Zalma’s Insurance Fraud Letter – May 15, 2021

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ZIFL – May 15, 2021

The May 15, 2021 issue of Zalma’s Insurance Fraud Letter Includes articles on the following subjects and a video at https://rumble.com/vh1fdj-zalmas-insurance-fraud-letter-may-15-2021.html or at https://youtu.be/BJuH9MY3ac0

EUO Is A Condition Precedent

People who commit insurance fraud tend to run from serious insurers who deny claims for fraud, misrepresentation, concealment or failure to fulfill conditions precedent. State Farm filed an unopposed motion for summary judgment against defendants All Med Merchandise and Trading, Inc., Haar Orthopedics & Sports Medicine, P.C., Park Avenue Orthopedics, P.C., and Anthony Vigorito, D.C., probably because the defendants knew they had no case and placed their efforts to collect from fraud by going against insurers who would rather pay than fight.

Insurance Fraud Statutes

Insurance fraud laws have been enacted in 47 of the 50 states, the District of Columbia and the United Kingdom. The statutes were not written to give an unfair advantage to insurers, as some members of the plaintiffs’ bar claim, but to protect the insurance buying public against the enormous disadvantage insurers meet when faced with a potentially fraudulent claim.

Unlike other victims of crimes, insurers are required by most of the statutes, to staff Special Investigative Units (SIU) to investigate and work to defeat insurance fraud attempts.

Ethics and the Public Insurance Adjuster

Some public insurers, acting alone or with the assistance of unscrupulous lawyers, violated the standards set by NAPIA and the covenant of good faith and fair dealing.

Health Insurance Fraud Convictions

Sentenced to Prison for Defrauding Medicaid Program Out of Hundreds of Thousands of Dollars – Folashade Adufe Horne, 52, of Laurel, Maryland, was sentenced May 12, 2021 to 13 months in prison for defrauding the D.C. Medicaid program out of more than $370,000. Plus many more convictions.

Other Insurance Fraud Convictions

Former Madera Insurance Agent Convicted for Felony Grand Theft Because she Embezzled over $20,000 of consumers’ insurance payments

Wendy Judd, 47, of Madera, a former insurance agent pleaded guilty to felony grand theft after embezzling over $20,000 of insurance premium payments from consumers. Plus many more convictions.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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A Video About the Adjustment of a Commercial Property Claim

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Commercial Property Claims Require Experienced and Qualified Adjusters

See the full video at https://rumble.com/vgze7v-adjustment-of-a-commercial-property-claim.html  and at https://youtu.be/A28popOyoVw

The adjustment of a commercial loss is performed in the same manner as any other property loss. The difference is one of tone, extent of loss and professionalism of the insured, rather than substance.

Adjusters who usually deal with a business entity, and its officers or employees, rather than an individual, find claims handling is often, but not necessarily always, easier.

The experienced adjuster who deals with commercial claims usually has knowledge of the business and the people who operate the business. Some insurers even assign a single adjuster to a major commercial insured to handle all claims presented by the commercial insured. Familiarity, and a good working relationship over a period of months or years, benefits both the insured and the insurer.

A fire can be devastating for a business if the business is not rapidly put back to work after the fire is extinguished. The adjuster must recognize this fact and act quickly to complete a fair and thorough investigation.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

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Win Some – Lose Some – No Harm No Foul

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Contract Limiting Exposure of Fiduciary Partially Enforced

In Thomas John, etc. v. George Varughese, etc., 2017-04162, 2017-05352, 2021 NY Slip Op 03026, Supreme Court Of The State Of New York Appellate Division, Second Judicial Department (May 12, 2021) the plaintiff appealed a judgment upon the decision made after a nonjury trial, in favor of the defendant and against the plaintiff dismissing the complaint.

FACTS

In April 2015, the plaintiff on behalf of Dutchess Gardens Realty, LLC (hereinafter the company), commenced a shareholders’ derivative action against the defendant, George Varughese, the then managing member of the company. The defendant had begun serving in that capacity in late 2009. The plaintiff alleged that the defendant engaged in certain improper conduct to the detriment of the company. After a nonjury trial, the Supreme Court, dismissed the complaint.

ANALYSIS

The elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct.

The company’s operating agreement contained a provision exculpating a managing member from liability for breach of fiduciary duty, except as to actions or omissions that were “in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled.” The defendant may be held liable only for an intentional or bad faith breach of fiduciary duty, or an act from which he personally gained a financial profit or other advantage to which he was not legally entitled.

The trial evidence showed that the defendant intentionally breached a fiduciary duty to the company by transferring the sum of $50,000 from the company’s funds to another entity in which he had an interest, without authority and without any benefit to the company. The defendant’s use of those funds for his own attorney’s fees was not authorized by the company’s operating agreement.

However, the remaining alleged actions of the defendant did not rise to the level of an intentional or willful breach of fiduciary duty, nor an intentional waste of the company’s assets. The plaintiff failed to establish that the defendant overpaid himself for professional services or overpaid a property manager, or that he otherwise breached a fiduciary duty to the company.

In addition, the plaintiff failed to establish any acts of actionable misrepresentation. To prevail on a cause of action for fraudulent misrepresentation, a plaintiff must allege a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury. Liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified.

In light of the operative exculpatory clause in the company’s operating agreement, the defendant may be held liable only for an intentional act of misrepresentation or concealment. The plaintiff alleged that the defendant failed to disclose certain information regarding the lack of insurance coverage after a 2011 fire, and failed to timely disclose an action to foreclose a mortgage on real property owned by the company. The plaintiff also alleged that the defendant failed to timely disclose certain financial information about the company. Because the plaintiff did not prove that any such actions induced reasonable reliance or resulted in damage to the company, Plaintiff failed to establish the elements of these causes of action.

Lastly, the cause of action alleging gross negligence, insofar as based on a 2011 fire and the lapse in insurance coverage at that time, was untimely asserted. Contrary to the plaintiff’s contention, the defendant properly raises the statute of limitations as an alternative ground for affirmance.

The plaintiff failed to establish that any other alleged acts of the defendant constituted gross negligence, as the evidence did not show that the defendant engaged in intentional wrongdoing, or conduct that evinced a reckless indifference to the rights of others.

CONCLUSION

The judgment was modified, on the law and the facts, by deleting the provision thereof dismissing the second cause of action, which alleged breach of fiduciary duty, and substituting therefor a provision awarding judgment in favor of the plaintiff as to that cause of action in the principal sum of $50,000; as so modified, the judgment was affirmed insofar as appealed from.

