subtenants to use as art studios. Joan Meinck (“Plaintiff”) was one such artist and a subtenant.

In 2013 Plaintiff was leaving through the rear exterior exit of the subject building while carrying several large pictures. She lost her balance while on a set of steps and fell. As a result of her fall, Plaintiff suffered a broken hip, required hospitalization, and incurred medical expenses. Portions of the cement on the steps had allegedly cracked and eroded. The large pictures she was carrying may have prevented her from seeing where she was stepping.

Plaintiff sued in 2015 alleging Defendant had negligently failed to maintain the exit stairs of the building or to warn her of the dangerous condition of the steps and stairs. Plaintiff’s complaint alleged Defendant had waived governmental immunity by purchasing liability insurance.

Defendant filed a motion for summary judgment asserting that the City was entitled to governmental immunity, that Defendant was not negligent as a matter of law, and that Plaintiff was contributorily negligent as a matter of law. The trial court determined that Defendant’s liability insurance policy “contained an express non-waiver provision” and that Defendant had not waived governmental immunity. The trial court also determined Defendant was engaged in a governmental function, was entitled to governmental immunity, and granted summary judgment to Defendant on that basis.

EARLIER OPINION

In the Court’s unanimous prior opinion it held Defendant was engaged in a proprietary function and, as such, was not entitled to governmental immunity. It also held Defendant was not entitled to summary judgment on the issue of Plaintiff’s contributory negligence. Because it concluded Defendant was engaged in a proprietary function, it did not further address Plaintiff’s argument that the City’s non-waiver provision in its liability insurance contract did not preserve the City’s sovereign or governmental immunity.

The North Carolina Supreme Court reviewed the Court of Appeals’ decision and held “the trial court correctly determined that defendant was engaged in a governmental function[.]” The Supreme Court remanded the issue of “whether the trial court correctly ruled that defendant did not waive governmental immunity by purchasing liability insurance” to the Court of Appeals.

ANALYSIS

Under the doctrine of governmental immunity, a county or municipal corporation is immune from suit for the negligence of its employees in the exercise of governmental functions absent waiver of immunity. A municipality may, however, waive its governmental immunity to the extent it has purchased liability insurance. A governmental entity does not waive sovereign immunity if the action brought against them is excluded from coverage under their insurance policy.

INTERPRETATION OF INSURANCE POLICIES

When interpreting provisions of an insurance policy, provisions that extend coverage are to be construed liberally to provide coverage, whenever possible by reasonable construction.  If the language in an exclusionary clause contained in a policy is ambiguous, the clause is to be strictly construed in favor of coverage.

As a general rule, ambiguities in insurance policies are to be strictly construed against the drafter, the insurance company, and in favor of the insured and coverage since the insurance company prepared the policy and chose the language.

THE CITY’S INSURANCE POLICY

Defendant’s general liability insurance policy expressly provides for coverage up to a limit of $1,000,000 for “bodily injury.” The coverage provisions of Defendant’s general liability policy unambiguously provide coverage to Defendant for the bodily injuries sustained by Plaintiff.

In support of its motion for summary judgment, Defendant submitted the affidavit of Gastonia’s City Manager, Edward C. Munn. Munn’s affidavit referenced an endorsement of exclusion of coverage provided by Defendant’s general liability insurance policy, entitled “Sovereign Immunity and Damages Caps”. The endorsement states:

Sovereign Immunity and Damages Caps

For any amount for which the Insured would not be liable under applicable governmental or sovereign immunity but for the existence of this Policy; the issuance of this insurance shall not be deemed a waiver of any statutory immunities by or on behalf of any insured, nor of any statutory limits on the monetary amount of liability applicable to any Insured were this Policy not in effect; and as respects to any “claim”, we expressly reserve any and all rights to deny liability by reason of such immunity, and to assert the limitations as to the amount of liability as might be provided by law. (Emphasis supplied)

The City contends the quoted endorsement “clearly and unambiguously retains Gastonia’s governmental immunity.” The City does not dispute that it has purchased general liability insurance or that its general liability policy would otherwise provide coverage for claims attributable to Plaintiff’s injuries, but for the exclusionary language of the endorsement.

Analyzing the endorsement the Court of Appeal noted that the emphasized language of the first clause is ambiguous because it is ungrammatical and does not clearly convey whether governmental immunity is waived under the policy. The endorsement is not a complete sentence or clause and does not convey any clear meaning on its own. Unlike this provision other numbered endorsement provisions all begin with complete, grammatical sentences.

Under the common law doctrine of governmental immunity, a municipality is immune from liability for the torts of its officers committed while they were performing a governmental function.

With the ambiguous language in the endorsement, the Court of Appeal must “strictly construe” the insurance policy Defendant purchased as providing coverage for claims which clearly stated provisions preserving governmental immunity would otherwise bar.

With the purchase of liability insurance coverage, Defendant waived governmental immunity up to the amount of its general liability policy limits of $1,000,000. The ambiguous exclusionary endorsement, strictly construed in favor of coverage and against the drafter, does not exclude the express coverage the City obtained when it purchased the liability insurance policy. Furthermore, the unambiguous provisions of the City’s general liability policy clearly provides coverage for “bodily injury” up to a limit of $1,000,000.

The trial court’s grant of summary judgment to Defendant, partly on the basis the City did not waive governmental immunity by purchasing liability insurance through the exclusionary provision, is reversed.

ZALMA OPINION

Writing a clear and unambiguous policy provision is the most difficult thing an insurer does. In this case the insurer and the City failed to write a clear and unambiguous policy provision. The Court of Appeal actually rewrote the provision to show how it could be written to be enforceable. The City and the insurer – if it wishes to maintain sovereign immunity – should adopt the court’s wording and amend the policy by endorsement immediately or the City could cancel the policy and have no insurance acting as a waiver.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

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How to Create A Staff of Insurance Claims Professionals

The Insurance Claims Library

Today there are more insurance jobs available than competent people to fill the jobs. The only solution to a need for competent and professional claims personnel is to train those you can hire even if they are just graduates of two-year colleges, humanities majors at a four year college who can’t even define the word “insurance,” veterans, including disabled veterans, and people who have been out of the workplace for years.  Barry Zalma’s Insurance Claims Library will make the training possible and help an insurer create a staff of insurance claims professionals.

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

Barry Zalma can provide claims training in person or by video.

Some of the books that can help an insurer make its current claims personnel and new hires to become professional claims handlers.

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Ethics for the Insurance Professional

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

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

Available as a paperback.

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.

“The Insurance Examination Under Oath”

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

Available as a Kindle book.

Available as a paperback.

“Random Thoughts on Insurance”

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

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

Check http://www.zalma.com

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Love is Not Enough to Save Murderer from Jail

Avoiding Insurance Fraud Conviction Leads to Paramour’s Conviction for Murderer

The mother of Orlandous Tyrone Jackett’s (Jackett) children, fearing prosecution for insurance fraud for the arson-for-profit scheme to destroy a vehicle he used while committing a murder, testified in his murder trial after getting immunity from the insurance fraud charge in The People v. Orlandous Tyrone Jackett, D071898, Court Of Appeal, Fourth Appellate District Division One State Of California (January 9, 2019).

As a result a jury convicted Jackett and an attached gang enhancement allegation and that he had personally discharged a firearm causing great bodily injury and death.  Jackett later admitted one strike prior conviction, one serious felony prior conviction, and three prison prior convictions. He also admitted that he was released on bail when he committed the murder. The trial court sentenced him to an indeterminate term of nine years plus 75 years to life in prison and a determinate term of 16 years four months in prison.

Jackett appealed.

GENERAL FACTUAL BACKGROUND

Jackett was a member of the Neighborhood Crips criminal street gang. In January 2013 Jackett’s car was set on fire. A rival gang took credit for burning Jackett’s car. Jackett’s gang criticized him for not retaliating. Jackett saw the victim, a pedestrian, wearing clothes in the rival gang colors and a baseball cap embroidered with what appeared to be a gang moniker. Jackett fired multiple gunshots at the victim from his car, killing him.

Margie told police that Jackett admitted to her that he had killed the victim. Margie testified that she asked for the Range Rover to be burned and that she did so for the insurance money.

DISCUSSION

Jackett notes that at the preliminary hearing, and at trial, Margie testified under a grant of immunity. He contends the trial court erred in failing to sua sponte instruct the jury with that portion of CALCRIM No. 226 that would have permitted the jury to take the grant of immunity into consideration when evaluating Margie’s testimony. Jackett contends this error was prejudicial because his entire defense was centered around discrediting Margie’s testimony. He claims that the prosecutor’s closing argument exacerbated the error because he repeatedly cited Margie’s testimony admitting her role in burning the Range Rover for insurance proceeds as proof of her candor, while concealing the fact that Margie received full immunity for that crime.

Witnesses may not be compelled to incriminate themselves. A trial court must permit a witness to exercise his or her Fifth Amendment privilege if there is any possibility the witness’s testimony could serve as a link in a chain of evidence tending to establish guilt of a crime. When a court determines that a witness has a valid Fifth Amendment right not to testify, it may not require the witness to invoke that privilege in front of a jury.

Under the California immunity statute, a witness who invokes the Fifth Amendment privilege against self-incrimination can be compelled to testify if, upon the prosecutor’s request, the court grants the witness immunity from prosecution based on the compelled testimony. The prosecutor is statutorily authorized to request a judicial order mandating that a witness provide answers on topics that witness has characterized as self-incriminating, so long as “no testimony or other information compelled under the order or any information directly or indirectly derived from the testimony or other information may be used against the witness in any criminal case.

