A Video Explaining the Need to Use Construction Experts When Dealing with a Construction Defect Claim or Suit

Construction Experts

See the full video at https://youtu.be/OcWFnAD0THA

In construction defect cases, the standard of care and its breach must generally be shown through expert testimony. Lay testimony is sometimes sufficient where the defects are of common knowledge.

In construction cases and other cases involving licensed professionals, standard of care evidence in negligence matters generally must be provided by expert testimony, because the standard of care involved in construction is not an area that comes within the realm of common knowledge. Expert testimony regarding a standard of care is generally not required to establish a breach of contract rather than conduct beneath the standard of care. There are many experts involved, not only in the construction of a building, but also the investigation of any defects that surface after a building is complete. A person faced with liability for a defective structure or a potentially dangerous structure should consider involving various experts.

The Construction Consultant

There are few schools that teach construction except those that assist individuals to become licensed general contractors. Consequently, a construction consultant develops his or her expertise by a combination of education, training, and experience as a general contractor in the state where the property is located. He or she also usually has experience in evaluating the work of people in the construction trades. The construction consultant can also establish his or her credentials by earning a license to construct buildings (and in fact doing so), and by being well-read in the field of construction, publishing peer-reviewed articles and books in his or her fields of expertise, and testifying in court on the subject. A construction expert is a person with practical experience, rather than one whose knowledge comes from schooling alone. Such experts are considered to be the most effective in providing advice, and in convincing a jury of the correctness of their advice and stated conclusions.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

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Theft of Salary Specifically Excluded

Not Every Employee Theft is Covered by a Fidelity Bond

An Illinois appellate court was asked whether an employer can recover for an employee’s wage theft under the terms of the employer’s business insurance policy. Plaintiffs (collectively 3BC Properties, LLC, or “3BC”) own and operate four Dunkin’ Donuts franchise locations in Du Page County. 3BC purchased a business owners’ insurance policy for each restaurant through State Farm Fire and Casualty Company (State Farm). All of the policies had identical language. In 3BC Properties, LLC; 3BC Properties-Mitchell, LLC; 3BC Properties-Daniel, LLC; and 3BC Properties -Taylor, LLC  v. State Farm Fire And Casualty Company, 2020 IL App (2d) 190501, No. 2-19-0501, Appellate Court Of Illinois Second District (July 27, 2020) the appellate court resolved the issue raised by the employer.

BACKGROUND

In 2016 and 2017, 3BC employed one Brenda Vazquez to manage each of the four restaurants. As part of her duties, Vasquez was responsible for supervising the employees and reviewing their time records for payment. 3BC also employed four of Vasquez’s relatives in various roles at 3BC’s restaurants. In April 2017, 3BC’s owners discovered that Vazquez had falsified time records for herself and her four relatives; doing so resulted in over-payments to Vazquez and her kin of more than $66,000. The owners reported the fraud to the authorities and tendered claims for their losses to State Farm under the business insurance policy.

THE POLICY

The State Farm policy contained a rider and an exclusion, which insured 3BC against some losses resulting from employee dishonesty. In insurance parlance, this type of rider is known as a “fidelity bond” or a “salary-and-benefits exclusion.” The provision at issue here reads as follows:

“Employee Dishonesty  *** “b. Obtain financial benefit (other than salaries, commissions, fees, bonuses, promotions, awards, profit sharing, pensions or other ’employee’ benefits earned in the normal course of employment) for: (1) Any ’employee’; or (2) Any other person or organization intended by that ’employee’ to receive that benefit.” (Emphasis added.)

CLAIM DECISION

State Farm denied coverage citing the italicized language. 3BC sued for a declaratory judgment to determine coverage. In the trial court, 3BC asserted that the salary exclusion was meant to cover “bona fide salary disputes.” As there was no dispute that Vazquez committed fraud by falsifying time records, 3BC asserted that “[t]he money was not earned in the normal course of employment” and therefore that the loss was covered under the endorsement. State Farm’s countered that the endorsement covers certain types of fraud such as embezzlement or theft but not wage fraud. Accordingly, because the unearned salary payments were still paid by 3BC as salary, coverage for the loss was barred by the exclusion.

The trial court issued a six-page memorandum decision finding in State Farm’s favor.

ANALYSIS

In this case the first clause of the policy states that the insurer will cover any loss intentionally caused by an employee to obtain a financial benefit “other than salaries, commissions, fees, bonuses, promotions, awards, profit sharing, pensions or other ’employee’ benefits earned in the normal course of employment.” (Emphasis added.)

Contrary to 3BC’s interpretation, the phrase “normal course of employment” does not modify the word “salaries.” Rather, it modifies the phrase “other ’employee’ benefits” and describes a characteristic of an additional, general type of payment that is excluded from coverage.

The first eight nouns are ‘salaries,’ ‘commissions,’ ‘fees,’ ‘bonuses,’ ‘promotions,’ ‘awards,’ ‘profit sharing,’ ‘pensions.’ The ninth noun, the phrase, ‘other employee benefits earned in the normal course of employment’ describes, in unspecified form, all the other forms of compensation that are generally earned in the normal course of employment. This general description is necessary because, of course, the list cannot go on forever. In other words, the parenthetical is merely a list where the last item is a catch-all—the equivalent of writing “etc.”

The language in this fidelity bond has been an industry-wide standard since the mid-1970’s and there are numerous cases interpreting the same provision under similar circumstances. As the trial court noted, almost all of these decisions hold that unearned salaries and unearned commissions are nonetheless salaries and commissions. That is, they do not lose their essential character as employer-to-employee financial transactions merely because they were obtained through deceit.

Context within the entire policy led the appellate court to the conclusion that “salary” payments are the type of typical employer-to-employee transactions that are excluded from coverage under the fidelity bond. Ambiguity is not established merely because courts reach inconsistent results. The contrary interpretation must be reasonable the appellate court concluded that it is not.

Had Ms. Vazquez used the contents of the stockroom as collateral for a loan, or helped herself to all the donuts in the restaurant, or sold one of the cappuccino machines on eBay, then 3BC’s loss would be covered. As accurate as was the example, given the fact that there is an exclusion, the policy clearly was not designed to cover all conceivable employee criminal conduct.

Wage theft is simply one form of indirect employee theft that is excluded from coverage.

ZALMA OPINION

The Illinois appellate court read the full policy (RTFP) and concluded that the exclusion was clear and unambiguous and excluded the excess salary payments that Ms. Vazquez paid to herself and her relatives. No question what she did was a theft but it was a theft that was clearly and unambiguously excluded. RTFP is necessary in every possible coverage interpretation.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

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A Video Explaining the Evidence Needed to Prove Fraud

What is Evidence?

See the full video at https://youtu.be/snar91UYIxY

Direct Evidence

Direct evidence is proof that tends to show existence of a fact in question without the intervention of the proof of any fact. It includes testimony that tends to prove or disprove a fact in issue directly, such as eye-witness testimony or a confession.

Sometimes, direct evidence may not exist because records have been destroyed in a fire, destroyed by water, stolen, discarded, or eaten by vermin.

If direct evidence does not exist for any reason, circumstantial evidence must be produced to prove the fraud.

As important as direct evidence is to the proof of fraud or attempted fraud, but, as courts have noted in the past, it can be difficult to obtain direct evidence of something so internal as intent to commit fraud. [United States v. Washington, 715 F.3d 975, 980 (6th Cir. 2013)]. Jurors are therefore free to consider circumstantial evidence and draw reasonable inferences from it. In United States v. Hawkins (6th Cir., 2019) circumstantial evidence was sufficient to allow a jury to convict.

Circumstantial Evidence

Circumstantial evidence is all evidence of an indirect nature when the existence of the principal fact is deduced from evidentiary facts by a process of probability reasoning. The investigator takes circumstantial evidence and uses deductive reasoning to reach a conclusion. Circumstantial evidence and the deductions of a professional investigator are often more reliable than direct evidence like eye-witness testimony. Circumstantial evidence is sufficient to establish proof of arson and other criminal activities. [Hoosier Insurance Company, Inc. v. Mangino, 419 N.E. 2d 978, 986 (Ind. App. 1981)].

 


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

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Eighth Circuit Properly Slaps Down Insurer for Charging Premium Not Owed

Audit Including Seamen Excluded from Workers’ Compensation Policy not Appropriate

LM Insurance Corporation sued Dubuque Barge and Fleeting Service Company, d/b/a Newt Marine Service (“Newt Marine”), for breach of contract alleging Newt Marine wrongfully refused to pay premiums owed under three separate workers’ compensation insurance policies. Both parties moved for summary judgment. The district court granted Newt Marine’s motion and denied LM Insurance’s motion, concluding the premiums LM Insurance sought from Newt Marine were not merited by the terms of the polices. In LM Insurance Corporation v. Dubuque Barge and Fleeting Service Company, doing business as Newt Marine Service, No. 19-1647, the United States Court of Appeals For the Eighth Circuit (July 20, 2020) was called upon to resolve the dispute.

BACKGROUND

Newt Marine is an Iowa marine construction company that conducts most of its work on a floating dredge barge and plant on the Mississippi River. Through Iowa’s assigned risk plan, LM Insurance issued Newt Marine three successive one-year workers’ compensation insurance policies starting in May 2013. Each policy included the same premium terms. Newt Marine pays an up-front, estimated premium. Then, following an audit, LM Insurance calculates the final premium. If the final premium exceeds the initial estimated premium, Newt Marine must pay the difference.

Each policy also included the same coverage exclusion. Coverage did not extend to bodily injuries to “a master or member of the crew of any vessel,” otherwise known as “seamen” under the Jones Act, 46 U.S.C. § 30104. This exclusion exists because “seamen” have a private right of action against their employers for personal injuries and, according to the Iowa Supreme Court, that private right of action deprives Iowa’s workers’ compensation commission of subject matter jurisdiction to award benefits to seamen employees. [Harvey’s Casino v. Isenhour, 724 N.W.2d 705, 709 (Iowa 2006).]

Even though the workers’ compensation policies issued by LM Insurance excluded Newt Marine’s seamen employees from coverage, LM Insurance charged Newt Marine a premium for their coverage by including all seamen employees in its final premium calculations. Since they are excluded by the terms of the policy, seamen are not engaged in “work covered by [the] policy” and Newt Marine refused to pay the additional premium based on the earnings of seamen.

ANALYSIS

LM Insurance sued Newt Marine claiming it was in breach of contract for refusing to pay premiums allegedly owed. Since the construction of an insurance contract and the interpretation of its language are matters of law for the court.

Under Iowa law, the intent of the parties, as determined by the language of the policy, controls the court’s interpretation of an insurance policy. The premiums LM Insurance seeks in this lawsuit are based entirely on remuneration paid or payable to Newt Marine’s seamen employees during the three consecutive policy terms.

Remuneration for those employees is not encompassed by the policy. When read together, it is clear that language encompasses remuneration for employees engaged in covered work or remuneration for nonemployees, like independent contractors, engaged in covered work.

The Eighth Circuit concluded that remuneration for Newt Marine’s seamen employees is not encompassed by the policy because Newt Marine’s seamen, although employees, do not engage in covered work. Despite LM Insurance’s arguments to the contrary even though Newt Marine’s employee seamen are, of course, employees, they are not employees of the workers’ compensation policy. The charged premiums were not merited by the language of the policies.

The possibility that Newt Marine may, during the policy period, reclassify a seaman employee as an employee engaged in covered work does not suddenly implicate the policy and make all of the seamen covered employees. In the event of reclassification, the reclassified employee’s remuneration would be encompassed by the part of the policy dealing with employees and LM Insurance’s audit at the conclusion of each policy period could appropriately account for any such reclassifications.

Because the premiums LM Insurance charged to Newt Marine were not merited, Newt Marine did not breach its obligations under the workers’ compensation insurance policies by refusing to pay.

ZALMA OPINION

Since workers’ compensation insurance is based upon the remuneration of covered employees LM Insurance over-charged Newt Marine by assuming, since the seamen could be reclassified as employees, that they were all reclassified. They were not and the premium charged at audit was improper and violated the terms and conditions of the policy issued by LM.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Subscribe to my NEW YouTube Channel

Barry Zalma on YouTube

Zalma on Insurance 

Those 54 of you who subscribed here to Zalma on Insurance as a YouTube Channel where I posted many videos has made it impossible for me post more.

I have created this new Channel so please go from this link to the new link and subscribe.

Presently there are 29 videos on insurance, insurance claims and insurance law including:

Video thumbnail: A Video Explaining the Evidence Needed to Prove Fraud
17:17

A Video Explaining the Evidence Needed to Prove Fraud

Direct Evidence Direct evidence is proof that tends to show existence of a fact in question without the intervention of the proof of any fact. It includes testimony that tends to prove or disprove a fact in issue directly, such as eye-witness testimony or a confession. Sometimes, direct evidence may not exist because records have been destroyed in a fire, destroyed by water, stolen, discarded, or eaten by vermin. If direct evidence does not exist for any reason, circumstantial evidence
Video thumbnail: A Video Explaining How a Claims Person Should Select Counsel
13:29

A Video Explaining How a Claims Person Should Select Counsel

Retaining an Attorney In instances where insurance claims may entail litigation, insurers must move quickly to engage counsel. When an attorney is retained to defend a person insured, the fact should be documented in writing by the attorney, the adjuster, and the insured who is to be defended. Before an insurer retains an attorney to represent an insured to defend an insured who has been sued for a tort the claims person should be certain the lawyer is competent to defend the insured. This can
Video thumbnail: A Video Explaining the Use of an Independent Medical Examinations
18:16

A Video Explaining the Use of an Independent Medical Examinations

When a claimant claims an injury that does not agree with the facts of the incident claimed to have caused the injury, the adjuster will often seek the assistance of an Independent Medical Examiner (IME) to verify the extent of the claimed injury. The IME is usually a forensic physician or a chiropractor who has agreed to evaluate an injured person for a fee and is not involved in the treatment of the injured person. In Pennsylvania, an insurer providing medical benefits to its insureds followi
Video thumbnail: Defenses to the Tort of Bad Faith
17:33

Defenses to the Tort of Bad Faith

The Genuine Dispute Doctrine Insurers in states where the tort of bad faith exists deny fraudulent insurance claims with fear and trembling. The specter of punitive damages has worked to make multi-millionaires of many insurance criminals who convince insurers to settle rather than take a chance on trial. Insurers pay claims they believe they do not owe because they are fearful—regardless of the merits of their position—of being assessed punitive damages in a bad faith action. The fear is not
Video thumbnail: A Video Explaining the Concurrent Cause Doctrine
16:18

A Video Explaining the Concurrent Cause Doctrine

Concurrent Cause Doctrine The concurrent cause doctrine holds that if more than one cause concurred to cause a loss, one of which is excluded and the other not, the entire loss is covered. It was finalized by the California Supreme Court in State Farm Mutual Auto Ins. Co. v. Partridge, 10 Cal. 3d 94, 109 Cal. Rptr. 811 (1973). In this case, the court found that coverage existed for defense and indemnity under a homeowners policy, even though the accident occurred while the insured was operating
Video thumbnail: A Video Explaining Why Bodily Injury Caused by Mold or Fungi is Uncertain
15:21

A Video Explaining Why Bodily Injury Caused by Mold or Fungi is Uncertain

The Guid ance for Clinicians on the Recognition and Management of Health Effects Related to Mold Exposure and Moisture Indoors (Guidance) is one of the most recent studies of the effects of mold in the environment and its effect on human health when combined with other causes. The authors found that there is strong evidence that significant disease can result from dampness and fungi in the home or workplace Recognizing that dust mites in damp environments explain some of the relationship betwee
Video thumbnail: A Video Explaining When the Notice-Prejudice Rule Does Not Apply
12:12

A Video Explaining When the Notice-Prejudice Rule Does Not Apply

The Notice-Prejudice Rule Doesn’t Always Apply Claims made and claims made and reported policies contain a date certain notice requirement. In Colorado, the Colorado Supreme Court found:­­ “The notice-prejudice rule does not apply to a date-certain notice requirement in a claims-made insurance policy. In a claims-made policy, the date-certain notice requirement defines the scope of coverage. Thus, to excuse late notice in violation of such a requirement would rewrite a fundamental term of the
Video thumbnail: A Video Explaining the Duties of the Public Adjuster
19:05

A Video Explaining the Duties of the Public Adjuster

Public Insurance Adjusters Most policyholders do not have the in-house capability to investigate, evaluate, and negotiate significant property insurance losses. While some losses, such as a small fire loss requiring only minor repairs, may be dealt with easily, others, which involve more complex damages and different potential causes of loss, are much harder to assess. Resolving them may require expertise in understanding the scope of coverage provided by the applicable property insurance poli
Video thumbnail: Trigger of Coverage/Property Damage
10:47

Trigger of Coverage/Property Damage

The term “trigger of coverage” means “what event must occur for potential coverage to commence under the terms of the insurance policy” and “what must take place within the policy’s effective dates for the potential of coverage to be ‘triggered.'” [In Re Feature Realty Litig., 468 F. Supp.2d 1287, 1295, n.2 (E.D. Wash. 2006)] After the California Supreme Court adopted a continuous trigger in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 685, 42 Cal.Rptr.2d 324, 913 P.2d 87
Video thumbnail: Claims Personnel
17:37

Claims Personnel

The Claims Adjuster The claims adjuster is the contact between the insured and the insurer. He or she can be an employee of the insurer or an independent contractor retained by the insurer to investigate and adjust insurance claims on its behalf.  The adjuster is person charged with investigating a claim to fulfill the promises made by the policy of insurance and establish whether the company is liable to the insured or a claimant and to what extent. The investigation can include interviews of
Video thumbnail: ZALMA’S INSURANCE FRAUD LETTER - JULY 15, 2020
18:32

