Zalma’s Insurance Fraud Letter – January 2, 2024

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Zalma’s Insurance Fraud Letter (ZIFL) continues its 25th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma.  It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/

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The comments made in each issue of ZIFL are for information only and are not intended as legal advice.

Zalma’s Insurance Fraud Letter January 2, 2024

Posted on January 2, 2024 by Barry Zalma

ZIFL – 01-0-2024 – Volume 28, Issue 1

The Source For Insurance Fraud Professionals

This, the First issue of the 28th year of publication Zalma’s Insurance Fraud Letter provides multiple articles on how to deal with insurance fraud in the United States.

Issue 28 Number 1 – ZIFL-01-02-2024

The Source for Insurance Fraud Professionals

ZIFL – Volume 28 – Issue 1

Happy New Year

The Resource for the Insurance Claims and Insurance Fraud Professionals

This, the first issue of the 28th Year of ZIFL includes articles and reports relating to insurance fraud, including:

False Swearing & Insurance Fraud

In common language the “false swearing” provision of an insurance policy merely means that if the insured lies under oath the policy is void whether the lie is in a proof of loss or at an examination under oath. In Texas and Oklahoma, false swearing is explained this way: where an insured knowingly and willfully overestimates the value of property destroyed or damaged, the policy is voided and the insured’s right to recover is defeated.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

More McClenny Moseley & Associates Issues

This is ZIFL’s twenty first installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana.

Louisiana State Police Open Criminal Investigation Into McClenny Moseley

Louisiana State Police have opened a criminal investigation into efforts by McClenny Moseley & Associates and Apex Roofing to solicit customers after receiving a complaint by the state Insurance Department about “suspected fraudulent actions” related to insurance claims.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Waiver of Right to Appeal Effective

Insurance Agent Defrauded Clients by Taking Premium Money and Keeping it for Personal Expenses

When a criminal defendant’s valid guilty plea includes a waiver of the right to appeal, the Fourth Circuit Court of Appeals generally enforces the waiver by dismissing any subsequent appeal that raises issues within the scope of the waiver.

However, even if an appeal waiver is valid and applicable, the Fourth Circuit will review a claim that a district court’s sentence or restitution order exceeded the court’s statutory authority. In United States Of America v. Glenda Taylor-Sanders, Nos. 21-4136, 20-4604, United States Court of Appeals, Fourth Circuit (December 12, 2023) the Defendant sought a change of the sentence and restitution order.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Now Available The Compact Book of Adjusting Property Claims – Fourth Edition

On January 2, 2024, in Kindle, paperback and hardback formats, The Compact Book of Adjusting Property Claims, Fourth Edition is now available for purchase here and here. The Fourth Edition contains updates and clarifications from the first three editions plus additional material for the working adjuster and the insurance coverage lawyer.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Fictionalized True Crime

The Largest Residential Burglary of All Time

This is a Fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help Everyone to Understand How Insurance Fraud in America is Costing Those who Buy Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

After twelve months trying to get insurance on over $3,000,000 in jewelry and a like amount of fine arts, a Taiwanese man who was a wanted criminal in his own country convinced two American insurers to agree to insure him against the risk of loss to the contents of his home.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Health Insurance Fraud Convictions

Guilty Verdict of Physician Who Subjected Patients to Unnecessary and Invasive Tests

Payam Toobian, M.D. Paid Kickbacks to Physicians for Patient Referrals and Defrauded Medicaid by Subjecting Patients to Unnecessary Radiological Tests.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Fraudster Must Serve Time and Lose His Residence to Pay Restitution

Armando Valdes appealed his 60-month sentence for health care fraud after he pleaded guilty. Valdes’s conviction and sentence arose out of his scheme to submit millions of dollars in fraudulent medical claims to United Healthcare and Blue Cross Blue Shield for intravenous infusions of Infliximab, an expensive immunosuppressive drug. These infusions, purportedly given to patients at Valdes’s medical clinic, Gasiel Medical Services (“Gasiel”), were either not provided or were medically unnecessary.

In United States Of America v. Armando Valdes, No. 22-12837, United States Court of Appeals, Eleventh Circuit (December 19, 2023) the Eleventh Circuit disposed of the arguments asserted by Valdes.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Other Insurance Fraud Convictions

Prison Sentences In Multi-Million Dollar Insurance Fraud; Returns $7.75M to NYSIF

SADAF BHATTI, 40 and his company, ANAAR CONSTRUCTION & CONTRACTING CORP., pleaded guilty November 2, 2023, in New York State Supreme Court to Insurance Fraud in the First Degree for their role in Certified Public Accountant STEVEN LYON’s scheme to defraud the New York State Insurance Fund (“NYSIF”) of more than $18 million. BHATTI was sentenced to 1-to-3 years in state prison and ANAAR CONSTRUCTION & CONTRACTING CORP. was sentenced to a three-year conditional discharge.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

The Role of the Insurer’s Attorney After Ending the EUO

A well-executed Examination Under Oath (EUO) is not only one of the insurer’s most effective weapons against fraud. It can also be highly instructive for the adjuster. If an attorney is responsible for performing the examination, the adjuster must make clear that it is his or her obligation to provide sufficient factual information supported by legal authority for the insurer to make a decision on the claim.

The adjuster should also, if possible, attend the EUO to help the attorney and to study questioning techniques. Attorneys, whose job it is to ask questions, will usually do a more thorough job of EUO than will insurance claims staff.

After the EUO, the attorney will usually suggest additional investigation and can also give the adjuster legal advice as to the insurer’s rights, duties, and obligations.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Barry Zalma

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 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com and read the full 21 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-12-01-2023-1.pdf

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ to consider more than 50 volumes written by Barry Zalma on insurance and insurance claims handling.

Go to Zalma’s Insurance Fraud Letter at https://zalma.com/zalmas-insurance-fraud-letter-2/ Follow Mr. Zalma on Twitter at https://twitter.com/bzalma Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921 Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ and GTTR at https://gettr.com/@zalma

Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/08/ZIFL-08-15-2023-1.pdf

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 web site. 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. If you desire consultation you may retain the services of Mr. Zalma after signing an engagement letter.

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Clear Policy Exclusion Defeats Claim

Policy only Applies to Risks Taken by Insurer

Post 4699

See the full video at https://rumble.com/v43u8ht-clear-policy-exclusion-defeats-claim.html   and at https://youtu.be/4aByIN1KBJo

Plaintiffs in multiple consolidated actions appealed the Judgment granting the Motion for Summary Judgment in favor of defendant, The Burlington Insurance Company (“TBIC”) based upon a clear and unambiguous exclusion.

In Cameron Soule v.  Woodward Design + Build, LLC, et. al., Nos. 2022-CA-0352, 2022-CA-0353, 2022-CA-0354, 2022-CA-0355, 2022-CA-0356, Court of Appeals of Louisiana, Fourth Circuit (December 21, 2023) Louisiana resolved the dispute.

STATEMENT OF FACTS

After a July 28, 2017, accident at the Standard Condominium construction project (“Project”), when a construction elevator/hoist fell, injuring several workers, including multiple plaintiffs. As required by the owner of the Project, Woodward obtained a Contractor Controlled Insurance Program (“CCIP”) policy or “Wrap-Up” policy from Houston Casualty Company (“HCC”) for the insurance on the Project.

Eagle’s Subcontract with Woodward provided that Eagle agreed to “furnish all labor, equipment, miscellaneous materials, and supervision for MAN/MATERIAL HOIST ERECTION & DISMANTLE,” including “[p]reventative maintenance for 12-month rental period.” Regarding insurance, Eagle’s Subcontract stated, in pertinent part, that Woodward “has arranged for the Project to be insured under a controlled insurance program (the “CCIP” or “Wrap-Up”).”

In connection with the accident, plaintiffs filed suit against various parties and TBIC, Eagle’s own commercial general liability (“CGL”) insurer.

TBIC denied coverage for Eagle, maintaining that its CGL policy contained a”Wrap-Up Exclusion” which precluded coverage to Eagle for all claims arising from the Project. The Wrap-Up Exclusion provided, in pertinent part, that coverage is excluded in “[a]ll locations where you perform or have performed work that is or was to be insured under a consolidated (wrap-up) insurance program as described below.” (Emphasis added).

On April 24, 2017, the Administrator sent a letter advising Eagle that it was not covered “under the General Liability Contractor Controlled Insurance Program for the trade of Hoist Rental and Service – the Standard Project.”

TBIC maintained that the CCIP policy was intended to cover Eagle under two distinct provisions: 1) as a lessor of equipment under the above mentioned “Additional Insured” endorsement; and 2) as an enrolled contractor, (for Eagle’s work pursuant to the Subcontract to erect, dismantle, and provide preventative maintenance for the hoist) under the Wrap-Up endorsement. The latter endorsement provided that Woodward’s “enrolled contractors” are insured “only while performing duties related to the project.”

Interpretation of Insurance Contracts

An insurance policy is a contract between the parties and should be construed using the general rules of interpretation of contracts set forth in the Civil Code. The judicial responsibility in interpreting insurance contracts is to determine the parties’ common intent.

An insurance policy should not be interpreted in an unreasonable or a strained manner so as to enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion.

If after applying the other general rules of construction an ambiguity remains, the ambiguous contractual provision is to be construed against the insurer and in favor of coverage. Under this rule of strict construction, equivocal provisions seeking to narrow an insurer’s obligation are strictly construed against the insurer.

ANALYSIS

Woodward’s Subcontract with Eagle specifically provides that Woodward arranged for the Project to be insured under the CCIP policy to provide coverage for Eagle’s work at the Project site. The CCIP policy was issued by HCC. Notwithstanding the reason why Eagle was ultimately not enrolled, the record demonstrates that Eagle was clearly performing work on the Project that was to be insured under the CCIP policy. Moreover, the plain language of the Wrap-Up Exclusion stated  that coverage for Eagle is excluded in “[a]ll locations where you perform or have performed work that is or was to be insured under a consolidated (wrap-up) insurance program . . .”

The TBIC policy Wrap-Up Exclusion clearly and unambiguously precludes coverage for Eagle’s work on the Project. Accordingly, the Wrap-Up Exclusion must be enforced as written.

ZALMA OPINION

Courts are required to read the entire policy at issue and interpret the policy as its wording relates to the facts of the incident that resulted in bodily injury to the plaintiffs. The court did so and ignored the creative, yet unconvincing, arguments made by the plaintiffs. The policy excluded the incident.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Lie to Your Insurer and You Will Lose

Coverage Limited to What the Insured Pays For at Inception

See the full video at https://rumble.com/v43mpmb-lie-to-your-insurer-and-you-will-lose.html  and at https://youtu.be/9SPvYRsVfoc

Post 4698

The Eleventh Circuit Court of Appeals was asked to resolve whether two residential homes destroyed by a fire while under construction were covered under an insurance policy  issued by Travelers Property Casualty Company of America (“Travelers”) to its named insured, Talcon Group LLC (“Talcon”). Talcon is an underground utility contractor for sewer, storm drains, and treatment plants and never told Travelers it was building two residential buildings.

In Travelers Property Casualty Company Of America v. Talcon Group LLC, No. 22-13547, United States Court of Appeals, Eleventh Circuit (December 20, 2023) the Eleventh Circuit decided the extent of the coverage available to Talcon.

TWO RESIDENTIAL HOMES

Rick testified that “[a]lmost every bit” of Talcon’s work was underground utilities, such as sewers, storm drains, and treatment plant work. Talcon did not own the Florida land on which the two residential homes were constructed. Instead, the land was owned by a different family entity.

Talcon was to benefit from the sale of the two residential homes by becoming a “local vendor” in the county where the homes were being constructed, entitling it to a 5% advantage with other contractors when bidding on future projects in the county.

Wildfire Peril

In May 2020, a wildfire completely destroyed the two residential homes. At that time, the residential homes were mostly complete but did not have certificates of occupancy.

Talcon submitted a property loss notice, stating that the two residential homes were lost in the wildfires. Travelers denied the claim, because construction of two single family homes is not the same type of work as the installation of underground utility contractor work, which is what Travelers agreed to cover.

THE POLICY

In 2019  Talcon, through an insurance agent, submitted a ‘”Commercial Insurance Application” with Travelers. Talcon’s application was for a renewal of a 2018 policy with Travelers. In an application field titled “Description of Primary Operations,” Talcon listed “[u]nderground utility contractor.” Under the “Installation/Builders Risk Section,” Talcon selected “Installation,” indicated that it averaged three commercial projects each year and left blank a section to list the number and value of any residential projects. An e-mail to Travelers submitting the renewal application stated that Talcon conducted “predominately water and sewer line work,” and that a “heavy contractor questionnaire” was attached to explain Talcon’s exposures.

Travelers  covered “Installation” property from direct physical loss or damage. The Policy “Definitions” section defined “Installation” as “[p]roperty described in the Declarations under ‘Installation’ owned by you or property of others for which you are legally liable, that you or your subcontractors will install, erect or fabricate at the job site.'”

THE SUIT

Travelers filed a complaint seeking a declaratory judgment that the two residential homes were not covered property under the Policy. The district court entered summary judgment in favor of Travelers. Because the two residential homes were unrelated to Talcon’s underground utility work, the court concluded that the Policy did not cover them declaring that the Policy’s coverage did not extend to the construction of the two residential homes.

 DISCUSSION

Under Florida law every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy and as amplified, extended, or modified by any application therefor.

While Rick and Zack testified that Talcon constructed multiple residential homes in recent years, Talcon’s renewal application did not include this past residential work or indicate the prospect of future residential construction. Even though Talcon had begun constructing the two residential homes at the time of the renewal application, it misrepresented to Travelers that it was not engaged in any residential construction. Talcon, in fact, stated that 0% of its current work was “Residential” and 100% was “Municipal/Government.”

The Eleventh Circuit concluded that the only reasonable reading of the Policy and the renewal application is that Travelers provided coverage for Talcon’s underground utility and site development work. The construction of the two residential homes was neither of those items and was not covered by the Policy.

ZALMA OPINION

The covenant of good faith and fair dealing requires that neither party to the contract of insurance will do anything to deprive the other of the benefits of the contract nor misrepresent or conceal material facts from the other. In this case Talcon lied when it submitted its application by claiming it did no residential construction work at the time that it was, in fact, constructing two residential properties. Since it is true that liars never prosper the lie about the work being done defeated its claims.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Go to Jail, Do Not Pass Go

Fraudster Must Serve Time and Lose His Residence to Pay Restitution

Post 4698

See the full video at https://rumble.com/v43fprn-go-to-jail-do-not-pass-go.html and at https://youtu.be/Dvn85TdW320

Armando Valdes appealed his 60-month sentence for health care fraud after he pleaded guilty. Valdes’s conviction and sentence arose out of his scheme to submit millions of dollars in fraudulent medical claims to United Healthcare and Blue Cross Blue Shield for intravenous infusions of Infliximab, an expensive immunosuppressive drug. These infusions, purportedly given to patients at Valdes’s medical clinic, Gasiel Medical Services (“Gasiel”), were either not provided or were medically unnecessary.

In United States Of America v. Armando Valdes, No. 22-12837, United States Court of Appeals, Eleventh Circuit (December 19, 2023) the Eleventh Circuit disposed of the arguments asserted by Valdes.

LOSS AMOUNT

Federal Courts sentence convicted defendants based upon offense levels set by federal statutes. The sentences are increased with the amount of “loss” caused by the offense. In Valdes’s case, his base offense level was increased by 22 levels because the district court found that the loss amount was $38 million, and thus more than $25 million.

Section 2B1.1(b)(1)(L) provides that a defendant’s base offense level is increased by 22 levels if the loss from the fraud offense was more than $25 million but less than $65 million.  Intended loss includes harm “that would have been impossible or unlikely to occur.”

ANALYSIS

Valdes did not show the Eleventh Circuit that the district court’s loss amount of $38 million was clearly erroroneous. Valdes admitted that through Gasiel, he submitted approximately $33 million in fraudulent claims to United Healthcare and approximately $5 million in fraudulent claims to Blue Cross Blue Shield.

Even if United Healthcare was unlikely to reimburse Valdes for the entire amount billed or for duplicate claims those claims were nonetheless properly included in the intended loss amount. At the sentencing hearing, Valdes’s own fraud analyst testified that, even accounting for duplicate claims, the total loss amount was above $25 million, the threshold for the 22-level increase in Valdes’s offense level.

SOPHISTICATED MEANS ENHANCEMENT

If a defendant’s fraud offense involved sophisticated means, his offense level is increased by two levels. Whether conduct is sophisticated is based on the conduct as a whole, not on the individual steps. The Eleventh Circuit reviews a district court’s factual findings for clear error and its application of the guideline provision to those facts.

Since the Eleventh Circuit found no error in the district court’s application of the two-level sophisticated means enhancement that part of the sentence was affirmed. The Eleventh Circuit noted that Valdes operated an elaborate, years-long scheme to defraud insurance companies for expensive Infliximab infusions, obtaining over $7 million as a result. The large amount of money defrauded and the six-year period the scheme went undetected supported a finding of sophisticated means.

Valdes hid behind two licensed doctors, Hilario Isaba and Ramon Santiago, who claimed no ownership interest in Gasiel and did not prescribe Infliximab. In light of these facts, the district court properly applied a two-level sophisticated means enhancement.

FORFEITURE OF VALDES’S RESIDENCE

Valdes argued the district court erred by ordering the forfeiture of his home as substitute property. Valdes admitted, however, that as part of his plea agreement, he agreed to forfeit his primary residence as substitute property.

Valdes’s statements made during the plea colloquy are taken to be true. In these statements, Valdes acknowledged he had read and understood his indictment and plea agreement.

Because Valdes failed to show any plain error in the district court’s accepting his guilty plea as to the forfeiture allegations, he has not shown the district court erred in ordering the forfeiture of his primary residence as substitute property.

ZALMA OPINION

People who earn millions by defrauding health insurers find it difficult to believe that they were found guilty of a crime and were required to serve time in jail and pay restitution to their victims. Valdes admitted his crime only to be so shocked by his sentence that he filed an appeal to eliminate or reduce the sentence to the crimes he admitted by asserting a plea of guilty. He wasted the time of the trial court and the Eleventh Circuit and should have been punished further for attempting the appeal. He was lucky that the Eleventh Circuit only affirmed the sentence.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com  https://www.newsbreak.com/@c/1653419?s=01

Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Fictionalized True Crime

The Largest Residential Burglary of All Time

See the full video at https://rumble.com/v43auvt-fictionalized-true-crime.html  and at https://youtu.be/xJ0jwx70HsQ

This is a Fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help Everyone to Understand How Insurance Fraud in America is Costing Those who Buy Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

After twelve months trying to get insurance on over $3,000,000 in jewelry and a like amount of fine arts, a Taiwanese man who was a wanted criminal in his own country convinced two American insurers to agree to insure him against the risk of loss to the contents of his home.

To obtain the insurance he concealed from the American insurers that he was, at the time he purchased the insurance:

  • an alien a court had ordered deported;
  • that in his home country he was a wanted criminal;
  • that he had left his home country with over $60,000,000.00 in checks unpaid;
  • that every insurer at Lloyd’s, London had refused to insure him;
  • that all of his property was appraised for more than twice its actual retail replacement value; and
  • that most of the antiques he had insured in reliance on an “appraisal” attesting to a $3,500,000 value, were fakes.

His application gave the impression that he was a Beverly Hills, California investor with appropriate concerns for security. He also made it clear that he was willing to pay a high premium for the protection, a fact that should have raised the concern of the underwriters asked to accept the risk of loss of his property.

Within seven days of the delivery of his policy, a “burglary” was reported. A total of $7,000,000.00 of specifically identified and scheduled personal property was reported stolen. He claimed an additional $2,000,000 in unscheduled diamonds were stolen from their hiding place in one of his 50 suit coats hanging in his master bedroom closet.

The burglars had no problem effecting the burglary because the Insured was out of town. The burglars circumvented, what the insurers were told was a sophisticated central station alarm system, because it was merely a local gong type alarm that had never been turned on. They defeated the promised class E safe (one that requires at least 30 minutes to drill out the lock) with a simple wood drill since the actual safe was nothing more than a locking gun cabinet built into a closet.

The insurers refused to pay because they believed the insured made material misrepresentations and he concealed material facts in the purchase of the insurance.

The Insured retained a prestigious plaintiff’s bad faith lawyer to represent his interests. Because of the reputation of counsel for the Insured and the fear of an extra-contractual judgment, the insurers (against the advice of three different defense firms) settled for more than $4,000,000.00 of the $7,000,000.00 claim. The Insured’s lawyer took a contingent fee of 50%, the insured’s creditors took 20%, and the Insured took what remained. Because the IRS was unable to assert its multi-million-dollar lien in time, it got nothing.

The insurers spent hundreds of thousands of dollars defending the lawsuit brought by the insured. To save $3,000,000.00 off the policy limit claim they paid $4,000,000.00 which they did not owe.

There was no question the insured committed fraud when he got the policy. There was little question that the burglary was also a fake. The burglars even threw some of their loot off a local pier where it could be discovered to make everyone believe it was a legitimate burglary.

Even if the burglary was legitimate, there was clearly no coverage. A court with just a small amount of gumption would have declared the policy void.

The Insured had misrepresented that he had been refused insurance by several insurers and was canceled by another. He concealed the fact that he had neither a central station alarm system nor a class E burglar resistant safe. The promises he made when he bought the policy were false. The insurers believed the misrepresentations and facts concealed were sufficient to void the contract.

After a trip to China to take an examination under oath of the insured’s sister – who was also named as an insured – and two years of discovery, counsel for the insurers moved the court for summary judgment confirming rescission of the policy. The evidence available of multiple misrepresentations and the concealment of material facts, rescission was warranted and counsel was confident the court would agree.

The day before the insurers’ counsel were to appear for oral argument on the motion for summary judgment the insurers and the insured’s lawyer settled the suit without communicating with defense counsel and against the recommendations of defense counsel.

Common sense showed that an insured with a legitimately acquired $7,000,000 valued policy would never settle for less than $7,000,000 if he suffered a true loss. That he was willing to settle should have convinced the insurers the claim was fraudulent. Rather, the reluctance of the court to take a position (it had moved the oral argument three times), lack of action by the courts and the police agencies, and the lack of courage on the part of the insurers, cost the insurers involved more than $4,000,000 in settlement payments and many thousand dollars in defense and investigation costs.

To recover the money lost by paying the Insured the insurers could only pass the payment on to other, honest, insureds and the reinsurers.

The insurers’ fear of punitive damages that shadow every claim made in the states that recognize punitive damages for breach of the covenant of good faith, seemed to be impossible for the insurers to overcome. To stop the criminal who brings a fraudulent claim, insurers must not be frustrated by the continual refusal of the authorities to prosecute insurance fraud. They should decide to recoup the monies paid to the perpetrators of fraud from the fraud perpetrators by judgment or orders of restitution, rather than the honest insured whose premiums are raised to cover the payments made to the perpetrators.

Some insurers believe they have no choice but to settle because the exposure to punitive damages in a bad faith suit, no matter how frivolous, is so great that a jury might believe the fraudsters arguments.

Those insurers fail to realize that paying those who perpetrate fraud, to eliminate the exposure to punitive damages, regardless of the cost of defense of bad faith lawsuits brought by frauds, is not cost effective. Bad Faith is a two-way street. Even though insurers cannot sue for tort damages as a result of an insured’s bad faith they may sue to recover the damages they incur as a result of fraud. Criminal courts, when they convict insureds of fraud should be encouraged to order the person convicted to make restitution of all investigative and legal expenses incurred by the insurer as a condition of probation.

When an insurer makes payment of $4,000,000 for a claim it knows is fraudulent [even if it is a $3,000,000 savings over the policy limits] the insurer is issuing an engraved invitation to every con-artist in the country to move in and try the same thing. The expense is not for just the obvious fraudulent claim that is paid. The major expense is all of the other claims that are made with the knowledge that, when pushed, the Company will pay.

Once an insurer gets a reputation for paying for fraudulent claims rather than fighting with all of its assets those who perpetrate fraudulent claims will gather like vultures over a rotting carcass ready to pick the bones clean. The reverse is also true: when an insurer makes it clear it will never pay a fraudulent claim, regardless of cost, those who earn their living by fraud will stay away.

