Everything Needed by the Insurance Claims Professional from Barry Zalma

Construction Defects and Insurance & Mold Claims

Every claims person – first party property adjusters or third party liability claims adjusters – will be asked to deal with a claim involving construction defects, mold, or a combination of both.

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 for insurers and their claims staff to become insurance claims professionals.

The two sets of books described below make it possible for the insured, the policyholder’s lawyer, the insurance adjuster, the public insurance adjuster, and the insurance coverage lawyer, deal with construction defect and mold claims.

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


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 guide 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 Mold Claims Volume Three: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.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.

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

 


© 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 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.

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.

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.

 

 

Posted in Zalma on Insurance | Leave a comment

Submission of Proof of Loss is not Agreement on Amount of Loss

Payment Only due After Insured and Insurer Reach Agreement on Amount of Loss

To collect on a first party property policy of insurance it is required that the insured submit a proof of loss and the insurer agrees that the proof of loss properly states the cause was a covered cause of loss and agrees to the amount of loss stated on the proof is what should be recovered under the policy.

In Rigby Enterprises LLC v. Westchester Surplus Lines Insurance Company, Case No.: 2:19-cv-228-FtM-38NPM, United States District Court Middle District of Florida, Fort Myers Division (January 15, 2020) the insured submitted a proof of loss but failed to obtain agreement from the insurer as to the amount of loss. Regardless, the insured claimed that the insurer was obligated to pay the amount on the insured’s proof of loss if thirty days passed after its submission, even if the insurer did not agree on the amount.

BACKGROUND

Plaintiff’s luxury tennis academy and boarding school in Naples, Florida was damaged by Hurricane Irma. Plaintiff-insured Rigby Enterprises LLC alleges that Westchester Surplus Lines Insurance Company breached its coverage obligations to Rigby under a commercial insurance policy for Defendant’s failure to compensate Rigby in the full amount of its damages and loss resulting from Hurricane Irma.

Plaintiff moved for partial summary judgment in its favor, raising one argument – that the undisputed evidence shows that Defendant undisputedly breached the contract by making a payment 46 days late under the Policy. Westchester countered by stating that the parties never agreed as to the amount of loss.

In support of summary judgment, Rigby relies on the purportedly unambiguous Loss Payment clause of the Policy, which provides a 30-day deadline that Westchester did not meet. The “Loss of Payment” provision provides: “4. Loss Payment … a. In the event of loss or damage covered by this Coverage Form, at our option, we will… pay for covered loss or damage within 30 days after we receive the sworn proof of loss, if you have complied with all of the terms of this Coverage Part, and: (1) we have reached agreement with you on the amount of loss . . . .” (emphasis added)

On October 24, 2018, Rigby provided Westchester six Sworn Statements in Proof of Loss (POLs) totaling $8,594,168.78. On November 2, 2018, Westchester sent a letter to Rigby rejecting the POLs, disagreeing with the sums claimed, and requesting more information. Even so, Rigby argues that Westchester had all of the information it needed and has continually delayed paying the claim. Rigby asserts that Westchester’s payment was due on November 23, 2018 – 30 days after it provided Westchester the POLs. But instead Westchester paid Rigby $703,038.12 on January 8, 2019 – forty-six days late in breach of the contract.

DISCUSSION

Viewing the evidence and all reasonable inferences in favor of Westchester, the Court found that after receipt of the POLs Westchester disputed the extent of damages that Rigby claimed it was owed under the terms of the Policy as outlined in the POLs.

Because an agreement as to the “amount of loss” is required to trigger the insurer’s obligation to pay within 30-days under the Loss Payment provision, and because there was no evidence that the parties reached an agreement as to the amount of loss, the payment obligation under the Loss Payment provision was not triggered.

Plaintiff’s Motion for Partial Summary Judgment, therefore, was denied.

ZALMA OPINION

This case is another failure by the insured – or its counsel – to read the full policy. The language of the policy is clear and unambiguous. The insurer will pay after receipt of the proof of loss and agreement by the insurer with the claim. Since the insurer did not agree with the insured’s proof and paid an undisputed amount there was no event that triggered the obligation to pay. The court believed in, and actually, read the full policy. RTFP is important.


© 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 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.

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.

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.

 

 

Posted in Zalma on Insurance | Leave a comment

Change of Insurer When Policy Renewal is Identical No Need to Resign Agreement to Lower Available UM/UIM Coverage

It is Difficult to Understand Why Anyone Would buy More Coverage than Others than for Themselves

Most states, like South Carolina, require that insurers issue UM/UIM coverage with the same limits as liability coverages unless the insured asks for lower limits. Many reduce limits on UM/UIM to save a few dollars in premium. After an accident with an underinsured or uninsured motorist the insured reconsiders the decision to reduce UM/UIM limits. Unfortunately, wisdom coming after an incident, does not allow the change in limits and the insured is bound to the original agreement.

In Selective Insurance Company of America v. Robyn Novitsky, individually and as Executrix of the Estate of Kevin C. Novitsky, deceased; Village Auto Sales, Inc.; Patricia Novitsky, as Executrix of the Estate of Clement Novitsky, deceased, No. 19-1685, United States Court of Appeals for the Third Circuit (January 14, 2020), after a tragic automobile accident the court was asked whether the insured’s heirs were entitled to insurance proceeds of either $1,000,000 or $35,000. The District Court found the lesser amount due under law.

FACTS

Appellant Village Auto bought insurance from Selective Insurance Company of South Carolina (Selective-South Carolina) in 1999. Two years later, Appellant Robyn Novitsky, in her capacity as President of Village Auto, signed an uninsured/underinsured motorist’s (UM/UIM) coverage selection form that reduced its UM/UIM combined single limit from $1,000,000 to $35,000. The form stated that “[t]hese coverages will remain as outlined above until such time I [sic] execute another Coverage Selection Form.” Ms. Novitsky also signed an “Important Notice,” which explained the statutory UM/UIM benefits. That notice specified that Ms. Novitsky understood the statutory requirements along with the benefits and limitations she chose (here, the waiver of UM/UIM coverage).

Selective-South Carolina transferred Village Auto’s coverage to an affiliate, Selective Insurance Company of America (Selective-America). Following the transfer in 2012, Selective-America did not send Village Auto another UM/UIM coverage reduction form to sign because it believed that the policy was simply a renewal of the original policy with only a change in name of the insurer.

In 2017, Ms. Novitsky’s husband Kevin and her son Clement were killed in a car accident while driving a Village Auto company vehicle. The tortfeasor’s insurance carrier distributed the policy limits of $1,000,000 among all claimants, including $789,576.80 to the Novitskys, which was insufficient to compensate them in full. Accordingly, they sought to recover UIM benefits under the Village Auto policy, claiming entitlement to $1,000,000 because they did not sign a new form when the insurer’s name changed.

Selective-America sued seeking declaratory judgment that determined the amount of underinsured motorist coverage due under the policy. The District Court found that the $35,000 election remained valid following the transfer of the policy from Selective-South Carolina to Selective-America.

ANALYSIS

Pennsylvania’s Motor Vehicle Financial Responsibility Law, governs this case. Section 1731 of that law requires insurance companies to provide UM/UIM coverage equal to the bodily injury liability coverage, unless the insured validly rejects UM/UIM coverage or validly requests lower limits of coverage pursuant to section 1734.

The statutory language is clear. When issuing a new policy, insurers must provide the bodily injury liability coverage, unless the insured requests a lower amount of coverage in writing. Selective-South Carolina provided Village Auto with the required “Important Notice,” and Village Auto elected $35,000 UM/UIM coverage knowingly, voluntarily, and in writing in 2001. Village Auto’s decision to waive UM/UIM coverage is presumptively effective during the life of the policy unless changed. Because Village Auto made no changes, Selective-America would have to send a new written reduction form only if the transfer from Selective-South Carolina to Selective-America created a new insurance policy. Regardless of the claim of the Novitskys the District Court concluded that the transfer did not create a new policy.

Pennsylvania precedent supports Selective-America’s argument. The only difference between the policy at issue following the transfer was the name of the insurer. Village Auto kept the same policy number, paid the same premiums, maintained the same coverage, used the same agent, and never had to apply for coverage. The appellate court concluded that the transfer between insurers acted as a renewal of the same policy, rather than an issuance of a new policy. Obviously, if the $1,000,000 limit was provided the premium would have been higher.

Therefore, the Third Circuit concluded that the District Court did not err in finding that Village Auto’s election of $35,000 in UM/UIM remained effective after the transfer.

ZALMA OPINION

This case teaches that it is unusual and imprudent to buy insurance to protect others that is greater than the insurance provided to protect yourself. Whatever premium was saved was not even close to the amount needed to recover for the loss of a husband and son. States require UM/UIM coverage equal to the third party liability coverage. Village Auto’s election to reduce the limit saved a few hundred dollars in premium and cost $1 million in indemnity. The sad result should teach everyone to never reduce the UM/UIM coverages.


© 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 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.

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.

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.

 

Posted in Zalma on Insurance | Leave a comment

New Today – The Second Edition of The Insurance Examination Under Oath

A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud

Published today at Amazon.com is the Second Edition of “The Insurance Examination Under Oath” as either a Kindle book or a paperback.

Table of Contents

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

This Article is Adapted from the Preface

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by the agreement of the insurer, when he, she or it acquires a policy of insurance, to submit to a condition of the insurance contract that compels the insured to appear and give sworn testimony at the demand of the insurer. Failure to appear and testify is considered a breach  of a material condition.

The EUO is conducted before a notary and a certified shorthand reporter who is present to give the oath to the person interviewed. The reporter will record the entire conversation and prepare a transcript to be read, reviewed, corrected and signed by the witness under penalty of perjury or by an oath taken before a notary or judge.

The EUO is a tool only sparingly used by insurers in the United States. A professional insurer will only require an insured to submit to an EUO when a thorough claims investigation raises questions:

  1. about the application of the coverage to the facts of the loss,
  2. the potentiality that a fraud is being attempted, or
  3. to assist the insured in the obligation to prove to the insurer the cause and amount of loss.

Although seldom used the EUO is an important tool needed by insurers when there is a question of coverage, destruction of evidence needed to prove a compensable loss or the amount of loss or evidence indicating the potential that a fraud is being attempted.

The Reason for the Examination Under Oath

As early as 1884, the U.S. Supreme Court explained the purpose of the EUO, as follows:

The object of the provisions in the policies of insurance, requiring the assured to submit himself to an EUO, to be reduced to writing, was to enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to their rights, to enable them to decide upon their obligations, and to protect them against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. A false answer as to any matter of fact material to the inquiry, would be fraudulent. If it made, with intent to deceive the insurer, would be fraudulent. If it accomplished its result, it would be a fraud effected; if it failed it would be a fraud attempted. And if the matter were material and the statement false, to the knowledge of the party making it, and willfully made, the intention to deceive the insurer would be necessarily implied, for the law presumes every man to intend the natural consequences of his acts. No one can be permitted to say, in respect to his own statements upon a material matter, that he did not expect to be believed; and if they are knowingly false and willfully made, the fact that they are material is proof of an attempted fraud, because their materiality, in the eye of the law, consists in their tendency to influence the conduct of the party who has an interest in them, and to whom they are addressed. [Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884)] (Emphasis added)

The position taken by the U.S. Supreme Court in Claflin has been upheld by every court that has considered it to date. For example, in Gipps Brewing Corp v. Central Manufacturers Mutual Insurance Co., 147 F.2d 6, 13 (C.A. 7, 1945) the Seventh Circuit stated:

We think there is no escape from the conclusion that these witnesses purposefully refused to answer ques­tions upon EUO which were materi­al to the inquiry. We see no basis for refusal to answer upon the ground that they were controversial or that the answers thereto might have been used for the purpose of impeachment. Such a limitation would seriously impair and perhaps destroy defendants’ right under this provision of the policy.  We would think that defendants had a right to examine as to any matter material to their liability, as well as to its extent.

In light of the evidence cited by the defendants (of which these are only a few examples), a reasonable juror could conclude that the plaintiff breached the insurance policy by not carrying out her duties as the insured party, thereby rendering the policy void.

Courts that construe submission to an EUO as a condition precedent to recovery generally do not require the insurer to prove that it suffered actual prejudice from an insured’s unexcused refusal to submit to an examination. Refusal to testify at EUO is sufficient to refuse indemnity and deny the claim presented by the insured. [Lorenzo–Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 790 N.E.2d 692, 695–96 (2003)].

The EUO and Legal Action provisions in an insurance policy are conditions precedent to an insured’s ability to file suit, and that since the insured failed to substantially comply with the terms of those provisions, the appropriate remedy is dismissal without prejudice. The insured’s failure to comply with these conditions does not bar his ability to bring suit to recover, but merely suspends his ability to bring suit until he has fully complied with those conditions. [Gerke v. Travelers Cas. Ins. Co. of America, 815 F.Supp.2d 1190 (D. Or. 2011)]

The EUO provides a mechanism for the insurer to corroborate the claim by obtaining information that is primarily or exclusively within the possession of the insured by requiring production of documents and sworn testimony of the insured or the insureds employees and agents.

Recently, in New York, the appellate court stated no recovery of benefits were available to the claimant after refusal to testify:

Defendant contends that the request for the EUOs was improper because plaintiffs failed to show how all the claims were related to an allegedly staged accident involving a single claimant and his passenger, but its principal did not deny knowledge of fraudulent claims or staged accidents, and the EUOs reasonably sought to determine whether defendant’s claims were legitimate. [Country-Wide Ins. Co. v. Power Supply, Inc., 2020 NY Slip Op 38 (N.Y. App. Div. 2020)]

The claim failed as a result of the refusal and there was a similar result in Am. Transit Ins. Co. v. Singh, 2019 NY Slip Op 33721(U) (N.Y. Sup. Ct. 2019).

When an insurer moves for summary judgment dismissing a complaint on the ground that the assignor failed to appear for an EUO, to establish its prima facie case, the insurer need only establish that it twice duly demanded an EUO from the assignor, who had allegedly been injured in a motor vehicle accident, that the assignor twice failed to appear, and that the insurer issued a timely denial of the claims. [Interboro Ins. Co. v Clennon, 113 AD3d 596, 597 [2014])]. Since appearance at a duly demanded EUO is a condition precedent to the insurer’s liability on the policy contrary to plaintiff’s contention, defendant established its e

ntitlement to summary judgment. [Big Apple Med. Supply, Inc. v. Titan & Nationwide, 2019 NY Slip Op 52067(U) (N.Y. App. Term 2019)]

The EUO condition does not limit the insurer to one EUO. It is an open-ended requirement without limitation and even if it were true that a reasonableness principle applies to the subject matter, topic, or scope of the EUO. There was no factual indication in Nati

onal Athletic Sportswear v. Westfield Ins., 528 F.3d 508 (7th Cir. 2008) that the Defendant’s purpose in holding the second EUO was meant to harass the Plaintiff. In fact, the record indicated that the Defendant’s purpose in conducting a second EUO was to inquire into documents that were either requested of and received from the Plaintiff after the first EUO or not discussed during the first EUO. The Plaintiff’s belief that an EUO was meant to harass, a belief does not create a triable issue of fact for a jury to determine. [Moore v. Allstate Ins. Co., 293 Or App 690, 429 P.3d 1045 (Or. App. 2018)]

The authority to take an EUO is provided by the insurance contract and also exists, as a result of statutes establishing a state mandated fire insurance policy that must be incorporated in every policy in the state that insures against the peril of fire. For example, the New York Standard Fire Policy provides as follows:

The insured, as often as may be reasonably required, shall exhibit to any person designated by this company all that remains of any property herein described and submit to EUO by any person named by this compa­ny, and subscribe the same; and as often as may be reason­ably required, shall produce for examination and copying all books of account, bills, invoices, and other vouchers… (Emphasis added

Barry Zalma’s Insurance books are all available at amazon.com.  If the link above doesn’t work go to https://www.amazon.com and type into the search bar “Barry Zalma” or “Barry Zalma and Examination” and it will direct you to the EUO books.


© 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 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.

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.

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.

 

Posted in Zalma on Insurance | Leave a comment

The Homeowners Policy & Zalma on Insurance Claims

The Insurance Claims Library is Essential to Everyone Who Deals with an Insurance Claim

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. 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. A Comprehensive Review of insurance, insurance claims, the law of insurance policy interpretations, the practicalities of Property, Casualty and Liability Insurance Claims. Read about the following books and more than 2950 posts at https://zalma.com/blog.

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

“THE HOMEOWNERS INSURANCE POLICY”

HOW TO BUY AN APPROPRIATE HOMEOWNERS POLICY AND SUCCESSFULLY MAKE A CLAIM TO THE INSURER

Insurance is a contract between a person seeking insurance and an insurer. It is obtained by making contact with the insurer as a prospective insured seeking insurance. The homeowners policy is a specialized policy of insurance that protects the homeowner from certain risks of loss to the real and personal property at the home, the exposure the insured faces for injury to a household employee, and the exposure the insured faces to liability for bodily injury or property damage caused to third parties. The book explains how to buy a homeowners policy and how to collect on any claim made to the homeowners insurer.

Paperback Book     Kindle Book

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.”

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. 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. A Comprehensive Review of insurance, insurance claims, the law of insurance policy interpretations, the practicalities of Property, Casualty and Liability Insurance Claims.

Zalma on Insurance Claims Volume 101 – Second Edition”

A Comprehensive Review of insurance, insurance claims, the law of insurance and policy interpretation Paperback – July 17, 2019

This volume covers

  1. WHAT IS INSURANCE?
  2. THE HISTORY OF INSURANCE,
  3. ACQUISITION OF THE POLICY,
  4. CLAIMS PERSONNEL,
  5. KINDS OF INSURANCE POLICIES,
  6. THE LIABILITY POLICY.

The 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.

