No Promised Central Station Alarm – No Theft Coverage

Promises Made Must be Kept for Coverage to Exist

Insurance contracts require, for validity, that the parties to the contract keep the promises made when the policy was acquired. When a plaintiff promises – in order to obtain coverage for theft – that it will install an operational central station reporting alarm system it must do so to obtain the coverage.

In Orchard Park Plaza, LLC v. Chubb Custom Insurance Company, No. 1-17-2526, 2018 IL App (1st) 172526, Appellate Court of Illinois First Judicial District Fourth Division (December 20, 2018) Orchard Park Plaza, LLC (Orchard)  made such a promise and obtained insurance from Chubb Custom Insurance Company (Chubb). However, it failed to install a central station reporting alarm system and its claim to Chubb for theft was denied.

Orchard Park sued Chubb who had denied a property damage claim submitted by Orchard. The parties filed cross-motions for summary judgment, and the circuit court granted summary judgment in favor of Chubb on Orchard’s claims for reformation and declaratory judgment.

BACKGROUND

Orchard owns commercial property located on Orchard Drive in Park Forest, Illinois (property). When Orchard sought to obtain new insurance coverage for the property in March 2012, Orchard and Chubb negotiated through intermediaries. During the negotiations, the Matanky Realty Group was represented by Euclid Insurance Agency, a/k/a USI Company (Euclid), a retail insurance broker. Kevin Walker (Walker) from Euclid coordinated with Theodore Cornell (Cornell) at R-T Specialty of Illinois (RTS), a wholesale broker. Cornell contacted WKF&C Agency, Inc. (WKF&C), an underwriter for Chubb and other insurers.

The proposed policy excluded theft coverage. On March 20, 2012, Cornell responded, in part, “we need the following to bind: *** [c]onfirm theft will be included with a CS Alarm (they are putting one in).” A “CS Alarm” refers to a central station alarm. The broker responded that it can include theft once a central station alarm has been installed and confirmed active either with service contract or inspection.

The property was damaged and substantial amounts of copper cables and tubing were cut out of the walls during a break-in on October 15, 2012. Although Robert did not know the exact installation date, he testified during his deposition that an alarm system was operational at the property before September 27, 2012. According to Robert, the alarm system was set up with an automatic dialer. If the alarm was triggered, it would automatically dial the property manager, Gary Miller (Miller), as well as Matanky Realty Group and the Park Forest police department. Robert testified that the alarm was not functioning at the time of the burglary because the electric utility company had caused a power outage and the backup battery was drained.

After Orchard submitted a claim for the loss, Chubb requested information regarding which company monitored the alarm system at the property. In an email to Walker, Robert stated that the alarm was not monitored “since it was set up with a direct dialer to property management and the police.”

Chubb denied Orchard’s claim based on the theft exclusion in the policy. In the declaratory judgment count, Orchard sought an order declaring that the alarm system installed at the property is a central station alarm system or, alternatively, that the term central station alarm system is ambiguous and should be interpreted in favor of Orchard, as the insured.

The circuit court granted Chubb’s motion for summary judgment. The circuit court found that the policy could only be amended by endorsement and that there was no request to remove the theft exclusion by endorsement.

ANALYSIS

Orchard seeks reformation of its insurance contract with Chubb. A court may reform a contract when the written agreement does not reflect the intent of the parties. To state a claim for reformation, a plaintiff must allege:

  1. the existence and substance of an agreement between the parties and the identity of the parties to the agreement;
  2. that the parties agreed to reduce their agreement to writing;
  3. the substance of the written agreement;
  4. that a variance exists between the original agreement of the parties and the writing; and
  5. the basis for reformation.

Based on the communications between the parties, Orchard cannot prove an agreement by clear and convincing evidence and thus the elements of a reformation claim cannot be met. Even assuming that the parties’ intent was to remove the theft exclusion upon the fulfillment of certain conditions, Orchard nevertheless failed to satisfy what those conditions were and whether they were met.

The court observed that the alarm system installed at the property does not appear to have been a central station alarm because the hazard-detecting device installed at the property did not transmit a signal to a “central station.” Alarms can be

  • a local alarm, in which an alarm bell on the premises signals an intrusion;
  • a direct connect alarm, in which the alarm bell or signal device is located in a police or fire station; and
  • a central station alarm, in which the signal device is located in a station and the station continually checks the signal system and either contacts the authorities or sends out its own armed guards when an emergency signal is received. (See Michael H. Boyer & Barry Zalma, Property Investigation Checklists: Uncovering Insurance Fraud, § 2:55 (May 2018 update).

The EVDFI proposal for the installation of a “wireless alarm system,” which was accepted by Robert on behalf of Orchard, made no reference to a central station alarm. Robert acknowledged that the alarm at the property was “not monitored since it was set up with a direct dialer to property management and police.”

Even assuming that the alarm system qualified as a central station alarm, the other requirements articulated in the Kipp email were not satisfied. Kipp wrote that theft coverage could be included “once a central station alarm has been installed and confirmed active either with service contract or inspection.”

The Chubb policy, as written, included a theft exclusion. In its breach of contract count, Orchard did not allege a breach of the written policy.

Chubb was not in the business of providing information, and the information it provided (through intermediaries) to Orchard was merely ancillary or incidental to the sale of insurance policies. Since there was no central station reporting alarm system active at the property there was no coverage for the theft.

ZALMA OPINION

Insurers are usually unwilling to insure against the peril of theft in a commercial property without assurance that the property is protected by a central station reporting alarm system. Chubb offered to insure theft if the insured installed an operational central station reporting alarm system. The insured installed an alarm that did not report to a central station. As a result it did not accept Chubb’s offer and the theft exclusion applied because the insured did not meet the condition required for theft coverage.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

 

 

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Insurance Fraud for Fun & Profit

Fictionalized True Insurance Crime Books

Over the last 51 years I have been involved in efforts to defeat insurance fraud. During that career I have run into interesting people who attempted insurance fraud and were caught and many who attempted insurance fraud and succeeded. I have written up the truth about those cases – changing the names and places to protect the guilty. Read any one of the following true crime stories as a Kindle book or a paperback and find a way to enjoy the work some have done to defeat insurance fraud.

“HEADS I WIN, TAILS YOU LOSE”

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

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

Available as a Kindle Book.

Available as a paperback.

“Candy and Abel: Murder for Insurance Money

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

Product DetailsAvailable as a Kindle Book.

Available as a paperback.

 

 

“Murder And Insurance Fraud Don’t Mix”

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

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

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

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

Available as a Kindle book.

Available as a paperback

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

 

Product Details

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

Available as a Kindle book.

Available as a paperback.

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

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

Available as paperback.

Available as a Kindle Book.

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

 

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

Available as a paperback.

Available as a Kindle book.


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

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Ponzi Scheme by Insurance Agent Not the Obligation of the Insurers

Insurers Not Responsible for Non-Insurance Scheme of Agent

Insurance agents are authorized by law to transact insurance with and on behalf of an insurer. They are not authorized to defraud customers under the guise of giving financial advice nor to bind the insurers to a responsibility for the agents frayd,

In Helen Rode et al. v. Allianz Life Insurance Company et al.,  D072178, Court Of Appeal, Fourth Appellate District Division One State Of California (October 16, 2018) the plaintiffs appealed from a judgment of dismissal after the trial court sustained defendant insurance companies’ demurrers to a third amended complaint (complaint) without leave to amend.

FACTUAL BACKGROUND

Plaintiffs retained the fee-based financial advisory services of Sunil Sharma, who owned and operated his own financial advisory business in Rancho Bernardo, purported to be a registered investment advisor, and offered a variety of financial services, including the purchase and sale of securities and insurance products.

Sharma was a financial advisor since the late 1990s or early 2000s and had a long-term relationship with plaintiffs. At various times prior to 2015, Sharma advised plaintiffs to invest in companies that he formed, Gold Coast Holdings, LLC and/or Safeharbor Tax Lien Acquisitions, LLC (hereinafter, Gold Coast), asserting it was a safe and secure investment for plaintiffs.

At the same time Sharma was providing investment advice to plaintiffs, he was an insurance agent for multiple insurance companies  (collectively, insurance companies or insurers). Sharma advised plaintiffs to purchase annuity policies from these insurance companies, for which he served as the insurance agent.

The annuity policies performed as expected. The complaint alleged that Sharma improperly advised plaintiffs to surrender their annuities and invest the proceeds of the surrendered policies in Gold Coast. To induce plaintiffs to invest in Gold Coast, Sharma told each plaintiff numerous and different lies about the purported investments and/or failed to disclose material facts. Unknown to plaintiffs, Gold Coast had no legitimate business purpose, and Sharma was using it to perpetuate a Ponzi scheme. When the scheme essentially collapsed by January 2015, Sharma reported himself to law enforcement authorities. Plaintiffs collectively lost millions of dollars they had invested in Gold Coast.

Rode sued Sharma and Gold Coast. In October 2015, Rode and additional plaintiffs filed a first amended complaint, adding certain insurance companies as defendants. The plaintiffs tried three times to allege a viable suit against the insurers.

Each plaintiff sought relief from the insurer or insurers who sold him or her an annuity policy — for losses arising from his or her investment in Gold Coast, not for any losses arising from the annuity policy(ies). As alleged, the claims for relief against the insurers are primarily premised on their vicarious liability for Sharma’s fraudulent acts.

DISCUSSION

Plaintiffs alleged both respondeat superior and agency theories of liability.  An actual agency exists when the agent is really employed by the principal. An agency is ostensible when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him. Ostensible agency cannot be established by the representations or conduct of the purported agent; the statements or acts of the principal must be such as to cause the third party to believe the agency exists.

Plaintiffs claim that Sharma was acting on behalf of the insurers when he defrauded plaintiffs. Plaintiffs expressly alleged that Sharma was acting as the insurers’ “actual and ostensible authorized agent” when Sharma recommended that plaintiffs purchase annuity policies from the insurers, and then advised the plaintiffs to surrender their annuity policies and invest in Gold Coast. Accepting as true that Sharma was an agent of the insurers in transacting their insurance business  the complaint still fails to allege sufficient facts demonstrating that Sharma was acting within the scope of his agency when he advised plaintiffs to surrender their annuities and invest in Gold Coast.

Sharma’s actual and ostensible agency was limited to transacting insurance for the insurance companies. Each insurer could only be potentially liable for claims arising from these types of insurance transactions performed by Sharma on its behalf.

The fatal defect in plaintiffs’ claims is that they do not arise out of or relate to the solicitation, preliminary negotiations, and/or execution of, their insurance contracts.  It is clear from the complaint that the insurance companies had no control over Sharma’s representations related to his marketing of Gold Coast. The fraudulent investment products at issue were products in which the defendants had no financial interest and were outside the scope of Sharma’s agency relationship with defendants.

The complaint is devoid of any allegations that Sharma purported to serve the interests of the insurance companies when he formed and marketed Gold Coast. Furthermore, because Sharma exceeded the scope of his insurance agency in giving plaintiffs fraudulent financial advice, his knowledge of false representations is not imputed to the insurers as plaintiffs contend.

Plaintiffs’ claims premised on Sharma’s alleged ostensible authority are similarly defective. The complaint makes clear that Sharma’s actions and fraudulent representations caused plaintiffs to invest in his Ponzi scheme.  The well-pleaded factual allegations make clear that plaintiffs retained Sharma (and his financial advisory business) for investment advice and that only Sharma was recommending Gold Coast.

Finally, Plaintiffs claim that the insurance defendants ratified Sharma’s actions. This claim lacks merit.  Sharma was acting to benefit himself only. Only Sharma earned fees for providing financial advisory services to his individual clients. In addition, the insurers persuasively argue that plaintiffs’ relinquishing their annuities and investing the proceeds in Gold Coast was not in the insurers’ interests; thus, it cannot be reasonably inferred they approved or adopted Sharma’s acts as their own. None of the allegations in the complaint supports any inference that Sharma was acting on behalf of defendant insurers when Sharma engaged in his fraudulent actions. On the contrary, the allegations of the complaint demonstrate that Sharma acted on his own behalf as part of his scheme to get plaintiffs to invest in his companies.

The insurance companies were neither blameworthy for Sharma’s misconduct nor could they have reasonably prevented plaintiffs’ losses.

Plaintiffs final theory of liability is that the insurance companies were negligent in hiring, retaining, and supervising Sharma. Sharma was an independent insurance agent, and the complaint does not sufficiently allege his incompetence in performing the duties of an insurance agent. A causal connection is lacking. The insurance companies did not hire or retain Sharma to advise plaintiffs to invest in Gold Coast only to sell insurance products.

Plaintiffs’ claims do not arise from their annuity policies but rather from their investments in Gold Coast. The complaint does not sufficiently allege the insurance companies acted as plaintiffs’ investment advisors, knew of Sharma’s fraudulent advice, or knew the proceeds of any surrendered policies were being used in a Ponzi scheme. The trial court, therefore, sustained demurrers.

The insurers are not vicariously liable for Sharma’s fraudulent acts. Further, the insurers did not owe plaintiffs any duties beyond the terms of their annuity policies.

Because plaintiffs have failed to demonstrate there is a reasonable possibility the complaint can be amended to state a claim, and they have been afforded numerous opportunities to do so, the trial court did not abuse its discretion in denying leave to amend.

ZALMA OPINION

Mr. Sharma created a criminal Ponzi scheme and defrauded his insurance customers of millions of dollars by advising them to cash in their annuity contracts – that they admitted performed as promised – and invest the cash in a fake entity used by Sharma to defraud his clients. They sued the insurers because they have deep pockets and could fund the indemnity needed. There was, however, no case against the insurers because they did nothing to allow Sharma to support his scheme nor did they participate in the scheme. In fact, by having his clients turn the value of their annuities to the detriment of the insurers into an investment in his scam company. He was a fraud and a thief but the insurers were not. They can sue Sharma and will probably recover. They cannot even allege a viable claim against the insurers.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

 

 

 

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Last Minute Gifts – Kindle Insurance Books

How to Fulfill The Covenant of Good Faith & Fair Dealing

You can deliver perfect gifts for insurance professionals by e-mail by ordering Kindle books from Amazon. The books on the Fair Claims Settlement Practices Regulations, the SIU Regulations and Ethics will help everyone involved with the business of insurance to fulfill the requirements of the implied covenant of good faith and fair dealing in every policy of insurance.

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Ethics for the Insurance Professional

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

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

Available as a paperback.

You can learn about other insurance publications by Barry Zalma at http://zalma.com/blog/insurance-claims-library/

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Truly Genuine Dispute Defeats Bad Faith Claim

Double Recovery from Workers’ Compensation and UM Coverage Not Allowed

It should be strange and unusual for a person who has a legitimate insurance claim to seek to recover more than available under the policy. Unfortunately, many people try to obtain more than indemnity promised by a policy of insurance but to profit from a loss.

In Melissa Case v. State Farm Mutual Automobile Insurance Co., Inc., B281732, Court Of Appeal Of The State Of California Second Appellate District Division Four (November 21, 2018) Case asserted claims for breach of insurance contract and bad faith against respondent State Farm Mutual Insurance Company, Inc. (State Farm), and requested an award of punitive damages. The trial court granted summary adjudication in State Farm’s favor on each claim and on the request for punitive damages.

FACTUAL BACKGROUND

In March 2013, Case was employed by Lawry’s Restaurant, and insured under a personal automobile policy issued by State Farm. The policy’s uninsured-underinsured motorist (UM) coverage for bodily injury was $100,000 per person and $300,000 per accident. On March 29, 2013, while returning to Lawry’s Restaurant from an off-site catering location, Case was injured in a car accident involving an uninsured driver. The next day, she sought workers’ compensation benefits through her employer’s policy and submitted a claim to State Farm under her personal automobile policy. In 2014, after Case submitted a demand for UM policy benefits, State Farm sought verification of a “final lien” relating to medical expenses incurred as workers’ compensation benefits. Rather than complying with the inquiry Case sued State Farm for breach of an insurance contract and bad faith.

Her suit asserted that State Farm acted improperly in delaying arbitration and settlement of Case’s claim for UM benefits, alleging that although she verified a final workers’ compensation lien relating to medical expenses no later than November 2014, State Farm neither paid her claim for UM benefits nor undertook arbitration. The complaint requested compensatory and punitive damages.

State Farm and Case settled her claim for UM benefits for $35,000. In December 2016, State Farm sought summary judgment or adjudication on Case’s claims. State Farm requested summary adjudication on the claim for breach of the insurance contract, contending it had provided all policy benefits due Case.