It is time that prosecutors learn that the victim is not the giant insurance company but each and every person who buys insurance.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Named Beneficiary Must be Paid Death Benefit

Where There is a Will – There are Relatives

Post 4695

See the full video at https://rumble.com/v42jwx3-named-beneficiary-must-be-paid-death-benefit.html  and at https://youtu.be/hjG5sMnXY1s

Della Lopez, Fred Lopez, Shella Gill, and Paul Imrie (collectively “Plaintiffs”) appealed from the trial court’s Order, arguing the trial court erred by granting summary judgment in favor of The Prudential Insurance Company of America (“Prudential”) and abused its discretion by denying Plaintiffs’ Motion to Compel.

In Della Lopez, Fred Lopez, Shella Gill and Paul Imrie v. The Prudential Insurance Company Of America, No. COA23-427, Court of Appeals of North Carolina (December 19, 2023) the Court of Appeals resolved the dispute of relatives of a decedent’s fight over life insurance benefits.

FACTUAL BACKGROUND

Following her husband’s death, Sherry elected to purchase a Policy from Prudential and continued to make the premium payments. To effectuate purchase of the Policy, Sherry completed and signed an Optional Group Universal Life Enrollment Form (the “Beneficiary Designation”) on 25 April 2007, naming her half-sister, Diana Imrie (“Diana”), as her sole beneficiary and Diana’s children as contingent beneficiaries.

After her husband’s death in 2007, Sherry moved in with Diana and her then-husband Paul Imrie (“Paul”) in North Carolina. Diana and Paul divorced in December 2014, and Sherry continued to live with Diana in North Carolina until March 2016.

Sherry believed Diana took the money because Diana was a joint signatory on the account and had access to the funds. Following this discovery, Sherry wanted to cancel the Policy with Prudential because she could no longer make the monthly payments, and “Diana was the sole beneficiary.”

The Prudential representative advised Della she would send a “Cancel Coverage Form” via email.  Della did not complete and return this form. Without the return of this form, the cancellation of the Policy did not go into effect.

In 2016, Sherry attempted to commit suicide by overdosing on her heart medication. On 22 March 2016, Sherry died due to complications from her suicide attempt.

On 10 May 2016, Diana emailed Prudential with a copy of the Beneficiary Designation form Sherry had signed in April 2007. After Prudential received the Beneficiary Designation from Diana Prudential was asked to verify whether the Beneficiary Designation should be accepted by Prudential.  Prudential paid Diana $54,000, the full amount of the Policy.

On 5 May 2017, after Paul and Della emailed Prudential alleging Diana was aware the Policy had been canceled and therefore fraudulently claimed she was the beneficiary of the purportedly canceled Policy.  As a result of Paul and Della’s multiple emails and the transcription of the cancelation call, the matter was referred to Prudential’s Corporate Investigations Division (“CID”).

CID Investigator Peter Friscia (“Friscia”) was assigned to investigate any alleged fraud regarding the payment of the Policy to Diana and the cancelation call made by Della. Following interviews with Della, Paul, and Diana, Friscia concluded there was no evidence to substantiate any fraud by Diana, but Della’s impersonation of Sherry did constitute fraud.

Based on Friscia’s report, Prudential referred the case to the Georgia Department of Insurance (the “GDOI”) for further investigation. Prudential’s referral stated that Della was suspected of committing insurance fraud due to her impersonation of Sherry on the cancellation call. The referral further stated Paul “aided and abetted” Della in her attempt to cancel the Policy.

Plaintiffs filed a Complaint in Gaston County District Court requesting a declaratory judgment as to their rights under the Policy. In the Complaint, the Sibling-Plaintiffs alleged Prudential was required to pay out the Policy to the surviving siblings in equal shares, and the payout to Diana was wrongful because she was not the beneficiary on file.

On 21 December 2022, Judge Bell granted both of Prudential’s partial motions for summary judgment.

ANALYSIS

First, the Sibling-Plaintiffs argued that the trial court erred but there was no uncertainty as to the respective legal rights of the parties in the Policy. The evidence in the Record showed Diana submitted a Beneficiary Designation, signed by Sherry, noting Diana as the sole beneficiary of the Policy. Prudential confirmed the information in the Beneficiary Designation and concluded the claim by Diana was valid.

Moreover, the Sibling-Plaintiffs’ own evidence shows they likewise believed Diana was the beneficiary of the Policy.

The Sibling-Plaintiffs have failed because the evidence shows Diana was the beneficiary of the Policy and the judgment was affirmed.

ZALMA OPINION

Because the decedent had fallen out with her sister and wanted to cancel the policy to keep her from benefiting from the decedent’s death, she asked her other sister to cancel the policy. The sister failed to do so and the person the decedent did not want to receive the benefits of the policy got the money. The rest of the family tried to make the decedent’s wishes be honored but could not do so because of the incompetence of the attempt to cancel the policy. Relatives should never get involved in the life insurance held by others.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Insurance Fraud as a State Crime

States Make Insurance Fraud a Crime

See the full video at https://rumble.com/v42cao0-insurance-fraud-as-a-state-crime.html  and at https://youtu.be/jDi62dEpuiA

Post 4694

In Hawaii, a person was convicted of fraud in State v. Whitaker, 175 P.3d 136, 117 Hawai’i 26 (Haw.App. 12/31/2007). As a result of a claim made by Hiram Whitaker (Whitaker) to AIG Hawaii Insurance Company, Inc. (AIG), his automobile insurance carrier, in which he sought insurance benefits for vandalism damages to his car, Whitaker was indicted, convicted, and sentenced for Insurance Fraud in violation of Hawaii Revised Statutes (HRS) § 431:10C-307.7(a) (1) and (b) (2) (2005), and Attempted Theft in the Second Degree (Attempted Theft 2) in violation of HRS § 708-831(1) (b) (Supp. 2000) and HRS § 705-500 (1993).

At trial, Cheryl Cabrera (Cabrera), an AIG claims-service representative, testified that she was assigned to follow up on Whitaker’s telephone call to AIG in which he reported the vandalism to his car. She called Whitaker at home, asked him to specifically describe the damages to his car, and requested that Whitaker “come in the next day for an estimate.” Cabrera recalled that the damages claimed by Whitaker were pretty extensive for a vehicle being vandalized. “I remember him stating his vehicle, the entire car was scratched or keyed. I remember damages he mentioned to the hood, trunk, passenger side, and driver’s side signal light.” The damages were inconsistent of a vehicle being vandalized. Every part of his vehicle was damaged, either scratched or indented and so forth.

Both Whitaker and his wife, Eva, testified at trial. They described the vandalism damages to the car that they observed on March 1, 2001. They also acknowledged that some of the damages to the car pre-existed the vandalism.

As to the Insurance Fraud offense, the indictment charged that Whitaker did knowingly present, cause or permit to be presented false information on a claim to AIG with intent to obtain benefits or recovery or compensation for benefits or services provided, to wit, insurance proceeds. When the definition of an offense specifies the state of mind sufficient for the commission of that offense, without distinguishing among the elements thereof, the specified state of mind shall apply to all elements of the offense, unless a contrary purpose plainly appears.

Not all insurance fraud cases deal with individual acts like those cases. Some involve major conspiracies to defraud insurers by multiple acts of fraud. Consider a case where 46 counts of fraud were charged and how many more counts could have been charged against the schemers who operated a capping (running) scheme to recruit injured persons and inflate their injuries for profit. In New York a “runner is defined as:

‘Runner’ shall mean any person who, for a pecuniary benefit, procures or attempts to procure a client, patient or customer when such person knows, or a reasonable person would know, that the purpose of an owner of a no-fault motor vehicle insurance medical clinic is to falsely or fraudulently: (I) obtain medical benefits from a no-fault motor vehicle insurer; or (ii) assert a claim against an insured or a no-fault motor vehicle insurer for the provision of health care services to such client, patient or customer; provided, however, that such term shall not include a person who procures or attempts to procure clients, patients or customers through public media or a person who refers clients, patients or customers as authorized by law.

Nothing in this chapter shall be deemed to prohibit an agent, broker or employee of a health maintenance organization from seeking to sell health maintenance organization coverage or health insurance coverage to any individual or group. [New York City Administrative Code § 20-900.]

In People v. Zanoletti, 173 Cal.App.4th 547, 92 Cal.Rptr.3d 757 (Cal.App. Dist.2 04/28/2009) Ramon Alfonso Zanoletti (Alfonso) and his wife Magdalena Rosalis Zanoletti (Magdalena) appealed their convictions by jury of insurance fraud. Specifically, Alfonso was convicted of 19 counts of felony insurance fraud (Pen. Code, § 550, subd. (a)(1)) (counts 1, 4, 7, 10, 12, 14, 16, 18, 20, 22, 24, 26, 28, 32, 34, 38, 40, 42 & 45), with findings of a pattern of fraudulent taking of more than $100,000 (§ 186.11, subd. (a)(3)) and damages exceeding $50,000 (§ 12022.6, subd. (a)(1)). He was also convicted of one count (count 3) of misdemeanor unauthorized practice of law (Bus. & Prof. Code, § 6126, subd. (a)). Magdalena was convicted of the same insurance fraud counts and special allegations, plus another 19 counts of felony insurance fraud (§ 550, subd. (a)(5)) (counts 2, 5, 8, 11, 13, 15, 17, 19, 21, 23, 25, 27, 29, 33, 35, 39, 41, 43 & 46), with the same special allegations. The trial court sentenced each to 22 years in state prison.

Magdalena worked as an office manager at the Franklin Chiropractic Clinic on West 8th Street in Los Angeles (the clinic) and received an annual salary of $40,000. Clarence Franklin worked as a chiropractor at the clinic. Magdalena’s husband Alfonso leased the space for the clinic and also leased some of the medical equipment, including the X-ray machine, and paid the clinic’s telephone bill. Alfonso, who ­was not an attorney, had an office at the Law Offices of Taghizadeh & Associates (the law office). Between December 12, 2003 and December 3, 2004, Alfonso received $183,115.42 from the law firm in sporadic checks of unequal sizes, often with the notation “for ex-services.”

Magdalena testified on her own behalf. She and Alfonso had been married 35 years and have two daughters. She had worked at the clinic approximately 11 years, and denied directing patients to sign for more treatments than they received. She attributed errors in the billings to human error. Alfonso would meet clients at the clinic and also discussed patients with her. Alfonso leased the space for the clinic and paid the clinic’s telephone bill.

Alfonso testified on his own behalf. He worked at the clinic from 1992 through 1995 as an administrator, and again from 2003 to 2006, though he did not recall that time very well. He also began working at the law office around September 2003. As to the $183,000 he received from the law office in 2004, he cashed the checks, then returned an unspecified sum to the law office, though he paid taxes on the full amount.

The court concluded that multiple convictions were appropriate. Sign-in sheets used by the clinics were clearly fraudulent. Magdalena assisted in the preparation of this documentation, as well. She was appropriately convicted under section 550, subdivision (a) (5) for her role in personally creating such documents with the intent that they be presented in support of a fraudulent claim. Under this subdivision, the crime was complete as soon as the writing was completed.

The court found that a conspiracy exists when the defendant and another person have the specific intent to commit an offense and a member of the conspiracy commits an overt act in furtherance of the conspiracy. The existence of a conspiracy may be inferred from the conduct, relationship, interests, and activities of the alleged conspirators before and during the alleged conspiracy. In this case the evidence overwhelmingly established that Alfonso and Magdalena were part of a sophisticated conspiracy to make fraudulent insurance claims.  With minor modification in the judgments the two were ordered to serve their sentence.

ZALMA OPINION

Insurance fraud is a serious crime – a felony – in most states. Every person convicted of insurance fraud or acting as a runner or capper to assist unscrupulous lawyers to commit insurance fraud, should be arrested, tried and if convicted sentence to the full penalty allowed by the state’s insurance fraud statute.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Waiver of Right to Appeal Effective

 Insurance Agent Defrauded Clients by Taking Premium Money and Keeping it for Personal Expenses

See the full video at https://rumble.com/v426ins-waiver-of-right-to-appeal-effective.html and at https://youtu.be/vBixIaZUyBE

When a criminal defendant’s valid guilty plea includes a waiver of the right to appeal, the Fourth Circuit Court of Appeals generally enforces the waiver by dismissing any subsequent appeal that raises issues within the scope of the waiver.

However, even if an appeal waiver is valid and applicable, the Fourth Circuit will review a claim that a district court’s sentence or restitution order exceeded the court’s statutory authority. In United States Of America v. Glenda Taylor-Sanders, Nos. 21-4136, 20-4604, United States Court of Appeals, Fourth Circuit (December 12, 2023) the Defendant sought a change of the sentence and restitution order.

FACTS

From February 2017 through May 2019, Taylor-Sanders took advantage of her role as a licensed insurance agent to defraud several trucking companies and the insurance finance company BankDirect Capital Finance. She defrauded the trucking companies by misappropriating funds that the companies provided her to pay for their insurance policy premiums and BankDirect Capital Finance by obtaining loans under the guise of nonexistent insurance policies. Instead of using the funds she obtained to pay insurance policy premiums or to pay back BankDirect Capital Finance for the legitimate loans it made to the trucking companies, Taylor-Sanders spent the funds on personal expenditures including cars, football tickets, and mortgage payments.

Predictably, some of the trucking companies’ insurance policies lapsed because Taylor-Sanders did not pay the insurance premiums.

Her scheme unraveled when one trucking company, DW Express, discovered its insurance policy was canceled for nonpayment after it tried to file a claim for an April 2019 trucking accident. Taylor-Sanders signed a plea agreement, under which she agreed to plead guilty to one count of wire fraud (Count Four). She also agreed to pay “full restitution, regardless of the resulting loss amount, to all victims directly or indirectly harmed by [her] ‘relevant conduct,’ . . . including conduct pertaining to any dismissed counts or uncharged conduct, regardless of whether such conduct constitutes an ‘offense’ …” And she “waive[d] all rights to contest the conviction and sentence in any appeal” on any grounds other than ineffective assistance of counsel or prosecutorial misconduct. 

In exchange, the Government agreed to dismiss all the remaining counts against her. After this colloquy, the magistrate judge found that Taylor-Sanders’s plea was knowing and voluntary and that Taylor-Sanders understood the charges and potential penalties and consequences of her plea.

Four months later Taylor-Sanders moved to withdraw her guilty plea, asserting “she was told she had no choice but to plead guilty” and that “her plea was not knowing and voluntary because ‘she did not fully understand the interplay between what her guideline range could be versus the final sentence.'”

On March 10, 2021, the district court ordered Taylor-Sanders to pay restitution in the amounts the Government requested.

ANALYSIS

The magistrate judge conducted a proper Rule 11 colloquy. The magistrate judge confirmed that Taylor-Sanders had reviewed the charge with counsel, understood the contents and possible consequences of her plea agreement, and was voluntarily pleading guilty. When Taylor-Sanders twice expressed concerns about the plea agreement or factual basis document, the magistrate judge provided a recess for her to convene with counsel and make any necessary changes to the plea agreement before proceeding. Taylor-Sanders’s appeal waiver was valid.

The restitution order included $139,847.09 for a year of DW Express’s lost profits. Since Taylor-Sanders did not dispute that the Mandatory Victims Restitution Act permits restitution. The Fourth Circuit concluded that each of Taylor-Sanders’s claims on appeal are barred by the appeal waiver in her guilty plea. Therefore, her appeal was dismissed.

ZALMA OPINION

Fraud perpetrators have no honor. Even after obtaining a plea agreement that saved her years in prison, Taylor-Sanders took up the time of the District Court and the Fourth Circuit to hear a spurious motion to withdraw her guilty plea after knowingly entering into the plea agreement and waiving her right to appeal. She will pay restitution and spend an appropriate time in jail.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

 

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

 

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A Christmas Fable of Fraud

The Christmas Gift of Insurance Fraud

The story that follows is fiction based, in part, on a true case worked on by me. Any similarity to real people is unintentional. It is meant only to educate fraud professionals about how some unscrupulous people use the crime of insurance fraud for fun and profit during the Christmas season. I publish this story every year.

Post 4692

See the full video at https://rumble.com/v41xwj8-a-christmas-fable-of-fraud.html and athttps://youtu.be/pnkSb_pMECI

Raymond Alexander had no religion. He cared only for himself and the money he could take from good-hearted people.

Raymond loved the Christmas season.

The marks were in such a kind and giving mood it wasn’t even work to take their money.

The Christmas before last Raymond stumbled on insurance fraud as a lucrative means of making quick, easy money. Raymond made a good living playing bunco schemes about town. He would work the money switch with old folks, the dip, and every possible scam invented to take money from honest people who had a little larceny in their hearts.

Because he was good at what he did Raymond lived well. He leased a three-bedroom apartment in the best part of town, drove a BMW convertible when he wasn’t working and purchased all of his suits from a custom tailor. He ate at gourmet restaurants and collected an eclectic assortment of popular art dishes and Lladro figurines.

Raymond, because he loved his collection, insured his home with the best and most expensive insurer he could find. He had his dishes and figurines appraised and scheduled on his policy so there was no dispute concerning their value if he had to make a claim.

Last Christmas burglars entered Raymond’s home and stole two Lladro figurines and one art dish depicting the English Countryside on Spode china. Raymond was upset that a burglar ripped him off. It was his profession to rip off others. Raymond felt he now understood how women who had been raped must feel.

Raymond called his insurance agent and reported his claim. To his surprise his insurer telephoned him and asked what was lost. No one came to his home. No one asked to come to his home to investigate. They merely called on the telephone and asked for the number of the police report so the insurer could obtain a copy.

Such unthinking trust deserved to be made a victim of Raymond’s wiles. He, the consummate professional, could not resist the temptation. He told the person on the telephone that he was not sure what was taken and that he had only reported that which was obvious on first inspection to the police. As a bunco artist of the first order what came next was simple – the police officer had left him with a sheet of paper to list any items that he later discovered were missing. Raymond sat at his oak and leather antique partner’s desk and prepared his supplemental police report. On the report he listed one out of every four items on the insurance schedule. Then he added three Armani suits, two pairs of Ecco dress boots, a pair of Bruno Magli sport shoes, two pairs of gold cufflinks, and a simple Omega wrist watch. He was not greedy.

He sent the list to the detective and a copy to the adjuster who spoke with him on the telephone. Raymond expected he would need to haggle and would be forced to document each item to the insurance company. Much to his surprise, two weeks later Raymond received a nice letter from his insurer. It advised him that the adjuster had calculated his loss, deducted $500 (his deductible) and could only pay $1,000 for the jewelry that was not scheduled because of a special limitation in the policy. The adjuster expressed her regret in not being able to pay him for everything he lost and hoped the enclosed check for $35,650 would be satisfactory.

Since Raymond had only lost $375.50 worth of goods, he found the check to be quite satisfactory. Raymond spent the Christmas season in a comfortable resort in Bermuda funded by his kind and generous insurance adjuster.

When Raymond returned from Bermuda, he took the things he had reported stolen to high-end swap meets in Long Island, New York. He traded one Lladro for another, one plate for another and bought some new jewelry.

He called his appraiser, who updated the appraisal on his schedule by taking out the items Raymond had claimed were stolen and replacing them with the new items he had acquired. In addition, the appraiser valued all of his jewelry and added it and the new art pieces to the policy. His policy was renewed and the schedule increased and changed to meet the new items with a value of more than $150,000.00.

Raymond Alexander was not a greedy man. He was a successful confidence man because he was not greedy. He did not bleed his marks’ dry. He just took what he believed was an adequate sum of money to properly support his accustomed lifestyle. Raymond never took everything the mark had. He wanted the mark to know he was taken and to be too embarrassed to do anything about it.

Raymond looked on his insurance company as another mark. He did not want to collect $150,000 from them, only enough to take him through the holiday season that he had not celebrated since he was four-years-old.

It was time to have another loss and claim. A fire was out of the question, too messy. Robbery was dangerous and the person hired to fake a robbery might forget he was not supposed to really rob Raymond. A fake burglary might be worse because the police got testy about false police reports. He might make a mistake and they would learn the burglary was not real.

Raymond Alexander was successful at his chosen criminal profession because he paid attention to detail. He read his insurance policy. Part of that policy was a Personal Articles Floater that insured scheduled items for all risks of physical loss. It had very few exclusions. It covered, for instance, the Lladros and the plates against loss (with no explanation) or even breakage from any cause, including an earthquake.

Raymond knew he could not cause an earthquake but he had no problem reporting that he lost his art. He removed from his home, two or three items at a time, for several weeks. Figurines and plates valued by his appraiser at $51,632.00 were stored at a Public Storage unit. The number was nice, odd and with no zeros except the cents.

On November 15 Raymond telephoned his insurance agent to report that he returned home from a weekend trip to Massachusetts to his apartment in Boston and found selected parts of his collection missing. There was no evidence of a break-in to his house and all he could explain to the agent was that the items had disappeared, mysteriously from his home. The alarm had been set and was operating perfectly. It detected no intruders but the items were gone.

Again, Raymond was contacted by an adjuster by telephone. He learned that she was in Phoenix, Arizona and never left her desk to deal with claims. She asked for, and Raymond gladly gave, a recorded statement concerning the events and the items claimed lost. She kept him on the telephone for almost an hour taking from Raymond as much detail as he could possibly remember about each item.

Raymond was distraught. His holiday had been ruined. The adjuster empathized with him and told him she would work hard to complete his claim before Christmas. She did. A check for $49,162.00 arrived in Raymond’s mail box on November 30. They broke a record getting money to him. They did no investigation other than speak to him, and they paid him promptly. Since the loss was his second loss in two years the adjuster sent a note to the underwriters about the loss history and they decided not to renew Raymond for a second term.

He went to his insurance broker, after he “replaced” all the missing goods and obtained an identical policy from another insurer for a smaller premium. They were willing to take a chance that lightning would not strike the same place three times in a row.

Raymond enjoyed his insurance company money and did less of his normal scams. It seemed wrong to take an old woman’s savings through a convoluted scheme when he could wrest money from an insurer with such ease. The payments also allowed him to add to his collection with no new spending.

Raymond was a happy man. His BMW had become boring to him. The state made him insure it so he had the best insurance money could buy from the New York Auto Insurance Specialists.

He drove the vehicle to Boston Harbor where it was shipped to an acquaintance with whom he had done a sting in Hartford who now lived in Belize. For a 15% commission the BMW was sold to a General in the Belize army for its high Blue Book value. Raymond then reported to the Boston PD and his insurance company that his BMW had been stolen from the street in front of his apartment while he slept.

Everything went well, the BMW was valued and the insurer was ready and willing to pay Raymond low blue book value on the car. They did, however, automatically report the theft to the National Insurance Crime Bureau (The “NICB”) an entity that records the vehicle identification number of every vehicle ever shipped out of the United States. The insurer was about to send a check to Raymond when it received a report from NICB that the BMW had been shipped from Boston to Belize three months before.

The insurer assigned the investigation to its Special Investigation Unit. Investigator Steve Nazarian went to Raymond’s home to interview him in detail. Raymond lied with alacrity until he was confronted with the shipping documents. The ease with which he had been caught frightened Raymond. He thought he might have to go to jail. He knew there was no way to take back the reported theft. It was a week before Christmas. He pleaded with Nazarian.

“Well, Mr. Alexander” Nazarian, responded, “the state of Massachusetts takes insurance fraud very seriously. We are required to report you to the Insurance Fraud Bureau. They make all decisions about crime. Your insurer, on the other hand, is quite upset that you tried to cheat it. What do you think we should do?”

“Just forget I made the claim. I will sign any paper you ask to withdraw my claim. Getting me arrested won’t help you.” Raymond suggested.

“I just happen to have a release in my briefcase, here. Please sign it. I will report you to the IFB but I will also report that we settled with you for no payment as I am required to do by law. They may have more important criminals to arrest than you.”

“Give me the release.” Raymond exclaimed as he grabbed the release out of Steve Nazarian’s hand and signed it. “Now please leave my house.”

“Of course, Mr. Alexander” Nazarian said, and with a snide accent said: “Have a Merry Christmas.”