After Margie invoked her Fifth Amendment right the trial court concluded that it was appropriate to instruct the jury that Margie was testifying under a grant of immunity, and the court stated it would allow defense counsel to raise this issue. Defense counsel, satisfied with the court’s tentative ruling, asked the court for “parameters on what I can talk about.”

Despite being given permission to elicit evidence that Margie was testifying under a grant of immunity, defense counsel never asked Margie any questions about immunity. Neither counsel questioned Margie about immunity, and the jury never heard the word “immunity” mentioned during trial. The record does not support Jackett’s contention that the trial court erroneously “concealed” Margie’s grant of immunity from the jury.

Because there was no evidence before the jury regarding any witness with immunity, the trial court had no sua sponte duty to instruct on immunity.

Jackett claims that the prosecutor committed misconduct during closing argument by asserting that Margie’s admission to arson of the Range Rover with the intent to defraud an insurance company was an act of courage that provided independent proof of her fealty to the oath she took to testify truthfully. He contends that the prosecutor’s argument was deceptive and indisputably false because Margie’s admission to this crime was made under a grant of immunity requested by the prosecution, with no potential consequences to Margie. As Jackett recognizes, a claim of prosecutorial misconduct cannot be raised on appeal without a timely objection and request for admonition.

Defense counsel may have made the reasonable tactical choice to not call attention to the prosecutor’s remarks, especially since the jurors had been instructed that they alone, must judge the credibility or believability of the witnesses. Moreover, even if defense counsel had objected, the court could discern no reasonable probability that it would have resulted in an outcome more favorable to Jackett. Margie loved Jackett and did not want to testify against him. Her testimony regarding who burned the Range Rover was a collateral matter with the jury hearing two differing versions from Margie. With regard to the murder, however, Margie told the police that Jackett admitted to her that he had killed the victim. While Margie did not repeat that claim during trial, cellular telephone records placed Jackett near the murder scene and revealed that he telephoned Margie from that area almost immediately after the murder.

DISPOSITION

The judgment of conviction was affirmed.. If appropriate following exercise of that discretion, the trial court is to resentence defendant accordingly and amend the abstract of judgment and the minute order of the sentencing hearing.

ZALMA OPINION

Although love usually conquers all it does not always cause one to go to jail for love. Margie faced five years in jail for arson and insurance fraud.  Jackett was an admitted murderer and oft convicted felon who faced overwhelming evidence at trial. When offered immunity from the arson and insurance fraud charge in exchange for testimony against Jackett Margie took the immunity and Jackett, an evil, murderous gang member and professional criminal will spend a great deal of time in jail.

 


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

 

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Hire Military Vets and Train Them

Insurance Professionals are Hard to Find

Today there are more insurance jobs available than competent people to fill the jobs. The only solution to a need for competent and professional claims personnel is to train those you can hire even if they are just graduates of two-year colleges or humanities majors at a four year college who can’t even define the word “insurance.” Barry Zalma’s Insurance Claims Library will make the training possible and help an insurer create a staff of insurance claims professionals.

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

 

“Insurance Fraud & Weapons to Defeat Insurance Fraud”

In Two Volumes

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

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do

so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

The Compact Book of Adjusting Property Insurance Claims

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

Available as a Kindle book.

Available as a paperback.

“The Compact Book on Adjusting Liability Claims”

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.

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The Telephone Consumer Protection Act (TCPA) Exclusion

Insurance Company Has the Right to Enforce a Clear and Unambiguous Exclusion

The Telephone Consumer Protection Act (TCPA) exposes a person or entity to excessive damages from every person with whom a communication was sent without the consumer’s consent. Insurers are loathe to insure the risk of a TCPA class action or direct action series of suits. As a result the risk of a TCPA suit is often excluded from business owners policies, E&O and D&O policies and commercial general liability policies.

In American Family Mutual Insurance Company v. Vein Centers for Excellence, Inc., St. Louis Heart Center, Inc., No. 17-3266, United States Court of Appeals For the Eighth Circuit (January 3, 2019) American Family Mutual Insurance Company (“American Family”) sought declaratory judgment against its insured, Vein Centers for Excellence, Inc. (“Vein Centers”), disputing American Family’s duty under certain policies to defend and indemnify Vein Centers in a class action lawsuit.  St. Louis Heart Center, Inc. (“St. Louis Heart”) was the class representative in the underlying suit against Vein Centers and was later joined as a defendant in the declaratory action.

The district court concluded American Family’s insurance policies did not cover the claims against Vein Centers in the class action lawsuit and awarded summary judgment in favor of American Family.

BACKGROUND

In 2011, St. Louis Heart sued Vein Centers for itself and others similarly situated, for sending unsolicited advertisements via facsimile to multiple recipients, alleging a violation of the Telephone Consumer Protection Act (“TCPA”). The district court granted St. Louis Heart’s motion for class certification on December 11, 2013.

The issue presented to the Eighth Circuit was whether the insurance policies of Vein Centers obligated its insurance provider, American Family, to defend and indemnify the lawsuit.

Vein Centers tendered the lawsuit to American Family for defense and indemnification under two insurance policies: a Businessowners Policy and a Commercial Liability Umbrella Policy. American Family agreed to provide a defense to Vein Centers subject to a full reservation of rights.

Both policies contained an exclusion for the “Distribution of Material in Violation of Statutes.” Under the Businessowners Policy, the relevant portion of this exclusion barred coverage for damage arising directly or indirectly out of any action or omission that violates or is alleged to violate The TCPA, including any amendment of or addition to such law.

The parties filed cross-motions for summary judgment. American Family argued that neither the Business nor Umbrella policies provided coverage for the TCPA claim in part because both explicitly excluded coverage for violations of the TCPA. St. Louis Heart conceded the TCPA exclusion was enforceable under the Umbrella Policy. However, St. Louis Heart contended the exclusion in the Businessowners Policy never took effect because American Family failed to properly notify Vein Centers of the provision’s addition when the policy was renewed. On this basis, St. Louis Heart argued Missouri law dictated it was entitled to indemnification under the Businessowners Policy.

DISCUSSION

Subject Matter Jurisdiction

St. Louis Heart first argued the district court lacked subject matter jurisdiction under 28 U.S.C. § 1332 because the $75,000 amount-in-controversy requirement was not met.

Typically, complaints need only allege the jurisdictional amount in good faith and will be dismissed only if it appears to a legal certainty that the claim is really for less than the jurisdictional amount

In a declaratory judgment action where an insurer sues an insured to determine its obligation to defend and indemnify, the amount in controversy ordinarily equals the probable costs of defense and indemnification of the underlying litigation less any applicable deductible. An adverse judgment against Vein Centers would have entitled St. Louis Heart to an award far exceeding the threshold, as evidenced by St. Louis Heart’s motion for summary judgement requesting $17,605,500 plus prejudgment interest. American Family’s insurance policies created the potential for a single indemnity obligation to Vein Centers in the millions of dollars. While the coverage limit is not the measure of the amount in controversy, the indemnification amount is, and in this case that amount clearly exceeds the jurisdictional threshold. And that is to say nothing of the costs of defending the underlying action, which would have likely exceeded $75,000.

The anti-aggregation rule does not apply to a federal declaratory-judgment action between a single plaintiff and a single defendant, just because the unitary controversy between these parties reflects the sum of many smaller controversies. Subject matter jurisdiction over this action was, therefore, proper.

Receipt of Notice of Exclusion

The Eighth Circuit concluded that American Family is entitled to the presumption that Vein Centers received notice of the policy exclusion. To establish compliance with the notice requirements under Missouri law, American Family offered the deposition testimony of Ms. Deborah Woodcock, one of its corporate representatives. Ms. Woodcock testified that American Family mailed a Coverage Summary Letter (“CSL”) to Vein Centers more than sixty days prior to the Businessowners Policy renewal date. Ms. Woodcock further testified that it was American Family’s standard business practice to include with the CSL a Policyholder Communication (“PLC”), which is a notification of changes made to an insured’s policy.

The presumption of a letter’s receipt is not unassailable. When a purported sender presents evidence that a letter was mailed, the presumption of receipt may be rebutted by evidence it was not, in fact, received. St. Louis Heart failed to submit any evidence which would indicate Vein Centers did not, in fact, receive the CSL and PLC.

Missouri law does not require direct proof or personal knowledge of mailing; only evidence of the settled custom and usage of the sender in the regular and systematic transaction of its business.  Speculation that American Family’s normal business procedures were not followed is not the same as affirmative evidence that Vein Centers did not receive the documents.

Summary judgment in favor of American Family was proper because St. Louis Heart has not provided any evidence that adequate notice of the exclusion was not provided to Vein Centers.

ZALMA OPINION

American Family presented evidence the the addition of the TPCA exclusion was delivered to its insured and was clear and unambiguous. The proof was sufficient, as a matter of law, to establish notice and that the clear and unambiguous language of the TPCA exclusion had to be applied.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

 

 

 

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How to Overcome the Tight Employment Market by Training Your Personnel

Insurance Professionals are Hard to Find

Today there are more insurance jobs available than competent people to fill the jobs. The only solution to a need for competent and professional claims personnel is to train those you can hire even if they are just graduates of two-year colleges or humanities majors at a four year college who can’t even define the word “insurance.” Barry Zalma’s Insurance Claims Library will make the training possible and help an insurer create a staff of insurance claims professionals.

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

Construction Defects and Insurance

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

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

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

The Eight volumes include:


Mold Claims

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

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

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

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

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

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

TMold Claims Volume Four: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.he author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.


Time to Rescind the Tort of Bad Faith

Insurance and the Law of Unintended Consequences Paperback 

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

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

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

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

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

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Insurers Should Never Rely on Prosecutors to Defeat a Fraudulent Claim

Lawyers Accused of  Invasion of Privacy During Claims Investigation

When investigating a potential arson for profit an insurance company lawyer will always, reasonably, ask for financial documents from the suspected insured to eliminate a poor financial situation as a motive to commit arson. In California the insurer is obligated to advise the insured that tax returns are privileged and need not be produced although the failure may make it difficult, if not impossible, to prove their loss.