ZALMA OPINION

Failure to obtain insurance by a fiduciary of a property owning LLC could be actionable except where there is no damage to the LLC. The defendant was lucky that his failure to provide insurance coverage protecting the property resulted in no harm to the LLC. However, using the LLC’s money to pay his personal attorney, was a clear breach of the fiduciary duty and the appellate division reversed that part of the judgment and ordered the defendant to pay what he misappropriated.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

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A Video Describing Some Types of Insurance Fraud

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Types of First Party Property Fraud

See the full video at https://rumble.com/vgxehx-a-video-describing-some-types-of-insurance-fraud.html and at https://youtu.be/tFb93xdIr6w

Every first-party property adjuster will face in his or her career attempts to defraud the insurer for whom the adjuster works. It is necessary that the adjuster is aware of each type of property insurance fraud he or she may encounter. Some, but surely not all, fraud types follow:

Arson for Profit

Arson is the intentional burning of property. It no longer is limited to specific types of property. Although perhaps the most dangerous of all methods of insurance fraud, people continue to attempt insurance fraud by burning their homes, vehicles, and business structures.

The Staged Theft

The staged or fake residential theft where the insured reports the theft of property from a residence or business when none actually occurred. In U.S. v. Tam, 240 F.3d 797, 2001 Daily Journal D.A.R. 885, three defendants were convicted of conspiracy to commit mail fraud and to transport stolen cars in foreign commerce, mail fraud, and transporting stolen cars in foreign commerce, and two of them were also convicted of conspiracy to launder money, following a jury trial. The appellate court concluded evidence was sufficient to support one defendant’s convictions.

Staged Water Damage or Mold Claim

Where the insured intentionally promotes damage by wetting down the residence or business property with a hose or disconnecting a plumbing fixture to generate water damage and encourage mold growth.

A staged loss, regardless of the type, is fraud. Even if no claim is filed an insured can be accused of attempted fraud and face criminal penalties. For example, in a New York case, a man gave his car keys to a third party who was to sell or otherwise dispose of the car. The insured was told by the third party to file a fraudulent claim against his own policy and claim that the car was stolen. After reporting the theft, the insured became frightened and did not move forward with the claim.

Post-Dating a Loss

This fraud technique involves a loss at a time when an individual has no insurance or inadequate insurance.

Following the loss, the individual applies for insurance, or increases the limits of existing coverage, so he or she has sufficient insurance to cover the loss. After a period of time (usually several weeks), a fraudulent claim is submitted for a loss reported to have happened after the new policy came into effect.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Murderer of Four of Her Children by Arson Avoids Death Penalty

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A Case of Evil – But Death Penalty Reversed

This is not an insurance case although the damage caused by Sandi Dawn Nieves would have resulted in a fire insurance claim. This is a case of premeditated murder by a woman who intentionally killed four of her children and attempted – but failed – to kill the fifth. The California Supreme Court, in The People v. Sandi Dawn Nieves, S092410, Supreme Court Of California (May 3, 2021) spent more than 180 pages to conclude that her conviction should stand but reversed the finding of the jury that she should be put to death.

A jury convicted Sandi Dawn Nieves of the first degree murder of her daughters Nikolet Amber Nieves, Rashel Hollie Nieves, Kristl Dawn Folden, and Jaqlene Marie Folden, attempted murder of her son, and arson. The jury found true the special circumstance allegations that defendant committed multiple murders, and that each murder was committed while lying in wait and while engaged in the crime of arson. Following the penalty phase of trial, the jury returned a verdict of death. The trial court denied defendant’s motion to modify the death penalty verdict and her motion for a new trial and sentenced her to death. This appeal is automatic.

BACKGROUND

Defendant called 911 to report a fire at her home in early July 1998. When paramedics arrived, the fire had been out for some time and defendant was covered in soot and sitting in the living room with her 14-year-old son F.D. Defendant’s four daughters, ages 12, 11, 7, and 5, were lying on sleeping bags on the kitchen floor and had all died of smoke inhalation. The oven was open with burned items inside and gasoline had been poured and lit in the hallway and bedrooms.

Defendant sent a note “Now you don’t have to support any of us! FUCK YOU you are scum!” Defendant’s son F.D. testified that on the night of the fire defendant declared they would have a “slumber party” in the kitchen.

DISCUSSION

Prospective jurors are disqualified from serving on a capital jury when their views about capital punishment would prevent or substantially impair the performance of their duties in accordance with their instructions and oath.

Here, the prospective juror’s responses to adequate written questions were not ambiguous and the questionnaire twice instructed him to consider the nature of the charged crimes when answering. The trial court did not abuse its discretion by declining to repeat questions in oral voir dire that had already been answered.

Guilt Phase Issues

The trial court struck a portion of testimony by defense expert Del Winter, a retired fire investigator. Winter testified that the fire at defendant’s house was set in several places and that a very small amount of gasoline was used. He found it odd that the fire was set where it was not likely to cause significant damage and the gas can was put back in its place after use. He concluded that “the fire didn’t make a lot of sense.” Winter could not recall a similar type of fire, stating, “This is pretty unusual.” Addressing scorched items in the oven, Winter testified that “[i]t’s just like the rest of this case. It just doesn’t make any sense as far as logic.”

At the conclusion of his testimony, Winter identified several classifications of arson, such as insurance fraud and crime cover-up and a category he called “psycho fires,” in which the motive for the fire is obscure. Although Winter was allowed to opine over objection that defendant’s fire fell into the “psycho” category, the next day the trial court revisited the ruling and struck the testimony.

Arson-Murder Special Circumstance

The requirement of an independent felonious purpose applies to felony-murder special-circumstance findings. This subdivision authorizes a special circumstance finding when the murder was committed while the defendant was engaged in the commission of or the attempted commission of various other specified felonies.

There was substantial evidence from which the jury could have concluded that defendant’s purpose for the arson apart from the murder was suicide. After lighting gasoline throughout the house, defendant lay down with her children and stayed with them while the fire and smoke overwhelmed them; at one point when he regained consciousness, defendant’s son saw that she was unconscious on the floor with his sisters. In her testimony, defendant acknowledged that she had contemplated suicide most of her life.

Because killing oneself is a purpose separate from killing one’s victims, the Supreme Court concluded that the evidence is sufficient to establish that defendant committed arson with independent, albeit concurrent, goals of killing herself and killing her children.

The Supreme Court reversed the death sentence and affirmed the judgment in all other respects.

ZALMA OPINION

Although Ms. Nieves had no intention to defraud her insurer she provided evidence that any arson, including an arson-for-profit, is a dangerous and evil proceeding where people die or are seriously injured. In this case the fire intentionally set and accelerated by Ms. Nieves killed four of her children and seriously injured a fifth. I don’t understand the reversal of the death penalty since Ms. Nieves fit all the required categories but can hope she will never leave prison. The case did not deserve a more than 180 page opinion. It could have been resolved without giving detailed analysis of each claim of error.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

 

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A Video About Care Needed to Elect Rescission

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Rescission is an Important Remedy to Avoid Fraud

See the full video at https://rumble.com/vgvbcz-a-video-about-care-needed-to-elect-rescission.html?mref=6zof&mrefc=2 and at https://youtu.be/w4svt_3v-64

Never Rescind a Policy Without a Thorough Investigation and Advice of Counsel

Insurers must use the rescission remedy with care. Insurers should never assume that the promise to pay indemnity to the insured under a policy of insurance can, with impunity, be broken by advising the insured that the insurer has rescinded the policy.

