“The Insurance Examination Under Oath”

An Important Tool to Defeat Fraud

Product DetailsThe Standard Fire Insurance policy, statutorily mandated for two centuries, contains a condition that requires an insured to appear for and testify at examination under oath before anyone appointed by the insurer. The U.S. Supreme Court in 1884 ruled in Claflin v. Commonwealth Insurance Co. (1884) 110 U.S. 81 [28 L.Ed. 76, 3 S.Ct. 507]. ““The object of the provisions in the policies of insurance, requiring the assured to submit [202 CalApp3d Page 1416] himself to an examination . . . was to enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to its rights, to enable it to decide upon its obligations, and to protect it against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. A false answer as to any matter of fact, material to the in-not statements made in an insured’s claim.”

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by 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.


 

Barry Zalma, Inc.

© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Insured Must Treat Insurer With Good Faith & Fair Dealing

Insured Must Cooperate in Insurer’s Investigation of Claim

The covenant of good faith and fair dealing goes in both directions. Neither party to the contract of insurance may do anything to deprive the other of the benefits of the contract of insurance.

When an insured makes a first party claim the insured is obligated to cooperate in the investigation of the insurer and provide documents required to be produced by the insurer. In addition the insured can be required to provide sworn testimony about the loss. The cooperation requirement is a condition precedent to indemnity. Since many insureds think insurers are evil and can be threatened to pay any claim presented if threatened with bad faith, when a claim is denied for failure to cooperate the insured will usually sue.

In Ngoc Tran v. Federal Insurance Company, Case No. 17-3921, United States Court Of Appeals For The Sixth Circuit (April 18, 2018) the Sixth Circuit dealt with an interesting case presented by Ngoc Tran. She owned a great deal of gold jewelry: $374,330 worth, to be exact. A few years ago, she decided it was time to insure her collection. She purchased a valuable-articles policy from Federal Insurance Company (“Federal”). About eight months later, Tran reported the jewelry stolen and sought to collect on the policy.

SUSPICIOUS CLAIM

Federal suspected that the burglary was an inside job. For starters, the responding officer did not think the crime scene—which would have required the purported burglar to make a rather acrobatic leap through a window—looked like a break-in. And Federal spotted a number of other inconsistencies and oddities in Tran’s story, including the substantial disparity between her reported annual income ($0) and monthly living expenses (sometimes in excess of $5000). As a result, the company asked Tran to provide various business and personal records to corroborate her story. For one reason or another, Tran failed substantially to do provide the business and personal records. After several unsuccessful attempts to obtain the records, Federal denied Tran’s claim, citing her “failure to cooperate.”

THE SUIT

Tran filed suit, seeking to compel Federal to cover the claimed loss. The district court granted Federal summary judgment, holding that Tran had failed to cooperate with the company’s investigation. Tran appealed.

ANALYSIS

Insurance policies often include “cooperation clause[s]” that impose certain duties on the insured party in the event of a loss. Tran’s policy had a cooperation clause requiring her to “produce all records and documents” that the insurance company requested. Because Tran failed to produce many requested documents, Federal maintains that it does not have to pay out her claim.

Under Ohio law, an insured party’s failure to comply with a cooperation clause lets the insurer off the hook if the insured’s noncooperation result[s] in material and substantial prejudice to the insurance company.

Federal repeatedly requested records from Tran, and Tran repeatedly failed to produce many of those records. Initially, Tran claimed that she did not have the records. Then, instead of retrieving copies of those records from third parties—such as her bank and accountant—she gave Federal written authorization to get the documents. The problem is, even with Tran’s written authorization, many of the third parties would not provide the records directly to the company.

When Federal eventually received some records Tran refused to confirm their accuracy. For example, the company obtained a few years’ tax returns from Tran’s accountant, but Tran would not verify that they accurately represented her income. In another instance, Federal got Tran’s phone records from AT&T, but Tran claimed not to remember the identities of eight key telephone numbers listed in the log. And when Federal obtained win/loss statements from local casinos (Tran’s live-in boyfriend was a gambler), Tran disputed the statements’ accuracy.

Federal was never able to obtain, in the course of its claims, investigation Tran’s complete bank account information, as well as two years’ tax returns. Tran initially told Federal that she did not have any bank accounts. After further questioning, she admitted to having two accounts, but she still never gave Federal complete account information. Tran also claimed that two years of missing tax returns simply did not exist, but did not offer evidence to support that claim. When all was said and done, Tran provided the insurance company only some of the documents and information it requested and refused to confirm the accuracy of several key documents Federal obtained on its own accord.

This level of noncompliance was material and substantial. Federal had reason to question Tran’s story about the burglary. And Tran’s failure to provide the requested records impeded its ability to investigate the truth of her claims. The bank records and tax returns would have shed light on Tran’s financial situation in the years surrounding the alleged burglary. So too would the casino records reflecting her boyfriend’s gambling habit.

Federal was confronted with a record that suggested Tran had no annual income, yet somehow maintained monthly expenses sometimes exceeding $5,000 around the time of the loss. Tran’s obstinacy frustrated the company’s ability to determine Tran’s motive, alibi, or any other aspect of her involvement (or non-involvement) in the alleged burglary. Moreover, because Tran’s noncooperation persisted for months and affected several categories of information, it impaired Federal’s ability to complete a full and fair investigation. Her noncooperation was clearly prejudicial.

Tran nevertheless insisted that her attempted compliance was enough. She reasons that she provided some records and made an effort to obtain others. But Tran sets the bar for compliance too low. A party’s compliance with some of a policy’s requirements does not excuse the party’s material failure to comply with others. Although Tran provided Federal with authorizations to obtain records from third parties, it was Tran’s undisputed responsibility under the contract to obtain the requested documents—not Federal’s.

Tran also argues that Federal cannot prove that her failure to cooperate was willful, because she did not destroy any documents or fail to produce documents that she had in her possession. Maybe so, but she missed the point since, if Tran did not currently have the requested records, the cooperation clause obligated her to make an effort to obtain them. While Tran suggests that she did eventually make an effort to obtain her tax returns, she did not do so until more than a year after she filed this suit. That is not “cooperation.”

The district court thus properly granted summary judgment to Federal on the grounds that Tran failed to cooperate.

ZALMA OPINION

Federal went beyond the call of duty required by the covenant of good faith and fair dealing. It was patient and waited for production from Tran after multiple requests. It took authorizations and tried to get the records which were withheld and it was met with an impossible fact that she earned nothing but spent $5,000 a month. Unable to complete the investigation Federal rightfully and fairly rejected the claim. Failure to cooperate is a breach of a material condition and a failure to deal in good faith.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

 

 

 

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Insurance Ethics and Rescission

How to Be an Effective Insurance Professional

Since insurance is a business of utmost good faith it is necessary for every insurance professional to understand the ethical compass that must be followed to deal fairly and in good faith with every insured.  The same obligation falls equally on the insured who, if the insured breaches the covenant and deceives the insurer into entering into a contract of insurance, the contract can be rescinded from its inception.

The two books that follow make it possible for every insurance professional to deal ethically and understand how to void a policy of insurance if the insured does something that deceives an insurer into issuing a policy it would not have issued had it not been deceived.

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.

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.

Read this and more books by Barry Zalma at http://zalma.com/zalma-books/


 

Barry Zalma, Inc.

© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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“Chutzpah” by an Arsonist

Appeal to Remove Guilty Plea Ridiculous

Arson is the most dangerous and vicious of insurance crimes. Firefighters, residents, neighbors, passers by, pets and other animals often die as a result of an arson for profit. “Chutzpah” as readers of this blog know is a Yiddish word meaning unmitigated gall usually defined as a criminal defendant who is convicted of murdering his parents seeks mercy because he is an orphan.

When an arsonist is given the opportunity to plead guilty in exchange by removing many of the charges available to the state the defendant can obtain a lesser sentence than if convicted of all of the charges against the arsonist. When, as in Gloria Eun Hye Lee, a/k/a Gloria Eunhye Lee v. The State Of Nevada, No. 72653, Supreme Court Of The State Of Nevada (April 10, 2018) is greater than expected the defendant will attempt to change the plea and seek a new trial claiming inadequacy of counsel.

CONTENTIONS

Gloria Eun Hye Lee contends that the district court erred in denying claims that her counsel was ineffective. She asserts that, had counsel more effectively challenged the charges pretrial, she would not have pleaded guilty and would have insisted upon going to trial. She also argues that counsel was ineffective at sentencing.

ANALYSIS

To establish ineffective assistance of counsel, a petitioner must demonstrate counsel’s performance was deficient because it fell below an objective standard of reasonableness, and resulting prejudice in that there is a reasonable probability, but for counsel’s errors, the petitioner would not have pleaded guilty and would have insisted on going to trial. The Supreme Court will always give deference to the district court’s factual findings if supported by substantial evidence and not clearly erroneous.

First, Lee argues that trial counsel was ineffective for failing to successfully dismiss the charge of first-degree arson or challenge the statute at sentencing because the business she was accused of setting ablaze, a pet store, was unoccupied and not a dwelling. Lee failed to demonstrate deficient performance because the pet store was an “other structure” within the plain language of NRS 205.010(1) and, under the same provision, whether that structure was occupied is irrelevant. Therefore, the district court did not err in denying this claim.

Second, Lee argues that trial counsel was ineffective for failing to challenge the charges of first-degree arson, arson with intent to defraud, and insurance fraud as violations of double jeopardy. Separate charges for these offences do not offend double jeopardy. First-degree arson and burning with intent to defraud an insurer are not the same offense. First-degree arson requires the willful and malicious setting of a fire to a structure. Setting a fire with intent to defraud an insurer requires the willful setting of a fire with the intent to defraud the insurer. The arson offenses were completed upon the setting of the fires and insurance fraud was alleged to have occurred afterward. Lee has not demonstrated prejudice considering the significant benefits she received in pleading guilty. The State dropped charges of conspiracy to commit burglary, burglary, conspiracy to commit arson, 26 counts of attempted cruelty to animals, one count of arson with intent to defraud insurer, and attempted theft. Therefore, the district court did not err in denying these claims.

Third, Lee contends that counsel should have argued that there is no felony crime of attempted cruelty to an animal as the statute only operates where actual harm has come to an animal and she did not intend to commit animal cruelty as her alleged actions only incidentally endangered the dogs. Lee failed to demonstrate deficient performance. She has cited no authority suggesting that starting a fire in a building could not amount to willfully and maliciously attempting to kill the dogs kept therein. Therefore, the district court did not err in denying this claim.

Fourth, Lee argues that the district court erred in denying her claim that trial counsel failed to investigate mitigating circumstances before her guilty plea and sentencing. She asserts that counsel should have introduced evidence concerning Lee’s medical and mental health history, specifically, her drug addiction. This argument lacks merit. Counsel introduced Lee’s medical and mental health history through a sentencing memorandum and letters from Lee, her family, friends, and associates. These documents referenced Lee’s miscarriages, high-risk pregnancy, migraines, abuse of pain medications, depression and attendant medication, and history of counseling. Notably, Lee’s letter to the court did not reference drug addiction and counsel could not recall Lee ever informing them of serious drug addiction. Given this evidence, the district court’s conclusion that counsel was not deficient for not unearthing additional comparable evidence and that such evidence would not have affected the outcome of the sentencing is supported by substantial evidence. As this proposed evidence was unlikely to have affected the outcome of sentencing, Lee failed to demonstrate that it was so compelling as to have demonstrated a legal excuse for the crimes such that she would have forgone the significant benefits of the guilty plea agreement and insisted upon going to trial. Therefore, the district court did not err in denying this claim.

Fifth, Lee argues that the district court erred in denying her claim that the cumulative effect of the ineffectiveness of counsel, prosecutorial misconduct, and trial court error deprived her of due process. Lee has cited no authority that requires consideration of the cumulative effect of defaulted claims with properly raised claims of ineffective assistance of counsel.

ZALMA OPINION

Lee set fire to her pet shop in order to obtain money from her insurance company ignoring the fact the pet shop was filled with animals who could have died from the results of the fire, not to mention firefighters and neighbors. She was charged with many crimes and pleaded guilty to one to avoid a very long sentence. Then, with Chutzpah greater than that expressed by Bernie Madoff, she tried to withdraw her guilty plea and get a trial. Thankfully, the Supreme Court of Nevada did not fall for her claims and she will spend the full sentence in prison.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

 

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California Claims Regulations

Training Required Every September

The state of California regulates the insurance industry with a vengeance. Every year everyone involved in claims must be trained on the application of the California Fair Claims Settlement Practices Regulations and the California SIU Regulations. It does allow, rather than require a training session, that the claims person can sign a sworn statement that he or she has read and understood the Regulations.

In two books each set of Regulations is explained in language any claims person or member of claims management can understand and apply. The books are available at Amazon.com at http://zalma.com/zalma-books/

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.

You can read about each book and other books by Barry Zalma available at Amazon.com at http://zalma.com/zalma-books/


 

Barry Zalma, Inc.

© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Physician Heal Thyself — in Prison

Sex With Patient Not a Legitimate Psychotherapeutic Treatment

A practicing psychologist, Richard Scott Lenhart, engaged in sexual behavior with two of his patients under the guise that the sexual contact was legitimate psychotherapeutic treatment which he then routinely billed insurance for these sessions. He was charged with insurance fraud and indecent assault and plead no contest in a Pennsylvania state court.

In Commonwealth Of Pennsylvania v. Richard Scott Lenhart, J-S01036-18, No. 1070 MDA 2017, Superior Court Of Pennsylvania (APRIL 6, 2018) after the conviction Lenhart received a fairly harsh sentence and appealed his conviction and sentence.

FACTS

On May 19, 2015, Appellant entered a nolo contendere (no contest) plea to two counts each of indecent assault and insurance fraud. On February 4, 2016, with the benefit of a pre-sentence investigation report (“PSI”), the court ordered Appellant to pay restitution to the insurance company in the amount of $71,557.00 and sentenced him to an aggregate term of three (3) to six (6) years’ incarceration. The court also adjudicated Appellant a Tier III sex offender and a sexually violent predator (“SVP”) under the Sex Offender Registration and Notification Act (“SORNA”) in effect at that time.

ISSUE

Appellant raised the following issue for review:

DID THE SENTENCING COURT ABUSE ITS DISCRETION IN IMPOSING MINIMUM SENTENCES WITHIN AND ABOVE THE AGGRAVATED RANGE OF THE SENTENCING GUIDELINES WHERE THE RECORD DID NOT SUPPORT AGGRAVATING CIRCUMSTANCES OR REASONS TO DEPART FROM THE GUIDELINES[?]

ANALYSIS AND ARGUMENTS

Appellant argued he had no prior record and cannot abuse his position of authority as a psychologist anymore, due to the revocation of his license and his conviction for a registerable offense. Yet, the court sentenced Appellant to an aggregate sentence of three to six years’ incarceration, including consecutive, aggravated range or above the aggravated range sentences, which were unsupported by legitimate factors, the court’s reasons, or the record.

Appellant complained the number of counts charged against him adequately addressed the number of victims, and their vulnerability was sufficiently addressed in the acknowledgment that the offensive conduct was nonconsensual. Appellant submitted his commission of these offenses while he also committed insurance fraud was adequately addressed by the consecutive nature of the sentences imposed.