The trial court granted summary judgment, concluding that summary adjudication was proper with respect to Case’s claims and her request for punitive damages.

DISCUSSION

Generally, an insured can pursue a breach of contract theory against its insurer by alleging the insurance contract, the insured’s performance or excuse for nonperformance, the insurer’s breach, and resulting damages. In view of the requirement for contract-related damages, an insurer may secure summary adjudication on the claim when there are no unpaid policy benefits.

To establish bad faith, a policy holder must demonstrate misconduct by the insurer more egregious than an incorrect denial of policy benefits. In the context of a bad faith claim, an insurer’s denial of or delay in paying benefits gives rise to tort damages only if the insured shows the denial or delay was unreasonable.

Under this standard, an insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured’s coverage claim is not liable in bad faith, even though it might be liable for breach of contract. That is because when there is a genuine issue as to the insurer’s liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute.

The injured worker is entitled to recover the costs of medical treatments reasonably required to cure or relieve the effects of his or her injury. The California Insurance Code provides two provisions designed to prevent a double recovery of UM benefits and workers’ compensation benefits for the same injury. It provides that any loss payable under the terms of the uninsured motorist coverage to or for any person may be reduced by the amount paid and the present value of all amounts payable to him or her under any workers’ compensation law, exclusive of nonoccupational disability benefits. It also imposes a stay of arbitration regarding UM benefit disputes until specified circumstances occur relating to a workers’ compensation claim.

ANALYSIS

Case contends only that State Farm improperly declined to pay UM benefits — including noneconomic damages — prior to a determination regarding the extent to which her medical expenses were payable through the workers’ compensation system.

The loss-payable-reduction provision in Case’s policy authorized State Farm to reduce UM benefits to reflect certain medical expenses potentially included in her July 2014 demand, namely, past and future expenses for injury-related treatments payable through — but not submitted to — the workers’ compensation system. That provision states that the UM benefit “shall be reduced by any amount paid or payable to . . . the insured [¶] . . . [¶] . . . under any workers’ compensation, disability benefits, or similar law.” (Italics omitted and added.)

The term “payable” necessarily encompasses medical expenses eligible for payment through the workers’ compensation system, regardless of whether the insured has submitted a claim for them. That conclusion flows from the italicized language, viewed in conjunction with the related policy provision expressly denying coverage for bodily injury “to the extent [such coverage would] benefit[] [¶] . . . any workers’ compensation . . . insurance company.”

The provision in Case’s policy required that the loss payable be reduced by the determinable medical expenses eligible for payment through the workers’ compensation system, regardless of whether Case submitted a claim for them. For that reason, State Farm could not ascertain the loss payable until the amount of such expenses was known to State Farm. Accordingly, the provision authorized State Farm to request a determination regarding the extent to which her past and future medical expenses could be paid through that system.

As the amount of the medical expenses eligible for payment through the workers’ compensation system increased, State Farm’s liability for UM benefits diminished. As a result no triable issues exist regarding whether State Farm acted reasonably in seeking an eligibility determination.

There are no triable issues regarding the reasonableness of State Farm’s resolution of Case’s claim for UM benefits. When Case submitted her July 2014 demand, State Farm promptly requested information regarding her workers’ compensation claim. Although a dispute arose in November 2014 when Case provided evidence of a purported final lien and denied the likelihood of receiving additional workers’ compensation benefits, the dispute was “genuine,” as State Farm had reason to believe that Case’s medical expenses were eligible for payment through her workers’ compensation claim, which she had withdrawn. Because State Farm resolved Case’s claim shortly after determining the amounts payable by workers’ compensation, no triable issues exist regarding bad faith.

The record discloses only that State Farm resolved Case’s claim promptly after learning of her ineligibility for future Workers’ Compensation benefits. In sum, Case has demonstrated no triable issues precluding summary judgment on her complaint.

ZALMA OPINION

Insurance, by definition, is a promise to provide indemnity to a person injured who was intelligent enough to purchase insurance to protect herself. Case did so when she obtained UM insurance from State Farm. She tried to collect the same indemnity from State Farm and her employer’s workers’ compensation insurer which would have resulted in a double recovery. Her bad faith suit failed because State Farm did what was required to reach a settlement with Case and did so promptly after receiving the final lien information.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

 

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Insurance Adjuster: Give Yourself a Christmas Gift You Can Use

The Basics of Insurance Adjusting

No one knows everything there is to know about insurance adjusting. Some know a great deal; some know nothing at all; and most are in the middle. Regardless of your position as a claims person the two compact books that follow will either provide you with the basics needed to perform the job of an adjuster competently or refresh your knowledge to make your work as an adjuster better.

The Compact Book of Adjusting Property Insurance Claims

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

Available as a Kindle book.

Available as a paperback.

The Compact Book on Adjusting Liability Claims

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.

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

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Negligent Supervision Does Not Eliminate Auto Use Exclusion

Crashing an ATV on Public Roads Not a Homeowners Policy Loss

Lawyers are creative. They take a clear and unambiguous policy exclusion, accept it, and then claim it doesn’t apply because there is another non-excluded cause of the injury. The Court of Appeal of Oregon acknowledged the creativity, ignored it, and, as it should, applied the clear and unambiguous language of the policy.

In Brodi Epps, by and through his guardian ad litem, Molly S. Epps v. Farmers Insurance Exchange, an inter-insurance exchange, et al., and Truck Insurance Exchange, an inter-insurance exchange, dba Farmers Insurance Company of Oregon; John Douglas Pollard; and Alta Lorena Hise-Pollard, 295 Or App 385, No. 604 A166532, Court of Appeals of the State of Oregon (December 12, 2018) the plaintiff sought coverage for the negligent entrustment of a minor to a drunk who took the minor on an off premises all terrain vehicle (ATV) ride.

FACTS

Plaintiff, by and through his guardian ad litem, began this declaratory judgment action to determine whether a homeowners’ insurance policy that defendant had issued covers the liability of the insureds, the Pollards, in an underlying action against them. The trial court granted defendant’s motion for summary judgment, ruling that the policy does not cover the Pollards’ potential liability because of the motor vehicle exclusion in the policy.

Defendant sold a homeowners’ insurance policy to John and Alta Pollard, which, subject to various exclusions, covered their personal liability for bodily injury to others. While the policy was in force, plaintiff’s mother took plaintiff, who was just under two years old, to the Pollards’ home and left plaintiff in Alta’s care while plaintiff’s mother ran errands. Alta knew that John was intoxicated but still allowed John to place plaintiff between his knees on an all-terrain vehicle (ATV) and drive around the premises without plaintiff wearing a helmet or protective gear. At some point, John drove the ATV onto a public road and ran the ATV into a fence, which caused the ATV to roll and eject plaintiff, causing plaintiff serious bodily injury.

The Pollards tendered an insurance claim to defendant, which defendant denied on the basis of the motor vehicle exclusion to coverage in the policy. Plaintiff then sued seeking declaratory judgment against defendant to determine whether the Pollards’ homeowners’ insurance policy covers the Pollards’ liability in plaintiff’s action against them.

As noted above, on appeal, plaintiff does not dispute the trial court’s determination that his claim against John Pollard is excluded from coverage under the policy because the plaintiff’s injuries resulted from the use of a motor vehicle off of the insured premises. Plaintiff argued that the trial court erred when it determined that the policy excluded coverage for Alta’s negligence.  The plaintiff believed that Alta’s negligent supervision of plaintiff occurred on the insured premises and resulted in a foreseeable harm to plaintiff.

ANALYSIS

In disputes such as this one, that turn on the meaning of an insurance policy, the primary and governing rule is to ascertain the intention of the parties and, to do so, the court must examine the terms and conditions of the policy, and where a particular term is not defined in the contract, by identifying that term’s plain meaning. If the term is ambiguous, the court is required to examine that term within the context of the policy as a whole. If two or more plausible interpretations still remain, the court construes the term against the drafter and in favor of the insured.

The policy sets forth certain exclusions like “We do not cover bodily injury, property damage or personal injury which: ***** 7. results from the ownership, maintenance, use, loading or unloading of: ***** b. motor vehicles.” The policy defines “motor vehicle” as “any *** motorized land vehicle designed for recreational use off public roads,” but that definition does not include “a motorized land vehicle, not subject to motor vehicle registration, used only on an insured location.”

Reading the exclusion and definition together, the apparent purpose of the exclusion is to require the insured to obtain separate liability insurance for recreational vehicles, except when they are “used only on an insured location.” Once the ATV left the Pollards’ property and was traveling on the public road, the ATV was a “motor vehicle” within the policy’s definition.

Plaintiff, relying on the definition of “occurrence” in the policy, contends that Alta’s negligent supervision of plaintiff on the insured premises “constituted an occurrence under the policy because [it] exposed the child to conditions resulting in bodily injury” and, because “the policy insures against” the use of the ATV on the insured premises, the policy coverage should extend to Alta’s acts.

Plaintiff’s construction of the policy ignores the applicability of the motor vehicle exclusion to occurrences that cause bodily injury. The policy unambiguously excludes coverage for “occurrences” which result in bodily injury, when the bodily injury “results from the *** use *** of” “motor vehicles” off the premises of the insured.

In this case, plaintiff’s injuries were the result of John’s and plaintiff’s “use” of a “motor vehicle” on a public road. The policy specifically and unambiguously excludes coverage for bodily injury that results from the “use” of “motor vehicles,” such as the one used in this case, and the application of the exclusion under the policy does not depend on plaintiff’s theory of liability or the defendant against whom his claim is stated.

Plaintiff’s negligent supervision claim is based on Alta’s act of allowing plaintiff to use the ATV with John. The court of appeal concluded that this is not a case where there is an independent non-motor vehicle related cause of plaintiff’s bodily injuries that would take the claim outside of the motor vehicle exclusion. John’s and plaintiff’s use of the ATV off the premises of the insured triggered the Pollards’ alleged liability for plaintiff’s bodily injuries, and the policy unambiguously excludes coverage for bodily injuries that result from such a use.

Because plaintiff’s bodily injuries resulted from the use of the ATV off the premises of the insured, plaintiff’s claim squarely falls within the exclusion for coverage, regardless of who the plaintiff sues or under what theory of liability plaintiff seeks to recover.

ZALMA OPINION

There is no question that Alta was negligent when she let John take the child on an ATV ride. That negligence, however, did not cause the injury. The child was injured when John, drunk, ran the ATV into a tree and the child was ejected and incurred serious injury, a cause clearly and unambiguously excluded. The Pollards needed available auto insurance coverage for the incident rather than try to make a homeowners policy into an auto liability policy.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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What the Insurance Industry Needs to Make a Profit

Insurance Fraud & the Tort of Bad Faith

Insurance fraud has been estimated to take from the property and casualty insurance industry from $80 billion to $300 billion every year to fraud perpetrators. Insurance professionals can only estimate the extent of fraud since most fraud attempts succeed because insurers are frightened to reject fraudulent claims because of the potential of major damages for the tort of bad faith. Barry Zalma’s books on the rescission of the tort of bad faith and how to defeat insurance fraud will help the industry deal with the extensive number of crimes imposed on them by insurance criminals.

Time to Rescind the Tort of Bad Faith

Insurance and the Law of Unintended Consequences Paperback 

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

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

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

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


“Insurance Fraud & Weapons to Defeat Insurance Fraud”

In Two Volumes

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

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

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

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

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

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The Pot Called the Kettle Black

Insured Suspected of Fraud Unsuccessfully Charges Insurer with Fraud

Often, people whose claim was correctly rejected will attempt to obtain coverage by claiming that the insurer defrauded the person insured. In Terry Granger v. The Travelers Home and Marine Insurance Co., No. 04-17-00814-CV, Fourth Court of Appeals San Antonio, Texas (December 12, 2018) Terry Granger appealed a summary judgment dismissing her breach of contract and common law fraud causes of action against The Travelers Home and Marine Insurance Company.

BACKGROUND

Granger purchased a Renter’s Insurance Policy from Travelers (the Policy). The Policy provided coverage against personal property loss caused by theft. The Policy included the standard conditions for the insured’s duties, the requirement to testify at examination under oath (EUO) and to submit a sworn proof of loss. In addition the policy contained a private limitation of action provision prohibiting suit against the insurer unless there has been full compliance with all of the terms under Section I of this policy and suit is brought against the insurer within two years and one day after the cause of action accrues.

While the Policy was in force, Granger submitted a claim for coverage for the loss of personal property from an alleged burglary of her rental residence. After Granger’s claim was made, Travelers notified Granger she was required to complete a proof of loss, provide documentation of the stolen property, and submit to an examination under oath. Granger failed to respond to Travelers’s requests. Travelers sent Granger a letter closing her claim. Granger later filed her lawsuit against Travelers alleging breach of contract.

Travelers filed a motion for summary judgment as a matter of law alleging that Granger’s breach of contract claims were barred by the Policy’s “two years and one day” limitations condition. Subsequently, Granger amended her petition to include a common law fraud claim by which she claimed that her landlord, who she alleges was also an agent for Travelers, falsely represented to her that the limitations period for filing any insurance claim was four years. The trial court granted Travelers’s motion for summary judgment on both claims.

BREACH OF CONTRACT CLAIM

In her first issue, Granger argues that the Policy’s “two-years-and-one-day” limit is not supported by consideration. Granger contends that the uncontroverted summary judgment evidence shows she did not receive consideration for her relinquishment of the four-year limitations period defined in section 16.051. Accordingly, Granger insists, the two-years-and-one-day limitation does not apply to her and her lawsuit against Travelers is not barred.

Generally, the limitations period for a breach of contract cause of action is four years after the day the cause of action accrues. However, parties to a transaction may agree to the time in which a person must file suit on a given cause of action.

The appellate court concluded that the policy’s limitation provision of two years and one day to file a cause of action against Travelers is valid and binding.

The Policy’s language is unambiguous. The premium Granger paid was consideration for all provisions contained in the Policy, including the two-years-and-one-day limitation provision. Accordingly, Granger’s argument that additional consideration for the reduction in the limitations period was necessary failed as a matter of law.

Because Granger filed her suit more than two years and one day after Travelers denied her claim, Granger’s cause of action for breach of contract is, as a matter of law, barred by the Policy’s limitation period.

COMMON LAW FRAUD

A common law fraud claim requires a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of its truth, which was intended to be acted upon, which was relied upon, and which caused injury.

Granger submitted no evidence that Travelers assigned Detweiler (Granger’s landlord) to present the Policy to Granger or to explain its conditions, especially the limitations condition, to her. There is no evidence that Travelers controlled Detweiler’s tasks. There is likewise no evidence that Travelers permitted Detweiler to hold himself as an agent with authority to explain the limitations portion of the Policy or that it knowingly or voluntarily permitted Detweiler to misstate the limitations period to file a claim against Travelers.
Granger failed to meet her burden to present some evidence that established that Detweiler had apparent authority to act for Travelers. The appellate court concluded that Travelers’s no-evidence motion for summary judgment on the common law fraud was properly granted because there was no evidence that any alleged fraud on Detweiler’s part can be imputed to Travelers under the theory of apparent authority.

ZALMA OPINION

It would seem that the reason that Granger waited more than two years after her claim was denied was a desire to not appear for an EUO and that Travelers suspected fraud. Then, with utmost and unmitigated gall she claimed she was defrauded because her landlord – who had no agency relationship with Travelers and did not appear on the policy as the agent – told her the four year state statute of limitations applied and the private limitation of action provision did not apply. The claims were grasps in the dark and failed.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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Construction Defects and Mold

Books for the Insurance Professional

In eight cogent and thorough volumes Barry Zalma explains everything an insurance professional needs to know about construction defects from the investigation and discovery of the defects to insurance dealing with the defects. In addition, in four complete volumes the Mold Claims book makes available the details an insurance professional needs to deal with a mold claim.

Construction Defects and Insurance

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

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

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

The Eight volumes include:


Mold Claims

This series of books is the latest addition to Barry Zalma’s insurance claims series of books and articles that will form the most thorough, up-to-date, expert-authored insurance claims guide available today.Mold Claims Volume One: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.

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

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

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

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

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

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

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Attempt to Profit From Catastrophe Fails

A Reason to Do Away with the Tort of Bad Faith

Catastrophes, like hurricanes, bring out the best and worst of the U.S. public. The Cajun Navy coming to the rescue of flood victims without a need for remuneration and seeking nothing more than thanks shows the best of the U.S. public. Those who attempt to profit from a catastrophe and steal from an insurer and seeking bad faith tort damages in addition to actual losses should be condemned and shunned.