Rescission without sufficient evidence is wrongful. Rescission without the advice of competent counsel is a tactic fraught with peril.  Rescission without a thorough investigation is dangerous. Where no valid ground for rescission exists, the threat or attempt to seek such relief, may constitute a breach of the covenant of good faith and fair dealing which is implied in the policy and expose the insurer to tort damages for that breach, including punitive damages.  One plaintiffs’ lawyer became wealthy when he learned that claims people were given a rubber stamp that said “RESCISSION” and had no idea what it was. He would take the claims person’s deposition and ask them to spell the word. When the claims person failed his bad faith case was established. When they spelled the word correctly, he would ask the adjuster to state the elements necessary to effect a rescission. Almost none could answer.

California, with a Draconian rescission law, still make it clear that if an insurer elects rescission without sufficient evidence it will bring the wrath of the courts down on it and will be the basis for allegations, easily proven, of extra-contractual torts. [ Imperial Casualty & Indemnity Co. v. Sogomonian (1988) 198 Cal.App.3d 169, 184, 243 Cal. Rptr. 639.]

If sufficient evidence exists, the rescission remedy will deprive the insured or the insurer of all rights under the policy. The court will conclude that the contract never existed and neither party has any right under the contract.

 


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

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Lie on Application for Life Insurance Voids Coverage

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Rescission Available for Misrepresentation of Material Facts

Insurance requires that neither party to the contract of insurance do anything to deprive the other of the rights of either to the benefits of the policy. Each must, therefore, treat the other with the utmost good faith. In Edith Darby v. Primerica Life Insurance Company And Ashton Lucian King, Civil Action No. 20-1723 Section “R” (1), United States District Court Eastern District Of Louisiana (May 4, 2021) the insurer moved for summary judgment because the insured and the decedent lied in the application for life insurance.

BACKGROUND

On February 4, 2019, Darby, as policy owner, and her son, Wilbert Bias, as insured, applied for life insurance with Primerica. In completing the application, Bias answered “no” to the following two questions: “[w]ithin the past 10 years has any person named in this application been treated for or diagnosed by a member of the medical profession with: . . . [a] mental or nervous disorder?  [w]ithin the past 10 years, has any person named in this application: . . . used illegal or illegally obtained drugs (including prescription drugs) or been convicted of drug or alcohol related charges?

Both Bias and Darby signed the policy application below the following in bold-face type: “The approval of insurance for the proposed insured(s) is based on the representations made regarding the use of tobacco or nicotine, responses to medical questions and other application information. False representations will result in a denial of coverage in a claims investigation and may be considered insurance fraud.

Further, Bias and Darby acknowledged that “coverage may be rendered void if [Primerica] determines that any information in the application related to such coverage is false, incomplete or incorrect.”

After the policy came into force, Bias died before the expiration of the two year contestability period.  Darby submitted proof of Bias’s death to Primerica in an attempt to collect on the policy. Because Bias died during the two-year contestability period set forth in the policy, Primerica contends that it initiated a routine investigation. In the course of that investigation, Primerica contends that it discovered Bias was diagnosed with and treated for a mental or nervous disorder and that he was a regular illegal drug user.

In light of the information it discovered in its investigation, Primerica asserts that it denied Darby’s claim, rescinded its policy, and refunded the premiums paid for the policy. Darby sued asserting a breach-of-contract claim and seeking damages. Primerica moved for summary judgment, arguing that Bias’s misrepresentations on the insurance application preclude the success of Darby’s breach-of-contract claim.

DISCUSSION

Primerica supports its motion for summary judgment by citing to uncertified medical records. The medical records being unsworn or uncertified, in itself, does not bar their consideration for purposes of a summary judgment motion in federal court.

Primerica’s Motion

Under Louisiana Revised Statute Section 22:860, an insurer is not liable for the death benefit provided by its policy if the insurer can show that the insured made misrepresentations on his application for insurance.

False Statements Mental or Nervous Disorder & Illegal Drug Use

The Fifth Circuit has found that the ordinary meaning of “mental or nervous disorder” includes conditions like depression. A medical record from New Orleans East Behavioral Health Center indicates that Bias reported “panic attacks” as well as “depressed mood” to his health care providers. The same document revealed that Bias was prescribed “Zoloft titration to 100mg daily for anxiety and mood,” as well as “Hydroxyzine” for anxiety. In light of the uncontroverted evidence provided by Primerica, the Court found that there is no genuine issue of material fact as to whether Bias made a false statement by answering “no” to the question of whether he had been diagnosed with or treated for a “mental or nervous disorder” within the past ten years.

In multiple places, the medical records reflected that Bias used cannabis regularly.   Primerica, therefore, established that there is no genuine issue of material fact as to whether Bias made a false statement by answering “no” to the question of whether he had used illegal drugs in the past ten years before completing his application.

Intent to Deceive

Next, the Court considered whether Bias acted with the “intent to deceive” when he made the above representations. The intent to deceive must be determined from surrounding circumstances indicating the [1] insured’s knowledge of the falsity of the representations and [2] his recognition of the materiality of his misrepresentations, or from circumstances which create a reasonable assumption that the insured recognized the materiality.

As to whether Bias knew that the misrepresentations were material, the policy application communicates the fact in bold print. Bias and Darby both signed the application just beneath this language. There is no indication that Bias disclosed his drug use or medical problems elsewhere on his application.

Materiality

To prove materiality Primerica’s Underwriter testified that had Primerica knew of the Decedent’s mental health treatment and his habitual illegal drug use at the time of the Application, it would not have issued the Policy.

Plaintiff has introduced no evidence tending to show that the misstatements were immaterial regarding defendant’s risk assumption. Accordingly, the Court concluded that no issue of material fact exists as to whether Bias’s misrepresentations materially affected the risk assumed by Primerica. Therefore, Primerica’s motion for summary judgment was granted.

ZALMA OPINION

Rescission is an ancient equitable remedy that exists so that no one may profit from fraud or misrepresentation or concealment of material facts. Here, the insured and the decedent lied on the application for insurance and it was established that the insurer would never have been issued on the life of Bias because of his drug use and mental disorders. Equity – fairness – required the court to affirm the rescission of the policy.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Mold Myths

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Insurance Claims and Mold Reality

See the full video at https://rumble.com/vgta21-mold-myths.html and at https://youtu.be/EwII0VakWeE

Get Rich Quick Thanks to Mold

Although there have been successful lawsuits, the days of multi-million dollar verdicts in insurance mold claims are probably disappearing.