In Dennis Strawn et al. v. Morris, Polich & Purdy, LLP et al., A150562, Court Of Appeal Of The State Of California First Appellate District Division Two (January 4, 2019) the Strawns’ home and pickup, which were insured by State Farm were “damaged and destroyed” by fire. They immediately notified State Farm. Dennis Strawn was prosecuted for arson, but the case was dismissed in four years later. After the dismissal State Farm denied the claim and the Strawns sued State Farm and Douglas K. Wood, the attorney who represented State Farm, and Morris Polich & Purdy, LLP (MPP), the law firm in which Wood was a partner. The trial court dismissed the claims against the attorneys.

BACKGROUND

The first three causes of action, although alleged only against State Farm, set the stage for appellants’ claims against the lawyers. In the fourth cause of action, for invasion of privacy, appellants alleged that Wood, as representative for State Farm, repeatedly demanded that appellants produce financial records, including tax returns; that appellants were aware that tax returns are privileged against disclosure and refused to waive the privilege; that appellants authorized their accountant to provide to Wood and State Farm financial records that were used to prepare the tax returns, but not the actual tax returns; that the accountant’s office mistakenly provided the returns along with the other financial information; and that Wood, despite having been expressly informed that appellants were not waiving privilege, failed to advise appellants of the error and sent the returns to State Farm and the forensic accounting firm it hired, which used information from the returns in the analysis it provided to State Farm. Appellants alleged that in “publishing” the tax returns to “third parties,” including State Farm employees, Wood and MPP violated their right to privacy under article 1, section 1, of the California Constitution.

Respondents filed a demurrer and the trial court sustained the demurrer without leave to amend and dismissed the complaint as to Wood and MPP.

DISCUSSION

The trial court sustained the demurrer to the invasion of privacy claim on the ground that it was barred by the litigation privilege. With the “principal purpose” of affording litigants and witnesses “the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions,” the privilege “applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” (Silberg v. Anderson (1990) 50 Cal.3d 205, 212-213.)

A prelitigation communication is privileged only when it relates to litigation that is contemplated in good faith and under serious consideration. Whether a prelitigation communication relates to litigation that is contemplated in good faith and under serious consideration is an issue of fact. Because the privilege does not attach prior to the actual filing of a lawsuit unless and until litigation is seriously proposed in good faith for the purpose of resolving the dispute, even a threat to commence litigation will be insufficient to trigger application of the privilege if it is actually made as a means of inducing settlement of a claim, and not in good faith contemplation of a lawsuit.  The communication and subsequent use of the information by the accountants occurred during State Farm’s investigation and processing of appellants’ insurance claim. No litigation was pending at the time: The criminal prosecution had concluded, and the present litigation was not instituted until almost a full year after State Farm denied the claim.

The Court of Appeal did not question the assumption that, in the context of an insurance claim being investigated following the dismissal of criminal charges of arson against the insured, it may have appeared “likely” that denial of the insurance claim would lead to a civil action against the insurer. However, it found “likely” not enough to support the work product protection or the attorney client privilege.

The protection of the privilege only exists to protect the communications at the point in time when litigation is no longer a mere possibility, but has instead ripened into a proposed proceeding that is actually contemplated in good faith and under serious consideration as a means of obtaining access to the courts for the purpose of resolving the dispute.

There may always be potential for litigation when an insurance claim is denied, but respondents’ and the trial court’s rationale in effect assumes that the investigation involved in processing an insurance claim is necessarily conducted in anticipation of litigation (at least where there is some basis to suspect fraud by the insured). The allegations of the complaint raised a factual question as to whether, when Wood forwarded appellants’ tax returns, State Farm was, in good faith, seriously considering litigation.

Alleging an invasion of privacy in violation of the state constitutional right to privacy must establish each of the following: (1) a legally protected privacy interest; (2) a reasonable expectation of privacy in the circumstances; and (3) conduct by defendant constituting a serious invasion of privacy. Actionable invasions of privacy must be sufficiently serious in their nature, scope, and actual or potential impact to constitute an egregious breach of the social norms underlying the privacy right.

Whether the public policy of preventing insurance fraud outweighs the confidentiality of tax returns would depend, in part, on the extent to which the financial information appellants did disclose was sufficient to allow State Farm to determine appellants’ financial condition, and the extent to which the returns revealed confidential information not relevant to State Farm’s investigation.

Although appellants failed to state a claim against respondents for financial elder abuse they did state a claim for violation of the right of privacy. Therefore the case was remanded to the trial court to resolve the question of whether the lawyers violated the Strawns’ right of privacy in their tax returns.

ZALMA OPINION

The court’s reasoning – based solely on pleadings – appears logical. However, it ignores the fact that when an insured is investigated by an insurer for arson-for-profit and fraud; that person is arrested and prosecuted for the crime of arson only to have the charge dismissed; and then based on its own investigation to deny the claim for fraud, there is a certainty, beyond a almost all doubt, that the insured will file suit claiming bad faith, breach of contract and any other tort conceivable. To sue the lawyers for representing their client and providing to a forensic accountant tax returns delivered inadvertently to the lawyers for invasion of privacy when the same documents supported the prosecution seems to be a sophistic stretch to allow an insured who probably attempted insurance fraud to sue the insurer and its lawyers. Trial should show proof of a true anticipation of litigation not obvious from the complaint and the decision, if appealed to the Supreme Court, should be reversed.


© 2019 – Barry Zalma

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

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

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

His newest book:

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

Books from Full Court Press

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

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

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

 

 

 

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Overcome the Tight Employment Market by Training Your Personnel

Insurance Professionals are Hard to Find

Today there are more insurance jobs available than competent people to fill the jobs. The only solution to a need for competent and professional claims personnel is to train those you can hire even if they are just graduates of two-year colleges or humanities majors at a four year college who can’t even define the word “insurance.” Barry Zalma’s Insurance Claims Library will make the training possible and help an insurer create a staff of insurance claims professionals.

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

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

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

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

Zalma on Insurance Claims Volume 101

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

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

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

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

Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the ten volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law. As you read through the various volumes of Zalma on Insurance Claims, you will find comprehensive—yet comprehensible—coverage of key topics, including:

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

Zalma on Insurance Claims Part 102

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

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

Zalma on Insurance Claims Part 103

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

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

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

Zalma on Insurance Claims Part 104

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

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

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

Zalma on Insurance Claims Part 105

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

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

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

Zalma on Insurance Claims Part 106

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

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

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

Zalma on Insurance Claims Part 107:

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

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

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

Zalma on Insurance Claims Part 108

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

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

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

Zalma on Insurance Claims Part 109 

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

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

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

Zalma on Insurance Claims Part 110

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

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

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

THE HOMEOWNERS INSURANCE POLICY

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

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

Paperback Book    Kindle Book

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

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Trial Court’s Erroneous Instruction on Burden of Proof Requires New Trial

Insurer Has Burden to Prove Notice of Termination of Policy Was Mailed

To properly cancel a policy of insurance it is necessary to mail the notice to the insured. If the policy allows for a grace period to pay premium that notice, also, must be mailed to the insured. Prudent insurers maintain records of the mailing of such notices and have an officer who can testify that the notice was placed in the hands of the United States Postal Service for delivery. With such proof there is a presumption that the notice was delivered regardless of testimony by the insured that it was not received.

In Conestoga Trust, also known as Conestoga Settlement Trust; Conestoga Trust Services, L.L.C. v. Columbus Life Insurance Company, No. 17-50073, United States Court Of Appeals For The Fifth Circuit (January 3, 2019) Conestoga Trust sued Appellee Columbus Life Insurance Company alleging that Columbus failed to mail a grace notice prior to terminating the policy following Conestoga’s failure to pay the life insurance policy premiums.

The jury was asked to consider one question: whether Columbus failed to mail the grace notice as required by the policy. The jury answered no, the district court entered judgment in favor of Columbus and Conestoga appealed.

FACTS

Columbus issued a universal life insurance policy on the life of Peggy Mulvaney, a Michigan resident, in October 2007. Three years later, James Settlement Services International, LLC purchased the Policy in a life settlement transaction. The Policy was sold by JSS to Conestoga, who contracted with Provident Trust Group, LLC to manage its policies and serve as its escrow agent to hold investor funds and pay life insurance premiums. In providing that service, Provident called insurers each month to confirm the monthly premium due and sent monthly emails to Conestoga to obtain approval to pay premiums owed.

In mid-2014, Provident erroneously stopped paying premiums on the Policy and stopped calling Columbus to determine the minimum payment due. Consequently, the Policy entered a grace period. Once that occurs, the Policy provides: “We [Columbus] will allow a Grace Period. We will mail You . . . a notice indicating the minimum premium You must pay in order to keep the policy in force. . . . You will have 61 days from the date We mail You this notice to pay or mail enough premium. If You do not pay or mail the needed premium within the 61-day Grace Period, all coverage provided by this policy will terminate without value at the end of the 61-day period. We will rely on the postmark to determine the date of mailing.”

Pursuant to this provision, Columbus contends that it mailed Conestoga a grace notice dated November 17, 2014, triggering the 61-day grace period. Conestoga maintains that it never received the Grace Notice, and neither Provident nor Conestoga paid the overdue $15,223.96 premium to Columbus within the 61-day period.

Columbus terminated the Policy and mailed Conestoga a Notice of Loss of Coverage.  Although the Policy permits reinstatement of coverage within a five-year period, as both the Notice of Loss of Coverage and the letter rejecting the wired funds indicated, Conestoga did not apply for reinstatement.