Appellant concedes the possibility of consecutive sentences, based on the number of counts he pled guilty to, but he insists the court cannot then use the same factors (number of victims or insurance remuneration) to justify any departure from the standard sentencing guidelines. Appellant complained the sentence was too strict.

Generally, Pennsylvania law affords the sentencing court discretion to impose its sentence concurrently or consecutively to other sentences being imposed at the same time or to sentences already imposed. Any challenge to the exercise of this discretion ordinarily does not raise a substantial question.

A basic allegation that a sentencing court failed to consider or did not adequately consider certain factors does not raise a substantial question that the sentence was inappropriate.

On the other hand, an appellant raises a substantial question when he alleges the sentencing court erred by imposing an aggravated range sentence without consideration of mitigating circumstances. An allegation that the sentencing court provided inadequate reasons on the record for imposing a sentence above the standard range also constitutes a substantial question.

A sentencing court may consider any legal factor in imposing an aggravated range sentence. Provided there is an appropriate evidentiary link between the uncharged conduct and the defendant, the court may consider the conduct as relevant to the “protection of the public” sentencing factor.

The appellate court’s standard of review concerning the discretionary aspects of sentencing states: “Sentencing is a matter vested in the sound discretion of the sentencing judge, and a sentence will not be disturbed on appeal absent a manifest abuse of discretion. In this context, an abuse of discretion is not shown merely by an error in judgment. Rather, the appellant must establish, by reference to the record, that the sentencing court ignored or misapplied the law, exercised its judgment for reasons of partiality, prejudice, bias or ill will, or arrived at a manifestly unreasonable decision.” [Commonwealth v. Hyland, 875 A.2d 1175, 1184 (Pa.Super. 2005)]

Where the sentencing court had the benefit of a PSI, the appellate court is allowed to assume the sentencing court was aware of relevant information regarding the defendant’s character and weighed those considerations along with mitigating statutory factors.

After a thorough review of the record, the briefs of the parties, the applicable law, and the well-reasoned opinion of the Honorable Jonathan D. Grine, the appellate court concluded the record belies Appellant’s claims, which in turn merit no relief. The trial court opinion comprehensively discusses and properly disposes of the complaints raised. Appellant abandoned all professional ethics when he engaged in sex acts with his highly vulnerable patients for seventeen years, failed to stop on his own, and isolated himself from other professionals and support people who warned him to stop. Appellant was unable to accept that his conduct was wrong. The trial court considered, for example, Victim N.M.’s impact statement and Victim A.M.’s allegations and explained on the record it imposed sentences outside standard range on both indecent assault charges, in light of Appellant’s monstrous offenses against his victims, whom he exploited and intimidated mentally and physically over long periods of time for Appellant’s own sexual gratification. The trial court’s belief Appellant is a poor candidate for rehabilitation and the court’s explained on record it imposed aggravated range sentences for insurance fraud offenses because Appellant systematically sought and received financial gain from his victimization of his patients.

As a result the appellate court concluded that the trial court properly fashioned an aggregate sentence for the Appellant under the circumstances. The sentencing court considered the particularly heinous specifics of the offenses, which Appellant perpetrated for many years while he occupied a position of trust, as well as his character and lack of remorse.

ZALMA OPINION

Dr. Lenhart is a perfect example of unmitigated gall. To state, after using his profession as a means of convincing vulnerable women to allow him to sexually abuse them – the equivalent of a rape by fraud – and then to charge insurance companies for the activities that he claimed was treatment, is probably the most egregious form of insurance fraud coupled with sexual misconduct.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

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Basic Training For All New and Experience Claims People

All Adjusters Need Knowledge of Insurance and Claims Handling

Are you a claims person? Do you employ claims people? Do they all know the basics necessary to thoroughly and in good faith investigate and resolve an insurance claim? Do they all think they know everything there is to know about claims handling? Are you presenting a claim? Do you want to know what the adjuster should do when handling your claim?

The claims person or claims management interested in effective, good faith claims handling the two compact books on insurance claims handling are a necessity for everyone in the insurance claims business.

The person presenting a claim to an insurer needs to know what to expect from the adjuster assigned to their claim. The two compact books on insurance claims handling are necessary for everyone presenting a claim to an insurer to understand the process and successfully obtain the benefits to which the person making a claim is entitled.

“The Compact Book on Adjusting Liability Claims: A Handbook for the Liability Claims Adjuster”

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

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

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

Available as a Kindle book

Available as a paperback.

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

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

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

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

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

Available as a Kindle book.

Available as a paperback.


 

Barry Zalma, Inc.

© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Excess Insurer Must Prove Bad Faith of Primary Insurer to Subrogate

Equitable Subrogation Requires Subrogee to Stand in the Shoes of the Insured

In Preferred Professional Insurance Company v. The Doctors Company, 2018 COA 49, Court of Appeals No. 17CA0405, Colorado Court of Appeals (April 5, 2018), because the insured would have to prove bad faith in an action against his primary insurer based on the insurer’s refusal to settle, the primary insurer argued that the excess insurer must also plead and prove such bad faith. The court surmised:

“Suppose that an injured party sues a person who has both primary and excess insurance covering the claim. The injured party offers to settle for an amount within the primary coverage limit. The primary insurer exercises its contractual, discretionary right not to accept the settlement. But the excess insurer, perhaps spooked by the prospect of a judgment exceeding the primary coverage limit, pays the settlement demanded by the injured party. When the excess insurer sues the primary insurer to recover the amount paid in settlement, claiming that the primary insurer should have accepted the settlement offer, what sort of claim may the excess insurer assert? And must the excess insurer plead and prove that the primary insurer acted in bad faith in declining to settle?”

FACTS

Preferred Professional Insurance Company (PPIC) is the excess insurer that paid the settlement. The Doctors Company (TDC) is the primary insurer that declined to settle. But while PPIC purported to bring a claim of equitable subrogation against TDC, it disavowed any intent to proceed on the legal theory that it stands in the insured’s shoes. And it did not plead or attempt to show that TDC acted in bad faith. Instead, PPIC’s theory is that general equitable principles allow it to recover from TDC apart from any rights of the insured under his contract with TDC, and that it need not plead or prove that TDC acted in bad faith.

The district court accepted PPIC’s theory and granted summary judgment in its favor.

BACKGROUND

The undisputed facts establish that the parties both held separate professional liability policies for the same insured, Dr. Rupinder Singh. A medical malpractice suit was filed against Dr. Singh and other parties.

TDC defended Dr. Singh in the suit as required by its primary liability policy. The policy provided coverage up to a limit of $1 million. TDC’s policy required Dr. Singh’s consent before accepting any settlement offers, but TDC retained the discretion whether to accept or reject any such offers.

PPIC’s insurance policy was an “excess policy,” which would cover any losses that exceeded TDC’s $1 million coverage up to an additional $1 million. As an excess insurer, PPIC did not have any duty to defend Dr. Singh in the suit.

The plaintiff in the medical malpractice suit offered to settle the case with Dr. Singh for $1 million. Dr. Singh conveyed his desire to accept the settlement offer to both insurers, but TDC declined the plaintiff’s offer. PPIC told Dr. Singh he should accept, and it paid the $1 million settlement.

On appeal, TDC contended that the district court erred as a matter of law. TDC asserted that, under well-established Colorado insurance law, an equitable subrogation claim brought by an excess insurer against the primary insurer to recover the amount paid in settlement can only be derivative of the insured’s rights.

ANALYSIS

Subrogation is a creature of equity having for its purpose the working out of an equitable adjustment between the parties by securing the ultimate discharge of a debt by the person who in equity and good conscience ought to pay it. Equitable subrogation arises because it is imposed by courts to prevent unjust enrichment.

In insurance cases, equitable subrogation is often used as a loss-shifting mechanism, dependent on the rights, obligations, and duties between the parties as set forth in the insurance policy. Thus, a subrogated insurer has no greater rights than the insured, for one cannot acquire by subrogation what another, whose rights he or she claims, did not have.

Under the terms of an insurance policy, a primary insurer, to the exclusion of the insured, may have complete discretion to accept or reject settlement offers. However, in deciding whether to accept a settlement offer, the insurer must give at least as much consideration to the insured’s interests as it does to its own.

If Dr. Singh had a contractual right to bring a tort claim against TDC for breach of the insurance contract for alleged bad faith failure to settle. In that claim, Dr. Singh would be required to prove that TDC acted in bad faith.

Conversely, Dr. Singh could not recover against TDC for any liability he suffered if TDC’s settlement decisions were shown to have been objectively reasonable. A primary insurer does not guarantee that its decision as to settlement will end advantageously, but it owes to its insured the duty to exercise an honest discretion at the risk of liability beyond its policy limits. Premising liability on an insurer’s negligence for failure to settle reasonably reflects the quasi-fiduciary relationship that exists between the insurer and the insured by virtue of the insurance contract, which necessarily imposes a correlative duty on the part of the insurance company to ascertain all facts in making a decision to settle.

It has often been said that the equitable doctrine of subrogation places the subrogee in the precise position of the one to whose rights and disabilities he is subrogated. Based on this principle the excess insurer and subrogee stands in the same place as the insured.

Whether derivatively based or not, an equitable subrogation claim allows for recovery only against obligated parties. Conversely, equity will not impose on someone an obligation not otherwise required by law. Equitable subrogation is not an unchecked principle of conscience that allows recovery whenever it seems fair or right to make the defendant pay for the subrogor’s losses that defendant is not legally obligated to pay.

PPIC presented no good reason for ignoring the parties’ rights under the insurance contract. To the contrary, if PPIC were allowed to seek recovery without a showing that TDC acted in bad faith in ordinary circumstances such as alleged here, an excess carrier could accept a pretrial settlement offer within the primary insurer’s policy limits, knowing it could collect reimbursement from the primary carrier for whatever settlement amount it, as the “equitable subrogee,” paid. This outcome would occur regardless of whether the primary carrier had fulfilled its contractual duty to its insured to make settlement decisions reasonably and in good faith.

Were the Court of Appeal to accept PPIC’s argument that equitable subrogation applies where the excess insurer shows merely that it “had a reasonable, good faith belief that it should make the payment to settle the claim,” the Court of Appeal would subvert a primary insurer’s contractual right to control the insured’s case by effectively giving control of settlement decisions to the excess insurer. That would incentivize excess carriers to settle claims within primary policy limits without regard to damages or liability, and with no risk to them.

Without an assertion that TDC acted in bad faith, PPIC’s equitable subrogation claim is not legally viable. Therefore, because PPIC’s claim for recovery is not supported by law, the Court of Appeal reversed the district court’s order granting summary judgment for PPIC and remanded the case for entry of judgment of dismissal in TDC’s favor.

ZALMA OPINION

An excess insurer does not want the obligation of the primary insurer to defend the insured. It only wants to become involved if the exposure faced by the insured exceeds the primary limits. In this case the offer was for the primary limit that the primary did not want to accept. The excess, without evidence that the refusal was in bad faith, paid out its limit and then sued the primary insurer without cause. The Court of Appeal refused to subvert the primary insurer’s rights to control defense and settlement.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

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Risk Transfer Devices Don’t Always Work

A Brief Opinion Must Be Honored

Landlords engage in risk transfer by requiring a tenant to insure the property leaving the responsibility for damages to the structure or bodily injury occurring to people on the premises. Because they don’t trust the tenant the landlord will often buy its own insurance to protect against contingent losses.

In Jedak Corporation d/b/a Razzle’s v. Seabreeze Office Associates, LLC and Neil Hunter, Case No. 5D16-3777, District Court of Appeal of The State Of Florida Fifth District (April 13, 2018) the parties disputed the obligations under a written commercial lease agreement.

Seabreeze Office Associates, LLC (“Landlord”), obtained summary judgment for damages arising from the breach of contractual provisions requiring that Appellant, Jedak Corporation d/b/a Razzle’s (“Tenant”), to indemnify and provide insurance coverage to protect Landlord from losses arising from Tenant’s occupancy of the premises. Although Tenant raises numerous issues on appeal, the Court of Appeal only needed to address one, which it conclude is dispositive of the dispute.

The Court of Appeal cited the parties to Cas. Indem. Exch. v. Penrod Bros., 632 So. 2d 1046, 1047 (Fla. 3d DCA 1993) where the landlord’s insurer fully covered a loss, the landlord was found to suffer no compensable damages arising from tenant’s breach of contract.

Because the Landlord did not incur any damages that were caused by the breach of the particular lease provisions dealing with insurance, the lower court erred in granting summary judgment in favor of Landlord and in denying summary judgment in favor of Tenant.

Accordingly, the Court of Appeal reversed and remanded the cause with directions that summary judgment be entered in favor of Tenant.

ZALMA OPINION

The Court of Appeal resolved the issues in three paragraphs and probably could have done it with one. Since lawyers and insurers are faced with reviewing court opinions that run dozens of pages before getting to the point Chief Justice Cohen and justices Palmer and Torpy must be commended for their brevity and succinctness. Those of us who read appellate decisions thank you all.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

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Insurance Fraud & Weapons to Defeat Fraud In Two Volumes

Insurance Fraud

A Manual for Insurance Claims Professionals, Insurance Fraud Investigators and Insurance Coverage Lawyers

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

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

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback


 

Barry Zalma, Inc.

© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Zalma’s Insurance Fraud Letter

The Essential Resource For The Insurance Fraud Professional  

 April 15, 2018

In 1973 an insurance adjuster, frustrated by his failure to prove that a bar owner had destroyed his bar by arson with the intent to defraud the insurer, was responsible for the creation of the tort of bad faith in first-party claims. The California Supreme Court, in Gruenberg v Aetna Insurance Co., 9 Cal 3d 566, 108 Cal Rptr 480 (1973), concluded that unfounded actions by an investigator which caused an insured to be arrested for arson required implementation of the new tort of bad faith.

Zalma’s Insurance Fraud Letter, Volume 22, No. 8


  • Ethics & the Insurance Fraud Investigation
  • A Fraud Decision
  • Creative Criminal Gets 57 Months in Prison
  • Please, Say It Isn’t So, DidCalifornia Steal More than $1 Billion from the Federal Government?
  • How Much Does Fraud Take From California?
  • Man Bites Dog – Insurer Gets Judgment Against Medical Provider for Fraud
  • Good News From the Coalition Against Insurance Fraud
  • Health Insurance Fraud Convictions
  • Other Insurance Fraud Convictions
  • Zalma Books

 Now available as Kindle or paperback books are the following non-fiction texts for insurance professionals:

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

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

  • Heads I Win, Tails You Lose
  • Arson for Profit
  • Murder & Old Lace
  • Murder and Insurance Fraud Don’t Mix
  • Candy & Able – Murder for Insurance Money
  • The Runt – a short story

See all Barry Zalma Books Available on Amazon here.


Zalma on Insurance – A Blog

 The most recent posts to the daily blog, Zalma on Insurance, are available at  http://zalma.com/blog.

Check in every day for a case summary at http://zalma.com/blog:

Zalma’s Insurance 101

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

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

Some of the 1,022 videos follow: If you start at Volume 1 at the bottom of the blog’s first page and view one or two videos a day you will have approximately 12 to 24 hours of training a year until you get to the last video.

 Advertise

Are you a lawyer, law firm, independent insurance adjuster or insurer who would you to promote yourself or your firm to more than 200 daily visits by insurance professionals or the more than 2000 subscribers to ZIFL?