As for the get-rich-quick mold remediation companies, they are finding that they must give real service or they will soon be visiting the bankruptcy court.

“Killer Mold” Exists

Despite alarmist headlines that pronounce “Black mold can kill you!” medical research has not been able to determine what amount of exposure to “black mold,” if any, is toxic to a normally healthy individual. [Article in the IEQ Review entitled “Indoor Exposure To Molds And Allergic Sensitization”] Nonetheless, there are several toxic and pathogenic species of mold that can have a severe acute or chronic effect on people, especially those whose immune systems are compromised.

Mold Can Be Killed with Bleach Alone

Although a 10% bleach solution is, in some cases, an effective means of cleaning up mold, it is not a solution. It is more important to determine why the mold is there in the first place. If the moisture and warm temperatures that facilitate the growth are not remedied, mold will return no matter how much bleach is applied.

The Existence of Mold Means There Is a Problem

Mold exists everywhere. It is an important component of the natural scheme of things. Once a baseline is established for “normal” quantities of mold, the property owner can be certain that there is no problem until the normal quantities are exceeded. Unfortunately, most self-proclaimed experts in the field have yet to agree on what is “normal.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

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EUO is a Condition Precedent

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Fail to Appear for, or Sign and Return, EUO Breaches Material Condition

People who commit insurance fraud tend to run from serious insurers who deny claims for fraud, misrepresentation, concealment or failure to fulfill conditions precedent. State Farm filed an unopposed motion for summary judgment against defendants All Med Merchandise and Trading, Inc., Haar Orthopedics & Sports Medicine, P.C., Park Avenue Orthopedics, P.C., and Anthony Vigorito, D.C., probably because the defendants knew they had no case and placed their efforts to collect from fraud by going against insurers who would rather pay than fight.

In State Farm Mutual Automobile Insurance Company v. Advantage Med Innovations, Inc., Ake Services,  Inc.,All City Family Healthcare Center, Inc.,Allmed Merchandise And Trading, Inc.,Apt Physical Therapy, et. al, Index No. 157328/2019, 2021 NY Slip Op 31344(U), Supreme Court Of The State Of New York New York County Part IAS Motion 46 (April 21, 2021) the trial court was asked to rule on State Farm’s Motion for Summary Judgment claiming fraud by the insured.

FACTS FOR MOTION FOR SUMMARY JUDGMENT

State Farm sought a declaration that it had no duty to provide coverage or make a payment of claims for no-fault benefits made by or on assignment of Peter S. Rosario, the insured party, Cheyenne Griffin, the driver, and Shreick Hoffman and Omar Osborne, passengers in the vehicle. The no-fault claims sought to be nullified arise out of a two-vehicle collision that occurred on October 28, 2018 at approximately 9:00 p.m. on Pennsylvania Avenue and Stanley Avenue in Brooklyn, New York.

State Farm’s motion against All Med Merchandise and Trading, Inc., Haar Orthopaedics and Sports Medicine, P.C., Park Avenue Orthopaedics, P.C., and Anthony Vigorito, D.C. was based on an intentional act and that Griffin, Hoffman and Osborne’s injuries did not arise from the incident, that Hoffman failed to appear for his examination under oath, and that Griffin and Osborne failed to return subscribed copies of their examination under oath transcripts.

ANALYSIS

An intentional and staged collision caused in the furtherance of an insurance fraud scheme is not a covered accident under a policy of insurance. A no-fault insurer is not required to establish that the subject collision was the product of fraud, which would require proof of all elements of fraud, including scienter, by clear and convincing evidence. Rather, a no-fault insurer must demonstrate the facts elicited during an investigation which make up the founded belief that the alleged injury does not arise out of an insured incident.

In support of the motion, plaintiff submitted the examination under oath transcripts of Cheyenne Griffin and Omar Osborne, as well as an affidavit of merit from Timothy Dacey, claims specialist for plaintiff State Farm Mutual Insurance Company.

Griffin testified that the light at the intersection was green, she proceeded through the intersection and was almost fully through the intersection, when another vehicle pulled out of a parking space and forcefully hit her vehicle’s right bumper.

Osborne was asked how he found his attorney, he stated that the lawyer contacted him, picked him up and told him that he had a lawyer. He guesses that the therapy people gave them his contact information.

State farm submitted the affidavit of claims specialist Timothy Dacey. He testified that the claimants began receiving tens of thousands of dollars’ worth of treatment from various medical providers. Dacey further averred that the claim’s legitimacy was questioned since the insured was not in the vehicle at the time of the accident and that the insured’s policy was cancelled one month after the accident due to non-payment. Additionally, the fact that the insured obtained new insurance with GEICO and was subsequently involved in two additional losses, one on November 11, 2018 and the other on November 25, 2018 involving a friend driving the insured’s vehicle. Lastly, the fact that none of the claimants alleged injuries at the scene of the accident and thereafter began undergoing significant treatment with a large number of medical providers, also contributed to the plaintiff questioning the legitimacy of the claimants’ representations.

The court concluded that State Farm met its prima facie burden establishing that there is a founded belief that the collision was intentionally caused, that the loss was not a covered event, and that the claimants’ injuries did not arise from an insured incident as evident from inconsistencies in the transcripts. Additionally, State Farm asserted that Hoffman failed to appear for his examination under oath, and Griffin and Osborne failed to subscribe their examination under oath transcripts, violating a condition precedent to no-fault coverage.

The failure of a person eligible for no-fault benefits to appear for a properly noticed EUO constitutes a breach of a condition precedent, vitiating coverage. The injured party or that party’s assignee, medical service provider, must then submit written proof of claim or it will be precluded from offering any defenses at trial.

As to Griffin and Osborne who submitted to their EUO’s, although they appeared, they failed to subscribe and return their EUO transcripts. The claimants’ failure to subscribe and return the transcripts of their examinations under oath violated a condition precedent to coverage and warranted denial of the claims.

State Farm’s summary judgment motion was granted.

ZALMA OPINION

This decision from New York is an example of the need for insurers faced with a potentially fraudulent claim to refuse to pay. It will find that fraud perpetrators are unwilling to fight an honest attempt to defeat a claim that was fraudulent since it is more profitable to assert fraudulent claims against insurers who are unwilling or unable to fight a fraudulent claim. Since the fraud in this case was obvious State Farm was obligated to fight. It did so and avoided a fraudulent claim. The court should have referred the defendants to the local prosecutor for criminal prosecution of attempted insurance fraud.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Fraud by Divine Right

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A Video True Crime Story of Insurance Fraud

See the full video at https://rumble.com/vgo0sp-fraud-by-divine-right.html and at https://youtu.be/jtoznFpV5e4

They were All-American girls. Muffy and Buffy met each other as cheerleaders in high school. They were best friends. They did everything together. The two young women shared everything from clothes to boyfriends. They decided to use insurance fraud to supplement their income and allow them to continue to live with nothing but the best in excess of their earnings.