ZALMA’S INSURANCE FRAUD LETTER – JULY 15, 2020

Insurance Fraud Is Often A Violent Crime Murder as a Side-Effect To An Insurance Fraud There is a myth that abounds in the criminal and civil courts of the United States that insurance fraud is a non-violent crime. Abdullah Alkhalidi (“Alkhalidi”) was convicted of murder, robbery, and theft. The Indiana state court denied relief, holding Alkhalidi’s innocence claim strongly indicated he would not have accepted the plea deal. The state court also held that Indiana requires a defendant to adm
Video thumbnail: A Video Explaining How the Law of Unintended Consequences Destroyed the the Tort of Bad Faith
18:11

A Video Explaining How the Law of Unintended Consequences Destroyed the the Tort of Bad Faith

The Law of Unintended Consequences and the Tort of Bad Faith The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence. Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defe
Video thumbnail: A Video Explaining the Claims Made CGL
15:25

A Video Explaining the Claims Made CGL

The insurance industry spent 10 years trying to restrict their liability for long tail losses. They tried wording that would prohibit stacking, as well as wording that would only allow coverage for losses first discovered during the policy period. “Claims Made” wording, which would only allow coverage to be triggered upon the making of a claim, and limited “occurrence” coverages were also attempted. Ultimately, the decision was made by the ISO and its supporters to use a Claims Made approach, p
Video thumbnail: California Fair Claims Settlement Practices Regulations

California Fair Claims Settlement Practices Regulations

The Reasons Behind the California Fair Claims Settlement Practices Regulations In 1993 the state of California determined that the insurance industry needed to be regulated to stop insurers from treating the people insured badly and without good faith. It created a set of Regulations called the “California Fair Claims Settlement Practices Regulations” (the “Regulations) to enforce the mandate created by the California Fair Claims Settlement Practices statute, California Insurance Code Section
Video thumbnail: Ethics and The Insurance Product
16:53

Ethics and The Insurance Product

The basic insurance product is a promise that the insurer may never be called upon to fulfill. The value of the promise is based on the trust of the policyholder in the insurer being able and willing to fulfill the promises made by the insurance policy. Gallup polls since 1977 have consistently ranked insurance sales persons among the lowest in terms of perceived honesty and ethical standards. In the November 1999 poll, insurance sales persons ranked third from last, just above telemarketers
Video thumbnail: Considerations for Early Settlement of Construction Defect Claims
17:29

Considerations for Early Settlement of Construction Defect Claims

It is an axiom followed by almost every attorney that the sooner a suit is settled the less it will cost the defendants. Invariably as suits drag on, as discovery is received and analyzed, the positions of the parties become less amenable to compromise. If defendants and their counsel believe that liability against the defendant is reasonably clear, they should work to bring the parties together to attempt an early settlement. Some of the reasons for the early settlement are discussed below. Ad
Video thumbnail: A Video Explaining How to Negotiate the Settlement of a Liability Claim
19:28

A Video Explaining How to Negotiate the Settlement of a Liability Claim

After the adjuster determines that coverage exists, that the insured is probably liable for causing bodily injury or property damage to a third person, the adjuster must negotiate a settlement with the claimant or his or her attorney. Just like the plaintiff’s attorney in a personal injury case, the insurance adjuster will investigate the claim – the facts of the accident and the plaintiff’s damages. A very skillful and well-prepared insurance adjuster will often know more about the accident a
Video thumbnail: Heads I Win, Tails You Lose - True Crime Stories of Insurance Fraud
14:55

Heads I Win, Tails You Lose – True Crime Stories of Insurance Fraud

This video includes two true crime stories from my book “Heads I Win, Tails You Lose. The title, “Heads I Win, Tails You Lose” is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser. If the fraud succeeds the insurer must charge more premium to cover the expense of defending the fraud and payment of funds to the fraud perpetrator. If the fraud fails the insurer m
Video thumbnail: How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives
16:11

How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives

ETHICS FOR THE INSURANCE PROFESSIONAL Insurance is, by definition, a business of the utmost good faith. This means that both parties to the contract of insurance must act fairly and in good faith to each other and do nothing that will deprive the other of the benefits the contract of insurance promised. Without the covenant of good faith and fair dealing and ethical people who work in the insurance industry applying and fulfilling the covenant, insurance is impossible. One cannot act fairly a
Video thumbnail: False Swearing About Material Facts Voids an Insurance Policy and Defeats a Fraudulent Claim
14:28

False Swearing About Material Facts Voids an Insurance Policy and Defeats a Fraudulent Claim

FALSE SWEARING 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. The reason for the false swearing
Video thumbnail: Getting the Whole Truth, Interviewing Techniques for the Lawyer
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Getting the Whole Truth, Interviewing Techniques for the Lawyer

The interview is an essential form of fact gathering for every type of human interaction. Interviews happen everywhere; they are performed by almost everyone. Interviewing is also an art, and the most effective interviews are conducted by those who are knowledgeable and skilled in this art. Everyone has been interviewed. And everyone has, at some point in life, interviewed another person. Not everyone conducting an interview, however, has accomplished the desired outcome. One type of informal
Video thumbnail: What Can Insurance People Do to Change the Poor Insurance Fraud Conviction Statistics?
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What Can Insurance People Do to Change the Poor Insurance Fraud Conviction Statistics?

he Obligation of an Insurance Professional to Defeat Insurance Fraud It is the obligation of all who work 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 to change the system so that: all the money goes to all kinds of insurance fraud at the discretion of the Commissioner of Insurance; prosecutors must be assigned to
Video thumbnail: A Video Explaining Why Arson is a Named Peril
10:38

A Video Explaining Why Arson is a Named Peril

Because arson is a fire, it is not an excluded peril in any first party property policy of insurance. An arson is never a defense to an insurance claim alone. Only when arson is caused by the named insured, or any insured is involved in causing the fire to occur for the purpose of defrauding an insurer. In Eddie P. Bates v. Hartford Insurance Company of the Midwest, No. 09-12840 (E.D.Mich. 03/03/2011) the insurer attempted to deny coverage by claiming that the fire was a “vandalism.” Since the h
Video thumbnail: A Video Explaining the Hazard Created Mutability of Memory for the Lawyer or Investigator
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A Video Explaining the Hazard Created Mutability of Memory for the Lawyer or Investigator

THE MUTABILITY OF MEMORY It is important that every investigator or lawyer preparing a case for trial must understand how memory influences the information obtained. Very few people have a perfect eidetic (photographic) memory. Memory is a fluid and often unreliable human function. During my time as a trainee investigator at the Army Intelligence School at Fort Holabird, Maryland, a classroom lecture on interviewing was interrupted by a man dressed in a clown mask, a tuxedo, swim fins, a co
Video thumbnail: Investigation of Mold Claims of Bodily Injury or Property Damage
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Investigation of Mold Claims of Bodily Injury or Property Damage

Because multiple exclusions in a CGL policy or other liability policy may involve an adjuster, an insured or the attorney for either, the adjuster starting an investigation should protect the insurer from potential misunderstanding or inadvertent waiver of the insurer’s rights. In that regard the adjuster should make immediate, but no later than 24 hours after notice is received, contact with the insured. The insured should be asked at the first meeting to sign a non-waiver agreement that is a c
Video thumbnail: The Law of Unintended Consequences and the Tort of Bad Faith
13:40

The Law of Unintended Consequences and the Tort of Bad Faith

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissib
Video thumbnail: Subrogation Waiver
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Subrogation Waiver

The Waiver of Subrogation Subrogation is an equitable remedy where a person who pays the debt of another is entitled to assume the rights of the person whose debt he or she paid. In insurance, when an insurer pays a claim, it assumes all of the rights of the person insured, to sue and recover the amounts paid from any third party who was responsible for the loss. Equity allows creative remedies for wrongs that do not fit within the confines of traditional tort or contract remedies (i.e., wi
Video thumbnail: Sick Building Syndrome and Construction Defects
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Sick Building Syndrome and Construction Defects

Sick Building Syndrome Sick building syndrome (SBS) covers a whole range of health problems that are related to toxin exposure in a building. There are serious questions raised by physicians and mold experts about the existence of a true relationship between the mold and bacterial infections that have been reported to be the cause of SBS. SBS is used to describe situations in which building occupants experience acute health and discomfort effects that appear to be linked to time spent in a buil
Video thumbnail: Adjusting Property Claims
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Adjusting Property Claims

A site for the insurance claims professional and anyone who wants to know something about insurance, insurance claims, insurance coverage, and insurance law. https://zalma.com/blog
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A Video Explaining How a Claims Person Should Select Counsel

Retaining an Attorney

See the full video at https://youtu.be/gHo76rNgvFE

In instances where insurance claims may entail litigation, insurers must move quickly to engage counsel. When an attorney is retained to defend a person insured, the fact should be documented in writing by the attorney, the adjuster, and the insured who is to be defended.

Before an insurer retains an attorney to represent an insured to defend an insured who has been sued for a tort the claims person should be certain the lawyer is competent to defend the insured. This can be accomplished by attending a trial conducted by the lawyer where the claims person can evaluate the lawyer’s competence at trial. If that option is not available the claims person should seek recommendations from other insurance claims professionals who have retained the lawyer in the past or the insurance company’s list of approved defense lawyers who have been evaluated by the insurer’s management.

If the attorney is being retained for the first time by the insurer, the insurer should obtain an engagement letter from the attorney setting forth the terms and conditions of the retention and signed by the attorney, the claims person, and the insured. If the attorney or law firm has an ongoing relationship with the insurer, only the person being defended need sign an engagement letter.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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In Mississippi Insureds Have a Mandatory Duty to Read the Policy

Failure to Read a Policy Defeats Malpractice Case Against Insurance Agent

Ladner Investments Inc. (Ladner) and its sister company are in the transportation and logging business. In 2010, Michael Conway Inc. (MCI) sold Ladner an inland marine insurance policy from Shelter Mutual Insurance Company (Shelter Insurance) to cover equipment used in Ladner’s business.

In Ladner Investments Inc. v. Michael Conway Inc., NO. 2019-CA-01111-COA, Court Of Appeals Of The State Of Mississippi (July 21, 2020) the Court of Appeals was called upon to deal with the suit from Ladner against MCI (among other defendants) in tort for damages after the fire loss of an uninsured Caterpillar skidder.

Ladner alleged that MCI negligently represented that it would obtain insurance on the skidder and negligently failed to process or procure that coverage. The circuit court granted summary judgment in MCI’s favor and dismissed Ladner’s lawsuit. The circuit court found that Ladner’s claims were barred by Mississippi’s “duty-to-read” doctrine.

STATEMENT OF FACTS

In 2010, MCI sold an inland marine insurance policy from Shelter Insurance to Ladner to cover equipment used in Ladner’s business. Ladner routinely and frequently purchased and sold equipment in the ordinary course of its business. Likewise, Ladner would often would add and remove equipment to and from coverage under its insurance policy. The process of adding equipment to coverage under the policy was initiated by Ladner, or the equipment seller, or the financing company involved in the transaction. MCI would be contacted by a person from one of these entities via telephone, email, text message, or fax with instructions to add a specific piece of equipment on Ladner’s insurance policy.

If MCI received a request to add a piece of equipment to Ladner’s insurance policy from a party other than Ladner, such as the equipment seller, or the financing company, MCI would contact Ladner to gather information needed to procure insurance on the new piece of equipment before submitting the insurance change to Shelter Insurance. For each piece of equipment added or deleted from coverage, Shelter Insurance would issue a new declarations statement and would mail the new declarations statement to Ladner. MCI would send the proof of insurance to the insured, the sales representative, and/or the financing company.

On July 17, 2015, Ladner took possession of a Caterpillar skidder from Puckett Machinery, and on July 30, 2015, Micah Ladner, as president of Ladner, signed an installment-sales contract for the skidder. The skidder’s $203,300.00 purchase price was financed by Caterpillar Financial Services Corporation (Caterpillar Financial). Puckett Machinery forwarded that sales contract, which included an “insurance selection form,” to Caterpillar Financial for financing. Caterpillar Financial testified that Caterpillar Financial faxed the insurance selection form for the new skidder to MCI on July 31, 2015, in order to ensure that Caterpillar Financial was listed as loss payee on the new skidder.

The skidder was not added to the Shelter policy because MCI claimed it never received the fax seeking insurance. The record contains no evidence that there was any communication between Ladner and MCI relating to insuring the skidder.

The Ladners confirmed that no one had contacted MCI prior to the skidder burning to check whether MCI had received the insurance selection form sent via fax from Caterpillar Financial or to ask about evidence of insurance for the new skidder. Before the fire MCI sent Ladner declarations statements that contained itemized lists of equipment insured under Ladner’s Shelter Insurance policy. Four skidders were listed. The Cat skidder was not listed.

The record reflected that if MCI received an insurance request from someone other than Ladner, as alleged, MCI would contact Ladner to gather additional information needed to procure insurance on the new piece of equipment before submitting the insurance change to Shelter Insurance

The skidder burned on November 5, 2015, nearly four months after Ladner took possession of it. Shelter denied Ladner’s claim because the skidder was not listed on its insurance policy.

Ladner sued MCI claiming it was liable to it for negligently failing to procure the insurance coverage on the skidder.

The circuit court found that Ladner’s claims against MCI were precluded by the duty-to-read doctrine, which, as the circuit court explained, is “where knowledge of an insurance property is imputed to an insured regardless of whether the insured read the policy.” Because it was “undeniable” that before the loss occurred Shelter Insurance sent two declarations statements to Ladner that did not include the subject skidder, Ladner was imputed with that knowledge.

DISCUSSION

Ladner asserted that by accepting requests for insurance via fax through the parties’ five-year course of dealing, MCI gratuitously assumed the duty to process the insurance request to add the subject skidder to the Shelter policy.

Even if a plaintiff can show an assumed duty based on detrimental reliance, the assumed duty is limited to the scope of the gratuitous undertaking.  Any liability incurred by a defendant must be limited to the duty it undertook. According to Ladner, this assumed duty arose from Ladner’s reliance on the parties’ course of dealing with respect to other insurance requests on other equipment in the past.

Although Caterpillar Financial, not Ladner, initiated the insurance request in this case, the court of appeals found no evidence in the record of any communication between MCI and Ladner about insuring the subject skidder that would ordinarily take place.  In short there was no evidence that MCI assumed a gratuitous duty to procure insurance or process the insurance request on the skidder at issue in this case.

Duty to Read

As a matter of law an insured may not neglect or purposely omit acquainting himself with the terms and conditions of the insurance policy and then complain of his ignorance of them. [Gulf Guar. Life Ins. Co. v. Kelley, 389 So. 2d 920, 922 (Miss. 1980)].

In Mississippi insureds are imputed with knowledge of the contents of their insurance policy, whether or not they have read the policy. This “duty-to-read” or “imputed-knowledge” doctrine is firmly rooted in Mississippi precedent and barred Ladner’s claims against MCI.

It was the insureds’ failure to read the policy—not the agent’s breach of duty—that was the proximate cause of their damage. The problem could have been cleared up by reading the policy. Ladner could have ascertained that the subject skidder was not covered by the Shelter Insurance policy simply by reading the October 12, 2015, or the October 30, 2015 policy declarations statements. Ladner’s negligence claims against MCI fails a matter of law.

The issue in this case is MCI’s alleged failure to process an insurance request to procure coverage for the subject skidder under the Shelter Insurance policy. Ladner’s failure to read the policy it purchased to cover the property at issue (the skidder)  proximately caused its damages and precludes Ladner’s claims against its agent, MCI.

ZALMA OPINION

I have argued until I have exhausted my ability to speak that is necessary for every insured to read the policy. In Mississippi it is the law. In other states the courts are not as stringent as Mississippi. The Ladner’s simply assumed – because the lender allegedly sent a fax to MCI – that coverage was placed. Then, before there was any damage to the skidder, they were advised in writing by MCI that it was not on the list of covered equipment. Although they were give two times to discover the lack of insurance the Ladners’ did not read nor did they do anything directly to insure the skidder. There was no insurance because of their own negligence, not the failure of the agent to act, resulted in the denied claim. An insured should never assume anything with regard to insurance.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Barry Zalma’s Insurance Claims Books

Ethics & California’s Fair Claims & SIU Regulations

Over the last 52 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 for insurers and their claims staff to become insurance claims professionals.

Ethics for the Insurance Professional – Second Edition

How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives

Insurance is, by definition, a business of the utmost good faith. This means that both parties to the contract of insurance must act fairly and in good faith to each other and do nothing that will deprive the other of the benefits the contract of insurance promised.

Without the covenant of good faith and fair dealing and ethical people who work in the insurance industry applying and fulfilling the covenant, insurance is impossible. One cannot act fairly and in good faith without being a person with a well-formed ethical compass.

In Carter v. Boehm S.C. 1 Bl. Burr 1906, 11th May 1766. 593, 3 Lord Mansfield in the British House of Lords stated: “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.” Insurers, when making a decision to insure or not insure a risk, rely on the information provided to them by the insured. As Lord Mansfield instructed, the insured must provide the information requested honestly and in good faith.

The implied covenant explains that no party to a contract of insurance should do anything to deprive the other of the benefits of the contract.

The implied covenant of good faith and fair dealing imposes obligations not only as to claims by a third party but also as to those by the insured. When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort. For the insurer to fulfill its obligation not to impair the right of the insured to receive the benefits of the agreement, it again must give at least as much consideration to the latter=s interests as it does to its own.

Therefore, since, at least 1766, the business of insurance is a business of the utmost good faith, that is, each party to a contract of insurance must deal with each other ethically. The general duty of good faith and fair dealing incorporated by reference into every policy of insurance requires a complete understanding of ethics and ethical behavior.