Conestoga, rather than seeking reinstatement, sued, alleging that Columbus had breached the life insurance policy by failing to “mail and/or postmark” the Grace Notice and seeking a declaratory judgment that the Policy is in full force and effect. Columbus moved for summary judgment, submitting evidence of Columbus’s mailing procedures and arguing that applicable law precluded Conestoga’s attorneys’ fees claim.  The court rejected Conestoga’s argument that Columbus could only prove the mailing of the Grace Notice with its postmark, deeming that theory “thoroughly unpersuasive.” The court additionally determined that Michigan law applied to Conestoga’s attorneys’ fees claim, thereby barring any fee award.

Before the case proceeded to trial, Conestoga proposed jury instructions that placed the burden on Columbus to prove that it “properly cancelled the Policy.” Conestoga’s proposed instructions further specified that an insurer must “strict comply” with the termination provisions at issue. Before jury selection, the district court, having received additional briefing on the issue, ruled from the bench that Conestoga had the burden of proof.

Conestoga contends that Columbus failed to present direct evidence that the Grace Notice was mailed, arguing that their documentation only goes as far as showing that the Grace Notice was diverted for quality control, faulting Columbus for failing to produce a postmark or certified mail receipt.

The jury verdict form presented one question: “Did Columbus Life fail to mail the notice of Grace Period and Termination of Coverage as required by the policy?” The jury answered, “No,” and the court entered judgment in favor of Columbus.

ANALYSIS

An insurance policy is a contract, generally governed by the same rules of construction as all other contracts.  When construing a contract, the Court’s primary concern is to ascertain the intentions of the parties as expressed in the contract, beginning the analysis with the language of the contract because it is the best representation of what the parties mutually intended. Importantly, an ambiguity does not arise simply because the parties offer conflicting interpretations.

Conestoga is correct that Texas law indeed requires strict compliance with an insurance policy’s termination provision. That stricture, however, does not change the fact that nothing in the plain language of the grace period provision requires Columbus to “create or retain” a postmark when mailing a grace notice. The plain language of the Policy does not compel a postmark requirement.

Because Mulvaney (the insured) was domiciled in Michigan when she bought the policy, Michigan law applies and Conestoga is unable to collect attorneys’ fees, even if it were to succeed on its breach of contract claim.

The Fifth Circuit concluded that the district court erred in its allocation of the burden of proof. In Texas, the insurer has the burden to prove that it sent a grace notice that is required prior to termination of the policy. This is true even where the question of whether the cancellation notice was mailed to the insured is the sole jury issue.  Although there was no formal denial of benefits, coverage under the Policy was indisputably terminated by Columbus.

The Fifth Circuit found Columbus needed to prove it complied with that Grace Notice requirement. While the misallocation of the burden of proof did not produce an “irrational verdict” here, the evidence — though largely in favor of Columbus —I s not so one-sided that Conestoga failed to present a genuine issue of material fact. Given that the jury was incorrectly instructed on the law on the sole issue before it, the Fifth Circuit was left with a substantial doubt whether the jury was fairly guided in its deliberations.

Accordingly, we affirm the district court’s denial of Conestoga’s motion for a judgment as a matter of law, finding that nothing in the plain language of the Policy required Columbus to “create or retain” a postmark to establish that it had mailed the Grace Notice. Therefore, the Fifth Circuit affirmed the district court’s grant of summary judgment as to attorneys’ fees.

However, finding that the district court erred in placing the burden of proof on Conestoga, the Fifth Circuit reversed and remand for a new trial.

ZALMA OPINION

This is a strange case because the owner of the policy chose to sue the insurer rather than simply asking – since the life insured was still alive – to reinstate the policy which would probably have been granted upon the payment of the premium. The retrial was needed because of the failure of the trial court to properly instruct the jury. The insurer, if it had set up a system where all mailings are recorded and, with the testimony of the person responsible for the mailing, could have easily proved that the document was mailed. On retrial, even with a proper instruction, the mailing will be proved. The filing of litigation when the policy could have been reinstated makes no sense and resulted on a second trial.


© 2019 – Barry Zalma

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

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

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

Books from Full Court Press

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.

 

 

 

 

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Everything Needed by the Insurance Claims Professional

Insurance Claims Library

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

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Ethics for the Insurance Professional

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

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

Available as a paperback.

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.

“The Insurance Examination Under Oath”

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

Available as a Kindle book.

Available as a paperback.

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

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Occurrence & Aggregate Limits

Asbestos Claims & Analysis of “Occurrence” and “Aggregate Limits”

Asbestos litigation is often multi-faceted and spread across locations, time, and policy periods. When claims are made the insurers try to limit their exposure to the occurrence and aggregate limits stated in the policy. The insureds, on the other hand, try to convince a court that the aggregate limits do not apply and that the limits apply, if at all, to each occurrence.

In Ohio Valley Insulating Company, Inc., a West Virginia Corporation v. Maryland Casualty Company, Zurich American Insurance Company, a New York corporation as successor by merger to Maryland Casualty Company v. Continental Insurance Company, an Illinois corporation, and Granite State Insurance Company, a Pennsylvania Corporation, Civ. No. 16-211, United States District Court for the Western District of Pennsylvania (December 27, 2018) the court faced with multiple asbestos claims was asked to resolve which limits apply and how they apply to each occurrence.

ANALYSIS

In resolving the pending motions, the Court limited its analysis to the three policies included in the record—i.e., policy no. CL 20 67 87 (“CNA Policy”) 1, policy no. 41-191384 (“Zurich Policy”) 2, and policy no. POP 17-28-96 (“AIG Policy”) 3—(collectively, “Policies”). On the undisputed record at this stage, the Court is able to resolve only two legal issues, i.e., the number-of-occurrences and the aggregate limits.

ISSUES

On the first issue, OVI, the insured, sought a declaration that the various asbestos suits against it (“Asbestos Suits”) were based on multiple “occurrences” related to its operations, i.e., installation and removal of asbestos containing materials. Insurers, on the other hand, maintained that the Asbestos Suits arose out of a single “occurrence,” i.e., OVI’s use of asbestos-containing insulation products.

As to the second issue, Insurers seek a declaration that the aggregate limits associated with either the “products” or the “completed operations” hazards apply in accordance with the rule announced in In re Wallace & Gale Co., 385 F.3d 820, 830 (4th Cir. 2004) (“Wallace & Gale Rule”), whereas, OVI contends that the aggregate limits are simply not implicated.

CHOICE OF LAW

OVI urged the Court to apply West Virginia law whereas Insurers rely upon Pennsylvania law. A federal court exercising diversity jurisdiction generally applies the choice-of-law rules of the forum state, which in this case is Pennsylvania. A “choice-of-law analysis is unnecessary where the laws at issue do not conflict. The legal treatment of the number-of-occurrences issue — where one event causes damage to several persons — is same under both Pennsylvania and West Virginia law. Therefore, the Court applied the substantive law of the forum state, i.e., Pennsylvania.

NUMBER OF OCCURRENCES

The Policies provide that, for the purpose of determining the limit of liability, “all bodily injury . . . arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence.” Under Pennsylvania’s cause-oriented approach, similar policy language has been interpreted to mean that all injuries arising from the same source arise from one occurrence so long as there is a single proximate, uninterrupted, and continuing cause which resulted in all of the injuries and damage.

In Kvaerner U.S. Inc. v. One Beacon Insurance Co., the insured—who constructed asbestos furnaces at various sites during different time periods — was sued by multiple claimants alleging exposure to asbestos. Because the claimants that were exposed to asbestos at the same location and at the same time were exposed to substantially the same general condition. In so holding, the court specifically distinguished “products” claims from “operations” claims and reasoned that the insured’s “activities which triggered the underlying claims did not arise from a single, negligent practice that could be considered one cause such as distributing a uniformly defective product from a single manufacturer or selling a product containing asbestos from one location.” The District Court was persuaded by the reasoning of Kvaerner and found it applicable to the present case in all material respects. Applying the rules:

  1. The Policies restrict coverage to OVI’s specified operations—i.e., “Steam Pipe or Boiler Insulation”—at various sites.
  2. The Policies provide coverage for “completed operations” hazards but are silent on “products” hazards’ coverage.
  3. The Asbestos Suits arise from multiple contracts, operations, and job sites. And finally,
  4. Insurers’ determination of OVI’s liability in the Asbestos Suits is based on a “contract book” match, i.e., whether a particular claimant’s work history coincides with the list of OVI’s contemporaneously recorded operations.

The claimants in the Asbestos Suits who were exposed to asbestos during the same time and at the same site where OVI was conducting one of its operations were subjected to continuous or repeated exposure to substantially the same general condition. Accordingly, the Court concluded that each site where OVI conducted its operations constitutes a separate “occurrence.”

AGGREGATE LIMITS

The Policies differentiate between claims that fall under the “products” and the “completed operations” hazards, and claims that fall outside those hazards—i.e., “operations” claims. Under the CNA and the AIG Policies, claims falling under the “products” and the “completed operations” hazards are subject to aggregate limits.

In Pennsylvania, exposure to asbestos, as well as all phases of an ensuing disease, independently trigger coverage. Pennsylvania’s all sums method of allocating liability dictates that once multiple policies have been triggered for an indivisible loss the insured is free to select the policy or policies under which it is to be indemnified.

Undoubtedly, multiple policies are triggered by the Asbestos Suits. Therefore, the Court concluded that the aggregate limits associated with the “completed operations” hazard are applicable.

Resolving the dispute the District Court found that each site where OVI conducted its operations constitutes a separate “occurrence” and that the aggregate limits of the “completed operations” hazard are applicable to the “occurrences.”