Buffy and Muffy admitted to the adjuster that the watches were never stolen in either claim. They withdrew the claim for the two watches. They still tried to convince him that the rest of their claim resulted from a legitimate auto burglary. He was not convinced. He denied the claim on the spot. He followed up with a written denial.

He reported the claim to the Fraud Division who agreed it was a fraudulent claim and presented it to the local district attorney. The District Attorney refused to prosecute on the grounds that there was insufficient evidence to guarantee a conviction.

Muffy and Buffy went back to work at the bank. They hired a lawyer who threatened to sue if the claim was not paid in full. Since there was no arrest the insurer felt vulnerable. It paid $60,000 to obtain a general release.

Muffy and Buffy lived comfortably for a while on the money the lawyer obtained for them.  They were determined to, and continued to, commit insurance fraud once every few years, to supplement their income.

For Muffy and Buffy crime pays well.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Certificate of Insurance Does Not Confer Insurance Coverage

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Additional Insured Can Rely on Certificate

The trial court judgment granted the motion of defendant Philadelphia Insurance Companies for summary judgment declaring that it had no obligation to defend or indemnify plaintiff. In County Of Erie v. Gateway-Longview, Inc., et al., And Philadelphia Insurance Companies, 157 CA 20-00665, 2021 NY Slip Op 02631, Supreme Court Of The State Of New York Appellate Division, Fourth Judicial Department (April 30, 2021) the Appellate Division looked on the judgment with a jaundiced eye.

FACTS

Plaintiff commenced this action seeking a declaration that the Philadelphia Insurance Companies (defendant) were obligated to defend and indemnify it as an additional insured in the underlying actions. Defendant moved for summary judgment declaring that it had no obligation to defend or indemnify plaintiff on the ground that plaintiff is not an additional insured under the relevant policy.

ANALYSIS

It is well established that a certificate of insurance, by itself, does not confer insurance coverage, particularly where, as here, the certificate expressly provides that it is issued as a matter of information only and confers no rights upon the certificate holder and does not amend, extend or alter the coverage afforded by the policies. [Landsman Dev. Corp. v RLI Ins. Co., 149 AD3d 1489, 1490 [4th Dept 2017]]. A certificate of insurance is only evidence of a carrier’s intent to provide coverage but is not a contract to insure the designated party nor is it conclusive proof, standing alone, that such a contract exists.

Nevertheless, an insurance company that issues a certificate of insurance naming a particular party as an additional insured may be estopped from denying coverage to that party where the party reasonably relies on the certificate of insurance to its detriment. For estoppel based upon the issuance of a certificate of insurance to apply, however, the certificate must have been issued by the insurer itself or by an agent of the insurer.

The appellate court concluded, therefore, that there was an issue of fact whether the insurer is estopped from denying additional insured coverage to plaintiff. In its moving papers, the insurer did not present any evidence addressing plaintiff’s reliance on the certificate of insurance or establishing that neither it nor an authorized agent issued the certificate of insurance. Defendant’s failure to make such a prima facie showing requires denial of the motion, regardless of the sufficiency of the opposing papers.

ZALMA OPINION

People, not necessarily insurance experts, rely on Certificates of Insurance as evidence that they are protected by the insurer who issued, or allowed the insurer’s agent, to issue a certificate of insurance showing it to be an additional insured. The Appellate Division made it clear that the only way the insurer can prove it did not add the Plaintiff as an additional insured only if it makes a case that the Plaintiff did not rely on the Certificate or that it was not issued by an authorized agent. I would, of course, prefer that no one rely on a Certificate of Insurance and demand the actual endorsement or policy with the endorsement showing it to be an additional insured.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

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You Only Get What You Pay For

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Insurance Agent Owes no Duty to a Person Not a Client

In Jeff Fendley v. Sims Norment, No. 06-20-00066-CV, Court of Appeals Sixth Appellate District of Texas at Texarkana (April 29, 2021) an attempt to avoid legal problems by transferring title to a house from Jeff Fendley to his parents created a problem when the house and its contents burned.

After a home owned by Charles and Sallie Fendley was destroyed by fire, they received the full value claimed under an insurance policy issued by Hochheim Prairie Farm Mutual Insurance Association (the Insurance Company). The Fendley’s adult son, Jeff Fendley, who had always resided in the home, deeded it to his parents “for legal reasons” and paid the monthly premium for the insurance (the Policy).

When Jeff asked Sims Norment, an insurance agent if he needed to purchase renter’s insurance to cover loss of personal property in the event of a disaster, Norment believed and represented to Jeff that his belongings were covered by the Policy and that renter’s insurance was unnecessary.

The Insurance Company denied a claim for Jeff’s belongings because he was not an insured. Jeff sued Norment for negligence and alleged that he “had a duty to provide the insurance coverage that [Jeff] needed.” Norment moved for summary judgment on the ground that he did not owe Jeff any duty to provide a particular insurance coverage that he did not apply or pay for. The trial court granted Norment’s summary judgment.

Factual Background and the Summary Judgment Evidence

The summary judgment evidence established that Charles and Sallie never lived in the home that Jeff deeded to them in 2011 “for legal reasons.” Jeff said that he told Norment that he lived in and owned the home even though “the house was in [his] father’s name.” Even so, summary judgment evidence established that Charles applied for the Policy, the down payment receipt for the Policy listed Charles’s name, the Policy was issued to Charles and Sallie, and Jeff, who paid for the insurance premiums, was not an insured under the Policy.

Before the fire Norment told Jeff that it was unnecessary to purchase renter’s insurance since the contents of the home were covered under the Policy. In explaining that he had misadvised Jeff.  According to Norment, the Insurance Company denied Jeff’s claim for property loss on the ground that he was not insured under the Policy.

Jeff’s petition alleged only one ground of negligence, namely that Norment “had a duty to provide the insurance coverage that the Plaintiff needed and paid a premium for” and that the “negligence was the direct and approximate cause of [Jeff] not having insurance coverage on his contents when the loss occurred.”

In his motion for summary judgment, Norment argued that Jeff was not his client, did not apply for insurance coverage, was not the insured under the Policy purchased by his parents, and had no agreement with the Insurance Company. Norment stated, “I have done work for Jeff Fendley in the past, but not related to this particular Policy.” The summary judgment evidence showed that Jeff was paying for his parents’ Policy and that they received the coverage paid for, which included compensation for personal property gifted to Jeff and placed in his home. As a result, Norment argued that he had no duty to provide additional insurance coverage that Jeff had neither applied for nor paid for.