In every insurance contract there is an implied covenant of good faith and fair dealing that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.

Available as a Paperback   

Available as a Kindle Book.

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

 


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining the Use of an Independent Medical Examinations

Independent Medical Examinations

See the full video at https://youtu.be/oytFzG6m2YI

When a claimant claims an injury that does not agree with the facts of the incident claimed to have caused the injury, the adjuster will often seek the assistance of an Independent Medical Examiner (IME) to verify the extent of the claimed injury. The IME is usually a forensic physician or a chiropractor who has agreed to evaluate an injured person for a fee and is not involved in the treatment of the injured person.

In Pennsylvania, an insurer providing medical benefits to its insureds following an automobile accident did not have to establish good cause before the insureds were required to take physical examination administered by doctor of insurer’s choice, even though statute provided generally that insurer seeking to compel independent medical exam was required to show good cause; policy gave insurer right to order examination without establishing good cause. [Fleming v. CNA Ins. Companies, 409 Pa. Super. 285, 597 A.2d 1206 (1991)].

When an insurer’s adjuster testified that he was told by his supervisor at TOP that the purpose of a claims department was not to find ways to pay claims, but to find ways to deny claims. Thus, based on Dr. Ramey’s report, he felt that there was sufficient information to deny plaintiff’s claim, and that it was unnecessary to consider any other information.

The truth was the opposite of what the insurer testified to: the purpose of a claims department is to find ways to pay, not to deny, claims. The $5 million verdict that resulted in the Sprague case made insurers much more careful when they ordered independent medical exams in California and, hopefully, will never again tell an IME what to conclude after doing the examination.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Assignment of Claim to Plaintiff a Win for Defendant and its Insurers

Greed & Hope of Punitive Damages Results in Nothing

Underlying this insurance dispute is a lawsuit between Marvin W. Durment (Durment) and several policyholders of Burlington and Endurance over alleged breaches of a joint venture agreement and an intellectual property agreement. The insurers failed to defend the policyholders against an amended complaint tendered to the insurers on the eve of trial. The policyholders then settled with Durment, assigning their claims against the insurers to him in exchange for a covenant not to execute against the policyholders.

In Marvin W. Durment; et al. v. The Burlington Insurance Company, a North Carolina corporation v.  Endurance American Specialty Insurance Company, a Delaware corporation, No. 19-55353, United States Court Of Appeals For The Ninth Circuit (July 22, 2020) Marvin Durment appealed the grant of summary judgment in favor of Burlington Insurance Company and Endurance American Specialty Insurance Company.

Durment and several policyholders of Burlington and Endurance sued over alleged breaches of a joint venture agreement and an intellectual property agreement. The insurers failed to defend the policyholders against an amended complaint tendered to the insurers on the eve of trial. The policyholders, members of the joint venture, then effected a settlement with Durment for no money but assigning their claims against the insurers to Durment in exchange for a covenant not to execute.

Durment, hoping to collect the agreed amount of the settlement plus tort damages for bad faith, sued Burlington and Endurance, seeking reimbursement and bad faith tort damages.

The district court granted summary judgment to both insurers on the reimbursement claim and to Endurance and Burlington on the bad faith claim.

DECISION

Durment argued that the district court erred by concluding that an insurer that breaches the duty to defend is not liable for settlement costs outside the scope of the insurer’s indemnification duty. Well-settled law establishes that a breaching insurer is generally liable for a post-breach judgment only to the extent of coverage.

Where the insured settles the underlying claim, the court must also consider the issue of the duty to indemnify, because if it turns out the policy covered the claim, the amount of reasonable, good faith settlement payments made by the insured are recoverable. The plaintiff’s ultimate recovery against breaching insurers after settling the underlying claim will depend upon it being established that there was coverage and that the insurers were obligated to indemnify the insured.

By definition, the duty to indemnify entails the payment of money in order to resolve liability. Settlement costs cannot be defense costs because, instead, they resolve liability. Therefore, the Ninth Circuit concluded that the district court correctly applied California law to reject Durment’s argument that he could recover for settlement amounts from the insurers without establishing coverage.

However, the two bases Durment relies upon to establish economic loss—the insureds’ settlement costs that they assigned to him and his attorney’s fees in this action—were unconvincing.

Although an assignee can show economic loss based on costs incurred by an assignor, this presupposes that the assignor has incurred actual costs. Because Durment’s covenant not to execute against the insureds insulated the insureds from actual losses, the settlement did not involve the sort of concrete interference with property rights that California courts consider a threshold requirement of economic loss.

Likewise, the attorney’s fees Durment has incurred in this litigation cannot satisfy the economic loss requirement because California law entitles a plaintiff in an insurance coverage dispute to recover attorney’s fees only to the extent those fees were incurred to obtain the policy benefits.

Because Durment failed to recover policy benefits, he is not entitled to attorney’s fees and he cannot use his fees to show economic loss.

ZALMA OPINION

Durment was snookered. If the policyholders with whom he settled had any assets to pay the settlement he should have taken that money. If not, he took a chance hoping to force two insurers to settle. Since they had no coverage for the indemnity portion of the claim and had paid up to the moment of settlement to defend the policyholders, Durment was unable to obtain an assignment of any claim had by the policyholders and there was no coverage for the claim of indemnity, he got nothing. The covenant not to execute did away with any rights he could have obtained from the insurers.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Defenses to the Tort of Bad Faith

The Genuine Dispute Doctrine

See the full video at https://youtu.be/MvTn85OWf3M

Insurers in states where the tort of bad faith exists deny fraudulent insurance claims with fear and trembling. The specter of punitive damages has worked to make multi-millionaires of many insurance criminals who convince insurers to settle rather than take a chance on trial. Insurers pay claims they believe they do not owe because they are fearful—regardless of the merits of their position—of being assessed punitive damages in a bad faith action.

The fear is not well placed if the suspected fraudulent claim or non-covered loss is denied based upon a fair and thorough investigation, an intelligent review of the facts as they relate to the policy wording, and a reasonable application of the law of the jurisdiction. If, after a fair and thorough investigation, an insurer believes that a fraud is being attempted or that the loss is not covered by the policy wording, the dispute between the insurer and the insured is one of fact not tort and the insured is limited to recovery of contract damages.

If the insurer has done its work properly before denying a claim it should never be held liable for breach of the covenant of good faith and fair dealing. Tort and punitive damages allegations should be eliminated as a matter of law.

In Guebara v. Allstate Insurance Co., 237 F. 3d 987 (9th Cir. 2001), Allstate believed, from its investigation that Guebara had attempted fraud. The Ninth Circuit Court of Appeal held:

The genuine dispute in this case was not purely factual. The genuine dispute as to the contents claims was based on factual evidence—three expert opinions, inconsistent testimony by Guebara and her witnesses, and desperate financial circumstances. The genuine dispute as to the structure claim, however, was based on the fraud language in the policy and on an unsettled issue in California insurance law.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Intentional Act Exclusion Applies When Resident Child Sets Fire

Setting Fire to a Blanket to Upset Her Father is an Intentional Act

On August 30, 2018, the property suffered significant damage due to a fire which originated from the bedspread in Plaintiffs’ bedroom. The fire spread from the bed and caused damage to other areas of the property. Zoe was inside the property at the time the fire began. Zoe was angry with her father due to an argument they had earlier in the day. Because she wanted to upset her father, Zoe used a lighter to ignite the bedspread. Zoe attempted to put the fire out but was unable to do so. Zoe went outside and called the fire department.

In Christina Taylor and Donald Taylor v. LM Insurance Corporation, Case No. 19-1030-JWB, United States District Court For The District Of Kansas (July 15, 2020) the insurer refused to pay under the intentional act exclusion of its policy because Zoe was an insured and intentionally set the fire.

Uncontroverted Facts

Plaintiffs Christina and Donald Taylor own a home located at 301 S. Summit Street, El Dorado, Kansas (“the property”). Plaintiffs purchased a homeowner’s insurance policy (“the policy”) from Defendant LM Insurance Corporation for the property and were the named insureds under the policy. Under the terms of the insurance policy, an insured includes members of the family of the named insureds residing at the property. Plaintiffs’ daughter, Zoe, was living at the property with Plaintiffs. Zoe was an insured under the policy.

The policy contains an exclusion for intentional loss.  The fire spread from the bed and caused damage to other areas of the property. Although Zoe initially denied starting the fire, she later admitted her involvement. Zoe told Detective Sergeant Sam Humig of the El Dorado Police Department that she intended to burn the blankets and she got scared once the fire started.

Plaintiffs made a claim for coverage under the policy. After receiving notice of the loss, Defendant began adjusting the loss and advanced funds to Plaintiffs. The insurer advised Christina Taylor by phone that Defendant was denying the claim on the basis that the policy excludes coverage for intentional loss and Defendant determined that Zoe set the fire to the bedspread in the master bedroom.

Plaintiffs sued Defendant asserting that Defendant breached its agreement to provide coverage for the loss. Both parties  moved for summary judgment.

Analysis

Plaintiffs claim that Defendant breached its agreement to insure Plaintiffs by failing to pay the claim and failing to reasonably investigate the claim.

The interpretation of the policy is a question of law for the court. In construing the policy, the court should consider the policy as a whole and construe it in a way that will give effect to the parties’ intent. If the policy language is unambiguous, the court must take the unambiguous language in its plain, ordinary, and popular sense.

To determine whether the claim is covered under the policy, the insured bears the burden of proving that the claim falls within the policy. The insurer then has the burden to prove that an exclusion in the policy precludes coverage of the claim.

Intentional Loss Exclusion

In this case, there is no dispute that the policy provides coverage for property damage due to fire. Property damage is covered under section one of the policy. The policy also includes exclusions under section one. Defendant denied coverage on the basis that the intentional loss provision under section one excluded coverage for the claim.

Because it is undisputed that Zoe is an insured and that she intended to set fire to the bedspread the exclusion applies. Plaintiffs argue that the term “loss” is ambiguous, and that the intention of the parties was for the language to mean the “intent to cause an [insured] loss.” Plaintiffs argue that this reading is a common sense reading of the policy because otherwise the exclusion would bar someone who burned down their home after disposing of leaves in a burn barrel.

The term loss is not defined in this policy. Black’s Law Dictionary defines the term “loss” as “[a]n undesirable outcome of a risk; the disappearance or diminution of value, [usually] in an unexpected or relatively unpredictable way.” This definition is reasonable in reading the policy as a whole. A loss is the disappearance or diminution of value. A “loss” occurs when there has been damage to that covered property as the value of the property is diminished when it has been damaged.

What Is Required To Show That Zoe “Intended” To Cause A Loss?

The Kansas Supreme Court has set forth the standard to evaluate an intentional act exclusion in an insurance policy in Thomas v. Benchmark Ins. Co., 285 Kan. 918, 933, 179 P.3d 421, 431 (2008). The court held that “the ‘intentional act’ or ‘intentional injury’ exclusion test in Kansas should be as follows: The insured must have intended both the act and to cause some kind of injury or damage. Intent to cause the injury or damage can be actual or it can be inferred from the nature of the act when the consequences are substantially certain to result from the act.”

Moreover, although the provision at issue is titled intentional loss, the provision is applicable to intentional acts that result in an intentional loss. As such, it is an exclusion based on an intentional act. The court concluded that Thomas is applicable to the policy in this case which excludes coverage for an intentional loss arising out of any act by an insured with the intent to cause the loss. Zoe’s actions in lighting the fire were intentional as she wanted to make her father upset. All that is required is the intent to cause some damage or, as applied to the policy, a loss.

Plaintiffs make several references to Zoe’s mental health and argue that she was unable to form the requisite intent. The uncontroverted facts, however, are that Zoe intended to burn the blankets. Plaintiffs have the burden of proof to rebut the presumption of sanity and intent by introducing evidence to show that Zoe’s mental condition prevented her from forming the necessary intent. Plaintiffs have not done so.

The court found that the damage to the bedspread is a loss. Therefore, Zoe intentionally caused a loss. The resulting loss of approximately $200,000 to other parts of the property arose out of the fire set to the bedspread. Accordingly, that loss is excluded under the policy. Because the policy excludes any loss that arises of out an act committed by “an insured,” the policy does not permit Plaintiffs to recover under the policy.

Duty to Investigate

Plaintiffs also contend that Defendant breached the contract by failing to investigate the claim in good faith. Defendant asserts that Plaintiffs cannot succeed on this claim as the policy does not provide coverage under the intentional loss provision and that Defendant does not owe any additional duties under the contract.

Conclusion

The trial court was not pleased with its decision. It found the case to be difficult because, in many ways, the outcome seems unfair. Plaintiffs are indisputedly innocent insureds. Plaintiffs have been paying their insurance premiums and, as any insured, would expect that a fire loss would be covered under a policy. The circumstances of this case make the loss all the more bitter because it was caused by Plaintiffs’ own child.

The court is required to enforce the policy according to its terms, and under Kansas law those terms compel the result reached herein.

ZALMA OPINION

Kansas law required the conclusion reached. Clearly, Zoe intentionally set fire to blankets expecting to upset her father and have some “fun.” The house was almost destroyed as a result. There was no question that she intended to destroy the blankets and that was enough to deprive her parents of insurance coverage. They should punish her accordingly. There was a mortgage on the house and it would have had a viable claim if it had been made. This suit could have been avoided had the insurer issued a Union Mortgage Clause and advised the mortgagee of its right to make a claim up to the amount of its interest. The mortgagee decided, perhaps to its detriment, to wait for the conclusion of this appeal.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Insurance Claims Library

Everything Needed by the Insurance Claims Professional from Barry Zalma

Over the last 52 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 for insurers and their claims staff to become insurance claims professionals.

The Compact Book of Adjusting Property Insurance Claims – Second Edition

A Manual for the First Party Property Insurance Adjuster

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

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

The Compact Book of Adjusting Property Claims -- Second Edition: A Primer For The First Party Property Claims Adjuster.Technically, if the wording of the policy was followed literally the insurer could sit back, do nothing, and wait for the proof. If the insured was late in submitting the proof the insurer could reject the claim. If the insured submits a timely proof of loss the insurer could either accept or reject the proof of loss. If the insurer rejected the proof of loss the insured could either send a new one or give up and gain nothing from the claim. Suit on the policy would be difficult because the policy contract limited the right to sue to times when the proof of loss condition had been met.

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

The Second edition adds new material from 2018 and 2019, is easier to use and more compact than the original.

Available as a Kindle book.

Available as a paperback.

The Compact Book on Adjusting Liability Claims, Second Edition

A Handbook for the Liability Claims Adjuster

This Compact Book of Adjusting Liability Claims is designed to The Compact Book Of Adjusting Liability Claims Second Edition: A Handbook for the Liability Claims Adjusterprovide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster.

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

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

Available as a Kindle book

Available as a paperback.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

 

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Claiming the Same Property Destroyed in Multiple Fires Establishes Arson for Profit

Convicted Arsonist Sentenced to 204 Months Because of Stupidity in the Presentation of a Fraudulent Claim

The USA and its Department of Justice has taken a stand against arson for profit. Because it is a serious crime where people are injured or killed it is the most dangerous form of insurance fraud. It is defeated in cases like United States Of America v. James Edward Lester, a/k/a Punkin, No. 19-4333, United States Court Of Appeals For The Fourth Circuit (June 9, 2020) where the defendant is incompetent.

After a jury convicted James Lester of arson conspiracy, money laundering conspiracy, mail and wire fraud conspiracy,  arson to commit wire fraud, aiding and abetting an unlawful monetary transaction, and structuring transactions he received a 204-month sentence. On appeal, Lester claims that the district court erred in admitting evidence of a prior fire at a residence he owned (the “Wharncliffe fire”).

ISSUES ON APPEAL

Lester, raising an last ditch and creative defense, contended on appeal that the district court abused its discretion in admitting the Wharncliffe fire evidence. The district court admitted the evidence as intrinsic to the charged crimes. Alternatively, the district court determined that the evidence was admissible as probative of Lester’s motive, knowledge, and intent.

The prosecution presented evidence that the Wharncliffe fire insurance claim contents list was overwhelmingly similar to those of the Matoaka and Ikes Fork fire claims that were the basis of the prosecution.

Lester challenged the district court’s admission of the Wharncliffe fire evidence as intrinsic to the fraud charges, and he argues that the story of the crime was complete in itself and that there was no need to introduce evidence of the Wharncliffe fire. Lester also argued that the prejudicial effect of the Wharncliffe fire evidence substantially outweighed any probative value it may have had to prove the criminal nature of the fires that occurred at properties owned by the coconspirators in Matoaka and Ikes Fork, West Virginia.

ANALYSIS

Lester’s appeal was based on Rule 404(b) that applies only to evidence of other acts that are extrinsic to the one charged.  Evidence is intrinsic if it is necessary to complete the story of the crime on trial. Other criminal acts are intrinsic when they are inextricably intertwined or both acts are part of a single criminal episode or the other acts were necessary preliminaries to the crime charged. Evidence is inextricably intertwined with the evidence regarding the charged offense if it forms an integral and natural part of the witness’s accounts of the circumstances surrounding the offenses for which the defendant was indicted.

The Fourth Circuit concluded that the district court did not abuse its discretion in admitting the Wharncliffe fire evidence as intrinsic to the charged conspiracies. This evidence laid the foundation for the arson and insurance fraud schemes, and it was necessary to complete the story of Lester’s relationships with his co-conspirators. Moreover, the Wharncliffe fire evidence was “inextricably intertwined” with the charged arson conspiracies because the Wharncliffe fire was used as a “playbook” for the Matoaka and Ikes Fork fires and resulted in evidence being collected that the “playbook” was followed to the letter, including making claim for the same property destroyed in the Whancliffe fire as in the other two.