In Ammar Investments, LLC d/b/a Zegar, Inc. and d/b/a Fouad & Faris, Inc. v. Certain Underwriters of Lloyd’s, London, NO. 18-ca-347, Fifth Circuit Court of Appeal State of Louisiana (December 12, 2018) the Louisiana Court of Appeal not only refused to allow the attempt to profit from a hurricane but chided those attempting to profit from the storm. The only thing the appellate court failed to do was to report the plaintiff to a prosecutor for prosecution for attempted insurance fraud.

FACTS

Ammar Investments, LLC d/b/a Zegar, Inc. and d/b/a Fouad & Faris, Inc. (“AI”), appealed the trial court’s judgment awarding it $26,654.10 in damages for loss of personal property as a result of Hurricane Isaac, but denying its claim for damages sustained to the roof of its building. AI also appealed the trial court’s denial of its motion for new trial and/or rehearing of a prior judgment granting summary judgment in favor of defendant, Certain Underwriters of Lloyd’s, London (“Underwriters”), and dismissing AI’s claim for bad faith damages due to Underwriters’ alleged misrepresentation of its policy provisions pertaining to the hurricane deductible.

Ammar Zughayer is the owner of AI, which owns and operates Mike’s Food Mart, a convenience store and gas station located on River Road East in Garyville, Louisiana. Mike’s Food Mart was insured against building and personal property (inventory) loss under a policy of insurance issued to AI by Underwriters (“the Policy”). The Policy, which required a three percent (3%) wind and hail deductible, was effective from June 8, 2012 to June 8, 2013; its coverage included a $300,000.00 limit for damages occasioned to the building, and a $200,000.00 limit for loss of personal property located on the premises.

On August 28-29, 2012, Hurricane Isaac made landfall in St. John the Baptist Parish causing widespread power outages throughout the parish. Underwriters retained SyNerGy Adjusting Corporation to investigate Mr. Zughayer’s claims. SyNerGy’s senior claims’ adjuster, Mike Dossett, inspected the property and assessed the damages. He discovered only minimal damage to the metal fascia of the canopy situated over the diesel pumps. Mr. Dossett then inspected the inside of the building, which he found to be in good condition and well-stocked. Mr. Zughayer identified for him two areas of the store where he claimed water was leaking through the roof: (1) in between a walk-in cooler and a back wall, and (2) around a hood vent positioned over cooking equipment in the kitchen. Mr. Zughayer then showed Mr. Dossett the store’s inventory that was damaged, which included food and drinks that were spoiled as a result of the power outage.

Mr. Dossett found the building to be in “excellent condition” and determined that the covered damages to the premises were minor. No estimates for building damages, nor a completed itemized list of damaged contents, were ever provided by Mr. Zughayer to Mr. Dossett during the adjustment period.

Although it did not send new or detailed information required AI filed suit against Underwriters seeking recovery for damages to the building and personal property (i.e., business inventory) caused by Hurricane Isaac. AI sought additional damages claiming that Underwriters acted in bad faith and was “arbitrary and capricious” in adjusting its claim and refusing to pay for its property damage. The matter proceeded to a two-day trial after which the trial court took the matter under advisement and later issued judgment with written reasons. The trial court denied AI’s claim for damages to the building on the basis that AI failed to adduce sufficient evidence to satisfy its burden of proving that damages were sustained to the building’s roof, canopies or signs.

Despite its rejection of AI’s claim for damages to the building’s roof caused by the hurricane, the trial court awarded $26,654.10 to AI for the cost of replacing its water-damaged tobacco inventory (less the 3% hurricane deductible), which was stored in the attic directly underneath the roof.

LAW AND DISCUSSION

To prevail on a claim for bad faith claims adjusting a plaintiff bears the burden of proving:

  1. the insured provided a proof of loss;
  2. the proof of loss was satisfactory; that is, sufficient information to allow the adjuster to pay the undisputed amount within 30 days; and
  3. the insurer’s failure to timely make payment of the undisputed amount was the result of conduct that was arbitrary, capricious and/or without probable cause.

An insurer’s actions are “arbitrary and capricious” when its willful refusal of a claim is not based on a good faith defense, or is unreasonable or without probable cause.

AI argues that the uncontroverted testimony at trial established that at the time of Hurricane Isaac, the building and its roof were just over a year old and that there had been no prior issues with leaks. AI introduced numerous photographs into evidence at trial that were taken of the inside of the convenience store by Mr. Zughayer depicting what he alleged to be water damage caused by the leaking roof. Notably, of the 82 photographs offered into evidence, not one photograph was taken of the purported damage to the roof.

Although A-1’s estimate was submitted to Mr. Zughayer on September 28, 2012—only twenty days after Mr. Dossett had inspected the building on behalf of Underwriters—this estimate was never provided to Underwriters (nor was any other estimate of purported damage to the building or its contents).

In Louisiana, a plaintiff bears the burden of proving with legal certainty every item of damages, and the plaintiff’s own uncorroborated testimony is insufficient to satisfy that burden. If the damaged property has been restored to its former condition by repair, the proper basis for assessing damages is the repair bill itself.

The trial judge determined AI failed to produce a single receipt for the repairs to the roof.  Further, the check Mr. Zughayer claims to have given to Mr. Burr as evidence that roof repairs were made — which check Mr. Burr denied ever having even seen it — was made payable to someone other than Mr. Burr and was made out for $28,200.00, not the estimated $27,000.00. The only consistency in the testimony of Mr. Zughayer and Mr. Burr was that Mr. Burr was paid $22,000.00 in cash for the job, yet neither could produce a single receipt, bank statement or deposit slip as proof that the cash payment was either made or received.

When Underwriters subsequently sought to subpoena AI’s (or Mr. Zughayer’s) bank records, those checks that AI claimed to have been paid did not appear. Nor did the bank’s records reveal cash withdrawals matching the amounts indicated on the checks.

Given AI’s presentation of its case in the trial court — which the lower court found to be “contradictory [and] inconsistent” — coupled with the total absence of documentary evidence to substantiate the damages AI alleged were sustained to the building’s canopies, gas pumps, and air conditioning units, it is understandable why the trial court rejected all of AI’s claims to the building (including the roof).

Underwriters filed a cross appeal in this matter averring the trial court manifestly erred in awarding $26,654.10 in damages to AI for the loss of its tobacco inventory. Because AI’s evidence regarding its tobacco inventory loss was riddled with conflicting, inconsistent and unsupported evidence that was insufficient to prove that the alleged damage was in any way related to Hurricane Isaac, the appellate court resolved the inconsistency in favor of Underwriters. Consequently, it reversed that portion of the trial court’s judgment awarding $26,654.10 to AI for loss of its tobacco inventory.

Not only did Mr. Zughayer fail to show Mr. Dossett damaged tobacco that day, Mr. Zughayer failed to even mention water damage to his tobacco inventory. The appellate court found it incredible that having placed a substantial order that same day to replace inventory he was claiming to be damaged, and at a significant cost for which he was requesting repayment, that when asked to specify the damaged items, he would fail to even mention the loss of that expensive item.

AI’s burden to show a preponderance of the evidence of a loss to tobacco products was manifestly erroneous and clearly wrong requires reversal of the $26,654.10 in damages awarded to AI for its loss of inventory claim.

ZALMA OPINION

The lawsuit filed by AI and Zughayer was more than inadequate it was clearly fraudulent and supported by false documents. Insurance fraud is a felony in Louisiana and La.R.S. 22:1243 makes it a crime to present or cause to be presented any written or oral statement  as part of or in support of a claim for payment or other benefit pursuant to an insurance policy, knowing that such statement contains any false, incomplete, or fraudulent information concerning any fact or thing material to such claim. As a result the insurer is obligated to report AI and Zughayer to the state’s insurance fraud investigators and the trial judge and court of appeal should have recommended prosecution.

 


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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Never Trust a Close Relative of Your Opponent

No Duty to Defend

Although the duty to defend is broader than the duty to indemnify under a liability insurance policy that duty is not without limit. To defeat a motion for summary judgment the defendant, seeking defense and/or indemnity from an insurer must present evidence that they are entitled to receive a defense or indemnity. Simply denying the plaintiff’s allegations is insufficient.

In State Farm Fire and Casualty Co., an Illinois Corporation v. Telecomm Consultants, Inc., an Oklahoma corporation; Myron C. Butler, Iball Instruments LLC, an Oklahoma limited liability company; Carl P. Bright, No. 18-6061, United States Court of Appeals for the Tenth Circuit (December 13, 2018) State Farm Fire and Casualty Company (“State Farm”) obtained a declaration that it had no obligation to defend and indemnify Myron Butler, an individual sued for misappropriation of trade secrets and breach of contract in Oklahoma state court.

FACTS

In 2007, Butler and Carl Bright formed iBall Instruments LLC (“iBall”) to manufacture and market a gas detection and monitoring system for use in oil and gas exploration. Disagreements developed between the two about iBall’s operation. In December 2010, they reached several agreements to resolve their dispute. One agreement created a “Joint Server,” a computer on which company-related data was stored and to which both men would have access.

In January 2011, Bright filed suit in Oklahoma state court, seeking a declaration concerning the ownership and control of iBall. The court appointed David Rhoades to administer iBall’s business and assets while the litigation was pending. Rhoades hired Butler’s son, Aaron Butler, and his son’s company, The Computer Lab, to upgrade iBall’s computer facilities. Butler’s son-in-law, Mark Davis, was also affiliated with The Computer Lab. As part of the upgrade, Rhoades allegedly approved the transfer of data from the Joint Server to new computers and the destruction of iBall’s Joint Server and other computers.

In June 2013, Bright and Butler executed a Settlement and Release Agreement (“Settlement Agreement”) to resolve the 2011 lawsuit. That Agreement granted Bright 100% ownership of iBall and assigned to him iBall’s intellectual property. It further provided that Bright, Myron Butler, TCI, and Bright’s company, Carl Bright, Inc. (“CBI”), assigned to iBall all intellectual and intangible property related to iBall or to its products and services offered to iBall’s customers.

Before the scheduled closing date of the settlement, Bright hired a forensic computer analyst to examine iBall’s computers. That examination showed software was installed on iBall computer hard drives to allow the user to delete and remove information permanently from the computer, and that software was then uninstalled a month later, likely to evade detection. The examination could not recover the deleted information. However, emails reference documents not otherwise produced during the transfer of iBall’s intellectual property to Bright.

On November 8, 2013, Bright and iBall sued Aaron Butler and Davis in Oklahoma state court. The amended petition alleges that Davis and Aaron Butler caused the destruction of iBall’s physical and intellectual property, including the possible destruction of the Joint Server. It also alleges that Butler and Davis violated the Settlement Agreement’s non-compete covenant by forming a company to actively compete with iBall and to sell a device developed using iBall’s property.

Prior to the initiation of the 2013 lawsuit, State Farm issued a businessowners policy and a commercial liability policy to TCI. Each policy names TCI as the insured. Butler is insured under the policies as an executive officer of TCI, “but only with respect to [his] duties” as a corporate officer.

State Farm initially defended Butler in the 2013 Oklahoma suit under a reservation of rights. Although he withdrew his request for defense and indemnification in August 2014, Butler asked State Farm to reopen his claim and to defend and indemnify him in the Oklahoma action in January 2017. State Farm agreed to defend him, again subject to a reservation of rights. State Farm sued in federal district court seeking declaratory relief that it had no obligation to defend and indemnify Butler. The district court granted summary judgment in favor of State Farm, absolving it of any obligation to defend and indemnify Butler..

ANALYSIS

There are five factors district courts should consider in determining whether to exercise their discretion to hear and decide claims for declaratory judgment:

  • whether a declaratory action would settle the controversy;
  • whether it would serve a useful purpose in clarifying the legal relations at issue
  • whether the declaratory remedy is being used merely for the purpose of procedural fencing or to provide an arena for a race to res judicata;
  • whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and
  • whether there is an alternative remedy which is better or more effective.

Under Oklahoma law, the duty to defend is broader than the duty to indemnify, and arises when the insurer ascertains the presence of facts that give rise to the potential of liability under the policy. The focus is on the facts of the incident not merely the allegations in the complaint.

When presented with State Farm’s properly supported motion, which included the policies, the first amended petition, and other pleadings from the state court action showed there was no possibility of coverage. Butler and TCI could not defeat the motion by trying to “rest upon the mere allegations or denials of [their] pleading, but [were required to] set forth specific facts showing that there [was] a genuine issue for trial.” Schneider v. City of Grand Junction Police Dep’t, 717 F.3d 760, 767 (10th Cir. 2013) (quotations omitted).

Because they failed to do so, the district court properly entered summary judgment in State Farm’s favor.

ZALMA OPINION

This business dispute with wrongful conduct by the business partners who deleted the software to punish one for bringing the suit was less than commendable. It was, rather, wrongful. State Farm alleged there was no coverage and Butler presented no evidence to defeat the motion but simply relied on its denials of State Farm’s allegations. Failing to present evidence in opposition to a motion for summary judgment is just plain stupid and resulted in a loss of the right to a defense.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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Needed by Every Insurance Professional

Everything Needed by the Insurance Professional

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

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

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

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

Zalma on Insurance Claims Volume 101

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

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

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

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

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

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

Zalma on Insurance Claims Part 102

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

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

Zalma on Insurance Claims Part 103

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

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

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

Zalma on Insurance Claims Part 104

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

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

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

Zalma on Insurance Claims Part 105

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

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

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

Zalma on Insurance Claims Part 106

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

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

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

Zalma on Insurance Claims Part 107:

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

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

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

Zalma on Insurance Claims Part 108

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

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

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

Zalma on Insurance Claims Part 109 

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

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

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

Zalma on Insurance Claims Part 110

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

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

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

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

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Zalma’s Insurance Fraud Letter – December 15, 2018

Zalma’s Insurance Fraud Letter  

A Christmas Fable of Fraud 

 Zalma’s Insurance Fraud Letter, Volume 22, No. 24     

   

Merry Christmas

A Christmas Fable of Fraud

 
ZIFL publishes this story at Christmas time every year. I hope you like it again.

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

Raymond loved the Christmas season.

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

The Christmas before last Raymond stumbled on insurance fraud as a lucrative means of making quick, easy money. Raymond made a good living playing bunco schemes about town. He would work the money switch with old folks, the dip, and every possible scam invented to take money from honest people who had a little larceny in their hearts.
Because he was good at what he did Raymond lived well. He leased a three-bedroom apartment in the best part of town, drove a BMW convertible when he wasn’t working and purchased all of his suits from a custom tailor. He ate at gourmet restaurants and collected an eclectic assortment of popular art dishes and Lladro figurines.

The Christmas Present We All Need 

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

Read the entire story and the rest of ZIFL here.


 The Current Issue Contains the Following  

  • Merry Christmas
  • A Christmas Fable of Fraud
  • Guilty of Arson Should Also be Guilty for Insurance Fraud
  • Investigating Fraud
  • Surveillance & The Insurance Fraud Investigation
  • Good News From the Coalition Against Insurance Fraud
  • The Insurance Fraud Hall of Shame
  • Health Insurance Fraud Convictions
  • Other Insurance Fraud Convictions
  • Books from Barry Zalma – All Available at the Insurance Claims Library
  • New From Barry Zalma, Zalma on Property and Casualty Insurance.

Books


The most recent posts to the daily blog, Zalma on Insurance, one of Feedspots top 50 insurance law blogs are available at http://zalma.com/blog.

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

 Zalma’s Insurance 101

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

If you start at Volume 1 at the bottom of the blog’s first page and view one or two videos a day you will have approximately 12 to 24 hours of training a year until you get to the last video.
Barry Zalma, Inc. 
4441 Sepulveda Boulevard
CULVER CITY CA 90230-4847
310-390-4455
Fax: 310-391-5614
Insurance claims consultant and Expert Witness
zalma@zalma.com

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Everything Needed by the Insurance Claims Professional

Everything Needed by the Insurance Claims Professional

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. The monthly Commentary on Insurance Law provides the reader with the opportunity to understand what is new or interesting in insurance claw.