Analysis

The threshold inquiry in a negligence case is duty. An insurance agent generally does not owe a duty unless there is privity between the agent and the putative insured. No evidence showed that Jeff and Norment were in privity with respect to any policy that would provide coverage for Jeff’s personal belongings.

The Court of Appeal, therefore, concluded that there is no Texas case that interposed any duty in favor of a non-client upon a client’s insurance agent regarding the agent’s negligent failure to procure a liability policy with a certificate designating the non-client as an additional insured.

Even accepting Jeff’s argument that he is Norment’s customer based on past, unspecified, dealings, in Texas, an insurance agent owes the following common-law duties to a client when procuring insurance:

  1. to use reasonable diligence in attempting to place the requested insurance, and
  2. to inform the client promptly if unable to do so.

Here, neither of those duties was breached because Jeff did not pay for or apply for additional insurance, and the coverage he paid for on behalf of his parents was provided pursuant to the Policy.

Although Jeff asked for Norment’s opinion on the need for renter’s insurance, no legal duty exists on the part of an insurance agent to extend the insurance protection of his customer merely because the agent has knowledge of the need for additional insurance of that customer, especially in the absence of evidence of prior dealings where the agent customarily has taken care of his customer’s needs without consulting him.

Since no evidence showed that Jeff and Norment shared an expectation that the agent habitually would satisfy all of Jeff’s insurance needs without consultation, Jeff had no basis to expect performance from Norment.

Jeff claimed only that Norment had a duty to provide the insurance coverage that the Plaintiff needed and paid a premium for.

The failure to provide coverage claim failed as a matter of law because Texas law imposed no duty on Norment to secure additional insurance not specifically requested or applied for under the facts of this case, and the coverage under the Policy that was paid for was provided and the Court of Appeal, therefore, affirmed the trial court’s judgment.

ZALMA OPINION

Jeff was his own worst enemy. He tried to avoid legal problems by transferring title of his home to his parents who did not live there. He occupied the house and when it burned his personal property was damaged or destroyed. Since he was not an insured of the policy the insurer owed nothing to him. He had no privity with the agent who owed him no duty. If there is no duty there can be no negligence case. Jeff was too smart by half and failed to order insurance to protect his insurable interest.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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A Video Explaining Common Tactics Used to Set Up a Bad Faith Claim

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Bad Faith Set-Ups Defeat the Purpose of the Tort of Bad Faith

See the full video at https://rumble.com/vgjxmn-a-video-explaining-common-tactics-used-to-set-up-a-bad-faith-claim.html and at https://youtu.be/82UeL_GwlDg

One tactic for setting up a bad faith claim is to make a settlement offer that likely cannot be complied with by the insurer. Knowing the settlement demands may not be met, the insured/claimant waits for the insurer’s misstep, then asserts a bad faith claim.

Sometimes the insured/claimant will make an offer for settlement containing an arbitrary and unrealistic deadline for acceptance, before the insurer has had the opportunity to fully investigate the claim. When the insurer is unwilling to agree immediately to the insured’s/claimant’s demands, a bad faith claim is filed.

For example, in DeLaune v. Liberty Mut. Ins. Co., 314 So. 2d 601 (Fla. 4th DCA. 1975), plaintiffs made an offer to settle their claim stemming from an automobile accident for the $10,000 policy limit, attaching a 10-day deadline for the defense to accept the offer. Defense counsel, believing that settlement for the policy limits was possible, but not yet authorized to approve the settlement, contacted the plaintiffs’ counsel on the last day of the deadline and asked for an extension of the offer until the following Monday after the Friday deadline. The plaintiffs refused and initiated a common law bad faith action for the excess judgment.

These developments have resulted in the bad faith landscape in some jurisdictions appearing geared more closely to providing policyholder counsel with a lucrative recovery than safeguarding the appropriate balance of interests between insurer and insured.

Bad faith cases that are manufactured to avoid a settlement expand the concept of “bad faith” beyond what the case law and statutes require for “good faith.” An offer of settlement made only for the purpose of setting up a bad faith lawsuit is the obverse of the requirement that insurers act fairly and in good faith. Ultimately, bad faith claims have become so common that the stringent standard actually needed to prove the tort of bad faith appears to have been ignored and bad faith claims allowed based on mere technical failures in reaching a settlement.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Posted in Zalma on Insurance | Leave a comment

Bad Faith Set-Ups

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How to Recognize an Attempted Bad Faith Set Up

Bad faith insurance claims are successful when a plaintiff can prove that the insurance company wrongfully denied an insurance claim and deprived the insured of the benefits of the contract of insurance without good cause. Bad faith insurance suits can arise in the context of any insurance policy.

California created the tort of bad faith by court decision. Florida, on the other hand, like many states created by legislation liability for insurers who act in bad faith in denying insurance claims. Since most states allow suit for the tort of bad faith it often seems that every claim that is rejected – whether correctly or wrongfully – results in a suit alleging breach of contract and the tort of bad faith.

In light of the substantial damage awards attendant to bad faith claims, plaintiffs’ attorneys have great incentive to try to maneuver insurance companies into committing acts that may constitute bad faith. They may, and fairly often do, attempt such “set-ups” by creating a situation where the insurer refuses to settle a tort claim within policy limits within a limited period of time. The plaintiff’s purpose, of course, is to recover substantial extra-contractual damages, including attorneys’ fees, where permitted. In short, since a bad faith verdict can be vastly more lucrative than simply collecting on a “within policy limits” claim, the temptation for a lawyer to take advantage of a young, inexperienced or inadequate insurance adjuster, overcomes any sense of morality or the need to obtain a settlement that is in the best interests of the lawyers’ clients.

With bad faith claims viewed as the gateway to recovering attorney fees and damages well in excess of policy limits, insurers and policyholders counsel need to be well versed in addressing scenarios in which an insurer’s allegedly flawed investigation, settlement practices, and/or noncompliance with statutory claims handling requirements open the door to extracontractual disputes.

While bad faith claims start with establishing some form of unreasonable conduct by the insurer, something more than negligence, a mistake, or poor judgment is required to present a meritorious bad faith claim. This holds true whether the bad faith claim rests on the insurer’s alleged breach of the implied covenant of good faith and fair dealing, its fiduciary or quasi-fiduciary obligations owed to its insured, or its violation of unfair insurance practices or claims handling statutes.

Some fact situations that can easily result in a bad faith suit include:

  1. Low policy limit and high exposure claims;
  2. Failure to settle a liability claim within limits when liability of the insured is clear.
  3. Lost opportunities to settle within limits;
  4. Failure to apprise insured of material litigation or settlement developments;
  5. Flawed investigation unduly focused on developing grounds to deny claim;
  6. Competing claims for policy limits;
  7. Mishandled control of defense, including disregard of conflicting interests and/or insured’s entitlement to independent counsel;
  8. Failing to timely apprise insured of coverage limitations;
  9. Overlooked traps in demand letters;
  10. Insufficient attention to efforts to establish bad faith claim in problematic jurisdictions;
  11. Material violation of statutory claims handling requirements; and/or
  12. Problematic claims file entries.