If you are, an ad on the blog Zalma on Insurance or Zalma’s Insurance Fraud Letter, to such a selective audience of insurance professionals and management can be more effective than any other form of advertising.

For only $100 a month on the blog or $100 an issue on ZIFL your ad will be permanent and effective.

Regards,
Barry Zalma  

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The Compact Book on Commercial Property Insurance Policy:

The Means to Effectively Acquire a Commercial Property Policy and Present and Collect a First Party Property Insurance Claim

 

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

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


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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A Mule Drawn Cart is Neither an Auto nor a Trailer

Win Some – Lose Some

Insurance contracts need to be written in clear and unambiguous language that can be understood by anyone with a Fourth Grad education. Preparing an insurance contract is often difficult and by not being absolutely clear can cost an insurance company money.

In Georgia Farm Bureau Mutual Insurance Company v. Claxton et al., A18A0737, Court of Appeals of Georgia (April 2, 2018) Georgia Farm Bureau Mutual Insurance Company (“Georgia Farm Bureau”) appealed from the trial court’s denial of its motions for summary judgment in a declaratory judgment action it filed against Dena Claxton and Carl Lowery. Claxton and Lowery, both of whom hold insurance policies issued by Georgia Farm Bureau and were involved in a motor vehicle accident. They each sought coverage under their respective policies.

FACTS

The largely undisputed record before the court reflects that Lowery was operating a mule-drawn carriage in a Christmas parade organized by the City of McRae. Claxton was riding in the carriage. After the parade had ended, Lowery and Claxton were riding the carriage back to Lowery’s motor vehicle when the carriage was struck in the rear by a motor vehicle operated by a third party, resulting in injuries to Claxton.

Lowery testified at deposition that the carriage he was driving was designed to be pulled by one horse or mule. He further stated that the carriage was designed to only be pulled by an animal and could not be hooked up to a motor vehicle. The carriage was being pulled by a mule during the parade and at the time of the accident. Lowery did not charge Claxton a fee to ride in the carriage.

Following the accident, Claxton filed suit against Lowery. In that action, which is separate from this case, she sought damages from Lowery arising out of the accident.

Lowery, an insured of Georgia Farm Bureau, claimed the policy covers any liability he may have for Claxton’s injuries. In the same action, Claxton also claims that two uninsured motorist (“UM”) policies she holds with Georgia Farm Bureau also provide coverage for her injuries arising from the accident.

THE COVERAGES

The liability policy issued to Lowery contains an exclusion that Georgia Farm Bureau claims shields it from liability under the insurance contract. The exclusion provides that the policy “does not apply to . . . [t]he use of any livestock or other animal, with or without an accessory vehicle, for providing rides to any person for a fee or in connection with or during a fair, charitable function, or similar type of event[.]” The policy defines “livestock” to include mules.

The UM policies issued to Claxton define “uninsured motor vehicle” to mean a “land motor vehicle or trailer of any type.” The policy defines “trailer” to mean a “vehicle designed to be pulled by a . . . [p]rivate passenger auto [or] [p]ickup or van.”

ISSUES

Georgia Farm Bureau first argues that the trial court erred by denying its motion for summary judgment with regard to its claim that the exclusion for livestock in Lowery’s policy applies and that Georgia Farm Bureau has no liability to him under his policy.

The trial court’s order focused specifically on the phrase “for a fee,” determining that because neither Claxton nor any other party had paid Lowery a fee to drive the carriage the exclusion did not apply. The actual terms of the policy provide an exclusion where the insured provides rides “for a fee or in connection with or during a fair, charitable function or similar type of event.” (emphasis supplied by the court) The trial court’s omission of this small but critical word caused it to err in denying summary judgment on these grounds. However, that does not end the issue.

ANALYSIS

The Mule Drawn Cart

It is undisputed that Claxton was utilizing a mule to draw the carriage at all relevant times, including during the parade and as he and Claxton were returning to Lowery’s vehicle at the time of the accident. However, it remains disputed whether the parade constitutes a “fair, charitable function, or similar type of event.”

The construction of an insurance contract is a matter of law for the court. When an exclusion is unambiguous and capable of but one reasonable construction, the trial court must expound the contract as made by the parties. A word or phrase is ambiguous when it is of uncertain meaning and may be fairly understood in more ways than one.

The Merriam-Webster Dictionary defines “similar” variously to mean “having characteristics in common” and “alike in substance or essentials.” Whether one thing is similar to another thing is necessarily a multi-faceted, qualitative, and subjective determination, and it is no less so in determining whether the parade at issue here is similar to a fair or charitable function. In brief, whether something is similar to something else is almost inherently ambiguous.

Because any ambiguities in the contract are strictly construed against the insurer as drafter of the document and any exclusion from coverage sought to be invoked by the insurer is likewise strictly construed. The court of appeal was unable to conclude that, as a matter of law, the Christmas parade was an event similar to a fair or charitable function.

Whether Lowery was providing a ride in connection with the event at the time of the accident is also a question of fact. The record reflects that the parade had ended at the time of the accident and that Lowery and Claxton were riding the carriage back to Lowery’s vehicle. As with the determination of whether the parade constitutes a “similar type of event” contemplated by the insurance policy, whether Lowery’s act of driving back to his vehicle was taken in connection with the parade is a question of fact for a jury to resolve.

In light of the foregoing, summary adjudication of Georgia Farm Bureau’s claim in regard to Lowery’s policy is not appropriate.

The UM/UIM Claim

Georgia Farm Bureau next argues that the trial court erred in denying its motion for summary judgment in regard to its coverage obligations under Claxton’s UM policies. Here, the record before us makes clear that the carriage Claxton was riding in was not a motor vehicle under the terms of her UM policy. She claimed the cart was a “trailer” as defined in her UM policy.

However, the definition of the term “trailer” in the UM policies sets a clear outer boundary relevant to the issues in this case: in order to qualify as a trailer that can be considered an uninsured motor vehicle, the vehicle must be designed in such a way that it can be pulled by private passenger autos, pickups, or vans.

The undisputed testimony in the record shows that the carriage Claxton was riding in was designed only to be drawn by an animal and that it specifically could not be attached to or pulled by a motor vehicle. Thus, there is no genuine issue of fact as to whether the carriage constituted a trailer under the terms of Claxton’s UM policies, and summary judgment was improperly denied by the trial court as to Georgia Farm Bureau’s coverage obligations under those policies.

ZALMA OPINION

If Georgia Farm Bureau wished to avoid liability for a mule draw cart in a parade would have been to add the word “parade” to the exclusion’s limitation to an animal drawn action in a “fair or charitable function” and not rely on the statement: “or similar type of event” language that was vague and ambiguous on its face.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

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True Insurance Crime Stories

Insurance Crime Stories from an Insurance Fraud Expert

Insurance fraud is a major crime taking as much as $300 billion every year from the insurance public. Understanding insurance fraud is important to the public and the people involved in the insurance industry. To protect the guilty I have fictionalized some cases in which I was personally involved dealing with the crime of insurance fraud. They have been published at Amazon.com as Kindle and as paperback books. Sometimes the fraud succeeds and sometimes it does not.

I hope you enjoy these, and other books I have written that are summarized at http://zalma.com/zalma-books/.

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.

Candy and Abel: Murder for Insurance MoneyProduct Details

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

Available as a Kindle Book.

Available as a paperback.

Murder And Insurance Fraud Don’t Mix

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

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

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

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

Available as a Kindle book.

Available as a paperback

Murder & Old Lace: Solving Murders Performed for Insurance Money

Product Details

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

Available as a Kindle book.

Available as a paperback.

Arson for 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.


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Falling Down Is Not a Motor Vehicle Accident

Nexus With Vehicle and Injury Required

Uninsured motorist (UM) coverage and Personal Insurance Protection (PIP) coverage is designed to protect an insured person against the risk of injury by an uninsured person. If an uninsured operator of an automobile causes injury to a person who has UM or PIP coverage the person with UM or PIP coverage can treat his insurer as if it was the insurer of the uninsured motorist. The coverage, of course, is limited to an accident that has a direct nexus to a vehicle.

In Gino Sulpizi v. LM General Insurance Company, Docket NO. A-4255-16T4, Superior Court Of New Jersey Appellate Division (April 4, 2018) Plaintiff Gino Sulpizi appealed after his insurer obtained a summary judgment of no coverage.

FACTS

Plaintiff, a Pennsylvania resident, primarily resides in Philadelphia. He owns a vehicle that has a Pennsylvania automobile insurance policy provided by LM Insurance. Plaintiff also owns a vacation home in Brigantine, New Jersey.

On June 30, 2015, plaintiff was at his vacation home in New Jersey when he decided to mail a letter. He drove his car from his home and parked across the street from a mailbox. Plaintiff exited his vehicle and began to walk across the street towards the mailbox. When he was halfway across the opposite lane, he saw a pickup truck approaching him and he “scurried over” to the side of the road. Plaintiff then tripped on the curb and fell near the mailbox. He alleges he suffered personal injuries as a result of the fall.

His Pennsylvania automobile policy issued by LM Insurance provided $5000 in PIP medical benefit coverage. Plaintiff submitted a PIP claim to LM Insurance for benefits exceeding $5000, contending he was entitled to additional coverage under the Deemer statute that makes an out of state policy a New Jersey policy if incident occurs in New Jersey. LM Insurance denied the claim because plaintiff was injured as a pedestrian and not while using his vehicle.

Thereafter, plaintiff filed a declaratory judgment action seeking $250,000 in New Jersey standard PIP benefits under the Deemer statute. On cross-motions for summary judgment, the trial court granted summary judgment to LM Insurance and denied plaintiff’s request for summary judgment.

ANALYSIS

The Deemer statute generally requires an insurer, authorized to do business in New Jersey, to provide PIP coverage for policies sold outside of New Jersey when the insured motor vehicle is “used or operated” in New Jersey.

The Deemer statute provides that out-of-state policies within its ambit are automatically construed as New Jersey policies when the covered vehicle is involved in a New Jersey accident. Specifically, the question is whether the Deemer statute requires coverage for a claim involving a pedestrian injured after parking his or her car and while walking across the street.

After reviewing the plain language of the statute and the case law discussing the terms “use” and “operation[,]” the court noted that the Deemer statute demanded a “‘substantial nexus’ between that out-of-state vehicle and the accident for which benefits are sought.

The appellate court affirmed the order granting summary judgment in favor of LM Insurance. Plaintiff never came into contact with the truck. Instead, he was injured when he moved out of the way, tripped, and fell. Thus, there was no nexus between plaintiff’s use or operation of his vehicle and his injuries.

ZALMA OPINION

When a person is injured it is natural to seek payment from whoever is responsible for the injury. Mr. Sulpizi attempted to put the blame on the person driving the truck he scurried away from while crossing the street. He never came in contact with the vehicle and tripped over the curb. Being clumsy after leaving a car is not an auto insurance loss.

 


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

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“Random Thoughts on Insurance”

 Digests from Barry Zalma’s Blog: Zalma on Insurance

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

Product Details

Since 2010 I have been writing a blog post at least five days a week.

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

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

Available as a Kindle book.

Available as a paperback.

Volume IV

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

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

Total Volume IV Available as a Kindle Book

2014-2015 Available as a paperback

2014-2015 Available as a Kindle Book

Volume III for the period from August 2013 to February 2015

Since 2010 I have been writing a blog post at least five days a week. Random Thoughts on Insurance Volume III: From Barry Zalma's Blog - "Zalma on Insurance" for the period from August 2013 to February 2015This book is a collection of those posts that reveal my interest in insurance case law. Some of the cases reviewed were important. Some were of first impression. Others will be totally unimportant. All were interesting to me and I hope are interesting to the reader.

Available as a Kindle book.

Available as a paperback.

Volume II: Articles from August 2012 – August 2013

Since 2010 I have been writing a blog post at least five days a week. This book is a collection of those posts that reveal my interest in insurance case law. Some of the cases reviewed were important. Some were of first impression. Others will be totally unimportant. All were interesting to me and I hope are interesting to the reader.

Available as a Kindle book.

Available as a paperback.

Volume I

Case Digests from Barry Zalma’s blog: “Zalma on Insurance”

Since 2010 I have been writing a blog post at least five days a week. This e-book is a collection of those poRandom Thoughts on Insurance - Volume One: Case Digests from Barry Zalma's blog: "Zalma on Insurance"sts that reveal my interest in insurance case law. Some of the cases reviewed were important. Some were of first impression. Others will be totally unimportant. All were interesting to me and I hope are interesting to the reader. This is the first of Five Volumes.

Available as a Kindle Book.

Available as a paperback.


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Forge a Certificate of Insurance – Guilty of Crime

Certificate of Insurance Has Legal Efficacy

Although issued by insurance agents with alacrity, Certificates of Insurance (COA) are important documents relied upon by those who receive them to provide comfort that the person they are dealing with is appropriately insured. When someone fails to obtain an accurate COA or alters a legitimate COA and forges the document to make it state the coverages falsely that person is subject to criminal prosecution.

In State of Washington v. Stacy Ann Bradshaw, No. 75853-5-I, Court of Appeals of the State of Washington Division One (April 9, 2018) the Court of Appeals was asked to determine if there was sufficient evidence to support a charge under the current forgery statute. To support the charge the State needed to prove that the allegedly altered written instrument had “legal efficacy.” Stacy Ann Bradshaw (Bradshaw), an escrow agent was convicted of forgery for altering a certificate of insurance to make it appear she had enough liability insurance to cover a transaction she had been hired to handle

FACTS

In 2014, Bradshaw was a licensed escrow agent and the owner of North Sound Escrow. By law, an escrow agent must maintain several types of liability insurance. Bradshaw had coverage for crime as well as for errors and omissions through the insurance firm USI Kibble & Prentice. The limits were $1 million per claim.

In February 2014, Bradshaw was retained as the escrow agent for the sale of commercial property for the price of approximately $1.4 million. Umpqua Bank was the lender for one of the parties. Umpqua asked Bradshaw for a copy of her insurance information. Bradshaw obtained a “Certificate of Liability Insurance” from Kibble & Prentice showing her limits of $1 million. She gave Umpqua a copy of the certificate that was altered to represent that Bradshaw had coverage limits of $2 million. Umpqua noticed the alterations and contacted both Kibble & Prentice and the Department of Financial Institutions, the agency that regulates escrow agents. This led to the prosecution of Bradshaw on one count of forgery who was convicted and sentenced her to 40 hours of community service, $3,600 in financial restitution, and 6 months of community supervision.

Bradshaw appealed.

ANALYSIS

Evidence is sufficient to support a conviction if, viewed in the light most favorable to the prosecution, it permits a rational trier of fact to find the essential elements of the crime beyond a reasonable doubt. At common law, forgery was the act of falsely making or materially altering, with intent to defraud, a writing which, if genuine, might apparently be of efficacy or the foundation of legal liability.

Legislation revising the forgery statute in 1975 removed the particularized list of categories of items susceptible to forgery. The current forgery statute simply prohibits the forgery of a “written instrument.”

At Bradshaw’s trial, the only issue was whether the certificate of insurance was a “written instrument.” A written instrument is broadly defined in the current statute as (a) Any paper, document, or other instrument containing written or printed matter or its equivalent; or (b) any access device, token, stamp, seal, badge, trademark, or other evidence or symbol of value, right, privilege, or identification. [RCW 9A.60.010 (7).] This definition was intended to continue the common law requirement that the instrument be something which, if genuine, may have legal effect.