COIL Commentary on Insurance Law

Volume 1, Number One

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

A Journal providing information about insurance, insurance claims handling and insurance law as it changes with new decisions from the state and federal appellate courts.Future issues will be issued regularly providing information on new and interesting insurance appellate decisions.  Articles included:

  • What is Insurance?
  • Claims in a Catastrophe
  • Misrepresentation or Concealment of a Material Fact
  • Only in California “Once” is with “Such Frequency as to Indicate a General Business Practice”

COIL Commentary on Insurance Law

Volume 1, Number Two

Commentary On Insurance Law: November 1, 2018 Volume One, Number Two by [Zalma, Barry]

  • Accident – the name of Insurance – Needed to Obtain Benefits
  • Late Report of Loss Fatal to Claim to Excess Insurer
  • The Danger of Retaining an Unlicensed and Dishonest Public Adjuster
  • Insurance and the Law of Unintended Consequences
  • A CPA’s Obligations with Regard to Errors & Omissions Insurance

COIL Commentary on Insurance Law Volume 1, Number Three

Contents:

  • Agent Who Kept Premium Owed To Zurich Loses At Ninth Circuit
  • Asbestos Victim Fund Under Investigation.
  • If You Do The Crime You Must Do The Time.
  • When Reasonable Expectations Are Not Reasonable.
  • When A Court Reads And Understands A Policy Justice Is Done
  • The Stupidity Of Covering Others For More Than Yourself
  • You Can’t Make An Insurer Pay For Coverage You Didn’t Buy
  • Appraisers Can’t Determine Amount Without First Determining Cause Of Loss
  • First Party Insurance Appraisers & Causation.
  • Ethical Behavior & Success.
  • Rescission – The Equitable Remedy.
  • Subrogation And The Tort Remedy.
  • Preparing A Case For Trial

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

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Coulda, Shoulda, Woulda – Divorce is Expensive

Divorce Effects Cancellation of Dependent Life Insurance Coverage

Employer provided life insurance programs are controlled by the Employee Retirement Income Security Act (“ERISA”) and its terms and conditions. Unlike insurance obtained directly by the insured for the benefit of a beneficiary the ERISA policy provides limited coverages for which the employee/insured has no control.

In David Glenn Morris v. Southern Intermodal Xpress, Assurant Employee Benefits, Union Security Insurance Company, No. 18-10785, United States Court of Appeals for the Eleventh Circuit (December 4, 2018) David Morris filed a federal civil action to recover benefits allegedly due him under a life-insurance policy governed by ERISA.

Morris sued both Southern Intermodal Xpress (“SIX”), which offered the policy to its employees, and Union Security Insurance Company (“Union”), which issued the policy and then denied Morris benefits under the trade name Assurant Employee Benefits. The district court liberally construed his complaint as bringing a claim for wrongful denial of benefits under an ERISA plan, pursuant to 29 U.S.C. § 1132(a)(1)(B); dismissed the complaint as to SIX for lack of a connection to the decision to deny benefits; and then granted summary judgment in favor of Union on the merits of Morris’s claim.

THE INSURANCE

Morris was insured under a group term-life-insurance policy offered by his employer, SIX, and issued by Union. The policy insured Morris’s life and also provided dependent life-insurance benefits. Dependent insurance extended to “eligible dependents,” which the policy defined as a “lawful spouse” and certain children. Dependent insurance ended if, among other things, a dependent was “no longer eligible.” Morris was married at the time he became insured, but he divorced on September 24, 2015. Nearly two months later, his ex-wife died.

FACTS

After his ex-wife’s death, Morris filed a claim for dependent life-insurance benefits under the policy. Union denied the claim because, in its view, dependent coverage ended as of the date of divorce. At the time of her death, according to Union, Morris’s ex-wife was not his lawful spouse and so was not an eligible dependent under the policy.

Morris then sued both SIX and Union “pursuant to . . . ERISA,” demanding payment of the “death beneficiary proceeds” related to his ex-wife’s death. He claimed that he was entitled to benefits as the “named beneficiary.” He attached to his complaint a copy of the policy and a letter from Union denying his appeal.

SIX moved to dismiss the complaint for failure to state a claim. SIX argued that it could not be held responsible for wrongful denial of benefits because, as the documents Morris submitted with his complaint demonstrated, it had no role in denying benefits. Rather, SIX asserted, Morris’s claim was against Union alone. Union filed an answer and then moved for summary judgment.

Morris’s complaint did not identify a specific ERISA provision as the basis for his claim. But given his allegations that he was wrongfully denied benefits under an “ERISA policy,” the district court liberally construed his complaint as raising a claim under 29 U.S.C. § 1132(a)(1)(B), which authorizes an ERISA-plan “participant or beneficiary” to sue “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”

The district court then granted SIX’s motion to dismiss. Later, the district court granted summary judgment to Union, determining that Union correctly denied the claim under the terms of the life-insurance policy. The court reasoned that dependent life-insurance coverage for Morris’s ex-wife had ended before her death because she was no longer his “lawful spouse” as of the date of divorce.

ANALYSIS

Morris argues that the district court erred in forcing him to proceed under 29 U.S.C. § 1132(a)(1)(B), that he stated a plausible claim against SIX because SIX offered the policy under which, in Morris’s view, benefits were owed, and that the court erred by failing to compel SIX to pay dependent benefits following the death of his ex-wife.

First, the district court did not err by liberally construing Morris’s complaint to raise a claim under 29 U.S.C. § 1132(a)(1)(B). That provision of ERISA authorizes a participant in or beneficiary of an ERISA plan to bring a civil action “to recover benefits due to him under the terms of his plan.” 29 U.S.C. § 1132(a)(1)(B). Because Morris filed suit “pursuant to . . . ERISA” to recover “death beneficiary proceeds” he claimed were owed under an “ERISA policy,” the district court properly construed his claim as one “to recover benefits due to him under the terms of his plan” under § 1132(a)(1)(B). Furthermore, any state-law claim that Morris’s complaint may have raised was preempted by ERISA.  That provision converts state-law claims into federal ERISA claims.

Second, the district court did not err by dismissing the complaint for failure to state a claim against SIX, Morris’s employer. The court concluded that SIX was not liable  because nothing in the complaint indicated that the denial of benefits was caused by any impropriety on SIX’s part. The court noted that the policy itself gave Union “sole discretionary authority” over the benefits decision, that Union alone issued the decision denying Morris’s claim for benefits and his appeal based on its interpretation of the policy, and that Morris had not alleged any impropriety in SIX’s handling of the claim paperwork before Union made its decision. The court concluded that any improper denial of benefits was attributable to Union, not to SIX.

By granting summary judgment to Union on the merits of Morris’s claim for unpaid benefits, the district court determined that Union correctly denied benefits under the terms of the life insurance policy.

The Eleventh Circuit agreed with the district court that Union’s decision to deny benefits was the correct one under the terms of Morris’s life-insurance policy. Morris’s policy provided coverage to “eligible dependent[s],” which included a “lawful spouse.” Coverage ended if a dependent was no longer “eligible.”

Because Morris’s ex-wife was not his “lawful spouse” as of the date of their divorce, she ceased to be an “eligible” dependent as of that same date. By the time of Morris’s ex-wife’s death nearly two months later, any dependent coverage had ended.

Morris’s assertion that he is a “named beneficiary”— in the sense that he may have been entitled to benefits notwithstanding the divorce — finds no support in the language of the policy because the ex-wife was no longer an insured or eligible for the dependent coverage.

ZALMA OPINION

It is essential to the interpretation of an insurance policy that the court asked to interpret it read the words of the policy. In this case the clear and unambiguous language of the policy only allowed coverage for a dependent lawful spouse. Since the divorce was final she was no longer a dependent nor was she a lawful spouse. Clear language of a policy must be enforced where there is no ambiguity and in this case it was.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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ABA Insurance Books by Barry Zalma

Books from the American Bar Association

The Commercial Property Insurance Policy Deskbook

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

By Barry Zalma

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

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

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

The Insurance Fraud Deskbook

Author: Barry Zalma

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

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

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

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

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

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

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

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

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

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

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

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


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

Property Investigation Checklists: Uncovering Insurance Fraud provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims:

  • Recognizing suspicious claims
  • Proper investigation procedures
  • Analysis of laws concerning fraudulent personal and real property claims
  • Evaluating and settling claims.

The book also examines recent developments in areas such as arson investigation procedures, bad faith, and extracontractual damages. The appendix includes the NAIC Insurance Information and Privacy Protection Model Act.

Mr. Zalma’s other books are available as Kindle books or paperbacks at Amazon .com and from other publishers, reached at http://zalma.com/blog/insurance-claims-library/

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

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Suit Must Allege Facts Giving Rise to a Potential for Coverage

Facts Ultimately Proven in the Underlying Litigation Have No Bearing on an Insurer’s Duty to Defend

In Maryland and many other states coverage for defense or indemnity are determined from the allegations in the suit brought against the insured for which it seeks defense and indemnity. A declaratory relief suit seeks an order from the court that the insurer owes the insured defense or defense and indemnity. The pleading of the declaratory relief suit and the underlying action control the decision.

In Robert A. Casero, Jr.; Catherine Mary Hattenburg v. Chicago Title Insurance Company; Fidelity National Title Group, Inc., No. 18-1234, United States Court of Appeals for the Fourth Circuit (December 11, 2018) the Appellants, Robert A. Casero, Jr. and Catherine Mary Hattenburg, appealed the district court’s orders granting the Appellees’ (Chicago’s and Fidelity’s) motion to dismiss the declaratory relief complaint and denying reconsideration. The suit asked the court to render a declaratory judgment that the Appellees had a duty under a title insurance policy to defend and indemnify the Appellants from various claims asserted by their neighbors.

DECISION

On review the Fourth Circuit Court of Appeals must assume all well-pled facts to be true, and draw all reasonable inferences in favor of the plaintiff. Under Maryland law, which is applicable here, in determining whether an insurer has a duty to defend, a court must determine the coverage under the terms of the policy and determine whether the allegations in the underlying complaint bring the claim within the policy’s coverage.

The inquiry focuses on the language and requirements of the policy and the allegations of the underlying suit. The facts ultimately proven in the underlying litigation have no bearing on an insurer’s duty to defend.

A court determines whether there is any potentiality of coverage, i.e. whether the allegations in the complaint could possibly give rise to coverage under the policy. The duty to defend is broader than the duty to indemnify and arises when allegations of a law suit demonstrate any claim potentially covered by policy. Where a potentiality of coverage is uncertain from the allegations of a complaint, any doubt must be resolved in favor of the insured.

The Fourth Circuit thoroughly reviewed the record and the relevant legal authorities and concluded that the district court did not err in concluding that, based on the allegations of the underlying complaint, there was no potentiality of coverage under the policy. Therefore, the Appellees had no duty to defend the Appellants in the underlying suit.

ZALMA OPINION

Appellate pleadings are called “briefs” but are seldom brief. Appellate decisions often emulate the briefs filed by the lawyers by being anything but brief. The Fourth Circuit refused to follow the rule of thumb and issued a truly brief decision that found no potentiality for coverage and, therefore, no need for the insurers to defend.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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Great Gifts for the Insurance Professional

New Books from Full Court Press

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

Barry Zalma practiced law in California for more than 44 years as an insurance coverage and claims-handling lawyer, and has spent more than 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

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

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

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

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

CalifCal Lawornia Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the UniZalmated States, and few know more about California insurance law than Barry Zalma.

Insurance Bad Faith and Punitive Damages Deskbook: Understand the relationship between insurance, the tort of bad faith, and why punitive damages are awarded to punish insurers.

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

All available at fastcase.com.

Books from ClaimSchool, Inc.

“Insurance Law”

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

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

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

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

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

Mold Claims Coverage Guide

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

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

Construction Defects Coverage Guide

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

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

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

Insurance Claims: A Comprehensive Guide

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

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

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

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

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Duty to Defend Only Applies to Person Sued

No Right to Rescind a Contract that Does Not Exist

Liability insurance is designed to provide defense and indemnity to persons insured who are sued as a result of events covered by the insurance policy. It does not, nor can it, provide defense to a person not insured. Further, a liability policy will not defend if a clear and unambiguous exclusion applies.

In Robert Mau; Eagle Well Services, Inc. v. Twin City Fire Insurance Co., No. 17-3392, United States Court of Appeals For the Eighth Circuit (December 6, 2018) Robert Mau and Eagle Well Services, Inc. (“EWS”) failed in its efforts to get defense and indemnity from Twin City. They then appealed the district court’s grant of Twin City Fire Insurance Company’s (“Twin City”) cross-motion for summary judgment.

THE AVAILABLE COVERAGE

Twin City insured Eagle Operating, Inc. and its subsidiaries. Endorsement No. 2 of the policy defined Eagle Operating’s subsidiaries to include EWS and MW Industries, Inc. During the relevant period, Mau was president of Eagle Operating, shareholder and president of EWS, director and president of MW, and an owner of American Well Services (“AWS”).

In February 2012, EWS sold its assets to a predecessor of Sun Well Services (“Sun Well”) through an Asset Purchase Agreement (“Agreement”). EWS and Mau were parties to the Agreement, which included a noncompetition covenant.

BREACH OF A NONCOMPETITION CONTRACT

After the Agreement was signed, MW sold equipment to AWS. Claiming that the sale violated the noncompetition covenant, Sun Well sued Mau for breach of contract, fraud, and civil conspiracy, and it sued EWS for breach of contract and fraud. Twin City refused to defend the suit.

THE DECLARATORY RELIEF ACTION

Mau and EWS sued Twin City, seeking a declaration that they were insured under the policy. They also sued Twin City for breach of contract and breach of the implied covenant of good faith and fair dealing. Mau filed a motion for partial summary judgment. Twin City filed a response in opposition and a cross-motion for summary judgment, asking the court to find that Twin City had no duty to defend Mau or EWS. The district court denied Mau’s motion for partial summary judgment, and it granted Twin City’s cross-motion for summary judgment.

North Dakota law applies in this case. An insurer has no duty to defend an action if there is no possibility of coverage under the policy. Any doubt about whether a duty to defend exists must be resolved in favor of the insured.

Mau argued before the district court that Twin City owed him a duty to defend because Sun Well sued him in his capacity as a director and officer of MW, an insured subsidiary of Eagle Operating. The district court rejected his argument. Sun Well’s claims do not depend on any actions Mau took as president of MW. This is evidenced by the fact that Sun Well did not sue MW. While Sun Well’s complaint mentions MW contextually, MW is not a party to the suit. There is no need for an insurer to defend a party who was not sued.

Instead, Sun Well’s claims depend on the alleged breach of the noncompetition covenant in the Agreement between EWS and Sun Well, an agreement to which MW was not a party. Sun Well would have no claim for breach of contract, fraud, or civil conspiracy against Mau were it not for the Agreement, which he signed as president of EWS, not as a director and officer of MW. Thus, Sun Well sued Mau in his capacity as president of EWS. Because Sun Well’s complaint contains no claims based on any actions Mau took as a director and officer of MW, Twin City owes him no duty to defend on that basis.

Eagle Operating’s insurance policy with Twin City includes an exclusion that applies to Mau in his capacity as president of EWS. The dual service exclusion provides as follows: “The Insurer shall not pay Loss: . . . of an Insured Person based upon, arising from, or in any way related to such Insured Person’s service, at any time, as a director, officer, trustee, regent, governor or equivalent executive or as an employee of any entity other than an Insured Entity even if such service is at the direction or request of such Insured Entity….”

Because the allegations of the complaint govern the duty to defend, the appellate court looks to Sun Well’s complaint when applying the dual service exclusion. The complaint says that Mau “participated in the formation and subsequent operation” of AWS. And it says that AWS is an “affiliate” of Mau “as that term is defined in Section 7.13 of the [Agreement].”  Any loss Mau suffers from the Sun Well litigation certainly “arises from” and is “related to” his service in one of the exclusion’s stipulated roles for AWS, an uninsured entity. Thus, the dual service exclusion applies to Mau.

Because Mau was not sued in his capacity as director and officer of MW and because the dual service exclusion applies, there is no possibility of coverage for Mau under Twin City’s policy.

Similarly, Twin City has no duty to defend EWS in this suit. The insurance policy includes another exclusion that reads as follows: “The Insurer shall not pay Loss under Insuring Agreement (C) in connection with any Claim based upon, arising from, or in any way related to any actual or alleged: ¶ (1) liability under any contract or agreement, provided that this exclusion shall not apply to the extent that liability would have been incurred in the absence of such contract or agreement . . . .”