The Fourth Circuit, therefore, affirmed the district court’s judgment and dispensed with oral argument because the facts and legal contentions are adequately presented in the materials before the court and argument would not aid the decisional process.

ZALMA OPINION

If a person wishes to succeed at arson-for-profit it is necessary to think through the situation and not provide police and prosecutors with evidence to convict with little effort. The fact that Lester, before the fires for which he was charged, made claim in an earlier fire where the claim presented to the insurer was identical to the claim presented in the two fires and claims for which he was prosecuted. Lester, therefore, was a Darwin Award winner in the insurance fraud and arson for profit industry and should never be allowed to reproduce.

 

 


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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A Video Explaining the Concurrent Cause Doctrine

Concurrent Cause Doctrine

See the full video at https://www.youtube.com/watch?v=uhc5y21fNAU

The concurrent cause doctrine holds that if more than one cause concurred to cause a loss, one of which is excluded and the other not, the entire loss is covered. It was finalized by the California Supreme Court in State Farm Mutual Auto Ins. Co. v. Partridge, 10 Cal. 3d 94, 109 Cal. Rptr. 811 (1973). In this case, the court found that coverage existed for defense and indemnity under a homeowners policy, even though the accident occurred while the insured was operating an automobile (excluded by the homeowners policy), because there was a non-excluded event that concurred to cause the loss. The facts of the Partridge case illustrate how the concurrent cause doctrine was born out of an outrageous fact situation and the potentiality doctrine first enunciated in Gray, supra.

The insured, Partridge, hunted rabbits from his pickup truck with a .357 Magnum pistol. One night at home, he filed down the trigger on his gun so that it had a “hair trigger.” Then, he and a friend went out hunting in the truck, scaring up rabbits in an open field. The gun sat on the bench seat between the insured and his friend. The truck hit a bump, the gun bounced on the seat, and, because of the hair trigger, it discharged and shot the passenger. The injuries from such a large weapon were understandably severe.

Partridge, the defendant (insured), had minimal liability coverage—$15,000—on his automobile and a limit of $25,000 on his homeowner’s policy. The plaintiff was severely injured and could not be made whole by the payment of either policy limit.

Both the insured’s auto policy and his homeowners policy were written by State Farm. Partridge demanded defense and indemnity from both policies. State Farm accepted the defense on the auto policy but refused to defend or indemnify under the homeowners policy because it clearly and unambiguously excluded loss resulting from the use of an automobile. State Farm reasoned that the gun would not have discharged at all if it was not bounced around in the insured’s truck. They made a logical interpretation of the policy—which the Supreme Court later concluded was wrong.

The Supreme Court found that there were two causes for the loss, which had to concur to cause the plaintiff injury: first, filing the hair trigger; and second, driving over an open field with the gun on the seat.

Coverage was provided under both policies since both causes concurred in the loss, and since they could not be separated from each other. The Court would not admit it, but the severity of the injury incurred by the plaintiff, coupled with the egregious negligence of the insured, could have weighed heavily in the creation of the concurrent cause doctrine.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Arsonist Did the Crime and Must Serve the Time

Arson-for-Profit that Caused Death of Firefighter Results in 360 Months in Federal Prison

As I have said many times, arson-for-profit is the most evil form of insurance fraud and one where people are injured or die. Arson-for-profit fraud is highly profitable and is engaged in by people who have no concern for the lives or property of others. Some are competent and destroy the property and nothing else. Others are incompetent and injure or kill innocents.

In United States Of America v. Steve Allen Pritchard, No. 18-6210, United States Court Of Appeals For The Sixth Circuit (July 7, 2020) Judge Nalbandian, writing for the Sixth Circuit, started his opinion with a wise description of those who commit arson: “Some men just want to watch the world burn. Others start fires to collect insurance money.” Steve Pritchard is the latter.

After playing with fire several times, Pritchard’s penchant for profiting from arson took a deadly turn. Instead of only damaging property, a fire started by Pritchard in June 2011 led to firefighter Charles Sparks’s death. At issue before the Sixth Circuit was whether Pritchard caused Sparks’s death within the meaning of the federal arson statute.

THE ISSUES

Pritchard’s appeal turns on first principles of causation. The common law typically permits liability only when the perpetrator acts as both the but-for and the legal cause of the harm. Laws that invoke proximate causation generally impose liability when the harm was foreseeable. Under the arson statute Sparks’s death need only be “a direct or proximate result of [Pritchard’s] conduct.” Sparks claimed he was neither a direct nor proximate cause of Sparks’ death.

FACTS

At 3:05 AM on June 30, 2011, a 911 caller reported a fire at the Pritchard residence. Eleven minutes later, firefighters, including Assistant Chief Charles Sparks, arrived on the scene. These firefighters found the house engulfed in “[a] lot of fire, a lot of flames.” During the firefighting, Sparks lost consciousness. Eight days later, Sparks died after being taken off life support.

To Brandi Pritchard’s purported surprise, Pritchard decided to drive her to work that morning, telling her that it “would be a good morning to go ahead and start . . . this fire in this house[.]” On the way to work, Pritchard proclaimed, “I did it[,]” referring to the fire. Pritchard had arranged for Brandi’s children and his dog to be out of the house that morning. Later, Brandi’s children would testify that Pritchard showed them photographs of the fire he took from his phone and that Pritchard implied he started the fire.

Pritchard wanted Brandi to tell investigators that he had spent the night in Louisville. And that’s the same story he gave to the police. Yet Pritchard’s alibi did not withstand scrutiny. Cell tower records revealed that Pritchard had not been in Louisville on the night of the fire.

Six days before the fire Brandi bought a $50,000 insurance policy for the house. So, when Pritchard learned about the insurance policy, he remarked about “how easy it would be to burn the house down and get the money for it.” After the fire, Brandi collected on her insurance policy. In the ensuing investigation of the fire, carried out by Kentucky State Police and the FBI, Pritchard pressured Brandi to lie to cover up the arson. When he became worried about Brandi’s resolve, Pritchard resorted to threats of violence to coerce Brandi not to confess. Pritchard’s threats continued for years; after the FBI interviewed Pritchard in 2014, he broke into Brandi’s house and threatened to harm her and her children if she told the truth about the arson. Brandi eventually confessed to her role in the arson, the insurance fraud, and the cover up.

At Pritchard’s trial, Dr. Thomas Hales concluded that firefighting “triggered” Sparks’s fatal heart attack.  Regardless of arguments, objections and motions by his lawyer Pritchard was convicted and received a sentence of 360 months for arson causing death and a concurrent 240-month term for mail fraud.

ANALYSIS

There was no question that an arsonist started a fire to collect insurance money. A firefighter lost his life putting that fire out. The firefighter had a history of cardiac disease and passed away from a heart attack suffered during the fire. Pritchard, who started the fire, argued that he isn’t responsible for the firefighter’s existing heart condition. But the government argued that Pritchard’s arson set in motion foreseeable events where a firefighter could lose his life.

The statute permits punishment when “death results to any person, including any public safety officer performing duties as a direct or proximate result of conduct prohibited by this subsection[.]” [18 U.S.C. § 844(i)] Because the statute covers unlawfully destroying a building or other property with fire it covers injuries caused by Pritchard’s arson. The case turned on when death is “a direct or proximate result” of arson.

While proximate cause lacks a “precise definition,” proximate cause language generally injects a foreseeability element into the statute. Typically, proximate cause presents a narrower range of liability than an actual, or direct, cause.

A fundamental principle of criminal law is that a person is held responsible for all consequences proximately caused by his criminal conduct. Thus, where events are foreseeable and naturally result from one’s criminal conduct, the chain of legal causation is considered unbroken and the perpetrator is held criminally responsible for the resulting harm.

Pritchard’s theory that there can only be one cause of death sufficient for imposing liability flouts precedent. It is true that Sparks suffered from serious ailments, including diabetes and blocked arteries, and evidence showed that Sparks had not been taking his prescribed heart medication or insulin for some time. Pritchard contended that the presence of these other factors that could have been the cause of Sparks’s heart attack means the fire could not have proximately caused Sparks’s death.

Even though Pritchard offered evidence that Sparks’s pre-existing medical condition led to his death, the jury, after hearing and evaluating all of the evidence presented at the trial,  found an unbroken chain of causation between the fire and Sparks’s heart attack. After all, the government entered evidence showing that firefighting stresses the heart, meaning that heart attacks can be caused by responding to arsons just like severe burns. And to show proximate cause, the government only needed to enter sufficient evidence that Sparks’s death was a foreseeable and natural result of Pritchard’s actions.

Because the jury relied on evidence showing Pritchard proximately caused Sparks’s death, a direct causation analysis is unnecessary.

Given Brandi’s testimony, testimony from neutral parties, and Pritchard’s faulty alibi, the jury had enough evidence to convict Pritchard without relying on his prior bad acts or West’s expert testimony, so any error in admitting that evidence would be harmless and Pritchard’s argument failed.

Pritchard came up with the idea for arson, presented it to Brandi for recruitment purposes, tried to sway her when she resisted, bragged about being a “genius” at arson-based insurance fraud, planned the logistics of the fire, directed the coverup, and threatened domestic violence to execute the coverup.

Pritchard’s conviction and sentence was affirmed.

ZALMA OPINION

Pritchard was, and is, a very bad man. He set multiple fires in his criminal career. The last arson-for-profit proved he was not the arson genius he believed. He had an incompetent alibi; involved Brandi as his alibi and co-conspirator, threatened to kill her and her children if she refused to lie, and did it so poorly that she testified against him. He directly and proximately caused the death of a firefighter and as a result deserved the sentence he received. He should spend all 360 months in federal prison and will have time to consider why he did not commit an insurance fraud that did not put firefighters at risk.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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A Video Explaining Why Bodily Injury Caused by Mold or Fungi is Uncertain

Maybe Mold Doesn’t Cause Bodily Injury or Illness

See the full video at https://youtu.be/xiyBJilePUY

The Guidance for Clinicians on the Recognition and Management of Health Effects Related to Mold Exposure and Moisture Indoors (Guidance) is one of the most recent studies of the effects of mold in the environment and its effect on human health when combined with other causes.

The authors found that there is strong evidence that significant disease can result from dampness and fungi in the home or workplace Recognizing that dust mites in damp environments explain some of the relationship between dampness and respiratory symptoms.

The causal relationship between the damp environment and health symptoms, including respiratory symptoms, headache, fatigue, and recurrent infections, is less understood. Mold seems to represent part of the explanation. The Guidance focused its analysis on the effect of mold in the indoor environment and the relationship between exposure to mold and mold spores on occupants’ health.

After reviewing case studies, the Guidance reports that fungi can cause disease in humans and animals by a variety of biological mechanisms which can be classified into four groups:

  • infections;
  • allergic or hypersensitivity reactions;
  • irritant reactions; and
  • toxic reactions.

In addition, the CDC found that a possible association between acute idiopathic pulmonary hemorrhage among infants and Stachybotrys chartarum (Stachybotrys atra) has not been proved. The CDC believes that further studies are needed. It is difficult, therefore, for any expert to support a causal relationship between exposure to mold, even the much maligned Stachybotrys chartarum, and illness in humans.

 

 


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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Video Explanations of Insurance and Claims Topics

FREE VIDEOS EXPLAINING INSURANCE CLAIMS AND INSURANCE LAW TOPICS

Video thumbnail: A Video Explaining Why Bodily Injury Caused by Mold or Fungi is Uncertain
15:21

A Video Explaining Why Bodily Injury Caused by Mold or Fungi is Uncertain

The Guid ance for Clinicians on the Recognition and Management of Health Effects Related to Mold Exposure and Moisture Indoors (Guidance) is one of the most recent studies of the effects of mold in the environment and its effect on human health when combined with other causes. The authors found that there is strong evidence that significant disease can result from dampness and fungi in the home or workplace Recognizing that dust mites in damp environments explain some of the relationship betwee

Jul 21, 2020

Video thumbnail: A Video Explaining When the Notice-Prejudice Rule Does Not Apply
12:12

A Video Explaining When the Notice-Prejudice Rule Does Not Apply

The Notice-Prejudice Rule Doesn’t Always Apply Claims made and claims made and reported policies contain a date certain notice requirement. In Colorado, the Colorado Supreme Court found:­­ “The notice-prejudice rule does not apply to a date-certain notice requirement in a claims-made insurance policy. In a claims-made policy, the date-certain notice requirement defines the scope of coverage. Thus, to excuse late notice in violation of such a requirement would rewrite a fundamental term of the
Video thumbnail: A Video Explaining the Duties of the Public Adjuster
19:05

A Video Explaining the Duties of the Public Adjuster

Public Insurance Adjusters Most policyholders do not have the in-house capability to investigate, evaluate, and negotiate significant property insurance losses. While some losses, such as a small fire loss requiring only minor repairs, may be dealt with easily, others, which involve more complex damages and different potential causes of loss, are much harder to assess. Resolving them may require expertise in understanding the scope of coverage provided by the applicable property insurance poli

Jul 17, 2020

Video thumbnail: Trigger of Coverage/Property Damage
10:47

Trigger of Coverage/Property Damage

The term “trigger of coverage” means “what event must occur for potential coverage to commence under the terms of the insurance policy” and “what must take place within the policy’s effective dates for the potential of coverage to be ‘triggered.'” [In Re Feature Realty Litig., 468 F. Supp.2d 1287, 1295, n.2 (E.D. Wash. 2006)] After the California Supreme Court adopted a continuous trigger in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 685, 42 Cal.Rptr.2d 324, 913 P.2d 87

Jul 16, 2020

Video thumbnail: Claims Personnel
17:37

Claims Personnel

The Claims Adjuster The claims adjuster is the contact between the insured and the insurer. He or she can be an employee of the insurer or an independent contractor retained by the insurer to investigate and adjust insurance claims on its behalf.  The adjuster is person charged with investigating a claim to fulfill the promises made by the policy of insurance and establish whether the company is liable to the insured or a claimant and to what extent. The investigation can include interviews of

Jul 15, 2020

Video thumbnail: ZALMA’S INSURANCE FRAUD LETTER - JULY 15, 2020

ZALMA’S INSURANCE FRAUD LETTER – JULY 15, 2020

Insurance Fraud Is Often A Violent Crime Murder as a Side-Effect To An Insurance Fraud There is a myth that abounds in the criminal and civil courts of the United States that insurance fraud is a non-violent crime. Abdullah Alkhalidi (“Alkhalidi”) was convicted of murder, robbery, and theft. The Indiana state court denied relief, holding Alkhalidi’s innocence claim strongly indicated he would not have accepted the plea deal. The state court also held that Indiana requires a defendant to adm

Jul 15, 2020

Video thumbnail: A Video Explaining How the Law of Unintended Consequences Destroyed the the Tort of Bad Faith
18:11

A Video Explaining How the Law of Unintended Consequences Destroyed the the Tort of Bad Faith

The Law of Unintended Consequences and the Tort of Bad Faith The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence. Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defe

Jul 13, 202

Video thumbnail: A Video Explaining the Claims Made CGL
15:25

A Video Explaining the Claims Made CGL

The insurance industry spent 10 years trying to restrict their liability for long tail losses. They tried wording that would prohibit stacking, as well as wording that would only allow coverage for losses first discovered during the policy period. “Claims Made” wording, which would only allow coverage to be triggered upon the making of a claim, and limited “occurrence” coverages were also attempted. Ultimately, the decision was made by the ISO and its supporters to use a Claims Made approach, p

Jul 13, 2020

Video thumbnail: California Fair Claims Settlement Practices Regulations
13:16

California Fair Claims Settlement Practices Regulations

The Reasons Behind the California Fair Claims Settlement Practices Regulations In 1993 the state of California determined that the insurance industry needed to be regulated to stop insurers from treating the people insured badly and without good faith. It created a set of Regulations called the “California Fair Claims Settlement Practices Regulations” (the “Regulations) to enforce the mandate created by the California Fair Claims Settlement Practices statute, California Insurance Code Section

Jul 9, 2020

Video thumbnail: Ethics and The Insurance Product
16:53

Ethics and The Insurance Product

The basic insurance product is a promise that the insurer may never be called upon to fulfill. The value of the promise is based on the trust of the policyholder in the insurer being able and willing to fulfill the promises made by the insurance policy. Gallup polls since 1977 have consistently ranked insurance sales persons among the lowest in terms of perceived honesty and ethical standards. In the November 1999 poll, insurance sales persons ranked third from last, just above telemarketers

Jul 8, 2020

Video thumbnail: Considerations for Early Settlement of Construction Defect Claims
17:29

Considerations for Early Settlement of Construction Defect Claims

It is an axiom followed by almost every attorney that the sooner a suit is settled the less it will cost the defendants. Invariably as suits drag on, as discovery is received and analyzed, the positions of the parties become less amenable to compromise. If defendants and their counsel believe that liability against the defendant is reasonably clear, they should work to bring the parties together to attempt an early settlement. Some of the reasons for the early settlement are discussed below.