OVI’s motions were granted on the number-of-occurrences issue and denied in all other respects. And, the Insurers’ motion was granted to the extent they seek the applicability of the “completed operations” hazards and denied in all other respects.

ZALMA OPINION

Wisdom from the District Court applied the local law and found a way to limit the number of occurrences to each location where OVI installed asbestos regardless of the number of people who claimed injury from exposure to the asbestos and then applied the aggregate limit to each policy. Since asbestos claims seem to be unlimited and seem to metastasize like a virulent cancer, applying the wording of a policy to limit the insurers’ exposure to that stated in the policy.


© 2019 – Barry Zalma

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

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

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

Books from Full Court Press

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.

 

 

 

 

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Everything Needed by the Insurance Claims Professional

How to Adjust Property & Liability Insurance Claims

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

The Compact Book of Adjusting Property Insurance Claims

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

Available as a Kindle book.

Available as a paperback.

The Compact Book on Adjusting Liability Claims

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.

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

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Poor Choice – Insurer v. Insurer

“Any Contractor” Includes “All Contractors”

I have warned against the problems raised when one insurer sues another without conducting a thorough analysis of the policy. Regardless, it keeps happening and often results in bad law for all insurers. Watch as the Second Circuit reads the policies and rules on their clear and unambiguous language.

In American Empire Surplus Lines Insurance Company v. Colony Insurance Company, 17-3799, United States Court Of Appeals For The Second Circuit (December 4, 2018) two insurers disputed coverage for defense costs incurred by the New York City Housing Authority (“NYCHA”) in three personal injury suits brought against it by employees of its contractor, Technico Construction Services.

SUMMARY JUDGMENT

Summary judgment was granted by the Southern District of New York in favor of Colony Insurance Company, which insured NYCHA, and against American Empire Surplus Lines Insurance Company, which issued a policy to Technico (as contractor) that covered NYCHA (as owner of the property). The district court held that Colony’s policy excluded coverage for these types of personal injury suits.

FACTS

In 2014, NYCHA hired a contractor, Technico, to remodel several of its buildings in Manhattan. In connection with this project, NYCHA received insurance coverage from Colony, and Technico received coverage from American Empire. Three Technico employees were injured on the project and sued NYCHA. American Empire assumed the legal costs for these lawsuits under the policy it issued to Technico but then filed the present suit to obtain contribution from Colony, on the theory that Colony is the primary insurer for these lawsuits.

Colony argued that the personal injury lawsuits were excluded from its policy with NYCHA. Colony’s policy covers NYCHA for “‘bodily injury'” that is “caused by an ‘occurrence’ and arises out of: (a) Operations performed for you by the ‘contractor.'”

ANALYSIS

The word “contractor”–in quotes–is defined as Technico. An exclusion in the policy provides that there is no coverage for: “‘[b]odily injury'” “sustained by any contractor, subcontractor or independent contractor or any of their ’employees,’ ‘temporary workers,’ or ‘volunteer workers.'”

Colony argues that these tort lawsuits are excluded from coverage because they were brought by employees of Technico, a contractor, and the exception plainly excludes coverage for bodily injury sustained by an employee of “any contractor.”  In response, American Empire argued that the term “any contractor” does not include the term “contractor” (in quotes), which is defined as Technico. American Empire further argues that the purpose of an Owners and Contractors Protective policy (such as was issued by Colony) is to cover bodily injury to employees of the designated contractor–here, Technico.

The interpretation of this exclusion is the only question before the appellate court. Under New York law, an insurance contract is interpreted to give effect to the intent of the parties as expressed in the clear language of the contract.  As the district court concluded, the exclusion provides, in straightforward and unambiguous wording, that the policy does not provide coverage for bodily injury sustained by employees of “any contractor.”  “Any contractor” must be read to have its plain meaning.

The plain meaning of “any contractor” includes Technico, because Technico is defined in the policy as a “contractor” (in quotes). Technico does not lose its status as a contractor simply because it is also the defined “contractor” (in quotes). The presence of the word “any” before contractor supports the breadth of the exclusion. Because these lawsuits were filed by employees of a contractor, Technico, they are excluded under the plain terms of the policy.

Further, American Empire’s argument–that “any contractor” does not include the defined “‘contractor'” — is refuted by another contract provision. The “Other Insurance” clause provides:

“[W]e will not seek contribution from any other insurance available to you [NYCHA] unless the other insurance is provided by a contractor other than the designated ‘contractor’ . . .” App’x 86 (emphasis added).

The explicit exclusion of the designated “‘contractor'” (Technico) in this provision reinforces the conclusion that the phrase “any contractor” (in the exclusion) includes the designated “‘contractor'”. If the parties wanted to exclude Technico from the policy exclusion, they would have done so explicitly, as they did elsewhere in the contract.

The trial court judgment was affirmed.

ZALMA OPINION

It seems ridiculous that an insurer, a professional in the art of reading and writing an insurance policy, would attempt an argument that a policy that excludes “any contractor” did not mean to include within the limitations of the word “any” a specifically named contractor. “Any” contractor has no limitation and this suit and appeal seems to have been a waste of time and money. It is necessary that insurers and their lawyers RTFP.


© 2019 – Barry Zalma

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

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

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

Books from Full Court Press

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.

 

 

 

 

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Everything Needed by the Insurance Claims Professional

Fraud & the Tort of Bad Faith

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

Time to Rescind the Tort of Bad Faith

Insurance and the Law of Unintended Consequences Paperback

Paperback

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

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

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

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


“Insurance Fraud & Weapons to Defeat Insurance Fraud”

In Two Volumes

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

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do

so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

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

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Never Lie to An Insurance Company

Depriving an Insurer of its Subrogation Rights is Fatal to a UIM Claim

It is axiomatic that an insurer – unless waived in writing – has a right to subrogate against a person responsible for the injuries that resulted in a loss payable under a policy of insurance.  Depriving an insurer of that right voids any right the insured has to the benefits of the policy.

In Guisepe A. Iellimo a/k/a Joseph Iellimo and Barbara Iellimo, his wife v. Amica Mutual Insurance Company, Docket No. A-4975-16T1, Superior Court Of New Jersey Appellate Division (December 21, 2018) Plaintiffs Guisepe A. Iellimo (Iellimo) and Barbara Iellimo appealed from the June 8, 2017 order of the Law Division granting summary judgment in favor of defendant Amica Mutual Insurance Company (Amica) on plaintiffs’ claims for underinsured motorist (UIM) coverage.

FACTS

On December 1, 2012, Iellimo, while walking in Manhattan, was struck and injured by a motor vehicle owned and operated by Saul Casiano. On the date of the incident, Casiano’s vehicle was insured by GEICO Insurance Company (GEICO) under a policy with a liability limit of $25,000. Iellimo was insured under an automobile policy issued by Amica with UIM coverage with a limit of $250,000.

In 2015, Iellimo initiated a legal action against Casiano in New York Supreme Court for damages resulting from the accident. There is no evidence in the record that Iellimo’s counsel notified Amica of the New York action.

On January 11, 2016, Iellimo executed a release of all of his claims arising from the December 1, 2012 accident against Casiano in exchange for Casiano’s policy limit of $25,000. On that date, Iellimo’s counsel sent the signed release to GEICO with a signed stipulation of dismissal of the New York action.

The following day, January 12, 2016, Iellimo’s counsel sent a letter to Amica. The letter provides, in relevant part: “As you are aware, this firm represents the claimant, Mr. Guisepe (a.k.a. Joseph) A. Iellimo, for personal injuries he sustained in the December 1, 2012 motor vehicle accident. By way of this letter, I am hereby putting you on notice of my client’s intent to immediately file an Underinsured Motorist Claim in this matter. This is due to the fact that Mr. Iellimo was involved in an accident with a motor vehicle that was insured by GEICO Insurance Company, which policy has limited bodily injury coverage.”

THE LIES

The January 12, 2016 letter did not alert Amica that the prior day Iellimo released Casiano from all claims arising from the December 1, 2012 accident in exchange for $25,000, or that Iellimo had filed a complaint against Casiano in New York Supreme Court, and had signed a stipulation of dismissal in that action. On January 19, 2016, GEICO issued a settlement check to Iellimo and his counsel for $25,000.

The omission of a copy of the January 13, 2016 letter is troubling in light of the following statement in the January 22, 2016 letter stating it would protect Amica’s subrogation rights if demands were paid quickly or he accept this offer any time after thirty (30) days from the date of this correspondence. If your company intends to pay the policy limits and accept an assignment of Mr. Guisepe A. Iellimo’s claim against Saul Casiano, you should notify our offices, in writing, within that thirty (30) day period. In the absence of any such notice, the settlement from GEICO Indemnity Company will be accepted as indicated above.

These statements were obviously false. As of January 22, 2016, Iellimo had already accepted $25,000 as a settlement from GEICO. He had executed a release in favor of Casiano with respect to all claims arising from the December 1, 2012 accident, and his counsel had signed a stipulation of dismissal of the New York action.

CLAIM REJECTED

Amica rejected the claim because it was unable accept either of the options presented as Iellimo have already released the tortfeasor from any further involvement in this matter. Thereafter, Iellimo and his spouse filed a complaint in the Law Division against Amica seeking UIM benefits for Iellimo’s injuries from the December 2, 2012 accident.

SUMMARY JUDGMENT GRANTED

In its bench opinion, the court found that plaintiffs’ “former counsel lied [when he] sent a notice saying we’re thinking about accepting this after their release had already been signed in an attempt retroactively to create a Longworth record to support the U.I.M. claim.” Having reviewed evidence of Casiano’s income, car, and income-producing, multi-unit home, the court held that it was “not satisfied that the plaintiff has shown a lack of prejudice.” The trial court, therefore, granted Amica’s motion.