In other words, the contract exclusion applies to claims arising from the insured’s contracts or agreements unless liability otherwise would exist in the absence of the contract or agreement. This exclusion applies to EWS because Sun Well’s claims against EWS for breach of contract and fraud are based upon, arise from, or are related to the Agreement, and liability could not have been incurred in the absence of the Agreement.

EWS does not contest that Sun Well’s claims are based upon, arise from, or are related to the Agreement. EWS argues that Sun Well’s fraud claim created the possibility that the Agreement would be rescinded. If the Agreement were to be rescinded, EWS claims, liability would exist in the absence of the Agreement.

In either case, even if EWS’s arguments had some validity, the contract exclusion would apply to any resulting liability. Sun Well’s fraud claim would not exist in the absence of the Agreement. The fraud claim alleged that Mau and EWS “concealed” material facts about their plan to breach the noncompetition covenant that they had a duty to disclose. And a contract that does not exist cannot be rescinded.

There is no possibility of coverage for EWS under Twin City’s policy because the contract exclusion applies.

Applying North Dakota law, the court held that Twin City owed no duty to defend Mau in his capacity as director and officer of MW because no claims were brought against him in that capacity and, in any event, the dual service exclusion applied. The court also held that Twin City did not owe a duty to defend EWS where the claims against it for breach of contract and fraud are based upon the Asset Purchase Agreement and liability could not have been incurred in absence of the Agreement. Furthermore, even if EWS’s arguments had some validity, the contract exclusion would apply to any resulting liability.

ZALMA OPINION

Liability insurance is not designed to protect against breaches of contracts which, by definition, must be neither contingent nor unknown losses and are, therefore, not insurable. Breaching a non-competition clause is, by definition, an intentional act. Since fortuity is required for coverage under a liability policy an intentional breach of contract can never be the subject of insurance. Finally, there can never be an obligation of an insurer to do the impossible – defend an insured who was not sued.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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Insurance Crime for Fun, Profit & Jail

Fictionalized True Insurance Crime Books

“HEADS I WIN, TAILS YOU LOSE”

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

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

Available as a Kindle Book.

Available as a paperback.

“Candy and Abel: Murder for Insurance Money

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

Product DetailsAvailable as a Kindle Book.

Available as a paperback.

 

 

“Murder And Insurance Fraud Don’t Mix”

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

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

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

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

Available as a Kindle book.

Available as a paperback

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

 

Product Details

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

Available as a Kindle book.

Available as a paperback.

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

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

Available as paperback.

Available as a Kindle Book.

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

 

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

Available as a paperback.

Available as a Kindle book.

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

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When an Insurer Sues Another Insurer Without Good Cause

The Problems Arise because an Insurance Company Couldn’t or Wouldn’t Read a Policy

Under basic state law across the country an employer never can be sued for injuries incurred by its employees. However, contracts between builders and owners often shift the obligation to defend and indemnify the owner, and eventually to the insurer for the builder. Even insurance companies forget that an insurance policy is just a contract that must be interpreted in accordance with the plain meaning of the contract as must a construction contract.

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

TRIAL COURT HOLDING

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

FACTS

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

THE POLICY

Colony’s policy covers NYCHA for “‘bodily injury'” that is “caused by an ‘occurrence’ and arises out of: (a) Operations performed for you by the ‘contractor.'” The word “contractor”– in quotes – is defined as Technico. An exclusion in the policy provides that there is no coverage for: “‘[b]odily injury'” “sustained by any contractor, subcontractor or independent contractor or any of their ’employees,’ ‘temporary workers,’ or ‘volunteer workers.'” (emphasis added)

ANALYSIS

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

The interpretation of this exclusion was the only question before the Second Circuit. The initial interpretation of a contract is a matter of law for the court to decide. Under New York law, an insurance contract is interpreted to give effect to the intent of the parties as expressed in the clear language of the contract.

As the district court concluded, the exclusion provides, in straightforward and unambiguous wording, that the policy does not provide coverage for bodily injury sustained by employees of “any contractor.” “Any contractor” must be read to have its plain meaning. The plain meaning of “any contractor” includes Technico, because Technico is defined in the policy as a “contractor” (in quotes).

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

Further, American Empire’s argument – that “any contractor” does not include the defined “‘contractor'” – is refuted by another contract provision. The “Other Insurance” clause provides: “[W]e will not seek contribution from any other insurance available to you [NYCHA] unless the other insurance is provided by a contractor other than the designated ‘contractor’ . . .”

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

ZALMA OPINION

It is astonishing that an insurer whose business includes writing, issuing, interpreting and fulfilling the promises made by an insurance policy was willing to litigate with another insurer claiming that a “contractor” is not one of the people described by the language: “any contractor.”  This suit was a waste of time and legal fees.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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Ethics, Rescission and the Examination Under Oath

The Covenant of Good Faith And Fair Dealing

For the last three centuries, at least, every insurance policy issued contains, by judicial fiat, a covenant of good faith and fair dealing. That covenant requires that every insurance transaction is ethical, fair, honest and conducted with the utmost good faith. In the following three books the basis for insurance is explained with an explanation of ethics for the insurance professional, the equitable remedy of rescission that exists if an insurance contract is acquired in bad faith and the examination under oath an insurance policy contractual requirement that can be used to establish that the insured and insurer conducted a thorough and good faith investigation of a claim.

Ethics for the Insurance Professional

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

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

Available as a paperback.

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.

The Insurance Examination Under Oath

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

Available as a Kindle book.

Available as a paperback.

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

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False Warranty Eliminates Coverage

It’s Not Nice to Lie to an Insurer – It’s Fatal

Warranties made to insurers and made a part of an insurance policy are special promises the veracity of which are the basis upon which the insurance exists. If the warranty is false the coverage will never apply. For that reason prospective insureds asked to submit a warranty to an insurer should do so carefully, honestly, thoroughly and with absolute good faith and fair dealing.

In Patriarch Partners, LLC v. Axis Insurance Company, No. 17-3022, United States Court of Appeals for the Second Circuit (December 6, 2018) Patriarch Partners, LLC (“Patriarch”) appealed from a judgment entered in the United States District Court granting summary judgment in favor of Axis Insurance Company (“Axis”) on Patriarch’s claims for breach of contract and declaratory relief. The central question presented to the District Court and on appeal is whether a lengthy Securities and Exchange Commission (“SEC”) investigation into Patriarch ripened into a “claim” before the Axis insurance policy inception date, thereby excluding related defense costs from coverage under the terms of the policy and a related warranty provided by Patriarch to Axis.

The District Court ruled that coverage was excluded under the Axis policy’s “prior or pending claims” endorsement.

FACTS

Patriarch is a private equity investment firm that, among other things, bundles distressed loans to sell to investors as Collateralized Loan Obligations (“CLOs”). Patriarch employs numerous professionals, but Lynn Tilton (“Tilton”) is Patriarch’s founder, sole director, and sole officer.

By letter dated May 27, 2011, and addressed to counsel for Patriarch the SEC contacted Patriarch. In the May 2011 letter, the SEC requested extensive information and documents relating to Patriarch’s organization and business practices. It also requested information about particular “Patriarch Structures,” which the agency defined to include any CLO that Patriarch had provided investment advice on from 2002 until the date of the letter, and certain other funds marketed by Patriarch, including the “Zohar” CLOs.

On June 3, 2011, the SEC internally issued an “Order Directing Private Investigation and Designating Officers to Take Testimony” (the “Order of Investigation” or “Order”) against Patriarch. It bore the same caption as the May 2011 letter. The Order of Investigation authorized certain SEC enforcement officers for the first time to issue subpoenas and take sworn testimony under oath in the Patriarch matter.

In or about June 2011, the SEC requested interviews with two former Patriarch executives, Todd Kaloudis and Meric Topbas. Kaloudis and Topbas each retained counsel for assistance in responding to the SEC requests. In June and July of 2011, they turned to Patriarch for indemnification of their legal expenses, and Patriarch agreed to their requests.

On July 5, 2011, Patriarch’s outside counsel provided information on Patriarch’s structure, operations, and certain of its CLOs.

At that time Patriarch was in the process of renewing its directors and officers (D&O) professional liability insurance portfolio. Patriarch had maintained a “tower” of D&O insurance comprised of several policies totaling $20 million in policy limits. As of June 2011, the existing tower consisted of (1) a primary policy with a $10 million limit issued by Continental Casualty Company (the “CNA Policy”), (2) a $5 million first-level excess policy issued by the Great American Insurance Company, and (3) a $5 million second-level excess policy issued by Illinois National Insurance Company.

On August 9, Patriarch’s insurance broker, Steve Blount, recommended to Patriarch that it purchase a third excess layer of $5 million, extending Patriarch’s policy limit to $25 million.  Axis gave Blount a quote for a third $5 million excess layer. Patriarch accepted the Axis quote on August 12, at which point the Axis Policy became bound. Coverage under the Axis Policy was made effective as of July 31.

The policies defined a “Claim” to include, among other things, “an Investigation of an Insured alleging a Wrongful Act.” An “Investigation” was defined to include “a formal . . . regulatory investigation or inquiry,” including specifically “an order of investigation or other investigation by the [SEC].”

Before Patriarch accepted the Axis quote Blount notified Patriarch’s insurance team that Axis had made its quote contingent upon Patriarch’s execution of a warranty statement (the “Warranty”). Blount wrote in an email dated August 12 that Axis intended the Warranty to “eliminate the potential for Axis to come on the program and be immediately hit with a claim that the client knew was close but hadn’t been filed yet.”  Axis received an executed copy of the Warranty on the latter date.

The Warranty provided:

The undersigned, on behalf of Patriarch and all of its directors and officers, hereby represents that as of the date of this letter neither the undersigned nor any other director or officer of Patriarch is aware of any facts or circumstances that would reasonably be expected to result in a Claim under the Captioned Policy. It is understood that the Captioned Policy and any renewal thereof does not provide coverage for Claims relating to facts or circumstances that, as of the date of this letter, Patriarch was aware of and would reasonably have expected to result in a Claim covered by such Captioned Policy (or future renewal thereof).

On February 27, 2012, just over six months after the Axis Policy became effective, the SEC served the subpoena that it had advised Patriarch in August would be forthcoming (the “Patriarch Subpoena”).

On March 5, 2012, in a letter to all of its D&O insurers, including Axis, Patriarch tendered notice of the Patriarch Subpoena as a “new matter.” CNA responded to Patriarch in a letter dated March 7, 2012, that Patriarch Subpoena “appears to qualify as a ‘Claim’ for a ‘Wrongful Act.'” Axis also acknowledged Patriarch’s notice of the SEC investigation as a Claim but, in a letter dated October 7, 2013, expressly reserved its rights to deny coverage under the Axis Policy.

The costs of defending the SEC proceeding had depleted nearly all of Patriarch’s underlying $20 million in D&O coverage. In August 2015, Patriarch notified Axis that it had exhausted its underlying policy limits, and asked Axis to assume the obligation to cover defense costs. Axis denied coverage on the basis (among others) that the SEC investigation was not a Claim “first made” against Patriarch during the Axis Policy period, because the investigation had begun before the policy inception date of July 31, 2011. Patriarch sued.

ANALYSIS

By Summary Judgment motion Axis argued that it was excused from coverage on at least two bases: First, that the SEC investigation was a “Claim” first made before the Axis policy incepted and was therefore not covered by the Axis Policy; second, that the Warranty relieved Axis of its obligations because the SEC investigation constituted “facts or circumstances” of which Patriarch was aware that could reasonably have been expected to result in the Claim.

Insurance coverage exclusions must be stated in clear and unmistakable language and are subject to a strict and narrow construction. Any ambiguities are to be construed in favor of the insured.

Patriarch’s position that the Warranty applies only to facts or circumstances subjectively known by Tilton is unsupported by the text of the Warranty, which explicitly refers to facts or circumstances that “Patriarch was aware of.” Moreover, “under traditional principles of agency [an] attorney’s knowledge must be imputed to [her client].” Veal v. Geraci, 23 F.3d 722, 725 (2d Cir. 1994).

Because the Axis Policy is a “follow-form” policy, the same Claims that are “covered by” the CNA Policy are also “covered by” the Axis Policy and other underlying excess policies.  The only reasonable interpretation of the Warranty is that it excludes claims arising from facts or circumstances of which Patriarch was aware as of August 12 and that Patriarch would reasonably have expected to result in a Claim as defined by the CNA Policy.

The Warranty, read as a whole to determine its purpose and intent, contains no ambiguity.

By August 12, 2011, the effective date of the Warranty, Patriarch “was aware” of the SEC Order of Investigation, the escalating severity and focus of the SEC investigation, the subpoena of a former employee, and notice of an impending subpoena to be issued to Patriarch itself. Patriarch had accrued over $390,000 in legal expenses for outside counsel in responding to the SEC’s requests of it by the time the Warranty was executed.

Contrary to the representations made in the Warranty, Patriarch was “aware” that the SEC had become more—not less—insistent in its demands of Patriarch, despite Patriarch’s accrual of hundreds of thousands of dollars in legal costs to prevent such escalation.

These are “facts and circumstances” that could reasonably be expected to give rise to a Claim under the Axis Policy. The Warranty thus excludes Patriarch’s losses arising from its defense of the SEC investigation Claim from coverage under the Axis Policy.

ZALMA OPINION

Warranties are special. Patriarch falsely warranted that it was not under investigation although it had already spent more than $300,000 on attorneys fees responding to the investigation of the SEC. It should have advised Axis at the time the warranty was requested that there was a potential for a claim. By presenting a false warranty Patriarch lost the ability to gain defense or indemnity from the Axis policy. A false warranty stops a policy from attaching to the risk.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

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Books for the Insurance Professional – A Perfect Gift

Adjusting

The need for experienced, well trained and professional claims handlers is severe especially after the many catastrophes by wildfire, hurricane and tornado. The two Compact Books on Adjusting will allow even the novice adjuster to understand the profession and the more experienced refresh their knowledge and training. Those working in California need to comply with the fair claims settlement practices and SIU regulations all available from Barry Zalma at Amazon.com.

The Compact Book of Adjusting Property Insurance Claims

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

Available as a Kindle book.

Available as a paperback.

The Compact Book on Adjusting Liability Claims

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

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

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SOS – Limited Coverage for Sewage in Restaurant

Insurer Provided Sewer Back-Up Coverage But Limited its Liability

People who write insurance policies have found a way to avoid contentious claims where the cause of loss is difficult to ascertain or deal with by an insurer. Rather than trying to deal with the task of writing an all encompassing exclusion they create a peril insured against and limit the amount payable. I have seen this used in mold claims, earth movement, and mudflow situations.

In Fouzia Salih v. Ohio Security Insurance Company, Docket No. A-1179-17T1, Superior Court of New Jersey Appellate Division (December 3, 2018) it was used in a sewer back up claim.

FACTS

Fouzia Salih owned property on Main Street in Paterson, New Jersey which she leased to Jehad Daher, who operated a restaurant on the property. Daher contacted plaintiff’s son, Massy Salih, and informed him that there was water and an odor at the restaurant. When Massy arrived, he immediately noticed water and a very foul odor that prevented him from entering the property any further. Massy contacted Anytime Plumbing, which inspected the property and informed him that there was a clog in the restaurant’s toilet, which resulted in dirty water, including human feces, overflowing out of the toilet, and into the restaurant. The water caused heavy damage to the property’s tiles, basement, first-floor bathroom, and kitchen, and destroyed the water heater and furnace.

The damage rendered the property inoperable, and Daher stopped paying rent. In order to restore the property, Massy hired Sure Kleen Restoration to remove the damaged tiles and dry wall, and to clean and sanitize the premises. Plaintiff’s public insurance adjuster, Chris Powers, determined that plaintiff’s loss was caused by a discharge of water that resulted in $162,933.63 in total damages to the property.

Plaintiff filed a claim with Ohio Security. After an initial investigation and inspection by its insurance adjuster, Ohio Security determined that the “cause of loss” was “from a back[-]up of raw sewage and not an overflow.” As a result, Ohio Security denied coverage for losses in excess of its $25,000 policy sublimit. In making its decision Ohio Security relied on its policy provisions and information gathered from Sure Kleen Restoration, confirming that the loss was from a sewer back-up, as well as the plumber, who “used a snake to clear the sewer line to remedy the issue.”

According to defendant, although under the “Water Exclusion Endorsement,” the insurance policy generally excluded water damage from “[w]ater that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment,” the “Water Exclusion Endorsement” was “deleted and replaced,” and coverage was extended for “direct physical loss or damage caused by water . . . [w]hich backs up into a building or structure through sewers or drains which are directly connected to a sanitary sewer or septic system.” However, coverage under the custom endorsement was limited to a maximum of $25,000.