As a result, the bad faith set-up became common. The bad-faith set-up is not a new tactic. In 1985, Justice Kaus of the California Supreme Court observed:

It seems to me that attorneys who handle policy claims against insurance companies are no longer interested in collecting on those claims, but spend their wits and energies trying to maneuver the insurers into committing acts which the insured can later trot out as bad faith. [White v. W. Title Ins. Co., 710 P.2d 309, 328 n.2 (Cal. 1985) (Kaus, J., concurring and dissenting)]

In J.B. Aguerre, Inc. v. American Guarantee & Liability Ins. Co. (1997) 59 Cal.App.4th 6, 68 Cal.Rptr.2d 837, the Court of Appeal affirmed a judgment of dismissal on demurrer, holding a liability insurer did not act unreasonably as matter of law in refusing to meet the plaintiff’s $2 million settlement demand, despite the alleged risk of exposing the insured to uncovered punitive liability. The insured’s alleged fear of his punitive exposure coerced him to contribute to a settlement out of duress. Justice Neal observed as follows:

What we have here, at bottom, is an effort by [the insured] to concoct a bad faith claim out of whole cloth   with the ‘ingenious assistance of counsel.’    [The insured] has attempted to position itself to pursue a high stakes, bad faith case, seeking punitive damages, from which it hopes to emerge not only with the [underlying] claim disposed of at no cost to [the insured], but a profit as well in the form of damages recovered from [the insurer].  [¶] Bad faith litigation is not a game, where insureds are free to manufacture claims for recovery.   Every judgment against an insurer potentially increases the amounts that other citizens must pay for their insurance premiums. Id. at pp.17-18, 68 Cal.Rptr.2d 837.)

Bad faith set-ups most frequently originate in the third-party context. When an insurer is defending an insured against a tort claim and there are insufficient limits available to compensate the insured party. In this context, the set-up involves attempts to cause an insurance company to reject a policy limits settlement offer. Third-party claimants and their counsel have come up with various ways in which to present their offers to reduce the chance that the insurer will actually accept the offer within the stated time period.

The plaintiff’s goal, of course, is to obtain a sizeable excess verdict. If successful, the next step in the strategy is for claimant’s counsel to enter into an agreement with the insured whereby claimant gives a covenant not to execute on the judgment in exchange for an assignment of the claim based on bad faith failure to settle. The most common form of a bad faith set-up is to make a settlement demand – typically policy limits – with an unreasonable time demand.

A claimant may make a settlement demand with an unrealistic time limitation before the insurance company has full access to the information bearing on liability and damages.  The insurance company often declines to meet the demand, explaining that it needs further information. This position is then portrayed as a failure to settle, and will then be used against the insurance company as evidence of unreasonable conduct in the settlement of the case.

In a particular case, an insured’s demand letter imposed such unreasonable conditions that the Ninth Circuit concluded that the insurer did not act in bad faith in not immediately meeting the demand. [Charyulu v. California Cas. Indem. Exch., 523 F. App’x 478, 480 (9th Cir. 2013)]

In assessing bad faith, the reasonableness of the conduct of the insurer’s counsel must be measured against the corresponding actions of the plaintiff’s counsel. Granting summary judgment, one district court may properly look to another district court’s determination that a particular demand letter was unreasonable and a legally insufficient predicate for an insurance bad faith claim as a matter of law. [AAA Nevada Ins. Co. v. Vinh Chau, 808 F. Supp. 2d 1282, 1288 (D. Nev. 2010), aff’d in part, dismissed in part sub nom.]

In AAA Nevada Ins. Co. v. Chau, 463 F. App’x 627 (9th Cir. 2011) the Ninth Circuit granted summary judgment because, on the undisputed facts, the insureds’ counsel’s “demand letter was itself unreasonable and appears to be nothing more than an attempt to set up a potential bad faith claim.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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A Video About The Duties of the Liability Claims Adjuster

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Explaining the Need for Liability Claims Adjusters

See the full video at https://rumble.com/vghs7p-a-video-about-the-duties-of-the-liability-claims-adjuster.html and at https://youtu.be/zT-keAsU2Tc

The insurance adjuster is seldom, if ever, mentioned in a policy of insurance. The strict wording of the third party liability policies set the obligation to prove a claim that entitles the insured to defense or indemnity of a claim against the insured by an injured third party. Over a century ago insurers determined that to properly deal fairly and in good faith with their insureds, an insurance claims professional was needed to thoroughly investigate claims made against the insured, work with the insured and a third party claimant to resolve claims without litigation, and properly protect the interests of the insured.

Adjusting liability insurance claims requires skill, patience, knowledge of insurance, basic knowledge of tort and contract law, and knowledge and experience as an investigator. To properly and effectively perform the duties of a liability claims adjuster, he or she must be capable of effectively dealing with the following basic obligations:

  1. To understand the law of torts as applied in the state where the adjuster works.
  2. To understand the law of contracts as applied in the state where the adjuster works.
  3. To understand sufficient medical terminology to be able to evaluate claims of injury.
  4. To understand the costs to repair or replace damaged real or personal property.
  5. To understand how to read and apply the terms and conditions of a liability insurance policy to a particular fact situation developed by his or her investigation.
  6. To understand how to thoroughly investigate all claims assigned.
  7. To conduct an investigation of every claim assigned fairly and in good faith with an intent to find coverage for the loss presented by the insured.
  8. To be able to effectively, fairly and in good faith negotiate with claimants and lawyers to resolve bodily injury or property damage claims asserted against an insured.
  9. To ascertain that the insurer pays promptly all claims the insurer owes under the contract.
  10. To resist, and recommend against payment of all claims the insurer does not owe under the contract of insurance.

In the United States, the average adjuster is a 22-year-old graduate of a liberal arts college who has little or no training sufficient to allow him or her to fulfill the obligations imposed on them as a representative of an insurer.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Arbitration Awards will be Confirmed as a Judgment Absent Obvious Error

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Insurance Settlement’s Arbitration Provision Resolves Disputes Regarding Asbestos Claims

Arbitration exists for the sole purpose of limiting disputes and avoiding long, drawn-out lawsuits. When major litigation is resolved involving multiple parties, like asbestos litigation, prudent litigators – when they settle – include an arbitration clause to avoid further expensive litigation.