Available as a paperback

Available as a Kindle Book

Zalma on Insurance Claims Part 102 – Second Edition”

This the second edition of the second volume in the latest addition to Barry Zalma’s insurance claims series of books and articles is part of the most thorough, up-to-date, expert-authored insurance claims guide available today. Zalma on Insurance Claims, part 102 provides in-depth explanations, analysis, examples, and detailed discussion of: •  Other Insurance Clauses; •   Trigger of Coverage; •    Underwriting; •    Conditions, Warranties and Exclusions

The 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.

Available as a Kindle book

Available as a paperback 

“Zalma on Insurance Claims Part 103 Second Edition”

A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims. Insured, Insurer, adjusting.

The Implied Covenant of Good Faith and Fair Dealing

The principle on which insurance has existed for the last three to four centuries is that insurance business is conducted with the utmost good faith (uberrima fides). The principle, called a covenant of good faith and fair dealing, must be followed religiously by both the insurer and the insured. This means, simply, that both parties to the insurance contract must treat each other in such a way that neither will deprive the other of the benefits of the contract.

This, the third part of Zalma on Insurance Claims and includes materials concerning:
This is part 103 of Zalma on Insurance Claims and will deal with:

•The Covenant of Good Faith and Fair Dealing
•Duties of the Insured and the Insurer
•Declaring a Policy Void
•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.

Available as a Kindle Book

Available as a paperback

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.

Available as a Kindle Book

Available as a paperback

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.

Available as a Kindle Book

Available as a paperback

“Zalma on Insurance Claims Part 106 Second Edition”

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

This latest addition to Barry Zalma’s insurance claims series of books and articles is part of the most thorough, up-to-date, expert-authored insurance claims guide available today. Written by nationally-renowned insurance coverage expert Barry Zalma, an insurance coverage attorney, consultant, expert witness and blogger.

Thorough, yet practical, this book is 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 this multiple volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law.

The 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.

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

  1. Property Insurance & the Tort of Bad FaithChapter
  2. Grounds for Finding Bad FaithChapter
  3. Avoiding Charges of Bad FaithChapter
  4. Punitive DamagesChapter
  5. Bad Faith & Liability Insurance.
  6. Defenses to the Tort of Bad Faith

The appendices also include full text of important insurance law cases and statutes

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 107 – Second Edition”

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.

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 108 -Second Edition”

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.

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 109 Second Edition”

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.

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 110 Second Edition”

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.

Available as a Kindle book

Available as a paperback

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Agent Need Only Obtain What the Insured Ordered

Lies on Application the Sole Responsibility of the Insured who Signed the Application

People who lie to their insurer to obtain an insurance policy cannot claim it was the agent’s fault for not stopping the applicant from fabrication. When the insured sought coverage on a rental dwelling that had no water, electricity or gas service and had a bootleg and illegal electrical service attempted to defraud the insurer when he applied for a homeowners policy. When a fire occurred the insurer learned of the fraud and refused to pay the claim. The insurer sued for declaratory relief and the insured’s sued for damages against the insurer and the agent who placed the business and tried to get out of federal court by that action.

In Michael Odoms and Ericka Odoms v. Geovera Specialty Insurance Company And Susan Angelica Insurance Agency, LLC, Civil Action No. 19-12477 SECTION M (4), United States District Court Eastern District of Louisiana (November 14, 2019) Michael Odoms (“Odoms”) and Ericka Odoms (“Ericka”) (collectively, “Plaintiffs”) moved the USDC to remand this action to the 24th Judicial District Court, Parish of Jefferson, State of Louisiana, for lack of subject-matter jurisdiction.

BACKGROUND

Odoms, a citizen of Louisiana, entered into an agreement to purchase a property located at 6565 Benedict Drive in Marrero, Louisiana and then sought insurance from Susan Angelica Insurance Agency, LLC (“SAIA”), also a Louisiana citizen. Odoms advised SAIA of his insurance needs and alleged that he answered truthfully all questions asked by SAIA. All of the underwriting questions were answered in the negative.

Odoms signed the insurance application on June 21, 2018, acknowledging that he had “read the above applications and any attachments and declare[d] that the information is true and complete” and that the “information [was] being offered to the company as an inducement to issue the policy for which [he was] applying.”

GeoVera, relying on the application, issued a tenant-occupied homeowners insurance policy for the Benedict Drive. On July 21, 2018, the Benedict Drive property was damaged by a fire and a claim was presented to GeoVera.

GeoVera, concerned about the claim, required Odoms to provide sworn testimony at two examinations under oath (“EUO”).  Odoms testified that he participated in applying for the insurance, SAIA explained the underwriting questions to him, he answered the questions, and he signed the application. With respect to the bankruptcy question, Odoms testified that he was aware that Ericka was making payments on debts related to a bankruptcy until October 2015, and that answering “no” to the bankruptcy underwriting question was incorrect. Indeed, Odoms acknowledged that the bankruptcy question was incorrectly answered in the negative on all seven insurance applications that were discussed in the EUO, including the insurance application for the Benedict Drive property.

GeoVera determined it has no duty to indemnify Odoms because he submitted false answers on the insurance application for the Benedict Drive property. GeoVera noted that Odoms and Ericka (his live in) submitted several insurance applications in which one, or both, of them falsely affirmed that neither was “involved in” a bankruptcy proceeding in the previous five years.

GeoVera stated that Odoms falsely represented that the Benedict Drive property was connected to public utilities, when in fact, the property did not have water or gas, and the electricity was obtained via an illegal meter attached by the squatters who previously occupied the property. GeoVera further stated that it would not have issued the policy if Odoms had provided accurate information in the insurance application.

GeoVera contended that SAIA’s Louisiana citizenship did not destroy complete diversity because it was improperly joined. GeoVera further alleged that the amount in controversy threshold of $75,000 was met because Plaintiffs seek the full value of the property damage, plus attorney’s fees and penalties for bad faith.

LAW & ANALYSIS

If a plaintiff has stated a claim, but has misstated or omitted discrete facts that would determine the propriety of joinder, the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry.

Odoms’ claims for breach of contract, negligence, failure to use reasonable diligence, and detrimental reliance that the policy was secured, are not truly separate claims, but really one claim that SAIA breached its alleged duty to procure adequate insurance coverage for the Benedict Drive property. In Louisiana, an insurance agent owes a duty of “reasonable diligence” to its customer which is fulfilled when the agent procures the insurance requested. An insured has a valid claim against the agent only when the insured demonstrates that:

  • the insurance agent agreed to procure the insurance;
  • the agent failed to use reasonable diligence in attempting to procure the insurance and failed to notify the client promptly that the agent did not obtain insurance; and
  • the agent acted in such a way that the client could assume he was insured.

The agent has no obligation to spontaneously, or affirmatively, identify the scope or amount of insurance coverage the client needs.

The court concluded that Odoms could not maintain a claim that SAIA breached its duty to procure the insurance requested, and by extension, cannot maintain a similar breach of contract, negligence, or detrimental reliance suit against the agent. Odoms requested that SAIA obtain a tenant-occupied homeowners insurance policy for the Benedict Drive property, which is exactly what SAIA did. There is no allegation that SAIA obtained the wrong type of policy on Odoms’s behalf or failed to account for a known relevant history in making insurance recommendations.

The critical issue in this case is not the procurement of the policy, but rather whether there were material misrepresentations made in the insurance application that would result in rescission of the policy.

By signing the insurance application, Odoms acknowledged that he read it and affirmed that all answers provided were true. Because Odoms cannot maintain any claims against SAIA under Louisiana law, SAIA was improperly joined and the motion to remand was denied.

ZALMA OPINION

Removal failed because the agent he sued to defeat diversity did nothing more than was requested and the suit against the agent was dismissed.  In addition, it is obvious that the Odoms’ lied when they  obtained the insurance about material facts. If GeoVera had moved for judgment on the rescission ground, or on the breach of contract ground, relating to fraud in the inception the court would have invariably granted the motion. I assume that a motion for summary judgment will be forthcoming shortly if the insurer’s lawyers have any sense.


© 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 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.

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.

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.

 

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Important Books for Anyone Interested in Insurance

The Insurance Claims Library

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

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 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four 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”Zalma

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 United States, and few know more about California insurance law than Barry Cal LawZalma.

“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

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”

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.

 


© 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 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.

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.

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.

 

Posted in Zalma on Insurance | Leave a comment

Zalma’s Insurance Fraud Letter – January 15, 2020

 ZALMA’S INSURANCE FRAUD LETTER  January 15, 2019 

Is Hard Labor for Insurance Fraud a Real Deterrent?

Louisiana takes Insurance Fraud Seriously

Insurance fraud is a crime that takes a great deal of money from the insurance buying public. Estimates – since most insurance frauds succeed no one really knows how much it takes – range from $80 billion to $300 billion a year. In most states, when an insurance fraud perpetrator is caught, arrested, prosecuted, tried and convicted sentences vary from probation and, if jail time is assessed, it is usually quite limited.
In State of Louisiana v. Anthony Scott Tubbs, No. 52,417-KA, Court of Appeal Second Circuit State of Louisiana (November 20, 2019) insurance fraud is taken seriously and the defendant not only is sentenced to prison, he or she is also, by statute, sentenced to hard labor. The defendant, Anthony Scott Tubbs, was convicted of insurance fraud. He was ordered to serve five years at hard labor, with all but one year suspended. He was placed on four years’ active, supervised probation and ordered to pay a fine of $1,500, along with restitution.
 

Insurer Should Never Make an Unsubstantiated Claim of Fraud by Insured

I have been involved in insurance claims since 1967 as an adjuster, a lawyer, a coverage lawyer and author. Most of my career has involved representing insurers. I never represented, as a lawyer, a policyholder in a suit against an insurer. As a consultant and expert witness, I serve the court in helping it understand how insurance claims are, and should be, investigated with the utmost good faith and fair dealing. In the Idaho case I was shocked to find that the insurer failed to deal fairly and in good faith with its insured who, eventually, obtained a favorable judgment from the court.
This case taught an insurer that if it felt it necessary to accuse an insured of fraud it needed convincing evidence of the insured’s conduct not just a suspicion. It is also a violation of the covenant of good faith to ignore evidence and legal precedent.

How to Create A Staff of Professional  Claims Handlers

Business reporters complain every day that the United States is now at full employment. There are more than seven million jobs available and only six million people available to fill those jobs. Since insurance claims jobs are not the most desirable to recent high school or college graduates. Experienced and professional claims people are in a sellers’ market.
If you wish to keep up the quality of your claims staff you must start from scratch by hiring intelligent but totally ignorant of the business of insurance claims and train them to be professional.
Learn about the available property claims training program for property claims here. A similar course is available with regard to liability claims.

I Didn’t Know the Gun Was Loaded – A Lie to Get Insurance Benefits

Pre-Existing Condition Material to No Fault Claim

No fault insurance plans, like that in Michigan, provide benefits to an injured person regardless of fault. All the state asks from the injured party is that he or she is honest in the presentation of the claim. Misrepresenting material facts in the presentation of a no fault claim is considered fraud and deprives the person injured of the right to receive benefits.
In Mark Smith v. Michigan Automobile Insurance Placement Facility, No. 344023, State of Michigan Court of Appeals (December 26, 2019) Smith lied to the Placement Facility when making his claim and tried to avoid losing benefits by claiming he forgot his previous condition and did not intentionally lie.

Read the full article here.

Insurance Fraud Hall of Shame

Say hello to the Insurance Fraud Hall of Shame, home of the most-brazen insurance scammers of 2019. They’re America’s newest Commanders in Thief.
The No-Class of 2019 proves insurance fraud is hardly a victimless crime. Insurance fraud is a national epidemic. We’re all victims, with $80 billion stolen each year.
Honest Americans lose their lives. … Our bank accounts are drained. … Our credit is wrecked. … We endure painful and disfiguring surgeries. … Families face despair. … Scams drive up everyone’s premiums.
Fraud fighters are hunting hard. Let’s turn the corner on insurance fraud together – one criminal at a time.

Insurance Claims Library 

Zalma on Insurance

The Zalma on Insurance blog has posted over 2850 digests of insurance appellate decisions and other important insurance materials and articles published five days or more a week and are available at http://zalma.com/blog.
The videoblog is adapted from my book, Insurance Claims: A Comprehensive Guide available at the Zalma Insurance Claims Library
The Zalma on Insurance blog has posted over 2850 digests of insurance appellate decisions and other important insurance materials and articles published five days or more a week and are available at http://zalma.com/blog.
The videoblog is adapted from my book, Insurance Claims: A Comprehensive Guide available at the Zalma Insurance Claims Library
Barry Zalma, Inc.
&
ClaimSchool, 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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Insurance Fraud for fun and Profit

Fictionalized True Insurance Crime Books

Sometimes I find it necessary to provide information about insurance fraud that simply cannot be told in a non-fiction book. Although I am no competition for Tom Clancy, the books explain, by fictionalizing a true crime, the reality of insurance fraud becomes easier to understand even if you have nothing to do with the insurance industry. Some of the true crime stories available as a Kindle book or a paperback. You can read about these and other insurance books by Barry Zalma at https://zalma.com/blog/insurance-claims-library/

Arson for Terrorism and Profit

Arson for Terrorism and Profit: How an Insurance Investigator and Insurance Lawyer Defeated a Plot to use a Fire to Fund Terrorism by [Zalma, Barry]How an Insurance Investigator and Insurance Lawyer Defeated a Plot to use a Fire to Fund Terrorism (c) 2020 by Barry Zalma & ClaimSchool, Inc.

There are many excuses for the inability of the criminal justice system to effectively handle arson cases and eventually, almost universally, the prosecutor will find an excuse not to prosecute an arson case regardless of the amount of evidence produced. As a result, with regard to an arson-for-profit scheme, the time, investigative work, and litigation is left to the insurer to refuse to pay a claim based on fraud, pay the investigators and lawyers needed to prosecute a civil fraud defense to a fraudulent claim created with an arson-for-profit scheme.

The following story is based upon an attempted arson-for-profit that took up a large portion of my professional career. Although fiction, the story is based on a true crime that involved the efforts of the intended victims – an English insurer and an American insurer – the work of professional fire cause and origin investigators, private investigators, insurance claims handlers, insurance coverage lawyers and insurers who refused to pay tribute to a criminal. After five years of investigation and litigation the defendants established that the arson-for-profit scheme was designed for more than cash but was intended to obtain funds to support a terrorist organization whose purpose was to kill or maim anyone connected to the government of Germany.The names, places, professions, organizations, fire departments, police, prosecutorial agencies and of the individuals involved have been changed to protect the innocent, criminal, and professional.

Available as a Paperback

Available as a Kindle book

“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 MoneyProduct Details

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

Available as a Kindle Book.

Available as a paperback.

“Murder And Insurance Fraud Don’t Mix”

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

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

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

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

Available as a Kindle book.

Available as a paperback

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

Product Details

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

Available as a Kindle book.

Available as a paperback.

“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.

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

A true crime novel based on the experience of the author, Barry Zalma, who for more than 51 years has acted for insurers who were faced with arson-for-profit, one of the most dangerous insurance fraud schemes. The book explains how an insurance claims adjuster, working with a fire cause and origin expert, a forensic accountant and insurance coverage lawyer, were able to defeat an arson-for-profit scheme and obtain a judgment requiring the perpetrator to take nothing and repay the insurer all of its expenses in defeating the claim.

Available as a paperback.

Available as a Kindle book.

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Workers’ Compensation is an Exclusive Remedy

No Right to Contribution from Employer of Injured Plaintiff

Construction contracts contain multiple provisions to shift the obligation from one to another in case of injury during the work. Often the contracts work to attempt to avoid the exclusivity of workers’ compensation insurance to the employer causing an employer to indemnify another if an employee is injured.

In Paul Kanyuch v. 11 West 19th Associates LLC C/o Block Buildings LLC, Maia MP Construction Inc, Talisen Construction Corp, Tony Birch, 11 West 19th Associates LLC
C/o Block Buildings LLC, Talisen Construction Corp, Tory Burch i/s/h/a Tony Birch v.
Eclipse Contracting Corp., 2020 NY Slip Op 30004(U), Index No. 153529/2016
Third-Party Index No. 595070/2017, Supreme Court of the State of New York New York County Part IAS Motion 47EFM (January 3, 2020) a New York appellate court was asked to make the employer of an injured worker contribute to the defense and indemnity of the owner and other contractors involved in the construction project.

FACTUAL BACKGROUND

Paul Kanyuch sued after he fell from a scaffold while performing work at a construction site. Defendants sued the plaintiff’s employer  Eclipse Contracting Corp. (Eclipse), for common-law indemnification and contribution.

Eclipse moved for summary judgment seeking dismissal of the first  cause of action in the third-party complaint for common-law contribution and indemnification.

Burch, a tenant of the building, hired Talisen as the general contractor for the construction of an office space and showroom. Talisen in turn hired Eclipse as the carpentry subcontractor for the renovation project. Plaintiff was injured when he fell from a scaffold that collapsed under him while applying ceiling tiles at the jobsite. Plaintiff testified at his deposition that he was employed by Eclipse as a carpenter. Eclipse gave plaintiff instructions for his work.  According to the bill of particulars, plaintiff sustained multiple fractures, torn ligaments, joint effusions, and sprains as a result of the accident.

ANALYSIS

With respect to common law contribution and indemnification, it is well-established that where an employee is injured in the course of employment, his exclusive remedy against his employer is ordinarily a claim for workers’ compensation benefits. The employer cannot be held liable for common law indemnification and contribution claims asserted by third-parties unless the employee sustained a “grave injury”. Injuries qualifying as grave are narrowly defined in the law.

In order to be entitled to dismissal of the contribution and indemnification claims, Eclipse, must show that plaintiff was its employee at the time of the accident and that he did not suffer a “grave injury” as defined by the Workers’ Compensation Law. Eclipse met this burden.