Based on these policy provisions, defendant issued checks to Sure Kleen Restoration for $16,652.76, and plaintiff for $8347.24, for a combined total of $25,000.

Because plaintiff’s expenses to maintain and restore the property exceeded $25,000, on plaintiff sued alleging Ohio “breached its contractual obligations to pay benefits to [p]laintiff for a loss covered under [d]efendant’s policy of insurance.” Relying on the custom endorsement, defendant moved for summary judgment.

According to plaintiff, because the damage resulted from an “accidental discharge” of water from a blockage in the plumbing system within the property, rather than a sewer back-up originating outside of the property, the $25,000 sublimit in the custom endorsement did not apply, and plaintiff was entitled to recoup lost business income.

The motion judge determined that the custom endorsement limitation controlled. Finding no genuine issue as to any material fact, the judge acknowledged that an insurance policy is a contract to be enforced as written, and that policy exclusions are ordinarily strictly construed against the insurer.

ANALYSIS

Plaintiff purchased and bargained for coverage for water damage in the custom endorsement which states the most the insurer will pay for loss or damage under the coverage extension is $25,000.

If the evidence of record — the pleadings, depositions, answers to interrogatories, and affidavits — together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact, then the trial court must deny the motion. On the other hand, when no genuine issue of material fact is at issue and the moving party is entitled to a judgment as a matter of law, summary judgment must be granted.

The appellate court agreed with the trial court there are no factual disputes. The issue on appeal presents solely a question of law. Because the interpretation of an insurance contract is a question of law which is to be decided independent of the trial court’s conclusions. An insurance policy is construed in accordance with principles that govern the interpretation of contracts and the parties’ agreement will be enforced as written when its terms are clear in order that the expectations of the parties will be fulfilled.

To that end, an appellate court, when considering the meaning of an insurance policy, interprets the language according to its plain and ordinary meaning. Further, New Jersey courts often have construed ambiguous language in insurance policies in favor of the insured and against the insurer. However, in the absence of an ambiguity, a court should not engage in a strained construction to support the imposition of liability or write a better policy for the insured than the one purchased. Moreover, New Jersey courts will not manufacture an ambiguity where none exists.

Applying the insurance contract interpretation requirement the appellate court agreed with the trial judge that defendant was entitled to summary judgment as a matter of law.

The policy’s exclusionary language was “deleted and replaced” by the custom endorsement, which added water damage coverage for sewer backups. However, the custom endorsement also limited recovery to a maximum of $25,000, and excluded loss for business income or extra expenses.

The policy terms are clear, unambiguous, and support Ohio’s interpretation. The appellate court, therefore, rejected plaintiff’s attempt to create ambiguity and to support an alternate interpretation of the policy provisions by relying on case law from jurisdictions throughout the United States that differentiate a sewer back-up from an accidental discharge of water.

ZALMA OPINION

The Ohio Security policy, in clear and unambiguous language, agreed to cover damage caused by the back-up of a sewer and limited its liability for such losses to $25,000. It paid the limit and was sued for applying the clear and unambiguous language of the policy. As I have said until I have turned blue in the face, before suing an insurer, it is incumbent on the litigants and their lawyers to read the policy and not try to create an ambiguity that isn’t there. The New Jersey court read the policy and refused to give the insured a coverage for which she did not pay.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

Go to Zalma Books Paperbacks and Kindle books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library.

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Needed by Every Insurance Professional

A Gift Wished for by Every Insurance Professional

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

Mr. Zalma explains why the court created tort of bad faith has outworn its welcome and needs to be eliminated because it gives fraud perpetrators and less than honorable lawyers a weapon to obtain payment from insurers of monies not owed.

Time to Rescind the Tort of Bad Faith

Insurance and the Law of Unintended Consequences Paperback 

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

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

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

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


“Insurance Fraud & Weapons to Defeat Insurance Fraud”

In Two Volumes

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

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

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

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

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

 

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Failure to Fulfill Warranty Prevents Policy from Attaching to Risk

An Assignment of a Bad Faith Claim is Worthless if there is no Coverage

Insurance policies include conditions precedent and warranties to protect the insurer against being compelled to indemnify an insured for risks the insurer had no intent or desire to insure. Litigants seek assignments from tortfeasors against insurance companies to obtain punitive damages in addition to a judgment. This only works, however, if counsel reads and understands the policy that will be the subject of their suit.

In Debra Gray et al. V. American Safety Indemnity Company, B289323, Court of Appeal of the State of California Second Appellate District Division Four (December 3, 2018) Plaintiffs Debra Gray and numerous other former tenants of an apartment building successfully sued the owner for multiple serious habitability violations. They did so as part of a settlement with the owner, which included an assignment of the building owner’s claim for bad faith and breach of contract against the owner’s insurer—American Safety Indemnity Co. (ASIC)—after ASIC refused to defend and cover those claims.

FACTUAL BACKGROUND

On February 14, 2013, plaintiffs asserted claims for habitability against New Hampshire, including breach of the warranty of habitability, breach of the covenant of quiet enjoyment, negligence, and related claims based on the conditions of the property. Plaintiffs alleged that the premises were infested by vermin and cockroaches, lacked security, had broken windows and doors that were off their hinges, lacked adequate water supply, heat, proper sewage disposal, and the smoke detectors were either missing or inoperable, and was generally unsanitary and in poor repair. (Habitability Action.)

New Hampshire was insured by ASIC. ASIC refused to defend New Hampshire.

A settlement agreement (Agreement) entered into between plaintiffs and New Hampshire on April 30, 2014, provided for the release of New Hampshire from plaintiffs’ claims and assignment of New Hampshire’s claims against its insurer to plaintiffs, based upon certain terms and conditions including a release of New Hampshire. After a trial by reference  the judge ruled in favor of plaintiffs and issued a judgment for $1.3 million against New Hampshire. A corrected judgment was entered that specified numerous deficiencies in the property, including “lack of smoke detectors, or smoke detectors that were inoperable.”

Plaintiffs sued ASIC alleging claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. Plaintiffs asserted that ASIC had refused to defend New Hampshire in the Habitability Action, and refused to provide coverage.

ASIC successfully demurred to the second amended complaint. ASIC argued that plaintiffs failed to satisfy a condition precedent, precluding coverage. ASIC relied on the insurance policy’s language regarding the “Protective Safeguard Promissory Warranty.” The language of this warranty provided that “the insured shall maintain in complete working order all equipment and services pertaining to the operation of the described protective safeguard. . . . [¶] Smoke Detectors in all units/living spaces. [¶] Breach of any warranty(s) shall render coverage provided by this policy null and void.”

ASIC argued the complaint and first amended complaint in the habitability action alleged a “lack of smoke detectors, or smoke detectors that are inoperable.” ASIC requested judicial notice of tenants’ complaints regarding the property and citations from the Los Angeles Department of Housing, which stated that the property lacked operating smoke detectors.

Plaintiffs claimed substantial compliance with the warranty. Plaintiffs also asserted compliance with the smoke detector requirement should be equitably excused because the missing or unrepaired smoke detectors constituted a technical forfeiture.

DISCUSSION

Plaintiffs assert that their position in the two actions regarding the condition precedent (the smoke detectors) is not inconsistent, and in any event, factual issues regarding substantial compliance, waiver, and equitable excuse preclude demurrer.

NEW HAMPSHIRE’S FAILURE TO SATISFY THE CONDITION PRECEDENT PRECLUDES COVERAGE UNDER THE POLICY.

The Protective Safeguard Promissory Warranty is a Condition Precedent to Coverage Under the Policy.

A condition precedent refers to an act, condition, or event that must occur before the insurance contract becomes effective or binding on the parties. Conditions precedent in insurance policies neither confer nor exclude coverage for a particular risk, but impose certain duties on the insured in order to obtain the coverage provided by the policy. The existence of a condition precedent depends on the intent of the parties as set forth in the insurance contract.

Here, New Hampshire’s policy specified that “BREACH OF ANY WARRANTY(S) SHALL RENDER COVERAGE PROVIDED BY THIS POLICY NULL AND VOID.” New Hampshire failed to satisfy this condition, and as a result ASIC’s obligation to provide coverage under the policy never accrued. (See American Way Cellular, Inc. v. Travelers Property Casualty (2013) 216 Cal.App.4th 1040, 1055 [insured failed to maintain sprinkler system as required by the terms of the endorsement].)

Here, the court only needed to look to the judgment in the habitability action to conclude plaintiffs are estopped from asserting the smoke detectors were in substantial compliance with the warranty condition. The judgment in the habitability action made a finding that “[p]laintiffs allege that during the time they resided at the Property, they became aware of defective and dangerous conditions at the Property, including: . . . [¶] Lack of smoke detectors, or smoke detectors that are inoperable.” The judgment further found, “[p]laintiffs allege that because of the defects such as those listed above [including missing or inoperable smoke detectors], the premises of the Property were rendered uninhabitable and unfit for human occupation.”The factual summary included the allegations concerning the lack of smoke detectors. Plaintiffs was unable to change their position in the proceeding and assert that the smoke detectors were installed and functioning, or at the very least that their condition was in substantial compliance with the condition precedent of the policy.

Similarly, under principles of collateral estoppel, plaintiffs cannot assert that the condition precedent was satisfied. Issue preclusion prohibits the relitigation of issues argued and decided in a prior case, even where the second suit raises different causes of action.  Here, the judgment in the habitability action found nonfunctional or missing smoke detectors, the same issue plaintiffs assert here as the basis for the bad faith complaint. Plaintiffs are bound by that finding.

For a Condition Precedent in a Warranty to Void Coverage, No Nexus to the Loss is Necessary.

Generally, an insured must be in strict compliance with a condition precedent to the right of recovery under a policy. As explained in Wells Fargo & Co. v. Pacific Ins. Co. (1872) 44 Cal. 397, 412, ‘”the very meaning of a warranty is, to preclude all question whether it has been substantially complied with; it must be literally”‘ complied with.

Lack of a nexus to the loss does not vitiate a warranty as a precondition to coverage. “California courts have held the breach of even an immaterial warranty will void a policy ‘where the policy expressly declares that it shall avoid it.’ [Citation.].” (Certain Underwriters at Lloyd’s v. Montford (9th Cir. 1995) 52 F.3d 219, 223.) In Certain Underwriters, the insured obtained a policy on a vessel that contained a “cruising warranty” that specifically excluded Colombian and Nicaraguan waters, and that a breach of the warranty would render the policy “null and void.” The insured sought reimbursement after the vessel disappeared from its berth in Costa Rica. The captain admitted that the vessel had recently cruised in waters near Colombia one month before it disappeared.  The court concluded that no nexus was required.

No Equitable Excusal of Condition.

Finally, plaintiffs argue that because enforcement of the warranty will result in a forfeiture in this instance, they should be equitably excused from compliance with a condition (smoke detectors) that has no relationship to the loss (habitability).

There are no grounds for equitable excusal. There is no evidence that New Hampshire’s compliance with the condition was rendered nearly impossible to perform or that New Hampshire made any effort to honestly comply with the condition before obtaining the insurance.

The failure to have operational equipment does not work a forfeiture but merely prevents the insurer’s obligation under the policy from accruing.

ZALMA OPINION

Warranties are a special type of promise made by the insured that, as a condition precedent, prevents a policy from attaching to a risk of loss. In this case the insured promised to have operational smoke detectors in every unit of the building. The insured, New Hampshire, had failed to maintain the smoke detectors and the trial court in the underlying action ruled against New Hampshire because, among other reasons, failed to protect the tenants with smoke detectors. As a result the insured failed to fulfill the warranty and the policy never attached to the risk of loss.  As a result the assignment the plaintiffs obtained from New Hampshire was worthless because the policy never attached to the risk.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

Go to Zalma Books Paperbacks and Kindle books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library.

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More Perfect Gifts for Insurance Professionals

Insurance Claims, Construction Defect and Mold

Do you make it a practice to provide gifts to insurance professionals, insurance claims departments, insurance underwriting departments, insurance agents or insurance brokers? Remember, wine, cookies, fruit, etc last a few days and are quickly forgotten. Books, like those listed below, will be used for the entire year and will be appreciated every time they are referred to by the insurance professional. Rather than adding to obesity you will add to their intelligence and professionalism.

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

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

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

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

Zalma on Insurance Claims Volume 101

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

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

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

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

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

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

Zalma on Insurance Claims Part 102

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

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

Zalma on Insurance Claims Part 103

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

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

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

Zalma on Insurance Claims Part 104

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

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

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

Zalma on Insurance Claims Part 105

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

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

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

Zalma on Insurance Claims Part 106

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

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

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

Zalma on Insurance Claims Part 107:

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

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

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

Zalma on Insurance Claims Part 108

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

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

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

Zalma on Insurance Claims Part 109 

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

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

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

Zalma on Insurance Claims Part 110

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

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

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


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 – Kindle book; 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

  • Mold Claims

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

    Mold Claims Volume One: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.Mold Claims provides in-depth explanations, analysis, examples, and detailed discussion of:

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

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

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

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

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

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Insurance Company – Read The Policies Before You Sue

No Grant of Coverage Means No Need to Discuss “Other Insurance” Provisions

Reason requires that an insurance policy is capable of reading and understanding the policy of insurance it issued and policies of insurance issued by other insurers. Litigation, however, has little to do with reason and more to do with money. Litigation between insurers who should know better — don’t.

In Joshua W. Balde, Deltco of Wisconsin, Inc., Mt. Morris Mutual Insurance Company v. Olivia L. Haas, Wisconsin Mutual Insurance Company, Mt. Morris Mutual Insurance Company, Appeal No. 2017AP2173, State of Wisconsin in Court of Appeals District III (November 27, 2018) an insurer attempted to recover what it paid to an injured party on behalf of a person it insured from another insurer it claimed also insured the liability of the party causing the injury.

FACTS

A lawsuit involving a utility task vehicle (UTV) accident that allegedly caused injuries to a passenger, Joshua Balde was defended by Wisconsin Mutual who then sued Mt. Morris Mutual to recover what it paid.

Olivia Haas was driving the UTV and lost control, causing the UTV to tip over and injure its passenger, Balde. The UTV was owned by Olivia’s uncle, Edward Berube, who lived immediately adjacent to the land where the accident occurred. Wisconsin Mutual had issued an insurance policy to Berube which contained coverage for bodily injuries stemming from the use of the UTV. It is undisputed that Olivia was a permissive user of the UTV; it is also undisputed that Olivia was an “insured” under the Wisconsin Mutual policy while using the UTV.

The property on which the accident occurred was owned by Olivia’s father, Glen Haas. Mt. Morris had issued an insurance policy to Haas. As the property insurance carrier for the property on which the accident occurred, Mt. Morris paid medical expenses on Balde’s behalf.

Mt. Morris was added as a party in the lawsuit in order to address its subrogation lien for those medical payments. Mt. Morris requested a determination that no coverage was owed under the Mt. Morris policy as Olivia was not defined as an “insured” under its policy because Wisconsin Mutual provided other applicable insurance covering Olivia’s use of the UTV.

The circuit court agreed that Olivia was not defined as an “insured” under the Mt. Morris policy because other insurance—i.e., the Wisconsin Mutual policy—undisputedly covered Olivia for her alleged negligent operation of the UTV. Accordingly, the trial court granted summary judgment dismissing Mt. Morris, and Wisconsin Mutual now appeals.

DISCUSSION

The interpretation of an insurance contract is a question of law. When the language of an insurance contract is unambiguous, courts apply its plain and ordinary meaning. Haas was the named policyholder of the Mt. Morris policy. Olivia was not a named insured under the Mt. Morris policy issued to her father. Therefore court was required to determine whether Olivia was otherwise defined as an “insured” under the policy.

It is undisputed that the Wisconsin Mutual policy provided liability insurance coverage to Olivia while using the UTV. Accordingly, “other insurance covering the liability” was available through the Wisconsin Mutual policy issued to Edward Berube. As such, under subdivision b) of the policy the circuit court correctly concluded that Olivia was not defined as an “insured” under the Mt. Morris policy, and the policy thus did not provide an initial grant of coverage.

Nevertheless, Wisconsin Mutual contends its policy declares that its coverage is “excess over other insurance that applies to the loss or claim.” Wisconsin Mutual argues that, as a matter of law, its policy is thus “excess coverage” and does not qualify as “other” insurance as that term is used in the Mt. Morris policy.

The appellate court dismissed the argument over excess and “other insurance” provisions because the obvious purpose of the definition of an “insured” in the Mt. Morris policy is to determine whether there is a grant of coverage in the first instance. Olivia was only an insured under the Mt. Morris policy if there was no other insurance available to her covering the liability.

The unambiguous requirement is definitional. It is only when there is an initial grant of coverage that conflicting “other insurance” clauses, exclusions and exceptions to the exclusions need to be analyzed. Under the plain and unambiguous terms of the Mt. Morris policy, Olivia did not meet the definition of an “insured,” there was no initial grant of coverage, and thus the court’s inquiry ends.

The circuit court correctly found there was “other such insurance as it is undisputed that the UTV [Olivia] was operating was insured through the Wisconsin Mutual policy.” Under the undisputed facts of this case, Mt. Morris did not owe coverage for Olivia’s alleged negligence. There was no initial grant of coverage due to the availability of other insurance.

ZALMA OPINION

It is annoying when people sue because they failed to read the policies that were the basis of the claim. It is doubly annoying when one insurance company sues another because it did not read the policy of the defendant. The first thing every insurance adjuster and every insurance lawyer does when reviewing a policy of liability insurance is determine who is insured. If the person involved, in this case, Olivia is not an insured then the insurer owes her nothing. Please, insurers and insureds, read and understand the policy involved before filing suit.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

Go to Zalma Books Paperbacks and Kindle books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library.

 

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More Gifts for the Person Interested in Insurance

Books for the Insurance Professional

Do you make it a practice to provide gifts to insurance professionals, insurance claims departments, insurance underwriting departments, insurance agents or insurance brokers? Remember, wine, cookies, fruit, etc last a few days and are quickly forgotten. Books, like those listed below, will be used for the entire year and will be appreciated every time they are referred to by the insurance professional. Rather than adding to obesity you will add to their intelligence and professionalism.

 

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

COIL Commentary on Insurance Law

Volume 1, Number One

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

A Journal providing information about insurance, insurance claims handling and insurance law as it changes with new decisions from the state and federal appellate courts.Future issues will be issued regularly providing information on new and interesting insurance appellate decisions.  Articles included:

  • What is Insurance?
  • Claims in a Catastrophe
  • Misrepresentation or Concealment of a Material Fact
  • Only in California “Once” is with “Such Frequency as to Indicate a General Business Practice”

COIL Commentary on Insurance Law Volume 1, Number Two

Commentary On Insurance Law: November 1, 2018 Volume One, Number Two by [Zalma, Barry]

  • Accident – the name of Insurance – Needed to Obtain Benefits
  • Late Report of Loss Fatal to Claim to Excess Insurer
  • The Danger of Retaining an Unlicensed and Dishonest Public Adjuster
  • Insurance and the Law of Unintended Consequences
  • A CPA’s Obligations with Regard to Errors & Omissions Insurance

COIL Commentary on Insurance Law Volume 1, Number Three

Contents:

Agent Who Kept Premium Owed To Zurich Loses At Ninth Circuit
Asbestos Victim Fund Under Investigation.
If You Do The Crime You Must Do The Time.
When Reasonable Expectations Are Not Reasonable.
When A Court Reads And Understands A Policy Justice Is Done
The Stupidity Of Covering Others For More Than Yourself
You Can’t Make An Insurer Pay For Coverage You Didn’t Buy
Appraisers Can’t Determine Amount Without First Determining Cause Of Loss
First Party Insurance Appraisers & Causation.
Ethical Behavior & Success.
Rescission – The Equitable Remedy.
Subrogation And The Tort Remedy.
Preparing A Case For Trial


The Commercial Property Insurance Policy Deskbook

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

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

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


Zalma on Property and Casualty Insurance

Zalma #4The earnings of almost every civil lawyer in the United States are funded by the insurance industry. Insurance can best be described as the mother’s milk of the law profession. The civil defense lawyer is paid by an insurer for each hour he or she works. The civil plaintiffs’ lawyer is usually paid by taking a percentage of any judgment entered in favor of the plaintiff, which judgment is usually paid by the defendant’s insurer.

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

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

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

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No Right of Subrogation Against an “Insured”

Anti-Subrogation Defeats Suit

Subrogation is a very important equitable remedy available to an insurer to allow it to recover from a third party tort-feasor or a person with a contractual obligation to pay for damages, to improve its bottom line. The right of subrogation has been limited by statute in most states and by equity which does not allow an insurer to subrogate against its insured since that would eliminate the purpose of an insurance contract.

In Depositors Insurance Company v. Craig Dollansky, Respondent, Julie Dollansky, A17-0631, State Of Minnesota In Supreme Court (November 14, 2018) Depositors insured a motor vehicle home owned by Karavan Trailers, Inc., which rented the motor home to Dollansky. The rental agreement provided that Julie Dollansky was responsible for all damages to the RV during the term of the agreement. The motor vehicle caught fire while Dollansky was driving it. Karavan submitted a claim to its insurer, Depositors, which paid the full amount of the damages. Depositors then filed a complaint against Dollansky, alleging that Depositors was surrogated to the rights of Karavan in the same amount.

The bar in Minn. Stat. § 60A.41(a) (2016) against an insurer proceeding in a subrogation action against “its insured,” where the loss was caused by the nonintentional acts of the insured, includes a proceeding against any person covered under the insurance policy.

The statute prohibits an insurance company from “proceed[ing] against its insured in a subrogation action where the loss was caused by the nonintentional acts of the insured.”

FACTS

Dollansky signed a rental agreement with Karavan for a 2001 Newell Motor Home (“the RV”). The RV caught fire while Dollansky was driving it in Nebraska. The cause of the fire is unknown, but nothing in the record suggests that intentional acts by Dollansky caused the fire or the subsequent damage to the RV. The damage to the RV totaled $204,895.05.

The rental agreement provided that Dollansky was responsible for all damages to the RV during the term of the agreement, regardless of the cause of the damage. Dollansky had obtained an extension of his personal-vehicle insurance for the RV, as required by the rental agreement. After the fire, Karavan submitted a claim for the full amount of the damages to Dollansky’s insurer, American Family Insurance. American Family paid Karavan $4,500—that is, the $5,000 deductible set out in Karavan’s insurance policy with Depositors minus the $500 deposit Dollansky had paid to Karavan. American Family denied the remainder of Karavan’s claim.

Depositors and Dollansky filed cross-motions for summary judgment. The district court examined the policy Depositors issued to Karavan and focused on the policy’s definition of “insured” in “Section V—Definitions”: “any person or organization qualifying as an insured in the Who Is An Insured provision of the applicable coverage.” The district court found that because the “Who Is An Insured” provision contained in Section II of the policy defines “insured” as including “[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow,” Dollansky was an “insured” for purposes of Minn. Stat. § 60A.41(a) because Karavan permitted Dollansky to use the covered vehicle, in this case, the RV.

ANALYSIS

Interpretation of an insurance policy, and whether a policy provides coverage in a particular situation, are questions of law. When interpreting a statute, the court first looks to see whether the statute’s language, on its face, is clear or ambiguous. A statute is only ambiguous when the language therein is subject to more than one reasonable interpretation. If a statute is unambiguous the court must apply the statute’s plain meaning.

There exist two reasonable interpretations of the word “insured” in Minn. Stat. § 60A.41(a): it could mean any party covered by some part of the insurance policy, or it could mean any party who is covered by the specific section of the insurance policy that applies to the particular loss at issue. The Supreme Court concluded that Minn. Stat. § 60A.41(a) is ambiguous.

Under another section of chapter 60A, however, “insured” has been defined as “mean[ing] any named insured, additional insured, or insured under an insurance policy.” Minn. Stat. § 60A.0811, subd. 1(2). Although this definition does not directly apply to Minn. Stat. § 60A.41, it would be consistent with interpreting “insured” as including anyone insured under the insurance policy.

When the language of a statute is ambiguous the court may also look to policy considerations to determine how the statutory language is best interpreted. In other cases involving the interpretation of insurance policies and determinations of coverage, the Supreme Court has acknowledged the great disparity in bargaining power between insurance companies and those who seek insurance. Ambiguities in an insurance policy are generally resolved in favor of the insured. The great disparity in power between insurance companies and insureds, and our general tendency to protect insureds’ rights as against those of insurance companies, support a conclusion that public policy favors an interpretation that is broadly protective of the rights of insureds. This conclusion led the Supreme Court to interpret the term “insured” consistently with that policy, lending support to an interpretation that broadly protects the rights of insureds against subrogation.

An insurer has no right of subrogation against its insured. The word “insured” in Minn. Stat. § 60A.41(a) encompasses any party covered by some part of the insurance policy at issue. Therefore, if Dollansky is covered by any part of Karavan’s RV insurance policy with Depositors, Depositors is barred from bringing a suit in subrogation against Dollansky.

Dollansky clearly had permission to use the RV, which was a covered “auto” under the policy. He therefore met the policy’s definition of an “insured,” and was thus provided at least some coverage under Depositors’ insurance policy. Depositors is a sophisticated party. While nothing we say here prevents Depositors from writing its insurance contracts differently in the future, it cannot escape the legal ramifications of its current policy by protesting that it did not know it would be prohibited from subrogating against one of its insureds under its policy.

In circumstances such as these, if an insurance company believes that another insurance policy should be considered the primary policy, it can bring a declaratory judgment action to determine priority and eventually seek payment from the other insurance company as appropriate.

ZALMA OPINON

The most difficult thing an insurer or its lawyers do is write a clear an unambiguous policy. Legislators have the same problem when enacting a statute. By creating an ambiguous statute and a fairly clear policy of insurance Dollansky, as a permissive driver of the rental motor home, became an insured of the policy issued by Depositors and as a result deprived Depositors of its rights of subrogation to enforce the lessor’s contract with Dollansky. The lesson taught by the Minnesota Supreme Court is to be careful when writing a policy of insurance and protect your rights. It could easily have limited coverage to the lessor by limiting coverage to it, as the named and only insured.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

Go to Zalma Books Paperbacks and Kindle books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library.

 

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Zalma’s Insurance Fraud Letter – December 1, 2018

 

Zalma’s Insurance Fraud Letter, Volume 22, No. 23      

Happy Chanukah  

Misrepresentation or Concealment of Material Fact Requires Rescission

The verdict of a jury is usually honored by trial and appellate courts. Juries usually make a correct decision based on the evidence presented to the jury. However, juries can be deceived into reaching a verdict against an insurer by insureds who claim to be disadvantaged or in need of mercy. For that reason the trial judge is empowered by the law to enter a judgment notwithstanding the verdict of the jury to avoid a miscarriage of justice.

In Julius And Eva Sesztak v. Great Northern Insurance Co., Inc., and Walter B. Howe Agency, Inc., Docket No. A-2846-15T4, Superior

Court Of New Jersey Appellate Division (November 14, 2018) the trial judge found the jury erred and issued a verdict notwithstanding the verdict of the jury in favor of the insurer and the broker.

Eva lied on the application for insurance and in the presentation of the claim. The jury, perhaps feeling sorry for her and her husband, entered a judgment that simply did not fit the evidence presented at trial. The court was obligated to set aside the verdict and allow the insurer to take over the mortgage and recover the money they were forced to pay the lender. If not paid they can foreclose on the property. The case establishes that a lie to an insurer about material facts – even if a jury does not care and issues a verdict against the insurer – will not stand.


 The Current Issue Contains the Following  


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

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

 

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Perfect Gift for Anyone Interested in Insurance

Give a Practical and Useful Gift

In this season insurance professionals often receive from vendors cookies, popcorn, and other goodies to celebrate the season. Instead of fattening and sugar laden foods that disappear quickly consider giving people in the business of insurance or who need insurance, the ten volumes of Zalma On Insurance Claims which will be used daily and always remind the recipient of your gift every day of the year.

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

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

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

Zalma on Insurance Claims Volume 101

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

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

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

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

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

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

Zalma on Insurance Claims Part 102

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

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

Zalma on Insurance Claims Part 103

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

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

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

Zalma on Insurance Claims Part 104

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

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

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

Zalma on Insurance Claims Part 105

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

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

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

Zalma on Insurance Claims Part 106

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

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

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

Zalma on Insurance Claims Part 107:

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

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

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

Zalma on Insurance Claims Part 108

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

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

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

Zalma on Insurance Claims Part 109 

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

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

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

Zalma on Insurance Claims Part 110

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

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

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

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

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Bad Faith Cause of Action Accrues When Cause of Action is Available

Coverage Doesn’t Need to be Determined Before Bad Faith Suit Can Be Brought

Bad faith claims in Delaware are statutory and must be brought in accordance with the statute. When the suit can be filed can be in dispute. In Homeland Insurance Company Of New York v. Corvel Corporation, No. 60, 2018, Supreme Court Of The State Of Delaware (November 20, 2018) Homeland Insurance Company of New York (Homeland) appealed from a Superior Court judgment entered against it in the amount of $13.5 million plus pre-judgment interest.

FACTS

The litigation that led to the judgment was initiated by CorVel Corporation. CorVel is a Delaware company that operates a national Preferred Provider Organization (PPO) network. Homeland issued CorVel a claims-made errors and omissions liability policy with limits of $10 million.

CorVel’s PPO network included agreements with medical providers in Louisiana. In late 2004 and early 2005, Louisiana medical providers began filing claims (the “PPO claims”) asserting that CorVel had improperly discounted medical payments without providing proper notice in violation of a Louisiana statute (the “Louisiana PPO Statute”). Litigation ensued in Louisiana which ultimately involved millions of dollars of claims against CorVel. In 2011, CorVel entered into a settlement of the litigation. As part of the settlement consideration, CorVel paid $9 million.

In 2015, CorVel filed its complaint in this case, alleging that Homeland owed it damages and penalties under another Louisiana statute. The statute in question, La. R.S. 22:1973 (“Louisiana’s Bad Faith Statute”), provides, in relevant part, that an insurance company that knowingly misrepresents “pertinent facts or insurance policy provisions” shall be liable for any damages sustained by the insured “as a result of” the misrepresentation and may, in addition, be held liable for penalties.

CorVel alleged that Homeland knowingly misrepresented facts or policy provisions in a complaint that Homeland filed in a declaratory judgment action in Delaware in 2011. The alleged misrepresentation was an averment that CorVel had not timely reported the PPO claims in accordance with the policy’s requirements. The damages CorVel sought were the $9 million that it paid to settle the Louisiana litigation, penalties, attorneys’ fees, and pre-judgment interest. The Superior Court agreed with CorVel’s claim and awarded it $9 million in damages, $4.5 million in penalties, and pre-judgment interest.

Homeland argued that the allegation in its declaratory judgment complaint, that CorVel had not timely reported the claims, was a statement of a coverage position that could not give rise to a finding of bad faith under either Delaware or Louisiana law. Next, it argues that no causal connection exists between the allegation in the declaratory judgment complaint and CorVel’s decision to settle the PPO claims. Finally, it argues that the applicable statute of limitations bars CorVel’s claim.

UNDERLYING TRIAL COURT DECISION

The federal district court agreed with CorVel, and on November 6, 2006, ordered that the parties submit their disputes to arbitration. On or about December 22, 2006, LCMH submitted a demand for arbitration to the American Arbitration Association (the “LCMH arbitration”). CorVel notified Homeland in writing of the arbitration proceeding on March 28, 2007.

By letter dated June 4, 2007, Homeland informed CorVel that it declined coverage of all the PPO claims. As grounds for denial, Homeland relied upon provisions in the policy that excluded (1) claims made against CorVel prior to the inception date of CorVel’s claims-made policy, (2) claims made during the policy period but which were related to claims made prior to the inception date, and (3) claims not reported within 90 days of the end of the policy period.

On September 3, 2010, the American Arbitration Association issued an Order holding that LCMH’s arbitration demand against CorVel could proceed as a class-wide arbitration. On September 24, 2010, CorVel wrote to Homeland informing it of the arbitration order. CorVel’s letter also stated that CorVel would look to Homeland for full defense and indemnity of the arbitration claims. In December 2010, CorVel requested that Homeland commit itself to funding a settlement of the LCMH arbitration up to the policy limits.

Homeland did not agree to fund a settlement of the LCMH arbitration and, on January 10, 2011, filed the above-mentioned declaratory judgment action in the Delaware Superior Court seeking a declaration that it had no obligation under the policy to provide defense or indemnity coverage to CorVel for the PPO claims.

One of the grounds given for such relief was that “CorVel did not report the [LCMH arbitration] or any subsequent related actions to Homeland in accordance with the [policy’s] reporting requirements.”

On June 23, 2011, CorVel settled with the plaintiff class in the Williams action for $9 million plus a partial assignment of CorVel’s Homeland policy. This settlement also resolved the LCMH arbitration.

On January 5, 2018, the Superior Court granted summary judgment in favor of CorVel on its bad faith claim. The court found that Homeland committed bad faith under Louisiana’s Bad Faith Statute by knowingly misrepresenting in its declaratory judgment action that CorVel failed to comply with the reporting requirements of the policy. The court further found that CorVel suffered $9 million in damages (the amount it paid to settle the Williams action and the LCMH arbitration) as a result of Homeland’s bad faith.

DISCUSSION

The Superior Court determined, and the parties agree, that Delaware’s three-year statute of limitations applies to CorVel’s bad faith claim. Under Delaware’s statute of limitations, CorVel was required to bring this claim within three years “from the accruing of the cause of such action.” The Superior Court found that CorVel’s bad faith claim did not accrue until the Louisiana trial court found coverage under the policy on January 21, 2016, “because CorVel could not incur damages until there was a determination on coverage.” Homeland contendezd that this finding was error and that the claim accrued when CorVel could plead damages, which was June 23, 2011, the date on which CorVel settled the Williams action and the LCMH arbitration.

We agree with Homeland that CorVel’s bad faith claim accrued no later than June 23, 2011. Once CorVel could plead the necessary elements of a prima facie claim under Louisiana’s Bad Faith Statute, the cause of action accrued for purposes of Delaware’s statute of limitations.

Where, as here, the plaintiff is the insured party, a prima facie claim for damages under subsection (B)(1) of Louisiana’s Bad Faith Statute requires the following elements: (1) the insured has “a valid, underlying, substantive claim upon which insurance coverage is based”; (2) the insurer knowingly misrepresented pertinent facts or insurance policy provisions relating to that coverage; and (3) the insured suffered damages “as a result of” that misrepresentation. CorVel could plead the three elements of the prima facie case immediately after it settled the Williams action and the LCMH arbitration on June 23, 2011. The limitations period expired three years later on June 23, 2014.

Because CorVel did not file this action until May 8, 2015, its claim is barred by the statute.

In essence, CorVel argues, where coverage is disputed, a cause of action under Louisiana’s Bad Faith Statute does not accrue until a court has first made a judicial determination that the insurance policy actually covers the underlying claims.

CorVel had a valid claim upon which the insurance coverage was based, and could plead that claim, when it settled the Williams action and the LCMH arbitration in June of 2011. The bad faith action accrued then. The fact that the Louisiana trial court did not adjudicate the coverage claim until January 21, 2016, is not relevant.

By its terms, this statute refers to damages that are recoverable “pursuant to” an insurance contract. The Louisiana Supreme Court, however, has held that the damages and penalties available under Louisiana’s Bad Faith Statute are separate and distinct from, and do not include, any damages that may be available under the insurance contract itself.

For the foregoing reasons, the Superior Court’s grant of summary judgment and entry of judgment in CorVel’s favor is reversed.

ZALMA OPINION

The decision to litigate a bad faith case is usually rather easy. If a claim is denied for a reason the insurer or its lawyers believe are not appropriate there is no reason to wait to file suit. Insurance policies often contain private limitations of actions provisions and every state has a statute of limitations preventing suit after a specified time goes by. In this case CorVel and its lawyers decided not to file suit against the insurer until everything was resolved in the underlying actions. By so doing the did not file suit until after the statute of limitations had expired. The delay in filing suit was fatal. The more than  $9 million verdict was lost and became nothing more than a piece of paper.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

Go to Zalma Books Paperbacks and Kindle books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library.

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Information Needed by Everyone who Works in Insurance

The Key to Professionalism in Insurance is Education

Insurance, and insurance law, is an ever changing process. As readers of this blog surely understand new case law, new statutes, new policy forms, and new Regulations seem to inundate the insurance industry every year. Everyone involved in the business of insurance, whether as an insurer, claims person, underwriter, insurance agent, insurance broker, risk manager or insured must be involved in a course of continuous learning. The new books from Full Court Press are a good start providing desk books on insurance law, California insurance law and bad faith and punitive damages. The new books from the ABA provide a fraud desk book, a commercial property policy desk book and a book on diminution of value claims. Finally, Thompson Reuters published the Property Investigation Checklists Uncovering Insurance Fraud, 12th Edition. Each will help the reader become an insurance professional.

New Books from Full Court Press

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

Barry Zalma practiced law in California for more than 44 years as an insurCal Lawance coverage and claims-handling lawyer, and has spent more than 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.

 

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

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

Insurance Bad Faith and Punitive Damages Deskbook: Understand the relationship between insurance, the tort of bad faith, and why punitive damages are awarded to punish insurers.

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

All available at fastcase.com.

 

Books from the American Bar Association

The Commercial Property Insurance Policy Deskbook

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

By Barry Zalma

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

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

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

The Insurance Fraud Deskbook

Author: Barry Zalma

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

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

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

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

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

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

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

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

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

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

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

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


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

Property Investigation Checklists: Uncovering Insurance Fraud provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims:

• Recognizing suspicious claims

• Proper investigation procedures

• Analysis of laws concerning fraudulent personal and real property claims

• Evaluating and settling claims.

The book also examines recent developments in areas such as arson investigation procedures, bad faith, and extracontractual damages. The appendix includes the NAIC Insurance Information and Privacy Protection Model Act.

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

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For Wrongs by the State there is no Remedy

Strip Search and Sovereign Immunity

It is an ancient maxim that “for every wrong there is a remedy.” That maxim, however, does not apply always. If a government does wrong and has neither waived sovereign immunity nor purchased insurance there is no remedy.

Being a police officer is often dangerous, unusually difficult, and sometimes expensive. When an officer acts in the course and scope of his employment the city or state that employs the officer is immune from suit. However, if the officer did a wrongful act in his or her personal capacity, he or she will be required to defend himself.

In Richard M. Chamberlain v. Officer George Pyle, et al., C.A. No.: N18C-07-035 SKR, Superior Court Of The State Of Delaware (November 2, 2018) Plaintiff Richard M. Chamberlain (“Plaintiff”) was an inmate housed at Howard R. Young Correctional Institution (“H.R.Y.C.I”) in Wilmington, Delaware. On July 5, 2018, Plaintiff sued two officers at H.R.Y.C.I, George Pyle (“Officer Pyle”) and Bernard Smith (“Officer Smith”), and Warden Kolawole Akinbayo (the “Warden”) (collectively, “Defendants”). Plaintiff alleged, among other things, that, while conducting a strip search of Plaintiff, Officer Pyle “plac[ed] both of his hands on Plaintiff’s buttocks and forcibly spread them open.” Plaintiff also alleges that Officer Smith witnessed the incident but did not intervene.

Plaintiff’ alleged against all Defendants sexual battery and (2) intentional/reckless infliction of emotional distress. Plaintiff states that the claims against the Warden are based on respondeat superior.

IMMUNITY

Defendants contend that Plaintiff’s case is barred by sovereign immunity, barred by qualified immunity, or the Complaint fails to state a claim.

The doctrine of sovereign immunity provides that the State, as well as its agencies, cannot be sued without its consent. The Delaware General Assembly, however, can waive sovereign immunity by an Act that “clearly evidences its intention to do so.” There are two means by which the General Assembly may waive immunity: (1) by procuring insurance  for claims cited in the complaint; or (2) by statute which expressly waives immunity.

Sovereign immunity also extends to state officials sued in their official capacities.

Defendants submitted an affidavit (the “Affidavit”) of Debra Lawhead, the State’s Insurance Coverage Administrator. Lawhead averred that the State does not have insurance that applies to the circumstances alleged in the Complaint. She reviewed the Complaint and determined that the State has not purchased any insurance or established any self-insurance program that would be applicable. She also verified that the General Assembly has not appropriated any money for obtaining said insurance, nor has it enacted any legislation pertaining to or allowing any possible liability of the State resulting from the facts alleged by the Plaintiff.

CONCLUSION

Based on the record currently before us, the Court found that there was no genuine issue of material fact since the State does not maintain any insurance coverage that is applicable to the claims raised in the Complaint and since there is no statute through which the State has waived its immunity. Thus, sovereign immunity bars Plaintiff’s claims as alleged against Defendants in their official capacities.

For the forgoing reasons, Defendants’ Motion to Dismiss, which has been converted to a Motion for Summary Judgment, is granted with regard to all Defendants in their official capacities.

This leaves Officer Pyle as the only defendant in this case, and the case will proceed against him solely in his individual capacity.

ZALMA OPINION

Sovereign immunity is a hold over from the British Common Law where the king, regardless of what bad acts he may have done, could not be sued to protect his ability to govern. U.S. governmental entities have the same protection unless the voluntarily waive the immunity. If they decide to buy insurance the entity then waives the immunity up to the amount of insurance purchased. When the insurance is purchased the governmental agency makes a gift to the victim of the government’s tort and if not, the injured person is just out of luck without a remedy.


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

Go to Zalma Books Paperbacks and Kindle books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library.

 

 

 

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More Perfect Christmas Gifts

Christmas Gifts for Anyone Interested in Insurance

If you know anyone interested in insurance, working as an insurance agent, broker, claims person, underwriter or actuary, these true crime stories will let them enjoy the post Christmas season with easy reading on how insurance criminals are dealt with by the insurance industry.

Fictionalized True Insurance Crime Books

“HEADS I WIN, TAILS YOU LOSE”

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

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

Available as a Kindle Book.

Available as a paperback.

“Candy and Abel: Murder for Insurance Money

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

Product DetailsAvailable as a Kindle Book.

Available as a paperback.

 

 

“Murder And Insurance Fraud Don’t Mix”

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

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

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

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

Available as a Kindle book.

Available as a paperback

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

 

Product Details

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

Available as a Kindle book.

Available as a paperback.

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

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

Available as paperback.

Available as a Kindle Book.

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

 

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

Available as a paperback.

Available as a Kindle book.

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

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Hard Fraud

Premeditated and Intentionally Committed

Hard fraud schemes are premeditated and intentionally committed. Those who differentiate between types of fraud would place these in the category of “hard fraud.” It is considered “hard fraud” because the person perpetrating the fraud did so intentionally and the claim was made for the sole purpose of defrauding the insurer.

False Swearing

In common language the “false swearing” provision of a 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.” [For further discussion of types of hard fraud, please see the following publications:Nebraska Department of Insurance 2004 Fraud Statistics (see www.doi.ne.gov/fraud/Statistics/2004stat.pdf); Insurance Fraud: The Crime You Pay For by the Coalition Against Insurance Fraud (see www.insurancefraud.org/fraud_backgrounder_set.html); and Douglas G. Houser, Recognizing Fraud, American Educational Institute, Inc. (Second edition, 1999).]

The reason for the false swearing defense can be explained because it would be unjust to allow a claimant to misrepresent facts which might lead to a valid defense and then allow him to escape the consequences of the falsehood simply because he had succeeded so well that the company was unable to establish the defense.

The Eighth Circuit recently upheld a “false swearing” defense when it stated:

The Willises also argue that State Farm made no showing that it had actually relied on Mr. Willis’s misstatements, or that it would have done anything different had Mr. Willis told the truth. The jury was not instructed, however, that a showing of reliance was necessary, and the Willises did not object to the jury instruction. We think, moreover, that the instruction was correct: Although reliance must be shown in a claim for fraud in the inducement … an exception to this general rule exists, of course, if a statutory provision specifically makes a party’s reliance an element of the defense of fraud or false swearing, see, e.g., McCullough v. State Farm Fire and Casualty Co., 80 F. 3d 269, 272 (8th Cir. 1996) (applying a Nebraska statute), but no such statutory provision currently exists in Arkansas. [Parasco v. Pacific Indemnity, 920 F. Supp. 647 (E.D.Pa. 04/2/1996).]

The New Jersey Legislature defined false swearing as existing when a person “makes a false statement under oath or equivalent affirmation, or swears or affirms the truth of such a statement previously made, when he does not believe the statement to be true.” [New Jersey Statute, NJSA 2C:28-2.]

False swearing (perjury) is a crime in all states. An insured who is guilty of false swearing is subject to the possibility of criminal liability. The person swearing falsely also destroys the right to recover under a policy of insurance.

An insurer can assert false swearing as an affirmative defense to an action brought by an insured. To prove the defense, the insurer must prove that the false statement was made under oath with knowledge that it was false and the insured or witness intended that the person to whom the statement was made would rely on it. The insurer is not required to prove actual reliance only the intent that the insurer rely on the statement. To establish a defense to a claim or a suit on a policy, the insurer must prove that the statement was false and material to the claim.

Almost every policy that insures against the risk of loss of property requires the insured to submit a sworn proof of loss. As one commentator has stated:

Where irregularities are suspected, the insurer may demand that the insured be examined under oath. Any significant deviations between the sworn proof of loss and the facts developed at an examination under oath can be the basis of a defense of fraud or false swearing. If false swearing is indeed found to exist, it will normally constitute a complete defense to any claim under a property insurance policy and will exonerate the insurer from liability. A false statement made under oath in an examination under oath or proof of loss must be knowingly false. … [T]he difference between fraud and false swearing is that since false swearing involves a false statement made under oath, it is more difficult for the person speaking to back off from it when confronted. [Douglas G. Houser, Recognizing Fraud. American Educational Institute, Inc. (Second edition,1999): page 44.]

The false swearing defense requires less evidence than the fraud defense. It gives the fraud investigator a basis for denial that is easier for a jury—the trier of fact— to understand since almost every person has lied or been lied to in the course of their life. If the adjuster or investigator cannot prove all of the elements of fraud, but can prove that the insured lied under oath, the insurer can effectively deny the claim.

In Parasco v. Pacific Indemnity, the insurer suspected arson and denied the claim. The insurer could not prove the insureds intentionally burned their property, but proved they lied as part of the claim investigation. The court concluded:

With respect to the first contention, we conclude that the record establishes beyond reasonable dispute that Mr. Parasco made misrepresentations under oath regarding both the bank fraud he committed in connection with the loan applications and the attempts he made to sell the house prior to the fire. In reaching this conclusion, we are mindful that the summary judgment standard requires us to view the evidence in the light most favorable to the nonmoving party. We also note, however, that the party opposing the motion cannot “simply rest on mere denials,” but must instead point to specific facts showing that there is a genuine issue for trial. (Citation omitted)

The insurer’s presentation of proof of misrepresentations made by the insureds under oath were undisputed. The court concluded that during the course of Pacific’s investigation of the loss, the Parascos’ “misrepresentations concerning both the fraud they perpetrated on the banks during the loan application process” and efforts to sell the house prior to the fire “concerned issues material to the investigation. Thus, there can be no dispute that the Parascos breached the fraud and concealment clause of the insurance policy; and as a result, they cannot recover under the contract.”

Pacific won every issue except the right to get damages from its insured. The fraud was established by summary judgment and Pacific was still able to go to trial on the issue of damages. Insurers must be ready to argue against the spurious claims of insureds like the Parascos so that there is sufficient information to defeat the arguments. An insurer is entitled, as the court made clear, to thoroughly investigate a suspicious claim and if there is a preponderance of the evidence to establish a fraud the court will give a judgment in favor of the insurer regardless of the arguments made by the insured.

[Adapted from Insurance Fraud and Weapons to Defeat Fraud, available here from Amazon.com Volume One available as a Kindle book and a paperback Volume Two Available as a Kindle book and a paperback.]


© 2018 – Barry Zalma

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

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

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

Books from Full Court Press

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

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

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

Go to Zalma Books Paperbacks and Kindle books by Barry Zalma at the Insurance Claims Library at http://zalma.com/blog/insurance-claims-library.

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The Perfect Christmas Gift for Every Insurance Professional

What Every Insurance Person Needs

Do you work with insurers? Do you represent insurers? Do you have friends or relatives who work in insurance claims? If so they need, and will enjoy any one or more of the following four books.

California Fair Claims Settlement Practices Regulations

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations

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

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

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

Available as a Kindle Book.

Available as a paperback.

Ethics for the Insurance Professional

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

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

Available as a paperback.

Rescission of Insurance

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

Available as a paperback.

Available as a Kindle book.

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

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