Jul 7, 2020

Video thumbnail: A Video Explaining How to Negotiate the Settlement of a Liability Claim
19:28

A Video Explaining How to Negotiate the Settlement of a Liability Claim

After the adjuster determines that coverage exists, that the insured is probably liable for causing bodily injury or property damage to a third person, the adjuster must negotiate a settlement with the claimant or his or her attorney. Just like the plaintiff’s attorney in a personal injury case, the insurance adjuster will investigate the claim – the facts of the accident and the plaintiff’s damages. A very skillful and well-prepared insurance adjuster will often know more about the accident a

Jul 6, 2020

Video thumbnail: Heads I Win, Tails You Lose - True Crime Stories of Insurance Fraud
14:55

Heads I Win, Tails You Lose – True Crime Stories of Insurance Fraud

This video includes two true crime stories from my book “Heads I Win, Tails You Lose. The title, “Heads I Win, Tails You Lose” is meant to describe insurance fraud as it works in the Unites States. It means that whenever a person succeeds in perpetrating an insurance fraud everyone who buys insurance is the loser. If the fraud succeeds the insurer must charge more premium to cover the expense of defending the fraud and payment of funds to the fraud perpetrator. If the fraud fails the insurer m

Jul 3, 2020

Video thumbnail: How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives
16:11

How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives

ETHICS FOR THE INSURANCE PROFESSIONAL Insurance is, by definition, a business of the utmost good faith. This means that both parties to the contract of insurance must act fairly and in good faith to each other and do nothing that will deprive the other of the benefits the contract of insurance promised. Without the covenant of good faith and fair dealing and ethical people who work in the insurance industry applying and fulfilling the covenant, insurance is impossible. One cannot act fairly a

Jul 2, 2020

Video thumbnail: False Swearing About Material Facts Voids an Insurance Policy and Defeats a Fraudulent Claim
14:28

False Swearing About Material Facts Voids an Insurance Policy and Defeats a Fraudulent Claim

FALSE SWEARING 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. The reason for the false swearing

Jul 1, 2020

Video thumbnail: Getting the Whole Truth, Interviewing Techniques for the Lawyer
17:43

Getting the Whole Truth, Interviewing Techniques for the Lawyer

The interview is an essential form of fact gathering for every type of human interaction. Interviews happen everywhere; they are performed by almost everyone. Interviewing is also an art, and the most effective interviews are conducted by those who are knowledgeable and skilled in this art. Everyone has been interviewed. And everyone has, at some point in life, interviewed another person. Not everyone conducting an interview, however, has accomplished the desired outcome. One type of informal

Jun 30, 2020

Video thumbnail: What Can Insurance People Do to Change the Poor Insurance Fraud Conviction Statistics?
14:50

What Can Insurance People Do to Change the Poor Insurance Fraud Conviction Statistics?

he Obligation of an Insurance Professional to Defeat Insurance Fraud It is the obligation of all who work 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 to change the system so that: all the money goes to all kinds of insurance fraud at the discretion of the Commissioner of Insurance; prosecutors must be assigned to

Jun 29, 2020

Video thumbnail: A Video Explaining Why Arson is a Named Peril
10:38

A Video Explaining Why Arson is a Named Peril

Because arson is a fire, it is not an excluded peril in any first party property policy of insurance. An arson is never a defense to an insurance claim alone. Only when arson is caused by the named insured, or any insured is involved in causing the fire to occur for the purpose of defrauding an insurer. In Eddie P. Bates v. Hartford Insurance Company of the Midwest, No. 09-12840 (E.D.Mich. 03/03/2011) the insurer attempted to deny coverage by claiming that the fire was a “vandalism.” Since the h

Jun 26, 2020

Video thumbnail: A Video Explaining the Hazard Created Mutability of Memory for the Lawyer or Investigator
16:43

A Video Explaining the Hazard Created Mutability of Memory for the Lawyer or Investigator

THE MUTABILITY OF MEMORY It is important that every investigator or lawyer preparing a case for trial must understand how memory influences the information obtained. Very few people have a perfect eidetic (photographic) memory. Memory is a fluid and often unreliable human function. During my time as a trainee investigator at the Army Intelligence School at Fort Holabird, Maryland, a classroom lecture on interviewing was interrupted by a man dressed in a clown mask, a tuxedo, swim fins, a co

Jun 25, 2020

Video thumbnail: Investigation of Mold Claims of Bodily Injury or Property Damage
12:13

Investigation of Mold Claims of Bodily Injury or Property Damage

Because multiple exclusions in a CGL policy or other liability policy may involve an adjuster, an insured or the attorney for either, the adjuster starting an investigation should protect the insurer from potential misunderstanding or inadvertent waiver of the insurer’s rights. In that regard the adjuster should make immediate, but no later than 24 hours after notice is received, contact with the insured. The insured should be asked at the first meeting to sign a non-waiver agreement that is a c

Jun 19, 2020

Video thumbnail: The Law of Unintended Consequences and the Tort of Bad Faith
13:40

The Law of Unintended Consequences and the Tort of Bad Faith

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissib

Jun 17, 2020

Video thumbnail: Subrogation Waiver
15:14

Subrogation Waiver

The Waiver of Subrogation Subrogation is an equitable remedy where a person who pays the debt of another is entitled to assume the rights of the person whose debt he or she paid. In insurance, when an insurer pays a claim, it assumes all of the rights of the person insured, to sue and recover the amounts paid from any third party who was responsible for the loss. Equity allows creative remedies for wrongs that do not fit within the confines of traditional tort or contract remedies

Jun 15, 2020

Video thumbnail: Sick Building Syndrome and Construction Defects
17:08

Sick Building Syndrome and Construction Defects

Sick Building Syndrome Sick building syndrome (SBS) covers a whole range of health problems that are related to toxin exposure in a building. There are serious questions raised by physicians and mold experts about the existence of a true relationship between the mold and bacterial infections that have been reported to be the cause of SBS. SBS is used to describe situations in which building occupants experience acute health and discomfort effects that appear to be linked to time spent in a buil

Jun 10, 2020

Video thumbnail: Adjusting Property Claims
19:28

Adjusting Property Claims

A site for the insurance claims professional and anyone who wants to know something about insurance, insurance claims, insurance coverage, and insurance law. https://zalma.com/blog
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Books for the Insurance Professionals

Everything Needed by the Insurance Claims Professional from Barry Zalma

Over the last 52 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 for insurers and their claims staff to become insurance claims professionals.

The Law of Unintended Consequences and the Tort of Bad Faith

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill desi

gned to cut the maximum permissible rate of interest from 6 percent to 4 percent. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive.

The business of insurance is, unfortunately, subject to the law of unintended consequences as if it were on steroids.

Available as a paperback  

Available as a Kindle book

Insurance Fraud – Volume I & Volume II

In Two Volumes

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

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

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

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

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

This book contains appellate decisions regarding insurance fraud from federal and state appellate courts across the country and full text of many insurance fraud statutes.

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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A Video Explaining When the Notice-Prejudice Rule Does Not Apply

The Notice-Prejudice Rule Doesn’t Always Apply

See the full video at https://youtu.be/ROzLqTpsa6Q

Claims made and claims made and reported policies contain a date certain notice requirement. In Colorado, the Colorado Supreme Court found:­­

“The notice-prejudice rule does not apply to a date-certain notice requirement in a claims-made insurance policy. In a claims-made policy, the date-certain notice requirement defines the scope of coverage. Thus, to excuse late notice in violation of such a requirement would rewrite a fundamental term of the insurance contract.” (Craft v. Philadelphia Indemnity Insurance Company, 2015 CO 11, 343 P.3d 951)

The conceptual differences between occurrence and claims-made liability policies lie at the core of this case. The Colorado Division of Insurance defines an occurrence policy as ‘an insurance policy that provides liability coverage only for injury or damage that occurs during the policy term, regardless of when the claim is actually made.’ (3 Colo. Code Regs. 702–5:5–1–8 (2014).)

Claims-made policies typically contain a second type of notice requirement not found in occurrence policies: the requirement that the insured provide notice of a claim within the policy period or a defined reporting period thereafter. Such a date-certain notice requirement fulfills a very different function than a prompt notice requirement.

Where a prompt notice requirement serves to allow the insurer to investigate the claim and negotiate with the third party asserting the claim, the date-certain notice requirement defines the temporal boundaries of the policy’s basic coverage terms.

 


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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New York Concludes an LLC is more akin to a Partnership than a Corporation

Member of LLC May Claim Underinsured Motorist Coverage

In the Matter of United Financial Casualty Company v. Alan Tekel, 2019-10964, 2020 NY Slip Op 03919, Supreme Court of The State Of New YORK Appellate Division, Second Judicial Department (July 15, 2020) the trial court order granted Alan Tekel’s motion to allow arbitration to go forward to seek supplemental Underinsured Motorist benefits (hereinafter SUM)

FACTS

Alan Tekel sustained injuries when, as a pedestrian, he was struck by a vehicle. After settling with the tortfeasor driver for the full limit of the driver’s insurance policy, Tekel submitted a claim for SUM benefits pursuant to a commercial automobile insurance policy issued by Progressive Casualty Insurance Company (hereinafter Progressive) to Air Repair, LLC (hereinafter the LLC), of which Tekel was the sole member.

Progressive denied coverage on the ground that Tekel did not meet the definition of an insured under the SUM endorsement, as he was not the named insured on the policy and, at the time of the accident, was not occupying a motor vehicle insured for SUM under the policy.

Following Terkel’s demand for arbitration, the underwriter of the policy sued seeking a permanent stay of arbitration. The Supreme Court (trial court) granted that branch of the petition which was to permanently stay arbitration only to change its position after reargument and denied that branch of the petition which was to permanently stay arbitration.

ANALYSIS

Where an automobile insurance policy contains a SUM provision and is issued to an individual, that individual and others in his or her family may be afforded SUM coverage under the policy when such person is injured in any vehicle, including a vehicle owned and insured by a third party. Where such a policy is issued to a corporation, however, the SUM provision does not follow any particular individual, but instead covers any person [injured] while occupying an automobile owned by the corporation or while being operated on behalf of the corporation. On the other hand, instances where the policy is issued to a partnership  the decision is easier since partnerships being a combination of individuals who can suffer injuries and do have spouses, households and relatives.

Here, the policy was issued to a limited liability company, which is more akin to a partnership than a corporation.

Considering the entire policy the determination to grant Tekel’s motion that the definition of the term “insured” must be resolved in Tekel’s favor, the SUM endorsement defines the term “insured” to mean “you, as the named insured and, while residents of the same household, your spouse and the relatives of either you or your spouse.”

Although the declarations page identifies the LLC as the named insured, it also states that supplemental spousal liability insurance coverage will be included within your bodily injury liability coverage at no additional premium charge.

Accordingly, a permanent stay of arbitration was not warranted.

ZALMA OPINION

The New York court ruled in favor of Tekel because the insurer did not write a policy that was clear, unambiguous or even logical. When insuring an LLC, a form of corporation, it also provided coverage for the insured’s spouse. Since a corporation cannot have a spouse it allowed the court to conclude that the insurer considered the LLC to be an individual (and its sole member) to be an insured and not the fictional entity doing business as an LLC. If they wanted to limit the coverage Progressive needed to rewrite the policy to deal with its insured as a corporation rather than as an individual. Cut and paste clearly did not work for the Progressive.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Three New Books by Barry Zalma

“Zalma’s Mold & Fungi Handbook”

Understanding mold, fungi, and bacteria infestations and what to do about them.

Zalma's Mold & Fungi Handbook: Understanding mold, fungi, and bacteria infestations and what to do about them. by [Barry Zalma]This book is the latest addition to Barry Zalma’s series of books and articles that form the most thorough, up-to-date, expert-authored guides available today about damage to structures and injuries to people by mold, fungi, bacteria or viral infections.

Zalma’s Mold and Fungi Handbook deals specifically with the issues relating to mold, fungi, and bacterial infestations and provides a detailed examination of the substances, their potential for property damage and bodily injury.

Written by nationally-renowned insurance coverage and insurance claims expert, Barry Zalma, a semi-retired insurance coverage attorney, insurance claims consultant, insurance claims expert witness, author, videoblogger and blogger. Zalma’s Mold and Fungi Handbook provides in-depth explanations, analysis, examples, and detailed discussion of:

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

Thorough, yet practical, this book forms the ideal guide for any property owner, professional who works in or frequently interacts with the repair or remediation of mold, fungi or bacteria infested property. It is also of use to every insurance underwriting, sales or claims professional and any lawyer involved in the construction industry or who is involved in construction defect litigation dealing with mold, fungi or bacterial infestations. Business owners, whether they own or rent property, will benefit greatly from the The Mold and Fungi Handbook. It is the perfect resource for insurance educators, trainers, and students whose role requires an understanding of mold, fungi and bacterial infestations.
The author has provided checklists, and information and references to statutes involved with mold, fungi or bacteria.

This, Zalma’s Mold & Fungi Handbook was written to help anyone faced with property damage or bodily injury as a result of exposure to mold, fungi or bacterial infestations. It was also written to assist in the presentation of claims to tortfeasors and insurers for the damages to property or persons.

Kindle Edition

Random Thoughts on Insurance – Ten Volumes

Random Thoughts on Insurance Volume X: From Barry Zalma’s Blog Zalma on InsuranceAfter more than 52 years acting as a claims person and insurance coverage lawyer I enjoy reading court decisions concerning insurance. The idea of this blog is to find new cases that are interesting to me and then write a summary. Some of the cases reviewed will be important. Some may be of first impression. Others will be totally unimportant. All will be interesting.

The case digests and articles from 2010 to the present, now in ten volumes, where I digest cases published by courts of the various states and the United States.

The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

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

by Barry Zalma, Esq., CFE

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

The purpose of an interview is to uncover the truth; the method of uncovering the truth is the art of the interview. Obtaining sufficient relevant information is imperative in everything a lawyer does to protect the interests of the client, yet interviewing techniques are not emphasized in law school training.

Getting the Whole Truth teaches lawyers–from novices meeting their first clients to experienced trial lawyers–effective methods of obtaining information by human interaction. No matter from whom you are seeking information or what your reason for desiring it, these techniques can help you meet and interact with others and effectively gather the facts you need.

$59 NON-MEMBERS, $44 MEMBERS

© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining the Duties of the Public Adjuster

Public Insurance Adjusters

See the full video at https://youtu.be/3xC2McFnSG8

Most policyholders do not have the in-house capability to investigate, evaluate, and negotiate significant property insurance losses. While some losses, such as a small fire loss requiring only minor repairs, may be dealt with easily, others, which involve more complex damages and different potential causes of loss, are much harder to assess. Resolving them may require expertise in understanding the scope of coverage provided by the applicable property insurance policy, scientific or other specialized background to determine the cause of a specific loss, the ability to determine the cost to repair or replace the damaged property, and the calculation of the amount of a time element (business interruption) loss.

In such cases, the policyholder may engage a public insurance adjuster (PA). PA’s are licensed by almost every state and their contract forms must be approved by the state. All PAs claim to be experts on property loss adjustment; most are. They represent only policyholders in fulfilling the duty to prepare, file, and adjust insurance claims. The PA should handle every detail of the claim, working closely with the policyholder and the insurer to obtain a prompt and reasonable settlement.

PAs usually charge a contingency fee, which they present to the insured as a fait accompli. But this fee is negotiable. The insured should try to lower it as much as possible. For a major loss, more than one PA will arrive at the site seeking a contract. A fee quoted by one can be reduced by seeking lower fees from the others. Rates can be negotiated from a low of 3% to a high of 40%, although the average charge is 10% to 15%. When considering a PA, the insured must take into account the fact that even if the insurer pays the full amount of the loss, the cost of the adjuster’s fee may not leave enough funds to fully repair the damaged structure.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Louisiana Anti-Indemnity Statute Defeats Additional Insured Endorsement

Government Owned Sewerage Department’s Construction Contract Additional Insured Requirements Declared Void

Anti-Indemnity Statute Refuses Coverage of Sole Negligence of Additional Insured

The Consolidated Sewerage District No. 1 of the Parish of Jefferson (hereinafter “the Parish”) and American Alternative Insurance Company (hereinafter “AAIC”) appeal from the trial court’s decision granting summary judgment in favor of co-defendants Amerisure Insurance Company (hereinafter “Amerisure”) and Alterra American Insurance Company (hereinafter “Alterra”), finding that policies issued were void to the extent that they provided indemnity and insurance coverage for damages caused by the Parish’s own negligence.

In Shane Salathe v. The Parish Of Jefferson Through The Department Of Sewerage, NO. 19-CA-427, C/W 19-C-303, Fifth Circuit Court Of Appeal State Of Louisiana (July 15, 2020) the Court of Appeal was asked to interpret the policies and state anti-indemnity statutes.

UNDISPUTED FACTS

At the time of his injuries, Mr. Salathe was performing work at a lift station, part of the sewerage system of the Parish.

The Parish and Fleming Construction Company, LLC (hereinafter “Fleming”) entered a contract for replacement or restoration of existing sewer mains in Jefferson Parish. The “Standard General Conditions of the Construction Contract” (hereinafter “General Conditions Contract”) between the Parish and Fleming required Fleming to procure certain insurance policies naming the Parish as an additional insured, including, inter alia, a commercial general liability and umbrella policy and also indemnifying the Parish, except in the instance of the sole negligence of the Parish.

Fleming procured from Amerisure the Commercial General Liability policy (hereinafter “Amerisure policy”) with the limit of $1,000,000.00 per occurrence. Further, Fleming procured from Alterra America Insurance Company the Commercial Excess Liability policy (hereinafter “Alterra policy”) with the limit of $5,000,000.00 per occurrence.

A Fleming foreman, Shane Salathe, descended a ladder into the wet well to perform his work. As Mr. Salathe ascended the ladder to exit the wet well, he grasped the door to the well to steady himself. When he put pressure on the door, the locking arm on the hatch door failed, allowing the door to slam, which caused Mr. Salathe to fall off of the ladder. Mr. Salathe fell almost thirty feet to the bottom of the well and suffered a traumatic brain injury and paraplegia.

Mr. Salathe sued the Parish contending that the Parish is liable for his injuries through its negligence in, inter alia, failing to maintain the hinge on the door to the well, which failed and caused his injuries. Later Salathe added as defendants, the Parish’s insurer, American Alternative Insurance Company (hereinafter “AAIC”), and Fleming’s insurers, Amerisure and Alterra (hereinafter “Fleming’s insurers”) because of their contractual obligation to defend and indemnify the Parish as a named insured.