DISCUSSION

The relationship between an insured and an insurance carrier is contractual. The obligation to offer UIM coverage, however, is statutory. Insurance carriers are required to offer each insured the option of purchasing coverage up to the limits of liability coverage, but not exceeding $250,000 per person and $500,000 per accident against the risk of injury caused by underinsured tortfeasors

A UIM carrier who pays benefits to an insured has the right to subrogate the insured’s claim against the tortfeasor to permit the carrier to recover from the tortfeasor the UIM benefits paid to its insured. To effectuate this right, a UIM carrier may intervene in an insured’s trial against a tortfeasor as a way to avoid relitigating the insured’s claim, and to bind the tortfeasor to the issues decided at trial.

There are three notices that an insured must give to a UIM carrier. First, the insured must notify the carrier when the insured commences a legal action against the tortfeasor. Second, the insured must advise the carrier when he determines the tortfeasor’s insurance coverage is insufficient to compensate the insured for his injuries. Third, the insured must notify the insurer of any settlement offer or arbitration award that does not satisfy the insured’s damages. This is commonly known as a Longworth notice.

The letter sent by counsel falsely stated that the tortfeasor had offered to settle the matter and that it was the insured’s “intention” to accept the settlement because the insured had already signed the release and received the settlement proceeds. In addition, the letter stated that if the carrier elected to preserve its subrogation rights, the insured would refrain from signing the release, and assign her rights to recover from the tortfeasor to the UIM carrier. This promise was misleading, as the insured had already released all of her claims.

Amoica responded within thirty days of the notice, requesting more information before it could decide whether to exercise its rights to subrogation. The carrier later denied UIM coverage, having discovered that the insured had released her claims prior to the Longworth notice.

Plaintiffs’ claim for UIM benefits from Amica is barred. The record contains no evidence that Iellimo’s counsel notified Amica of the filing of the New York Supreme Court action against Casiano. In addition, it is undisputed that Iellimo’s counsel accepted a settlement offer from Casiano, submitted an executed release of all of Iellimo’s claims against Casiano, and signed a stipulation of dismissal of the New York action without notifying Amica. By doing so, he caused the irretrievable loss of Amica’s subrogation rights.

What is clear from the record is that Iellimo’s counsel failed to comply with the procedures set forth in Longworth and caused the UIM carrier to lose its subrogation rights. The fact that counsel thereafter sent misleading correspondence to Amica only exacerbated the situation. Iellimo’s counsel, in fact, never notified Amica of the settlement of his client’s claims against Casiano. Plaintiffs’ UIM claim is barred. A showing by plaintiffs that Amica was not prejudiced by the settlement of Iellimo’s claims will not salvage his UIM claim.

ZALMA OPINON

The conclusion of the court was obvious, the lawyer for Iellimo lied on behalf of his clients and in so doing caused the clients to lose coverage on the UIM claims. By eliminating Amica’s right to subrogation counsel defeated the claim. Fortunately, the Iellimos’ are not without a remedy – they may, and should, sue the lawyer who caused them to lose the UIM claim.


© 2019 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

 

 

 

 

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Construction Defects and Mold Claims

Books for the Insurance Claims Professional

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

Construction Defects and Insurance

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

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

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

The Eight volumes include:


Mold Claims

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

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

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

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

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

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

TMold Claims Volume Four: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.he author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.

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

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Zalma’s Insurance Fraud Letter – January 1, 2018

A Reason to Do Away with the Tort of Bad Faith

 Zalma’s Insurance Fraud Letter, Volume 23, No. 1

Happy New Year

Catastrophes, like hurricanes, bring out the best and worst of the U.S. public. The Cajun Navy coming to the rescue of flood victims without a need for remuneration and seeking nothing more than thanks shows the best of the U.S. public. Those who attempt to profit from a catastrophe and steal from an insurer and seeking bad faith tort damages in addition to actual losses should be condemned and shunned.
In Ammar Investments, LLC d/b/a Zegar, Inc. and d/b/a Fouad & Faris, Inc. v. Certain Underwriters of Lloyd’s, London, No. 18-ca-347, Fifth Circuit Court of Appeal State of Louisiana (December 12, 2018) the Louisiana Court of Appeal not only refused to allow the attempt to profit from a hurricane but chided those attempting to profit from the storm. The only thing the appellate court failed to do was to report the plaintiff to a prosecutor for prosecution for attempted insurance fraud.
The lawsuit filed by AI and Zughayer was more than inadequate it was clearly fraudulent and supported by false documents. Insurance fraud is a felony in Louisiana and La.R.S. 22:1243 makes it a crime to present or cause to be presented any written or oral statement  as part of or in support of a claim for payment or other benefit pursuant to an insurance policy, knowing that such statement contains any false, incomplete, or fraudulent information concerning any fact or thing material to such claim. As a result the insurer is obligated to report AI and Zughayer to the state’s insurance fraud investigators and the trial judge and court of appeal should have recommended prosecution.

Read the entire article and the rest of ZIFL here.


 The Current Issue Contains the Following  


Books

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

 

I have completed a video blog called

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

If you start at Volume 1 at the bottom of the blog’s first page and view one or two videos.

 Barry Zalma, Inc. 

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

Barry Zalma, Inc. 
4441 Sepulveda Boulevard
CULVER CITY CA 90230-4847
310-390-4455
Fax: 310-391-5614
Insurance claims consultant and Expert Witness
zalma@zalma.com

© 2019 – Barry Zalma

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

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

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


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Everything Needed by the Insurance Claims Professional

New Journal Now Four Monthly Issues

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. His new Journal, COIL, the Commentary on Insurance Law has just published its fourth issue in both Kindle and paperback versions for less than ten dollars.

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

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

Articles included:

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

Kindle version Paperback version

Time to Rescind the Tort of Bad Faith

Insurance and the Law of Unintended Consequences Paperback

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

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

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

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

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

 

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Failure to Acquire Appropriate Insurance Costs Condo Management Company

Fees Incurred to Deal With Insurer’s Claim Requirements Not a Peril Insured Against

Condominium associations are usually run by a committee of owners usually called the Board of Directors. The members of a condominium Board of Directors are lay people with little or no experience with insurance or insurance claims. Recognizing their lack of skill and knowledge the Board of Directors will often enter into an agreement with a management company to deal with insurance and insurance claim duties.

In Capitol Property Management Corporation v. Nationwide Property And Casualty Insurance Company; Nationwide Mutual Insurance Company; Nationwide Mutual Fire Insurance Company, No. 17-1789, United States Court Of Appeals For The Fourth Circuit (December 14, 2018) Gunston Corner Condominium Association (the Association)  entered into an agreement with Capitol Property Management (Capitol) to handle a variety of property management duties for the Association buildings in exchange for a monthly fee paid by the Association (the management agreement, or the agreement).

THE MANAGEMENT AGREEMENT

The management agreement stated that the Association’s purpose is to perform “various functions pertaining to the maintenance and administration of” the condominium buildings, and that the Association delegated its duties to Capitol as “exclusive managing agent.” Capitol’s duties under the agreement included a section of responsibilities listed under the heading, “Insurance.” Those duties included procuring property insurance coverage for the Association, filing claims with the insurer in the event of loss, obtaining cost estimates for the repair or replacement of damaged property, and coordinating with the insurer regarding the proper processing of claims.

In addition to the monthly fee paid to Capitol by the Association, the management agreement required that the Association reimburse Capitol for “insurance claim processing” (the claim processing fee) of 10% of any amount recovered by the Association under its policy issued by Nationwide Companies (collectively, Nationwide). Second, the Association agreed to pay Capitol a “construction management fee” of 5% of any renovation project exceeding $20,000 (the construction management fee).

FACTUAL BACKGROUND

The Association had obtained from Nationwide an insurance policy covering certain property, including several condominium buildings and “business personal property” (the Policy). The Policy defined the term “extra expense” as an expense incurred to “avoid or minimize the suspension of business and to continue ‘operations.'” “Operations” was defined as the Association’s “business activities occurring at” the covered property.

During the period of coverage under the Policy, a fire damaged one of the Association’s condominium buildings. The parties do not dispute that the fire qualified as a “covered cause of loss” under the Policy’s primary coverage provision. After the Association filed a claim with Nationwide, Nationwide accepted the claim and paid the Association more than $2 million. That payment included coverage for direct damage to the building, as well as coverage for emergency repairs, demolition and debris removal, and recoverable depreciation.

Capitol filed a separate claim with Nationwide seeking payment for the claim processing fee detailed in Capitol’s management agreement with the Association. Nationwide denied Capitol’s claim, explaining that the fee was not a part of the insurance contract.

After Nationwide denied Capitol’s claim, Capitol sought payment from the Association for the claim processing fee. In a sealed settlement agreement, the Association agreed to pay Capitol part of the fee. The Association also assigned to Capitol “any right” the Association had to obtain from Nationwide the claim processing fee (the assignment).

Capitol filed a second claim with Nationwide for the claim processing fee, which Nationwide again denied. Nationwide explained that the fee did not qualify as an “extra expense” under the Policy, because the fee was “not a necessary expense incurred to avoid or minimize the suspension of business” under the plain terms of the Policy. The record does not contain any evidence that Capitol sought coverage for the construction management fee.

Capitol sued Nationwide alleging that Nationwide breached its insurance contract by denying coverage for both the claim processing fee and the construction management fee. The district court entered judgment in favor of Nationwide.

ANALYSIS

The trial court held that Capitol, which was not an insured under the Policy, could not assert a breach of contract claim against Nationwide for the construction management fee concluding that it could not prove the elements of a breach of contract action which are:

  • a legally enforceable obligation of a defendant to a plaintiff;
  • the defendant’s violation or breach of that obligation; and
  • injury or damage to the plaintiff caused by the breach of obligation.

The assignment of rights by the Association set forth the parties’ understanding that Capitol was seeking to recover under the Policy the claim processing fee. The assignment as a whole is clear that the Association intended to assign to Capitol only the right to seek payment of the claim processing fee. Capitol, therefore, failed to state a claim for breach of contract for the construction management fee because Capitol could not demonstrate that Nationwide had a legally enforceable obligation to Capitol with respect to coverage for that fee. Thus, the district court did not err in awarding summary judgment to Nationwide on this issue.

Capitol contended that the Policy is an “all risk policy,” meaning that the Policy provides coverage for any loss “incurred as a result of the fire” unless Nationwide can show that the loss is excluded. According to Capitol, Nationwide has failed to show that the fee is an excluded loss under the Policy. However, because the claim processing fee is a non-physical loss, the fee does not fall within that primary coverage provision.

Any potential coverage would have to qualify under the “additional coverage” provisions of the Policy. The claim processing fee did not qualify as an “extra expense” under the “additional coverage” provisions. To qualify as an “extra expense” under the Policy, the claim processing fee would have to fall within the definition of that term, namely, that the fee was incurred because of the physical loss, and was a “necessary” expense in maintaining the Association’s “operations” or “business activities occurring on the property.”

The duties relating to the claim processing fee correspond with the Association’s responsibilities listed under the Policy language of “duties in the event of loss or damage.” This provision describes the Association’s duty under the Policy to investigate and make reports on claims, and to cooperate with the insurer in processing any claims. And the Policy does not contain any language providing for payment by the insurer for the insured’s completion of those agreed upon duties. Thus, the Association’s decision to outsource its responsibilities relating to the filing of its claim with Nationwide did not transform the claim processing fee into an “extra expense” covered by the Policy.

Since the insured did not assign to the management company any rights with respect to one fee; and the policy did not provide coverage for the other fee, which arose from the association’s decision to outsource performance of its duties under the policy to the management company Capitol had no rights against Nationwide and the decision of the trial court was affirmed.

ZALMA OPINION

Some policies provide coverage for claims processing expenses. Since Capitol was the agent for the Association who acquired the Nationwide policy that covered the property but did not provide special coverage for claims processing expenses, its only source for those fees was the Association. This lawsuit was an attempt to recover fees that could have been recovered had Capitol fulfilled its obligation to acquire proper insurance protecting the Association.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

 

 

 

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Everything Needed by the Insurance Claims Professional

COIL – Commentary on Insurance Law & More

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

COIL Commentary on Insurance Law Volume 1, Number One, Number Two &  Number 3 

COIL, Commentary on Insurance Law Volume One, Number 4

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

Articles included:

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

Kindle version Paperback version

Construction Defects and Insurance

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

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

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

The Eight volumes include:


Mold Claims

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

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

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

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

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

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

TMold Claims Volume Four: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.he author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.

 

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

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ATV’s are Dangerous

Coverage for Operation of an ATV Limited

People who operate all terrain vehicles forget they are motor vehicles and not toys. They are exciting and fun to use but when used negligently operators and passengers can be seriously injured. It is only after the accident causing injury or death that the operator and his or her lawyers read the policies available and try to torture the language to make coverage apply.

In Courtney Conley v. Kentucky Farm Bureau Mutual Insurance Company; And Estate Of Edgar Gamble, Jr. By And Through His Administrator Edgar Gamble, Sr. NO. 2017-CA-000313-MR, Commonwealth of Kentucky Court of Appeals (December 21, 2018) Kentucky Farm Bureau Mutual Insurance Company (KFB) issued a homeowner’s insurance policy to Courtney Conley that excluded coverage for bodily injury arising from motor vehicle accidents. The trial Court determined an exception to that exclusion did not preserve coverage in a wrongful death action arising from an all-terrain vehicle (ATV) accident.

BACKGROUND

In June 2015, Conley was involved in an accident while operating an ATV on KY 867 in Magoffin County, Kentucky. His passenger, Edgar Gamble, Jr., died as a result of the accident. Gamble’s estate (the Estate) later sued Conley for wrongful death.

The lawsuit was presented to KFB, which had issued Conley a homeowner’s insurance policy with respect to his residence in Fayette County, Kentucky. On presentation, KFB initially paid Conley’s defense costs. However, it reserved the right to dispute whether insurance coverage extended to the Estate’s claims. KFB based its reservation on policy language excluding coverage for losses arising out of the ownership, maintenance, use, loading or unloading of motor vehicles or all other motorized land conveyances, including trailers, owned or operated by or rented or loaned to an “insured.” The exclusion does not apply to a motorized land conveyance designed for recreational use off public roads, not subject to motor vehicle registration and not owned by an “insured;” or owned by an “insured” and on an “insured location”.

Conley and KFB petitioned the circuit court to determine whether the policy provided coverage for the ATV accident. The parties agreed that the matter hinged on whether Conley “owned” the ATV under the terms of the policy. After construing the policy, the circuit court entered declaratory judgment in favor of KFB.

DISCUSSION

On appeal, Conley contends he was not the legal owner of the ATV he was operating the day of the accident because he was not the legal titleholder on a certificate of title. He also contends the insurance policy is ambiguous in its use of the term “owner.”

Titling of all-terrain vehicles is governed by regulation that holds that title of an all-terrain vehicle is transferred pursuant to regulations and state statutes just like motor vehicles. A seller can comply with the statute by completing and signing the assignment of title section on the certificate of title and delivering it to the buyer. Once title is transferred in this manner, the buyer becomes the “owner.”

Here, the insurance policy language is not ambiguous, but comports with established interpretations of Kentucky’s title statutes. An “owner” of an all-terrain vehicle under the policy is the one holding legal title to it. During the discovery process Conley admitted in his interrogatory responses that the ATV’s executed title was delivered to him at purchase.

However, Conley claimed he was not the title owner because he had not filed the title documents at the county clerks’ office to register the transfer at the time of the accident.

Still, the Court of Appeal concluded Conley owned the ATV when the accident occurred away from the “insured location.” The policy exception to the motor vehicle exclusion did not apply; therefore, Conley was not covered by the KFB policy and KFB neither owed a defense nor indemnity to Conley.

ZALMA OPINION

The Kentucky Court of Appeal, with ease, saw through Conley’s attempt to torture the language of the insurance policy by citing to the Regulations and Statutes that governed the ownership of vehicles in Kentucky. When the title was handed to Conley he became the owner of the ATV and it mattered not that he failed to file the document with the state.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

 

 

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Zalma on Insurance Claims

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

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

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

Zalma on Insurance Claims Volume 101

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

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

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

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

Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the insurance industry. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the ten volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law. As you read through the various volumes of Zalma on Insurance Claims, you will find comprehensive—yet comprehensible—coverage of key topics, including:

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

Zalma on Insurance Claims Part 102

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

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

Zalma on Insurance Claims Part 103

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

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

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

Zalma on Insurance Claims Part 104

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

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

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

Zalma on Insurance Claims Part 105

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

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

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

Zalma on Insurance Claims Part 106

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

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

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

Zalma on Insurance Claims Part 107:

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

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

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

Zalma on Insurance Claims Part 108

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

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

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

Zalma on Insurance Claims Part 109 

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

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

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

Zalma on Insurance Claims Part 110

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

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

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

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

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Insured is Obligated to Select Insurance Needed

Agent has no Duty to Advise Insurance Coverages Customer Needs

Insurance agents are sales people. They sell people the insurance required by the person seeking insurance in accordance with the order placed by the person seeking insurance. Only when, for consideration, the agent takes on an additional obligation to determine the insurance needs of the insured is the agent obligated to do more than fulfill an order. If the agent takes on a fiduciary obligation then the obligation is great.

In Somnus Mattress Corporation d/b/a Posturecraft Mattress Company v. Stephen Hilson and Crutchfield & Graves Insurance Agency, LLC, 1170250, Supreme Court of Alabama (December 21, 2018) Somnus Mattress Corporation d/b/a Posturecraft Mattress Company (“Somnus”) appealed from a summary judgment entered in favor of Stephen Hilson and Crutchfield & Graves Insurance Agency, LLC (“CGIA”), on Somnus’s claim that they were negligent. Somnus claimed it was the agent’s obligation to advise him to purchase insurance coverage for business interruption and loss of profits (hereinafter collectively referred to as “business-income coverage”) and that he was damaged because of the lack of business-income coverage.

FACTS

Somnus manufactured mattresses at a facility in Winston County, Alabama. Charles Jones founded Somnus, served as its president, and made all the consequential business decisions for Somnus – including decisions concerning business property insurance. In 2006, a fire at the Ashridge warehouse facility resulted in a total loss of that property.

Jones also testified that the subject of business income insurance came up in 2009 and he asked the broker “What do you think about it?” He replied it’s pretty expensive, and it’s hard to get because you’ve got to come up with a lot of records to verify whatever you’re claiming; and so he said that he didn’t think he needed it.

The agent testified he told Jones he needed business income insurance. Hilson, the broker, noted in his testimony that the proposal he submitted to Jones for insurance coverage of the mattress factory in 2009 included a quote with business-income coverage and a quote without business-income coverage because Jones asked for both quotes. Hilson testified that ultimately Jones elected not to pay for business-income coverage because he stated it was too expensive.

On April 12, 2013, a fire occurred at the factory. The fire rendered the factory a total loss. Ultimately, Somnus went out of business in 2015 after moving a factory to Mississippi.

Jones testified that his decision not to purchase business-income coverage even after the fire at the factory was based on what Hilson had told him in 2009 about it being expensive and difficult to obtain.