Raymond stayed at home through the Christmas season. He saw no one, did nothing. He ate a frozen turkey dinner alone on Christmas Eve. He decided he would never attempt an insurance fraud again.

The Insurance Fraud Bureau had received, along with Nazarian’s report of Raymond’s attempted fraud, eighteen hundred reports of suspected fraud for the month of November. His name was put in their data base for future reference but no file was opened. Bigger and more exciting fraud perpetrators took up their attention. No one was hurt. The insurance company paid no money and immediately cancelled all policies it had for Raymond.

Raymond went back to his regular work taking money from widows, orphans, the sick and the partially criminal. He continued to live well and never again committed insurance fraud. His Christmas present to the insurance industry was to set his criminal mind to other victims.

A Christmas Fable

This is, of course, a Christmas fable.

All insurers do not run auto thefts through the NICB or ISO database. Most insurers believe whatever the insured tells them. Most have under-trained, understaffed and overworked claims departments who just send out money. Very few have claims personnel who can, like Nazarian, conduct a thorough insurance claims investigation that provides to the insureds and insurer excellence in claims handling.

Most insurance criminals, unlike Raymond, know about the lack of staff, how overworked and underpaid adjusters are, and would never sign a release. The insurance criminal would either try to bribe the SIU investigator or sue the insurer for bad faith for having the gall to claim they caught them at their crime. Insurance fraud perpetrators do not give up a chance of easy money just because their scheme did not hold together. They change the scheme and bluster. Insurers, faced with an expensive defense, will pay something. Insurance criminals are not as naive as Raymond and insurers are not as bright and forceful as his auto insurer. Steve Nazarian would never just give Raymond a release, he would need to consult with management (up at least four layers) and a lawyer before he took such a chance to defeat an insurance fraud.

Insurance fraud perpetrators, even if they feel they have been caught and will never recover, merely redouble their efforts and perpetrate more frauds so they can make up for the few where they are caught. Raymond Alexander gave a Christmas present to the insurance industry but is still loose to take advantage of the old, the poor, and the weak who are prime candidates for a bunco artist. Insurers, unlike an octogenarian widow, should be better able to protect themselves from a bunco scheme. In most cases, as Raymond found, are not able, willing or even care to protect themselves.

The Christmas Present We All Need

The Christmas present I would like is a state government willing to prosecute every insurance fraud to the limit of the law. I dream of an insurance industry willing to spend the money necessary to fight insurance fraud.  Santa, this is what I want as a gift to me and the entire world: Governments and insurers willing to fight insurance fraud and give no quarter to the fraud perpetrator.

Raymond Alexander had no religion. He cared only for himself and the money he could take from good-hearted people.

Raymond loved the Christmas season.

The marks were in such a kind and giving mood it wasn’t even work to take their money.

The Christmas before last Raymond stumbled on insurance fraud as a lucrative means of making quick, easy money. Raymond made a good living playing bunco schemes about town. He would work the money switch with old folks, the dip, and every possible scam invented to take money from honest people who had a little larceny in their hearts.

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Subrogation Must be Fair

Insurer May Never Subrogate Against its own Insured

Post 4691

See the full video at https://rumble.com/v41fqbk-subrogation-must-be-fair.html  and at  https://youtu.be/YXe2JxSJ2XM

Zurich American Insurance et al sued their coinsurers – Appellant Certain Underwriters at Lloyd’s, London Subscribing to Policy Number B12630308616 (Lloyd’s) and Defendant Arch Insurance Company (Arch) – seeking a declaratory judgment that Lloyd’s is barred under New York law from bringing a common law indemnification or contribution claim against a party insured by Zurich, Arch, and Lloyd’s.

The district court granted Zurich’s motion for summary judgment, holding that New York’s anti-subrogation rule precludes Lloyd’s from bringing that claim.

In Zurich American Insurance Company, American Zurich Insurance Company v. Certain Underwriters at Lloyd’s of London Subscribing to Policy Number B12630308616, Arch Insurance Company, No. 22-2697, United States Court of Appeals, Second Circuit (December 12, 2023) the Second Circuit resolved the dispute.

Many Layers of Insurance

This dispute arose from a large construction project at LaGuardia Airport. Pursuant to the contract, Skanska and LGA obtained a Contractors Controlled Insurance Program for the project, which included a “tower” of general liability insurance with $300 million of coverage in three layers. Zurich underwrote the base layer of coverage, Arch provided a first layer of excess coverage, and then Lloyd’s provided a second excess policy, i.e. a third layer of coverage on top of Arch’s.

Each layer of coverage, including Lloyd’s, contains a standard employer’s liability exclusion.  Zurich agreed that the general liability insurance policy provided coverage for the suit and arranged for counsel to represent Port Authority and LGA beginning in August 2018. Roughly three years later, Lloyd’s contacted that counsel and requested that LGA and Port Authority commence a third-party claim for common law indemnification or contribution against Skanska. Counsel analyzed the feasibility of such a claim but concluded that New York’s anti-subrogation rule would bar it. After continued disputes between Lloyd’s, Zurich, and counsel for each, Zurich commenced this action, seeking a declaratory judgment that the anti-subrogation rule would indeed bar the indemnification or contribution claim against Skanska.

The Anti-Subrogation Rule

New York courts have established an anti-subrogation rule that is an exception to an insurer’s usual right of subrogation against third parties. It provides that an insurer has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered.

The anti-subrogation rule is needed both to prevent the insurer from passing the incidence of loss to its own insured and to guard against the potential for conflict of interest that may affect the insurer’s incentive to provide a vigorous defense for its insured.

The anti-subrogation rule appropriately prevents an insurer from recouping losses from its insured even where the insured has expressly agreed to indemnify the party from whom the insurer’s rights are derived and has procured separate insurance covering the same risk. The important public policies served by the rule means that the rule takes precedence over the parties’ private contractual arrangements.

Since Lloyd’s insures Skanska under the general liability policy that policy, through the insured contract provision, covers Skanska for the obligation it assumed in the contract to indemnify LGA and Port Authority for losses resulting from third-party claims for bodily injury like the one underlying the present action.

In conclusion the Second Circuit concluded that Lloyd’s cannot subrogate against Skanska — its own insured — for losses arising from the underlying suit that is exactly the risk for which Lloyd’s insured Skanska.

What Lloyd’s proposed is precisely what the anti-subrogation rule prohibits. As a result, straightforward application of the rule bars the claim.

ZALMA OPINION

Subrogation is an equitable remedy where, when an insurer pays a debt owed by its insured, fairness requires the insured to provide the insurer with the insured’s rights against third parties to recoup its payment on behalf of the insured. Regardless, it is unfair for an insurer to seek damages from its own insured because doing so violates the public policy of the state of New York and is, on its face, unfair. When two people are in a simple auto accident but are insured by the same insurer, they will both be paid regardless of who is at fault since the insurer can’t subrogate against its own insured.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Zalma’s Insurance Fraud Letter – December 15, 2023

ZIFL – Volume 27 – Issue 24

Merry Christmas,  

Happy Hanukah, and May the Winter Solstice be Peaceful & Mild

Post 4690

ZIFL-12-15-2023

See the full video at https://rumble.com/v419744-zalmas-insurance-fraud-letter-december-15-2023.html  and at https://youtu.be/ByPCyXI_BlY

The Resource for the Insurance Claims and Insurance Fraud Professionals

This, the 24th issue of the 27th Year of ZIFL includes articles and reports relating to insurance fraud, including:

 Former Root Marketing Exec Pleads Guilty to Taking Over $10 Million From the Insurer

Brinson Caleb “BC” Silver, former chief marketing officer for insurtech Root, has pleaded guilty to stealing more than $10 million from his former employer and violating court orders.

According to the U.S. Attorney’s Office for the Southern District of Ohio, Silver, 43, of Culver City, California, pleaded guilty to one count each of wire fraud and contempt of court and has agreed to pay more than $10.2 million in restitution. A prison sentence of 24-51 months has been recommended.

Read the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-12-15-2023.pdf

More McClenny Moseley & Associates Issues

This is ZIFL’s twenteeth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana.

December 8, 2023 – History of MMA Issues

Read the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-12-15-2023.pdf

The Insurance Examination Under Oath

A Tool Available to Insurers to Thoroughly Investigate Claims

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 its 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.

Read the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-12-15-2023.pdf

Health Insurance Fraud Convictions

Doctor and Wife Admit Genetic Testing Kickback and Bribery Scheme

Yitzchok “Barry” Kurtzer, 63, and his wife, Robin Kurtzer, 62, both of Monsey, New York, a Pennsylvania doctor, and his wife admitted to their roles in schemes to solicit and receive kickbacks and bribes in exchange for ordering genetic tests.

Read the full issue of ZIFL and about dozens of fraud convictions at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-12-15-2023.pdf

What is Needed to Deter Insurance Fraud?

To do so the insurers must train their staff to recognize the elements of both the crime of insurance fraud and the elements of the civil tort of insurance fraud. If well trained, insurance personnel collecting information about a potential insurance fraud, will know the type and quality of information that either a prosecutor or a civil defense lawyer will need to prove fraud was attempted.

Some estimates indicate that more money goes out fighting fraud than is saved. Others show that every dollar spent by insurers to defeat fraud save the insurer as much as seven dollars in fraudulent claims. Although insurance fraud is a crime in almost every jurisdiction in the United States it is seldom prosecuted.

Read the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-12-15-2023.pdf

Other Insurance Fraud Convictions

North Carolina Insurance Agent Can’t Appeal Sentence in $700,000 Fraud

Glenda Taylor-Sanders, of Charlotte, North Carolina, a former insurance agent who pleaded guilty to defrauding trucking company clients and a premium finance company of hundreds of thousands of dollars cannot challenge her sentence and restitution order, a federal appeals court decided.

Read the full issue and dozens of convictions at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-12-15-2023.pdf

Fraud After Catastrophes

Over the past few decades fraud has become an ever escalating problem. It is part of the CODB equation and quickly becomes just one more cost to be passed on to the insurance buying public. When a catastrophe hits everyone suffers. The victims of the catastrophe suffer. The insurers whose staff is not adequately trained to investigate and adjust claims and recognize fraud compounds the suffering of the victims and costs the insurer.

Read the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-12-15-2023.pdf

Barry Zalma

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 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Over the last 55 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ to consider more than 50 volumes written by Barry Zalma on insurance and insurance claims handling.

Go to Zalma’s Insurance Fraud Letter at https://zalma.com/zalmas-insurance-fraud-letter-2/  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma, Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921, Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg, Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ and GTTR at https://gettr.com/@zalma

Read the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-12-15-2023.pdf

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Insurance Litigation Never Easy

When Appraisers Fail to Agree on Umpire Court Must Appoint One

See the full video at https://rumble.com/v4124us-insurance-litigation-never-easy.html  and at https://youtu.be/B51ilfy6dLk

Post 4689

When a claim for damages due to a hurricane was disputed the parties demanded appraisal and appointed their respective appraisers. However, the appraisers could not agree on an umpire for reasons unclear and bad faith litigation ensured. Because of the inability of the appraisers to agree on an umpire the parties went to the District Court to appoint an umpire so the appraisal process can proceed.

In DORIAN THEODORE v. ALLIED TRUST INSURANCE COMPANY, Civil Action No. 22-951-SDD-RLB, United States District Court, M.D. Louisiana (October 18, 2023) the parties moved the USDC in Louisiana to appoint an Appraisal Umpire. The parties submitted separate lists of proposed umpires and their respective CVs for the Court’s consideration.

Background

The lawsuit involves claims for damage to property located in Gonzales, Louisiana as a result of Hurricane Ida.  Dorian Theodore (“Plaintiff”) sought coverage and statutory bad faith damages related to claims made under an insurance policy (the “Policy”) issued by Allied Trust Insurance Company (“Defendant”).

The parties represent that the Policy provides the following language with respect to appraisals, including the appointment of an umpire:

Appraisal

If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the “residence premises” is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. Any outcome of the appraisal will not be binding on either party.

Each party will:

1. Pay its own appraiser; and

2. Bear the other expenses of the appraisal and umpire equally.

Prior to the filing of this lawsuit, the parties selected their initial appraisers when Defendant demanded an appraisal of the loss. Plaintiff designated Matthew Addison as Plaintiff’s appraiser, and Defendant designated Ronald West as its appraiser. After the filing of this lawsuit, Plaintiff designated Mike Deckelman as Plaintiff’s appraiser.  The parties’ appraisers were unsuccessful in jointly selecting an umpire in accordance with the Policy.

As ordered, the parties submitted separate lists of proposed umpires for potential appointment.

Law and Analysis

There is no dispute between the parties that the appraisal provision in the Policy is enforceable. The parties have jointly sought court appointment of an umpire in accordance with the appraisal provision in the Policy.

The District Court appointed Cade Cole as the appraisal umpire for the purposes of the instant insurance claim dispute. Federal courts routinely have appointed Cade Cole as deputy special master and recognized him as a “neutral” in Hurricane Laura and Hurricane Delta cases. The Court took judicial notice of this fact and found that Mr. Cole is well-qualified for the position of umpire and so selects him to fulfill that role in this case.

If Mr. Cole declines to serve as umpire in this matter, then the Court selects Joel Moore as umpire. His resume demonstrates that he is well-qualified for the position and would likewise serve as a neutral umpire.

As discussed above, although both Mr. Cole and Mr. Moore were proposed by the Plaintiff, the Court has no reason to suggest that both can fulfill this role in a fair, neutral and impartial manner.

ZALMA OPINION

Insurance claims resulting from hurricanes that have struck Louisiana have become aggressive, unfair and unreasonable. For two appraisers to fail to pick an umpire is an indication of litigation game playing forcing the District Court to appoint an umpire. This litigation requiring a judge to do what insurance appraisers do every day with little or no discussion reflects a desire to make the process more expensive and difficult rather than fulfill its purpose to quickly and fairly resolve the quantum of a loss.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Activities of Lawyer in the Capacity of an Officer of Another Business Excluded

No Defense for Lawyer/Business Owner

Post 4788

See the full video at https://rumble.com/v40vw8n-activities-of-lawyer-in-the-capacity-of-an-officer-of-another-business-excl.html  and at https://youtu.be/2WSSwJjP4bA

Associated Industries Insurance Company (AIIC) sued Howard Kleinhendler and his former law firm, Wachtel Missry LLP, seeking a declaration that it need not provide insurance coverage for either defendant in a lawsuit brought by Allan Applestein. Applestein sought damages for legal malpractice, breach of fiduciary duty, elder abuse, and fraud related to the 2017 sale of land in Virginia, known as the Fones Cliffs Land, to Kleinhendler’s company, the Virginia True Corporation.

In Associated Industries Insurance Company, Inc. v. Howard Kleinhendler, Defendant-Appellant, Wachtel Missry LLP, No. 23-57, United States Court of Appeals, Second Circuit (December 7, 2023) the Second Circuit resolved the dispute.

THE POLICY EXCLUSION

The insurance policy contained an explicit exclusion for activities undertaken in the capacity of an officer of another business enterprise. The district court granted judgment on the pleadings to AIIC because it determined the policy exclusion unambiguously excluded coverage due to Kleinhendler’s position with Virginia True.

CONTENTIONS

Kleinhendler contended that AIIC has a duty to defend him in the Applestein lawsuit because the lawsuit alleges some acts that could give rise to claims covered by the insurance policy, namely acts that occurred before the formation of Virgina True and acts related to the Fones Cliffs Land transaction that were unrelated to Kleinhendler’s position with Virginia True.

AIIC responded that it does not have a duty to defend him because the Applestein complaint squarely centers on the conflicted sale of the Fones Cliffs Land to Kleinhendler’s company, and its claims thus arise from Kleinhendler’s position with that company.

ANALYSIS

Under New York law, an insurer’s duty to defend is exceedingly broad. To be relieved of its duty based on a policy exclusion, an insurer has a heavy burden of demonstrating that the allegations of the complaint cast the pleadings wholly within that exclusion.

The Second Circuit noted that the issue to be resolved is whether the Applestein complaint brings claims that could potentially result in liability not arising out of Kleinhendler’s position with Virginia True and concluded that it does not. The complaint does not state any claim for liability that does not arise out of Kleinhendler’s position with his company.

Therefore, the Second Circuit concluded that AIIC carried its burden to demonstrate the exclusion applied and it has no duty to defend Kleinhendler in the Applestein suit.

That each and every claim arises from the sale of the Fones Cliffs Land to Virginia True is confirmed by the damages Applestein seeks-$7,724,200.36, apparently corresponding to the amount he lost as a result of the transaction and a loan he made to HK Consulting Group LLC (another Kleinhendler company) in connection with it, plus interest.

In short, all of Kleinhendler’s potential liability in the Applestein suit stems at least in part from his position with that company.

Therefore, the district court properly concluded that AIIC’s policy exclusion applied.

AIIC does not have a duty to defend Kleinhendler in the Applestein action.

ZALMA OPINION

There is no reason why a lawyer cannot be involved in a business outside the practice of law. It only becomes a problem if the business is involved with a client of the lawyer owner. Insurers of lawyers limit the liability coverage to the practice of law and most, like AIIC exclude coverage for actions between a lawyer owner of a non-law business and a client of the lawyer.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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No Right to Insurance Proceeds After Foreclosure

Foreclosure Changes Insurable Interest from Borrower to Lender

Post 4787

See the full video at https://rumble.com/v40quhb-no-right-to-insurance-proceeds-after-foreclosure.html and at https://youtu.be/iNSo-kpWp7A

In this contested residential mortgage foreclosure, defendants Mitchell and Deanna Minchello appealed from the entry of summary judgment. Defendants contended that plaintiff violated the covenant of good faith and fair dealing by “refusing to disburse defendants’ insurance proceeds and forcing defendants’ home to remain in disrepair” and that the trial court applied an improper standard.

In Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, as owner trustee of the Residential Credit Opportunities Trust V v. Mitchell Minchello and Deanna Minchello, and J Hofert Company, FIA Card Services NA, Schumann Hanlon LLC, Discover Bank, Vanz LLC-December 10 Series01, Mri-West Morris Associates, and State Of New Jersey, No. A-3522-21, Superior Court of New Jersey, Appellate Division (December 8, 2023) the issues were resolved.

FACTS

The essential facts were undisputed. Defendants borrowed $522,000 in January 2007, secured by a thirty-year purchase money mortgage on their home in Mt. Arlington. Defendants stopped making their loan payments in 2010, and in 2012 they stopped paying the taxes and insurance on the property. In 2014 the lenders asserted its rights by suing for foreclosure in March 2015.

Defendants filed a bankruptcy petition under Chapter 13. The following day, December 7, defendant Deanna Minchello drove her car into defendants’ home, resulting in structural damage. The only insurance was forced placed insurance in the name of the lender.

ANALYSIS

The trial judge granted plaintiff’s motion for summary judgment. The judge found no dispute over the validity of the note and mortgage, defendants’ default in 2010 and plaintiff’s standing to foreclose the mortgage. Whether the lender allowed the insurance money to go to repair the structure was irrelevant since the foreclosure put the insurable interest in the lender and the lender was the only person insured.

Although the procedural history is long and complicated with the parties’ appendices exceeding 800 pages, the legal issues are straightforward, and the Court of Appeals had no hesitation in holding plaintiff established its entitlement to both summary judgment.

CONCLUSION

The trial court’s orders that plaintiff established its right to foreclose the mortgage, that defendants did not succeed in establishing plaintiff should be barred from asserting that equitable remedy, and that final judgment of foreclosure was properly entered against defendants.

ZALMA OPINION

When borrowers fail to pay mortgage payments, insurance premiums and taxes they have no insurance in their name, only the insurance acquired by the lender to protect its interests. The lender can apply the insurance to repair or simply apply it to reduce the debt. It took unmitigated gall to sue the lenders in this after defaulting in every obligation owed by a property owner that pledged the property as security for the loan. The court found it necessary to read and analyze all 800 pages and still found the trial court’s judgment in favor of the lender to be appropriate. Why the court did not sanction the borrowers and their attorneys is confusing to me.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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When Parties Agree to Appraisal Court has no Choice but to Agree

Appraisal Required to Resolve Extent of Loss

Post 4786

See the full video at  https://rumble.com/v409y5z-when-parties-agree-to-appraisal-court-has-no-choice-but-to-agree.html and at https://youtu.be/oOGc-09xpWs

In an insurance dispute stemming from Hurricane Ian The parties agreed that their case should go to appraisal to determine the extent of the loss.

When an insurance policy contains an appraisal provision, “the right to appraisal is not permissive but is instead mandatory, so once a demand for appraisal is made, ‘neither party has the right to deny that demand.’” [McGowan v. First Acceptance Ins. Co., Inc., 411 F.Supp.3d 1293, 1296 (M.D. Fla. 2019) (quoting United Cmty. Ins. Co. v. Lewis, 642 So.2d 59, 60 (Fla. 3d DCA 1994)].

Like other stipulations about dispute resolution, the Court must enforce contractual appraisal provisions by non-dispositive order. Therefore, in Buena Vista Of Deep Creek Condominium Association, Inc. v. Clear Blue Specialty Insurance Company, No. 2:23-cv-957-SPC-KCD, United States District Court, M.D. Florida (November 27, 2023) the court concluded that because appraisal will not dispose of any claims or defenses, the Court did not treat the motion to compel appraisal as one for summary judgment.

Since the parties agreed that appraisal is appropriate, their request was granted. Further, the parties requested a stay during appraisal which was also granted because the Hurricane Ian Scheduling Order contemplated such relief if the parties agreed that appraisal is appropriate. Thus, the case wase stayed.

All deadlines and events in the Hurricane Ian Scheduling Order are suspended. The parties have agreed that the appraisal panel must itemize the awarded damages by coverage, to be accompanied by a supporting estimate. Though the parties cite no contractual provision that requires such an award, because the parties agree, their request will be granted.

According, it was ORDERED:

  1. The Joint Stipulation for Appraisal and Stay of the Case was GRANTED, and the appraisal panel was ordered to itemize the awarded damages by coverage, to be accompanied by a supporting estimate.
  2. This case was STAYED pending appraisal, and the Clerk must add a stay flag to the file and administratively close the case.
  3. The parties were DIRECTED to file a joint report on the status of appraisal on or before February 26, 2024, and every ninety days thereafter until appraisal has ended.
  4. Within 15 days of a signed appraisal award, the parties were directed to jointly notify the Court of: (a) what issues, if any, remain for the Court to resolve; (b) whether the stay needs to be lifted; and (c) how this action should proceed, if at all.

ZALMA OPINION

The Appraisal condition of a first party property policy is an extra-judicial means of resolving disputes between an insurer and an insured about the amount of loss. Since the parties agreed that appraisal was an appropriate manner of resolving that limited dispute they moved to stay the action in hopes that the appraisal result will allow the parties to resolve all their differences. The court understood and issued orders to fulfill the agreement of the parties.

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Drunk Driving into a Pole Not a Covered Loss

No Coverage for Loss After Policy Cancelled

Post 4685

See the full video at https://rumble.com/v3zwzo8-drunk-driving-into-a-pole-not-a-covered-loss.html and at https://youtu.be/M8dwl_aHU70

In an action for declaratory judgment to determine whether the plaintiffs had a duty to defend and indemnify the defendants under certain insurance policies for injuries sustained in a motor vehicle accident, where the trial court granted the plaintiffs’ motion for summary judgment the dispute was moved to the Court of Appeals.

In Liberty Insurance Corporation et al. v. Theodore Johnson et al., No. AC 45933, Court of Appeals of Connecticut (December 5, 2023) the Court of Appeals resolved the dispute.

FACTS

The defendants, Theodore Johnson (Theodore) and Kim Johnson (Kim), appealed from the judgment rendered by the trial court following its granting of a motion for summary judgment filed by the plaintiffs, Liberty Insurance et al and Safeco Insurance Company of Illinois (Safeco). The primary issue is duty to defend a separate action that stemmed from a motor vehicle accident in which the defendants’ son, Aaron Johnson (Aaron), was driving a motor vehicle owned by Theodore when he lost control of the vehicle and struck a telephone pole, causing serious injuries to a passenger in the vehicle, Jordan Torres.