Fleming’s insurers filed their joint motion for partial summary judgment asking the trial judge to declare that the contractual indemnity and insuring agreements between the Parish and Fleming are “void, null, and unenforceable” under Louisiana law.

Notably, the Amerisure CGL policy contained a Contractor’s Blanket Additional Insured Endorsement (to which the Alterra excess policy was also subject). Fleming’s insurers argued that the language of indemnity and insuring provisions in the General Conditions Contract was null, void, and unenforceable under Louisiana law, and therefore, pursuant to the language of the endorsement to their insurance policies, Jefferson Parish is not an additional insured.

DISCUSSION

Louisiana statute: La. R.S. 38:2216(G) specifically allows for the additional insured provisions like those in the contract between Jefferson Parish and Fleming and provides: “It is hereby declared that any provision contained in a public contract, other than a contract of insurance, providing for a hold harmless or indemnity agreement, or both,
(1) From the contractor to the public body for damages arising out of injuries or property damage to third parties caused by the negligence of the public body, its employees, or agents, …”

If, for purposes of this appeal only, one accepts appellants’ argument that La. R.S. 38:2216(G) permits additional insured requirements covering a public entity’s negligence, then based on the facts at issue in the present matter, this provision is in conflict with the prohibitions contained in Louisiana’s anti-indemnity statute.

By including the phrase, “[n]otwithstanding any provision of law to the contrary and except as otherwise provided in this Section,” in the opening sentence of the statute the legislature expressed its intent for the statute to govern defined construction contracts performed in Louisiana, notwithstanding other existing laws to the contrary and subject only to the exceptions set forth in the statute further evidences the legislature’s intent to apply the statute to the broad range of construction contracts defined in the statute.

The court concluded, therefore, that La. R.S. 9:2780.1(C) governs the contract at issue unless subject to an exception set forth in the LAIA. The following subsections outline the exceptions to the application of the statute and found that La. R.S. 9:2780.1(C) applies to the contract at issue entered into between Jefferson Parish and Fleming.

The trial court’s judgment finding that the additional insured provisions contained in the contract entered into between Jefferson Parish and Fleming are null, void and unenforceable, to the extent they can be interpreted as requiring Fleming to indemnify and procure insurance coverage for Jefferson Parish’s own negligence, and dismissing, with prejudice, claims against certain commercial liability policies issued to Fleming by Amerisure and Alterra.

The judgment of the trial court dismissing, with prejudice, all claims asserted against Amerisure’s CGL policy and Alterra’s Excess Liability Policy to the extent that the policies could be interpreted as providing coverage for the Parish’s own, sole, joint or concurrent negligence was affirmed.

ZALMA OPINION

Louisiana’s statute is something different than the law in most states. It makes it impossible to transfer the risk of loss, by contract requiring another to indemnity the owner, builder or contractor working on a construction project to obtain indemnification from another by contract. Therefore, the standard AIA contracts that require additional insured endorsements cause an insurance contract obligation to defend and indemnify an additional insured void. Owners and general contractors must also obtain their own insurance to protect against the risk of loss to people working on a construction project in Louisiana.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Trigger of Coverage

A Video Explaining the Term “Trigger of Coverage for Property Damage

The term “trigger of coverage” means “what event must occur for potential coverage to commence under the terms of the insurance policy” and “what must take place within the policy’s effective dates for the potential of coverage to be ‘triggered.'” [In Re Feature Realty Litig., 468 F. Supp.2d 1287, 1295, n.2 (E.D. Wash. 2006)]

After the California Supreme Court adopted a continuous trigger in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 685, 42 Cal.Rptr.2d 324, 913 P.2d 878 (Montrose) in the case of successive policies, property damage that is continuous or progressively deteriorating throughout several policy periods is potentially covered by all policies in effect during those periods, so that the insurer’s duty to defend arose under those policies. Insurers, trying to limit their coverage, revised the policy wording.

Therefore, the precise question is what result follows under the language of the policies of insurance to which the parties agreed. The “continuous injury” trigger has been applied mostly in cases involving gradual release of pollutants and other environmental harms. After Montrose, the insurer revised its policies to use the language for the very purpose of “obviat[ing] the application of the ‘progressive damage-continuous trigger’ articulated in Montrose.” As a result, the defendant’s policies state that property damage “which commenced prior to the effective date of this insurance will be deemed to have happened in its entirety prior to, and not during, the term of this insurance.” [Ins. Co. of Pa. v. Am. Safety Indem. Co., 32 Cal.App.5th 898, 244 Cal.Rptr.3d 310 (Cal. App., 2019)]

In King Cnty. v. Travelers Indem. Co. (W.D. Wash., 2019) the Louisiana Court of Appeals ruled that allegations by a property owner that an environmental consultant failed to detect the presence of pollutants on its property did not trigger coverage under the consultant’s liability policies. The Court found that the “occurrence” giving rise to the claims against the insured took place years prior to the issuance of the policies in question.

Whenever a claim is made for damage to property it is essential that both the insurer and the party making the claim determine the date and time when the property was actually physically damaged. Claims should then be made only to the insurer on the risk (the one whose policy is in force) at the time the physical damage occurred not the one whose policy is in force at the time suit is filed.

The word “trigger”, as a term of art, means the event that activates coverage under one or more insurance policies. The trigger of coverage problem arises in determining exactly what must take place within the policy’s effective dates to trigger coverage.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Obamacare Results in Litigation About Lactation Services

Dismissal of Class Action for Lack of Private Right of Action in ACA

The Patient Protection and Affordable Care Act (“the ACA”) includes a mandate that group health plans and health insurers “provide coverage” and “not impose any cost sharing requirements for” certain types of preventive health services, including comprehensive lactation support and counseling services (“CLS”). The ACA defines cost sharing as “deductibles, coinsurance, copayments” and other expenditures required of an insured with respect to essential health benefits covered under a group health plan. Jillian York and Jody Bailey, members of group health plans subject to the mandate, submitted claims to be reimbursed for CLS provided by out-of-network providers. Wellmark Health Plan of Iowa, Inc., and Wellmark Blue Cross and Blue Shield of Iowa (collectively, “Wellmark”) refused to cover these costs.

In Jillian York; Jody Bailey, on behalf of themselves and all others similarly situated v. Wellmark, Inc., d/b/a Wellmark Blue Cross and Blue Shield of Iowa; et al., No. 19-1705, United States Court of Appeals For the Eighth Circuit (July 13, 2020) York and Bailey commenced a putative class action, asserting breach of contract claims under Iowa law and breach of fiduciary duty claims under the Employee Retirement Income Security Act (“ERISA”), based on allegations that Wellmark violated the mandate’s cost-sharing and “information and disclosure” requirements. The district court ruled in favor of the insurers.

FACTUAL BACKGROUND

Jillian York joined the UIChoice group health plan through her job at the University of Iowa. The plan’s coverage manual explains listed a network of providers specified in the manual.  All other medical providers are considered “Out-of-Network” providers.

In early 2016, York chose to deliver her baby at UIHC, which she knew was a UIChoice network facility. While pregnant, she received a prenatal lactation consultation with Deborah Hubbard, a registered nurse and International Board Certified Lactation Consultant (“IBCLC”) who operates UIHC’s breastfeeding clinic. When problems arose in early March, York consulted Mary Johnson, an IBCLC at UIHC, who created a personalized care plan. Johnson posited that York’s son was not transferring milk due to a tongue tie and told York to “seek help elsewhere” as Johnson “had very little experience” with this issue.  York was not charged for these services and consultations.

A pediatric dentist then performed a frenectomy to correct her son’s tongue tie, encouraged York to “follow up with a knowledgeable IBCLC,” and referred her to Jen Pitkin. A representative confirmed the plan covered lactation services but could not identify a CLS provider in Wellmark’s network. The representative noted that Pitkin was affiliated with a facility in the network and advised York to ask whether Pitkin could bill through that facility so York could obtain in-network benefits. York instead met with Pitkin, incurred a $65 charge, and sought reimbursement from the UIChoice plan for that charge. Wellmark denied the claim.

DISMISSAL ORDER ISSUES

Plaintiffs appeal the dismissal of claims that Wellmark violated cost-sharing and information and disclosure requirements of the ACA mandate.  As York was a member of a UIChoice group health plan not governed by ERISA, her breach of contract claim is governed by and construed in accordance with the laws of the State of Iowa, as the coverage manual expressly stated.

Because they could not get a referral to the needed experts the plaintiffs argued there was a facially plausible violation of the ACA’s preventive health services mandate.

In dismissing these claims, the district court accurately noted that neither the statutory mandate nor its implementing regulations requires the disclosure of information — including a list of providers — or prohibits “administrative barriers” or “inconsistent guidance.” The mandate’s implementing regulations do not include information and disclosure requirements.

Bailey seeks relief under a group health plan governed by ERISA, which preempts state law remedies. Although the ACA does not impose “information and disclosure requirements,” ERISA provides a private right of action for an alleged breach of a plan administrator’s duty to distribute written notices that are sufficiently accurate and comprehensive to reasonably apprise plan participants and beneficiaries of their rights and obligations under the plan. But Bailey did not assert a breach of that duty. Rather, her claim is that the ACA mandate and its implementing regulations impose a categorical fiduciary duty on the administrators of group health plans governed by ERISA to publish a “separate list” of lactation counseling providers. She was wrong, the health plan need only provide a list of network providers and describe when out-of-network services are covered.

Summary Judgment Issues.

The ACA mandate’s implementing regulations provide that a group health plan or issuer may deny coverage or impose cost sharing for items and services “performed by an out-of-network provider” if the plan or issuer “ha[s] in its network a provider who can provide an item or service.”

The ACA does not use the term “network of providers.” An implementing regulation provides that a plan or issuer may deny coverage or impose cost sharing for items and services “performed by an out-of-network provider” if the plan or issuer “ha[s] in its network a provider who can provide an item or service.”

To adopt Plaintiffs’ interpretation would require the court to change the contracts that state-regulated group health insurers negotiate with medical providers.

The undisputed facts show York and Bailey could receive (and in fact received) lactation support and counseling services at all relevant points during their pregnancies, during their inpatient stays, and after their discharge from the hospital. They received those services without charge from Certified Lactation Consultants at UIHC, an in-network facility seven miles from York’s home and ten to fifteen minutes from Bailey’s. . . . Wellmark’s decision not to credential lactation consultants, without more, does not prove Wellmark lacked in-network providers capable of providing comprehensive lactation services.

Difficulty in scheduling an appointment with a provider does not establish an insurer’s noncompliance with the requirements. Moreover, the summary judgment record established that Wellmark provided York and Bailey qualified, available in-network providers of CLS.

The Eighth Circuit concluded that the district court did not err in granting summary judgment dismissing Plaintiffs’ cost-sharing claims.

ZALMA OPINION

It seems the public, like the two ladies who tried to create a class action suit because of refusal to pay a $65 claim simply think the ACA guaranteed all medical services would be free. Clearly, that was not the case. The ladies received the services promised to them and even the ACA did not require that the health insurer provide free services for every possible situation. Insurance policies and statutes must be read in full and applied as written. Courts can’t change contracts nor can they even consider changing a clear and unambiguous statute.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube-

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Construction Defects and Insurance

Construction Defects and Insurance

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

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

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

The Eight volumes include:

Volume One : The Structure, The Construction Contract, and Construction Defect Insurance — Kindle book Paperback

Volume Two:The Defects andUnderstanding Insurance and Underwriting – Kindle book; Paperback

Volume Three: Construction Defect Policies – Kindle book;   Paperback

Volume Four: Liability Insurance. – Kindle Book; Paperback

Volume Five: The Tort of Bad Faith and Construction Defects – Paperback

Volume Six: Construction Defect Suits –  Kindle book; Paperback

Volume Seven: Tort Defences and the Trial of a Construction Defect Case – Kindle BookPaperback.

Volume Eight: Evaluation and Settlement & Alternative Dispute Resolution – Kindle Book; Paperback


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

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Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

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Claims Personnel

The People Who Keep the Promises Made by the Insurance Policy

Watch the full video at https://youtu.be/zfob5rQwBWY

The Claims Adjuster

The claims adjuster is the contact between the insured and the insurer. He or she can be an employee of the insurer or an independent contractor retained by the insurer to investigate and adjust insurance claims on its behalf.  The adjuster is person charged with investigating a claim to fulfill the promises made by the policy of insurance and establish

whether the company is liable to the insured or a claimant and to what extent. The investigation can include interviews of the parties involved, property inspections, and reviewing hospital records or police reports.

The Claims Investigator

Although a small part of the work of the claim adjuster is to investigate, the adjuster does many more things. Insurance companies now retain the services—either by employing them directly or by use of independent contractors—of investigators whose expertise relates exclusively to insurance claims. The experienced claims investigator is usually a part of, or vendor to, a Special Investigative Unit (SIU) set up to protect the insurer and mandated by most states as a means to reduce the amount of fraud perpetrated against insurers.

The Claims Supervisor or Claims Manager

The insurance company claims department is set up with a hierarchy based upon the complexity and value of losses. The claims adjuster’s authority is limited, whether he or she is an employee of the insurer or a contractor. The claims supervisor has more authority to resolve claims than the adjuster and will be consulted by the claims adjuster if the loss exceeds the adjuster’s authority. The supervisor controls the work of several adjusters, drawing on his or her greater experience, education, and training.

Claims Counsel

The insured may meet with an attorney representing the insurer under two circumstances:

  • If the insured has been sued by a third person the insurer will retain counsel to defend the insured at the insurer’s expense. Counsel will meet with the insured and work to present the most effective defense to the suit.Insureds most often meet with claims counsel in a situation where the insured is in an automobile accident and a third party sues him or her for injuries incurred in the accident.
  • If there is a problem with coverage or with the extent of the claim, if the insured retains counsel to present his or her claim, or if fraud is suspected, the insurer will retain counsel to protect its interests. Attorneys who represent insurers in such situations are often referred to as “Coverage Counsel.” Coverage Counsel will usually deal with the insured’s personal attorney.

© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Barry Zalma on YouTube-

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Failure to Identify Relative as a Resident of Household Limits Available UM Coverage

Uninsured Motorist Coverage Limited to Minimum Statutory Limits

Tiffany Chow appealed the district court judgment in favor of IDS Property Casualty Insurance Company in this insurance coverage dispute. In IDS Property Casualty Insurance Company v. Tiffany Chow, No. 19-55837, United States Court Of Appeals For The Ninth Circuit (July 14, 2020) Chow claimed she was entitled to full policy limits even though policy excluded her. The trial court allowed her to receive the statutory limit of $30,000 but refused to allow her to receive the stated UM limit of $250,000.

FACTS

The automobile insurance policy provided $250,000 per person in underinsured motorist bodily injury coverage to a named insured or a “relative” of a named insured. The policy defined a “relative” as “a person related to you by blood, marriage, registered domestic partnership under California law or adoption who is a resident of your household and whom you have previously identified to us.” The district court concluded that Chow was ineligible for coverage because she had not been “previously identified” to IDS as a resident relative. In fact, the named insureds had informed IDS that Chow was not a resident of their household.

The district court further concluded that Chow was covered by the implied-by-law terms of the policy. In the absence of a written waiver, California law requires an automobile insurance policy to provide underinsured motorist bodily injury coverage of at least $30,000 per person to any relatives of a named insured “while residents of the same household.” The district court held that Chow, as a resident relative, was covered for $30,000 as provided by California law. Chow appeals, arguing that her coverage was $250,000 rather than $30,000.

Chow claimed the “previously identified” requirement is unenforceable, and when that requirement is read out of the policy, she meets the policy’s definition of “relative.”

ANALYSIS

Under California law, policy exclusions are not enforceable to the extent they conflict with California law. Thus, the policy’s “previously identified” requirement is unenforceable, but only to the extent it denies all coverage to unidentified resident relatives. It is, however, enforceable to the extent it denies coverage above the $30,000 statutory minimum.

Unless the insurer and the named insured execute a written waiver an insurance policy governed by its terms will be held to provide uninsured motorist coverage in the amounts mandated in the statute. Every insurance policy must be read so as to provide the minimum coverage required by law under a policy of that type, even where the policy on its face fails to do so.

The purpose of the uninsured motorist statute is not to make all drivers whole from accidents with uninsured drivers, but to make sure that drivers injured by such drivers are protected to the extent that they would have been protected had the driver at fault carried the statutory minimum of liability insurance.

The Ninth Circuit rejected Chow’s contention that the district court improperly concluded that the “previously identified” requirement was not plain, clear, and conspicuous. Further, although the policy did not clearly or conspicuously state that Chow was eligible by law for $30,000 in underinsured motorist coverage, Chow points to no authority requiring a policy to clearly and conspicuously set forth policy terms enhancing—rather than reducing—insurance coverage.

The policy unambiguously required the named insured to identify Chow as both a relative and a resident of the household. Chow was not so identified. As a result she was not entitled to the full amount of the stated coverage but by law she was entitled to the statutory minimum.