Public Record

The certificate holder named on Bradshaw’s certificate of liability insurance is the Washington State Department of Financial Institutions. The certificate was filed with the department as evidence that Bradshaw was in compliance with coverage requirements. The trial court had no problem determining that the certificate has legal efficacy as a public record.

The former statute explicitly recognized that any “paper on file in any public office” is a writing susceptible to forgery. [Former RCW 9.44.020 (1909).] Bradshaw claimed, however, that to meet the requirement of legal efficacy as a public record, the written instrument must be issued by a government agency.

Forgery covers virtually every kind of instrument which has an effect on private or public rights.

This is not a case where an altered document found its way into an agency file accidentally. The certificate had material significance to the department. As part of the licensing process, an escrow agent must submit proof of financial responsibility to the department, including a fidelity bond providing coverage in the aggregate amount of one million dollars. To demonstrate compliance with the requirement for a fidelity bond, the applicant is required by regulation to provide the department with a certificate of insurance that includes the aggregate amount of coverage. Maintaining such insurance is a condition precedent to the escrow agent’s authority to transact escrow business in this state.

In short, the record shows that Bradshaw’s certificate of insurance was a type of document required by law to be filed and necessary or convenient to the discharge of the duties of the department. In view of the regulatory scheme, the trial court reasonably found that a certificate of insurance coverage for an escrow agent is a written instrument, the alteration of which supports a forgery charge because it is a public record with legal efficacy.

Bradshaw’s certificate of insurance, before alteration, was genuine. It was a representation of the limits of her coverage. The trial court correctly reasoned that if Umpqua had suffered damages as a result of the alteration and had sued Bradshaw for fraudulent misrepresentation, the original unaltered document would be a foundational piece of evidence of Bradshaw’s liability. And this is true even though the certificate states on its face that it “is issued as a matter of information only and confers no rights upon the certificate holder.” The court heard testimony that insurance certificates are typically used by insureds as evidence of their current policies and limits and that Bradshaw’s certificate provided such evidence to the department.

The Court of Appeals concluded that sufficient evidence supported the trial court’s determination that Bradshaw’s certificate of insurance had legal efficacy as a foundation for legal liability.

Rule of Lenity

Finally, Bradshaw invokes the rule of lenity to argue for reversal of her conviction. The rule of lenity operates to resolve statutory ambiguities in favor of a criminal defendant. The forgery statute provides a fair warning that it applies to Bradshaw’s conduct. She falsely altered a written instrument with intent to injure or defraud.

The requirement that the written instrument have legal efficacy is a limitation on the statutory definition of forgery, not an expansion of it. Because Bradshaw’s conduct is clearly covered by the statute, the rule of lenity is not applicable.

ZALMA OPINION

Bradshaw, to save some premium by increasing her limits of liability, became a felon and destroyed her ability to practice as an escrow officer. Although the criminal punishment is minimal with no jail time the effect on Brandshaw’s career explains why she tried to change the conviction on appeal. The COA is an important document and insurance professionals should be ready to report anyone who tries to modify it for purposes outside the true reason for the COA.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

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“HEADS I WIN, TAILS YOU LOSE”

Fictionalized Real Insurance Crime Stories

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.


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Mother, Don’t Let Your Child Become an Adjuster in Washington State

Statute Makes Individual Adjuster Liable for Tort of Bad Faith

The state of Washington, in an attempt to protect consumers, has acted in a way to drive insurers and their employed adjusters out of the state. This case makes it financially dangerous to be an insurance adjuster in Washington state.  I have railed against the tort of bad faith on this blog for several years and the case that follows proves why it should be done away with even if the insured was treated badly.

In Moun Keodalah and Aung Keodalah, husband and wife v. Allstate Insurance Company, a corporation, and Tracey Smith and John Doe Smith, wife and husband, No. 75731-8-I, Court Of Appeals Of The State Of Washington Division One (March 26, 2018) the Court of Appeals found that an adjuster could be personally liable for tort damages incurred by an insured as a result of what the state found to be bad faith conduct.

Moun Keodalah, unhappy with Allstate’s treatment of his uninsured motorist claim, sued Allstate and  Tracey Smith, the Allstate insurance adjustor who handled his claim. Washington state statute RCW 48.01.030 imposes a duty of good faith on all persons engaged in the business of insurance, including individual adjusters.

FACTS

Keodalah and a motorcyclist collided in April 2007. After Keodalah stopped at a stop sign and began to cross the street in his truck, a motorcyclist struck him. The collision killed the motorcyclist and injured Keodalah. Keodalah had purchased auto insurance from Allstate Insurance Company. Keodalah’s insurance policy provided underinsured motorist (UIM) coverage. The motorcyclist was uninsured.

The Seattle Police Department (SPD) determined the motorcyclist was traveling between 70 and 74 m.p.h. in a 30 m.p.h. zone. SPD reviewed Keodalah’s cell phone records. They showed that Keodalah was not using his cell phone at the time of the collision.

Allstate also investigated the collision. Allstate interviewed several witnesses who said the motorcyclist was traveling faster than the speed limit, had proceeded between cars in both lanes, and had “cheated” at the intersection. Allstate hired an accident reconstruction firm, Traffic Collision Analysis Inc. (TCA), to analyze the collision. TCA found that Keodalah stopped at the stop sign, the motorcyclist was traveling at a minimum of 60 m.p.h., and the motorcyclist’s “‘excessive speed'” caused the collision.

Keodalah asked Allstate to pay him the limit of his UIM policy, $25,000. But Allstate refused. Keodalah sued Allstate, asserting a UIM claim. Allstate designated Smith as its representative. Although Allstate possessed both the SPD report and TCA analysis, Smith claimed that Keodalah had run the stop sign and had been on his cell phone. Smith later admitted, however, that Keodalah had not run the stop sign and had not been on his cell phone. Before trial, Allstate offered Keodalah $15,000 to settle the claim. Keodalah refused and again requested the $25,000 policy limit. The case proceeded to a jury trial.

At trial, Allstate contended that Keodalah was 70 percent at fault. The jury determined the motorcyclist to be 100 percent at fault and awarded Keodalah $108,868.20 for his injuries, lost wages, and medical expenses.

Keodalah filed a second lawsuit against Allstate and included claims against Smith. These included IFCA violations, insurance bad faith, and CPA violations. Allstate and Smith moved to dismiss the complaint and the trial court granted the motion in part. It dismissed Keodalah’s claims against Smith and certified the case for discretionary review.

ANALYSIS

Bad Faith

Washington statute RCW 48.01.030 imposes a duty of good faith on “all persons” involved in insurance, including the insurer and its representatives.

The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.

A person who violates this duty may be liable for the tort of bad faith. Smith was engaged in the business of insurance and was acting as an Allstate representative. Thus, under the plain language of the statute, she had the duty to act in good faith. And she can be sued for breaching this duty.

The code’s broad definition of “person” includes both individuals and corporations and does not make any distinction between the duties they owe. Nothing in the statute limits the duty of good faith to corporate insurance adjusters or relieves individual insurance adjusters from this duty. The duty of good faith applies equally to individuals and corporations acting as insurance adjusters.

Washington courts have expressly stated that the statute does impose a duty of good faith on both the insureds and the insurer. Just as corporate insurance adjusters are representatives, so too are individual employee insurance adjusters.

RCW 48.01.030 imposes a duty of good faith on corporate and individual insurance adjusters alike.

The CPA

The CPA prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”  The CPA serves to deter unfair or deceptive acts or practices, protect the public, and foster fair and honest competition.

To prevail on a CPA claim, a plaintiff must show (1) an unfair or deceptive act or practice, (2) that act or practice occurs in trade or commerce, (3) a public interest impact, (4) injury to the plaintiff in his or her business or property, and (5) a causal link between the unfair or deceptive act and the injury.

The CPA itself, the purposes for which it was enacted, and precedent do not support the argument that a CPA claim must be predicated on an underlying consumer or business transaction. The CPA allows “[a]ny person who is injured in his or her business or property by a violation” of the act to bring a CPA claim. Nothing in this language requires that the plaintiff must be a consumer or in a business relationship with the actor.

Keodalah need not show the existence of a contractual relationship with Smith to establish a CPA claim against her.

The Court of Appeal concluded that an individual employee insurance adjuster can be liable for bad faith and a violation of the CPA.

ZALMA OPINION

Insurance adjusters who are not parties to the contract of insurance cannot breach the covenant of good faith and fair dealing because they are not a party to the contract, except in the State of  Washington. No reasonable person would agree to be an adjuster unless the insurer agrees, in writing, to defend and indemnify the adjuster for any claim or judgment of bad faith made against the adjuster. This opinion will devastate the insurance industry’s ability to retain well trained and experienced adjusters in Washington 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.

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

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

Legal Disclaimer:

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

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“The Insurance Examination Under Oath”

“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.


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Failure to Exceed SIR Releases the Excess Insurers

No Cover Available from Excess and Umbrella Policies

Insurers use a self-insured-retention (SIR) to avoid the expense of dealing with small claims and avoid the expense of defending or indemnifying an insured until the SIR or underlying insurance is exhausted. As a result the excess insurer can charge a small premium because its exposure is limited.

In City Of Phoenix v. First State Insurance Company, a foreign insurer; No. 16-16767, United States Court of Appeals For The Ninth Circuit (April 4, 2018) the City of Phoenix (“the City”) appealed an adverse summary judgment in favor of First State Insurance Company, Twin City Fire Insurance Company, New England Reinsurance Corporation, and Nutmeg Insurance Company (collectively, “Hartford”) on the City’s declaratory judgment, breach of contract, and bad faith claims, and from the denial of the City’s motion for partial summary judgment.

FACTS

The City’s insurance coverage action against Hartford arose from an underlying personal injury and wrongful death lawsuit brought by Carlos Tarazon and his wife. Mr. Tarazon was exposed to asbestos through his work as an underground pipe layer in the City from 1968 to 1993 and died of mesothelioma in 2014. The City settled the Tarazon family’s claims against it for $500,000. The City’s legal defense expenses amounted to over $1,400,000.

From July 1, 1981 to July 1, 1985, the City was covered by four successive excess liability policies (“Excess Policies”) issued by Hartford, each of which provided $500,000 in liability coverage in excess of a $500,000 self-insured retention (“SIR”). The City also purchased three successive umbrella policies (“Umbrella Policies”) from Hartford, covering periods from July 1, 1981 to July 1, 1984.

THE POLICY WORDING

The Excess Policies’ basic insuring agreement states that Hartford “will indemnify the [City] for ultimate net loss in excess of the retained limit [of $500,000.]” “Ultimate net loss” is defined in the Excess Policies to “exclude[] all loss adjustment expenses . . . .” The parties agree that defense costs are “loss adjustment expenses.” The plain language of this provision is unambiguous. Hartford only has to indemnify the City if the City’s ultimate net loss (i.e., not including defense costs) exceeds $500,000. The City settled its claim for $500,000 and is not entitled to indemnity.

The Excess Policies also contain a “No Costs” provision, which states: “Should any claim arising from such occurrence be adjusted prior to trial court judgment for a total amount not more than the retained limit, then no loss expenses or legal expenses shall be payable by the Company(s).”

ANALYSIS

The City attempts to inject ambiguity into the No Costs provision by arguing that use of the term “adjusted” includes both liability and defense costs, and defense costs therefore erode the SIR. However, this reading would contradict the language from the basic insuring agreement, which clearly provides that Hartford’s duty to indemnify applies when the retained limit is exhausted by liability costs. We are also persuaded by City of Oxnard v. Twin City Fire Insurance Co., which examined an insurance policy with similar policy language, and likewise concluded that the insured “was responsible for defense costs for claims it settled within its SIR amount.” 44 Cal. Rptr. 2d 177, 180 (Cal. Ct. App. 1995).

The City argues in the alternative that if Hartford is not obligated to pay the City under the Excess Policies, Hartford must pay under the Umbrella Policies. The Umbrella Policies provide that Hartford will indemnify the City “for ultimate net loss in excess of the underlying limit or the [SIR], whichever is the greater . . . .” The Umbrella Policies define “underlying limit” as the “limits of liability of the underlying insurance . . . .” Each Umbrella Policy’s Schedule of Underlying Policies lists an Excess Policy and states that the Excess Policy’s limit of liability is $500,000 in excess of the $500,000 SIR. Where no underlying insurance applies, the Umbrella Policies have a separate SIR of $10,000 or $25,000, depending on the policy year.

Because the City’s asbestos liability fell within the scope of the Excess Policies, the City is only entitled to “ultimate net loss in excess of the underlying limit . . . .” As the City did not exhaust the underlying limit of the Excess Policies, it is not entitled to indemnity under the Umbrella Policies.

The City conceded below that it could not show bad faith if Hartford’s refusal to pay out on the policies was justified.

ZALMA OPINION

Excess means what it says. The insurer doesn’t pay unless the underlying limit or SIR are exhausted. Since they were not exhausted the excess and umbrella insurers owed nothing. For once the Ninth Circuit has a clear, simple and appropriate decision.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Rescission of Insurance

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Insurance Fraud to Gain Thousands of Free Cell Phones

Creative Criminal Gets 57 Months in Prison

If criminals would put in the effort and skill they use to defraud insurers they would own a multi-million dollar business. Rather, they get short term profits and then find themselves is an 8 foot by 12 foot cell in a federal prison.

In United States Of America v. Carlo Michell, No. 16-16208, United States Court Of Appeals For The Eleventh Circuit (March 22, 2018) Carlo Michell, a very creative criminal, appealed his 57-month sentence imposed after he pled guilty to conspiracy to commit access device fraud.

FACTS

The indictment to which he pled guilty charged Michell and two other co-defendants with using customer identification information to fraudulently obtain wireless devices from AT&T Wireless. AT&T offers insurance that provides for a replacement wireless device if a customer’s phone is lost, stolen, or damaged. To get the replacement device, the customer pays a deductible and provides a personal identification number (“PIN”).

Michell and his co-conspirators got customer information from Teleperformance USA Corp., a contractor that provides customer service for AT&T. Five employees at Teleperformance accessed the personal account information of 3,700 AT&T customers—including the customers’ names, telephone numbers, and PINs—and sold that information to Michell and his co-conspirators. Using this information, the conspirators made false claims to AT&T for replacement wireless devices. Michell used his Facebook page to coordinate the receipt of the fraudulently obtained wireless devices by other co-conspirators. In total, approximately 3,800 wireless devices were shipped to Michell and his co-conspirators.

THE PRE-SENTENCE INVESTIGATION

The presentence investigation report (“PSR”) sets out that Michell recruited at least five people to receive shipments of wireless devices, and instructed them to send the wireless devices to him or a co-conspirator. After recruiting them to the conspiracy, he also asked two of them if they “wanted to come work for him instead” of another conspirator.

Michell objected to certain portions of the PSR, including the attribution of the total loss amount of the conspiracy to him as well as a sentencing enhancement based on the number of victims. The government also objected to the PSR, arguing that Michell should receive sentencing enhancements for trafficking in unauthorized access devices and for his role in the offense. The district court sustained the government’s objections, overruled Michell’s objections, and sentenced him to 57 months in prison.

ISSUE

Michell argues the district court should not have applied a two-level enhancement under Guidelines § 2B1.1 because the only victim was AT&T.

Language in the guidelines is given its plain and ordinary meaning. Ordinarily, the guidelines commentary is authoritative, unless it violates the Constitution or a federal statute, or is inconsistent with, or a plainly erroneous reading of, that guideline.

The commentary to § 2B1.1 defines a “victim” as “any person who sustained any part of the actual loss” as a result of the offense. In cases involving means of identification, a victim is further defined as “any individual whose means of identification was used unlawfully or without authority.”

The names and PINs of the AT&T customers are means of identification, and they were used without authorization. More than ten AT&T customers information was stolen because Michell admitted Teleperformance employees accessed 3,700 customer accounts, and admitted 3,800 wireless devices were ultimately obtained as a result of the conspiracy.

Michell argued, again creatively, that  he did not directly steal the identifying information, but merely bought it second-hand. However, the enhancement applies when a defendant uses the means of identification. Michell does not dispute that he used the names and PINs to fraudulently obtain wireless devices.

Michell and his co-conspirators used thousands of customers’ information to fraudulently obtain wireless devices, which was the clear purpose of the conspiracy.

Michell admitted to paying Teleperformance employees for customer information, which was emailed to him. He then used his Facebook page to coordinate the receipt of the fraudulently obtained wireless devices by other co-conspirators.

By receiving the stolen customer information, recruiting accomplices, directing the shipment of wireless devices, and managing a number of participants, Michell demonstrated a leadership role in the conspiracy. Michell admitted to purchasing stolen customer information—including names, telephone numbers, and PINs—and using that information to file false insurance claims in order to receive replacement wireless devices. The term “traffic” means transfer, or otherwise dispose of, to another, or obtain control of with intent to transfer or dispose of. Because Michell’s offense involved the trafficking of unauthorized access devices the district court properly applied the enhancement.

Michell’s final objection was to the loss amount attributed to him at sentencing. The district court is not required to make a precise determination of the loss, and only needs to make a reasonable estimate based on available information. When determining a loss amount, a defendant may be held responsible for the reasonably foreseeable acts of his co-conspirators in the furtherance of the conspiracy.

Michell agreed to fully participate in the offense. The district court found the actions of his co-conspirators were reasonably foreseeable. Specifically, the district court found Michell was deeply involved with the conspiracy because he personally obtained stolen customer information, filed false insurance claims, and used his Facebook page to coordinate the activities of the conspiracy.

In addition to his own actions, the district court found Michell maintained frequent contact with other co-conspirators, including 820 phone calls between Michell and his cousin Kennol Placil. Michell has not shown any reason why these findings were erroneous. To the contrary, the findings were supported by the record, so the district court did not err when it determined that the entire loss amount was attributable to Michell.

ZALMA OPINION

I thought, after dealing with insurance fraud for more than 50 years I had seen it all. I was wrong. Defrauding a cell phone insurer to get new cell phones is creative and does not include the hazards of armed robbery. The sentence for the multitudinous frauds seems small and insufficient to punish the perpetrator.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

 

 

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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.

 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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List Your Owned Auto on Policy or Be Self-Insured

Auto Must Be Identified on Policy to Provide Coverage

Classic automobiles often require a specialty insurer to insure the risks of loss to the classic automobile or caused by the operator of a classic auto. For that reason the basic auto insurer is not equipped to insure such a limited type of risk. When a family owned a classic and powerful Ford Shelby Cobra automobile they insured it separately from other autos owned by the family.

In Melissa P. Silverman v. Robert H. Digiorgio and Robert V. Digiorgio v. New Jersey Manufacturers Insurance Company and America Modern Home Insurance Company, Docket NO. A-4542-16T2, Superior Court Of New Jersey Appellate Division (April 2, 2018) Plaintiff Melissa P. Silverman was a passenger in a specialty car, a 1967 Ford Shelby Cobra, driven by defendant Robert H. DiGiorgio. She was badly injured when the driver lost control of the car and it struck a utility pole. The car burst into flames and both plaintiff and the driver were extracted from the vehicle.

FACTS

The Shelby was owned by the driver’s father, defendant Robert V. DiGiorgio. The father allowed the son, who lived with his parents, to have access to the car whenever he wanted to drive it so long as the father was not using it. As a specialty car, the Shelby had historic vehicle “QQ” license plates. The car was driven only a few hundred miles each year.

The Shelby was insured on a $500,000 policy with American Modern Home Insurance Company (“American”), with an annual 3,000 mile usage restriction. In addition to the American policy, the son’s mother Jean had a $500,000 auto policy with New Jersey Manufacturers Insurance Company (“NJM”) listing four other vehicles of the household as “covered autos,” but did not list the Shelby.

Paintiff sued the father and son for personal injuries. Those defendants, in turn, brought third-party complaints against American and NJM seeking a declaration of coverage for the accident.

Plaintiff settled with defendants for $1 million, memorializing that sum in a consent judgment. American paid an unspecified amount to plaintiff, and was dismissed from the case.

NJM moved for summary judgment, arguing that the terms of its policy did not cover the son’s accident. Assignment Judge Yolanda Ciccone granted the motion, construing the NJM policy to exclude the son’s operation of the Shelby.

THE POLICY

The NJM policy affords liability and indemnity protection to policyholders for their “covered autos,” defined in pertinent part to encompass the vehicles listed in the policy’s Declarations page. The Shelby was not listed as such a covered auto on the Declarations page.

An “insured” under the NJM policy is defined, in pertinent part, to include “You or any family member for the ownership, maintenance or use of any auto or trailer[,]” as well as “[a]ny person using your covered auto.” Thus, even though the Shelby was not listed by the DiGiorgios as a “covered auto,” the policy additionally supplies coverage for the use of a non-covered auto by “you” or by “any family member,” subject to the policy’s Exclusions.

Nonetheless, the “Exclusions” section of the policy is important because it can negate any viable claim for coverage in this case and provides at Exclusion B.2(a) that disallows coverage for “[a]ny vehicle, other than your covered auto, which is . . . owned by you . . . .” Indisputably, the Shelby is owned by the father.

THE APPEAL

The interpretation of an insurance contract is an issue of law. As a starting point in the analysis of an insurance coverage issue, courts look to the plain and ordinary meaning of the words contained in the carrier’s policy.

The purpose of a policy’s exclusionary clause is to allow an insurer to protect itself from covering all automobiles available to the insured’s use, even if the policy was bought for one automobile.

The appellate court concluded that the “DiGiorgios would readily understand that NJM did not intend to cover their son with respect to an automobile which a reasonable person would know ought to be listed in the policy for a further premium allocated to it.” The Shelby was conspicuously omitted from the Declarations page listing the other four vehicles of the household.

The DiGiorgios obtained the American policy to cover the Shelby because that specialty car was not on the NJM policy. Indeed, NJM derived no premium for that extra risk and probably would not have insured the Shelby if asked.

Exclusion B.2(a) negates the claim of coverage.

The trial court’s decision denying coverage was affirmed.

ZALMA OPINION

I once owned a classic car – it was a mistake – it was almost impossible to insure. I found that the insurer who had no trouble insuring my basic transportation cars refused to insure the classic. I assume the DiGiorgios had the same problem and that is why they did not list the Shelby on their NJM policy and purchased a limited cover from American. American paid the claim and NJM properly refused.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

 

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How to Comply with California Claims Regulations

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.


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Spousal Abuse Can Never be an Accident

There is no Right to Beat Your Girlfriend and Get Defense from your Insurer

People are known to do stupid things. Insurance is designed to protect the insured against his or her negligence or stupid conduct. People who drink alcohol to excess and intentionally get drunk almost certainly do stupid things because of the intentional act of getting drunk. Insurance is, by definition, not available for intentional conduct that causes bodily injury to another.

In D.G. v. B.E.A. v. Harleysville Insurance Company Of New Jersey and Hanover Insurance Company, Docket No. A-3527-15T3, Superior Court Of New Jersey Appellate Division (March 29, 2018) Defendant/third-party plaintiff B.E.A. sought coverage and a defense under a homeowner’s policy issued by third-party defendant Harleysville Insurance Company (Harleysville) for a claim for bodily injuries inflicted on his girlfriend, plaintiff D.G., during a domestic violence incident. The trial court granted summary judgment to Harleysville.

FACTS

Plaintiff and defendant began dating in 2009. They had no history of domestic violence or physical abuse until the morning of July 11, 2013. The day before, they went to a casino/hotel in Atlantic City for the weekend to gamble. Defendant consumed alcohol during the day and into the next morning. He was extremely intoxicated when he returned to the parties’ hotel room at approximately 3:30 a.m. and viciously assaulted plaintiff. He threw her against a wall and choked and strangled her to the point she almost lost consciousness and thought she was going to die. He also threw her through a doorway, slammed her head into an air conditioning grate leaving a dent, blocked the door as she crawled away in an attempt to escape, and kneed and kicked her in the head and shoulders.

The police arrested defendant for “domestic assault” and issued a supplemental domestic violence offense report. Defendant was charged with simple assault, Plaintiff obtained an indefinite temporary restraining order against defendant after his repeated attempts to communicate with her after the assault.

Plaintiff sustained injuries to her head, neck, throat, left knee, legs, and arms. She has permanent injuries to her vocal cords and ankle, including an approximately two-inch scar on her ankle, and suffers from post-traumatic stress disorder. She filed a complaint against defendant in the Law Division, which defendant eventually settled for $250,000.

THE POLICY

Defendant sought coverage and a defense under his homeowner’s policy. The policy provided as follows:

The policy defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period in: . . . ‘bodily injury[,]'” and defined “bodily injury” as “bodily harm, sickness or disease, including required care, loss of services and death that results.” The policy did not define the term “accident.” The policy excluded coverage for bodily injury “which is expected or intended by one or more ‘insureds’ even if the ‘bodily injury’ . . . (1) [i]s of a different kind, quality or degree than expected or intended; or (2) [i]s sustained by a different person or entity than expected or intended.”

CLAIM REJECTED

Harleysville disclaimed coverage and a defense, stating the assault was not accidental in nature and thus did not meet the definition of “occurrence” covered under the policy. Harleysville also disclaimed coverage based on the policy exclusion.

ANALYSIS

Defendant did not dispute he physically assaulted plaintiff or that this was an act of domestic violence. Rather, he claimed he was extremely intoxicated, had no recollection of what happened in the hotel room, and did not intentionally or knowingly cause plaintiff bodily harm.

Harleysville countered that defendant’s violent assault of plaintiff was not an accident under the policy, but rather, a particularly reprehensible act of domestic violence where intent to injure is presumed and insurance coverage is denied.

The motion judge agreed.  It held that when actions are particularly reprehensible, the intent to injure can be presumed from the act without an inquiry into the actor’s subjective intent to injure.

Grabbing a female by the neck and strangling that person and then smashing her head against an air conditioning unit would result, obviously, in nothing other than bodily injury.

Defendant claims he did not intentionally or knowingly injure plaintiff, and given his mental state – his intoxication – his actions were not expected or intended to cause plaintiff injury so as to apply the policy exclusion. He admits he assaulted plaintiff and this was an act of domestic violence.  The issue before the appellate court is whether defendant’s act of domestic violence was a particularly reprehensible act supporting a finding of presumed intent to injure plaintiff.

The New Jersey Supreme Court has applied an objective approach in the assault and battery context to determine the insured’s intent to injure. As a general rule, then, policy exclusions of the type at issue here represent enforceable limitations to an insurance contract when free of ambiguity. Courts ordinarily refrain from summary judgment unless the record undisputedly demonstrates that such injury was an inherently probable consequence of the insured’s conduct.

There are occasions where the objective conduct of the actor also determines the actor’s subjective intent to injure. Such is the case where the actor engages in assault and battery. The very nature of the conduct imputes the actor’s subjective intent to cause some injury to the victim. Where, as here, the plaintiff claims no more than the type of injuries that are inherently probable from such conduct there is no need to inquire into defendant’s subjective intent.

Allowing spouse abusers insurance coverage for their intentional abuse, whether it be physical or emotional, would contravene the public policy clearly enunciated by the New Jersey Supreme Court, and the intent of the Legislature in its enactment of the Prevention of Domestic Abuse Act. Clearly, coverage for spousal abuse, in any form, would encourage those who are disposed to commit such reprehensible acts to inflict injury upon their spouses with impunity, knowing that their insurance companies will indemnify them for the money damages recovered by their spouses if only they can convince some jury that they did not intend or expect bodily harm to flow from their conduct.

Spousal abuse in any form is so inherently injurious. That it can never be an accident, and therefore, as a matter of public policy and logic to the end that the intent to injure is presumed from the performance of the act. In a civilized society,  the New Jersey court concluded “wife-beating is, self-evidently, neither a marital privilege nor an act of simple domestic negligence.” Neither is any other intentional tort by which one spouse victimizes the other. Insurance coverage for such torts are not available as a matter of public policy.

Although there was only one incident of domestic violence here, it was sufficiently egregious to warrant the denial of coverage. Defendant brutally assaulted plaintiff, causing her significant and permanent injuries. Defendant’s conduct was so egregious as to be “particularly reprehensible,” warranting a presumption of intent to injure plaintiff and denial of coverage under the policy exclusion.

Defendant’s voluntary intoxication is no defense. Where domestic violence is involved, there is no exception. He intended to get drunk. He admitted his drunkenness was the reason for the violence. the claim of no intent to do harm failed.

Regardless of how a claim is framed, if the operative facts constitute an assault and battery, the exclusion applies, and the insurer has no duty to defend.

ZALMA OPINION

The result in this case was obvious. What surprised me was the unmitigated gall on the part of the batterer to sue the insurer and take such an obvious case up on appeal. I was also surprised that the court took the case seriously enough to render a lengthy and detailed analysis of the issues. The decision could have easily been reduced to a single sentence: “the act of domestic violence was so egregious as to warrant the denial of coverage because it was intentional.”


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

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Two Basic Books Needed by Every Insurance Claims Person

“The Compact Book on Adjusting Liability Claims: A Handbook for the Liability Claims Adjuster”

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

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

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

Available as a Kindle book

Available as a paperback.

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

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

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

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

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

Available as a Kindle book.

Available as a paperback.


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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A Contract of Insurance is a Binding Contract

Appellate Court May Not Rewrite Insurance Policy

Construction contracts are risk transfer devices. They often require each subcontractor to name the general contractor and the owner as an additional insured. The requirement can include multiple additional insured. Insurance policies, even though they are written in easy-to-read language are the least read contracts in business. They should be read and understood or the parties must be ready to suffer the financial consequences. Failure to read and understand an insurance policy can be painful in the event of a loss and very expensive to he who did not read and understand the policy.

Modern liability insurance policies issued to builders and owners of property under construction, rather than individually endorse a policy to name all additional insureds, allow the named insured, by contract, to make anyone an additional insured with whom the named insured has a contract to make someone an additional insured. In Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire and Marine Insurance Company, et al., Liberty Insurance Underwriters, 2018 NY Slip Op 02117, No. 22, Court of Appeals of New York (March 27, 2018) the highest court in the State of New York was asked to interpret an insurance policy wording to require it to accept a risk it claimed it never took.