At some point prior to 1:33 a.m. on December 26, 2019, Aaron left the defendants’ house and operated a 1997 Audi A4 2.8 Quattro (Audi) owned by Theodore. Torres was a passenger in the Audi at the time. As Aaron attempted to navigate a curve, he lost control of the Audi, crossed into the westbound lane of traffic, and left the roadway, striking a telephone pole.

Torres sustained personal injuries in the accident and sued a bar in Newington and its backer, as well as Theodore, Kim and Aaron. In the Torres action, Torres alleged that, on December 25, 2019, Aaron, a minor, consumed alcohol at the bar, after which he went to the defendants’ house in Glastonbury, where he was visibly intoxicated and consumed more alcohol.

Following the commencement of the Torres action, the defendants sought coverage from the plaintiffs for Torres’ claims under three policies of insurance:

  1. a homeowners insurance policy issued to the defendants by Liberty Insurance (homeowners policy);
  2. an automobile insurance policy issued to the defendants by Safeco (automobile policy); and
  3. an umbrella insurance policy issued to the defendants by Liberty Mutual (umbrella policy).

Thereafter, the insurer plaintiffs sued seeking a judgment declaring that the plaintiffs are not obligated to defend or indemnify the defendants with respect to Torres’ action.

Specifically, the insurers based that argument on an exclusion in the homeowners policy that excludes coverage for” ‘bodily injury’ or ‘property damage’ . . . arising out of (1) [t]he ownership, … of motor vehicles … operated by or rented or loaned to an ‘insured’ [motor vehicle exclusion] . . . .” Therefore, according to the plaintiffs, because the claims asserted against the defendants in the Torres action arose out of Theodore’s ownership of the Audi, as well as Aaron’s negligent operation of that vehicle, the motor vehicle exclusion barred coverage under the homeowners policy.

With respect to the automobile policy, the plaintiffs asserted that the policy’s coverage for bodily injury for the Audi had been cancelled prior to the date of the accident, at the request of the defendants which, obviously, eliminated the case against the auto insurer.

The trial court granted the plaintiffs’ entire motion for summary judgment.

The Court of Appeal noted that the policy explicitly and unambiguously provided that bodily injury arising out of the use of motor vehicles owned by an insured shall be excluded from policy coverage. On the basis of the record, including comparison of the allegations of the complaint in the Torres action with the language of the homeowners policy and the motor vehicle exclusion contained therein, the Court of Appeal concluded, as a matter of law, that the plaintiffs had no duty to defend the defendants in the Torres action.

Because there was no coverage on the auto policy pursuant to an underlying policy, Liberty Mutual had no duty under the umbrella policy to defend or indemnify the defendants with respect to the Torres action.

Therefore, the trial court properly granted the plaintiffs’ motion for summary judgment and determined, as a matter of law, that the plaintiffs have no duty to defend the defendants in the Torres action.

ZALMA OPINION

Insurance never covers every possible risk of loss. A homeowners policy with an auto exclusion cannot defend or indemnify an insured who injured someone while operating a motor vehicle. In addition, there can never be coverage on an auto policy that was cancelled, and not in effect, at the time of the loss. Although the opinion and arguments were lengthy, the case was simple on the facts of the policy wording and the facts of the accident.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Mold Suit Must Be Defended

Equally Fair Interpretation Favors Insured

Post 4685

See the full video at https://rumble.com/v3zqebh-mold-suit-must-be-defended.html and at https://youtu.be/DarYdfMbWns

WCPP Risk Purchasing Group, Inc. (“WCPP”) asserted coverage claims under a Commercial General Liability Policy (“Policy”) issued by Defendant, Lexington Insurance Company, on behalf of Village of Stoney Run, LLC (“Village of Stoney Run”) seeking defense and indemnity from an insurer who claimed a mold exclusion defeated coverage.

In WCPP Risk Purchasing Group, Inc. v. Lexington Insurance Company, Civil Action No. CAM-L-1025-22, Superior Court of New Jersey, Law Division, Camden (November 29, 2023) the Superior Court resolved the coverage dispute.

BACKGROUND

The Underlying Action alleges negligence, breach of the warranty of habitability, and breach of contract, asserting injury and damage claims against Village of Stoney Run due to toxic fungus/mold infestation in Pratt’s apartment. It is asserted that the mold caused the death of Pratt and damaged her personal property.

Plaintiff purchased the Policy on behalf of Village of Stoney Run as part of a joint purchasing group. WCPP is a risk purchasing group for primarily habitation and commercial real property locations.

The Underlying Action was initiated by Brian Pratt and Dawn Pratt (“Underlying Plaintiffs”), the co-administrators of the Estate of Darlene Pratt (“Decedent”) against the Village of Stoney Run, an apartment complex owned by a Bleznak Organization. As part of the action, Underlying Plaintiffs asserted claims of negligence, breach of warranty, and breach of contract arising out of allegations that Plaintiff failed to properly maintain and repair Decedent’s apartment at the Village of Stoney Run, resulting in dangerous living conditions, including mold.

Suit in the underlying action was forwarded to Lexington Insurance Company. AIG Claims, Inc. issued a disclaimer of coverage on behalf of AIG Property Casualty, Inc. That policy of insurance disclaimed coverage based upon the fungus/mold exclusion contained in the insurance policy.

ANALYSIS

The court must enforce the clear and unambiguous terms of the policy of insurance. A policy of insurance is ambiguous only where reasonably intelligent persons would differ regarding its meaning. The court places the obligation on the insurance carrier to draft clear and unambiguous contracts. Where the policy language will support two interpretations, only one of which will support a finding of coverage, the court will choose the interpretation favoring the insured and find that coverage exists.

Lexington asserts that the policy of insurance contains a mold exclusion which precludes coverage for the claims in the underlying suit.

Fungus/Mold

Bodily injury or property damage or any other loss, cost or expense, including, but not limited to losses, costs or expenses related to, arising from or associated with clean-up, remediation, containment, removal or abatement, caused directly or indirectly, in whole or in part, by:

  1. Any fungus(i), molds(s), mildew or yeast; or
  2. Any spore(s) or toxins created or produced by or emanating from such fungus(i), mold(s), mildew or yeast; or
  3. Any substance, vapor, gas, or other emission or organic or inorganic body substance produced by or arising out of any fungus(i), mold(s), mildew or yeast; or
  4. Any material, product, building component, building or structure, or any concentration of moisture, water or other liquid within such material, product, building component, building or structure, that contains, harbors, nurtures or acts as a medium for any fungus(i), mold(s), mildew, yeast or spore(s) or toxins emanating therefrom;

regardless of any other cause, event, material, product and/or building component that contributed concurrently or in any sequence to that bodily injury or property damage, loss, cost or expense.

The claims in this case arose from water leaks which resulted in the conditions about which plaintiffs decedent in the underlying complaint bases the cause of action. The court concluded that the interpretation of the mold exclusion by plaintiff that the loss was due to the water leaking, not mold per se, is equally reasonable to that interpretation of the defendant insurers.

Under the circumstances it is the interpretation most favorable to the insured which controls. Accordingly, the court concluded that coverage exists for the exposure to mold as a result of water leakage.

ZALMA OPINION

Courts interpret insurance contracts differently than other contracts. If a court finds an ambiguity or, as here, an interpretation of an exclusion by the insured and the insurer are equally reasonable, the interpretation of the insured will be enforced. Paraphrasing George Orwell in his novel Animal Farm, all litigants are equal, some – the insured suing an insurer – are more equal than the insurer.

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Tardy Claim Allows Judgment for Defendant

Claim Against State Must be Filed in Accord with Statute

See the full video at https://rumble.com/v3zlm4i-tardy-claim-allows-judgment-for-defendant.html and at https://youtu.be/DrXR1c0v4tM

In Angela Erika Cantu v. California Department Of Transportation et al., F084601, California Court of Appeals (November 30, 2023) Angela Cantu sued the California Department of Transportation (Caltrans) and James Hinson for alleged injuries sustained in a motor vehicle incident. Because she failed to file a proper and timely claim the trial court granted summary judgment to Caltrans and Hinson and Cantu appealed..

FACTUAL BACKGROUND

Angela Cantu and James Hinson, a Caltrans employee, were involved in a motor vehicle collision on State Route 168 in Fresno.  Two months later, on August 17, 2018, Caltrans received, via facsimile, a letter from counsel retained by Angela Cantu.

Richard Maynard, an analyst with the California Department of General Services, responded to Cantu’s “letter of representation dated 8-17-2018,” and shortly thereafter informed Cantu’s attorneys that he would be “handling this file for the State of California.” Maynard advised counsel that “The State of California has a six-month statute of limitation. If your claim is not resolved within six months from the date of loss, California law requires you to file a formal claim with the Government Claims Program (GCP) (Government Code 900, et seq.).

Cantu’s counsel took no further action until January 8, 2020, over 18 months after the underlying traffic collision. In the meantime, the six month claim period lapsed on December 19, 2018. Eventually, on January 8, 2020, Cantu’s counsel filed a Government Claim form, along with the $25 filing fee and an application to file a late claim. Thereafter Cantu filed a complaint in the Fresno County Superior Court.

Caltrans and James Hinson filed a motion for summary judgment on grounds that Cantu had failed to file an appropriate claim under the Government Claims Act, a mandatory prerequisite to filing a lawsuit. Judgment was subsequently entered in favor of Caltrans and James Hinson. Cantu appealed.

DISCUSSION

Trial Court Properly Granted Summary Judgment Based on Cantu’s Failure to Comply with the Government Claims Act

The trial court found Cantu had not complied with the claim presentation requirement of the Government Claims Act in this matter. Since plaintiff’s counsel’s letter does not touch on many of the required elements of a claim as specified in Government Code section 910, there was no substantial compliance.

Cantu’s Claims are Barred Under the Government Claims Act

The California Government Claims Act (Gov. Code, § 900 et seq.) requires a plaintiff seeking money damages against public entities and public employees acting within the scope of their employment, to file an initial claim with the relevant public entity.

While Cantu’s August 17, 2018 letter references a motor vehicle accident, it did not describe the circumstances of the accident nor any alleged injuries. More importantly, the letter does not specify the type of resolution contemplated by Cantu or whether a lawsuit was anticipated. Accordingly, the August 17, 2018 letter did not substantially comply with the Government Claims Act.

Here, the August 17, 2018 letter sent to Catrans on behalf of Cantu, was signed by a paralegal at a law firm. There is nothing in the subject letter that makes it readily discernible that appellant was making a compensable claim against the relevant government entity or that the failure to satisfy it would result in litigation nor an explanation why there was no response to the Cal Trans letter advising of the limitations. Therefore, Cantu’s letter of August 17, 2018, was not a “claim as presented” and did not trigger the notice-or-waiver provisions of Government Code sections 910.8 and 911.

The Court of Appeals was unable to find an error in the trial court’s analysis and affirmed it decision.

ZALMA OPINION

Statutes of limitation prevent stale claims. The paralegal’s initial letter was sufficiently prompt and the law firm was advised by the state of the need to comply with the statute. Rather, counsel did nothing for more than two years. The decision of the trial court was easy and obvious. Ms. Cantu is not without a remedy for her injuries, she can sue her lawyer to recover the damages she could have recovered if his sloth and inadequate response had not occurred.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Never Assume You Are Insured

Contractor Needs Permission of Insurer to be Protected by an Owner-Controlled Insurance Program

Post 4682

See the full video at https://rumble.com/v3zjnd8-never-assume-you-are-insured.html and at https://youtu.be/cp5PjEBh2_w

Team Industrial Services, Inc. (Team) found it had incurred a $222 million judgment against it in a wrongful-death lawsuit arising out of a steam-turbine failure in June 2018 at a Westar Energy, Inc. (Westar) power plant. Team sought indemnity for the judgment from Westar, Zurich American Insurance Company (Zurich), and two other insurance companies, arguing that it was, or should have been, provided protection by Westar’s Owner-Controlled Insurance Program (OCIP) through insurance policies issued by Zurich and the two other insurers.

In Team Industrial Services, Inc. v. Zurich American Insurance Company; Westar Energy, Inc.; Endurance American Insurance Company; Westchester Fire Insurance Company, and Kelli Most, individually and as personal representative of the estate of Jesse Henson; Cecilia Henson; Dorian Henson, No. 22-3275, United States Court of Appeals, Tenth Circuit (November 29, 2023) resolved the dispute acknowledging that Team’s arguments were well reasoned and creative.

BACKGROUND

In 2010 Westar entered into separate Master Services Agreements (MSAs) with Furmanite and Team to perform work at the Westar power plant and other sites. Team was to perform “pre-heat and stress relieving” services and Furmanite was to perform “valve maintenance” services. Both MSAs state that Furmanite and Team are independent contractors required to procure their own liability insurance and to name Westar as an additional insured on the policies. They both also state that “Contractor shall not assign or transfer any of its rights or obligations . . . under this Contract without previous written consent of [Westar] which consent shall not unreasonably be withheld.” (emphasis added)

In 2013 Westar instituted its OCIP, through which contractors and subcontractors could obtain insurance protection for work performed at covered locations. Westar had discretion to decide which contractors would be eligible to enroll in the OCIP. Eligible contractors had to complete enrollment forms to be considered for participation. During the time relevant to this dispute, insurance was provided by a Zurich policy, whose premiums were paid by Westar. According to Zurich’s policy, an enrolled contractor’s “rights and duties under this policy may not be transferred without [Zurich’s] written consent.” (emphasis added)

With permission from Westar, Furmanite submitted an application seeking enrollment in the OCIP and was enrolled in 2013. Furmanite was required to report payroll hours for each month to the broker, Aon. The payroll hours reported to Aon were used by Zurich to calculate the premium to be paid by Westar for the relevant policy period.

Westar never made Team eligible to enroll in the OCIP.  Team never submitted an enrollment application, and it was never enrolled. Team’s parent company acquired Furmanite’s parent company.

Although Team and Furmanite became “sister companies,” they were distinct legal entities and never merged. Team assumed Furmanite’s workload at the power plant. Furmanite’s insurance coverage under the Westar OCIP continued even though its service contract had been retired. Furmanite’s coverage continued, even after it perhaps should have ended.

Team argued to the District Court that it inherited Furmanite’s coverage under the OCIP via Change Order No. 2 and was therefore insured for the work it performed at the power plant. It also asserted alternative theories including reformation, and the doctrine of promissory estoppel against Westar and Zurich.

The District Court ruled that Change Order No. 2 unambiguously retired Furmanite’s MSA and left Team’s MSA as the sole governing document. The court declined to reform the Zurich policy and rejected the promissory-estoppel, breach-of-contract, and breach-of-fiduciary-duty claims.

DISCUSSION

Team ignored that the enrollment in Westar’s OCIP was not automatic. Westar alone could designate which contractors were eligible, and eligible contractors must apply to enroll in the program, and then be accepted by Westar, in order to receive coverage. Also, under the express terms of the Zurich insurance policy, coverage cannot be transferred without Zurich’s consent. Since Team never enrolled nor was it even invited to enroll in Westar’s OCIP, nor did Zurich ever give written approval to a transfer of coverage from Furmanite to Team, coverage did not exist.

The Change Order did not contain a mention of insurance coverage or the OCIP. There is no ambiguity in the language of the change order from which one could infer that Team would thereafter be provided insurance coverage through the Westar OCIP or otherwise. It was clear to the Tenth Circuit that the notice is to go only to contractors already covered by the OCIP, not contractors-like Team-who are not enrolled in the program. In sum, no contractual promise, nor even a hint or suggestion by Westar or Zurich entitled Team to coverage under the OCIP.

Since Zurich was necessarily one of the parties to the insurance contract, reformation would require proof that Zurich intended to insure Team. Team provided no argument, much less evidence, that Zurich intended to name Team as an insured.

The Zurich policy explicitly protects Zurich from such claims by requiring any transfer of coverage to be approved by Zurich in writing.

Finally, Team raises a perfunctory claim of promissory estoppel.  Since there was no allegation that Westar knew about the reporting it could hardly have expected to induce Team’s reliance. Nor was there any evidence of a promise by Zurich to provide insurance coverage to Team.

The Tenth Circuit affirmed the judgment.

ZALMA OPINION

When Team’s parent company acquired Furmanites parent company and took over the work originally done by Furmanite it assumed that it was covered under the OCIP but did nothing to confirm the fact, proving that breaking he word “assume” up into its component part and will cost Team $222 million. Insurance, even a contract as complex as an OCIP, must be fulfilled and to gain the coverage Westar needed to allow them to apply, Team needed to file an application with Zurich and Zurich had to agree. None of those things happened and Team had no coverage.

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Chutzpah: Criminal Seeks Disability Because his Crime was Discovered and Prosecuted

Claim of Disability Because of Stress of Arrest & Conviction Fails

Post 4681

See the full video at https://rumble.com/v3z1w38-chutzpah-criminal-seeks-disability-because-his-crime-was-discovered-and-pro.html and at https://youtu.be/90NDhUDIa18

Jason Brand (“Brand”) appealed from the judgment of the district court entered on September 30, 2021, challenging the court’s dismissal of Brand’s counterclaims for breach of contract and breach of the implied covenant of good faith and fair dealing. Brand’s claimed Principal Life Insurance Company (“Principal Life”) failed to pay him benefits under his disability insurance policy (the “Policy”).

In Principal Life Insurance Company v. Jason P. Brand, Nos. 21-2716, 21-2908, United States Court of Appeals, Second Circuit (November 30, 2023) the Second Circuit resolved the dispute.

DISCUSSION

The words and phrases in a contract of insurance must be given their plain meaning and the contract must be construed to give full meaning and effect to all of its provisions. Straining a contract’s language beyond its reasonable and ordinary meaning will not be understood to create an ambiguity. All provisions of a contract should be read together as a harmonious whole.

The Criminal Activity Exclusion Applies and Justified Principal Life’s Denial of Coverage

Courts may enforce an exclusionary clause only when it has a definite and precise meaning, unattended by danger of misconception and concerning which there is no reasonable basis for a difference of opinion. Whenever an insurer wishes to exclude certain coverage from its policy obligations, it must do so in clear and unmistakable language.

The Policy issued by Principal contains an exclusion for criminal activity (the “Criminal Activity Exclusion”) that states: “This policy does not pay benefits for an injury or sickness which in whole or in part is caused by, contributed to by, or which results from: . . . Your commission of or Your attempt to commit a felony, or Your involvement in an illegal occupation[.]” Principal Life contended that the exclusion entitled it to deny Brand’s 2014 claim for coverage.

Application of the Criminal Activity Exclusion.

As to the applicability of the Criminal Activity Exclusion, Brand premised his November 2014 claim for disability benefits on his assertion that he was “total[ly] disab[led]” by “extreme anxiety” that began in “July 2014, [after] a warrant was served” on him by officers of the New York State Attorney General’s Office. The application cites no other cause or type of disability. On February 8, 2016-about fifteen months after filing the application-Brand entered into a plea agreement in which he admitted to committing, in connection with his businesses, and between January 1, 2009, and March 11, 2015, the felony crimes of enterprise corruption, insurance fraud in the first degree, and grand larceny in the second degree.

Insured Admits Criminal Conduct

Brand stated under oath that he committed enterprise corruption, insurance fraud, and grand larceny in the period before he submitted his disability claim for “extreme anxiety.” Brand without merit contended that it was the criminal proceedings brought against him, not his commission of several felonies, that were the proximate cause of his disability. Even if the criminal proceedings triggered his most extreme anxiety, it was Brand’s commission of the felonies that led to those criminal proceedings that in turn led to his disabling anxiety

Brand’s 2014 claim for benefits was barred by the Criminal Activity Exclusion and  Principal Life was within its rights to reject the claim. The Court affirmed so much of the judgment as granted Principal Life’s motion for summary judgment dismissing, based on the Criminal Activity Exclusion, Brand’s counterclaims for breach of contract and breach of the implied covenant of good faith. However, the district court erred in dismissing the remaining claim asserted by Principal Life asking to reconsider Principal’s request for rescission.

ZALMA OPINION

Misrepresenting material facts to an insurer when acquiring a policy allows the insurer to rescind the policy. Principal established that Mr. Brand was a criminal and denied his claim appropriately. It doesn’t want him as an insured any more and sought rescission which the Second Circuit was unable to rule on so it returned the case to the trial court to decide whether rescission was appropriate because it appeared that he lied to obtain the policy.

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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Zalma’s Insurance Fraud Letter – January 1, 2024

ZIFL – Volume 28 Issue 1

See the full video at  and https://rumble.com/v4429q3-zalmas-insurance-fraud-letter-january-1-2024.html  at https://youtu.be/TH_iv5WQuN4

The Resource for the Insurance Claims and Insurance Fraud Professionals

This, the first issue of the 28th Year of ZIFL includes articles and reports relating to insurance fraud, including:

False Swearing & Insurance Fraud

In common language the “false swearing” provision of an insurance policy merely means that if the insured lies under oath the policy is void whether the lie is in a proof of loss or at an examination under oath. In Texas and Oklahoma, false swearing is explained this way:  where an insured knowingly and willfully overestimates the value of property destroyed or damaged, the policy is voided and the insured’s right to recover is defeated.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

More McClenny Moseley & Associates Issues

This is ZIFL’s twenty first installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana.

Louisiana State Police Open Criminal Investigation Into McClenny Moseley

Louisiana State Police have opened a criminal investigation into efforts by McClenny Moseley & Associates and Apex Roofing to solicit customers after receiving a complaint by the state Insurance Department about “suspected fraudulent actions” related to insurance claims.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Waiver of Right to Appeal Effective

Insurance Agent Defrauded Clients by Taking Premium Money and Keeping it for Personal Expenses

When a criminal defendant’s valid guilty plea includes a waiver of the right to appeal, the Fourth Circuit Court of Appeals generally enforces the waiver by dismissing any subsequent appeal that raises issues within the scope of the waiver.

However, even if an appeal waiver is valid and applicable, the Fourth Circuit will review a claim that a district court’s sentence or restitution order exceeded the court’s statutory authority. In United States Of America v. Glenda Taylor-Sanders, Nos. 21-4136, 20-4604, United States Court of Appeals, Fourth Circuit (December 12, 2023) the Defendant sought a change of the sentence and restitution order.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Now Available The Compact Book of Adjusting Property Claims – Fourth Edition

On January 2, 2024, in Kindle, paperback and hardback formats,  The Compact Book of Adjusting Property Claims, Fourth Edition is now available for purchase here and here. The Fourth Edition contains updates and clarifications from the first three editions plus additional material for the working adjuster and the insurance coverage lawyer.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Fictionalized True Crime

The Largest Residential Burglary of All Time

This is a Fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help Everyone to Understand How Insurance Fraud in America is Costing Those who Buy Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

After twelve months trying to get insurance on over $3,000,000 in jewelry and a like amount of fine arts, a Taiwanese man who was a wanted criminal in his own country convinced two American insurers to agree to insure him against the risk of loss to the contents of his home.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Health Insurance Fraud Convictions

Guilty Verdict of Physician Who Subjected Patients to Unnecessary and Invasive Tests

Payam Toobian, M.D. Paid Kickbacks to Physicians for Patient Referrals and Defrauded Medicaid by Subjecting Patients to Unnecessary Radiological Tests.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Fraudster Must Serve Time and Lose His Residence to Pay Restitution

Armando Valdes appealed his 60-month sentence for health care fraud after he pleaded guilty. Valdes’s conviction and sentence arose out of his scheme to submit millions of dollars in fraudulent medical claims to United Healthcare and Blue Cross Blue Shield for intravenous infusions of Infliximab, an expensive immunosuppressive drug. These infusions, purportedly given to patients at Valdes’s medical clinic, Gasiel Medical Services (“Gasiel”), were either not provided or were medically unnecessary.

In United States Of America v. Armando Valdes, No. 22-12837, United States Court of Appeals, Eleventh Circuit (December 19, 2023) the Eleventh Circuit disposed of the arguments asserted by Valdes.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Other Insurance Fraud Convictions

Prison Sentences In Multi-Million Dollar Insurance Fraud; Returns $7.75M to NYSIF

SADAF BHATTI, 40 and his company, ANAAR CONSTRUCTION & CONTRACTING CORP., pleaded guilty November 2, 2023, in New York State Supreme Court to Insurance Fraud in the First Degree for their role in Certified Public Accountant STEVEN LYON’s scheme to defraud the New York State Insurance Fund (“NYSIF”) of more than $18 million. BHATTI was sentenced to 1-to-3 years in state prison and ANAAR CONSTRUCTION & CONTRACTING CORP. was sentenced to a three-year conditional discharge.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

The Role of the Insurer’s Attorney After Ending the EUO

A well-executed Examination Under Oath (EUO) is not only one of the insurer’s most effective weapons against fraud. It can also be highly instructive for the adjuster. If an attorney is responsible for performing the examination, the adjuster must make clear that it is his or her obligation to provide sufficient factual information supported by legal authority for the insurer to make a decision on the claim.

The adjuster should also, if possible, attend the EUO to help the attorney and to study questioning techniques. Attorneys, whose job it is to ask questions, will usually do a more thorough job of EUO than will insurance claims staff.

After the EUO, the attorney will usually suggest additional investigation and can also give the adjuster legal advice as to the insurer’s rights, duties, and obligations.

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

Barry Zalma

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 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com and read the full 21 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-12-01-2023-1.pdf

Read the full 22 pages of this issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/12/ZIFL-01-01-2024-1.pdf

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Too Stupid to Succeed at Fraud

Why an Amateur’s Attempt at Fraud Failed

Post 4679

See the full video at https://rumble.com/v3ylwbq-too-stupid-to-succeed-at-fraud.html and at https://youtu.be/-AfnWKClZ-E

This is a fictionalized true crime story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is presented to help a reader to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

The insured was a poet. Before immigrating from Soviet Armenia, he was a member in good standing at the Armenian Poets Union. They paid him for his work five hundred rubles a month.

He lived in the capital city of Yerevan in the shadow of Mount Ararat. He, like all Soviet citizens, before the fall of the Soviet Union, supplemented his income by buying and selling in the black market. He specialized in jewelry and diamonds.

By 1977 he had amassed, off the pain and suffering of others, over 300 carats of diamonds and diamond jewelry. Most of the diamonds were old mine cut, popular in Russia in the 1890’s, but out of date. The wealth he had amassed frightened him. He knew that eventually the Soviet Police would catch him and send him to a Gulag. He was committing the most heinous of Soviet crimes: he was a successful entrepreneur.

He went to the American Consulate and got a visa as a refugee. He had convinced the American Consulate the Soviet Government was censoring his poetry. He wanted freedom to write.

Poetry is not an essential industry. The Soviet Government agreed to his immigration. He came directly to Los Angeles and settled in the Armenian community in the hills of Glendale, California. He brought with him all but twenty carats of the diamonds. He needed to use some of his 300 carats to bribe Soviet Customs Officials to get safely out of the country.

For many years he and his family lived by selling the diamonds at auctions. He continued to write poetry but there was no market for Armenian poetry in the United States. The few Armenian language newspapers would publish his poems but could not pay him.

Eventually his inventory of fine jewelry began to shrink. He had learned to enjoy living in the luxury the diamond sales had brought him. He didn’t know how to earn money to support himself in America. He did not want to return to Soviet Armenia to be a salaried poet.

At a social gathering at the Armenian church after services he expressed his concerns to an acquaintance who ran an art gallery. The gallery owner had been in the United States longer than the poet. He knew how trusting Americans were. He knew that Americans believed what they were told until proved otherwise. He understood that Americans took seriously their belief that everyone was innocent until proven guilty. He explained to his poet friend how he could easily make enough money to support his family comfortably for the rest of his life. The gallery owner told the poet he would rent him a portion of his art gallery to open a jewelry store. The poet only needed to buy an insurance policy insuring against loss of an inventory of his jewelry. The insurer would not ask him before issuing a policy to prove he had any jewelry but would take his word.

The poet was incredulous.

“Won’t they want to see the jewelry?”

“No. They insured my art gallery without ever sending anyone to look at the paintings. If they do send someone out just tell them the jewelry is in your safety deposit box. Tell them you feared bringing it out until you had insurance. You can put in showcases the jewelry you do have to make it look like a legitimate jewelry store.”

The next day Poetry Jewelry was born. The poet immediately applied for insurance. He filled out the application form honestly stating that he had been in the jewelry business for ten years buying and selling jewelry from his home. This was his first attempt at a retail business. He had never had a loss. He had never had an insurance policy canceled. He had over a million dollars in inventory.

The insurer took the risk without any questions. The security and safes were proper. The premium would be paid in full since the poet had obtained independent premium financing through his broker and only needed to pay 20% of the annual premium.

The insurer issued a policy that requested an immediate inspection of the premises. The inspector visited the premises, saw immediately that it was not as represented and advised the company to cancel. They did.

The insured went to a new broker. The new insurer did not require an inspection of the premises by anyone other than the broker. It issued a million dollar policy. Two weeks later, before the insurer could change its mind, the poet’s oldest son locked the poet and his mother, the poet’s wife, and the gallery owner in the small four by four foot bathroom. The son then took home all the inventory of Poetry Jewelers.

The three people locked in the bathroom waited ten minutes to make sure the oldest son had driven away and then pushed the holdup button secreted in the bathroom because it is common for thieves to lock jewelry store owners in the bathroom. The three captives also pounded on the wall to gain the attention of the restaurant owner next door. The police were called and broke the door down to free the poet, his wife and the gallery owner.

The loss exceeded a million dollars. The poet thanked God that they were insured.

Their million dollar fraud would have been successful but for an unusual coincidence. The insurer hired as its adjuster the same firm that had inspected the store for the first insurer. The adjuster remembered the insured. He knew that the prior insurer had canceled. He  knew when the poet told him that the policy was his first ever that he was lying. The adjuster knew when the insured told him that his inventory was a million dollars he was lying.

The adjuster gathered the evidence together and presented it to the insurer. The insurer decided to rescind the policy and deny the claim.

The insured and the gallery owner, his mentor, were shocked. They did not give up. They became more aggressive. They retained a lawyer. The lawyer immediately filed suit in U.S. District Court for breach of the covenant of good faith and fair dealing and made claim for fifty million dollars over the one million dollar claim. The insurer was confident it was right. It would not allow an insurance fraud to go forward. It would fight the poet through trial. It was, unusually for American insurers, dedicated to its cause.

The insurance company spared nothing. Its lawyers deposed every person who had any connection with the poet. The deposition of the poet lasted for three days. Each member of the family was deposed. Paralegals poured over every word of the transcripts and found conflicting testimony. The insurer obtained documentary evidence from every possible location except Yerevan, Soviet Armenia. The lawyers spent weeks preparing for trial. The poet was unprepared. His family was unprepared. They expected, regardless of the evidence they presented, that the jury would hate the insurance company and punish it.

At trial, although well-rehearsed, the poet’s lies began to compound. The testimony of the inspector established the inventory was not there at the time of the inspection. The insured did not have a safety deposit box and therefore could not even prove the existence of a box to hold the jewelry he claimed he had. Under cross-examination the poet’s son’s testimony became confused. The judge took over the cross- examination and, unable to answer confidently, the poet’s son broke down and cried on the stand. Lies were admitted.

After five days of trial with testimony from nine in the morning until six every night, the jury went off to deliberate. The jury returned with its verdict in forty-five minutes after spending thirty minutes to pick a foreman. The verdict was for the defense. The jury was convinced that the poet had presented a fraudulent claim and that the insurance company had properly rescinded the policy.

The result was unusual. The cost was enormous. The investigation cost, court costs, expert witness fees and attorneys’ fees exceeded $500,000. The insurer defeated the claim for one million dollars in lost jewelry and fifty million dollars in punitive damages.

The word went out. This insurance company fights. Do not insure with them.

The insurer saved more than the payment of the poet’s claim. It saved all the other fraudulent claims that would have been presented had they not fought. The poet paid nothing to his lawyer who took the case on a contingency basis.  He continued living off the jewelry he brought from Soviet Armenia.

The poet’s attempt at insurance fraud failed.  He learned a lesson about American jurisprudence. He would only make claims against insurance companies willing to insure him after he honestly reports his earlier attempts at fraud. He would not fake a fraudulent claim. He was lucky he was not referred to the U.S. Attorney by the trial judge.

This blog was adapted from my book Insurance Fraud Costs Everyone   Amazon.com.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

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Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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It is Expensive to Lie to Your Insurer

Fraud in Inception Allows Insurer to Rescind

Post 4678

See the full video at https://rumble.com/v3yd183-it-is-expensive-to-lie-to-your-insurer.html  and at https://youtu.be/oLMR9KIIEp4

Lamin Fatty appealed the trial court’s order granting summary disposition to Farm Bureau on the basis of finding Fatty’s fraud was grounds for contract rescission and reimbursement of benefits paid. In Lamin Fatty v. Farm Bureau Insurance Company Of Michigan, No. 363888, Court of Appeals of Michigan (November 21, 2023) the Court of Appeals resolved the dispute.

FACTS

After a motor vehicle accident where Fatty sustained bodily injuries the issue of rescission was raised when it was discovered that at the time of the accident, Fatty was insured by Farm Bureau under the no-fault act. Fatty obtained insurance with Farm Bureau on July 17, 2019. On the application for insurance, Fatty answered the following question in the negative: “Are any vehicles to be insured used to carry persons for a fee?”

Fatty received treatment for his injuries at Columbia Clinic among other medical facilities, and indicated to providers that he was “rear-ended as an Uber driver.”

Uber records indicated that Fatty began working as an Uber driver in early May 2019 (before he applied for the insurance) and drove for Uber on the day of the accident. Fatty’s drive log shows he picked up a rider at 6:05 p.m. and dropped them off at 6:30 p.m. Fatty picked up another rider at 6:38 p.m. and dropped them off at their destination at 6:50 p.m. Fatty continued picking up riders and completing trips that night until 8:17 p.m.

After this discovery, Farm Bureau filed a counterclaim on the basis of fraud, requesting reimbursement of benefits paid to or on behalf of Fatty with regard to the accident.

The trial court granted Farm Bureau’s motion for summary disposition of the counterclaim, including its request for reimbursement of $104,730.82 for benefits paid, because the policy was rescinded under the doctrine of fraud in the procurement. The trial court also found Fatty’s fraud entitled Farm Bureau to attorney fees under the no-fault act, and costs. Specifically, the trial court found the requested costs of $2,599.50 were reasonable and awarded $10,000 in attorney fees. Fatty appealed.

SUMMARY DISPOSITION OF THE CLAIM

The trial court properly rescinded the insurance policy because Fatty committed fraud in the procurement of the contract by explicitly denying using his vehicle to carry passengers for a fee. Because of this rescission, summary disposition of Fatty’s claims was appropriate, without regard to whether Fatty was driving for Uber at the time of the accident.

Fraud in the inducement to enter a contract renders the contract voidable at the option of the party deceived. An insurer has a reasonable right to expect honesty in the application for insurance. Rescission abrogates the contract and restores the parties to their relative positions had the contract never been made. A court must not hold an insurance company liable for a risk that it did not assume.

Farm Bureau’s evidence in the form of the litigation representative’s affidavit that he told the truth the policy would have been refused was unrefuted and it establishes the materiality of the misrepresentation. Fatty’s denial of carrying passengers for a fee was determined to be a material representation.

SUMMARY DISPOSITION OF THE COUNTERCLAIM

Reimbursement of the PIP benefits paid to Fatty was an appropriate remedy following rescission. Because the claim was fraudulent and Farm Bureau was the prevailing party, the award of attorney fees and costs was also proper.

The trial court properly awarded attorney fees to Farm Bureau. Farm Bureau was forced to defend against a claim pursued under a policy that was procured by fraud. Therefore, the award is within the range of reasonable and principled outcomes and was not an abuse of discretion. Accordingly, the award of attorney fees and costs to Farm Bureau was proper.

The trial court properly rescinded the contract because Fatty committed fraud in the procurement by explicitly denying he used his vehicle to carry passengers for a fee. Because the claim was fraudulent and Farm Bureau was the prevailing party, the award of attorney fees and costs was also proper.

ZALMA OPINION

Rescission is an equitable remedy that allows a contract to be voided from its inception as a result of fraud in the inception of the policy of insurance. Farm Bureau was deceived by Fatty who lied about a material fact, that he was carrying passengers as an Uber driver. He received no fault benefits as a result of this fraud and the court properly ordered the policy rescinded, ordered Fatty to repay the benefits he received plus attorneys fees it took to defeat the claim. Fatty learned that fraud does not pay and that he should never lie to a prospective insurer.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com  https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Unambiguous Policy Terms Must Be Applied

Coverage Excluded Cannot be Changed to Coverage Provided

See the full video at https://rumble.com/v3y6ehn-unambiguous-policy-terms-must-be-applied.html  and at https://youtu.be/3RbjqMeW_pE

An insurance coverage dispute that involved a commercial insurance policy (“the Policy”) that plaintiff, Winfire Management, LLC (“Winfire”) held with defendant, Massachusetts Bay Insurance Company (“Mass Bay”). The trial court concluded that the Policy covered Winfire’s business-income losses that resulted from a sewer backup and entered judgment in Winfire’s favor. Mass Bay appealed.

In Winfire Management, LLC v. Massachusetts Bay Insurance Company, No. 362960, Court of Appeals of Michigan (November 21, 2023) the Court of Appeals read the policy as written and resolved the dispute. 

BACKGROUND

Winfire’s claim for lost rental income following a July 2020 sewer backup at one of Winfire’s commercial properties was refused by Mass Bay. Winfire sued Mass. Bay for breach of contract for refusing to cover these business-income losses. Soon after, Mass. Bay moved for summary disposition arguing that the Policy did not provide business-interruption coverage for losses from a sewer backup.

Mass Bay conceeded that the Policy covered physical damage from sewer backups it explained that taking together the policy provisions in the Business Income (And Extra Expense) Coverage Form (“the BI Form”) and the Causes of Loss -Special Form (“the CL Form”), the Policy excluded coverage for lost business income from a sewer backup.

In response, Winfire disputed Mass. Bay’s interpretation of the Policy. Winfire argued that, because the Policy covered property damage from sewer backups under the Gold Property Broadening Endorsement (“the GP Endorsement”), a sewer backup was a covered loss triggering business-income loss coverage under the BI form.

The trial court agreed with Winfire . Accordingly, the court held, as a matter of law, that the Policy covered Winfire’s business-income losses from the July 2020 sewer backup.

PRINCIPLES OF LAW

The sole issue on appeal is whether the Policy covered Winfire’s business-income losses resulting from the sewer backup. When an insurance company argues that a policy exclusion negates coverage, the insurance company has the burden to prove that one of the policy’s exclusions applies. Consistent with the rules of interpretation, clear and specific exclusions will be enforced as written so that the insurance company is not held liable for a risk it did not assume.

ANALYSIS

Winfire’s commercial property insurance policy with Mass. Bay provided blanket building coverage, blanket business-income coverage, and blanket personal property coverage. There is no dispute that evaluating Winfire’s claim for business-income losses begins with the BI form. The BI form governs business-income coverage and states that a claimed business income loss “must be caused by or result from a Covered Cause of Loss.”

The BI policy provided that:

Exclusions

  1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
  2. Water

(3) Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment ….

The Policy explicitly excluded coverage for business-income losses from a sewer backup. The CL form controls what constitutes a Covered Cause of Loss to trigger business-income coverage under the Policy. Per the CL form, a Covered Cause of Loss under the BI form excludes losses caused directly or indirectly by water that backs up, overflows, or is discharged from a sewer.

The amendment providing property coverage for sewer backup amendment was added to “Additional Coverages” in the “Building and Personal Property Coverage Form.” It was not added to the BI form. That change explains why Mass. Bay covered the “direct physical loss or damage” to Winfire’s property that resulted from the sewer backup. The GP Endorsement did not amend the sewer backup exclusion referenced in the CL form that precludes coverage for business-income losses.

The Policy unambiguously excluded coverage for Winfire’s business-income losses stemming from the sewer backup.  The Court of Appeals noted that a court must enforce insurance policy exclusions that are clear and specific exclusions.

Therefore, the trial court’s judgment for Winfire was reversed and remanded for entry of an order granting summary disposition for Mass. Bay.

ZALMA OPINION

The insured tried to convince the Court of Appeals that when an insurer changes a policy to provide sewer backup coverage for property damage it must also provide similar coverage for BI losses. Although the imaginative and well presented argument convinced the trial court the Court of Appeal read the entire policy and noted that the amendment only applied to property damage and not to BI losses. Failure to read the full policy caused Winfire and the trial court to err and caused the trial court’s order to be reversed.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com  https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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The Perfect Gift for Your Insurance Company & Insurance Claims Clients

Most Insurers Have Rules Prohibiting their Employees to Get Gifts

See the full video at https://rumble.com/v3xfec0-the-perfect-gift-for-your-insurance-company-and-insurance-claims-clients.html  and at https://youtu.be/7qPdaA01t3A

When I was a young lawyer I tried to give gifts to the claims personnel who referred cases to me and my law firm. I tried to provide them with gifts that they would enjoy only to be told I was violating the company rules. I talked with management and was allowed to make a gift to the claims offices and would send them a book for their library. It was acceptable and accepted by the claims people with good grace and didn’t disappear as would a box of Mrs. Field’s cookies.

If you or your firm works with insurers and you wish to thank your clients consider sending a gift of a book or books for your clients that include:

Everything Needed by the Insurance Claims Professional from Barry Zalma

The library contains many books on the subject of insurance.

The Books include:

A Compact Book on How Judges Read, Understand, Interpret and Rule on Insurance Policy Issues

The book is available at Amazon.com as a hardcover here; a paperback here; and as a Kindle Book here.

The Compact Book on Ethics

How Ethical Doctrines from the Beginning of the Written Word to the Present Resulted in the Incorporation of the Covenant of Good Faith

The book is available as a Kindle book, a Paperback or a Hardcover

How to Acquire, Understand, and Make a Successful Claim on a Commercial Property Insurance Policy: Information Needed for Individuals and Insurance Pros to Deal With Commercial Property Insurance

The Book is now available as a Kindle book here, paperback here and as a hardcover here

The Equitable Remedy of Rescission of Insurance

Available as: A Kindle book A Paperback or a hardcover .

Insurance Fraudsters Deserve No Quarter

Book That Explains How to Defeat or Deter Insurance Fraud

Available as a paperback here.  Available as a hardcover here. Available as a Kindle Book here.

The Examination Under Oath to Resolve Insurance Claims

Insurance Fraud – Volume I & Volume II Second Edition

Available as a Kindle book; Available as a Hardcover;  Available as a Paperback 

Available as a Kindle bookAvailable as a HardcoverAvailable as a Paperback

The Homeowners Insurance Policy Handbook

How To Buy An Appropriate Homeowners Policy And Successfully Make A Claim To The Insurer

Available as a Kindle Book here.   Available as a paperback here.

It’s Time to Abolish The Tort of Bad Faith

A book examining the creation, history and effect of the Tort of Bad Faith.

Insurance Fraud Costs Everyone

Available as a Kindle Book and Available as a Paperback from Amazon.com.

California SIU Regulations 2020

Available as a Kindle book here.  Available as a paperback here.

California Fair Claims Settlement Practices Regulations 2022

Minimum Standards for Adjusting Claims in CaliforniaEvery Claims Person in California Must Read, Understand, or be Trained About the California Fair Claims Settlement Practices Regulations by September 1 of Each Year

Available as a Kindle Book.  Available as a Paper Back

“Zalma’s Mold & Fungi Handbook”

Kindle Edition Paperback Edition

“Getting the Whole Truth: Interviewing Techniques for the Lawyer”

Learn techniques that can help you interact with others and effectively gather the facts you need.

Zalma on Insurance Claims –  Third Edition

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

Mold Claims

The Compact Book of Adjusting Property Insurance Claims – Third Edition

A Manual for the First Party Property Insurance Adjuster. Available as a Kindle book. Available as a paperback.

The Compact Book on Adjusting Liability Claims, Third Edition

A Handbook for the Liability Claims Adjuster

available as a Kindle book Available as a paperback.

The Little Book on Ethics for the American Lawyer

The practice of law demands more than knowledge of statutory and case law. It Available as a Kindle book here. Available as a paperback here.

Random Thoughts on Insurance

Available as a paperback. Available as a Kindle book.

Fictionalized True Insurance Crime Books

Insurance Fraud Costs Everyone

available as a Kindle Book and Available as a Paperback from Amazon.com.

Candy and Abel: Murder for Insurance Money

How a young lawyer and wise old investigator defeated an  Available as a Kindle Book. Available as a paperback.

Murder And Insurance Fraud Don’t Mix

Available as a Kindle book. Available as a paperback

Murder & Old Lace: Solving Murders Performed for Insurance Money

Available as a Kindle book. Available as a paperback.

Arson for Terrorism and Profit

How an Insurance Investigator and Insurance Lawyer Defeated a Plot to use a Fire to Fund Terrorism

Available as a Paperback and as a Kindle book

M.O.M. & The Taipei Fraud

How an Experienced Adjuster Defeated a $7 Million Fake Burglary Claim

Available as a paperback. Available as a Kindle book.

Arson-For-Profit Fire at the Cowboy Bar & Grill

Available as a paperback. Available as a Kindle book.

The Defeat of a Fake $10 Million Jewelry Robbery Insurance Claim

New Books from Full Court Press

The Insurance Law Deskbook.

Paperback, only $95.00 available at https://www.fastcase.com/store/fcp/insurance-law-deskbook-2/

California Insurance Law Deskbook

Available at https://www.fastcase.com/store/fcp/california-insurance-law-deskbook/ a paperback for only $95.00.

Zalma on Property and Casualty Insurance Insurance Law Deskbook

Learn the insurance basics that are essential to every civil practitioner. Available at Fastcase.com bookstore.

California Insurance Law Deskbook

Fastcase.com bookstore.

Insurance Bad Faith and Punitive Damages Deskbook

All available at fastcase.com bookstore.

From Thomson Reuters

Property Investigation Checklists Uncovering Insurance Fraud, 13th Edition Available at https://store.legal.thomsonreuters.com/law-products/Forms/Property-Investigation-Checklists-Uncovering-Insurance-Fraud-13th/p/106702361 and as a THOMSON REUTERS PROVIEW eBOOK EDITION https://store.legal.thomsonreuters.com/law-products/Forms/Property-Investigation-Checklists-Uncovering-Insurance-Fraud-13th/p/106702363

From the American Bar Association

The Insurance Fraud Deskbook

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

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

Diminution in Value Damages

How to Determine the Proper Measure of Damage to Real and Personal Property

The Commercial Property Insurance Policy Deskbook

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

If you buy a book I will add all of your clients to my substack non-subscriber list and as free subscribers to Zalma’s Insurance Fraud Letter.


(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com  https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Insurance Does Not Cover a Sure Thing

Underwriting Against a Certain Loss and Claim is Appropriate

See the full video at https://rumble.com/v3xloeq-insurance-does-not-cover-a-sure-thing.html and at https://youtu.be/NRguA8OLZCs

The underwriting of an insurance policy requires evaluation of risks of loss faced by the proposed insured. When a proposed insured advises the underwriter that it has received an intent to sue from customers of the insured a prudent underwriter will exclude the  known risk faced by the Sunnyside Mobile Estate was excluded.

California Capital Insurance Company (CCIC) who defended and indemnified its insured Sunnyside Mobile Estates appealed from a judgment rendered in favor of Gotham Insurance Company (Gotham) on CCIC’s complaint for equitable contribution toward funds it paid and costs it incurred in defending and settling a claim against a mutual insured. Gotham defended based upon the underwriting of its policy that excluded the type of action CCIC defended because it specifically excluded the allegations having been told of an intent to sue served on the insured.

In California Capital Insurance Company v. Gotham Insurance Company, F084350, California Court of Appeals, Fifth District (November 6, 2023) the Court of Appeals interpreted the competing insurance policies.

THE INSURANCE POLICIES

CCIC and Gotham each provided commercial general liability (CGL) insurance for Sunnyside Mobile Estates, a mobilehome park located in Fresno, California during different policy periods. CCIC issued a number of CGL insurance policies for the mobilehome park commencing July 8, 2007, and ending July 19, 2016. The owner of the mobilehome park then switched his insurance carrier to Gotham which insured the park under a CGL insurance policy for the policy period July 19, 2016, to July 19, 2017 (the Gotham policy).

THE UNDERLYING SUIT

In July of 2016, several days before the Gotham policy was issued, residents of the mobilehome park sued the park’s owner, Peter M. Ormond (Ormond) and the Ormond Trust, which did business as Sunnyside Mobile Estates (the Alonso action). The Alonso action included claims for alleged failure to maintain and service the mobilehome park. Gotham had been made aware of the potential for such litigation during the insurance application process and issued its policy with an endorsement intended to exclude coverage for claims that might be raised in such litigation.

Ultimately, CCIC settled with the Alonso plaintiffs and brought the present action seeking equitable contribution from Gotham to pay its fair share of settlement funds expended, and defense costs incurred, by CCIC.

FACTUAL AND PROCEDURAL BACKGROUND

On April 8, 2016, mobilehome park residents, by and through one of the residents, sent Ormond a Notice of Intention to Commence Action dated March 1, 2016 (the “notice of intention to sue”) pursuant to the Mobilehome Residency Law (MRL).

The Ormond Insureds’ Insurance and Their Tender of Defense and Indemnity of the Alonso Action to CCIC and Gotham

Approximately five days after the Alonso complaint was filed, Gotham issued the Gotham policy to the Ormond insureds for the policy period July 19, 2016, to July 19, 2017. The Gotham policy contained an endorsement titled “Failure to Maintain Exclusion, Mobile Home Parks-California” (boldface &some capitalization omitted) (the “FTM exclusion”), which Gotham contends was intended to exclude coverage for matters addressed in the notice of intention to sue.

Ormond settled the Alonso action and some trip-and-fall claims. The matters were settled in a global agreement, which provided, among other things, for the payment of $925,000-$25,579 of which was allocated to the trip-and-fall claimant and the remainder to the Alonso plaintiffs, collectively.

Equitable Contribution

CCIC then sued Gotham for equitable contribution toward the funds it paid in settlement and its defense costs (the “equitable contribution complaint”). The trial court entered judgment against CCIC and in favor of Gotham.

DISCUSSION

Equitable contribution apportions costs among insurers sharing the same level of liability on the same risk as to the same insured and is available when several insurers are obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action without any participation by the others.

Gotham Did Not Have a Duty To Defend the Ormond Insureds in the Alonso Action

The duty to defend is both separate from and broader than a duty to indemnify. In mixed action cases involving both claims potentially covered by the insurance policy and claims not potentially covered by the policy, California law generally provides the insurer has a duty to defend the entire mixed action prophylactically, as an obligation imposed by law in support of the policy.

There Was No Possibility of Coverage Under the Gotham Policy Insuring Provisions for the Alonso Complaint Allegations

The undisputed evidence demonstrated the Ormond insureds knew that “bodily injury” and “property damage” alleged in the Alonso complaint occurred prior to the Gotham policy period. It is indisputable that any such injury or damage that existed at the time the Alonso complaint was filed did not occur during the policy period since the filing of the Alonso complaint preceded issuance of the Gotham policy.

There was no possibility of coverage under the insuring provisions of the Gotham policy. Accordingly, Gotham was under no duty to defend the Ormond insureds from claims asserted in the Alonso complaint.

The FTM Exclusion Relied Upon By Gotham and the Statutes and Regulations

The Gotham policy contained an endorsement titled “Failure to Maintain Exclusion, Mobile Home Parks-California” (boldface &some capitalization omitted) (i.e., the “FTM exclusion”). The statutes and regulations referenced in the FTM exclusion are the very statutes and regulations expressly referenced in the notice of intention to sue and the Alonso complaint.

The FTM Exclusion Eliminated the Potential for Coverage

The complaint expressly alleged and commenced with the notice of intention to sue. Moreover, each and every cause of action asserted in the Alonso complaint was premised, at least in part, on provisions of the MRL and, to that extent at least, service of notice of intention to sue was required.

As the California Supreme Court has said, “where there is no duty to defend, there cannot be a duty to indemnify.” (Certain Underwriters at Lloyd’s of London v. Superior Court)

The judgment in favor of Gotham on CCIC’s complaint for equitable contribution is affirmed. Gotham is awarded its costs on appeal.

ZALMA OPINION

If Sunnyside Mobile Estates did not tell Gotham of the notice of intent to sue Gotham could have rescinded the policy for misrepresentation of material facts. Sunnyside did not and, as a result, Gotham excluded the type of loss that resulted in the Alonso suit. CCIC knew about the loss before its policy expired and Gotham knew of it before it happened and the Alonso suit was filed before the inception of the policy. There was no equity involved in this attempt at equitable indemnity and CCIC attempted to force Gotham to pay that which it did not owe.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling  at my substack at https://barryzalma.substack.com/publish/post/107007808

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Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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You Win Some & You Lose Some

USDC Should Have Considered the Intentional Act Statute

See the full video at https://rumble.com/v3xfyah-you-win-some-and-you-lose-some.html  and at https://youtu.be/AKrFx1KdgwM

California State Grange (“Grange”) brought this action as a judgment creditor of non-party Chico Community Guilds (“Guilds”) seeking to recover from Guilds’ insurer Carolina Casualty Insurance Company (“Carolina Casualty”) damages awarded by the state court. The underlying judgment followed a lawsuit quieting title to real and personal property wrongfully converted by Guilds. Grange appealed the district court’s grant of Carolina Casualty’s motion to dismiss without leave to amend based on its conclusion that the underlying claims were not covered under the policy.

In California State Grange v. Carolina Casualty Insurance Company, No. 22-16169, United States Court of Appeals, Ninth Circuit (November 13, 2023) the Ninth Circuit Agreed to the District Court’s ruling in part and sent the case back to the court to another part of the case.

FACTS

Grange sued Guilds in Butte County Superior Court over the assets of Chico Grange No. 486 in which Grange brought several causes of action including cancellation of deed and quiet title, slander of title, and conversion. On February 25, 2021, the state court entered a ruling granting summary judgment to Grange on all claims. The judgment awarded in relevant part:

  1. the cancellation of the unauthorized deed recorded by Guilds in 2017;
  2. $23,167.50 in attorney’s fees related to the slander of title claim;
  3. “damages for conversion” of bank accounts in the amount of $80,697.68 plus $9,307.87 in prejudgment interest; and
  4. $1,945.49 in costs.

Grange sued Carolina Casualty in the USDC seeking a declaration that Carolina Casualty has a duty to indemnify Guilds under the policy to collect on the judgment for all monies awarded. The district court dismissed Grange’s suit without leave to amend.

ANALYSIS

The district court did not err in dismissing Grange’s claim for indemnification as to the conversion damages and prejudgment interest awarded by the Butte County Superior Court as restitution not covered under the policy. In the state court’s ruling on summary judgment, the Butte County Superior Court noted that Grange was not seeking title to the other personal property items identified in the complaint, but rather, only sought the converted funds totaling at least $80,697.69 in Guilds’ bank accounts, which, in turn was the exact amount awarded.

The relevant insurance policy explicitly excepts disgorgement or restitution from the definition of damages covered under the policy. Because the conversion damages and prejudgment interest awarded by the Butte County Superior Court was restitution not covered under the policy, the district court’s dismissal as to that claim was affirmed.

The USDC failed to consider whether the attorney’s fees awarded pursuant to the slander of title claim may have been covered under the policy where a wrongful act is defined as including any “error, misstatement, [or] misleading statement.” Slander of title involves the publication of a false statement that could be negligent.

The district court also failed to consider whether such coverage would implicate California Insurance Code § 533. Carolina Casualty argued that under such an interpretation – if slander of title is a wrongful act because it includes a misleading statement – coverage is barred under California Insurance Code § 533 because such an action would be purposeful.

Despite Carolina Casualty’s contention to the contrary, a willful act does not include negligent misrepresentations within the meaning of section 533. Bearnaise Butte County Superior Court made no finding as to whether Guilds’ actions were done with the requisite “willfulness” the applicability of section 533 is thus not readily apparent on the face of the record before the Ninth Circuit. Because the district court failed to consider the available, alternative basis for coverage under the policy that may be vulnerable to the argument that coverage was barred by section 533, the district court should reconsider the interpretive question.

The district court’s dismissal of Grange’s claim for attorney’s fees was vacated and remanded for reconsideration consistent with the opinion.

Because the issue for which the case is now being remanded was not considered by the district court because it would be futile, the district court did not err by denying California State Grange leave to amend.

ZALMA OPINION

The Ninth Circuit, trying to help a plaintiff to recover from an insurer when coverage is questionable, sent the case back to the District Court to determine if the acts of the Guilds were sufficiently intentional to bring into effect California Insurance Code Section 533 or not. If the USDC finds it willful then Carolina Casualty will owe nothing and if not it will owe a few dollars more. In so doing the Ninth Circuit makes the litigation a punishment of the insurer who was required to deal with a suit and an appeal on a policy that probably owed nothing but it will cost more to succeed than to pay off the plaintiff.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com  https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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No Sprinklers – No Coverage

Breach of Condition Precedent Defeats Policy

See the full video at https://rumble.com/v3x2s1f-no-sprinklers-no-coverage.html  and at https://youtu.be/IfcxiDYTx_4

Blog Post 4673

Plaintiff appealed the trial court’s order granting summary disposition in favor of defendant. In 23771 Blackstone, LLC v. Conifer Insurance Company, No. 364333, Court of Appeals of Michigan (November 16, 2023) the Plaintiff sought to avoid the fact it breached the material condition requiring it to maintain a fire sprinkler system as a protective safeguard.

FACTS

A fire occurred at plaintiff’s building in Warren, Michigan. The building housed a marijuana growing operation. Defendant insured the property against fire and other hazards under a commercial property insurance policy that defendant originally issued in 2017 and renewed annually thereafter. The parties did not dispute that defendant’s policy included a Protective Safeguards Endorsement (PSE), which provided, in pertinent part that the policy required as a condition precedent that the insured was “required to maintain the protective devices or services listed in the Schedule. The protective safeguards to which the endorsement applied was an Automatic Extinguishing System.

After the fire, plaintiff filed a claim under the policy, but defendant denied the claim because the property did not have an automatic extinguishing system (AES).

Plaintiff sued alleging that defendant had repeatedly inspected the property and “was aware, or should have been aware, from the inspection and other sources, that the property did not have an automatic sprinkler system.”

The insurer moved for summary disposition arguing that the policy language was clear and unambiguous, and that because plaintiff did not have an AES on its property, it was precluded from recovering fire protection benefits under the terms of the policy.

Plaintiff faced with an obvious failure of a condition responded that that defendant should be estopped from denying coverage for lack of an AES because the PSE was ambiguous since  it did not actually define the system.

The trial court ruled that the insurer was entitled to summary disposition because the policy unambiguously precluded coverage if the insured property did not have an AES, and it was undisputed that there was no AES on plaintiff’s property.

AMBIGUITY

Initially, plaintiff argued that the language of the policy was ambiguous and that it should be construed against defendant and in favor of coverage because an AES is not defined in the PSE. Finding that the language of the PSE was not ambiguous the Court of Appeals noted that the PSE refers to a definition of an “automatic sprinkler system,” stating that it means: “a. any automatic fire protective or extinguishing system, including connected: (1) Sprinklers and discharge nozzles; (2) Ducts, pipes, valves, and fittings; (3) Tanks, their component parts and supports; and (4) Pumps and private fire protection mains. b. When supplied from an automatic fire protective system; (1) Non-automatic fire protective systems; and hydrants, standpipes, and outlets.” [Emphasis added.]

Accordingly, the court concluded that the PSE is not ambiguous because it adequately explained the meaning of an AES.

Plaintiff asserted that the AES requirement should not bar coverage for its fire loss because both it and defendant were fully aware that an AES did not exist at the property. Plaintiff was aware because it owned the property, and defendant was aware because multiple inspections revealed that there was no AES on the property.

However, the mere fact that defendant and plaintiff may have been aware that the property did not have an AES does not establish that the parties mutually understood and agreed that an AES was not required as a condition of coverage. The policy unambiguously required that the property have an AES as a condition of coverage, and there was no evidence that defendant ever intended or agreed that an AES was not necessary. There was no evidence of a mutually shared factual mistake by the parties regarding the impact of not having an AES at the property on the availability of coverage.

ZALMA OPINION

Insurance policies are contracts. They agree to indemnify an insured against multiple risks of loss but never every potential risk faced by the insured. When an insurer requires protective safeguards like fire sprinklers or burglar alarms it reduces its premium because of the fact that the risk of loss is lessened by the protective safeguard. Failure to maintain a protective safeguard, a condition precedent, eliminates coverage because the risk of loss was not as promised even if the loss was not by fire.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com  https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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I AM THANKFUL

My Family and I are Thankful to Share This Thanksgiving with You

See the full video at https://rumble.com/v3x8se6-i-am-thankful.html  and at https://youtu.be/WZV5IWPH4lM

My family and I have much to be thankful for this year, not the least of which are the care provided by my daughter, Stephanie, who cares 24/7 for my wife and her mother, Thea who continues to recover her memory. I am personally in good health, walking four to five miles a day, with the assistance of my new aortic heart valve that was inserted with a transcatheter heart valve (TVR). In my semi-retirement I continue working only six to eight hours a day doing what I love the most, writing about insurance, insurance claims, insurance law and acting as an insurance claims consultant and expert witness.

I am thankful for you, my friends, clients and readers of “Zalma’s Insurance Fraud Letter,” my blog “Zalma on Insurance,” my Substack publications, my videos on Rumble.com and YouTube.com and my books and other writing including the new Third Edition of the ten volumes of my treatise, “Zalma on Insurance Claims.”

As a first generation American I am honored to join with all Americans the ability to celebrate Thanksgiving that started when the United States was a dream and just a colony of Great Britain to give thanks for the good things in life at least once a year. It took Abraham Lincoln, our greatest President, to make it an official holiday. The Thanksgiving holiday gives me and my family the opportunity to consider the blessings we received and to thank all who have made it possible.

Please allow me this opportunity to explain to you all the things I, and my family, can give thanks for:

1. I have loved my wife of 55 years since we first met when she was nine and I was twelve.
2. I am thankful that she still loves me and lets me make clear every day that I love her more now than I did when she ignored me when I was 12.
3. My three adult children who are successes in their own right.
4. That my three children, my almost seven-year-old granddaughter live nearby, put up with my wife and I, and are healthy, successful, and mostly happy in what they do.
5. That my grandson graduated from Puget Sound University in Washington state and is now working full time for a major business in Los Angeles.
6. My clients who, for the more than 55 years have allowed me to earn a living doing what I love: practicing law until I let my license go inactive, acting as a consultant, testifying as an expert witness, writing materials to help others provide excellence in claims services and creating videos to help every member of the insurance profession learn more about insurance and insurance claims handling.
7. My publishers the American Bar Association, Full Court Press, Fastcase.com, Thomson Reuters and Amazon.com.
8. My dearly departed parents and grandparents for having the good sense to leave the Ottoman Empire at the beginning of the 20th Century so we could avoid the Holocaust and I could be born American.
9. My country for giving me a place to live and work in peace and complain about it without fear.
10. The state of California, where I was born, and have lived for 81 years, for allowing me to have my home and grow my family, and the ability to pay the high taxes for the privilege.
11. Those of you who read what I write and gain something from it.
12. Eighty one years of mostly good health, but for a small heart attack, clogged arteries and a deteriorated aortic heart valve, that gave me the ability to continue to work – albeit at a reduced rate because of the skills of my cardiologists and the St. John’s hospital in Santa Monica.
13. Allowing me the health and ambition to avoid my cardiologist by walking every day and working on my garden and bonsai.
14. The hundreds of friends I have never met but with whom the Internet has allowed me to communicate in parts of the world I have never visited.
15. The wonder of the Internet that allows me to publish E-books, Zalma’s Insurance Fraud Letter (ZIFL) and my blog instantly on line.
16. That my family can get together to express our thanks for each other and our happiness this year again without a need for anything but enjoying each other’s company.
17. That most of you who I know only by my publications can also gather with your families to express your thanks.
18. To those friends I meet almost every day as I walk along the Ballona Creek bike path.

When I enlisted in the U.S. Army in 1967 to avoid the draft I volunteered to serve anywhere in the world other than Viet Nam and was sent, with the wisdom only the U.S. Army Intelligence Corps could understand, to Peoria, Illinois where I became a Special Agent in Charge of an office investigating people who sought security clearances. I was trained to be an investigator and enjoyed every minute of the job. Until the Army I had never seen a river without a concrete bottom only to see the mighty Mississippi as my first real river. I had never seen snow other than in the distance on mountains only to find myself shoveling the snow off the driveway in the small half-of-a-house I rented from an old couple who could not do it themselves. My investigative assignments required me to travel throughout Central Illinois from the Iowa to the Indiana borders. I stopped at court houses along the way, all of which had signs that Abraham Lincoln practiced law there. Those experiences with the courts, law enforcement officers, and court personnel probably gave me the incentive to become a lawyer.

When I finished my three year enlistment I returned home, proposed marriage to the love of my life, convinced her to agree and her parents to accept me as a son-in-law. After we were married I began the study of law at night and found my first real job where I could use the skills I learned in the Army. I was hired as a claims trainee at the Fireman’s Fund Insurance Company who spent the time to train me to be a claims adjuster. The training I received was, unlike what is done at modern insurers. It was thorough. I was required to read a treatise on insurance and insurance claims handling. I was sent out with experienced adjusters in all types of insurance Fireman’s Fund wrote, and eventually allowed to deal with the public under close supervision. Contrary to what was done in the insurance industry at the time, the Fireman’s Fund allowed me to study at night while I worked as a full-time insurance adjuster. I was fortunate enough to work for a claims manager – Coleman T. Mobley – who did not require me to go out of state to adjust major storm claims if it interfered with my law school studies. Since I was in law school 50 weeks a year the only storm duty I was required to work was a fire storm that burned from the San Fernando Valley to the ocean at Malibu. Because of Mr. Mobley and the Fireman’s Fund I was able to complete my studies and pass the California Bar in 1971 and was admitted to the California Bar on January 2, 1972.

I took a cut in pay to get my first job as an Associate Attorney with a law firm that was willing to teach me to be a lawyer handling every kind of problem a new lawyer could face from wills, tort claims, divorce, drunk driving, trials, depositions, and dozens of orders to show cause in multiple courts around the Inland Empire of California. By doing so, when I started practicing law in 1972, I became a lawyer who could deal with any issue brought to me. I was fortunate enough to move to an insurance law firm in Century City where I was assigned to a coverage lawyer who was trying to deal with over 500 active matters who, when I arrived, assigned me 250 of the matters and pointed me to the firm’s library to learn what to do. At the time new technology was an IBM Selectrict typewriter that could erase errors from the keyboard without the need to use white-out paint. I did legal research in the firm’s large library which, when it was inadequate for the task, I had to drive to the County Law Library in downtown Los Angeles. Research in a large library took days to find support for an issue. I needed three professional legal secretaries to keep up with my dictation. Now, using modern technology, I can do the same legal research in 30 minutes on Fastcase.com, need no secretary, and can operate my expert witness, consulting, writing, training and publishing businesses with no employees.

In 1979 I decided it was time to be my own boss. I started a law firm called Barry Zalma, Inc. with a secretary who came from my last firm and brought an IBM Selectrict typewriter with her into a small windowless office. I had obtained a line of credit from a bank that I hoped would carry us until the practice started since the only case I was certain would move to my new firm was my sister’s rear-ender from which I could not take a fee. The office was furnished with a file cabinet from my father-in-law’s dental practice and a dining room table from my wife’s grandmother who had passed away. I received my first call at 8:10 a.m. on the first day, October 1, 1979, and my practice began. I had nothing to do on October 3, 1979 so I wrote an article for publication. After that I had no peace and the firm quickly grew to 9 lawyers and a staff to serve them all defending people who were insured and acting as coverage counsel for insurers who needed advice and defense of bad faith suits. I was more successful than I ever expected. I, whose experience was limited to Los Angeles County and Central Illinois, found a need to travel to Taipei, Taiwan and London, England on behalf of my clients. I worked, as I had learned from my father who survived the Depression, 16 hours a day six or seven days a week.

When I became 75 years old my firm had been reduced to a sole practice and I decided it was time to stop practicing law and become a consultant and fulfill my childhood dream to be an author.

I am a very lucky and happy man. I do work that I love. I fulfilled my childhood dreams. I Live in a home I have owned for more than 47 years that my wife and I adapted and increased as children were born to meet our needs. I have the love of my life with me and look forward to celebrating our 56th wedding anniversary next month. I am honored that my eldest daughter has come back to live with us and care for my wife and I who are not able to do everything we used to do. I have three wonderful children, two great grandchildren and all live close. My son shares my office building and has time to visit with me as allowed by his busy schedule.

I hope, on this Thanksgiving weekend, that you can join my family and me remembering that it is more important to think about our blessings and those things that we have to be thankful for than to get in line for “Black Friday” to buy an inexpensive flat screen t.v. or tablet.

Enjoy the holiday and your family as I will.

(c) 2023 Barry Zalma

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“Personal Injury” Coverage Exclusion Eliminates Coverage

Speculation About Extraneous Facts Does Not Trigger Duty to Defend

Blog Post 4672

See the full video at https://rumble.com/v3x1wsl-personal-injury-coverage-exclusion-eliminates-coverage.html and  at https://youtu.be/XfyWqrSsU3U

AutoDistributors, Inc. and Steven Schneider (collectively “AutoDistributors”) appealed the district court’s order granting judgment on the pleadings in favor of Scottsdale Insurance Company, Nationwide E&S Specialty, Scottsdale Indemnity Company, and National Casualty Company (collectively “Defendants”). In Autodistributors, Inc. et al v. Nationwide E&S Specialty; et al., No. 22-16445, United States Court of Appeals, Ninth Circuit (November 17, 2023) the Ninth Circuit interpreted the insurance policy.

FACTS

This case arose from an underlying dispute between Sixt Franchise USA, LLC, Sixt Rent a Car, LLC (collectively “Sixt”), and AutoDistributors. Sixt Franchise and AutoDistributors entered into a Franchise Agreement that allowed AutoDistributors to operate a Sixt rental car franchise and use Sixt’s trademarks in connection with that franchise. Sixt sued AutoDistributors claiming it violated the Franchise Agreement by operating a used-car-sales business at the franchise location and using Sixt’s trademarks in connection with that business.

AutoDistributors tendered the suit to its insurer Scottsdale Insurance Company (“Scottsdale”), and Scottsdale refused to defend or indemnify. AutoDistributors sued the Defendants for breach of contract and breach of the implied covenant of good faith and fair dealing. The district court ruled for Defendants, holding that Scottsdale had no duty to defend AutoDistributors.

DUTY TO DEFEND

An insurer must defend a suit which potentially seeks damages within the coverage of the policy. To determine whether there is a duty to defend, the insurer compares the terms of the policy with the allegations of the complaint and any other facts that are reasonably inferable or otherwise known.

If the allegations suggest a possibility of coverage, the duty to defend is triggered-even if the precise causes of action pled by the third-party complaint fall outside policy coverage.

AutoDistributors’ insurance policy covers “personal and advertising injury,” defined to mean injury “arising out of” a specified list of offenses.  The policy excludes “‘personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights” (the “IP Exclusion”).

Some Of Sixt’s Allegations Clearly Fell Outside The Policy’s Coverage.

Sixt alleged that AutoDistributors breached the Franchise Agreement by “operating the unauthorized Used Car Sales Business at the Store” and “using the Store to facilitate a start-up incubator business.” That alleged conduct did not implicate any of the offenses in the definition of “personal and advertising injury,” so it did not trigger the duty to defend.

Sixt also alleged that AutoDistributors infringed Sixt’s trademarks by using the trademarks in connection with the used car business. Based on these allegations, Sixt alleged claims of trademark infringement and false designation of origin under the Lanham Act, common law trademark infringement, and common law unfair competition. This theory was also part of Sixt’s breach of contract claim because Sixt argued that the Franchise Agreement restricted the use of the trademarks.

Even assuming that trademark infringement would constitute a “personal and advertising injury,” there was no coverage for these claims because of the policy’s IP Exclusion. That exclusion provides that the policy does not cover “personal and advertising injury” arising out of the infringement of “trademark.”

Although the Sixt Complaint used the word “slogan” once, that single word did not trigger the duty to defend when read in context. AutoDistributors points to no allegation in Sixt’s Complaint describing AutoDistributors’ use of items associated with Sixt’s slogans, as opposed to Sixt’s trademarks.

An insured may not trigger the duty to defend by speculating about extraneous “facts” regarding potential liability or ways in which the third party claimant might amend its complaint at some future date. The extrinsic facts which may create a duty to defend must be known by the insurer at the inception of the third party lawsuit.

ZALMA OPINION

Personal Injury liability coverage is a very broad coverage providing defense and indemnity for multiple types of offenses. The Scottsdale policy in this case provided a Personal Injury coverage but limited it with an IP exclusion that defeated the claim of AutoDistributors because it was clear and unambiguous.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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No Good Deed Goes Unpunished

After Paying the Insured More than $637,000 he Sues for More

See the full video at https://rumble.com/v3wvpyx-no-good-deed-goes-unpunished.html and at https://youtu.be/l_s97-gbFEQ

Vahagun Safarian appealed from the judgment entered after the trial court granted the summary judgment motion filed by Fire Insurance Exchange (Fire). Safarian sued Fire for breach of contract and related claims after Fire denied in part Safarian’s claim for coverage under his homeowner’s insurance policy for damage to the foundation of his home resulting from a burst pipe that flooded the soil around the home.

In Vahagun Safarian v. Fire Insurance Exchange, B323862, California Court of Appeals, Second District, Seventh Division (November 14, 2023) Safarian asked the Court of Appeals to provide coverage for damages over the almost $700,000 received for damages due to a water line break and water damages.

FACTUAL BACKGROUND

Fire issued Safarian homeowner’s insurance policy effective from June 13, 2017 through June 13, 2018 (Policy). The insured property was Safarian’s three-level hillside home on Sunset Drive in Los Angeles (Property).

Paragraph 12, states, “We do not insure loss or damage consisting of, composed of or which is the movement, settling, cracking, bulging, shrinking, heaving, or expanding of any part of covered property, whether natural or otherwise …. [¶] [This] includes by way of example but not limited to foundations, foundation fill material, foundation piers, foundation beams, slabs, pads, patios, walls, floors.”

The policy also provided that “This water exclusion applies even if water combines or contributes in any way with any other excluded cause of loss or damage hereunder to cause loss or damage…” And the policy at paragraph (f) specifically excludes foundation damage.

PROPERTY DAMAGE, CLAIM, AND LAWSUIT

Water flooded the exterior of the Property as well. Safarian submitted a claim to Fire for water damage to the Property. Fire ultimately paid Safarian $637,999 in policy benefits, including $313,371 for damage to the Property, with the remainder for damage to personal property and loss of use.

Safarian hired William Musakhanyan, a licensed public adjuster, to handle his claim. Musakhanyan notified Hodson that the Property may have sustained foundation damage as a result of the plumbing breach. On March 12, 2018 a structural engineer retained by Safarian reported, “The water leak also appears to have caused fill soils in the crawl [space] . . . to settle,” which in turn caused interior floor tiles to separate and an exterior foundation wall to develop cracks. Musakhanyan transmitted the engineer’s report to Hodson, who on April 10 responded by email, “Per our conversation-as you know, Earth movement is not covered.”

Fire denied Safarian’s claim for foundation damage. Safarian sued .

FIRE’S MOTION FOR SUMMARY JUDGMENT

Fire argued it paid all covered damages and therefore did not breach the Policy. The trial court found the language of the Policy was undisputed and the trial court found that Safarian failed to meet his burden to prove Fire intentionally relinquished its right to invoke the paragraph (f) foundation damage exclusion, and he could not meet this burden based only on Fire’s denial of coverage in light of Fire’s reservation of rights in the denial letter. Finally, the court found that because there was no breach of contract, Fire was entitled to summary judgment as to the entire action.

DISCUSSION

In general, interpretation of an insurance policy is a question of law that is decided under settled rules of contract interpretation. The insured has the burden of establishing that a claim, unless specifically excluded, is within basic coverage, while the insurer has the burden of establishing that a specific exclusion applies.

On appeal, Safarian contended the water coverage extension provided coverage for any damage to the Property resulting from a plumbing breach, regardless of whether the damage was an uninsured loss under the Policy’s general terms. The Court of Appeal agreed with the trial court that foundation damage is not a covered loss under the Policy, regardless of the cause, and Fire was entitled to judgment as a matter of law.

The dispositive issue here was not, as argued by Safarian, the convergence of a covered peril (flooding from the burst pipe) and an excluded peril (earth movement, water, soil conditions, and settling) because the purported covered peril is not covered at all. The water damage extension for a burst pipe itself has an exclusion in paragraph (f) for foundation damage. Thus, neither peril provides coverage.

Safarian contended that Fire waived its right to enforce the paragraph (f) foundation damage exclusion by failing to assert it during the adjustment of his claim. Waiver is not established merely by evidence that the insurer failed to specify the exclusion in a letter reserving rights. Safarian did not present evidence that Fire intentionally relinquished its right to assert the paragraph (f) foundation damage exclusion.  Fire was free to develop one defense without impliedly waiving another.

ZALMA OPINION

No insurance policy covers every possible risk of loss. Fire found coverage for the damage done by the burst pipe and paid the insured what he agreed to concerning damage to the structure and his contents for more than $670,000. He then sought payment for damages due to settlement of the structure and its foundation that was clearly and unambiguously excluded by trying to create coverage without a basis in the policy or in the facts of the claims handling.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

Posted in Zalma on Insurance | Leave a comment

Why Insurance Fraud Is Costing You & Your Neighbors

Honest People Pay to Fund the Criminal Conduct of Insurance Fraudsters

INSURANCE FRAUD IS EPIDEMIC

Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no certain number. No one knows the amount that is taken by insurance fraud because most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States was estimated by the Coalition Against Insurance fraud to be $308 billion every year and that is a low estimate. Insurance fraud is a serious crime that bleeds the insurance industry sufficiently to have states compel insurers to create special investigative units (SIU’s) to investigate, deter and defeat insurance fraud to assist the state in its efforts to prosecute the crime.

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.

The National Insurance Crime Bureau (NICB) estimated that almost 25% of the bodily injury claims related to auto crashes are bogus. Property and casualty claims against auto insurance are not much better, coming in at around a 10% fraud rate.

The National Association of Insurance Commissioners (NAIC) reports that insurance fraud occurs when an insurance company, agent, adjuster or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, or underwriting insurance. Insurance fraud may fall into different categories from individuals committing fraud against consumers, individuals committing fraud against insurance companies and insurance companies defrauding those it insures.

Fraud not only inflicts extra costs on insurance companies, but it also financially impacts consumers, costing the average U.S. family an effect estimated to be between $400 and $700 per year in premiums needed to cover the investigation and payment of fraudulent claims.

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.

Insurance fraud is not limited to the US. In Britain fraud costs the British economy amounts estimated in billions of British pounds. Since the amount of fraud actually detected is a small portion of what was actually found, the estimates published are little more than an educated guess.

As the industry attempts to keep pace with fraudsters’ varied, ever-shifting tactics, it must deploy more innovative, effective anti-fraud technologies or risk dire losses.

Vendors and organizations include the Coalition Against Insurance Fraud (CAIF), CSC, Experian, FICO, IBM, Innovation Group, Insurance Bureau of Canada (IBC), ISO/Verisk, KPMG, LexisNexis, FastCase, Mattersight, Mitchell, the National Insurance Crime Bureau (NICB), SAP, SAS, and TransUnion.

Insurers must also generate a close relationship with the state insurance department’s fraud division or fraud bureau, local police agencies, the FBI, the ATF, Homeland Security, the Postal Investigation Service, the local fire department’s arson unit, local prosecutors, and the local U.S. Attorneys if they are to have any chance to reduce the effect of insurance fraud. Insurers should also work to make the general public, state legislators, state governors, congress members and U.S. Senators, and the Attorney General of the United States aware of the effect insurance fraud has on the public at large and the insurance industry.

Wherever insurance is written insurance fraud exists. It is an equal opportunity fraud committed by people of every race, religion or national origin.

Insurers who do not exercise serious anti-fraud efforts often complain that the local district attorneys and police agencies give a low priority to the crime of insurance fraud. The complaints are well founded. Insurance fraud prosecutions are document heavy and prosecutors are loathe to get involved in a complicated case.

No matter how seriously the insurers work to prove fraud the authorities often ignore them. In response, police and prosecutors complain that the insurers do nothing that police and prosecutors can use to prosecute the crime of insurance fraud while insurers complain that prosecutors ignore them when they present evidence of a fraud.

There is some truth in both complaints. Insurers, although compelled by statute to investigate potential insurance fraud and to present the results of their investigations to prosecutors, they are not trained as police officers. Insurance company employees, whether claims adjusters or Special Investigative Unit (SIU) investigators are not police offers, have no right to arrest, and can only conduct investigations with the permission and consent of those persons being investigated. The SIU investigator is capable, however,  to present evidence of a either a tort or a crime to a court.

The SIU investigator can only advise professional insurance fraud investigators at the state departments of insurance or state police agencies who must then investigate further to obtain evidence that is sufficient for a charge of insurance fraud or to convince a Grand Jury to issue an indictment.

More importantly the SIU investigation can gather enough evidence to determine, beyond a preponderance of the evidence available, to allow an insurer to conclude a fraud is being attempted and allow the insurer to disclaim coverage on a fraudulent claim based on exclusions and conditions in the policy of insurance.

If you are a person who has paid premium to be insured against certain risks of loss it is important that you recognize some of the more common insurance fraud schemes.

INSURANCE FRAUD SCHEMES

  • Premium Diversion — the embezzlement of insurance premiums.
  • Fee Churning —In fee churning, a series of intermediaries take commissions through reinsurance agreements.
  • Workers’ Compensation Fraud
  • Health Insurance Fraud —Health insurance companies as well as Medicare and Medicaid are serious targets of crooked health care providers who make claim for services never rendered
  • Property Fraud — Arson for profit, fake thefts, false water damage claims, intentional mold infestation, and construction defects that do not exist, among other types of property fraud.
  • Liability Claims Fraud — The staged auto accident, the swoop and squat accident, the false injury after a low impact accident, false chiropractic or medical treatment after a collision are auto related casualty or liability claims fraud.

WHAT IS NEEDED TO DETER INSURANCE FRAUD

The logarithmic growth of fraud against insurers and government based programs like Medicare and Medicaid, will eat away any chance insurers – and their shareholders – can operate profitably. In addition, medical fraud perpetrated on federal and state agencies, will increase the tax burden of those who pay taxes to support Medicare, Medicaid and the so-called “Affordable Care Act” or Obamacare, will be insufferable.

The cure for insurance fraud is a vigilant insurance buying public who can work with their insurers to defeat fraud.

If prosecution of insurance fraud is to be successful it is necessary that insurers, prosecutors, police agencies and the insurance buying public must work together as a team dedicated to defeat the crime of insurance fraud. To do so the insurers must train their staff to recognize the elements of both the crime of insurance fraud and the elements of the civil tort of insurance fraud. If well trained, insurance personnel collecting information about a potential insurance fraud, will know the type and quality of information that either a prosecutor or a civil defense lawyer will need to prove fraud was attempted. Police, prosecutors and judges must recognize that insurance fraud is a felony crime and cannot be ignored. Most importantly, the insurance buying public must become angry about the excessive premiums they must pay to allow the insurers to cover the cost of dealing with insurance fraud.

Where a handler having an actual suspicion of fraud (e.g., manual fraud indicator(s), tip off, system generated “high risk” referral etc.) challenges the applicant/claimant by letter, telephone call or instruction of an investigator etc., to clarify key information, provide additional information or documentation etc., and the applicant/claimant subsequently:

  • fails to co-operate or provide further documentation; and/or
  • formally withdraws the application/claim (by phone, e-mail or letter) without a credible explanation; and/or
  • allows all communication with the insurer to lapse despite the insurer’s reasonable attempts to re-establish contact; and/or
  • accepts (without a credible explanation) either a substantially reduced settlement offer in respect of a claim, or a substantially increased premium in respect of an application/renewal (other than in cases where there has been a careless misrepresentation).

All other ‘gone away’ claims/applications arising in the course of normal business do not represent suspected fraud under this definition.

What Insurance People Must Do to Change the Statistics

It is the obligation of all whose work in the business of insurance or are insured is to protect insurers against insurance fraud to do something to change the situation. Methods that are available and that should be exercised by every person who wants to reduce the effect of insurance fraud include:

  • Lobby local, state and federal police agencies to change the system so that:
    • All the insurance tax money must go to all kinds of insurance fraud at the discretion of the Commissioner of Insurance.
      • Prosecutors must be assigned to the Fraud Bureau or Fraud Division whose only job must be to prosecute insurance fraud.
      • When the local D.A. does not file a criminal complaint, the fraud investigator or lawyer for the insurer, must complain, loudly.
      • Insurers and their staff should work within the system to:
    • Report every suspected fraudulent claim to the Fraud Division
    • Follow-up with the Fraud Division after you get the letter saying they won’t investigate.
    • Supplement the Suspected Fraudulent Claim (“SFC”) report with investigation results and transcripts of examinations under oath.
    • Develop a personal relationship with investigators at the Fraud Division.
    • Develop a personal relationship with supervising investigators at the Fraud Division.
    • When the Fraud Division refers a case to a prosecutor, determine the identity of the prosecutor and establish a relationship with the prosecutor.
    • Make it clear to the prosecutor that you represent an interested and proactive victim.
    • Make it clear to the prosecutor that your insurance company is upset that it is the victim of a crime.
    • Make it clear to the prosecutor that you will make available to him or her anything needed or required.
    • Make it clear to the prosecutor that you, and other employees of the insurance company, will be available to testify at the trial of the insurance criminal.

(c) 2023, Barry Zalma & ClaimSchool, Inc.

Posted in Zalma on Insurance | Leave a comment

You Only Get What You Pay For

RTFP – Court Reads the Full Policy

See the full video at https://rumble.com/v3w4rhf-you-only-get-what-you-pay-for.html   and at https://youtu.be/aR9DGHaY0qc

Mark Scafella appealed the order granting Erie Insurance Company (“Erie”) and Stanley Geho’s summary judgment in the underlying declaratory judgment action. In Mark Scafella v. Erie Insurance Company and Stanley Geho, No. 22-ICA-173, West Virginia Intermediate Court of Appeals (November 14, 2023) the West Virginia Court of Appeals resolved the dispute by reading the full policy.

FACTUAL BACKGROUND

In 2017, Mr. Scafella purchased the Terra Alta property known as “Country Chapel Farm” (“Farm”). The property included a residential home, a large barn with an adjacent milk house, several sheds or smaller barns, and a small country church.

The underlying case arises from a fire on Scafella’s real property. The insurance claims Scafella made following that fire loss did not provide the result he desired and litigation followed.

THE POLICY

The property was insured under a homeowner’s policy of insurance issued by Erie, identified as the “ErieSecure Home Insurance Policy” (“policy”). The policy included other structures coverage limits of $101,400, and coverage for personal property of up to $380,250. The PROPERTY PROTECTION-SECTION 1, OUR PROMISEOther Structures provision of the policy contained a standard business pursuits exclusion, which excluded loss to property “1. used in whole or in part for “business” purposes …; or 2. used to store “business” property.”

It was undisputed that Mr. Scafella’s then fiance (Ms. Lisa Smith), obtained two insurance quotes from Erie for the property, one including an incidental farming endorsement and one without the endorsement. Ultimately, Mr. Scafella chose the insurance quote that did not include the incidental farming endorsement, a less costly option. It is further undisputed that in completing his application for insurance with Erie for the property at issue, that Mr. Scafella averred that there were no farm animals or pets on the premises and that he did not conduct “any business or occupational pursuits at the premises.”

IT IS NOT NICE TO LIE TO YOUR INSURER

Despite indicating to the contrary in his application for insurance, Mr. Scafella does not deny that after taking possession of the property, he began operating a business out of the milk house. That business, Olivia’s, LLC (“Olivia’s”), was a retail store selling meat, cheese, and sandwiches. Prior to the fire, Mr. Scafella alleges that he had begun to renovate the large barn structure into a catering hall and restaurant (to be known as Sophie’s Serendipity, LLC), as part of his plan to develop the farm into a destination wedding venue.

There is no question that the February 2, 2019, fire caused significant structural damage to the large barn and resulted in the loss of numerous items of Mr. Scafella’s personal property, which were stored in the large barn structure. Although the milk house was adjacent and physically abutted the barn, Mr. Scafella claims that it was not affected by the fire and that the origin of the fire had nothing to do with the business operations therein.

THE CLAIMS

Shortly after the fire loss, Mr. Scafella filed an insurance claim with Erie for that loss. Property adjuster Stanley Geho was assigned by Erie to handle the claim. As part of his investigation, Mr. Geho visited the fire-damaged property and drew a diagram that depicted the milk house as an addition to the barn structure with an interior doorway connecting the two areas. Mr. Geho’s depiction of the premises was consistent with a statement made by Ms. Smith who, during a recorded statement taken by Mr. Geho, described Olivia’s as being “in a different part of the [barn] building,” but “in the barn itself.”

Erie denied the portion of the fire loss claim for the structure of the large barn, under the business pursuits exclusion of the Other Structures provision of the policy, as Mr. Scafella was operating a business (Olivia’s) out of the structure.

The circuit court found that the “milk house and the barn are one structure” and the court concluded that the evidence on the record did not support Mr. Scafella’s claims.

DISCUSSION

The Court of Appeals concluded that Mr. Scafella failed to meet his burden to establish waiver, the court of appeals found no error in the circuit court’s award of summary judgment to Erie and Mr. Geho.

Other Structures Provision

The Court of Appeals concluded that the large barn area where the fire occurred and the milk house (where Mr. Scafella operated Olivia’s) are the same structure. In fact, when providing a recorded statement to Erie after the fire loss, Ms. Smith identified the barn and the milk house as being part of one building.

Claw-Back Provision

Here, Mr. Scafella represented that the property within the large barn was his personal property to collect $67,640.80 under the personal property coverage in his Erie policy, possibly to avoid the $2,500.00 limit to “business” personal property under the SPECIAL LIMITS – Personal Property Coverage section of policy.

The Court of Appeals concluded that to permit Mr. Scafella to change his classification of the property at issue to recover under corresponding portions of the policy is impermissible and would permit him a windfall and coverage for which he did not pay. Finding no error the trial court’s decision was affirmed.

ZALMA OPINION

When a person is given a choice of available coverages and chooses the one less expensive he or she is gambling that future losses will fit within the lesser coverages. If, in addition the prospective insured misrepresents the facts at the site of loss to obtain the less expensive coverage the insured is committing fraud. After the loss Scafella attempted to change the policy he purchased into the policy he refused to pay for, with multiple legal machinations that the courts of West Virginia refused to honor. The moral: always tell the truth to your prospective insurer and never buy a policy that does not provide coverage for the risks the property faces.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com  https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Lawyer Seeks Voluntary Disbarment For Fraud

MURDAUGH’S FRAUD DESTROYS ANOTHER LAWYER

See the full video at https://rumble.com/v3vy0dl-lawyer-seeks-voluntary-disbarment-for-fraud.html and at https://youtu.be/-RACGiO6Mhk

Cory Howerton Fleming (State Bar No. 292955) asked for voluntary discipline by the Supreme Court  Georgia before the issuance of a formal complaint. In the petition, Fleming admitted that during his representation of a client in South Carolina, he violated Rules 1.4 (a) (3), 1.5 (c) (1), 1.7 (a), 1.8 (b), 1.15 (I) (c), 5.4 (c), and 8.4 (a) (4) of the Georgia Rules of Professional Conduct (“GRPC”) found in Bar Rule 4-102 (d). As discipline, Fleming requested that the Court accept the voluntary surrender of his license to practice law.

In The Matter Of Cory Howerton Fleming, No. S23Y0970, Supreme Court of Georgia (November 7, 2023) the Supreme Court was asked to accept attorney Fleming’s request that he be disbarred to avoid a trial since his guilt was obvious. The State Bar filed a response, stating that the Supreme Court should accept the petition.

UNETHICAL CONDUCT

With regard to the conduct at issue in this case, Fleming admitted that he was asked by R. Alexander Murdaugh, a lawyer then-licensed in South Carolina to represent a woman injured at his property. The woman-who was a long-time employee of Murdaugh’s died from her injuries, leaving two sons. Murdaugh had two insurance policies providing coverage for this type of incident, one providing $505,000 and an excess providing an additional $5,000,000.

At some point in 2018, Fleming filed suit against Murdaugh-presumably on behalf of the woman’s estate-and, in November 2018, the primary paid its policy limits to settle Fleming’s client’s claims against Murdaugh. Fleming did not inform his client about this fact. Instead Fleming allowed Chad Westendorf to replace the son as the Personal Representative for the estate. Fleming admitted that the petition to the probate court detailed payments of $166,000 to his law firm for legal fees and $11,500 for “prosecution expenses”; that those figures were misrepresentations; and that there were no legitimate prosecution expenses.

In March 2019 a mediation with the excess insurer ultimately led to an additional settlement in Fleming’s client’s case that involved a total payment by the excess of $3,800,000. Fleming admitted that the presentation to the court was false.

MURDAUGH TAKES THE SETTLEMENT

After both settlements, Murdaugh, a defendant in the lawsuit, requested that Fleming make the net settlement proceeds check payable to “Forge,” apparently explaining that he had created structured settlement or annuity accounts for the woman’s surviving sons with Michael E. Gunn of Forge Consulting, LLC (“Forge Consulting”).  Murdaugh apparently converted the funds to his own benefit.

Although it was clear that the money was removed from Flemming’s IOLTA account and that it was not used for the purposes it was supposed to be used for, Fleming did not specify whether he retained the $26,200 for his own benefit or passed some of the money to Murdaugh, as suggested by the Bar’s response to the petition. He did admit, however, that he agreed to hold monies in his firm’s IOLTA account from the settlement that would be accessible to Murdaugh.

Fleming claimed that from the time of the settlement until September 2021, he was under the impression that Murdaugh was handling the creation of structured settlement annuities with Forge Consulting for the benefit of the heirs of Fleming’s client (the plaintiff). He asserted that, on September 3, 2021, he learned from one of Murdaugh’s law partners that the firm had discovered that Murdaugh was stealing money from it by using a fictitious bank account in the name of “FORGE dba R. Murdaugh.” Fleming then stated that thereafter, he was informed that Forge Consulting did not have any accounts related to this matter and had never received the funds from either settlement.

By this conduct Fleming admitted that his failure to reasonably communicate with the Personal Representative of the woman’s estate. Fleming stated that he has admitted facts sufficient to allow the imposition of discipline and offers to surrender his license as a way of streamlining the disciplinary process.

The Supreme Court concluded that Fleming admitted conduct sufficient to establish violations of the Rules of Professional Conduct and that the underlying facts may well be more egregious than Fleming admits. Regardless, the Supreme Court found no need to delve into those details because the conduct to which Fleming admitted was sufficient to establish the violations that Fleming’s conduct was worse than he acknowledges because he admitted that he warranted the most serious sanction the Supreme Court can impose in a bar discipline matter: disbarment. As a result it ordered that the name of Cory Howerton Fleming be removed from the rolls of persons authorized to practice law in the State of Georgia.