Somnus sued Hilson and CGIA. Somnus alleged claims of negligence against Hilson and CGIA. The suit asserted a single count of negligence against Hilson and CGIA, which specifically alleged that Hilson and CGIA “were negligent in not advising [Somnus] in regard to insurance coverage for business interruption and loss of profits which was available under an insurance policy.” The circuit court entered a summary judgment in favor of Hilson and CGIA.

ANALYSIS

The record reflects that Hilson testified that he advised Jones in 2012 to purchase business-income coverage, that Jones could recall meeting with Hilson each year, but that Jones could not recall the content of those conversations. Not remembering a conversation does not constitute evidence indicating that what the opposing party contends was relayed in that conversation did not occur.

Absent a specific agreement to do so, an insured’s agent does not have a continuing duty to advise, guide, or direct the insured’s coverage after the agent has complied with his or her obligation to obtain coverage on behalf of the insured. Insurance agents do not have an independent duty to identify their clients’ needs and to advise them regarding whether they may be underinsured because it is the client’s responsibility or duty, not the insurance agent’s, to determine the amount of coverage needed and advise the agent of those needs.

The insured has a duty to review the policy to ascertain that his or her needs are met.

A majority of courts that have considered the issue have held that an insurance agent owes clients a duty of reasonable care and diligence, but absent a special relationship, that duty does not include an affirmative, continuing obligation to inform or advise an insured regarding the availability or sufficiency of insurance coverage. The general duty of care excludes an affirmative obligation to give advice regarding the availability or sufficiency of coverage for several persuasive reasons.

There is no Alabama authority holding that an insurer may voluntarily assume a duty to advise a client regarding the adequacy of the client’s insurance coverage. The other way some jurisdictions have concluded that an insurance agent has voluntarily assumed a duty to advise a client about the adequacy of coverage is if a “special relationship” exists between the agent and the client.

Somnus never demonstrated that a “special relationship” existed between it and Hilson. There was no express agreement, nor was Hilson paid additional compensation to provide advice about the adequacy of Somnus’s insurance coverage.

At most, even viewing the evidence in the light most favorable to Somnus, Hilson simply relayed information to Jones that Somnus has never contended was false or misleading. It was up to Jones to accept or reject that opinion, knowing Somnus’s finances and needs.

Hilson and CGIA did not have a duty to advise Somnus concerning the adequacy of its insurance coverage. Without such a duty, as a matter of law Somnus could not establish that Hilson and CGIA were negligent in their actions.

ZALMA OPINION

Imposing liability on insurance agents for failing to advise insureds regarding the sufficiency of their insurance coverage would eliminate any burden from the insured to take care of his or her own financial needs and expectations in entering the marketplace and choosing from the competitive insurance products available. It is the obligation person seeking insurance to determine the coverages needed. If incapable of doing so the person seeking insurance can retain the services of a professional risk manager who, for a fee, will advise the insured of the coverages and limits needed. Because a loss occurs where the coverage was determined to be inadequate establishes only the negligence of the insured not the negligence of the agent who fulfilled the order of the insured.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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Start the New Year Right With Insurance Law Skills

New Books

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

Barry Zalma practiced law in California for more than 44 years as an insurance coverage and claims-handling lawyer, and has spent more than 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

Zalma on Property and Casualty Insurance:

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

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

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

Insurance Law Deskbook Zalma

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

CalifCal Lawornia Insurance Law Deskbook:

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

Insurance Bad Faith and Punitive Damages Deskbook:

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

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

All available at fastcase.com.


Books from ClaimSchool, Inc.

“Insurance Law”

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

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

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

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

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

Mold Claims Coverage Guide

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

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

Construction Defects Coverage Guide

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

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

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

Insurance Claims: A Comprehensive Guide

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

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

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


Books from the American Bar Association

The Commercial Property Insurance Policy Deskbook

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

By Barry Zalma

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

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

The Insurance Fraud Deskbook

Author: Barry Zalma

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

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

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

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

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

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

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

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

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

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

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

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


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

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

• Recognizing suspicious claims

• Proper investigation procedures

• Analysis of laws concerning fraudulent personal and real property claims

• Evaluating and settling claims.

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

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


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No Promised Central Station Alarm – No Theft Coverage

Promises Made Must be Kept for Coverage to Exist

Insurance contracts require, for validity, that the parties to the contract keep the promises made when the policy was acquired. When a plaintiff promises – in order to obtain coverage for theft – that it will install an operational central station reporting alarm system it must do so to obtain the coverage.

In Orchard Park Plaza, LLC v. Chubb Custom Insurance Company, No. 1-17-2526, 2018 IL App (1st) 172526, Appellate Court of Illinois First Judicial District Fourth Division (December 20, 2018) Orchard Park Plaza, LLC (Orchard)  made such a promise and obtained insurance from Chubb Custom Insurance Company (Chubb). However, it failed to install a central station reporting alarm system and its claim to Chubb for theft was denied.

Orchard Park sued Chubb who had denied a property damage claim submitted by Orchard. The parties filed cross-motions for summary judgment, and the circuit court granted summary judgment in favor of Chubb on Orchard’s claims for reformation and declaratory judgment.

BACKGROUND

Orchard owns commercial property located on Orchard Drive in Park Forest, Illinois (property). When Orchard sought to obtain new insurance coverage for the property in March 2012, Orchard and Chubb negotiated through intermediaries. During the negotiations, the Matanky Realty Group was represented by Euclid Insurance Agency, a/k/a USI Company (Euclid), a retail insurance broker. Kevin Walker (Walker) from Euclid coordinated with Theodore Cornell (Cornell) at R-T Specialty of Illinois (RTS), a wholesale broker. Cornell contacted WKF&C Agency, Inc. (WKF&C), an underwriter for Chubb and other insurers.

The proposed policy excluded theft coverage. On March 20, 2012, Cornell responded, in part, “we need the following to bind: *** [c]onfirm theft will be included with a CS Alarm (they are putting one in).” A “CS Alarm” refers to a central station alarm. The broker responded that it can include theft once a central station alarm has been installed and confirmed active either with service contract or inspection.

The property was damaged and substantial amounts of copper cables and tubing were cut out of the walls during a break-in on October 15, 2012. Although Robert did not know the exact installation date, he testified during his deposition that an alarm system was operational at the property before September 27, 2012. According to Robert, the alarm system was set up with an automatic dialer. If the alarm was triggered, it would automatically dial the property manager, Gary Miller (Miller), as well as Matanky Realty Group and the Park Forest police department. Robert testified that the alarm was not functioning at the time of the burglary because the electric utility company had caused a power outage and the backup battery was drained.

After Orchard submitted a claim for the loss, Chubb requested information regarding which company monitored the alarm system at the property. In an email to Walker, Robert stated that the alarm was not monitored “since it was set up with a direct dialer to property management and the police.”

Chubb denied Orchard’s claim based on the theft exclusion in the policy. In the declaratory judgment count, Orchard sought an order declaring that the alarm system installed at the property is a central station alarm system or, alternatively, that the term central station alarm system is ambiguous and should be interpreted in favor of Orchard, as the insured.

The circuit court granted Chubb’s motion for summary judgment. The circuit court found that the policy could only be amended by endorsement and that there was no request to remove the theft exclusion by endorsement.

ANALYSIS

Orchard seeks reformation of its insurance contract with Chubb. A court may reform a contract when the written agreement does not reflect the intent of the parties. To state a claim for reformation, a plaintiff must allege:

  1. the existence and substance of an agreement between the parties and the identity of the parties to the agreement;
  2. that the parties agreed to reduce their agreement to writing;
  3. the substance of the written agreement;
  4. that a variance exists between the original agreement of the parties and the writing; and
  5. the basis for reformation.

Based on the communications between the parties, Orchard cannot prove an agreement by clear and convincing evidence and thus the elements of a reformation claim cannot be met. Even assuming that the parties’ intent was to remove the theft exclusion upon the fulfillment of certain conditions, Orchard nevertheless failed to satisfy what those conditions were and whether they were met.

The court observed that the alarm system installed at the property does not appear to have been a central station alarm because the hazard-detecting device installed at the property did not transmit a signal to a “central station.” Alarms can be

  • a local alarm, in which an alarm bell on the premises signals an intrusion;
  • a direct connect alarm, in which the alarm bell or signal device is located in a police or fire station; and
  • a central station alarm, in which the signal device is located in a station and the station continually checks the signal system and either contacts the authorities or sends out its own armed guards when an emergency signal is received. (See Michael H. Boyer & Barry Zalma, Property Investigation Checklists: Uncovering Insurance Fraud, § 2:55 (May 2018 update).

The EVDFI proposal for the installation of a “wireless alarm system,” which was accepted by Robert on behalf of Orchard, made no reference to a central station alarm. Robert acknowledged that the alarm at the property was “not monitored since it was set up with a direct dialer to property management and police.”

Even assuming that the alarm system qualified as a central station alarm, the other requirements articulated in the Kipp email were not satisfied. Kipp wrote that theft coverage could be included “once a central station alarm has been installed and confirmed active either with service contract or inspection.”

The Chubb policy, as written, included a theft exclusion. In its breach of contract count, Orchard did not allege a breach of the written policy.

Chubb was not in the business of providing information, and the information it provided (through intermediaries) to Orchard was merely ancillary or incidental to the sale of insurance policies. Since there was no central station reporting alarm system active at the property there was no coverage for the theft.

ZALMA OPINION

Insurers are usually unwilling to insure against the peril of theft in a commercial property without assurance that the property is protected by a central station reporting alarm system. Chubb offered to insure theft if the insured installed an operational central station reporting alarm system. The insured installed an alarm that did not report to a central station. As a result it did not accept Chubb’s offer and the theft exclusion applied because the insured did not meet the condition required for theft coverage.


© 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

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