First, it is undisputed that plaintiff was employed by Eclipse on the date of the accident and that he was injured during the course of his work for Eclipse.

Second, plaintiff did not suffer a “grave injury” as defined by the Workers’ Compensation Law. According to plaintiff’s verified bill of particulars, plaintiff sustained multiple fractures, torn ligaments, joint effusions, and sprains as a result of the accident. Such injuries do not qualify as a “grave injury” under the Workers’ Compensation Law, which narrowly defines such injuries to be: “death, permanent and total loss of use or amputation of an arm, leg, hand or foot, loss of multiple fingers, loss of multiple toes, paraplegia or quadriplegia, total and permanent blindness, total and permanent deafness, loss of nose, loss of ear, permanent and severe facial disfigurement, loss of an index finger or an acquired injury to the brain caused by an external physical force resulting in permanent total disability.”

Accordingly, the first cause of action in the third-party complaint for common law contribution and indemnification against Eclipse must be dismissed.

ZALMA OPINION

It is important, when trying to shift the burden of injuries to workers, is an important part of every construction contract. It is effected with contribution and indemnification clauses and clauses requiring subcontractors to acquire insurance in favor of the owner and general contractors. In this case the indemnification clause was ineffective because of the exclusivity of workers’ compensation to the employer of the injured persons. Other attempts to shift the burden remain because of the failure to prove the existence of insurance. If Eclipse proves the existence of insurance it will be able to eliminate itself from the case.


© 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 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.

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.

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.

 

Posted in Zalma on Insurance | Leave a comment

The Covenant of Good Faith & Fair Dealing Requires Ethical Behavior

Ethics for Insurance and the Insurance Lawyer

To present, adjust, or represent anyone involved with an insurance claim it is necessary to understand the ethical basis of insurance and the obligations of an attorney.

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

The Little Book on Ethics for the American Lawyer

The practice of law demands more than knowledge of statutory and case law. It requires more than technical proficiency in the nuts and bolts of legal practice. A lawyer is an officer of the legal system whose conduct should conform to the requirements of the law, both in professional service to clients and in the lawyer’s business and personal affairs.

The practice of law requires that every lawyer treat each client, each adversary, and the court ethically and in good faith.

The practice of law is different from other professions because it requires that the lawyer act for his or her client, not him or herself, only if the actions for the client are ethical and in good faith.

What is Ethical Behavior?

The concept of ethical behavior refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues, all of which are essential to the lawyer.

Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from murder, rape, theft, assault, slander, and fraud. Ethical standards also include those that imply virtues of honesty, compassion, and loyalty.

There are rights presumed to exist such as those described in the Declaration of Independence submitted to King George of England in 1776 that held: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of happiness.” The unalienable rights also include the right to life, the right to freedom from injury, and the right to liberty. Such standards are adequate standards of ethics because they are supported by consistent and well-founded reasons.

Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from murder, rape, theft, assault, slander, and fraud. Ethical standards also include those that imply virtues of honesty, compassion, and loyalty.

There are rights presumed to exist such as those described in the Declaration of Independence submitted to King George of England in 1776 that held: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of happiness.” The unalienable rights also include the right to life, the right to freedom from injury, and the right to liberty. Such standards are adequate standards of ethics because they are supported by consistent and well-founded reasons.
Ethics also refers to the study and development of one’s standards of conduct.

Feelings, laws, and social norms can deviate from what is ethical. It is necessary, especially to people involved in the practice of law, to constantly examine one’s standards to ensure that they are reasonable and well-founded conduct that ethically treats a client, an adversary, and the court with the utmost good faith.

There is no single answer to the question of what is ethical behavior by a lawyer. Ethical behavior is subjective and fact dependent.

Available as a Kindle book here.

Available as a paperback here.

“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.


© 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 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.

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 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.

Posted in Zalma on Insurance | Leave a comment

Serious Injuries Can Make a Clear and Unambiguous Policy Ambiguous

Ohio Court of Appeals Finds “Close Proximity” is Synonymous with “Occupying”

The interpretation of an insurance policy should be simple. The words should be given their common meaning and applied in accordance with the agreement of the parties.

In Donald Martens, III v. Auto-Owners Insurance Company, Court of Appeals No. L-19-1011,  2019 Ohio 5423, Court of Appeals of Ohio Sixth Appellate District Lucas County (December 31, 2019) Donald Martens, III, appealed a January 22, 2019 judgment of the trial court granting summary judgment to appellee, Auto-Owners Insurance Company where the Court of Appeals was asked to conclude that “close” is enough to fit the words “occupying, in or on.”

Facts

On or about September 19, 2016, appellant and his boss arrived at 9955 Brint Road, Sylvania, Lucas County, Ohio. They were at the address to perform driveway sealing services for a residential address. The truck and the attached trailer were parked on the eastbound side of the road with about half of the truck in the grass and half on the roadway. Traffic cones were placed around the vehicle to direct traffic away from the truck. Appellant and his colleagues removed weed trimmers and other work equipment out of the truck and trailer and placed the equipment on the grass area next to the driveway. The unloading was completed prior to appellant’s injury.

Appellant then returned to the street side of the truck to ask his boss which end of the driveway they would begin their work. Both men were inside the traffic cones, but outside of the vehicle, while they discussed what the work for the day would entail. Appellant was “mere feet” from the truck at this time.

A negligent, underinsured driver then struck the truck and appellant. Appellant broke his left leg in three places and required surgery and physical rehabilitation.

At all times, the truck was covered under an insurance policy issued by appellee to appellant’s employer. Appellant filed the initial action against appellee seeking benefits under the underinsured motorist benefits of that policy.

During the course of the litigation, appellee filed a motion for summary judgment which sought to have the trial court determine appellant was not covered under the insurance policy because he was not “occupying” a vehicle at the time of the accident. Appellee argued it was entitled to judgment because appellant was not in, on, entering, exiting, or alighting from the vehicle at the time of the accident.

The trial court agreed with appellee and granted its motion for summary judgment.

Law

If the language of a contract is ambiguous or susceptible to more than one interpretation, it must be construed in favor of the insured and against the insurer. When an insurance contract is clear and unambiguous, its interpretation is a question of law.

The court must give the words and phrases in the policy their plain and ordinary meaning. When the plain and ordinary meaning of the language contained in an insurance policy is clear and unambiguous, a court cannot resort to construction of that language.

The Supreme Court of Ohio has stated that “the word ‘occupying’ should not be given an unduly narrow definition.” Kish v. Cent. Nat. Ins. Group, 67 Ohio St.2d 41, 51, 424 N.E.2d 288 (1981).

Analysis

The insurance policy defines occupying as “Occupying means being in or on an automobile as a passenger or operator, or being engaged in the immediate acts of entering, boarding or alighting from an automobile.”

The Ohio court found that the insurance contract in this matter is ambiguous because the definition of “occupying” is susceptible to multiple interpretations based on applying that definition to the facts at hand. Several courts, including the Ohio State Supreme Court, found in the past that the term “occupying” is ambiguous when used in a car-insurance context.

Appellant was clearly in close geographic proximity to the company’s truck. He was hit by the other motorist while he was next to the vehicle. Speaking with one’s coworker inside of a vehicle that is parked for the express purpose of beginning to work is a foreseeably identifiable use of the truck and those who occupy it.

Appellant was near the vehicle, at the time he was struck. Appellant had already unloaded the back of the truck and prepared some of the materials for the day near the driveway where they would shortly begin work. The proximity to the vehicle  was enough for the court to conclude that the appellant had a sufficient relationship with the vehicle.

What is required by case law, is that if the claimant is in close geographic proximity with the vehicle, the claimant has a sufficient relationship with the vehicle, and the claimant was acting with a purpose related to the vehicle.

ZALMA OPINION

The reversal of the trial court’s ruling was, in my opinion, an act of sophistry. Whether the appellant was in close proximity to the vehicle or 30 feet away, he was not occupying the vehicle since he was not in, on or upon the vehicle. He was standing to the side chatting with his boss about the work they were going to do with all the equipment they had already removed from the truck. Courts should not change the meaning of a clear word with an even more clear definition to provide coverage for a seriously injured person. A person is not, in my opinion, occupying a vehicle when he is in close proximity to it any more than when he is far away from it.


© 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 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.

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.

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.

 

Posted in Zalma on Insurance | Leave a comment

There are More Jobs Available than People to Fill Them — You Must Train Your People

How to Create a Staff of Professional Claims Handlers

Business reporters complain every day that the United States is now at full employment. There are more than seven million jobs available and only six million people available to fill those jobs. Since insurance claims jobs are not the most desirable to recent high school or college graduates. Experienced and professional claims people are in a sellers market.

If you wish to keep up the quality of your claims staff you must start from scratch by hiring intelligent but totally ignorant of the business of insurance claims and train them to be professional.

Learn about the available training program for property claims here: https://www.linkedin.com/…/have-you-found-difficult-find-pr…  

ClaimSchool, Inc. will produce and present – either live and in person – or by webinar a complete training course for your all your claims people, whether new or long-time employees, to allow them to become well-educated and professional claims handlers with a course equal to a Masters Degree program in claims handling.

The course is available in increments from six minutes a day, one hour, and full day increments depending on the needs of your staff.

Go to the Insurance Claims Library to see the available text materials at https://zalma.com/blog/insurance-claims-library/

Posted in Zalma on Insurance | Leave a comment

Circumstantial Evidence Sufficient to Prove Arson with Intent to Defraud

Never Set a Fire if your Neighbor has a Video System Recording your Efforts

Arson is the most vicious form of insurance fraud. People, the arsonist, neighbors or fire fighters are often injured or killed. When the arsonist is recorded by a neighbor’s video system as the fire ignited the chance of an acquittal from the charge of arson is slim to none.

In State of Louisiana v. David Costanza, NO. 19-KA-263, Fifth Circuit Court of Appeal State of Louisiana (December 26, 2019) Defendant Costanza unsuccessfully appealed his conviction and sentence for arson with intent to defraud.

FACTS

David Costanza, was charged with arson with intent to defraud. A bench trial was held. At trial, Officer Arnold Breaux testified that a gas can was recovered outside the rear door and there was a key inside the lock of the front door. Detective Christopher Fisher of the Westwego Police Department testified that he became involved in a potential arson investigation involving the house. Initially, he was told that the fire appeared to be “suspicious.” When Detective Fisher arrived, the scene had been secured, and the residence appeared to have significant fire damage on the outside. He recovered and reviewed a surveillance video from the house across the street.

Detective Fisher testified that the surveillance video showed him enough information to arrest defendant and charge him with arson with intent to defraud.

At trial, after the State rested, the defense called Costanza’s significant other, Ms. Walden, who painted Costanza as forgetful and not capable of crime, Costanza also called a fire cause expert who found the fire to be accidental.

At the conclusion of trial, the trial court found defendant guilty as charged. On January 18, 2019, the trial court sentenced defendant to one year of hard labor to be served via home incarceration.

LAW AND DISCUSSION

On appeal, defendant argued that the evidence was insufficient to support the verdict.

In reviewing the sufficiency of evidence, an appellate court must determine if the evidence, whether direct or circumstantial, or a mixture of both, viewed in the light most favorable to the prosecution, was sufficient to convince a rational trier of fact that all of the elements of the crime have been proven beyond a reasonable doubt.

Arson with intent to defraud is defined as “the setting fire to, or damaging by any explosive substance, any property, with intent to defraud.” The intent to defraud element requires specific intent. Specific intent is defined as “that state of mind which exists when the circumstances indicate that the offender actively desired the prescribed criminal consequences to follow his act or failure to act.” Specific intent need not be proven as a fact but may be inferred from the circumstances and actions of the accused.

The Court of Appeal concluded that the State presented sufficient evidence to show defendant intentionally set the fire. The State also presented sufficient evidence to show defendant intentionally set the fire with the specific intent to defraud. The trial judge listened to the witnesses and evaluated the evidence. She clearly found the State’s witnesses to be more credible than the defense witnesses.

The Court of Appeal concluded that a rational trier of fact could have found that the evidence was sufficient to find that defendant intentionally set fire to his home with the specific intent to defraud his insurance company.

The trial court is required to impose a determinate sentence. In this case, the transcript reflects that the trial judge sentenced defendant to one year of hard labor to be “served by way of home incarceration.” She ordered defendant to follow all of the home-incarceration rules and said, “they will explain those to you when you go over to home incarceration when you leave here today.”

A hard labor sentence and an order of home incarceration are incongruent. In order to sentence a defendant to home incarceration, first the sentencing court must suspend the imprisonment and order the suspension to be served in home incarceration with supervision.

The court concluded that the trial court erred by ordering the one-year hard labor sentence to be served in home incarceration because the trial court may order home incarceration in lieu of imprisonment — not as imprisonment.

Defendant’s conviction was affirmed and his sentence vacated to follow the law – either to prison and hard labor or to home confinement with proper controls.

ZALMA OPINION

The failure of the trial court to render a sentence that made sense – hard labor while at home confinement – the sentence needed to be cured but, because the evidence was overwhelming, conviction was required and he should either be jailed and perform the hard labor or be home confined for an appropriate time. To me, home confinement is too gentle for the crime of arson especially when the hard labor is washing dishes.


© 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 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.

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.

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.

 

Posted in Zalma on Insurance | Leave a comment

Insurance Claims Law Available on Amazon.com

Rescission, the Examination Under Oath and Random Thoughts

To present, adjust, or represent anyone involved with an insurance claim it is necessary to understand the law of rescission of insurance or the examination under oath.

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 for insurers and their claims staff to become insurance claims professionals.

Read about these books and more than 2950 insurance posts here.

“Rescission of Insurance – 2nd Edition”

Newly updated and expanded, “Rescission of Insurance – 2nd Edition” provides the insurance coverage lawyer, policyholder lawyer and claims professionals with everything needed to understand and enforce the equitable remedy of rescission. Everyone involved in or with the business of insurance must understand that rescission 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.

“Random Thoughts on Insurance”

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

The case digests and articles from 2010 to the present, in the six volumes 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.

 


© 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 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.

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.

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.

Posted in Zalma on Insurance | Leave a comment

Lawyers Need to Seek Professional Insurance Advice when Potential Claim Arises

Failing to Report an Error is Expensive

An insurance coverage dispute resulted from an insured committing, and failing to report, a mistake during the former policy period and seeking coverage for the resulting claim during the latter policy period by relying only on itself rather than seeking professional insurance advice. The failure left the lawyer without an insurer to pay for defense and indemnity resulting from his error.

In Weeks & Irvine LLC v. Associated Industries Insurance Company, Inc., No. 2:17-cv-02620-DCN, United States District Court for the District of South Carolina Charleston Division (January 6, 2020) litigation resulted when the law firm, Weeks & Irvine LLC (“Weeks”) submitted an application for renewal of its professional liability insurance with AIIC with an application responding in the negative to questions relating to claims or potential claims. AIIC renewed the policy with effective dates of October 27, 2016 to October 27, 2017 (the “2016-2017 Policy”).

BACKGROUND

In March 2016, Prairie Son Properties LLC (“Prairie Son”), the original plaintiff in this matter, hired Weeks to handle the closing of a $400,000 loan from Prairie Son to Moss Construction of the Lowcountry, LLC (“Moss Construction”). Weeks was insured by AIIC during this time. To secure the loan, Moss Construction issued a mortgage to Prairie Son on a property in Beaufort County, South Carolina (the “Property”). Under the terms of this agreement, Prairie Son would be in first lien position on the Property.

On March 11, 2016, Weeks closed the loan and the funds were disbursed by Prairie Son to Moss Construction. As a result of an error by the time Weeks submitted the mortgage for filing with the correct fee and had the recording perfected on May 23, 2016—over 70 days after the closing—three additional mortgages on the Property had been recorded. As a result, the Prairie Son mortgage had fourth priority on the Property rather than first as required.

Weeks alleged that on August 1, 2016, it discovered that the Prairie Son mortgage was in fourth priority, not first. Weeks claims that it discussed the issue with Prairie Son’s attorney, who Weeks believed had come to an agreement with the intervening mortgagees to subordinate their superior-priority mortgages to Prairie Son’s mortgage (the “Subordination Agreement”).

On or about September 16, 2016, after discovery of the error, Weeks submitted an application for renewal of its professional liability insurance with AIIC (the “Renewal Application”). Question 35 of the Renewal Application asked whether Weeks was “aware of any fact, circumstance, incident, error, situation or accident that may result in a claim.” Weeks answered “no” to this question. Weeks states that it learned in November 2016 that the Subordination Agreement fell through after Moss Construction declared bankruptcy.

In January 2018, AIIC denied coverage for Weeks in the underlying suit, asserting that “there is no coverage under the Associated Policy for the [Prairie Son] Lawsuit, given that the Insured had knowledge of the Wrongful Act prior to the inception Date of the Policy.”

DISCUSSION

AIIC argued that summary judgment is warranted because the Policy does not extend coverage to the Prairie Son Claim as a matter of law. AIIC contended that the terms of the 2016-2017 Policy do not extend coverage to the Prairie Son Claim because Weeks had knowledge of the claim’s underlying “wrongful act” prior to the policy’s inception date.

Coverage Under the Terms of the 2016-2017 Policy

AIIC also argues that coverage does not extend to the Prairie Son Claim under the terms of the 2016-2017 Policy because Weeks had knowledge of the underlying “wrongful act” prior to the inception date of the 2016-2017 Policy.

To the extent that the facts critical to this analysis are disputed, the court views them in a light most favorable to Weeks. Weeks failed to properly record the Prairie Son mortgage for a period of almost three months, resulting in the loss of Prairie Son’s priority position. Weeks had knowledge of this mistake on August 1, 2016, before the Policy’s inception date of October 27, 2017. Between the time that Weeks gained knowledge of its mistake and the inception date of the 2016-2017 Policy, Weeks believed that the Subordination Agreement would neutralize its mistake because the agreement would put Prairie Son back into first priority position by subordinating the three intervening mortgages.