ZALMA OPINION

Murdaugh was convicted of murder of his wife and son while trying to avoid prosecution for the theft of funds from his law firm and insurance fraud perpetrated on his professional liability insurers. He convinced Flemming to join in his crime and steal more than $4 million from the estate of his late housekeeper who, with the evidence of wrongdoing overwhelming sought to save the money and time to defend a disbarment proceeding, voluntarily asked the court to remove his license.  The sad destruction of a lawyer who trusted a prominent lawyer who turned out to be a murder, thief and insurance fraudster.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Zalma’s Insurance Fraud Letter – November 15, 2023

ZIFL – Volume 27 Issue 22

See the full video at https://rumble.com/v3vpx5k-zalmas-insurance-fraud-letter-november-15-2023.html and at  https://youtu.be/zKtQ7UIFqIc

The Resource for the Insurance Claims and Insurance Fraud Professionals

This, the 22nd issue of the 27th Year of ZIFL includes articles and reports relating to insurance fraud, including:

Insurance Fraud is a Violent Crime

Plea of Guilty of Murder for Insurance Cannot Be Withdrawn

In State of Ohio v. Darin Brusiter, No. 112410, 2023-Ohio-3794, Court of Appeals of Ohio, Eighth District, Cuyahoga (October 19, 2023) Darin Burster (“Brusiter”) appealed for the third time from the trial court’s denial of his post-sentence motion to withdraw his guilty plea.

FACTS

In April 2011, Brusiter was charged with two counts of aggravated murder, with murder-for-hire and firearm specifications, kidnapping, insurance fraud, and tampering with evidence in relation to the killing of Asia Harris (“Harris”). Harris’s husband Samuel Wilson was also charged in the same indictment.

Brusiter filed a motion to suppress the statements he made to the police as being in violation of Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). On May 2, 2012, the court denied Brusiter’s motion and that same day he pled guilty to one count each of aggravated murder, kidnapping, insurance fraud, and tampering with evidence. The court sentenced Brusiter to an agreed term of “33 years to life” in prison.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-11-15-2023.pdf

More McClenny Moseley & Associates Issues

This is ZIFL’s eighteenth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana.

February 14, 2023

Looking back in time, attorney William P. Gibbens, representing MMA advised USDC Judge Michael B. North, that McClenny, Moseley & Associates admits to instances where MMA told Carriers they represented the insured when they in fact represented Apex Roofing & Restoration.

The letter sent by MMA’s Counsel William P. Gibbens reported to Judge North that, in Exhibit D, there are 856 cases in which MMA admits to telling insurers that they represent the homeowner, when they actually represent Apex Roofing. They also admit to receiving funds from carriers after making these false statements.

November 7, 2023

Louisiana State Police Investigators Told WWL-TV They Are Starting Their Investigation with Five St. Tammany Parish Cases and Expanding From There.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-11-15-2023.pdf

How an Agent Defrauded the Insurer She Represented

In Destiney Kashia Xiong v. Security National Life Insurance Company, No. 2019AP2320, Court of Appeals of Wisconsin, District III (February 22, 2022) the Court of Appeal resolved the issues raised and allowed the case to go to trial with the insurer asserting a fraud defense. Destiney sued for breach of contract and various torts. Security attempted to plead a fraud defense based on circumstances it claims to have learned of after Wang’s death-including that Wang was not Destiney’s father and that he was unaware the policies were even issued.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-11-15-2023.pdf

Health Insurance Fraud Convictions

Addiction Treatment Center Supervisor Admits to Participating in a Scheme to Defraud Federal, State, and Private Health Care Insurers

Recovery Connections Centers of America Social Worker Admits to Leadership Role In Scheme To Bill Insurers For More Full Client Sessions Than Could Be Provided In A 24-Hour Day

Mi Ok Song Bruining, 63, of Warwick, RI, a clinical social worker on November 9, 2023, admitted to a federal judge that she helped devise and execute a scheme that shortchanged Rhode Island and Massachusetts substance abuse disorder patients out of counseling and treatment services while, at the same time, defrauding Medicare, Medicaid, and other health insurers out of more than $3.5 million dollars.

Read the full article and reports of dozens of convictions and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-11-15-2023.pdf

Insurance Fraudster Was a Very Bad Man

Insurance Fraudsters Convicted of Other Crimes

In my experience those who commit property or casualty insurance fraud are seldom arrested, even more rarely are they tried and convicted. Roberto Torner was an insurance criminal who avoided arrest for his insurance fraud activities but, because he was a serious criminal and dangerous, was arrested, tried and convicted of violent crimes. He filed a motion to vacate his conviction and sentence in United States of America v. Roberto Torner, CRIMINAL No. 3:17-343, United States District Court, M.D. Pennsylvania (November 1, 2023) and the USDC kept Torner in Prison.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-11-15-2023.pdf

Other Insurance Fraud Convictions

N.Y. No-Fault Fraudster Pleads Guilty, Agrees to Pay $40M in Restitution

Laurelle Monet Manley-Williams, 34, A Maryland claims adjuster pleaded guilty to one count of theft after she was caught manipulating auto insurance claims so she could steal from her employers.

Manley-Williams was hired as a claims adjuster for Agency Insurance Co. in July 2018. Only two months later, she started altering auto accident claims that were assigned to her by adding fraudulent passengers and issuing benefit checks to them, which she deposited into her own bank account.

To avoid detection, Manley-Williams later deleted the fictitious passengers from AIC’s records. She was able to steal $11,440.27 from the insurer before resigning in October 2018.

Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-11-15-2023.pdf

Barry Zalma

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 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Over the last 55 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

See the full issue at http://zalma.com/blog/wp-content/uploads/2023/11/ZIFL-11-15-2023.pdf

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No Written Agreement Ends Claim as an Additional Insured

No Written Agreement Ends Claim as an Additional Insured

See the full video at https://rumble.com/v3vgam0-no-written-agreement-ends-claim-as-an-additional-insured.html and at https://youtu.be/PcaNHvuoVao

The Chicago White Sox, Ltd., et al (the White Sox plaintiffs), and State Automobile Mutual Insurance Company (State Auto), the insurer for defendant We Clean Maintenance and Supplies, Inc. (We Clean) disputed whether the White Sox were additional insureds of We Clean’s policy with State Auto. After a patron was injured at a Chicago White Sox game, he filed a lawsuit against the White Sox plaintiffs alleging that State Auto had wrongfully denied coverage. The circuit court granted summary judgment in favor of State Auto, finding that the White Sox plaintiffs were not “additional insureds.”

In Chicago White Sox, Ltd.; Chisox Corporation; et al v. State Automobile Mutual Insurance Company et al, No. 1-23-0101, 2023 IL App (1st) 230101-U, Court of Appeals of Illinois, First District, Third Division (November 8, 2023)

BACKGROUND

Beginning in 2008 and continuing at least through 2012, the White Sox plaintiffs entered into a series of written agreements with We Clean pursuant to which We Clean agreed to provide cleaning services for all home games played by the Chicago White Sox during the applicable baseball season.

In 2011, while at U.S. Cellular Field, Raymond Myles was injured as he was walking down a ramp. Myles sued. The lawsuit was ultimately settled for an undisclosed amount.

In 2014, the White Sox plaintiffs tendered the defense of the underlying lawsuit to State Auto, the insurer for We Clean, as additional insureds under We Clean’s insurance policy.

We Clean was insured by State Auto under a commercial general liability insurance policy. While We Clean was the sole named insured on the policy, the policy contained an endorsement adding as an additional insured “[a]ny person or organization for whom you are performing operations when you and such person or organization have agreed in a written contract or written agreement that such person or organization be added as an additional insured on your policy.”

No “Indemnification and Insurance Agreement” for either 2010 or 2011 is contained in the record on appeal, and an affidavit from a White Sox representative indicates that the White Sox plaintiffs were unable to locate such a document.

The circuit court granted State Auto’s motion for summary judgment.

ANALYSIS

In this case, the sole issue is whether the White Sox plaintiffs qualified as additional insureds under We Clean’s insurance policy.

The language of the service contract merely requires We Clean to “comply with all insurance requirements set forth” by the White Sox plaintiffs and does not expressly require We Clean to name the White Sox plaintiffs as additional insureds under its insurance policy. Without a written agreement that the White Sox plaintiffs were to be named as additional insureds under We Clean’s policy, there is no basis for finding that they were, in fact, additional insureds and the circuit court properly granted summary judgment in favor of State Auto.

CONCLUSION

The circuit court properly granted summary judgment in favor of the defendant insurance company where the plaintiffs were not additional insureds under the insurance policy, as there was no written agreement between the plaintiffs and the insured requiring them to be named as such.  Since there was no written agreement between We Clean and the White Sox plaintiffs requiring the White Sox plaintiffs to be named as additional insureds under We Clean’s policy, the White Sox plaintiffs were not entitled to coverage by State Auto.

ZALMA OPINION

Reading the full policy is a requirement of everyone who is involved in acquiring or making claims against an insurance policy. The White Sox failed to create a contract with We Clean requiring it to make the White Sox an additional insured. Since it failed to include that requirement in the We Clean contract the White Sox gave up the right to be an additional insured of We Clean and the Sox and its insurer was obligated to defend it without help from We Clean’s insurer.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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Conditions in First Party Property Insurance # 2

What is a Condition?

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In AIG Centennial v. Fraley-Landers, 450 F.3d 761 (8th Cir. 2006) the Eighth Circuit found that Arkansas law does not require any showing of prejudice to the insurer when the insured fails to give the insurer notice of loss, and the giving of notice was made a condition precedent to coverage.

On the other hand, in Metrick/Kvaerner Fayetteville v. Federal Insurance, 403 F.3d 188 (4th Cir. 04/11/2005), the Fourth Circuit Court of Appeal found that summary judgment was inappropriate and that genuine issues of material fact were presented relating to a claim of late notice. It found that to establish the defense in North Carolina, the insurer needed to prove that:

  • whether there was a delay in notifying the insurer of a covered loss (the “Notice Element”);
  • if such notice was delayed, whether the insured acted in good faith with respect to the delay (the “Good Faith Element”); and
  • if the insured acted in good faith, whether the insurer was nevertheless materially prejudiced by the delay (the ‘Prejudice Element”).

In assessing the meaning of the terms “claim” and “notice,” the court concluded that the submission of a claim and the giving of a notice of loss or damage are separate and distinct occurrences and requirements.

If you wish to read the full article and other articles and webinars only available to subscribers, please subscribe to my Substack, Excellence in Claims Handling for $5 a month or $50 a year where you can read this and others at barryzalma.substack.com/publish/%%chec%%

 

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INSURANCE FRAUDSTER WAS A VERY BAD MAN

Insurance Fraudsters Convicted of Other Crimes

See the full video at https://rumble.com/v3uw6x8-insurance-fraudster-was-a-very-bad-man.html and at https://youtu.be/bcmn5yHADoM

INSURANCE CRIME DOES NOT PAY

In my experience those who commit property or casualty insurance fraud are seldom arrested, even more rarely are they tried and convicted. Roberto Torner was an insurance criminal who avoided arrest for his insurance fraud activities but, because he was a serious criminal and dangerous, was arrested, tried and convicted of violent crimes. He filed a motion to vacate his conviction and sentence in United States Of America v. Roberto Torner, CRIMINAL No. 3:17-343, United States District Court, M.D. Pennsylvania (November 1, 2023) and the USDC kept Torner in Prison.

BACKGROUND

In June 2015, the Luzerne County Drug Task Force commenced an investigation into Roberto Torner after receiving information about his heroin trafficking and firearms activity from a confidential informant (C.I.). Investigators subsequently used the C.I. to conduct a controlled purchase of approximately five grams of heroin from Torner, his girlfriend Liza Robles, and his associate David Alzugaray-Lugones. The controlled buy and conversations leading up to the event were captured in a series of recorded phone calls and body camera videos obtained by the C.I.

The ATF commenced an investigation into Torner, Robles, and Alzugaray-Lugones involving suspected arson, insurance fraud, and firearms offenses. On August 28, 2017, after obtaining information about Robles’s historical firearms purchases and activities, and after interviewing witnesses who reported recent instances of Torner possessing firearms, the ATF executed search warrants at Torner’s properties. During the execution of those warrants, the ATF recovered multiple firearms and ammunition.  The ATF interviewed additional witnesses, who relayed accounts of Torner possessing firearms.

Torner was granted pretrial release after being charged in a criminal complaint and subsequent indictment. Thereafter, the ATF obtained information from witnesses that Torner possessed C-4 explosives while on pretrial release. On January 5, 2018, law enforcement officials executed a search warrant at one of Torner’s properties, where they recovered approximately 1.5 pounds of stolen U.S. military C-4 plastic explosives.

Following a 12-day trial, Torner and his codefendants were convicted of all counts and Torner was sentenced to 270 months of imprisonment, five years of supervised release, and a $20,000 fine.

Torner challenged his conviction and sentence on direct appeal, only to have Third Circuit Court of Appeals affirm his conviction and sentence. Torner alleged that counsel provided ineffective assistance at trial for failing to seek suppression of recordings.

DISCUSSION

A review of the motion and the government’s brief, as well as the law and the claims make it clear that Torner’s claims are without merit.  Torner has not shown either the denial of a constitutional right nor that jurists of reason would disagree with this court’s resolution of his claims and  the court denied Torner’s motion to vacate.

ZALMA OPINION

I have spent the last 55 years working to help insurers and police authorities to defeat those who commit insurance fraud and disabuse authorities of the fact that insurance fraud is a non-violent crime and a crime without victims. Judges have been known to say from the bench that an insurance company can’t be a victim. In this case the ATF took on an insurance fraudster and convicted him of crimes of violence and possession of weapons and stolen explosives. His activities defrauding insurers and dealing drugs were ignored and his other criminal conduct stopped the fraud by putting Torner and his co-defendants in prison and stopped his work as an insurance fraud perpetrator. A small victory for the defrauded insurers.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

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Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

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How to Give a Gift to Insurer Employees

Most Insurers Have Rules Prohibiting their Employees to Get Gifts

When I was a young lawyer I tried to give gifts to the claims personnel who referred cases to me and my law firm. I tried to provide them with gifts that they would enjoy only to be told I was violating the company rules. I talked with management and was allowed to make a gift to the claims offices and would send them a book for their library. It was acceptable and accepted by the claims people with good grace and didn’t disappear as would a box of Mrs. Field’s cookies.

If you or your firm works with insurers and you wish to thank your clients consider sending a gift of a book or books for your clients that include:

Everything Needed by the Insurance Claims Professional from Barry Zalma

The library contains many books on the subject of insurance.

The Books include:

A Compact Book on How Judges Read, Understand, Interpret and Rule on Insurance Policy Issues

The book is available at Amazon.com as a hardcover here; a paperback here; and as a Kindle Book here.

The Compact Book on Ethics

How Ethical Doctrines from the Beginning of the Written Word to the Present Resulted in the Incorporation of the Covenant of Good Faith

The book is available as a Kindle book, a Paperback or a Hardcover

How to Acquire, Understand, and Make a Successful Claim on a Commercial Property Insurance Policy: Information Needed for Individuals and Insurance Pros to Deal With Commercial Property Insurance

The Book is now available as a Kindle book here, paperback here and as a hardcover here

The Equitable Remedy of Rescission of Insurance

Available as: A Kindle book A Paperback or a hardcover .

Insurance Fraudsters Deserve No Quarter

Book That Explains How to Defeat or Deter Insurance Fraud

Available as a paperback here.  Available as a hardcover here. Available as a Kindle Book here.

The Examination Under Oath to Resolve Insurance Claims

Insurance Fraud – Volume I & Volume II Second Edition

Available as a Kindle book; Available as a Hardcover;  Available as a Paperback 

Available as a Kindle bookAvailable as a HardcoverAvailable as a Paperback

The Homeowners Insurance Policy Handbook

How To Buy An Appropriate Homeowners Policy And Successfully Make A Claim To The Insurer

Available as a Kindle Book here.   Available as a paperback here.

It’s Time to Abolish The Tort of Bad Faith

A book examining the creation, history and effect of the Tort of Bad Faith.

Insurance Fraud Costs Everyone

Available as a Kindle Book and Available as a Paperback from Amazon.com.

California SIU Regulations 2020

Available as a Kindle book here.  Available as a paperback here.

California Fair Claims Settlement Practices Regulations 2022 Now Available

Minimum Standards for Adjusting Claims in CaliforniaEvery Claims Person in California Must Read, Understand, or be Trained About the California Fair Claims Settlement Practices Regulations by September 1 of Each Year

Available as a Kindle Book.  Available as a Paper Back

“Zalma’s Mold & Fungi Handbook”

Kindle Edition Paperback Edition

“Getting the Whole Truth: Interviewing Techniques for the Lawyer”

Learn techniques that can help you interact with others and effectively gather the facts you need.

Zalma on Insurance Claims –  Third Edition

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

Mold Claims

The Compact Book of Adjusting Property Insurance Claims – Third Edition

A Manual for the First Party Property Insurance Adjuster. Available as a Kindle book. Available as a paperback.

The Compact Book on Adjusting Liability Claims, Third Edition

A Handbook for the Liability Claims Adjuster

available as a Kindle book Available as a paperback.

The Little Book on Ethics for the American Lawyer

The practice of law demands more than knowledge of statutory and case law. It Available as a Kindle book here. Available as a paperback here.

Random Thoughts on Insurance

Available as a paperback. Available as a Kindle book.

Fictionalized True Insurance Crime Books

Insurance Fraud Costs Everyone

available as a Kindle Book and Available as a Paperback from Amazon.com.

Candy and Abel: Murder for Insurance Money

How a young lawyer and wise old investigator defeated an  Available as a Kindle Book. Available as a paperback.

Murder And Insurance Fraud Don’t Mix

Available as a Kindle book. Available as a paperback

Murder & Old Lace: Solving Murders Performed for Insurance Money

Available as a Kindle book. Available as a paperback.

Arson for Terrorism and Profit

How an Insurance Investigator and Insurance Lawyer Defeated a Plot to use a Fire to Fund Terrorism

Available as a Paperback and as a Kindle book

M.O.M. & The Taipei Fraud

How an Experienced Adjuster Defeated a $7 Million Fake Burglary Claim

Available as a paperback. Available as a Kindle book.

Arson-For-Profit Fire at the Cowboy Bar & Grill

Available as a paperback. Available as a Kindle book.

The Defeat of a Fake $10 Million Jewelry Robbery Insurance Claim

New Books from Full Court Press

The Insurance Law Deskbook.

Paperback, only $95.00 available at https://www.fastcase.com/store/fcp/insurance-law-deskbook-2/

California Insurance Law Deskbook

Available at https://www.fastcase.com/store/fcp/california-insurance-law-deskbook/ a paperback for only $95.00.

Zalma on Property and Casualty Insurance Insurance Law Deskbook

Learn the insurance basics that are essential to every civil practitioner. Available at Fastcase.com bookstore.

California Insurance Law Deskbook

Fastcase.com bookstore.

Insurance Bad Faith and Punitive Damages Deskbook

All available at fastcase.com bookstore.

From Thomson Reuters

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

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Contiguous Trigger is Law in West Virginia

Ambiguous Policy Wording Results in Adoption of Continuous Trigger of Coverage

See the full video at https://rumble.com/v3uozt6-contiguous-trigger-is-law-in-west-virginia.html  and at https://youtu.be/SeQskdjSAiU

The United States Court of Appeals for the Fourth Circuit certified a question to the Supreme Court of Appeals of West Virginia  asking: “[a]t what point in time does bodily injury occur to trigger insurance coverage for claims stemming from chemical exposure or other analogous harm that contributed to the development of a latent illness?”

In Westfield Insurance Company v. Sistersville Tank Works, Inc.; et al, No. 22-848, Supreme Court of Appeals of West Virginia (November 8, 2023) the Court answered the question.  The Supreme Court answered the question with the conclusion that a “continuous-trigger” theory applies to the policy, as the policy is ambiguous as to when coverage is triggered.

OPINION

The gateway to coverage under every standardized, commercial general liability (or “CGL”) policy issued in the United States since 1966 is proof that a bodily injury or property damage has “occurred.”

FACTUAL BACKGROUND

Sistersville Tank Works (“STW”) has, since late 1984, been a family-owned and -operated West Virginia corporation. STW manufactures, installs, and repairs various types of tanks at industrial sites throughout world, including at several chemical plants in West Virginia.

Beginning on the first day of 1985, STW was protected under a commercial general liability (“CGL”) policy it purchased from Westfield Insurance Company (“Westfield”), an Ohio corporation. Westfield thereafter renewed STW’s coverage under a series of CGL policies with one-year (or more) coverage periods. The CGL policy defines a “bodily injury” as a “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.”

At different points in 2014, 2015, and 2016, three men were diagnosed with various forms of cancer. In 2016 and 2017, the “claimants” (the men with cancer and/or their spouses) sued STW in three separate lawsuits in West Virginia state courts. The claimants alleged the cancers were, in some part, caused by STW’s tanks.

STW asked Westfield to provide a defense and indemnification to the three lawsuits under its previously purchased CGL policies. Westfield denied coverage under its CGL policies for the three suits and, in June 2018, filed a complaint against STW for declaratory relief  and after discovery, the parties filed competing motions for summary judgment.

In an order dated September 4, 2020, the district court granted a judgment in favor of STW and found Westfield owed STW a duty to defend and to indemnify under all of its policies issued from 1985 through 2010. The district court concluded that Westfield’s promise to cover a bodily injury that “occurs during the policy period” was ambiguous in light of the latent disease claims asserted against STW. The district court ruled that the language in Westfield’s policy did not clearly identify when coverage was “triggered” in instances where a claimant alleged repeated chemical exposures and the gradual development of a disease over successive policy periods.

The Supreme Court had never addressed the question raised before the district court. Nevertheless, the district court calculated that this Court would apply the continuous-trigger theory to clarify the ambiguous language in Westfield’s policy.

DISCUSSION

Occurrence-based CGL policies provide coverage if the event insured against takes place during the policy period, irrespective of when a claim is presented. The certified question raises a different, more complicated set of circumstances. Westfield contends that manifestation of a disease is the sole trigger of coverage under its occurrence-based CGL policies.

On the other hand, STW takes the position that the occurrence language incorporates a “continuous” trigger theory of coverage. STW’s argument encompasses the entirety of Westfield’s insuring agreement. STW points out that, by definition, an “occurrence” under Westfield’s policy includes “continuous or repeated exposure” to a “harmful condition []” that results in “bodily injury, sickness or disease.”

It is evident from the parties’ competing positions that the meaning of the policy’s insuring agreement is uncertain or doubtful in the context of latent or progressive diseases, as the parties have shown the occurrence language used is susceptible to at least two plausible constructions. Here, the occurrence and bodily injury provisions that Westfield chose to incorporate into its insuring agreement fail to precisely articulate a trigger of coverage. They are, the Supreme Court concluded, ambiguous.

History shows that the “occurrence” language incorporated into the CGL policy was designed with the goal of affording coverage for singular, repeated, or continuous exposures to hazardous substances if those exposures cause either a singular or a progressive bodily injury, sickness, or disease. The Supreme Court concluded, after review of the history of the drafting of the CGL, that the drafters of the occurrence language used by Westfield intended to incorporate a continuous trigger of coverage.

The Policy Language Supports A Continuous Trigger

The reasoning of the Supreme Court’s recognition of the continuous trigger of coverage has the effect of spreading the risk of loss widely to all of the occurrence-based insurance policies in effect during the entire process of injury or damage. As one court said, the continuous trigger theory is the most efficient doctrine for allocation of liability amongst insurers for toxic waste cases, because it encourages all insurers to monitor risks and charge appropriate premiums.

Therefore, an occurrence based CGL policy covers all injuries, sicknesses, or diseases that occur during coverage, not merely those that become manifest.

Under the continuous-trigger theory, when a claim is made alleging a progressive injury caused by chemical exposure or other analogous harm, every occurrence-based policy in effect from the initial exposure, through the latency and development period, and up to the manifestation of the bodily injury, sickness, or disease, is triggered and must cover the claim.

ZALMA OPINION

It is axiomatic that when a court finds an ambiguity in an insurance policy it must be interpreted in favor of coverage for the insured. West Virginia found the policy was ambiguous as to trigger and therefore, overruling a strenuous dissent, and applied the continuous trigger expanding the coverages available to STW for the claims of the plaintiffs that STW was responsible for the illnesses because under the continuous-trigger theory of coverage every moment from the first exposure to the harmful chemicals up to and including the date of diagnosis would be covered by Westfield’s policy.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;  Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library.

 

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