ZALMA OPINION

The Ninth Circuit read the entire policy and found its exclusion of coverage for a resident relative not previously identified to the insurer before a loss, to be clear, and unambiguous. Since the exclusion itself was conspicuous and known to the named insured who advised IDB that Chow was not a resident relative she was not entitled to the full limits but got the statutory minimum.  Facts can often be difficult things and those difficult things – and a statute – allowed Chow to receive up to $30,000 of UM coverage that IDB did not intend to pay but did not get the $250,000 she wanted.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Zalma’s Insurance Fraud Letter – July 15, 2020

Zalma’s Insurance Fraud Letter

Insurance Fraud Is Often A Violent Crime

See the video about  Zalma’s Insurance Fraud Letter, July 15, 2020 at https://youtu.be/xtExcV6fPuQ and read the full text of ZIFL at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-barry-zalma-esq-cfe-10c and at https://zalma.com/zalmas-insurance-fraud-letter-2/

Articles, including:

  • Insurance Fraud Is Often A Violent Crime
  • A Lie Under Oath to an Insurer is a Felony
  • Listen to the Oral Argument and the First Ruling Denying Claim for Loss of Earnings
  • Claim Resulting from Covid-19 Lockdown
  • Convictions from the Coalition against Insurance Fraud
  • Health Insurance Fraud Convictions
  • Other Insurance Fraud Convictions
  • Videos on YouTube and Zalma on Insurance from Barry Zalma​Consider Books to Show
  • Your Appreciation to Your Insurer Clients or Claims Employees
  • Books from Full Court Press
  • Books from the American Bar Association

© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining How the Law of Unintended Consequences Destroyed the Need for the Tort of Bad Faith

The Law of Unintended Consequences and the Tort of Bad Faith

See the full video at https://youtu.be/s7cnXrrJqTs

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill desi

gned to cut the maximum permissible rate of interest from 6 percent to 4 percent. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive.

The business of insurance is, unfortunately, subject to the law of unintended consequences as if it were on steroids.

Available as a paperback  

Available as a Kindle book


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Private Limitation of Action Provision Defeats Law Suit Against Insurer

Good Deeds by Insurer Still Punished by Late Filed Lawsuit

Insurance policies, to protect the insurer from stale claims and lawsuits where available evidence is difficult to obtain, contain private limitations of action provisions usually one or two years. In addition, those who are insured by a first party property insurance policy must protect the property from further loss and produce evidence to establish the amount of loss.

In Martha Ventilla v. Pacific Indemnity Co., 19-CV-1134 (JMF), United States District Court Southern District Of New York (July 9, 2020) Martha Ventilla submitted a supplemental insurance claim against Pacific Indemnity Company (“Pacific Indemnity”), seeking to recover, pursuant to a homeowner’s insurance policy (the “Policy”), nearly $400,000 in damages in addition to the $951,428.46 already paid that occurred when, on January 31, 2015, the bathtub in her Manhattan apartment overflowed and flooded her apartment with one to two inches of water.

Pacific Indemnity moved for summary judgment. Pacific Indemnity averred that all of Ventilla’s claims were time barred by the Policy’s two-year limitations clause.

FACTS

On January 31, 2015, Ventilla was in her apartment bedroom when she noticed water creeping in from under her door. She followed the rising stream to the bathroom, where she discovered that her bathtub was inexplicably overflowing. In a desperate attempt to stem the flood and protect her most-cherished items, Ventilla (in addition to contacting building staff, who arrived with a wet vacuum cleaner) mopped up the water with clothing and linens. But instead of laundering the clothing and linens for reuse or, at the very least, keeping the damaged possessions in storage in support of a later insurance claim, Ventilla bagged the soaked items and other ruined contents from her apartment and threw them away that same day.

Ventilla reported the incident to Pacific Indemnity on February 2, 2015, and on February 4 and 25, 2015, representatives from the insurance company conducted initial and follow-up surveys of her apartment. Ventilla did not, and indeed, could not, present the damaged items to the representatives for inspection during either visit.

More than a year passed, and other than presenting some receipts and credit card statements for certain items, Ventilla never provided more definitive details about her supplemental loss claim or provided the artwork for inspection or appraisal, despite Pacific Indemnity’s follow-up requests. An art appraisal from Ventilla’s expert was submitted June 2018, more than three years after the loss.

Eventually, the parties entered into a Settlement Agreement and Release (“Release”) signed by Ventilla on December 5, 2016, pursuant to which Pacific Indemnity paid Ventilla $951,428.46 on account of construction repairs, mold remediation, contents, fine arts and extra living expenses. In exchange, Ventilla released any “claims and potential claims for Additions & Alterations and Additional Living Expenses” arising under the Policy and pertaining to the January 31st incident.

Nearly twenty-eight months after the January 31st flood, on May 23, 2017, Ventilla submitted a Supplemental Contents Claim and, for the first time, advised Pacific Indemnity that she was seeking “$286,640.48 for damage to ‘seven closets’ worth of items.” Pacific Indemnity obtained a proof of loss and examination under oath. Yet it was only after this lawsuit commenced, on July 9, 2019 — over four and a half years after the date of loss — Ventilla in her First Set of Interrogatory Responses finally claimed $99,098.00 for damage to her fine arts collection (the “Fine Arts Claim”).

Pacific Indemnity advised Ventilla that the company disclaimed coverage for Ventilla’s Supplemental Contents Claim and any potential Fine Arts Claim as time barred by the policy’s two-year limitation clause.

ANALYSIS

Under New York law an agreement which modifies the Statute of Limitations by specifying a shorter, but reasonable, period in which to commence an action is enforceable. Courts have held that there is nothing inherently unreasonable about a two-year period of limitation; in fact, as Pacific Indemnity rightly notes, courts in New York have enforced limitation clauses that are even shorter. What matters here, however, is not so much the duration of the limitations period, but the accrual date and whether, in view of the circumstances of the particular case, the relevant conditions precedent can be satisfied within the prescribed time period.

Under the Policy Ventilla’s ability to bring any legal action against Pacific Indemnity was conditioned on two events: first, that she complied with all conditions of the policy, and second, that she bring the action within two years after a loss occurs. To satisfy all of the conditions for a property damage claim, Ventilla was required to notify Pacific Indemnity or her agent of the loss as soon as possible; take all reasonable means that are necessary to protect property from further loss or damage; prepare an inventory of damaged personal property, attaching bills, receipts, and other support of the like; and, upon Pacific Indemnity’s request, show Pacific Indemnity the damaged property, participate in an examination under oath, and submit, within sixty days of the request, a signed, sworn proof of loss.

All of these events could, with reasonable diligence, have been completed within two years of the January 31, 2015 incident. Ventilla’s failure to launder or keep the damaged items — and the snowball effect that that misguided decision may have had with respect to her ability to submit the Supplemental Contents and Fine Arts Claims before January 31, 2017 — does not excuse that fact. The court concluded that no reasonable jury would conclude otherwise.

Upon acceptance of an insurance policy and in the absence of fraud or misrepresentation, an insured is charged with knowledge of all of the terms and conditions of the policy.

ZALMA OPINION

No one is entitled to sit on rights, breach material conditions of a contract, and then claim their sloth was caused by an insurer taking advantage of their innocence or old age after being paid almost one million dollars. The two-year private limitation of action provision in many first party property policies is designed to avoid late or piecemeal  claims like those presented by Ventilla. This case teaches that the insured also has an obligation to deal fairly and in good faith with the insurer and act promptly and efficiently to prepare and prove a claim.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining the Claims Made CGL

The Claims Made Form

See the full video here: https://youtu.be/WoQzgOK375g

The insurance industry spent 10 years trying to restrict their liability for long tail losses. They tried wording that would prohibit stacking, as well as wording that would only allow coverage for losses first discovered during the policy period. “Claims Made” wording, which would only allow coverage to be triggered upon the making of a claim, and limited “occurrence” coverages were also attempted.

Ultimately, the decision was made by the ISO and its supporters to use a Claims Made approach, providing coverage only if the loss occurs and the claim is made to the insurer during the policy period. This eliminates long tail claims. Although effective, the Claims Made CGL turned out to be almost impossible to sell to the public. People in the construction industry would be exposed and probably uninsured for all but the most blatant defects, especially with long statutes of limitation or statutes of repose.

A key purpose of the claims made policy is to prevent limits or policies from being stacked, as well as to eliminate uncertainty regarding the policy that will apply to a given matter. This is accomplished by concentrating on the time that a claim is received instead of struggling with the problem of determining the date of “occurrence.” The date of “occurrence” is usually set at the date when the injured party was actually injured. Some courts have modified this simple rule to provide coverage where none was intended. The claims made form avoids such “social engineering.”

For example, if a builder had a Claims Made policy there would be no coverage available for a claim of defective construction:

  • filed nine years and eleven months after substantial completion of the structure; or
  • where the builder tried to fix the problem two years before only to have the roof leak again because the claim was made before the inception of the policy.

Pressures from several groups resulted in an alternative occurrence wording. In some Claims Made forms, both the injury-causing event and the claim must be made during the policy period. In others, the claim must be made during the policy period and the loss-causing event can occur any time.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Insurance Created by Government Needs Nine Years of Court Decisions to Make Sense

The Little Sisters of The Poor Establish Why Government Should Not Be Involved in Insurance

The Patient Protection and Affordable Care Act of 2010 (Obama Care or the ACA), an attempt to legislate health insurance brought about more than nine years of litigation over some of its requirements that demanded that religious people and religious organizations do something – providing for contraceptive insurance coverage – that violated the religious beliefs and raised litigation to gain an exemption from the mandate in violation of the First Amendment to the U.S. Constitution.

In Little Sisters Of The Poor Saints Peter And Paul Home Pennsylvania, et al. Donald J. Trump, President Of The United States, et al. v.  Pennsylvania, et al., No. 19-431, No. 19-454, Supreme Court Of The United States  (July 8, 2020) in a set of consolidated cases, Justice Thomas, writing for the Supreme Court, decided whether the Government created lawful exemptions from a regulatory requirement implementing the ACA, 124 Stat. 119.

The requirement at issue obligates certain employers to provide contraceptive coverage to their employees through their group health plans. Though contraceptive coverage is not required by (or even mentioned in) the ACA provision at issue, the Government mandated such coverage by promulgating interim final rules (IFRs) shortly after the ACA’s passage. This requirement is known as the contraceptive mandate.

THE SUPREME COURT HELD:

The Departments had the authority under the ACA to promulgate the religious and moral exemptions. The pivotal phrase, “as provided for,” granted sweeping authority to HRSA to define the preventive care that applicable health plans must cover. That same grant of authority empowers it to identify and create exemptions from its own Guidelines.

FACTUAL BACKGROUND

After six years of protracted litigation, the Departments of Health and Human Services, Labor, and the Treasury (Departments)—which jointly administer the relevant ACA provision—exempted certain employers who have religious and conscientious objections from this agency-created mandate. The Third Circuit concluded that the Departments lacked statutory authority to promulgate these exemptions and affirmed the District Court’s nationwide preliminary injunction. This decision was erroneous.

Shortly after the Departments promulgated the 2013 final rule, two religious nonprofits run by the Little Sisters of the Poor (Little Sisters) challenged the self-certification accommodation. The Little Sisters “are an international congregation of Roman Catholic women religious” who have operated homes for the elderly poor in the United States since 1868. They feel called by their faith to care for their elderly residents regardless of “faith, finances, or frailty.”

Consistent with their Catholic faith, the Little Sisters hold the religious conviction that deliberately avoiding reproduction through medical means is immoral. The Little Sisters were far from alone in raising RFRA challenges to the self-certification accommodation. Religious nonprofit organizations and educational institutions across the country filed a spate of similar lawsuits, most resulting in rulings that the accommodation did not violate RFRA. In Zubik v. Burwell, 578 U. S. ___, ___ (2016) (per curiam), the Supreme Court opted to remand the cases without deciding the question.

Within a week of the 2017 IFRs’ promulgation, the Commonwealth of Pennsylvania filed an action seeking declaratory and injunctive relief. Among other claims, it alleged that the IFRs were procedurally and substantively invalid under the APA. The District Court held that the Commonwealth was likely to succeed on both claims and granted a preliminary nationwide injunction against the IFRs. The Federal Government appealed. The Third Circuit affirmed.

Congress could have limited HRSA’s discretion in any number of ways, but it chose not to do so. Justice Thomas explained that it is a fundamental principle of statutory interpretation as it is a fundamental principle of insurance interpretation that “absent provision[s] cannot be supplied by the courts.” Rotkiske, 589 U. S., at ___ (slip op., at 5). This principle applies not only to adding terms not found in the statute, but also to imposing limits on an agency’s discretion that are not supported by the text.  It is not for the Supreme Court to rewrite the statute nor the policies written in accordance with the ACA requirements, so that it covers only what it thinks is necessary to achieve what it thinks Congress really intended.

The only question before the court was what the plain language of the statute authorizes. Justice Thomas, and six other justices including the Chief, concluded that the plain language of the statute clearly allows the Departments to create the preventive care standards as well as the religious and moral exemptions.

Because the court held that the Departments had authority to promulgate the exemptions, unless a statutory exception applies, here, the Departments issued an IFR that explained its position in fulsome detail and provided the public with an opportunity to comment on whether the regulations should be made permanent or subject to modification. The object of notice and comment, in short, is one of fair notice and respondents certainly had such notice.

For over 150 years, the Little Sisters have engaged in faithful service and sacrifice, motivated by a religious calling to surrender all for the sake of their brother. They commit to constantly living out a witness that proclaims the unique, inviolable dignity of every person, particularly those whom others regard as weak or worthless. But for the past seven years, they—like many other religious objectors who have participated in the litigation and rulemakings leading up to the decision—have had to fight for the ability to continue in their noble work without violating their sincerely held religious beliefs.

After two decisions from this Court and multiple failed regulatory attempts, the Federal Government has arrived at a solution that exempts the Little Sisters from the source of their complicity-based concerns—the administratively imposed contraceptive mandate.

The Departments had the statutory authority to craft that exemption, as well as the contemporaneously issued moral exemption. The rules promulgating these exemptions are free from procedural defects.

Therefore, the Supreme Court reversed the judgment of the Court of Appeals and remanded the cases for further proceedings consistent with the opinion.

The dissent by Justice Ginsberg concluded that the blanket exemption for religious and moral objectors to contraception formulated by the IRS, EBSA, and CMS is inconsistent with the text of, and Congress’ intent for, both the ACA and RFRA contending that neither law authorizes it. The original administrative regulation accommodating religious objections to contraception appropriately implemented the ACA and RFRA consistent with Congress’ staunch determination to afford women employees equal access to preventive services, thereby advancing public health and welfare and women’s well-being.

ZALMA OPINION

The ACA (Obamacare) is not insurance but a law mandating all heath insurance issued in the U.S. comply with the statute’s requirements. The ACA then gives regulators the ability to set rules and requirements for such policies. One such requirement was that every policy provide coverage for contraception for female insureds. Originally, there were no exceptions to the rule and the Little Sisters and many others sued to protect them from being ordered to violate their religious beliefs. After nine years of litigation and multiple appeals, the US, with regulations providing for exemptions, tried to protect the religious only to be sued by the state of Pennsylvania who had a court issue a nationwide injunction against the exemption. Justice Thomas and the other six justices in the majority found the exemption proper and enforced it by reversing the injunction. Insurers must learn from  this case, the same lesson learned by the government, that a court should not, and should always, refuse to rewrite a statute or policy when its language is clear.

 


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

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A Video Explaining the Fair Claims Settlement Practices Regulations

The Reasons Behind the California Fair Claims Settlement Practices Regulations

See the full video here https://youtu.be/7ELoCEAIldA

In 1993 the state of California determined that the insurance industry needed to be regulated to stop insurers from treating the people insured badly and without good faith. It created a set of Regulations called the “California Fair Claims Settlement Practices Regulations” (the “Regulations) to enforce the mandate created by the California Fair Claims Settlement Practices statute, California Insurance Code Section 790.03 (h) in response to the direction of the California Supreme Court. [Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal. 3d 287 (1988)]

In so doing the California Department of Insurance (CDOI) attempted to micro manage the business of insurance claims and create a method to punish those insurers who failed to comply with the Regulations. Some of the Regulations asserted what had always been recognized by the insurance industry and good faith and proper claims handling. Others imposed draconian mandates on what and when to do everything in the claims process.

The Regulations also provided a guide to insureds, public insurance adjusters and policyholders’ lawyers to assert any violation of the Regulations to be evidence of an insurer’s breach of the implied covenant of good faith and fair dealing.

The Regulations impose on all insurance claims personnel the requirement that they read and understand the Regulations or attend an annual training program no later than September 1 of each year. Insurers are compelled to ascertain that every employee involved in any way in the claims process is trained about the Regulations or has submitted a sworn statement that he or she has read and understands the Regulations. The Regulations even require that the insurance claims managing executive attest, under oath, that each employee has been trained with regard to and/or understands the Regulations. This requirement must be complied with in order to avoid the possibility of administrative penalties upon the insurer or prosecution of the officer for perjury.


© 2020 – 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 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Long Time in Jail for Pill Mill Doc & Fraudster

90 to 180 Months for Pill Mill Doc’s Fraud & Death of Victim to Whom She Provided Narcotic Drugs

In Commonwealth Of Pennsylvania v. Stephanie Tarapchak, J-S17021-20, No. 281 MDA 2018, Superior Court Of Pennsylvania (JUNE 23, 2020) Stephanie Tarapchak appealed  from the  judgment of sentence entered in the Court of Common Pleas of Lackawanna County (“trial court”), following her jury convictions for insurance fraud, theft by deception, corrupt organizations, perjury, endangering the welfare of children (“EWOC”), drug delivery resulting in death, distributing prescription to drug dependent person, and refusal or failure to keep records.

FACTS

Appellant operated a small internal medicine practice in Ashland, Pennsylvania.  Appellant prescribed and dispensed excessive amounts of narcotics to her paramour, Delton Bolton, as well as her minor child, F.T., whereby Appellant became engaged in a hostile custody dispute with her ex-husband, Alex Tarapchak. Additionally, Appellant was investigated in connection with the fatal drug overdose of Thomas Kromer (the “victim”).

On September 21, 2015, Appellant proceeded to a two-week jury trial. During trial, the Commonwealth presented thirty-four witnesses and admitted a voluminous amount of exhibits. With respect to the victim’s death, the Commonwealth offered the testimony of six witnesses.

The Commonwealth also presented evidence demonstrating that Appellant owned the internal medicine practice in Ashland. Appellant exhibited control of the distribution of narcotics to individuals in Ashland through her internal medicine practice and fraudulently billed insurance companies.

Appellant’s paramour, Mr. Bolton, testified that Appellant dispensed or prescribed quantities of Vicodin and testosterone to him throughout their two year relationship utilizing the Moore catalog. He recognized the Moore catalog, and described in detail the manner in which Appellant ordered the Vicodin, and designated the location of the Vicodin, on the nightstand. Mr. Bolton testified that he became a daily Vicodin user. Mr. Bolton verified Appellant’s awareness of his addiction, and admitted that they discussed his addiction on several occasions.

The jury began deliberations, and on October 6, 2015, the jury found Appellant guilty of insurance fraud, theft by deception, corrupt organizations, perjury, EWOC, drug delivery resulting in death, distributing prescription to a drug dependent person, and refusal or failure to keep records.

At sentencing the trial court stated: “your understanding that came from your medical background was put aside as you attempted to provide people who you clearly knew were addicted with things that would only enhance their addiction, and, as in this case, result in the loss of life of one of those people.” Further, the court stated: “when I saw that you put drugs in the hands of a member of your own family who was a minor. That presents serious problems to the court, because I don’t know what was clouding your thinking, because in your mind you had to know you were doing wrong. To give a prescription without the appropriate diagnostic procedures and having to treat the person fully, clearly is doing wrong from the perspective of being a healer of people.” Therefore, the court sentenced Appellant to an aggregate term of ninety to one hundred and eighty months’ imprisonment.

THE APPEAL OF THE SENTENCE

In particular, Appellant argues that the evidence was insufficient to sustain her convictions for drug delivery resulting in death and corrupt organizations. A claim challenging the sufficiency of the evidence is a question of law.

An appellate court, reviewing the sufficiency of the evidence, views all the evidence admitted at trial in the light most favorable to the verdict winner, there is sufficient evidence to enable the fact-finder to find every element of the crime beyond a reasonable doubt. In addition, the facts and circumstances established by the Commonwealth need not preclude every possibility of innocence. Any doubts regarding a defendant’s guilt may be resolved by the fact-finder unless the evidence is so weak and inconclusive that as a matter of law no probability of fact may be drawn from the combined circumstances.

The Commonwealth may sustain its burden of proving every element of the crime beyond a reasonable doubt by means of wholly circumstantial evidence. Moreover, in applying the above test, the entire record must be evaluated and all evidence actually received must be considered. Appellant’s sufficiency challenge regarding drug delivery resulting in death lacks merit.

The trial court accurately and thoroughly addressed the merits of Appellant’s sufficiency challenge regarding her conviction for drug delivery resulting in death. The court found, among other things, that Appellant demonstrated extreme indifference to human life by continuing to prescribe the victim opioids at an accelerated pace without (a) adequately evaluating him, (b) maintaining medical records or (c) a prescribing rationale.

The trial court found that Appellant was aware that the victim “consumed his opioid prescriptions in a haphazard and reckless manner, presented with several psychiatric diagnoses as well as chronic obstructive pulmonary disease, and possessed a predisposition for arrhythmia.” Yet, “she deliberately increased the potency and dosage” of his prescriptions “so as to bypass the restraint of the insurance company.”  In so doing, Appellant consciously disregarded an unjustified and extremely high risk that her actions might cause death or seriously bodily injury. The evidence establishes that the Commonwealth proved beyond a reasonable doubt that Appellant committed drug delivery resulting in death.

In her second issue, Appellant challenged the sufficiency of the evidence supporting her conviction for corrupt organizations. The trial court also accurately and thoroughly addressed the merits of Appellant’s sufficiency challenge regarding her conviction for corrupt organizations. The trial court found, inter alia, that Appellant “either directly or indirectly participated in a pattern of racketeering activity through the two predicate acts of Insurance Fraud, and Distributing Prescriptions to Drug Dependent Person.”

The court reasoned that the two predicate acts formed a pattern related to the enterprise in that Appellant used the resources of her medical practice to acquire and maintain through the Moore catalog an inventory of narcotics. She utilized this inventory to supply Vicodin to her drug-addicted paramour without a prescription so as to avoid insurance regulations and criminal investigation.

She further used the resources of the enterprise, including the labor of her employees, and unwitting patients to receive income from insurance companies and funnel the income to herself under the guise of legitimate income. Appellant engaged in illegal commerce on an ongoing regular basis, supplying patients with excessive opioid prescriptions without conducting examinations, or documenting her medical decision making and continued to fraudulently bill insurance companies as if she did.

Moreover, evidence of Appellant’s drug addiction explains the history of the case, including events surrounding her criminal conduct for which she was charged.

In sum, the court concluded that Appellant waived several of the issues raised and the evidence was sufficient to sustain her convictions for drug delivery resulting in death and corrupt organizations.

ZALMA OPINION

Pill Mill Doctors, like Stephanie Tarapchak, commit a dangerous crime that results in the injury and death of those people put in her care. Her crimes are as evil as people who set arson fires in occupied properties or people who commit premeditated murder. Considering she provided narcotics to an addict and her own minor child, her sentence is a minimal for such a heinous crime.


© 2020 – 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 a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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Zalma on Insurance – the Podcast

The Insurance Podcast

Available at https://anchor.fm/barry-zalma and Listen to the Podcast: Zalma on Insurance and https://open.spotify.com/show/2VTJCeGmBUkf0IlFV8SWJk and wherever you get podcasts.

You can listen to

Ethics and the Insurance Product

https://anchor.fm/dashboard/episode/egfj8n

https://anchor.fm/dashboard/episode/ege1rq

and more than 50 episodes with one added five days a week on subjects related to insurance, insurance coverage, insurance law and insurance claims.


© 2020 – 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 a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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A Video Explaining Ethics and The Insurance Product

The Products Sold by Insurers are Promises

See the full video at https://youtu.be/wx-BtQMCWZk

The basic insurance product is a promise that the insurer may never be called upon to fulfill. The value of the promise is based on the trust of the policyholder in the insurer being able and willing to fulfill the promises made by the insurance policy.

Gallup polls since 1977 have consistently ranked insurance sales persons among the lowest in terms of perceived honesty and ethical standards. In the November 1999 poll, insurance sales persons ranked third from last, just above telemarketers and car salesmen.

Depending on circumstances faced by an insurance agent, insurance broker, insurance claims handler or other insurance professionals find that they look to different resources for guidance when faced with an ethical decision. Dealing with mistakes in an honest manner appears to be more related to personal values, which could be assessed by insurers during the selection and hiring process.

The results of various surveys do not support the effectiveness of a number of common prescriptive actions to improve ethical behavior in the insurance industry.

One of the most common prescriptions is ethics training. The results indicate that logically, far fewer hours are spent in ethics training than in sales training.

In addition, there was no significant relationship between ethical intent/behavior and having received training or the number of hours spent in training. In addition, it is important to note that larger doses of ineffective training cannot be expected to improve ethical conduct.

Training in a formal setting, although useful, will not accomplish anything if the person being trained does not already have a well-defined ethical compass that has been applied to all interpersonal and business interactions throughout his or her adult life. State mandated ethical training will not change an unethical person into a paragon of ethics. The most ethics training can hope to accomplish is to reinforce the ethics of those students who are already ethical and will have little or no effect on those who are not.

Ethics training is essential for an insurer’s ability to successfully communicate and carry out its main goal of dealing with all insured’s and claimants fairly and in good faith. Effective ethics training for employees ensures that the insurer is situated for success and that individuals within the company will stay committed to their tasks at hand fairly, ethically and in good faith.

Prompt and efficient customer service to policyholders and other stakeholders is essential to the ethical insurance professional. Insurance is a service business. Good service must be offered at all times for the business to succeed. Insurance professionals dealing with the public are on the front line of providing good service. They are directly accountable to policyholders for this aspect of the policyholder’s relationship with the insurer. The need for rapid and efficient servicing is most apparent when a legitimate claim is received. Only in genuine cases of fraud, deception or negligence on the part of the policyholder should this requirement go unfulfilled.


© 2020 – 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 a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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A Lie Under Oath to an Insurer is a Felony

Swinger Shot by Unhappy Swinger Lies to Get Insurance Benefits and is Convicted of Fraud and Perjury

John Alfonzo Smiley and Cynthia Biasi-Smiley were both charged with presenting a false and fraudulent insurance claim, insurance fraud, concealing an event affecting a person’s right to insurance benefits, two counts of attempted perjury, and presenting a false claim to a state board. A jury found both defendants guilty of the two attempted perjury counts and could not reach a verdict on the other charges. At a subsequent bench trial, defendants were each found guilty of the remaining counts. The trial court suspended imposition of sentence as to the defendants and placed them both on five years of formal probation.

In The People v. John Alfonzo Smiley, The People, v.  Cynthia Biasi-Smiley, C081566, C081737, Court Of Appeal Of The State Of California Third Appellate District (Sacramento) (June 26, 2020) the defendants appealed their convictions for attempted perjury but not the other counts.

BACKGROUND

The Shooting and Statement to the Police

In 2008, Smiley was a correctional officer for the Department of Corrections and Rehabilitation, driving and escorting inmates from one secured facility to another. He and Biasi-Smiley were married. On April 27, 2008, he was shot in the back and rendered paraplegic while walking with his wife in the North Beach section of San Francisco. Smiley and Biasi-Smiley were interviewed about the incident by San Francisco police and gave the following rendition of the events:

  • Defendants went to Twist, a swingers club in North Beach.  Arriving at around midnight, they paid the $80 entrance fee and went upstairs to the “play area,” where people were engaging in sex in plain view.
  • Biasi-Smiley took off her dress and performed oral sex on Smiley. An attractive young woman came up to them, and a young, well-dressed man with the woman motioned to Smiley. Smiley and the man nodded at each other, indicating an agreement to switch partners. Smiley and the other woman began engaging in intercourse, as did Smiley-Biasi and the other man.
  • After a couple of minutes, the man came over and accused Smiley of not wearing a condom.  The, believing Smiley did not use a condom, asked Smiley if he had a weapon; Smiley said he did not. The man then told Smiley, “I got a nine, and I’m going to kill you.”
  • As the Smileys walked to their car, a luxury sedan sped up from behind, pulled up sideways, and stopped. The man from the club got out of the car and said, “I told you I’m going to kill you.” Smiley and Biasi-Smiley started to run but the man shot Smiley in the back, rendering him paraplegic.

The Claims

In April 2009, Smiley filed a workers’ compensation claim, asserting he had been shot by a former inmate. Neither Smiley nor Biasi-Smiley mentioned, either on the form or to the adjuster, being at Twist, Smiley’s having sex with the other woman, or his being threatened by her companion due to his alleged failure to wear a condom.

The claim sought a permanent disability payment of more than $2 million, plus a like amount in home health expenses, for a total claim of around $4 million. The claim was estimated by the State Compensation Insurance Fund (SCIF) to be worth $2.44 million. Biasi-Smiley subsequently filed a lien for $271,680 against Smiley’s workers’ compensation claim for ongoing medical expenses.

Smiley claims were denied and he appealed the denial; he and Biasi-Smiley were deposed by an SCIF attorney on October 15, 2009. Smiley told the deposing attorney he constantly faced threats of violence from inmates. According to Smiley, one time an African-American inmate from Alameda County did not like the way Smiley was talking to him and threatened to “put some le[a]d” in Smiley.

In her first deposition she testified the man said to Smiley, “You know what I do for a living? I kill people. And I’m going to kill you.” Smiley said to Biasi-Smiley, “Let’s go. That’s a parolee.”

SCIF incurred costs of $22,176.36 for medical evaluation, investigative expenses, and legal fees associated with the claim. Smiley filed a disability retirement selection with California Public Employees’ Retirement System (CalPERS) on March 4, 2010, seeking “industrial disability” benefits. These benefits were available only if the disability was work-related, with much greater monthly payments than those for retirement due to disabilities not related to work. CalPERS generally defers to SCIF when determining whether an injury is work-related.

CalPERS denied the request for industrial disability, but approved him for regular disability retirement. Smiley’s monthly disability check was $574 at the time of trial. He would receive $3,002 a month with a retroactive payment of $18,717.63 had his work-related disability retirement been approved.

Defense Evidence

Testifying on his own behalf at the jury trial, Smiley maintained he told the truth at both depositions. He did not mention the swingers club incident during the deposition because he did not believe it had anything to do with the shooting, and the condom issue was a known risk of a partner swap. Smiley thought the shooter agreed to swap partners because he did not immediately recognize Smiley as a correctional officer, and later used the condom allegation as a ruse so he could try to kill Smiley. He recognized the man was an Alameda County parolee two days after the shooting.

DISCUSSION

The elements of perjury are a willful statement, made under oath, of any material matter which the declarant knows to be false. The appellate court’s sole function is to determine if any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. The making of a deposition is deemed to be complete from the time when it is delivered by the accused to any other person, with the intent that it be uttered or published as true. A “complete” deposition transcript is one that has been executed, i.e., signed by the deponent. If a defendant has not signed his or her deposition, it may not be used to convict him or her of perjury.

There is no evidence either affidavit was signed by Smiley or delivered. Rather than being prosecuted for perjury, Smiley was charged with and convicted of attempted perjury. An attempt to commit a crime consists of two elements: a specific intent to commit the crime, and a direct but ineffectual act done toward its commission. Perjury cannot be committed unintentionally so attempted perjury is a crime.

There is ample evidence Smiley knowingly made false, material statements in both depositions about the events leading up to his shooting. Also, Smiley had motive to make these false statements. If his misrepresentations about the cause of his shooting were believed, his injury could be deemed related to his work and he would stand to receive significantly more money than if the injury was found not work-related

Sufficient evidence supports an intent to commit the crime of perjury by making false material statements in the depositions in order to collect substantially larger payments from the state. Making those false statements with that intent but failing to sign and execute the depositions is a classic example of an attempted crime, a specific intent to commit perjury with a willful but ineffective act to do so.

Sufficient Evidence of Presenting a False Claim

A person aids and abets the commission of a crime when he or she, acting with (1) knowledge of the unlawful purpose of the perpetrator; and (2) the intent or purpose of committing, encouraging, or facilitating the commission of the offense, (3) by act or advice aids, promotes, encourages or instigates, the commission of the crime. Biasi-Smiley helped Smiley fill out the claim form he submitted to CalPERS that forms the basis of the section 72 charge. She filled out all or parts of six pages of the eight-page form. She filled out all of page two, which included the statement that Smiley was shot in the back by a parolee. She also signed the form, which could not be processed without the signature.

The trial court could reasonably find that filling out most of the form and signing it was an act to facilitate Smiley’s fraudulent industrial disability retirement claim to CalPERS, she did so with knowledge of the claim’s fraudulent purpose, and did so with the intent of facilitating the fraudulent claim. Substantial evidence supports her conviction on an aiding and abetting theory.

ZALMA OPINION

It is unfortunate and sad that a correctional officer of the state of California was willing to lie to obtain benefits he knew, or should have known, he was not entitled to receive. That he was shot in the back by a “swinger” who was offended that he had sex with a strange woman at a swingers club without a condom, clearly had nothing to do with his occupation. Creating a story that the shooter was a parolee and getting his wife to support the false claim resulted in both of them being convicted of insurance fraud and attempted perjury. They were fortunate that they were only sentenced to probation.


© 2020 – 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 a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

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Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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A Video Explaining Considerations for Early Settlement of Construction Defect Claims

Early Settlement of Construction Defect Claims are in the Best Interest of all Parties

See the full video at https://youtu.be/3VftWnmb1Fc

It is an axiom followed by almost every attorney that the sooner a suit is settled the less it will cost the defendants. Invariably as suits drag on, as discovery is received and analyzed, the positions of the parties become less amenable to compromise. If defendants and their counsel believe that liability against the defendant is reasonably clear, they should work to bring the parties together to attempt an early settlement. Some of the reasons for the early settlement are discussed below.

Adverse Publicity

The reputation of a builder, developer, engineer, or architect can be destroyed by adverse publicity. Wide dissemination of a single charge of negligent construction can cause the person charged to lose business. Early settlement, if appropriate, can eliminate the concern for the damages caused by adverse publicity. Preferably, settlement should be reached before suit is filed and appropriate language in the settlement agreement should make the settlement confidential. The confidentiality agreement should include an agreement to pay liquidated damages (a damage amount set in the settlement agreement) to the other party if breached.

Bad Facts and Serious Injuries

Some lawsuits are based on clear liability; bad facts and serious injuries make the case one to settle as quickly as possible. Such a case is likely to be expensive to defend. If the attorney’s reaction to the fact pattern is disbelief or horror, and the first impulse is to trade the suit to another attorney or law firm, it is a case that must be settled quickly. For example, the collapse of a terminal at the Charles de Gaulle airport in France only one year after it was built, crushing to death several passengers, is the type of case that, if it occurred in the United States, would be preferable to settle as soon as possible and before any suit was filed.

If the plaintiff makes a demand equal to or less than what the defendant knows to be the value of the case, the demand should be immediately accepted without negotiation. It will shock the plaintiff’s lawyer but once the settlement is made the case is done and a great deal of expense will be avoided.

Multiple Claims & Legal Issues

If the case is not settled, bad law may potentially be established. Bad case law has almost always resulted from cases that should have been settled but were not because someone was stubborn or unthinking.


© 2020 – 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 a

n insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Go to Zalma on Insurance on YouTube- https://www.youtube.com/channel/UCFg7qxC0tVgKcMUqoUfnwPw

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

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