Was Weeks’ failure to properly record the mortgage during the pendency of the Subordination Agreement and before the inception date of the 2016-2017 Policy a “wrongful act” as defined by the 2016-2017 Policy, such that coverage does not extend to the Prairie Son Claim?

AIIC contends that Weeks’ recording error was such a “wrongful act.”

An insurance policy is a contract between the insured and the insurance company, and the terms of the policy are to be construed according to contract law. The cardinal rule of contract interpretation is to ascertain and give legal effect to the parties’ intentions as determined by the contract language. If the contract’s language is clear and unambiguous, the language alone, understood in its plain, ordinary, and popular sense, determines the contract’s force and effect.

The court found that Weeks’ failure to properly record the Prairie Son mortgage was a “negligent act, error, or omission” and thus a “wrongful act” based on the plain meaning of those terms. Negligence is lack of attention to what ought to be done; failure to take proper or necessary care of a thing or person; lack of necessary or reasonable care in doing something; carelessness.

Weeks failed to properly record the Prairie Son Mortgage for 74 days after overseeing the transaction’s closing, a mistake that resulted in Prairie Son losing priority position for its mortgage and, in turn, its ability to collect upon default of its loan. Indeed, Weeks’ own briefing repeatedly refers to that failure as a “mistake.” Even viewing the facts in a light most favorable to Weeks, the court concluded that Weeks admitted “mistake” was a “negligent act, error, or omission” and thus a “wrongful act” for the purposes of the 2016-2017 Policy. No other interpretation would be reasonable.

If Weeks had properly reported its “wrongful act” during the first policy period, there would be no gap in coverage. Unlike the insured in One Beacon, Weeks maintained insurance through the same insurer, AIIC, during both the policy period in which the wrongful act occurred (2015-2016) and the policy period in which the claim arose (2016-2017).

Based on the foregoing, the court concluded that there were no genuine issues of material fact, and that coverage under the 2016-2017 Policy does not extend to the Prairie Son claim as a matter of law.

ZALMA OPINION

Like shoemakers children who go without shoes, lawyers will most often fail to seek advice from other lawyers who have specialized knowledge. Had Weeks sought legal or insurance advice when it first learned of its error, it would have reported the “potential claim” to its insurer and there would have been no dispute over coverage. Relying on its own legal conclusions (without sufficient knowledge or experience to make such a conclusion) Weeks was its own worst enemy.


© 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 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.

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.

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.

Posted in Zalma on Insurance | Leave a comment

Books for the Insurance Professional

California Claims & SIU Regulations and Ethics for 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 for insurers and their claims staff to become insurance claims professionals.

Read about these books and more than 2950 insurance posts here.

“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.


© 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 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.

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.

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.

Posted in Zalma on Insurance | Leave a comment

RTFP – Failure to Read the Full Policy Not an Excuse

One Cannot Justifiably Rely on a Purportedly Unclear Statement in a Contract When Reading the Contract in Full Would Remove Any Lack of Clarity

When a plaintiff admitted he did not read his homeowners policy only to find that an Endorsement limited coverage to Actual Cash Value (ACV) for windstorm damage to a roof not the full replacement cost (RCV) that other claims on his homeowners policy would pay for other losses. In Murray Richelson v. Liberty Insurance Corporation, Case No. 19-3035, United States Court of Appeals for the Sixth Circuit (January 6, 2020) found his claim and attempted class action unconvincing.

FACTS

Murray Richelson entered into an insurance contract with Liberty Insurance. Richelson purports not to have read, at the time of signing, language in that contract that is now in dispute and today reads that language differently than does Liberty.

A windstorm caused damage to the roof of Murray Richelson’s home. Citing that storm damage, Richelson filed a claim with Liberty Insurance, from whom Richelson had purchased a homeowner’s insurance policy. An adjustor determined that the cost to replace the roof was $8,960. But Liberty declined to pay Richelson the replacement cost. Liberty instead paid Richelson the amount of the roof’s ACV. Liberty determined the ACV amount by applying the policy’s $1,000 deductible and deducting depreciation from the replacement cost amount. All told, Liberty reimbursed Richelson $4,350.58, less than half of the cost to replace the roof. This led to a dispute regarding the terms of Richelson’s policy.

Section 1 of Richelson’s policy addresses “A. Dwelling with Expanded Replacement Cost.” There, the policy states that “[l]osses covered under Section 1 are subject to a deductible of: $1,000.” Insurance policies also sometimes include “endorsements.” Relevant here is an endorsement to Richelson’s homeowner’s policy that, in large upper-case font, the endorsement reads: “THIS ENDORSEMENT CHANGES YOUR POLICY. PLEASE READ IT CAREFULLY.”

Below that, in equally large upper-case font, this time also in bold, the endorsement addresses: “ACTUAL CASH VALUE LOSS SETTLEMENT WINDSTORM OR HAIL LOSSES TO ROOF SURFACING.” The endorsement provides that losses to “[b]uildings under Coverage A or B, except for their roof surfacing, roof vents and roof flashing materials if the loss to the roof surfacing, roof vents and roof flashing materials is caused by the peril of Windstorm or Hail, [is] at replacement cost without deduction for depreciation . . . .”

Richelson, unhappy, sued in state court a class action complaint against Liberty. Because Richelson was an Ohio resident, and Liberty a Massachusetts corporation with its principal place of business in Massachusetts, there was diversity between them.

Liberty moved to dismiss the case. With respect to Richelson’s “ACV” breach-of-contract claim, the district court rejected as unreasonable Richelson’s interpretation. Rather, Richelson’s coverage (as relevant here) was limited to ACV only. Accordingly, the district court concluded, Richelson’s claim failed as a matter of law.

The district court also rejected Richelson’s argument that the deductible was not part of any calculation except the replacement-cost calculation. That interpretation was unreasonable, the district court concluded, first because it misunderstood the meaning of the term “deductible,” and also because it made the deductible language superfluous for three of the four Section 1 coverages. The district court likewise dismissed Richelson’s fraud claim. The district court concluded that the endorsement should not have gone unnoticed by a reasonable person, given the size of the bolded text used to highlight its importance.

ANALYSIS

Primarily, Richelson argues that Liberty breached the parties’ insurance contract by utilizing ACV, rather than replacement cost, in assessing the payment amount owed to Richelson for the windstorm damage to his roof. Alternatively, if ACV was in fact the proper method for determining the payment amount, Richelson claimed that Liberty nonetheless breached the contract by factoring in a deductible in the calculation for ACV.

The endorsement exempts from the standard coverage the very circumstance at issue. That plain language, in other words, sets forth an exception to replacement-cost coverage for windstorm damage like that experienced by Richelson.

Taking the language of the policy declaration and the endorsement together, the only reasonable interpretation is that the amount of Richelson’s claim for reimbursement for roof damage caused by a windstorm is calculated by utilizing the ACV—not the RCV —of the roof. Put another way, Richelson’s windstorm-based claim was governed not by the general rule (replacement cost), but rather by an express exception to that rule (ACV for roof damage caused by hail or wind). For the roof-damages portion of Richelson’s claim, then, Liberty was only required to pay ACV.

Ohio law understandably requires that we examine the insurance contract as a whole, giving meaning to each of its parts. Under Ohio law, where the court must give fair meaning to all language in the contract, Richelson’s interpretation of the ACV-related provision is not reasonable. Accordingly, he has not alleged a viable theory of breach by Liberty.

Failing to offer a reasonable reading of the policy language, Richelson alternatively argues that the policy language is so misleading that he was fraudulently induced into signing the contract. Richelson’s fraud claim was resolved by the court based solely on his failure to plausibly allege justifiable reliance.

An insured cannot justifiably rely on a purportedly unclear statement in a contract when reading the contract in full would remove any lack of clarity. Richelson cannot say that he was misled into signing a paper which was different from what he intended to sign when he could have known the truth by merely looking when he signed.

If Liberty was trying to hide the endorsement ball, as Richelson suggests, it did quite a poor job. The need to review the endorsement language was eminently clear to a reasonable reader. That is enough to doom Richelson’s fraud claim.

When interpreting policy language in an insurance contract, Ohio courts will construe ambiguous language against the insurer and in favor of the insured. Where an insurer has utilized contract language that is clear and unambiguous, Ohio courts will construe that language by giving it its ordinary and plain meaning. This latter principle resolves Richelson’s case.

The district court thus properly dismissed Richelson’s fraud claim.

ZALMA OPINION

I have written and opined for dozens of years that when dealing with a dispute over insurance coverage it is the obligation of the insured, his or her lawyers, the insurer and the court, to read the full policy. Failure to do so, and attempting to change the meaning of the policy wording after a loss, is a fool’s errand. Richelson’s hope of creating a highly profitable – for his lawyers – class action, was dashed because he did not read the policy and the Sixth Circuit Court of Appeal did.


© 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 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.

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.

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.

Posted in Zalma on Insurance | Leave a comment

Short and Sweet – USDC Requires Two Primary Insurers to Share Settlement Equally

Co-Primary Insurance Coverage on the Same Risk

In a dispute that should never have gone to trial, the USDC concluded: “[W]here two or more insurers independently provide primary insurance on the same risk for which they are both liable for any loss to the same insured, the insurance carrier who pays the loss or defends a lawsuit against the insured is entitled to equitable contribution from the other insurer or insurers[.]” Fireman’s Fund Ins. Co. v. Md. Cas. Co., 65 Cal. App. 4th 1279, 1289 (1998).

In Allied Premier Insurance, a Risk Retention Group v. United Financial Casualty Company, Case No. EDCV 18-88 JGB (Kkx), United States District Court Central District of California – Eastern Division (December 30, 2019) the USDC concluded that there was no genuine dispute of fact that Plaintiff Allied Premier Insurance, a Risk Retention Group (“Allied”) and Defendant Unified Financial Causualty Compnay (“UFCC”) provided co-primary insurance coverage on the same risk for which they were both liable.

Allied defended the Lawsuit against Jose Porras.

The Court therefore granted Plaintiff’s summary judgment on its equitable contribution claim. The parties agree that, if they are co-primary, they each share equally the $1 million paid by Allied to settle the underlying Lawsuit. Plaintiff has thus shown it is entitled to equitable contribution in the amount of $ 500,000.

Summary judgment was likewise granted on Plaintiff’s equitable subrogation claim to the extent consistent with but not duplicative of the remedy provided under Plaintiff’s equitable contribution claim.

ZALMA OPINION

The USDC, applying California law, in a short, sweet, clear and unambiguous decision ordered that the two insurers should share equally a $1 million settlement. Since Allied defended and paid the $1 million it was entitled to receive from United Financial its share of the liability.


© 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 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.

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.

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.

Posted in Zalma on Insurance | Leave a comment

How to Adjust Property & Liability Claims

The Compact Books of Adjusting Property & Liability Insurance Claims

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 for insurers and their claims staff to become insurance claims professionals.

“The Compact Book of Adjusting Property Insurance Claims – Second Edition”

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

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

Available as a Kindle book.

Available as a paperback.

“The Compact Book on Adjusting Liability Claims, Second Edition

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.

Read about these and more than 2950 blog posts at https://zalma.com/blog


© 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 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.

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.

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.

Posted in Zalma on Insurance | Leave a comment

I Didn’t Know the Gun Was Loaded – A Lie to get Insurance Benefits Fails

Pre-Existing Condition Material to No Fault Claim

No fault insurance plans, like that in Michigan, provide benefits to an injured person regardless of fault. All the state asks from the injured party is that he or she is honest in the presentation of the claim. Misrepresenting material facts in the presentation of a no fault claim is considered fraud and deprives the person injured of the right to receive benefits.

In Mark Smith v. Michigan Automobile Insurance Placement Facility, No. 344023, State of Michigan Court of Appeals (December 26, 2019) Smith lied to the Placement Facility when making his claim and tried to avoid losing benefits by claiming he forgot his previous condition and did not intentionally lie.

FACTUAL BACKGROUND

In October 2016, plaintiff visited his doctor, Dr. Mohamed Ayad, twice complaining of “chronic” and “acute” back and neck pain. Then, on November 5, 2016, plaintiff was involved in an automobile accident that, plaintiff alleges, injured plaintiff’s back, neck, and shoulder. On April 7, 2017, plaintiff filed an application with defendant, the Michigan Automobile Insurance Placement Facility, for personal protection insurance (PIP) benefits. In this application, plaintiff indicated that he did not have any preexisting conditions and did not seek treatment for such conditions before the November 5, 2016 accident.

Plaintiff falsely testified that he did see Dr. Ayad before the accident, but only for general health checkups. Plaintiff’s medical records from Dr. Ayad, however, showed that plaintiff visited Dr. Ayad for “chronic” and “acute” back and neck pain.

Defendant claimed that the plaintiff committed fraud when he indicated on his application that he did not have neck and back issues before the accident.

Plaintiff then sued contending that defendant unreasonably and unlawfully neglected to assign an insurer to pay plaintiff his requested PIP benefits. At the hearing on defendant’s motion for summary disposition the trial court stated, “[i]t appears to the court that it’s outside the realm of credibility that a person would be unable to recall being treated for back pain a mere month before the accident which resulted in claims of back pain.”

ANALYSIS

There was no evidence presented that created a genuine issue of material fact regarding whether plaintiff simply forgot about his previous injuries. It is not enough to merely assert allegations in a brief to successfully establish a genuine issue of fact.

Further, whether plaintiff’s injuries are the result of the accident or were preexisting and aggravated thereafter was material to defendant’s determination of whether to award plaintiff benefits, since its award of benefits would depend principally on when and to what extent plaintiff began suffering from his injuries.

Because plaintiff was not insured at the time of the accident, he sought benefits through the Michigan Assigned Claims Plan, which is facilitated by defendant. When defendant refused to assign plaintiff’s claim to an insurer, it did so based on the language in the no fault statute which provides:

 “A person who presents or causes to be presented an oral or written statement, including computer-generated information, as part of or in support of a claim to the Michigan automobile insurance placement facility, or to an insurer to which the claim is assigned under the assigned claims plan, for payment or another benefit knowing that the statement contains false information concerning a fact or thing material to the claim commits a fraudulent insurance act . A claim that contains or is supported by a fraudulent insurance act … is ineligible for payment of personal protection insurance benefits under the assigned claims plan.”

It was undisputed that plaintiff presented to defendant oral and written statements in support of his no-fault claim that indicated that plaintiff did not have pain prior to the accident. It also undisputed that those statements were not accurate. The defendant established fraud when it showed:

  • the misrepresentation was material,
  • that it was false,
  • that the insured knew that it was false at the time it was made or that it was made recklessly, without any knowledge of its truth, and
  • that the insured made the material misrepresentation with the intention that the insurer would act upon it.

A statement is material if it is reasonably relevant to the insurer’s investigation of a claim.

One makes a knowing false statement when they have knowledge that the statement is false, or when the statement is made recklessly even without knowledge of the truth. Plaintiff complained of back and neck pain, which was characterized as “chronic” and “acute,” six months before he filed the application seeking benefits. He was prescribed medications for this pain and did not indicate that he had stopped taking the medication before his application for benefits was submitted. Plaintiff did not state in his deposition that he went to the doctor before the accident for neck and back pain, but merely forgot by the time he applied for benefits—rather, he stated only that he visited the doctor for regular checkups and mild neck pain from sleeping wrong.

Plaintiff did not submit an affidavit or other evidence in response to defendant’s allegation in its motion for summary disposition that plaintiff knowingly misrepresented information in his application. Plaintiff did not provide evidence of a preexisting condition, let alone an aggravation of that condition. In fact, he initially denied having any significant pain in his back or neck prior to the accident. The alleged fraud was material because it was pivotal to whether his claim could be accepted, with or without a preexisting condition.

There were no genuine issues of fact regarding whether plaintiff made a material misrepresentation on his application for PIP benefits, which constituted a fraudulent insurance act and rendered plaintiff ineligible for benefits.

ZALMA OPINION

This case is a perfect example of the last ditch attempt by a criminal who claimed – after being charged with a crime of violence –  “I didn’t know the gun was loaded.” He knew, he lied, and his medical records established the lie. No one, not even in a no fault auto insurance state, should be allowed to profit from a fraudulent claim. What the trial court and the court of appeal should have done at the end of their decision is refer the plaintiff to a local prosecutor for an act of criminal insurance fraud.


© 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 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.

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.

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.

Posted in Zalma on Insurance | Leave a comment

Bad Faith & Fraud

Two Books for the Insurance Professional

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

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

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive and often results in bad faith judgments in favor of those to whom such damages are inappropriate or honor a fraud perpetrator.

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 for insurers and their claims staff to become insurance claims professionals.

“The Law of Unintended Consequences and the Tort of Bad Faith”

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

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

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

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

Available as a paperback  

Available as a Kindle book

“Insurance Fraud – Volume I & Volume II

In Two Volumes

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

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

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

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback


© 2020 – Barry Zalma

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.

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.

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.

Posted in Zalma on Insurance | Leave a comment

Mortgagee Entitled to no More than Owed

When an Insurer Pays Mortgagee and not Named Insured, it is Entitled to Assignment of the Debt Paid

Insurance companies often ignore the right, when it properly refuses to pay a named insured but must pay the debt owed to a mortgage, the insurance policy requires the mortgagee to assign its rights under the mortgage to the insurer. When faced with a policy defense – like failure to fulfill a warranty or insurance fraud – the insurer may deny the claim of the named insured but must pay the mortgagee.

In Berkshire Hathaway Homestate Insurance Company v. Chicago Metropolitan Hospital, LLC, Robert Dieleman, and Kathleen Dieleman, Case No. 17 C 9370, United States District Court for the Northern District of Illinois Eastern Division (January 2, 2020) Berkshire Hathaway Homestate Insurance Company (“Berkshire”) insured a property that sustained fire damage in 2017.

Berkshire denied coverage and sued the property owner Chicago Metropolitan Hospital LLC (“Chicago Metropolitan”) and the mortgagees Robert and Kathleen Dieleman (“the Dielemans”) for a declaratory judgment. The Dielemans counterclaimed for breach of contract and unreasonable and vexatious delay. Berkshire offered to pay the Dielemans the then-current balance of their mortgage note, but the Dielemans declined. Berkshire amended its complaint to seek a declaratory judgment that its offer to the Dielemans satisfied its obligations under the policy.

BACKGROUND

Chicago Metropolitan owns a building in Chicago that was once operated as Sacred Heart Hospital (the “Property”). In 2014, the Dielemans lent Chicago Metropolitan $500,000, secured by a mortgage on the Property and three other parcels of land. Berkshire issued a $7,500,000 commercial property insurance policy (the “Policy”) to Chicago Metropolitan covering the Property from September 26, 2016 to September 26, 2017. The Policy lists the Dielemans as loss payees.

The Policy provides that under certain circumstances, the Dielemans could be entitled to coverage even if Chicago Metropolitan is not. The Policy’s Loss Payable Provisions Endorsement provided that if Berkshire pays the Dielemans but not Chicago Metropolitan, Berkshire in effect buys the debt (or a portion of it) from the Dielemans and succeeds to their rights (or a portion of them) against Chicago Metropolitan. Hence, if Berkshire pays off the Dielemans in full, the Policy provides that Chicago Metropolitan “will pay [its] remaining debt to [Berkshire].”

Finally, the endorsement caps the Dielemans’ potential recovery, stating that Berkshire “will not pay any Loss Payee more than their financial interest in the Covered Property, and . . . will not pay more than the applicable Limit of Insurance on the Covered Property.”

In June 2017, a fire occurred at the Property. In December 2017, Berkshire denied Chicago Metropolitan’s claim, asserting that Chicago Metropolitan was ineligible for coverage because, among other things, it did not maintain an automatic fire alarm.

While litigation was pending, Berkshire’s attorney asked the Dielemans’ attorney to provide documentation about the loan and mortgage. When the Dielemans’ response revealed that two of the other parcels subject to the mortgage had been sold without the proceeds being credited to the loan balance, Berkshire requested more information.

ANALYSIS

Under Illinois law Berkshire may reduce the Dielemans’ claim by the amount it has already been satisfied, even if the satisfaction occurred after the fire. Full or partial extinguishment of the debt itself, whether prior to the loss or subsequent to the loss, precludes to the extent thereof, any recovery by the loss-payable mortgagee for the plain and sole reason that the debt, itself, has been to that extent extinguished. The purpose of the rule is clear. It is intended to prevent a mortgagee from receiving a double payment. Under this interpretation, the Dielemans will receive the full $500,000 they were owed at the time of the fire—$400,000 from Berkshire and $100,000 in principal that Chicago Metropolitan has already paid.

Although the Dielemans had to litigate to get Berkshire to make them whole, it has now offered to do so. Under the Dielemans’ theory, on the other hand, Berkshire would pay the Dielemans $500,000 to satisfy what is now a $400,000 debt. In total, under the Dielemans’ theory, the Dielemans would receive $600,000 in principal—$500,000 from Berkshire and $100,000 from Chicago Metropolitan. The Policy neither compels nor may it be compelled to tolerate such a windfall.

The Dielemans argue that Berkshire should not be entitled to take the Dielemans’ rights under the Note and Mortgage because Berkshire breached the Policy. As discussed above, Berkshire ultimately satisfied its obligations under the Policy by exercising its option to pay off the Dielemans in full. Berkshire therefore succeeds to the Dielemans’ rights under the Note and Mortgage.

Even though the Dielemans were originally owed $504,357.37, Berkshire needed only to pay the Dielemans what they were owed at the time of payment. Berkshire’s tender of $401,094.38 therefore satisfied its obligation to the Dielemans.

Because that payment would make the Dielemans whole, the Dielemans have no damages from Berkshire’s earlier denial of coverage. The Dielemans thus have no more rights under the Policy and must transfer their interest in the Note and Mortgage to Berkshire.

ZALMA OPINION

The safeguard against an insurer’s delay in paying a valid claim is not to inflate the insurance claim to make it punitive instead of compensatory but instead to penalize the insurer for unreasonable and vexatious delay under the Illinois Insurance Code. If the Dielemans’ had a claim for bad faith that they could prove they would have alleged such a cause. They did not. Rather, they tried to profit from an insurance claim, get paid the amount of the debt, and retain the debt instrument to collect again from the borrower. Their attempt was wrongful and the court properly refused to allow the lender to profit from its insurance claim.


© 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 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.

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.

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.

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Everything Needed by the Insurance Claims Professional

Construction Defects & Mold Claims

Two Book Series to Help Understand Construction Defect or Mold Claims

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 for insurers and their claims staff to become insurance claims professionals.

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 guide 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 Mold Claims Volume Three: Understanding insurance claims and litigation concerning mold, fungi, and bacteria infestations.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.

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

 

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Is Hard Labor for Insurance Fraud a Real Deterrent

Louisiana takes Insurance Fraud Seriously

Insurance fraud is a crime that takes a great deal of  money from the insurance buying public. Estimates – since most insurance frauds succeed no one really knows how much it takes – range from $80 billion to $300 billion a year. In most states, when an insurance fraud perpetrator is caught, arrested, prosecuted, tried and convicted sentences vary from probation and, if jail time is assessed, it is usually quite limited.

In State of Louisiana v. Anthony Scott Tubbs, No. 52,417-KA, Court of Appeal Second Circuit State of Louisiana (November 20, 2019) insurance fraud is taken seriously and the defendant not only is sentenced to prison, he or she is also, by statute, sentenced to hard labor. The defendant, Anthony Scott Tubbs, was convicted of insurance fraud. He was ordered to serve five years at hard labor, with all but one year suspended. He was placed on four years’ active, supervised probation and ordered to pay a fine of $1,500, along with restitution.

FACTS

Tubbs operated ASAP Appliances (“ASAP”) in Bossier City, Louisiana. The business sold and repaired used appliances. Richard Hayden was an employee. On Saturday, May 12, 2012, the vehicles driven by Hayden and Tubbs were parked in a lot behind the business. As Hayden was leaving, he backed his Ford Expedition into a Dodge Ram 3500 truck which was being used that day by Tubbs. Tubbs told the police officers who responded to the accident that he was getting into his vehicle when the accident occurred. Hayden later delivered a typed and signed statement to the police taking full responsibility for the accident and stating that Tubbs was entering his vehicle when the accident occurred.

At the scene, Tubbs said he was not injured, but asked for paramedics to check him out because he had recently had a medical procedure. Tubbs later claimed that he was seriously injured in the accident and filed a civil lawsuit against Hayden, State Farm and USAA. State Farm later settled the claim with Tubbs for $8,500. Tubbs also claimed to have been involved in separate, unrelated accidents with other drivers on May 28, 2012, and June 29, 2012, and received settlements from State Farm in those cases as well.

According to hospital records, the accident on May 28, 2012, occurred when Tubbs was traveling in his truck at a low rate of speed and was impacted on the passenger side by another vehicle. The accident on June 29, 2012, occurred when Tubbs claimed he was rear-ended in traffic by another vehicle. Tubbs settled the second and third accidents with State Farm for $10,494.18 and $10,592.04, respectively.

Tubbs’s insurance claims were eventually investigated by the insurance fraud and auto theft unit of the Louisiana State Police. Hayden changed his version of the events concerning the May 12 accident and said that Tubbs was actually inside the business at the time the collision occurred. Tubbs was charged with one count of insurance fraud in connection with this accident. He was tried by a six-person jury and Tubbs was found guilty as charged.

SUFFICIENCY OF THE EVIDENCE

Tubbs argues that the evidence adduced at trial was insufficient to support his conviction for insurance fraud. This argument is without merit.

Legal Principles

The standard of appellate review for a sufficiency of the evidence claim is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime proven beyond a reasonable doubt. The facts established by the direct evidence and inferred from the circumstances established by that evidence must be sufficient for a rational trier of fact to conclude beyond a reasonable doubt that the defendant was guilty of every essential element of the crime.

In Louisiana, any person who with an intent to injure, defraud, or deceive any insurance company is guilty of a felony and must be subjected to a term of imprisonment, with or without hard labor, not to exceed five years.

The following acts are felonious: “Assisting, abetting, soliciting, or conspiring with another to prepare or make any written or oral statement that is intended to be presented to any insurance company, insured, the Department of Insurance, or other party in interest or third-party claimant in connection with, or in support of or denial, or any claim for payment of 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 or insurance policy.”

Testimony and Evidence

At trial, the jury heard live testimony from six witnesses. In connection with the civil lawsuit, Hayden said he gave a deposition in which he stated that Tubbs was not in the vehicle at the time the accident occurred. He claimed that his deposition testimony and his trial testimony in this case contained the true version of the accident.

In the defense part of the case Tubbs did not testify but his wife did.

Based upon the Court of Appeal’s examination of the record it rejected the argument. Tubbs failed to demonstrate that Hayden’s testimony was unreliable or contained internal contradictions or inconsistencies with the physical evidence which would cause the court not to afford deference to the jury’s factual conclusion and credibility determination.

The intent to defraud an insurance company is a specific intent crime. Specific intent is that state of mind which exists when the circumstances indicate that the offender actively desired the prescribed criminal consequences to follow his act or failure to act. Due to the difficulty of presenting direct evidence as to the defendant’s state of mind, the trier of fact may infer intent from the facts and circumstances of a transaction and the defendant’s actions. The existence of specific intent is an ultimate legal conclusion to be resolved by the jury. The Court of Appeal concluded that the jury did not err in finding that Tubbs committed all the elements of the offense of insurance fraud beyond a reasonable doubt.

EXCESSIVE SENTENCE

Tubbs argued that his sentence of imprisonment for a first nonviolent felony offense is excessive. Tubbs argued that he should not have been sentenced to serve any time in prison. He maintained that, because he is a first felony nonviolent offender, he should have only received probation in this matter.

In imposing sentence, the trial court fully complied with the sentencing guidelines. The court noted that it considered a presentence investigation prepared in this matter, as well as a letter from Tubbs expressing appreciation for the professional and respectful way he was treated during the case.

Based upon factors of his relative youth, military service, and lack of prior convictions, the trial court sentenced Tubbs to five years at hard labor, with all but one year suspended, with credit for time served. The Court of Appeal found the sentence imposed was not constitutionally excessive because Tubbs coerced an employee to make a false statement concerning how this very minor accident occurred. Based upon that false statement, Tubbs claimed serious physical injury in order to profit financially.

The period of incarceration imposed was low and was not excessive under the facts of this case.  The defendant’s conviction and sentence were affirmed.

ZALMA OPINION

The rest of the states of the U.S. should seriously consider emulating the state of Louisiana and allow for serious sentences for those convicted of insurance fraud, including serious time in prison and even hard labor. Insurance fraud perpetrators will be reluctant to commit the crime if they face a real sentence of jail and hard labor rather than the usual probation that Tubbs wanted, but did not get.


© 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 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.

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.

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.

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Zalma’s Insurance Fraud Letter – January 1, 2020

 

  Zalma’s Insurance Fraud Letter, Volume 24, No. 1    

 Some of the articles you can read in this issue of ZIFL follow: 

Insurance criminals are spoiled. They are seldom caught. When caught and prosecuted they, and their lawyers use every trick and motion available to delay trial and conviction. Even after being convicted and sentenced they – using their ill-gotten funds – file multiple post-trial motions and appeals. Sometimes they succeed. Most times they must still serve the time required by the sentence. Always their actions cost the state, the federal government, the trial courts and the appellate courts much money and time in the attempts to keep the fruits of their crimes.
In United States of America v. Antonio Ramon Martinez-Lopez, File No. 1:16-CR-62, United States District Court for the Western District of Michigan Southern Division (December 3, 2019) a grand jury returned an indictment charging Defendant Antonio Ramon Martinez-Lopez, and several co-defendants with conspiracy to commit mail fraud, health care fraud, and mail fraud, charging Belkis Soca-Fernandez and David Sosa-Baladron with one count of conspiracy to commit mail fraud 12 counts of health care fraud, and 8 counts of mail fraud. It also charged Defendant with one count of unlawful procurement of naturalization.

Fraud Reporting Statute Immunizes Those Reporting

No Private Right of Action for Person Who Claims A Wrongful Report of Fraud

The United States Court of Appeals for the Second Circuit certified the following question to the Court of Appeals of New York:

Does New York Public Health Law [§] 230 (11) (b) create a private right of action for bad-faith and malicious reporting to the Office of Professional Medical Conduct?

In Dr. Robert D. Haar, M.D. v. Nationwide Mutual Fire Insurance Company, No. 81, 2019 NY Slip Op 08445, Court of Appeals of New York (November 21, 2019) Dr. Haar, an orthopedic surgeon licensed to practice medicine in New York, treated four patients who were injured in automobile accidents and insured by defendant Nationwide Mutual Fire Insurance Company. Plaintiff submitted claims to defendant in connection with each patient, and defendant either fully or partially denied each claim. Nationwide, thereafter, filed complaints with the Office of Professional Medical Conduct (OPMC) alleging insurance fraud. After an investigation, OPMC declined to impose any discipline against Dr. Haar who then sued asserting that Nationwide’s complaints to OPMC lacked a good-faith basis in violation of Public Health Law § 230 (11) (b), and interposed a separate cause of action for defamation.

Suit Against Lawyers for Fraud Survives SNAP Motion

Strategic Lawsuit Against Public Participation Does not Apply to Lawyers’ Settlement Demands

Insurance companies, like Allstate, are filing qui tam lawsuits against people they believe are presenting fraudulent claims against the insurer by suing the perpetrators and their lawyers under provisions of the California Insurance Code that allows the insurer to sue on behalf of the state.
In The People ex rel. Allstate Insurance Company et al. v. Kelly L. Casado et al., B288742, Court of Appeal of the State of California Second Appellate District Division Seven (December 23, 2019) Kelly L. Casado and the Casado Law Firm (collectively, Casado) appeal from an order denying their special motion to strike the complaint in this action under Code of Civil Procedure section 425.16 (section 425.16). They argue that their conduct in representing clients with claims against insureds of Allstate Insurance Company, including sending demand letters to Allstate, constituted protected prelitigation activity.

Another Kind of Fraud

Cox Communications Found Liable For $1 Billion For Infringing Music Copyrights

A U.S. District Court found telecom company Cox Communications Inc. liable to pay $1 billion to music labels and publishers over piracy infringement on more than 10,000 works.
Over 50 music companies, including Sony Music, Warner Music Group and Universal Music Group, had filed a lawsuit in July 2018, accusing Cox of ignoring infringement notices and allowing repeat offenders to continue using its service by allegedly turning a blind eye to the practice.
Cox received hundreds of thousands of notices of infringement and did not adequately respond or comply with its obligations to stop its subscribers from infringing on peer to peer networks reported the National Music Publishers Association (NMPA).
Cox described the liability amount as “unjust and excessive” and said it plans to appeal the ruling of the Virginia court.

NMPA said the ruling will serve as a warning to organizations that allow users to share information illegally. 

From the Coalition
* Appeal denied. Neurosurgeon Aria Sabit will serve out his 20-year federal term for bogus spinal fusion surgeries on patients with chronic back pain. The Detroit doc convinced patients they needed the procedures. Sabit opened them up, and implanted devices to stabilize their spines – even when they didn’t need the procedures. For other patients, Sabit operated, yet didn’t implant the devices. He then billed private insurers and Medicaid for inserting implants. Sabit falsified his surgical reports to create a bogus paper trail saying he’d used the spinal devices. He was handed 235 months in federal prison and ordered to repay nearly $2 million. Sabit appealed, claiming the U.S. District Court erred before his sentence was imposed by rejecting a plea deal. His right to speak during the sentencing wasn’t respected, Sabit also contended. Judges don’t have to accept plea deals, the federal appeals court ruled. The lower court also imposed no restrictions on what Sabit could say, and how long he could speak. So, back to jail for the rest of his sentence.
* Broke and getting kicked out of their rentalapartment, Jimmie and Thanikwa Thompson bought a policy and torched the place for $56,000 in Martinsburg, West Va. The Thompsons positioned a space heater against an inflatable air mattress in the bedroom. They left with their dog, giving the space heater time to catch the apartment on fire. The duo filed a fraudulent $56,000 claim with Allstate for losses and to secure a hotel room for several months of temporary housing. The Thompsons said they didn’t know what started the fire. The space heater was turned off, they claimed. It was turned on when the fire broke out, a forensic exam showed. The Thompsons owed $3,021 in back rent, and a court had ordered the couple to leave their apartment. Thanikwa took out the renter policy just a week before they had to evacuate. The couple had no money for rent or living expenses, and lived without insurance for nearly 2 years. They were saddled with credit-card debt and numerous collection notices. The Thompsons pled guilty, and each faces up to 20 years in federal prison when sentenced.

Read the full article here.

 Health Insurance Fraud Convictions

Underwriter Convicted of $13.5 Million Fraud

David Ballard, a former vice president of CAN Financial Corp. in Chicago, was charged with fraud in 2018 when federal prosecutors accused him of fraudulently obtaining more than $13.5 million in premium payments not authorized by CNA.
Ballard, a health care liability underwriter’s scheme to pocket premiums on policies sold to hospitals, which came to light in 2018 resulted in a prison sentence in 2019.
According to the charges, Mr. Ballard had collected premiums for more than 10 years on matching deductible insurance policies, where the policy limit matched the deductible and would only pay out if the policyholder became insolvent.
Using phony binders and a shell company to divert the premiums, Mr. Ballard used the money to buy real estate and fund expensive dinners and trips. He pleaded guilty to wire fraud in October 2018 and asked for other cases to be taken into consideration, bringing the total he owed in restitution to $16.1 million.

Owner of Detroit-Area Health Clinics Sentenced to Eleven Years Prison

Shirley Douglas, 70, of West Bloomfield, Michigan, was sentenced by U.S. District Judge David Lawson of the Eastern District of Michigan. In September, Douglas pleaded guilty to one count of conspiracy to distribute controlled substances.
Douglas, the owner of a Detroit-area pain clinic and physical therapy clinic was sentenced to 11 years in prison December 19, 2019 today for her role in a diversion scheme involving more than 500,000 pills of oxycodone and other drugs.
As part of her guilty plea, Douglas admitted that, as the owner and operator of a pain clinic and a physical therapy clinic located in Southfield, Michigan, she conspired with others to distribute medically unnecessary controlled substances, including oxycodone, oxymorphone, alprazolam, hydrocodone and promethazine hydrochloride, through the selling of appointments with physicians at their pain clinics.
The total drug amount attributable to Douglas is in excess of 500,000 pills of oxycodone.
Douglas’s co-defendant, Malik Fuqua, pleaded guilty on Nov. 13, 2019, and is scheduled to be sentenced on Feb. 26, 2020.

Other Insurance Fraud Convictions

Convicted of Workers’ Comp Fraud, Houston Medical Facility Must Repay $30k

EME International, owned by Christine Caldwell of Marblehead, Massachusetts, bit a Houston medical facility was ordered to pay $30,000 in restitution after pleading guilty to workers’ compensation fraud in a Travis County District Court.
The Texas Department of Insurance, Division of Workers’ Compensation said EME and Caldwell were convicted of a 3rd degree felony. The facility billed Texas Mutual Insurance Co. for two- to four-hour Functional Capacity Evaluation exams that did not take two to four hours to perform.
The fraudulent billing happened between April 28, 2014, to March 17, 2016, according to the DWC.
The DWC prosecution unit obtained the indictment against the company.

Probation Only for Insurance Fraud Conviction in Kentucky

Christopher Lee Strausbaugh, president of S&S Tower Services Inc., was placed on three years of probation in his home state of Kentucky, according to a news release from the Kanawha County Prosecutor’s Office.
Strausbaugh had told insurers that his employees did not work higher than 15 feet from the ground in buildings at the bases of towers and later an employee working on a tower fell 105 feet to his death.
The death resulted not only in the investigation into the cause of the death but also the issues relating to workers’ compensation insurance coverage and premiums. The state of Kentucky fined S&S $3,500 for violation of worker safety laws.
In October, Strausbaugh and the company entered pleas to felony offenses of engaging in a scheme.
S&S Tower Services Inc. as a corporation was fined $1,000 Wednesday in Kanawha County Circuit Court.
Additionally, the company and Strausbaugh were ordered to jointly pay more than $186,000 to Encova and more than $16,000 to the West Virginia Tax Department in restitution.

Insurance Claims Library

 

Everything Needed by the Insurance Claims Professional

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. Mr. Zalma’s books are available for purchase at amazon.com with details describing all of the materials at http://zalma.com/insurance-claims-library/

Second Edition of the Ten Volumes of Zalma on 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 

The Zalma on Insurance blog has posted over 2850 digests of insurance appellate decisions and other important insurance materials and articles published five days or more a week and are available at http://zalma.com/blog.

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

Barry Zalma, Inc.
&
ClaimSchool, 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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New Novel on a Plot to Use Arson to Support Terrorism

Arson for Terrorism and Profit

Arson for Terrorism and Profit: How an Insurance Investigator and Insurance Lawyer Defeated a Plot to use a Fire to Fund Terrorism by [Zalma, Barry]How an Insurance Investigator and Insurance Lawyer Defeated a Plot to use a Fire to Fund Terrorism (c) 2020 by Barry Zalma & ClaimSchool, Inc.

https://lnkd.in/gQXXiE9

There are many excuses for the inability of the criminal justice system to effectively handle arson cases and eventually, almost universally, the prosecutor will find an excuse not to prosecute an arson case regardless of the amount of evidence produced.

As a result, with regard to an arson-for-profit scheme, the time, investigative work, and litigation is left to the insurer to refuse to pay a claim based on fraud, pay the investigators and lawyers needed to prosecute a civil fraud defense to a fraudulent claim created with an arson-for-profit scheme. The following story is based upon an attempted arson-for-profit that took up a large portion of my professional career.

Read this and more insurance books by Barry Zalma at https://lnkd.in/gYq44VM

Available as a Paperback –https://lnkd.in/gYnDvsa

Available as a Kindle book –https://lnkd.in/g2vSVzD

 

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Wrong Defendant – No Standing – No Case

Ninth and Final Attempt to Create a Class Action to Recover from U.S. Government Fails

In their ninth attempt to pursue a class action against Zurich American Insurance Company (Zurich) the plaintiffs MSP Recovery Claims, claiming an agency relationship with Medicare Advantage Organizations, filed suit again, after failing eight times.

In MSP Recovery Claims, Series, LLC; and Series 16-08-483, a series of MSP Recovery Claims, Series LLC Series 15-09-335, LLC, a series of MSP Recovery Claims, Series LLC v. Zurich American Insurance Company, Case No. 18 C 7849, United States District Court for the Northern District of Illinois Eastern Division (December 18, 2019) Plaintiffs MSP Recovery Claims, Series, LLC and Series 16-08-483 brought a second amended putative class action complaint against defendant Zurich American Insurance Company claiming to be the assignees of legal claims held by various largely unidentified Medicare Advantage Organizations (“MAOs”). Plaintiffs sought double recovery under the Medicare Secondary Payor provisions of the Medicare Act for reimbursement of medical expenses that the various MAOs paid on behalf of Medicare beneficiaries despite defendant’s alleged obligation to pay under the MSPA. Defendant moved to dismiss the complaint for lack of standing, and under Fed. R. Civ. P. 12(b)(6) for failure to state a claim.

BACKGROUND

Many Medicare beneficiaries receive benefits directly from the government from Medicare Parts A and B, while others enroll in Part C under which their benefits are provided by private entities known as MAOs. The MAO receives a per capita reimbursement from the government for each Medicare enrollee covered by the MAO. The amount of the reimbursement varies according to the characteristics of the individual enrollee as well as other factors.

Congress made the government a secondary provider of medical insurance coverage when a Medicare recipient has other sources of primary insurance coverage. The Medicare Secondary Payer Agreement provisions shift responsibility for medical payments to other health plans, such as non-fault and liability insurance, which are considered “primary plans.” Under the MSPA, for Part A and B enrollees, Medicare is statutorily barred from making payments for medical costs when an enrollee has benefited or is likely to benefit from some other insurance or worker’s compensation plan where Medicare is a secondary form of coverage that applies only to costs not covered by the primary insurer.

If the primary insurer fails to pay, Medicare is authorized to make conditional payments to providers and then seek reimbursement from the primary insurer.  If the primary payer fails to reimburse the secondary payer (either Medicare or an MAO) for benefits it should have provided, the MSPA establishes a private right of action that permits some private plaintiffs to sue for double damages.

DISCUSSION

Plaintiffs in the instant case are not MAOs, but rather assert that they are assignees of claims that belonged to MAOs. In particular, plaintiffs alleged that they have assignments to pursue seven “exemplar” claims from Medicare enrollees. Plaintiffs allege that each of the identified enrollees were injured in an accident, an MAO made conditional payments for medical services, and that the MAO “assigned” its reimbursement claim to plaintiffs.

Standing is an essential element of the Constitution’s Article III’s case or controversy requirement. Because it is a jurisdictional requirement, plaintiffs bear the burden of establishing standing and, because it is not a mere pleading requirement but rather an indispensable part of the plaintiffs’ case, it must be supported in the same way as any other matter on which the plaintiffs bear the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.

A facial challenge to the court’s jurisdiction requires only that the court look to the complaint and see if the plaintiff has sufficiently alleged a basis of subject matter jurisdiction. In contrast, a factual challenge lies where the complaint is formally sufficient but the contention is that there is in fact no subject matter jurisdiction. When considering a motion that raises a factual challenge to jurisdiction, the court may look beyond the jurisdictional allegations and consider whatever evidence that has been submitted.

Defendant raises both a facial and factual challenge to plaintiffs’ standing. With respect to the exemplars, plaintiffs allege that they received an assignment to pursue these claims from Health Insurance Plan of Greater New York (“HIP”).

Plaintiffs’ complaint conveniently ignores that the assignment documents contain no list of which claims were assigned to it and which were excluded. The complaint fails even to acknowledge the exclusion by alleging that the six exemplar claims were assigned to plaintiffs and not to any other recovery vendor.

Absent such an allegation, the complaint fails to survive a facial challenge.

Moreover, even if the court were to infer that plaintiffs are alleging that the six exemplars were assigned to them and not “carved out” of the general assignment, defendant has provided letters from the Rawlings Group indicating that it has received assignments from HIP claims, and defendant has indicated that Rawlings is pursing the other three claims as well.

There is a more fundamental problem with this claim. The complaint contains no more information about that policy, but in the briefing defendant has submitted evidence, and plaintiffs appear to admit, that the policy in fact was issued by Universal Underwriters Insurance Company, not defendant. Thus, plaintiffs have named the wrong defendant.

The Federal Rules of Civil Procedure allow for one amendment as of right and directs district courts freely to give leave for further amendments when justice so requires. After the first amendment, the court has discretion to deny leave to amend.

As defendant points out, the instant complaint is not plaintiffs’ third attempt to establish standing and a claim, but actually their ninth. After their third attempt in each case was challenged by motion, plaintiffs voluntarily dismissed the cases and then filed the instant case in this district.

Nine attempts to establish standing and plead a cause of action is enough. The court, therefore, denied leave to amend and dismissed the action.

ZALMA OPINION

Class actions are major profit centers for the law firms that pursue them to judgment. They try hard to get past defenses. They don’t give up easy because a successful class action can cover the overhead and profit of a law firm for one or more years. This case proves that although “greed is good” to be properly and effectively greedy it takes skill and serious lawyering. Nine tries to state a viable cause of action proves the courts are too generous to those trying to move a class action. To add to the incompetence, suing the wrong defendant is unforgivable.


© 2019 – 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.

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.

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.

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Insurance Claims Library

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 for insurers and their claims staff to become insurance claims professionals.

“THE HOMEOWNERS INSURANCE POLICY”

HOW TO BUY AN APPROPRIATE HOMEOWNERS POLICY AND SUCCESSFULLY MAKE A CLAIM TO THE INSURER

Insurance is a contract between a person seeking insurance and an insurer. It is obtained by making contact with the insurer as a prospective insured seeking insurance. The homeowners policy is a specialized policy of insurance that protects the homeowner from certain risks of loss to the real and personal property at the home, the exposure the insured faces for injury to a household employee, and the exposure the insured faces to liability for bodily injury or property damage caused to third parties. The book explains how to buy a homeowners policy and how to collect on any claim made to the homeowners insurer.

Paperback Book     Kindle Book

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.”

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. 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. A Comprehensive Review of insurance, insurance claims, the law of insurance policy interpretations, the practicalities of Property, Casualty and Liability Insurance Claims.

Zalma on Insurance Claims Volume 101 – Second Edition”

A Comprehensive Review of insurance, insurance claims, the law of insurance and policy interpretation Paperback – July 17, 2019

This volume covers

  1. WHAT IS INSURANCE?
  2. THE HISTORY OF INSURANCE,
  3. ACQUISITION OF THE POLICY,
  4. CLAIMS PERSONNEL,
  5. KINDS OF INSURANCE POLICIES,
  6. THE LIABILITY POLICY.

The 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.

Available as a paperback

Available as a Kindle Book

Zalma on Insurance Claims Part 102 – Second Edition”

This the second edition of the second volume in the latest addition to Barry Zalma’s insurance claims series of books and articles is part of the most thorough, up-to-date, expert-authored insurance claims guide available today. Zalma on Insurance Claims, part 102 provides in-depth explanations, analysis, examples, and detailed discussion of: •  Other Insurance Clauses; •   Trigger of Coverage; •    Underwriting; •    Conditions, Warranties and Exclusions

The 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.

Available as a Kindle book

Available as a paperback 

“Zalma on Insurance Claims Part 103 Second Edition”

A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims. Insured, Insurer, adjusting.

The Implied Covenant of Good Faith and Fair Dealing

The principle on which insurance has existed for the last three to four centuries is that insurance business is conducted with the utmost good faith (uberrima fides). The principle, called a covenant of good faith and fair dealing, must be followed religiously by both the insurer and the insured. This means, simply, that both parties to the insurance contract must treat each other in such a way that neither will deprive the other of the benefits of the contract.

This, the third part of Zalma on Insurance Claims and includes materials concerning:
This is part 103 of Zalma on Insurance Claims and will deal with:

•The Covenant of Good Faith and Fair Dealing
•Duties of the Insured and the Insurer
•Declaring a Policy Void
•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.

Available as a Kindle Book

Available as a paperback

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.

Available as a Kindle Book

Available as a paperback

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.

Available as a Kindle Book

Available as a paperback

“Zalma on Insurance Claims Part 106 Second Edition”

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

This latest addition to Barry Zalma’s insurance claims series of books and articles is part of the most thorough, up-to-date, expert-authored insurance claims guide available today. Written by nationally-renowned insurance coverage expert Barry Zalma, an insurance coverage attorney, consultant, expert witness and blogger.

Thorough, yet practical, this book is 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 this multiple volume guide. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance law.

The 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.

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

  1. Property Insurance & the Tort of Bad FaithChapter
  2. Grounds for Finding Bad FaithChapter
  3. Avoiding Charges of Bad FaithChapter
  4. Punitive DamagesChapter
  5. Bad Faith & Liability Insurance.
  6. Defenses to the Tort of Bad Faith

The appendices also include full text of important insurance law cases and statutes

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 107 – Second Edition”

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.

Available as a Kindle book

Available as a paperback 

Zalma on Insurance Claims Part 108 -Second Edition”

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.

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 109 Second Edition”

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.

Available as a Kindle book

Available as a paperback

Zalma on Insurance Claims Part 110 Second Edition”

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.

Available as a Kindle book

Available as a paperback


© 2019 – 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.

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.

Posted in Zalma on Insurance | Leave a comment

Suit Against Lawyers for Fraud Survives SNAP Motion

Strategic Lawsuit Against Public Participation Does not Apply to Lawyers’ Settlement Demands

Insurance companies, like Allstate, are filing qui tam lawsuits against people they believe are presenting fraudulent claims against the insurer by suing the perpetrators and their lawyers under provisions of the California Insurance Code that allow the insurer to sue on behalf of the state.

In The People ex rel. Allstate Insurance Company et al. v. Kelly L. Casado et al., B288742, Court of Appeal of the State of California Second Appellate District Division Seven (December 23, 2019) Kelly L. Casado and the Casado Law Firm (collectively, Casado) appealed from an order denying their special motion to strike the complaint in this action under Code of Civil Procedure section 425.16 (section 425.16). They argue that their conduct in representing clients with claims against insureds of Allstate Insurance Company, including sending demand letters to Allstate, constituted protected prelitigation activity.

FACTUAL BACKGROUND

Allstate Sues Casado for His Involvement in an Allegedly Fraudulent Insurance Scheme

Allstate and related entities filed a qui tam action against Casado, two other law firms, several chiropractic clinics, and other individuals, alleging violations of Insurance Code section 1871.7 and Business and Professions Code section 17200. The suits alleged that the defendants owned and controlled “sham law offices and sham health care practices” that created fraudulent documents to support false insurance claims for personal injury clients and patients. Allstate alleged the defendants committed insurance fraud as defined in the California Insurance Code and the California Penal Code to the damage of Allstate and the state.

Allstate initially named as law firm defendants the Law Offices of Sunmin Lee & Associates and the Northwest Law Firm, Inc. Allstate amended the complaint to substitute Casado and his law firm as Doe defendants.

Casado Files a Special Motion To Strike

Casado filed a special motion to strike the complaint arguing the allegedly fraudulent demand letters and correspondence Casado sent to Allstate were prelitigation activities subject to the Strategic Lawsuit Against Public Participation statue and were protected work product. Casado argued he sent Allstate correspondence, primarily in the form of representation and demand letters preceding any litigation and pertaining to legitimate, legally viable claims.

Casado did not provide any templates from which he or others in his office created representation or demand letters, nor did he provide any exemplars of any actual letters he sent to Allstate.

The Trial Court Denies the Special Motion To Strike, and Casado Appeals

The trial court denied Casado’s special motion to strike. The trial court found Casado’s practice of sending demand letters in circumstances in which litigation is only a possibility if the claim is denied did not satisfy the requirement that the defendant make the prelitigation statements under serious consideration of litigation.

DISCUSSION

The procedure made available to defendants by a SNAP motion has a distinctive two-part structure. A court may strike a cause of action only if the cause of action if it:

  1. arises from an act in furtherance of the right of petition or free speech in connection with a public issue, and
  2. the plaintiff has not established a probability of prevailing on the claim.

The second step requires a summary-judgment-like analysis. The court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment.

Allstate’s Causes of Action Do Not Arise from Protected Petitioning Activity

At issue in this case are sections of the statute which describe as an act in furtherance of the right of petition any written or oral statement or writing made before a judicial proceeding or in connection with an issue under consideration or review by a judicial body. Communications preparatory to, or in anticipation of, bringing an action are within the of scope of the statute if a prelitigation statement concerns the subject of the dispute and is made in anticipation of litigation contemplated in good faith and under serious consideration, it falls within the scope of the statute.

The requirement to show that litigation is seriously contemplated ensures that prelitigation communications are actually connected to litigation and that their protection therefore furthers the statute’s purpose of early dismissal of meritless lawsuits that arise from protected petitioning activity.

In the insurance context, submitting an insurance claim in the usual course of business does not constitute prelitigation conduct unless circumstances show litigation is more than theoretical.

Those circumstances may exist where, for example, an attorney submits a claim after negotiations with an insurance company have been unsuccessful or an attorney submits a demand letter threatening to file a lawsuit after an insurance company has denied a claim.

Casado admitted in his declaration that he sent Allstate letters of representation and demand letters before knowing whether Allstate would comply with the demand or pay any amount on the claim. He said he sent demand letters with the lawful intent to compromise potential future litigation, not to threaten present litigation.

Based on this evidence, Casado’s unsupported statement that all of the representation and demand letters he submitted to Allstate were made under serious consideration of litigation does not, without more (and there was no more), bring his communications with Allstate. A simple claim for payment submitted in the usual course of business into protected prelitigation conduct solely on the basis of the subjective intent of the attorney submitting the claim is not possible.

Casado’s self-serving declaration is insufficient to establish a prima facie showing of protected activity. Instead, the circumstances Casado described in his declaration indicate Casado sent Allstate representation and demand letters while litigation was merely theoretical and not under serious consideration. Merely sending a representation or demand letter as part of the process described by Casado did not demonstrate litigation was imminent or impending.

Because Casado failed to show he prepared those letters in anticipation of litigation contemplated in good faith and under serious consideration, Casado’s conduct fell outside the scope of the statute.

The order denying the special motion to strike Allstate’s complaint against Casado and the Casado Law Firm is affirmed. Allstate is to recover its costs on appeal.

ZALMA OPINION

Allstate should be commended for its effort to proactively fight fraud rather than wait – interminably for the state to take action on its own. Acting as a private prosecutor, Allstate will take the profit out of the criminal activity, and move it from California to another jurisdiction where an insurer cannot file a qui tam action on behalf of the state. All insurers in California who believe they are victims of fraudulent conduct should emulate Allstate because it is becoming clear the state of California does not want to pursue insurance criminals with vigor.


© 2019 – 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.

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.

Posted in Zalma on Insurance | Leave a comment

Zalma’s Insurance Claims Library

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 for insurers and their claims staff to become insurance claims professionals.

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 51 years in the insurance business. Full Court Press welcomes his deskbooks as the first published under our Full Court Press imprint. Four 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 DeskbookZalma

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 United States, and few know more about California insurance law than Barry Cal LawZalma.

“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.

Posted in Zalma on Insurance | Leave a comment

Defendant Convicted of Insurance Fraud Unsuccessfully Pursues Appeal

Insurance Criminals Continue to Abuse System After Conviction

Insurance criminals are spoiled. They are seldom caught. When caught and prosecuted they, and their lawyers, use every trick and motion available to delay trial and conviction. Even after being convicted and sentenced they – using their ill-gotten funds – file multiple post trial motions and appeals. Sometimes they succeed. Most times they must still serve the time required by the sentence. Always their actions cost the state, the federal government, the trial courts and the appellate courts much money and time in the attempts to keep the fruits of their crimes.

In a good example of the truism, United States of America v. Antonio Ramon Martinez-Lopez, File No. 1:16-CR-62, United States District Court for the Western District of Michigan Southern Division (December 3, 2019), a grand jury returned an indictment charging Defendant Antonio Ramon Martinez-Lopez, and several co-defendants with conspiracy to commit mail fraud, health care fraud, and mail fraud, charging Belkis Soca-Fernandez and David Sosa-Baladron with one count of conspiracy to commit mail fraud 12 counts of health care fraud, and 8 counts of mail fraud. It also charged Defendant with one count of unlawful procurement of naturalization.

BACKGROUND

The charges against Defendant stemmed from his involvement in a scheme to submit fraudulent claims to automobile insurance companies. Defendant operated a business called Revive Therapy Center, L.L.C., in Wyoming, Michigan. Later, he and his co-defendants established Renue Therapy in Lansing, Michigan, and H&H Rehab Center in Wyoming, Michigan. Defendant worked with Soca-Fernandez and Sosa-Baladron to recruit others to stage automobile accidents and then seek physical therapy that was unnecessary or was not provided. Defendants submitted false claims for this therapy through Revive and the two other clinics, and the insurance companies paid these claims until they discovered that the claims were fraudulent.

After months of posturing Defendant’s counsel asked the Court for permission to withdraw as counsel, contending that the relationship between him and Defendant had broken down due to a “failure of communication and the meaningful exchange of information necessary and required for an effective defense and representation.” Among other things, counsel contended that Defendant “has not responded in a timely manner of [sic] requests to sign court documents or to provide information essential to an effective defense . . . .”

The Court scheduled the motion for a hearing  and required Defendant to be present at the hearing. Defendant did not show up for the hearing, however, so the Court issued a warrant for his arrest. The Court also granted the motion to withdraw.

The Court appointed new counsel to represent Defendant. New counsel unsuccessfully sought a continuance and/or severance, noting the many prior delays in the case and the fact that Defendant contributed to the circumstances giving rise to his request. The case proceeded to a jury trial. At the end of the trial, the jury found Defendants guilty of all the counts against them. The Court sentenced Defendant to a prison term of 87 months for all counts.

THE APPEALS

Defendant appealed his conviction and sentence. The Court of Appeals for the Sixth Circuit affirmed this Court’s judgment in an opinion issued on August 23, 2018. Defendant appealed that decision to the United States Supreme Court, which denied a petition for writ of.

A prisoner who moves to vacate his sentence must show that the sentence was imposed in violation of the Constitution or laws of the United States, that the court was without jurisdiction to impose such a sentence, that the sentence was in excess of the maximum authorized by law, or that it is otherwise subject to collateral attack. To prevail a petitioner must demonstrate the existence of an error of constitutional magnitude which had a substantial and injurious effect or influence on the guilty plea or the jury’s verdict.

ANALYSIS

Defendant unsuccessfully argued that his first attorney, Kurt Richardson, provided ineffective assistance because he did not investigate Defendant’s case and made an untimely motion to withdraw. To the extent Defendant relies on a “language barrier” as the reason for his inability to work with Richardson, Defendant does not address Richardson’s assertions that Defendant speaks conversational English, that Defendant spoke to Richardson on at least one occasion with an interpreter available, and that Defendant failed to give Richardson any material evidence or names of witnesses that would assist his defense.

As a general rule, persons jointly indicted should be tried together because there is almost always common evidence against the joined defendants that allows for the economy of a single trial. The fact that a defendant may have a better chance at acquittal if his trial were severed does not require the judge to grant his motion: the defendant must show substantial, undue, or compelling prejudice.

Defendant did not demonstrate that severance was warranted in his case, or that he was subjected to a mistrial due to joinder of his proceedings with the other defendants.

In addition to the insurance fraud conviction the Defendant was convicted of misrepresentation on his citizenship application after the jury heard evidence that he answered “no” in response to a question in his citizenship application asking whether he had ever committed a crime or offense for which he was not arrested. He did not disclose his actions in connection with the insurance fraud scheme. The immigration official reviewing his application testified that if Defendant had disclosed his activities related to the insurance fraud scheme, that disclosure would have affected the decision on his citizenship application.

Defendant’s claim that appellate counsel was ineffective was meritless because he did not show prejudice.

CONCLUSION

The Court concluded that Defendant’s claims were meritless. Moreover, an evidentiary hearing was not required because the record of the case conclusively showed that Defendant is not entitled to relief and concluded that reasonable jurists could not find that the Court’s denial of Defendant’s claims was debatable or wrong.

ZALMA OPINION

It is time for the courts of this country to punish those who frivolously raise multiple motions and file multiple appeals that have no basis in fact or law. Monetary sanctions are inadequate and almost impossible to collect. A convicted criminal who abuses the court process should have time added to his or her sentence. I propose adding a year for each frivolous or inadequate appeal that was filed solely for the purpose of delay.


© 2019 – 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.

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.

Posted in Zalma on Insurance | Leave a comment

Happy Boxing Day Gifts for Everyone Interested in Insurance

Insurance Claims Library

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 for insurers and their claims staff to become insurance claims professionals.

“The Law of Unintended Consequences and the Tort of Bad Faith”

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

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

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

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

Available as a paperback  

Available as a Kindle book

“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 – 2nd Edition”

Newly updated and expanded, “Rescission of Insurance – 2nd Edition” provides the insurance coverage lawyer, policyholder lawyer and claims professionals with everything needed to understand and enforce the equitable remedy of rescission. Everyone involved in or with the business of insurance must understand that rescission 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.

 


© 2019 – 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.

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.

 

Posted in Zalma on Insurance | Leave a comment

Fraud Reporting Statute Immunizes Those Reporting

No Private Right of Action for Person Who Claims a Wrongful Report of Fraud

The United States Court of Appeals for the Second Circuit certified the following question to the Court of Appeals of New York:

Does New York Public Health Law [§ ] 230 (11) (b) create a private right of action for bad-faith and malicious reporting to the Office of Professional Medical Conduct?

In Dr. Robert D. Haar, M.D. v. Nationwide Mutual Fire Insurance Company, No. 81, 2019 NY Slip Op 08445, Court of Appeals of New York (November 21, 2019) Dr. Haar, an orthopedic surgeon licensed to practice medicine in New York, treated four patients who were injured in automobile accidents and insured by defendant Nationwide Mutual Fire Insurance Company. Plaintiff submitted claims to defendant in connection with each patient, and defendant either fully or partially denied each claim. Nationwide, thereafter, filed complaints with the Office of Professional Medical Conduct (OPMC) alleging insurance fraud. After an investigation, OPMC declined to impose any discipline against Dr. Haar who then sued asserting that Nationwide’s complaints to OPMC lacked a good-faith basis in violation of Public Health Law § 230 (11) (b), and interposed a separate cause of action for defamation.

Defendant removed the action to federal court and moved to dismiss the complaint, arguing that Public Health Law § 230 (11) (b) did not expressly or impliedly provide plaintiff with a right of action and that the defamation claim was time-barred. The United States District Court for the Southern District of New York granted defendant’s motion to the extent of dismissing the cause of action premised on section 230 (11) (b). The District Court subsequently concluded that plaintiff’s defamation cause of action was time-barred.

ANALYSIS

Public Health Law § 230 governs professional medical misconduct proceedings. Section 230 (11) sets forth the procedures for reporting “information . . . which reasonably appears to show that a licensee is guilty of professional misconduct,” as defined by the Education Law (Public Health Law § 230 [11] [a]). To that end, the statute requires that certain organizations and licensees like Nationwide, report suspected medical misconduct, although the statute also permits “any other person” to submit complaints to OPMC. The provision provides that any person who reports or provides information to [OPMC] in good faith, and without malice shall not be subject to an action for civil damages or other relief as the result of such report.

Absent explicit legislative direction, it is for the courts to determine, in light of the statutory provisions, particularly those relating to sanctions and enforcement, and their legislative history, and of existing common-law and statutory remedies, with which legislative familiarity is presumed, what the legislature intended.

To determine if there is a private right of action a court must determine:

  1. whether the plaintiff is one of the class for whose particular benefit the statute was enacted;
  2. whether recognition of a private right of action would promote the legislative purpose; and
  3. whether creation of such a right would be consistent with the legislative scheme.

All three factors must be satisfied before an implied private right of action will be recognized.

Beginning with the first factor, plaintiff failed to demonstrate that he falls within the class the legislature intended to benefit by enacting the statute. Subdivision 11 was subsequently added and amended, providing immunity from civil litigation for making good-faith reports to OPMC. On the face of this provision, there is no indication that the legislature intended to benefit medical professionals accused of misconduct, as opposed to persons or entities that report suspected medical misconduct. To alleviate the concern that the reporting persons or entities would be sued for making the reports required by the statute, and to increase the reports of unprofessional conduct to OPMC, section 230 (11) (b) was codified specifically to afford immunity from civil suit.

The pertinent legislative history makes clear that section 230 (11) (b) was not added to the Public Health Law to protect physicians, such as plaintiff, accused of misconduct. Rather, that provision was intended to protect the public from medical misconduct by encouraging reporting.

There is no indication that physicians accused of misconduct were the intended beneficiaries of section 230 (11) (b). The first, and perhaps most easily satisfied, prong for determining whether a statute implies a private right of action is not satisfied in this case.

Because plaintiff failed to establish the first prong of the well-settled analysis, the appellate court found it must conclude — regardless of its consideration of the other two factors — that there is no implied right of action under Public Health Law § 230 (11) (b).

Plaintiff seeks to imply a private right of action based on negative implication; he argues that the “good faith” language implicitly recognizes that bad-faith reporting is actionable.

The court rejected plaintiff’s argument here that the language of Public Health Law § 230 (11) (b) creates an implied right of action by negative implication. Moreover, common law remedies exist, thereby undercutting plaintiff’s argument that there is no other method of deterring bad-faith reporting.

The third and final factor — whether creation of such a right would be consistent with the legislative scheme also militates against recognition of an implied right of action. The legislature enacted Public Health Law § 230 (11) to encourage robust reporting. The implied right of action plaintiff seeks would diminish the effectiveness of this statutory scheme. Recognizing an implied right of action in section 230 (11) (b) could discourage mandatory reporters from complying with their statutory duties out of concern that even a good-faith report could spawn litigation under that section. This result would be antithetical to the legislature’s clear objective.

In sum, Public Health Law § 230 (11) (b) was not enacted for the benefit of persons similarly situated to plaintiff, and a private right of action is inconsistent with the legislative purpose and broader statutory scheme. Because there is no indication that the legislature intended to create a private right of action in section 230 (11) (b), the appellate court answered the certified question in the negative.

ZALMA OPINION

Insurance fraud, and fraud by medical practitioners, has increased logarithmically over the last two decades. States, like New York, recognize how expensive fraud is to the public. It created a statute requiring reports of fraud to the state and, to encourage reporting, provided the person or entity reporting, immunity for a good faith report of fraud. That statute, without question, protected Nationwide from Dr. Haar’s suit. If the doctor could prove malice he still has the right to sue under the common law but could not create a private right of action from a statute designed to do the opposite.


© 2019 – 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.

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.

 

Posted in Zalma on Insurance | Leave a comment

Delaware Supreme Court Refuses to Rule Without a Justiciable Controversy

Parties Cannot Stipulate to Obtain an Advisory Opinion

Courts are designed to solve problems. They are not designed to give advice about how a party can avoid a problem or litigation or how to get an insurance company to provide benefits already settled by the parties.

When parties settle claims against each other there is no need, or ability, to litigate further to determine what insurer is obligated to pay the amount of the settlement. In George & Lynch, Inc. v. E.J. Breneman, L.P., No. 286, 2019, Supreme Court of the State of Delaware (December 18, 2019) the parties agreed to present an issue to the Supreme Court to resolve a dispute after all issues between the parties had been resolved by settlement.

FACTS

George & Lynch, Inc. (“George & Lynch”) and E.J. Breneman, L.P. (“Breneman”) were codefendants in a personal-injury and wrongful-death action that arose out of a single-vehicle accident. In that action, which was filed in the Superior Court, the plaintiffs alleged that the accident was caused by unsafe road conditions that were the byproduct of a road-resurfacing project, of which George & Lynch was the general contractor.

George & Lynch cross-claimed for contribution and contractual indemnity against Breneman, which was one of George & Lynch’s subcontractors.

After discovery was completed and expert reports were exchanged, Breneman settled with the plaintiffs and moved for summary judgment on George & Lynch’s contractual-indemnity claim. The expert reports included an opinion from the plaintiffs’ expert that, among other things, Breneman breached its duty of care in various ways. But when Breneman settled with the plaintiffs, the plaintiffs’ expert changed his opinion, submitting a supplemental report that concluded that Breneman was without fault.

Meanwhile, George & Lynch moved for summary judgment against the plaintiff. When the Superior Court granted George & Lynch’s motion, Breneman’s summary-judgment motion on George & Lynch’s cross-claim for indemnity was rendered moot. The plaintiffs, however, appealed the judgment in George & Lynch’s favor, and the Supreme Court reversed.

On remand, the Superior Court granted Breneman’s motion for summary judgment on George & Lynch’s contractual-indemnity cross-claim. The court ruled that George & Lynch could not rely on the plaintiffs’ expert’s earlier opinion that Breneman was at fault and, since it did not have its own expert to prove its claim of fault on Breneman’s part, Breneman prevailed.

After that decision, George & Lynch also settled with the plaintiffs, leaving George & Lynch’s cross-claims against Breneman as the only remaining claims in the case.

According to the Superior Court docket, nothing else happened in the case until early June 2019, when the Superior Court approved a stipulation of dismissal.

THE ISSUE

Although the separate settlements eliminated any direct claim that EJ Breneman and George & Lynch could assert against each other, the issue of EJ Breneman’s involvement in the accident remains relevant for the collateral issue of George & Lynch’s rights as an additional insured on EJ Breneman’s insurance policy.

ANALYSIS

By virtue of the settlements the parties no longer stoond in an adversarial relationship to each other, the absence of which the Supreme Court recognized as a “primary basis for not accepting review” of an otherwise moot matter.

George & Lynch was asking for an advisory opinion. In particular, George & Lynch suggested that one alternative resolution of the appeal would be for “this Court…[to] determine that the [summary judgment] order is not appealable and therefore cannot have preclusive effect in subsequent litigation [against Breneman’s insurance carrier].”

Despite George & Lynch’s acknowledgement that the settlements had “eliminate[d] any direct claim that EJ Breneman and George & Lynch could assert against each other in this action,” Breneman counters — by all appearances against its own interests — that “[t]he issue before the Court is not moot, because it involves a cross-claim for contractual indemnity,” a claim that was not dismissed with prejudice in the Stipulation of Dismissal.