Insurance Company of North America, Inc., Century Indemnity Company, and ACE Property and Casualty Insurance Company (collectively, “INA”) moved the USDC to confirm an arbitration award issued on January 6, 2020 (the “Award”). In Syngenta Crop Protection, LLC v. Insurance Company Of North America, Inc., Century Indemnity Company, and Ace Property And Casualty Insurance Company, 18cv715(DLC), United States District Court Southern District Of New York (April 23, 2021)

Background

This action concerned an insurance coverage dispute over the relationship between a set of decades-old insurance policies and a subsequent settlement agreement. Plaintiff Syngenta Crop Protection, LLC (“Syngenta”) sought coverage under these policies for claims involving asbestos exposure of contract workers associated with its predecessor. INA asserts that those asbestos-related claims were released by a 1999 settlement agreement (the “1999 Settlement”).

INA filed a demand for arbitration with the American Arbitration Association (“AAA”) pursuant to the 1999 Settlement. Syngenta sued seeking to enjoin arbitration. The court’s  opinion stayed this action pending arbitration, noting that the arbitration clause in the 1999 Settlement requires that “any dispute with respect to” the settlement be resolved through arbitration. The parties thereafter participated in arbitration and the Arbitrator issued the Award on January 6, 2020.

INA filed this motion to confirm the Award. INA sought immediate confirmation of the Award.

Discussion

The Federal Arbitration Act provides in relevant part that:

“If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration . . . then at any time within one year after the award is made any party to the arbitration may apply to the court . . . for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of [the FAA].”

The USDC noted that normally, confirmation of an arbitration award is a summary proceeding that merely makes what is already a final arbitration award a judgment of the court, and the court must grant the award unless the award is vacated, modified, or corrected.

A court’s review of an arbitration award is severely limited in view of the strong deference courts afford to the arbitral process. This deference promotes the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation. Consequently, the burden of proof necessary to avoid confirmation of an arbitration award is very high, and a district court will enforce the award as long as there is a barely colorable justification for the outcome reached.

Still, when asked to confirm an ambiguous award, the district court should instead remand to the arbitrators for clarification. INA timely filed a motion to confirm the Award. INA argued that the Award should be confirmed because it has not been vacated, modified, or corrected. The USDC concluded that INA is correct, and the Award must be confirmed.

The Award allowed Syngenta to obtain insurance coverage for claimants in a limited circumstance: “employment records must confirm that the individual [claimant] was exclusively employed for not less than 30 consecutive work days while working on [Syngenta’s predecessor’s] premises.” Syngenta contends that two phrases in the Award — “employment records” and “30 consecutive workdays” — are ambiguous.

Syngenta, however, did not move to vacate, modify, or correct the Award. Nor has it shown that remand to the Arbitrator is warranted because the Award is ambiguous. Syngenta has not shown that either phrase to which it points is “susceptible to multiple meanings” or has engendered any actual confusion that has occurred since the issuance of the Award over a year ago.

Courts are not required to find contract language ambiguous where the interpretation urged by one party would strain the contract language beyond its reasonable and ordinary meaning. Indeed, the Award confirms the proper interpretation when it repeatedly refers to claimants as “non-employee contractors” or “non-employee independent contractors.”

Additionally, Syngenta argued that the phrase “30 consecutive workdays” is ambiguous because it does not contemplate cases where the available evidence for a claimant reflects a gap in work but does not indicate that the claimant actually worked elsewhere during that gap. This argument failed because it does not make the phrase “30 consecutive workdays” ambiguous. A gap between workdays indicates that the workdays are no longer consecutive.

The USDC concluded that Syngenta had not demonstrated that the phrase is subject to multiple interpretations. To the extent the parties have a dispute regarding how the Award applies to a specific claim, the parties may return to arbitration to resolve the dispute. Therefore, INA’s motion to confirm the Award was granted.

ZALMA OPINION

This case established the wisdom of the parties in 1999 when they entered into a settlement agreement to include an arbitration provision. The dispute was resolved by the arbitrator with an opinion that was sufficiently clear and unambiguous to allow it to be followed by the parties and allowed them to avoid unneeded litigation. It would appear, especially with settlements of mass tort claims, to include an arbitration provision to allow disputes over the agreement to be resolved by arbitration. Otherwise, as did Syngenta, lawsuits would continue to be filed and money and time wasted and turn a settlement into a never ending story.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

 

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A Video Explaining Construction Defects and Exclusions to Coverage

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Intentional Acts Exclusions and Fortuity

See the full video at https://rumble.com/vgfw2f-a-video-explaining-construction-defects-and-exclusions-to-coverage.html and at https://youtu.be/U7fX5sEzdaU

Implicit in the concept of insurance is that the loss occur as a result of a fortuitous event not one planned, intended, or anticipated. Oddly, the fortuity principle never appears in insurance contracts. The principle is rooted in common law and in the statutes of at least six states. The fortuity principle has the effect of an exclusion. That is, an all-risk policy might provide coverage for all risks minus named exclusions, but never provides coverage for non-fortuitous events, even though non-fortuitous events are not named exclusions in the policy. For this reason, the fortuity principle is sometimes called the unnamed exclusion.

A fortuitous event is an event which so far as the parties to the contract are aware, is dependent on chance. It may be beyond the power of any human being to bring the event to pass; it may be within the control of third persons; it may even be a past event, such as the loss of a vessel, provided that the fact is unknown to the parties. Compagnie des Bauxites de Guinee v. Ins. Co. of N. Am., 724 F.2d 369,372 (3d Cir. 1983) (quoting Restatement of Contracts § 291 cmt. A (1932))

“The purpose behind the fortuity doctrine applies with full force where a party attempts to purchase insurance against the consequences of his own ongoing wrongful conduct.” (Scottsdale Ins. Co. v. Travis, Court of Appeal of Texas, 68 S.W.3d 72 (2001))

Judge Cardozo, in 1923, stated a simple and obvious rule of law that “no one shall be permitted to take advantage of his own wrong. [Messersmith v. American Fidelity Co., 232 N.Y. 161, 133 N.E. 432 (1921).] California, by statute, covers has codified Cardozo’s statement. Almost every insurance policy issued in the US excludes the intentional acts of the insured. Those that do not are covered by the public policy adopted by most states. To insure against wrongful acts would be to allow people to act wrongfully with no adverse effect since their victims would be compensated by insurance.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Failure of Standing Removes Declaratory Relief Action Back to State Court

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Attempt at Class Action Against Insurer Bounce Back to State Court

No court really likes to deal with class action suits, especially when they seek prospective action. In Leroy Mack v. USAA Casualty Insurance Company, No. 19-14958, United States Court Of Appeals For The Eleventh Circuit (April 22, 2021) Leroy Mack totaled his car and was not satisfied with the method his insurer, USAA Casualty Insurance Company, used to calculate what it paid him. He sued USAA on behalf of himself and a putative class for declaratory judgments that USAA’s method was inconsistent with Florida law and the insurance policy. As supplemental relief to those declaratory judgment claims, