The Claims Commandments – Seven & Eight

A Video Presentation on Claims Commandments

A video with two more commandments of fifteen available at

Claims Commandment VII — Thou Shall Never Lie to an Insured

Insurance is considered a business of the utmost good faith. The principle of utmost good faith (uberrimae fides) was, I believe, first stated in the British House of Lords by Lord Mansfield in 1766 in a case where he concluded that the duty of good faith rests upon both the insured and the insurer and held the insurer to its knowledge at the time the policy was signed. The insurer, like the insurers, took the premium, knowing the condition of the security provided, and could not upon loss claim the insurer was deceived. [Carter v. Boehm, 3 Burr 1905 (1766)]

As the old maxim says “honesty is the best policy.” There is no excuse for an insurance claims professional to lie to an insured. Not only is a lie to an insured a failure to act with the utmost good faith, it is an action fraught with danger. Keeping up a consistent lie is almost impossible. All definite statements can be corroborated or proven false by further investigation. If a lie, the lie will be proved.

Lies to insureds — even when done for what the claims person believes is a good purpose — will always cause the insurer problems. Lies created on the run invariably include internal contradictions. A lie told to an insured can be, and most certainly will be, used by the insured to prove that the actions of the insurer were made in bad faith such that the insurer will be punished with punitive damages.

Claims Commandment VIII — Thou Shall Not Suffer Fraud to Succeed

Insurance fraud in the U.S. is epidemic. Insurance fraud continually takes more money each year than it did the last from the insurance buying public. Estimates of the extent of insurance fraud in the United States range from $87 billion to $300 billion every year. In truth no one really knows the extent of insurance fraud because most insurance fraud schemes succeed without the insurer even suspecting that it is being defrauded.

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. No one will ever place an exact number on the amount lost to insurance fraud but everyone who has looked at the issue know – whether based on their heart, their gut or empirical fact of 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-insurers drops logarithmically.

The beginning of a thorough insurance fraud investigation is the interview. The interview can be informal, it can be recorded with an audio recording device, it can be recorded with a handwritten statement signed by the witness or it can be recorded by a certified shorthand reporter. The interview is a structured conversation. It is not an interrogation. It is not the stuff of spy films, police investigations, or prisoner of war camps. Interviews are everywhere. Interviewing is an art. Use of methods similar to those used by scientists conducting experiments is a more accurate description of interviewing.

Whenever fraud is suspected it is the duty of the insurer, its claim staff and its special investigation unit (SIU) to conduct a thorough investigation. If a preponderance of the evidence gathered reveals that a fraud has been committed: that there was a material misrepresentation or a concealment of a material fact, made with the intent to deceive the insurer, that the insurer was actually deceived, and that the insurer was damaged by the deception, the claim must be rejected.

If a preponderance of the evidence does not exist or establishes there was no fraud the claim should be paid.

© 2020 – 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 52 years in the insurance business. He is available at and

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

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

Go to Zalma on Insurance on YouTube

Go to the Insurance Claims Library 

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

Read last two issues of ZIFL here.

Go to the Barry Zalma, Inc. web site here

About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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