FACTS

In January 2002, Dormitory Authority of the State of New York (DASNY) contracted with Samson Construction Company (Samson), a general contractor, for construction of a new forensic laboratory for New York City, to be built next to Bellevue Hospital. Although the lab was constructed for use by New York City’s Office of the Chief Medical Examiner, the construction documents identified DASNY as the owner. DASNY also contracted with a joint venture between Gilbane Building Company and TDX Construction Corporation (hereinafter, “Gilbane JV”) for Gilbane JV to be the construction manager for the project. DASNY’s contract with Samson provided that Samson would obtain general liability insurance for the job, with an endorsement naming as additional insureds: “DASNY, the State of NY, the Construction Manager [Gilbane JV] and other entities specified on the Sample Certificate of Insurance provided by DASNY.” Samson obtained general liability insurance coverage from Liberty Insurance Underwriters (Liberty). The Sample Certificate of Insurance listed as “Additional Insureds under General Liability as respects this project: . . . Gilbane/TDX Construction Joint Venture.”

In 2006, DASNY sued Samson and Perkins Eastman, Architects, P.C., the project architect, alleging that Samson damaged the excavation support system in August of 2003 by negligently removing a section of steel plating which caused the foundation of the neighboring building to settle several inches. Perkins then commenced a third-party action against Gilbane JV in 2010.

Gilbane JV provided notice to Liberty by letter in April of 2011, seeking defense and indemnity under the Liberty policy for Perkins’ suit against it, which Liberty denied in July of that year. Gilbane JV sued in September of 2012, arguing that it qualified for coverage under the Liberty policy as an additional insured. The trial court denied Liberty’s motion for summary judgment, holding that Gilbane JV is an additional insured under the policy. The Appellate Division subsequently reversed, granting Liberty’s motion.

The relevant portion of the Liberty policy is the “Additional Insured-By Written Contract” provision, which reads: “WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you.” (emphasis added).

ISSUES

Gilbane JV has no written contract with Samson denominating it an additional insured, but argues no such contract is necessary, because that requirement would conflict with the plain meaning of the Liberty endorsement; with “well-settled rules of policy interpretation”; and with the parties’ reasonable expectations. Alternatively, Gilbane JV argues that the Liberty endorsement is, at most, ambiguous on that point, and therefore must be construed against Liberty and in favor of coverage. Gilbane JV is incorrect; the endorsement is facially clear and does not provide for coverage unless Gilbane JV is an organization “with whom” Samson has a written contract.

ANALYSIS

Generally, the courts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on specific language of the policies. In determining a dispute over insurance coverage, we first look to the language of the policy. As with the construction of contracts generally, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning.

The endorsement would have the meaning Gilbane JV desires if the word “with” had been omitted. But Samson and Liberty included that preposition in the contract between them, and the appellate court must give it its ordinary meaning. The “with” can only mean that the written contract must be “with” the additional insured. Gilbane JV proposes other wordings that, in its view, would more clearly require the existence of a written contract between Samson and an additional insured, but those formulations are no clearer and, in any event, the endorsement’s meaning is plain and unambiguous.1

The appellate court did not try to undermine an industry market solution aimed at efficiently allocating risk among entities involved in construction projects. Rather, it merely required contracting parties who desire the result proposed by Gilbane JV to remove the word “with” from their future contracts or make sure their future contracts include a requirement that it be made an additional insured.

Gilbane JV tried to change the situation by introducing extrinsic evidence of the intent of the parties. The court concluded, however, that extrinsic evidence of the parties’ intent may be considered only if the agreement is ambiguous, which is an issue of law for the courts to decide. Gilbane JV might have a claim against Samson for failing to obtain additional insured status for Gilbane JV, because of extrinsic evidence produced at trial, but that breach would not permit the appellate court to rewrite Samson’s contract with Liberty. The court refused to rewrite the contract of insurance and Gilbane JV received no coverage from Liberty.

ZALMA OPINION

The insurance policy required a written contract between the named insured and an additional insured if coverage was to be extended to anyone as an additional insured. Samson obtained general liability insurance coverage from Liberty Insurance Underwriters. Since Gilbane JV had no written contract with Samson denominating it as an additional insured, no coverage was available for Gilbane JV by Liberty. An unhappy, but accurate, result because of a failure by the parties to read the policy when it was acquired and a failure by Gilbane JV to include in the contract a requirement that it be named as an additional 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.

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

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

Legal Disclaimer:

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

 

 

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Zalma’s Insurance Fraud Letter – 4-1-18

Zalma’s Insurance Fraud Letter

 April 1, 2018

Some criminal have no sense of honor or justice. Emma J. Raine was involved in the violent death of one or more of her husbands. Before he was murdered by her soon to be brother-in-law she increased the amount of life insurance on his life, changed the beneficiaries and stole the portion of the policy owed to the dead man’s daughter from a previous marriage. After she was convicted of second degree murder she appealed in State of Louisiana v. Emma J. Raine, NO. 2017-KA-0330, Court of Appeal Fourth Circuit State of Louisiana, (March 7, 2018).
Raine argued on appeal that the evidence was insufficient to support her conviction, that the trial court improperly admitted hearsay evidence, and that the jury was improperly influenced by prosecutorial misconduct.

Zalma’s Insurance Fraud Letter, Volume 22, No. 7 

The Current Issue Contains the Following

  • Murder for Life Insurance
  • North Carolina Insurance Commissioner Causey Hires15 Agents to Fight Fraud
  • Texas Court Orders Liquidation of Access Insurance Company
  • Convicted of Insurance Fraud – Must be Deported
  • Wisdom
  • Suspended Lawyer in Fraud Trouble
  • Sascatchewan Government Insurance Finds New Way Insurers are Cheated
  • Good News From the Coalition Against Insurance Fraud
  • 227 California Medical Providers Suspended
  • Health Insurance Fraud Convictions
  • Other Insurance Fraud Convictions
  • Zalma Books

New Insurance Books by Barry Zalma

 

Now available as Kindle or paperback books are the following non-fiction texts for insurance professionals:

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

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

  • Heads I Win, Tails You Lose
  • Arson for Profit
  • Murder & Old Lace
  • Murder and Insurance Fraud Don’t Mix
  • Candy & Able – Murder for Insurance Money

The most recent posts to the daily blog, Zalma on Insurance, are available at  http://zalma.com/blog.

Check in every day for a case summary at http://zalma.com/blog:

Zalma’s Insurance 101

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

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

Some of the 1,022 videos follow: If you start at Volume 1 at the bottom of the blog’s first page and view one or two videos a day you will have approximately 12 to 24 hours of training a year until you get to the last video.

 Advertise

Are you a lawyer, law firm, independent insurance adjuster or insurer who would you to promote yourself or your firm to more than 200 daily visits by insurance professionals or the more than 2000 subscribers to ZIFL?

If you are, an ad on the blog Zalma on Insurance or Zalma’s Insurance Fraud Letter, to such a selective audience of insurance professionals and management can be more effective than any other form of advertising.

For only $100 a month on the blog or $100 an issue on ZIFL your ad will be permanent and effective.


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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


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The Compact Book on Commercial Property Insurance Policy

The Means to Effectively Acquire a Commercial Property Policy

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

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

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


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Allocating Damages to Pro Rata Time-on-the-Risk

Is it Fair to Require an Insurer to Pay for Periods for which it Received no Premium?

Some events causing pollution damage can occur over many decades, even more than a century. Existence of coverage for risks of loss by pollution did not exist, was unavailable to certain industries or was not purchased by the defendant. When the injury happens continuously over a long period of time who pays, and in what proportion, is often the subject of many lawsuits and appeals.

In March of 2018 the Court of Appeals of New York (its highest court) was asked to resolve a dispute of first impression in the state of New York as to how to apportion the risks of loss in Keyspan Gas East Corporation v. Munich Reinsurance America, Inc., Century Indemnity Company et al., 2018 NY Slip Op 02116, No. 20, Court of Appeals of New York (March 27, 2018).

Issue

The court was asked whether under the “pro rata time-on-the-risk” method of allocation, defendant Century Indemnity Company is liable to its insured, plaintiff KeySpan Gas East Corporation, for years outside of its policy periods when there was no applicable insurance coverage available on the market.

Facts

The claims resulted from environmental contamination caused by manufactured gas plants (MGPs) owned and operated by KeySpan’s predecessor, Long Island Lighting Company (LILCO), in Rockaway Park and Hempstead, New York. Gas production at the sites began in the late 1880s and early 1900s. After operations ceased decades later, the New York Department of Environmental Conservation (DEC) determined that there had been long-term, gradual environmental damage at both sites due to contaminants, such as tar, seeping into the ground and leeching into groundwater. The DEC required KeySpan to undertake costly remediation efforts, which were apparently concluded at the Hempstead and Rockaway Park sites in 2002 and 2012, respectively.

Between 1953 and 1969, Century issued eight excess liability insurance policies to LILCO covering property damage. It was stipulated that the damage at the sites occurred gradually and continuously before, during, and after the Century policy periods. It is also uncontroverted that the environmental contamination that occurred in any given year is unidentifiable and indivisible from the total resulting damages.

Analysis

Long-tail claims present unique difficulties. In such cases, the injury-producing harm is gradual and continuous and typically spans multiple insurance policy periods or implicates years during which insurance coverage was in place, as well as years for which no coverage was purchased.

In general, two primary methods of allocation are used by the courts across the country to apportion liability across multiple policy periods: all sums and proration.

  • All sums allocation permits the insured to collect its total liability under any policy in effect during the periods that the damage occurred, up to the policy limits.
  • Pro rata allocation, assuming complete coverage, an insurer’s liability is limited to sums incurred by the insured during the policy period; in other words, each insurance policy is allocated a pro rata share of the total loss representing the portion of the loss that occurred during the policy period.

Pro rata shares are often, although not exclusively, calculated based on an insurer’s “time on the risk,” a fractional amount corresponding to the duration of the coverage provided by each insurer in relation to the total.

New York has not adopted a strict pro rata or all sums allocation rule. Rather, the method of allocation is governed foremost by the particular language of the relevant insurance policy.

Where policy language indicates allocation by the pro rata method and gaps in coverage exist, the question arises as to which party — the insurer or the policyholder — bears the risk for periods of time in which no applicable coverage was in place.

When using a pro rata time-on-the-risk allocation, a number of jurisdictions have declined to place the policyholder “on the risk” if insurance was unavailable. These jurisdictions recognize the “unavailability rule” or, stated differently, an “unavailability exception” to the general rule that a policyholder is self-insured and on the risk for periods of time when insurance coverage was not obtained. Under this approach, a policyholder bears the risk for periods of time when it elected not to purchase available insurance, but not for those years when insurance was unavailable. Application of this rule serves to reduce the number of years included in the overall proration calculation, thereby increasing the shares of liability attributable to an insurer for each year in which a policy was in effect.

Other courts have rejected the unavailability rule. These courts have held that a policyholder is on the risk for periods of non-coverage, regardless of whether the lack of insurance coverage was attributable to a voluntary decision to self-insure or to an inability to obtain. The applicability of the unavailability rule is a matter of first impression in New York.

KeySpan argues, however, that it should be responsible only for those years in which insurance was available in the marketplace. Thus, KeySpan — supported by various amici — urges us to adopt the unavailability rule and hold that, in a pro rata time-on-the-risk allocation, liability should not be allocated to the policyholder for years in which insurance was unobtainable, either because it had not yet been offered by insurers or because the industry had adopted a pollution exclusion.

While the insurance policies at issue do not speak directly to allocation in the context of long-tail claims, each of the policies contain language (with minor variances) limiting the insurer’s liability to losses and occurrences happening “during the policy period.

The unavailability rule is inconsistent with the contract language that provides the foundation for the pro rata approach — namely, the “during the policy period” limitation — and that to allocate risk to the insurer for years outside the policy period would be to ignore the very premise underlying pro rata allocation. Such an approach could, once a policy is triggered, impose liability in perpetuity (or retroactively to periods prior to coverage) on an insurer who issued insurance coverage for only a limited number of years, thereby eviscerating much of the distinction between pro rata and all sums allocation.

KeySpan’s claim would effectively provide insurance coverage to it for years in which no premiums were paid. Moreover, such a rule would contravene the reasonable expectations of the average insured, who would not expect to receive coverage without regard to the number of years for which it purchased applicable insurance.

The whole idea of a time-on-the-risk calculation is that any given insurer’s share reflects the ratio of its coverage (and thus the premiums it collected) to the total risk. The spreading of industry risk through insurance is accomplished through the setting and payment of premiums for insurance, consistent with the parties’ forward-looking assessment of what that risk might entail, and that, in the absence of a contract requiring such action, spreading risk should not by itself serve as a legal basis for providing free insurance to an insured.  The policyholder is the one who allegedly caused the injury and, therefore, who ultimately will be financially responsible should insurance prove insufficient. Notwithstanding competing public policy concerns, an appellate court may not make or vary the contract of insurance to accomplish its notions of abstract justice or moral obligation.

Therefore, in New York, the unavailability rule cannot be reconciled with the pro rata approach. The Court of Appeal, therefore, rejected the application of the unavailability rule for time-on-the-risk pro rata allocation and required the insured to pay for those periods when it was uninsured or when insurance was unavailable.

ZALMA OPINION

Public policy – a notion of abstract justice or moral obligations – adopted by a court is fraught with danger of doing injustice while claiming to act in good faith to provide justice to all. In New York, and those states that agree with its decision, an insurer is only obligated to pay its pro rata share of a continuing loss based upon the periods of time it insured the risk of loss bears to the total time the loss occurred. No insurer should be required to indemnify an insured for damages that resulted before its policy came into effect or for a period when it did not insure the risk.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

 

 

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“Insurance Fraud & Weapons to Defeat Insurance Fraud”

 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


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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No Good Deed Goes Unpunished

Fourth Circuit Stops Asbestos Bleeding After Aggregate Limit is Exhausted

Asbestos litigation has destroyed multiple businesses who dealt with the product. Insurers of those entities have spent billions of dollars defending and indemnifying those insureds who dealt with asbestos. Some insurers who insured the asbestos producers were made insolvent. Many asbestos claims were established to be false and fraudulent. Regardless, insurers defended and indemnified their insureds up to the limits of liability of their policies. Unsatisfied, insureds attempted to get courts to ignore the terms and conditions of their insurance policies, and sought defense and indemnity without limit claiming any refusal to defend by an insurer to be bad faith tortious conduct.

In General Insurance Company Of America, Plaintiff, The Walter E. Campbell Company, Inc. Defendant and Third Party Plaintiff – Appellant, v. United States Fire Insurance Company; St. Paul Fire & Marine Insurance Company, and National Indemnity Company; Federal Insurance Company; Crum & Forster Corporation; Pennsylvania Manufacturers Association Insurance Company; The Continental Insurance Company, Defendants, The Hartford Financial Services Group, Inc., The Travelers Indemnity Company; Property & Casualty Insurance Guaranty Corporation, No. 17-1585, United States Court Of Appeals For The Fourth Circuit, (March 26, 2018) the applicability of two insurers’ policies to past, pending, and future asbestos-related bodily injury claims against the Walter E. Campbell Company (“WECCO”) was taken to the Fourth Circuit. The insured. WECCO appeals several rulings by the U.S. District Court for the District of Maryland against WECCO and in favor of United States Fire Insurance Company (“U.S. Fire”) and St. Paul Fire & Marine Insurance Company (“St. Paul,” and collectively with U.S. Fire, the “Insurers”).

ISSUE

The main questions at issue in this appeal—concerning both the scope and limit of the Insurers’ duties to defend and indemnify WECCO—were answered over a decade ago by the Fourth Circuit in In re Wallace & Gale Co., 385 F.3d 820, 833-34 (4th Cir. 2004). Unsatisfied with our precedent and the effect it would have on its cause of action, WECCO asked the Fourth Circuit to either consider these questions anew or certify them to the Maryland Court of Appeals.

Even though WECCO’s insurers paid, over the years, more than $60 million on WECCO’s behalf, WECCO was not satisfied and sought declaratory relief because many claims against WECCO remain pending. The Insurers now contend that, based on the aggregate liability limits set forth in their policies with WECCO, they no longer are contractually obligated to defend and indemnify WECCO against such claims.

FACTS

For decades, WECCO—a now-defunct Maryland corporation—handled, sold, installed, disturbed, and removed insulation materials containing asbestos. By 1972, WECCO ceased the sale and use of asbestos-containing products in its operations.

The policies first provides that it “applies only to bodily injury . . . which occurs during the policy period.” J.A. 938 (emphasis added). The policy further provides that: “[t]he Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury . . . to which this insurance applies, . . . arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the named insured conducted at or from the insured premises . . . , but the Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the Company’s liability has been exhausted by payment of judgments or settlements.” (emphasis added).

Not all claims are subject to the same “applicable limit,” however. In particular, the policy imposes an aggregate limit on the insurer’s obligation to indemnify WECCO for claims that fall within the completed-operations and products hazards.

Claims involving bodily injuries that fall under the completed-operations and products hazards are subject to an aggregate limit. Every dollar the insurer pays out to indemnify WECCO against such claims counts against the policy’s aggregate limit. Once the aggregate limit is reached, the insurer is no longer obligated to defend and indemnify WECCO for completed-operations and products hazard claims. On the other hand, operations claims—that is, bodily injury claims that do not constitute completed-operations or products hazards—are subject only to a “per occurrence” limit, meaning that there is no aggregate limit on the insurer’s obligation to defend and indemnify WECCO against operations claims.

In 2003, the Insurers notified WECCO that the aggregate limits contained in the primary policies issued to WECCO had exhausted and that, as a result, the Insurers were no longer obligated to defend or indemnify WECCO under these policies. Regardless, the Insurers continued to defend and indemnify WECCO under their umbrella/excess policies until U.S. Fire stopped in January 2009—after notifying WECCO that it had fully exhausted the aggregate limits contained in its umbrella/excess policies—and St. Paul stopped in June 2013—after doing the same.

In March 2017, the district court granted summary judgment to the Insurers. In so doing, the district court resolved several dispositive issues relevant to this appeal. The district court declared that St. Paul’s indemnity payments for several claims alleged by WECCO to be mischaracterized were in fact properly characterized as completed-operations claims and thus subject to the aggregate liability limits for such claims. In rendering this decision  the district court relied on its finding, based on the “undisputed” evidence, that WECCO had ceased all asbestos-related operations by 1972—years before any of St. Paul’s policies issued.

The district court also declared that the aggregate limits of St. Paul’s policies had been exhausted by the payments of those claims. In the alternative, the district court determined that the applicable three-year statute of limitations barred almost all of WECCO’s breach-of-contract claims against the Insurers.

ANALYSIS

WECCO’s argument amounts to an attempt to re-litigate this Court’s holding in Wallace & Gale. There, this Court applied Maryland law and interpreted the terms of various insurance policies issued to the Wallace & Gale Company—a company that, like WECCO, for decades supplied and installed asbestos-containing insulation materials.  And, like WECCO, the plaintiffs in Wallace & Gale argued that, under the policies’ terms, any claims due to asbestos-related bodily injuries that first arose during Wallace & Gale operations were properly classified as operations claims—regardless of whether Wallace & Gale had completed operations before the policies were issued. Therefore, such claims were not subject to aggregate limits.  By contrast, the insurer-defendants argued that, if a policy took effect only after a bodily injury-causing operation was completed, then a claim brought under that policy due to the completed operation should be treated as a completed-operations claim, subject to that policy’s aggregate limit.

WECCO concedes that the definition of a “completed operations” claim in its policies with the Insurers is substantively indistinguishable from the definition of that term in Wallace & Gale. Accordingly, under Wallace & Gale, “the insurers who issued general liability policies to [WECCO] for time periods wholly after [WECCO] completed its asbestos installation work”—like the policies issued by the Insurers to WECCO—”will only be liable to the extent of the aggregate limit contained in the policy.”

The Fourth Circuit found no reason to depart from Wallace & Gale‘s clear and controlling interpretation of the completed-operations hazard. Accordingly, it concluded that the district court correctly declared that any bodily injury claim based on an injury that occurred during a WECCO operation that completed prior to the start of a policy falls within the completed-operations hazard of that policy.

As the district court recognized, WECCO did not allege that the Insurers breached their contracts with WECCO by refusing to defend or indemnify WECCO against any particular claims alleging asbestos-related bodily injury. To the contrary, WECCO alleged that the Insurers “breached their obligations under their policies” by their “improper allocation of settled operations claims as settled completed operations claims.” In determining at which point a cause of action begins to accrue, Maryland courts abide by “the discovery rule, which now applies generally in all civil actions, and which provides that a cause of action accrues when a plaintiff in fact knows or reasonably should know of the wrong.” Hecht v. Resolution Tr. Corp., 635 A.2d 394, 399 (Md. 1994).

Here, WECCO was aware of the way in which the Insurers were classifying the claims they paid on behalf of WECCO since at least 2003 (with respect to the primary policies issued to WECCO) and 2009 (with respect to U.S. Fire’s umbrella policies).

ZALMA OPINION

WECCO, no longer in existence, obtained more than $60 million in indemnity and defense costs from its various insurers with good grace and skill. The amounts paid out by the insurers probably exceeded the premiums paid by ten to one thousand fold. Yet, when the limits were exhausted in accordance with precedent WECCO still sued the insurers to get more. By causing the insurers to pay lawyers to defend this action they punished the insurers for their good deeds taking care of hundreds of suits.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

 

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Sham Affidavit Fails to Defeat Summary Judgment

Insured May Not Lie to Avoid Summary Judgment

No one likes to have an insurance claim denied even if the insurer has a a good reason for denying the claim. In litigation, as in every aspect of insurance, both parties to the insurance contract owe an obligation to deal fairly and in good faith with each other and do nothing to deprive the other of the rights available under the policy.

Facts

In Joseph Jugan; Robin Jugan v. Economy Premier Assurance Company, No. 17-2410, United States Court of Appeals For The Third Circuit (March 22, 2018) the insureds, Joseph and Robin Jugan own a home in Fleetwood, Pennsylvania, which they insured under a homeowners insurance policy (the “Policy”) issued by MetLife. Their homeowers policy excluded from any coverage losses or damage resulting directly or indirectly from “freezing of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or of a domestic appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing.” That “Absolute Freezing Exclusion” stated that it did “not apply if you have used reasonable care to maintain heat in the building or if you shut off the water supply and drained the plumbing and appliance of water.”

Sometime between February 1, 2015, and March 13, 2015, while the Jugans were away, water leaked from their dishwasher, causing damage to their home and its contents. MetLife hired an expert, a certified engineer, to investigate the loss. He did so and issued a report stating that the water damage was due to a frozen dishwasher solenoid valve that fractured due to freezing in the water supply line to the dishwasher. He further concluded that the water froze because of insufficient heat within the home, which he “attributed to the thermostat for the hot water baseboard heat [having been] set too low[.]”

Since 2009, the Jugans had frequently left the home empty, sometimes for weeks at a time.

Mr. Jugan suffers from a brain tumor that requires him to take prescription narcotics. The tumor and the medications have led to forgetfulness, including a failure to recall events. He did not remember adjusting the digital thermostat on the main floor, and he could not definitively state whether the thermostat was set at 62°F before he left. He also did not remember adjusting the analog thermostat in the basement, and he could not remember the temperature it was set at when he left that day. But Mr. Jugan testified that he kept a thermometer on an interior wall of the basement, and that it generally read 54°F year round.

The Jugans sued MetLife for breaching the Policy after MetLife denied coverage. MetLife moved for summary judgment on that claim. When it did so, Mr. Jugan filed an affidavit containing averments that he said raised genuine issues of material fact barring summary judgment. The District Court applied the sham affidavit doctrine, striking certain averments that contradicted Mr. Jugan’s earlier testimony without sufficient explanation, while crediting other averments that did not contradict other evidence in the record.

The District Court granted summary judgment in favor of MetLife with respect to the Jugans’ claim under Coverage A of the Policy, after deciding that no reasonable jury could find that the Jugans had used reasonable care to maintain heat in their home. The Jugans timely appealed.

Discussion

Pennsylvania law provides that “[t]he interpretation of an insurance policy is a question of law.” Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins., 908 A.2d 888, 897 (Pa. 2006). The primary goal in interpreting a policy is to determine the parties’ intentions as manifested by the policy’s terms.

Pennsylvania law places the initial burden of establishing the existence of insurance coverage on the insured. After the insured has met that burden, the burden shifts to the insurer to prove the applicability of an exclusion in the insurance policy. If the insurer demonstrates that an exclusion applies, the burden shifts back to the insured to prove an exception to the exclusion, such that the damages claimed are covered notwithstanding the exclusion.

It is undisputed that the Jugans met their burden of establishing that the loss they suffered falls within the Policy’s affirmative grant of coverage – specifically, Coverage A. Furthermore, the District Court’s conclusion was also correct that MetLife met its burden of proving the applicability of the Policy’s Absolute Freezing Exclusion.  The Jugans did not provide any evidence to rebut that expert’s determination that the water leakage was due to freezing.

The Jugans pointed to no evidence showing that they used reasonable care to maintain heat in their home. They argue that, because Mr. Jugan testified that he only asked his neighbors to check on the home if he thought he had forgotten to do something, the District Court erred by relying on Mr. Jugan’s testimony that his neighbors had access to the home, had previously been asked to check on the home at other times, and were never asked to check on the home before the loss that occurred here. But establishing a reason for failing to ask a neighbor to check on the home is not in itself evidence of reasonable care.

A reasonable homeowner would have wanted to check to make sure that the radiators worked before he went away in the winter, even if that homeowner, like Mr. Jugan, had never experienced any problems in past. It does not matter that the Jugans had a thermometer in the basement generally observed over two decades to stay at 54°F and that the basement heat was almost always set at its low setting of 40°F, because other evidence suggests Mr. Jugan never tested the basement radiators after they were shut off for repairs the previous summer. That was a material change that rendered reliance on past experience unreasonable. In fact, Mr. Jugan testified that there was no way to know whether the radiators worked at all while he was absent from the home in early 2015.

The Third Circuit concluded that the District Court did not misapply the sham affidavit doctrine when it struck several averments from Mr. Jugan’s affidavit. The sham affidavit doctrine provides that “[w]hen a nonmovant’s affidavit contradicts earlier deposition testimony without a satisfactory or plausible explanation, a district court may disregard it at summary judgment in deciding if a genuine, material factual dispute exists.” Daubert v. NRA Grp., LLC, 861 F.3d 382, 391 (3d Cir. 2017).

Averments that are “entirely unsupported by the record and directly contrary to … testimony,” or that are “offered ‘solely’ to defeat summary judgment,” may properly be disregarded.  Mr. Jugan’s earlier deposition testimony that he could not say whether the main level thermostat was set to 62°F and that he does not remember the temperature at which the basement thermostat was set at the time of the loss. The Jugans were not free to defeat summary judgment by making last-ditch averments directly contrary to the established record.

The District Court properly decided the question of reasonable care at summary judgment because there was insufficient evidence upon which a reasonable jury could find that the Jugans exercised reasonable care to maintain heat in their home, given the unrebutted expert testimony and Mr. Jugan’s admissions during discovery.

ZALMA OPINION

It is not nice to lie to a judge. In many ways it can be criminal conduct. When an affidavit is submitted in opposition to a motion for summary judgment that is directly contradictory to earlier testimony at deposition without a reasonable excuse for the changed or different testimony, the court must ignore it and, in my opinion, punish the person for the false testimony. In this case the case was dismissed as an appropriate punishment.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

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Passover is Coming This Week – Are You Ready?

Passover Seder for Americans: An All English – Easy to Perform – Passover Seder Paperback

As my wife and I grew older and became seasoned citizens, it fell upon us to carry on the Passover tradition for our family. We are both natural born citizens of the United States and know very little Hebrew.

As we began to take on the obligation to tell the story we found the available books – the Haggadah – to be almost impossible to understand and had too much Hebrew and esoteric references to long dead Rabbis to be useful to us and our children.

Thea and I decided to write our own version of the Seder in English for our family and our celebration of the Passover in a way our family members could understand and still carry out the commandment to tell the story every year about how we were delivered from slavery in Egypt by G_d.

Passover is one of the many holidays Jewish people celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being? Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.

We tell the story of Passover every year. It is a story that Jewish people have told every year for more than 3,000 years. It is a very personal story and applies to each of us as if we were the people who lived it so long ago.

It is a story never to be forgotten. It is a story every Jewish father and mother are required to teach all of their children and their children’s children.

If you want to tell the story to your children and family you can buy the books for very little at the links below.

Available as a Kindle book.

Available as a paperback.

 


 

Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Examination Under Oath is a Condition Precedent

Failure to Testify at EUO Breaches Material Condition

The following is adapted from my new book, “The Insurance Examination Under Oath” now available on Amazon.com Available as a Kindle book and Available as a paperback.

Brizuela v. Calfarm

In Brizuela v. Calfarm Insurance Co.,116 Cal.App.4th 578, 10 Cal.Rptr.3d 661 (Cal.App. Dist.2 03/03/2004) and in California Fair Plan Association v. Superior Court of Los Angeles County, 115 Cal.App.4th 158 (Cal.App. Dist.2, 01/23/2004) the California Court of Appeal concluded that, “as a matter of law,” the insured “violated the requirement of the insurance policy that he submit to an EUO; that the insurer could on that basis deny his claim without a showing of prejudice; that the availability of a deposition in litigation does not excuse his breach of the EUO requirement; that he had no valid bad faith claim; and that the court properly dismissed his action.”

Since the EUO is an essential weapon in the insurer’s arsenal of tools to defeat insurance fraud these decisions are exceedingly important to every SIU insurance fraud investigator and insurance fraud counsel. The facts that supported the conclusion of the Court of Appeal in Brizuela were as follows:

  • On April 23, 1999, Brizuela’s adjuster faxed CalFarm 33 pages of documents, including alarm company information, checks and checking account statements, and documents related to the purchase of the business.
  • On May 27, 1999, CalFarm’s counsel sent a letter to Brizuela’s adjuster advising him that CalFarm had scheduled examinations under oath for Brizuela and Brizuela’s wife on June 16, 1999 at that counsel’s offices in Marina del Rey, California.
  • The insurance policy CalFarm issued to Brizuela included a provision allowing CalFarm to “examine any insured under oath” in the event of a claim.
  • In the May 27, 1999 letter, CalFarm’s counsel asked that Brizuela produce certain documents by June10, 1999 and confirm the examination date by June 11, 1999.
  • Brizuela’s adjuster responded by requesting copies of recorded statements that Brizuela and his wife had given to CalFarm shortly after reporting the claim. CalFarm’s counsel denied this request.
  • On June 14, 1999, CalFarm’s counsel offered to reschedule the examination and extend the time to produce documents. Brizuela’s adjuster responded by reiterating the request for copies of the recorded statements, and CalFarm’s counsel again denied the request.
  • On June 17, 1999, CalFarm’s counsel wrote to Brizuela’s adjuster stating:

“We understand that you have counseled Mr. Brizuela to appear for the EUO without additional delay, but he has elected instead to draw out the claims investigation by insisting on receiving documentation which the Insurance Code clearly and unambiguously indicates he has no entitlement at this stage of the proceedings. [¶] If Mr. Brizuela’s final position on this matter is that he is unwilling to come to an EUO without first receipt and review of his recorded statement testimony and that of his wife …”

  • Brizuela then retained counsel, who wrote to CalFarm’s counsel on June 24, 1999, complaining at length about CalFarm’s refusal to provide the Brizuelas’ previously recorded statements. Brizuela’s counsel wrote that “[t]he only purpose served by refusing to provide the transcripts would be the interest of the insurance carrier and its counsel to trick and confuse the insured to establish a basis for denial.” Brizuela’s counsel offered no dates for the EUO; instead he wrote that “[w]e will contact you directly to discuss time, dates and places for proceeding with the EUO as demanded.”
  • On July 6, 1999, CalFarm’s counsel sent Brizuela’s counsel a letter reiterating CalFarm’s denial of Brizuela’s request for the previously recorded statements and requesting proposed dates for the EUO.
  • Brizuela’s counsel responded by letter the next day accusing CalFarm of having “no interest to act fairly in this matter” by putting Brizuela “through an exercise to allow CalFarm to take advantage of its insured and subsequently deny the claim.”
  • On July 9, 1999, CalFarm’s counsel sent another request for examination dates and asked Brizuela’s counsel to respond by July 16, 1999. Brizuela’s counsel then sent two letters, dated July 20, 1999 and July 27, 1999, suggesting no dates for the examination but instead asking CalFarm’s counsel to provide dates.
  • Shortly thereafter, counsel for Brizuela and CalFarm had a telephone conversation during which CalFarm’s counsel said he would be unavailable for three weeks in August 1999, and the parties discussed proposed dates for the examination. On August 18, 1999, CalFarm’s counsel sent a letter to Brizuela’s counsel stating, “[w]hen we last spoke, several weeks ago, several proposed dates for your client’s EUO were exchanged: We have heard nothing from your offices since that time.” CalFarm’s counsel requested that “a date certain for the examination and the production of documents requested in our initial letter be supplied to our offices on or before the close of business on Wednesday, August 25, 1999,” noting that CalFarm would reach a decision on the claim “based on the available information to date” if no EUO occurred.
  • On August 20, 1999, Brizuela’s counsel responded by stating that his client had been available during the first three weeks of August and that “[w]e will contact you with available dates now that we know you have surfaced from your Trial matter.” There is no suggestion in this letter as to Brizuela’s availability for an EUO at any particular date or period of time.
  • On October 5, 1999, Brizuela’s counsel wrote another letter to CalFarm’s counsel, criticizing CalFarm’s conduct but offering no dates for the now long-delayed examination. Instead, Brizuela’s counsel suggested that CalFarm’s counsel “contact my office regarding proposed EUO dates.”
  • On November 15, 1999, Brizuela’s counsel wrote CalFarm’s counsel requesting proposed dates “immediately inasmuch as we are set to commence to Trial on December 13.”
  • Brizuela had never proposed a date for the EUO, and no examination ever occurred.

Brizuela sued CalFarm for breach of contract and for tortious bad faith breach of an insurance contract. Explaining the reason for its decision that the Insured breached the contract the court recited the history of the condition in California case law as follows:

An insured’s compliance with a policy requirement to submit to an EUO is a prerequisite to the right to receive benefits under the policy. (Hickman v. London Assurance Corp. (1920) 184 Cal. 524, 534 (Hickman).) In Hickman, an insurer investigating a loss under a fire policy demanded that the claimant attend an EUO, as required by the claimant’s policy. The claimant attended the examination, but refused to answer the insurer’s   questions, invoking his Fifth Amendment right against self-incrimination because of pending criminal charges against him for arson. At the examination, the claimant offered to comply with the demand for an EUO after the arson charge was dismissed, or at any time if the insurer would cause the charge to be dismissed. The court held that the claimant’s refusal to submit to an examination was not justified and that by refusing to submit to an examination, the claimant forfeited the right to benefits under the policy: “`If the insured cannot bring himself within the terms and conditions of the policy he cannot recover. The terms of the policy constitute the measure of the insurer’s liability. If it appears that the contract has been violated, and thus terminated by the assured, he cannot recover. He seeks to recover by reason of a contract, and he must show that he has complied with such contract on his part.'” (Hickman, supra, 184 Cal. at p. 534; see also California Fair Plan Association v. Superior Court (2004) 115 Cal.App.4th 158; Globe Indemnity Co. v. Superior Court (1992) 6 Cal.App.4th 725; Robinson v. National Auto, etc. Ins. Co. (1955) 132 Cal.App.2d 709; West v. State Farm Fire & Casualty Co. (9th Cir. 1988) 868 F.2d 348.)

After Brizuela failed to comply with CalFarm’s initial demand for an EUO, the Insured was obligated to take affirmative action to fulfill the requirement of being examined “by offering to submit to such an examination at a later time.” (Bergeron v. Employers’ Fire Ins. Co. (1931) 115 Cal.App. 672, 676.) Brizuela did not submit, or agree to submit to an EUO on any specific date after June 16, 1999. CalFarm “had done all that it was required to do to set in motion the policy provisions for an examination of the insured under oath.” Although CalFarm reiterated its demand numerous times thereafter by asking Brizuela to provide dates for the examination, Brizuela failed to do so.

Brizuela’s failure, six months after CalFarm’s initial request for the EUO, to propose any dates for an examination, to respond in a timely manner to CalFarm’s proposed dates, and to submit to an examination legally constituted a refusal to submit to EUO. For example, note Rosenthal v. Prudential Property & Casualty Co. (2d Cir. 1991) 928 F.2d 493 [applying New York law and granting summary judgment in favor of insurer after concluding that purported scheduling conflicts did not justify the 13-month delay of EUO that included six adjournments]; Gould Investors, L.P. v. General Ins. Co. (S.D.N.Y. 1990) 737 F.Supp. 812 [applying New York law, insured’s unexcused failure to attend EUO was material breach of policy; upon insured’s unilateral cancellation of a scheduled examination, burden is on insured to offer alternative future date for the examination]; Home Ins. Co. v. Olmstead (Miss. 1978) 355 So.2d 310 the insured’s refusal to submit to EUO as scheduled, and subsequent failure to offer to submit to examination for 16 months caused insured to forfeit rights under policy.

One of the most important findings of the court with regard to the failure and refusal of the insured to appear at EUO is its finding that there is no requirement that the insurer prove it was prejudiced as a result of the failure of the insured to appear. The court concluded that there “is no California authority . . . that requires an insurer to show prejudice before denying policy benefits to an insured who has violated a policy provision requiring submission to an EUO.” Finding that the cases provide that compliance with the policy requirement for an EUO is a condition precedent to any claim, and the refusal to submit to such an examination causes a forfeiture of any rights under the policy, the Court of appeal cites its readers to the California Supreme Court’s decision in Hickman quoted above. Regardless of the finding that prejudice need not be shown the Court of Appeal concludes that the failure or refusal to appear is, by definition, prejudicial.

An insured’s failure to comply with the policy requirement for EUO deprives the insurer of a means for obtaining information necessary to process the claim. The inability to obtain such information is, by definition, prejudicial, absent extraordinary circumstances.

Concluding that the insured’s breach made it impossible for him to collect indemnity under the policy there was no possibility for the insured to maintain a bad faith case and that the entire suit was properly dismissed.

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by 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.


 
Barry Zalma, Inc.© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Two Important and New Insurance Claims & Investigation Books

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.

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.

Barry Zalma, Inc.

© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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Insurance Contract Interpreted as Written

Pollution Exclusion Is Conspicuous, Plain and Clear

Insurance lawsuits abound like then ten plagues Moses imposed on Egypt. Insurers spend hundreds of hours and millions of dollars to write their policies in a way that they only take on the risks of loss they intend to take on and clearly, conspicuously, plainly and clearly exclude those risks it does not wish to take on.

In RLI Insurance Company v. City Of Visalia, 1:17-cv-01205-LJO-EPG, United States District Court For The Eastern District Of California (March 19, 2018) the District Court, after complaining about the failure of Congress to fully staff the court, spent many pages to resolve the dispute because, to paraphrase Benjamin Franklin, the court did not have the time to write a brief opinion.

INTRODUCTION

After being asked to defend the city of Vislia for a pollution claim RLI filed a motion for judgment on the pleadings and Visalia filed an opposition and RLI filed a reply (“Reply”).

The issue presented is whether a policy exclusion contained in the RLI insurance policy precludes insurance coverage in an underlying litigation brought against Visalia as a matter of law.

BACKGROUND AND FACTUAL ALLEGATIONS

RLI issued Policy No. R20040U, an umbrella liability insurance policy, to Visalia for the policy period March 8, 1978-1979 (“RLI Policy” or the “Policy”). The Policy was attached to RLI’s Complaint and to the Amended Answer. The Policy provides that RLI will indemnify Visalia for sums it is obligated to pay by reason of liability “for damages, direct or consequential and expenses, all as more fully defined by the term ‘ultimate net loss’ on account of: (i) Personal injuries, including death at any time resulting therefrom, (ii) Property Damage, (iii) Advertising liability, caused by or arising out of each occurrence happening anywhere in the world.”  The RLI Policy contains certain Policy exclusions. The Policy exclusion at issue provides:

THIS POLICY IS SUBJECT TO THE FOLLOWING EXCLUSIONS:
The policy shall not apply:

(f) as respects all operations,

(1) to the discharge, dispersal, release or escape of smoke, vapors, soot, acids, alkalis, toxic chemicals, solids, liquids or gases, waste materials, or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water unless such discharge, dispersal, release or escape is sudden and accidental.

(2) for the cost of removing, nullifying or cleaning up substances described in (1) above.

Visalia claims that it is entitled to insurance coverage under RLI’s Policy for an underlying lawsuit where Visalia was sued, Mission Linen Supply v. City of Visalia, Case No. 1:15-cv-00672-AWI-EPG, filed in the U.S. District Court Eastern District of California (the “Mission Linen Action” or “Underlying Action”). Mission Linen Supply (“Mission Linen”), a corporation that operated a commercial laundry facility, including dry cleaning, sued Visalia in relation to environmental contamination at and around property Mission Linen owned. Mission Linen was identified by the Department of Toxic Substance Control (“DTSC”) as a responsible party for contamination in soil and ground water at and around its property by chlorinated solvents, primarily tetrachloroethylene also known as perchloroethylene (“PCE”).  The Mission Linen Action alleges that Visalia is liable for the environmental contamination (at least in part) due to Visalia’s failure to maintain and repair its sewer system while accepting PCE for transport via the City’s sewers. More specifically, the Underlying Action alleges that the holes, cracks, and leaks in Visalia’s sewer system and its failure to maintain and operate its sewers caused or contributed to the release of PCE resulting in the contamination of soil and groundwater at or around the Plaintiff’s property since at least 1978. The Mission Linen Action correspondingly seeks damages pursuant to CERCLA for “all response costs incurred, and to be incurred by [Mission Linen], in response to the alleged release of PCE and other hazardous substances, in and around the Plaintiffs Property, and the environment…”

DISCUSSION

RLI argues that the Policy’s exclusions under section f(2) precludes insurance coverage for the Mission Linen Action as a matter of law.

Principles of Contract Interpretation

Interpretation of a contract is a purely legal question which is susceptible to a motion for judgment on the pleadings. Under California law, insurance policies are also contracts which can be interpreted as a matter of law, including the resolution of any ambiguity. Interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation.

The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the mutual intention of the parties which should be inferred solely from the written provisions of the contract if possible. If contract language is considered ambiguous it is resolved by interpreting the ambiguous provisions in the sense the promisor (i.e., the insurer) believed the promisee understood them at the time of formation. If application of this rule does not eliminate the ambiguity, ambiguous language is construed against the party who caused the uncertainty to exist, i.e. the insurer in insurance contracts.

To be effective, an “exclusionary clause must be ‘conspicuous, plain and clear.'” Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 273 (1966) However, “[i]t must be kept in mind that an insurer is free to select the character of the risk it will assume” and an insurer “has the right to limit the coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected.” Fresno Econ. Imp. Used Cars, Inc. v. United States Fid. & Guar. Co., 76 Cal. App. 3d 272, 280 (1977) (quoting Continental Cas. Co. v. Phoenix Constr. Co. 46 Cal. 2d 423, 432 (1956)).

The Scope of Section f(2)

In order to ascertain the scope of section f(2)’s exclusion, the Court first considered the language of the Policy. The Court found that the plain language in the policy exclusion is clear and explicit. A court cannot and should not do violence to the plain terms of an insurance contract by artificially creating ambiguity where none exists. In situations in which reasonable interpretation favors the insurer and any other would be strained and tenuous, no compulsion exists to torture or twist the language of the contract.

Visalia clearly did not contract for insurance of cleanup costs for environmental contamination liability with RLI. The insurer has the right to limit the coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected. The Court must respect the limitations to coverage that the parties contracted for as demonstrated by the written instrument which manifests the parties’ mutual intention.

The Duty to Defend

It is a well-accepted rule that the carrier must defend a suit which potentially seeks damages within the coverage of the policy. To be entitled to a defense, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential.

The insurer is not required to defend an action against the insured when the complaint in that action shows on its face that the injury complained of is not only not covered by, but is excluded from the policy.

The Injury Alleged In the Mission Linen Falls Squarely Within The Policy Exclusion

The RLI Policy explicitly excludes from coverage the cost of removal, nullification, and cleaning up environmental contamination. Therefore, there can be no doubt that RLI had no duty to defend insofar as plaintiff in the Underlying Action sought damages for the cost of removing, nullifying or cleaning up contaminating substances.

The Policy exclusion applies when the complaint itself makes no factual allegations which suggest any injury besides seeking contribution for CERCLA response costs that Mission Linen has incurred or will incur.

ZALMA OPINION

The court made it a point, in the first two paragraphs of the opinion that the parties and counsel are encouraged by the court to contact the offices of United States Senators Feinstein and Harris to address this Court’s inability to accommodate the parties and this action, regardless of the fact that the opinion resulted in a final judgment.  Noting that Civil trials set before Chief Judge O’Neill trail until he becomes available and are subject to suspension mid-trial to accommodate criminal matters. Regardless of its lack of time and resources the court reached a lengthy, fair, reasonable and clear opinion.


© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

 

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The Compact Book on Commercial Property Insurance Policy

The Means to Effectively Acquire a Commercial Property Policy and Present and Collect a First Party Property Insurance Claim

Paperback – March 22, 2018

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

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


Barry Zalma, Inc.

© 2018 – Barry Zalma

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

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

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

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

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

Legal Disclaimer:

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

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