The Supreme Court refused to render an advisory opinion simply because both parties might want it to do so.

Delaware law requires, like every other jurisdiction, that a justiciable controversy exist before a court can adjudicate properly a dispute brought before it. Where the settlement process has eliminated the adversity of the parties such that a justiciable controversy no longer exists, an adjudication after settlement would result in an impermissible advisory opinion on a purely academic question.

ZALMA OPINION

Usually, when parties reach a settlement and insurance is involved the insurer pays. In this case there was an indemnity agreement that may or may not have been involved in resolving the dispute raised by the auto accident. Rather than dealing with the issue the parties settled without resolving the insurance and indemnity disputes and asked the Supreme Court to fix their error by providing an advisory opinion. The court, finding no justiciable controversy refused, since it had no option, to give an advisory opinion.


© 2019 – 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.

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.

 

Posted in Zalma on Insurance | Leave a comment

Construction Defects and Mold Claims

Books Needed by Every Claims Persona and Insured


Read about these books and others insurance claims books at http://zalma.com/blog/insurance-claims-library/

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.

 

Posted in Zalma on Insurance | Leave a comment

Subject Matter Jurisdiction Required Under New York Law

No Jurisdiction – No Judgment

In an action for declaratory relief the nominal defendant Hereford Insurance Company (hereinafter Hereford) appeals from an order of the Supreme Court, Kings County (Andrew Borrok, J.). The order, insofar as appealed from, denied the motion of tHereford Insurance Company for leave to enter a default judgment on its counterclaim for loss transfer pursuant to New York Insurance Law § 5105(a) insofar as asserted against the plaintiff Repwest Insurance Company and deemed the reply of the plaintiff Repwest Insurance Company to the counterclaim to have been served.

In Repwest Insurance Company, et al. v. Nazim Hanif, et al., Hereford Insurance Company, 2018-05309, 019 NY Slip Op 09047, Supreme Court of the State of New York Appellate Division, Second Judicial Department (December 18, 2019) the court considered the applicability of the Insurance Law to the parties.

FACTS

The plaintiff Repwest Insurance Company (hereinafter Repwest) sued seeking judgment declaring that it has no duty to provide insurance coverage for any claims arising out of a collision between a livery vehicle insured by the nominal defendant Hereford and a vehicle driven by the defendant Nazim Hanif and insured by Repwest.

The defendants Dinorah Carmen Anglero, Dario Ferrer de la Cruz, and Ramon Duarte Garcia were passengers in the livery vehicle and no-fault benefits were paid on their behalf by Hereford. Repwest alleged that there is no coverage for the subject incident because it was not an accident, but rather the result of an intentional act/fraudulent scheme. Thereafter, Hereford interposed an answer to the complaint and asserted a counterclaim against Repwest, among others, for loss transfer pursuant to Insurance Law § 5105(a).

After Repwest failed to timely reply to the counterclaim, Hereford moved for leave to enter a default judgment on its counterclaim insofar as asserted against Repwest. The Supreme Court (trial court in New York) denied Hereford’s motion and deemed Repwest’s reply to the counterclaim to have been served.

ANALYSIS

Pursuant to Insurance Law § 5105(b), “[t]he sole remedy of any insurer or compensation provider to recover on a claim arising pursuant to subsection (a) hereof, shall be the submission of the controversy to mandatory arbitration pursuant to procedures promulgated or approved by the superintendent.”

Contrary to Hereford’s contention, since its counterclaim is for loss transfer pursuant to section 5105(a), the counterclaim is subject to mandatory arbitration and the Supreme Court had no subject matter jurisdiction over the counterclaim. Repwest’s complaint and its disclaimer of coverage for the subject incident do not dictate a different result.

Although Repwest did not seek dismissal of the counterclaim in the Supreme Court, a court’s lack of subject matter jurisdiction is not waivable, but may be raised at any stage of the action, and the court may, ex mero motu [on its own motion], at any time, when its attention is called to the facts, refuse to proceed further and dismiss the action.

Since the court lacked subject matter jurisdiction over Hereford’s counterclaim, the counterclaim should have been dismissed.

The order was reversed insofar as appealed from, on the law, with costs to the plaintiff Repwest Insurance Company, and the counterclaim of the nominal defendant Hereford Insurance Company is dismissed for lack of subject matter jurisdiction.

ZALMA OPINION

It is expected that an insurance company who retains competent counsel understand the statutory law of the state where an insurance claim is presented. After paying a claim, other than entering into an arbitration as required by statute, the insurer, Hereford, attempted to get around the statute and obtain a default judgment. The appellate court refused to honor the attempt and, on its own motion, found it had no subject matter jurisdiction. I often ask insurers to read the full policy. I must now add: follow the law of the jurisdiction.


© 2019 – 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.

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.

Posted in Zalma on Insurance | Leave a comment

Red Flags of Insurance Fraud

Indicators that help Raise a Suspicion of Insurance Fraud

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 for insurers and their claims staff to become insurance claims professionals. 

This article was adapted from my book, Insurance Fraud, in two volumes available at Amazon.com.  Volume One available as a Kindle book and a paperback. Volume Two Available as a Kindle book and a paperback

Suspicious claims have common attributes. Insurers and their anti-fraud organizations have collated the common attributes into lists of indicators or red flags of fraud. The lists were created as training aids and to be used to determine whether further investigation is required to determine if a claim is legitimate or false and fraudulent. Continually growing, these lists are known as the “red flags” or “indicators” of fraud. There are many different categories, ranging from those associated with the claim itself or with insureds to indicators of specific types of fraud, such as bodily injury fraud or arson for profit.

If, when assessing a claim, three or more red flags are found the need for further investigation should be considered and evaluated by the claims person, a supervisor and the insurer’s special investigative unit. The existence of red flags does not mean a fraud has occurred. Red flags are only a signal to the adjuster to investigate further so that the suspicion may be either removed or confirmed. It is not any single indicator that alerts the adjuster to the possibility of a fraudulent claim but a combination of the red flag or red flags discovered coupled with the results of the thorough claims investigation.

What to do When You Find Multiple Red Flags

Although the existence of multiple red flags should trigger an investigation, failure to investigate has been held to be reasonable as long as there are no patent inaccuracies or actual knowledge of false representations. In a Missouri case, the following “red flags” were found to be a reason for an insurer to suspect arson for profit:

  • more than one mortgage,
  • late payments,
  • divorce,
  • prior claims,
  • multiple claims,
  • problems affecting title to the property,
  • over-insurance,
  • an increase in insurance coverage right before the claim,
  • recent cancellations of insurance held with prior insurers,
  • liens,
  • threats of foreclosure on the property,
  • lawsuits, and
  • recent job transfers. [O’Donnell v. Allstate Insurance Co., 734 A.2d 901, 1999 PA Super 161 (Pa. Super., 1999); and LeForge v. Nationwide Mut. Fire Ins. Co., 82 Ohio App. 3d 692 (Ohio App., 1992)].

As the Nebraska Department of Insurance states in its booklet, Fraud Detection Hints, it is “important to remember that the … possible ‘red flags’ [indicate] that there may be some evidence consistent with an insurance fraud scheme. Any one or two of these by themselves may not raise your suspicions; however, when you have several of these hints (red flags) present or a pattern begins to emerge, you should investigate further or forward your suspicion to the Insurance Fraud Prevention Division.”

Red Flags Common to a Claim

An adjuster should consider further investigation if a claim occurs:

  • shortly after the issuance of the policy;
  • shortly after the limits of the policy are increased;
  • in an insured’s first insurance;
  • shortly before the expiration of a policy;
  • within days of a notice of cancellation being served; or
  • on a policy acquired from an agent far from the insured’s home or business.’

Red Flags Connected with the Insured or Claimant

Adjusters evaluate the manner in which the insured makes a claim. A few red flags that may raise suspicions include some of the following when the insured or claimant:

  1. retains or is represented by counsel on the day of the loss;
  2. does not want to retain counsel;
  3. is represented by a public adjuster on the day of the loss;
  4. wants a settlement approved quickly;
  5. does not want the claim to go to a supervisor, regional office, or claims committee for authority;
  6. is exceedingly cooperative and undemanding;
  7. is exceedingly demanding and threatens a bad faith suit from the date of first contact;
  8. demands a proof of loss form at the initial meeting;
  9. is familiar with insurance claims terminology;
  10. asks for the claims manager by name;
  11. is familiar with the adjuster’s authority limits, and wants to settle for a sum within those limits;
  12. handles all business in person (thus avoiding mail and potential
  13. prosecution for violation of federal mail fraud statutes);
  14. provides an address that is a post office box, mail drop, or hotel; or
  15. reduces the demand for settlement when it is suggested by the adjuster that he or she file suit.

The adjuster or investigator should also pay attention to the insured’s or claimant’s history and background, including their financial situation. Once again, red flags indicate that further investigation may be needed if the insured:

  • has a history of multiple, similar claims;
  • has a history of more than two lawsuits;
  • is recently separated or divorced (indicating a possible financial strain);
  • was recently laid off a job, has a spotty work history, or extended period of unemployment; or
  • has a history of gambling, alcohol, or drug abuse.

The National Insurance Crime Bureau (NICB), individual state Fraud Bureaus, and other agencies publish similar lists of red flags that would lead an investigator to suspect fraud and begin a more thorough investigation.

Even if three or more red flags or indicators exist, that does not mean there is, in fact, a fraudulent claim. It only means that further investigation is required.

Red Flags Concerning the Insured

  • The insured has lived at his current address less than six months.
  • The insured has been with current employer less than six months.
  • The insured has a previous history of losses.
  • The insured cancels scheduled appointments with the adjuster for statements and/or Examination Under Oath.
  • The insured is employed with an insurer.
  • The insured is unusually aggressive and pressures for a quick settlement.
  • The insured does not have a telephone.
  • The insured’s telephone number is only a mobile cellular phone.
  • The insured is difficult to contact.
  • The insured claims to be self-employed but is vague about the business, and his responsibilities.
  • The insured is very knowledgeable about claims process and Insurance terminology.
  • The insured offers inducement for a quick settlement.
  • The insured is unsolicited new, walk-in business, not referred by an existing policyholder.
  • The insured’s address is not consistent with his employment or income.
  • The insured only gives a post office box as his address. The insured is unemployed or in a transient occupation.
  • The insured seeks a copy of the policy before agreeing to insure.
  • The insured is vague about loss.
  • The insured’s report of loss is inconsistent.
  • The insured has a selective memory.
  • The insured has financial difficulties.

Red Flags Relating to Claimant

  • Insured is eager to accept blame for an accident.
  • Claimant retains lawyer immediately after the incident is reported.
  • Claimant and insured are from the same family.
  • Claimant and insured have the same address.
  • One or more parties present damages that are inconsistent with the facts of the loss.
  • Claimant’s lost earnings statement is handwritten or typed on blank paper rather than business letterhead.
  • Claimant has multiple insurance claims.
  • Several or all claimants treated at same clinic on same day.
  • Vehicle was purchased for cash.
  • Claimant has no proof of ownership of vehicle.
  • Vehicle recovered surgically stripped.
  • Claimant and insured know each other.

Red Flags Relating to Professionals

  1. Attorney reports claim to insurance company.
  2. Attorney is known as a lawyer who handles suspicious claims.
  3. Attorney’s office is run by an administrator.
  4. Attorney is rarely or never seen at the office.
  5. Attorney lien or representation letter dated the day incident was reported.
  6. High incidence of claims from attorney who recently passed the bar exam.
  7. Attorney and body shop frequently appear linked.
  8. All vehicles in reported loss are taken to the same body shop.
  9. Clinic may have continued billing or treatment irregularities.
  10. Clinic billing is done by an outside service.
  11. Contractor has inadequate equipment to perform job.
  12. Contractor arrives at loss site without being solicited.
  13. Contractor offers cash incentives to get the job.
  14. Contractor is not bonded or insured.
  15. Clinic treats several or all of the claimants on same day.
  16. Physician immediately refers claimant for a wide variety of tests not related to original claim.

Red Flags Relating to Facts of Loss

  1. Witness version does not agree with claim as presented.
  2. Presence of an overly enthusiastic witness at the scene of incident.
  3. No police report.
  4. All injuries are subjective.
  5. CPT codes appear inflated or “up-coded”.
  6. Losses occur just after coverage takes effect.
  7. Losses occur just before coverage ceases.
  8. Losses occur just after coverage limits have been increased.
  9. Losses include a large amount of cash.
  10. Commercial losses include old or non-saleable inventory.
  11. Building is in deteriorating condition.
  12. Building is located in a deteriorating neighborhood.
  13. Fire scene investigation suggest property or contents were heavily over-insured.
  14. Fire scene investigation reveals no remains of non-combustible items of scheduled property.
  15. Fire scene investigation reveals no remains of expensive items used to justify an increase of limits.
  16. Fire occurs at night.
  17. Fire occurs after 11 p.m.
  18. Commercial fire occurs on holiday, weekend or when business is closed.
  19. Fire alarm fails to work.
  20. Sprinkler system fails to work at time of loss.
  21. Insured over-documents losses.

Multiple Red Flags Require Referral to the SIU

Once an adjuster identifies a possible fraudulent claim, it is often passed on to a Special Investigation Unit (SIU). Most states require insurers, by statute, to maintain an SIU. On average, 3% to 10% of claims should be referred to the insurer’s SIU for further investigation. An industry study conducted during the mid-1980s revealed that by 1983, 47 of 399 insurers had SIUs in operation a number that has grown tremendously up to today where it approaches 100%.

Although this figure represented only 10% of the companies participating in the survey, the 47 companies with SIUs accounted for over 50% of the industry’s premium volume at the time. Today, as a result of statutory compulsion, almost every insurer has an SIU. An effective SIU has a major return on investment and gives a competitive edge to the insurer with an effective SIU over the insurer with no SIU or an ineffective SIU.


© 2019 – 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.

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.

 

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The Insurance Claims Library for Anyone Interested in Claims

Insurance Fraud & The Compact Books on Adjusting Property or Liability Claims

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

“Insurance Fraud – Volume I & Volume II

In Two Volumes

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

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

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

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

“The Compact Book of Adjusting Property Insurance Claims – Second Edition”

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

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

Available as a Kindle book.

Available as a paperback.

“The Compact Book on Adjusting Liability Claims, Second Edition”

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.

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Settlement is Favored by all Courts

Insurer Can’t Keep Settlement Secret but May Keep Amount Secret

Insurance companies often settle lawsuits even when they are sure they owe nothing to save the expense of the litigation and the effect on its reputation. To protect their good reputation insurers will often seek permission from a court to keep the settlement secret from everyone but the litigants.

In Village on James Street Association, a Washington non-profit corporation v. Oregon Mutual Insurance Company, an Oregon Corporation; Doe Insurance Companies 1-10, Case No. C18-1433-JCC, United States District Court Western District of Washington at Seattle (December 10, 2019) Oregon Mutual asked the USDC to approve a settlement reached after medication and then seal the motion.

BACKGROUND

Plaintiff is a nonprofit corporation with the duty to maintain the common elements and any limited common elements of the Village on James Street condominium complex.  In March 2018, an investigation uncovered hidden damage at the Village on James Street condominium complex. In May 2018, Plaintiff tendered claims to Defendant.

After the suit was filed  the parties participated in mediation and reached an agreement to settle. The parties jointly moved for an order approving the settlement and barring contribution claims. Oregon Mutual individually moved to file under seal two exhibits concerning the parties’ settlement.

DISCUSSION

A party may file a document under seal if a statute, rule, or prior court order expressly authorizes the party to file the document under seal; or if the party files a motion to seal the motion at the same time the party files the sealed document.. The party seeking to maintain documents under seal bears the burden of showing specific prejudice or harm that will result via a particularized showing to each individual document.

Motion to Seal

Defendant argued that the terms and conditions of the parties’ settlement are confidential. The existence of a confidentiality provision, without more, however, does not constitute good cause, let alone a compelling reason, to seal.

Since Oregon Mutual failed to identify a statute, rule, or prior court order expressly authorizing it to file the exhibits at issue under seal, and it did not carry its burden of demonstrating that the exhibits should be sealed under either the compelling reason standard or the good cause standard.

Motion to Approve Settlement and Bar Contribution Claims

A court has the equitable authority to enter an order precluding subsequent claims for contribution and indemnity by non-settling parties. Contribution bar orders are consistent with the public policy in Washington of encouraging settlement. In determining whether a contemplated contribution bar is appropriate, the court must decide if the settlement is reasonable and the interests of non-settling defendants are protected.

The parties agree that the settlement is reasonable. Finding no evidence of bad faith, collusion, or fraud regarding the settlement negotiations or the ultimate settlement agreement the court approved the settlement.

Interests of Non-Settling Defendants

There is no single formula for determining whether non-settling parties’ rights are protected when a bar order is entered. Since Oregon Mutual was the only defendant in this lawsuit the court concluded that the parties’ settlement agreement does not affect any non-settling defendant’s rights to its existing claims and defenses, and thus non-settling defenses may be entirely excused from liability.Therefore, the parties’ proposed settlement adequately protects the interests of non-settling defendants.

Oregon Mutual’s motion to seal was denied and the remaining motions were granted. The court also ordered that any claims, under any theory or combination of theories, including but not limited to equitable contribution or subrogation, that may be brought by any non-settling insurer of Plaintiff Village on James Street Association arising out of Plaintiff Village on James Street Association’s property insurance claim for hidden damages at the 6711 239th Place location to Defendant Oregon Mutual Insurance Company were barred.

ZALMA OPINION

Simple and to the point the court approved the settlement, refused to seal the settlement motion but allowed the insurer to delete the amount of the settlement. The court, in a Solomon-like decision, protected the settling insurer and barred any suits by other insurers who might be obligated to indemnify the plaintiff.


© 2019 – 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.

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.

 

Posted in Zalma on Insurance | Leave a comment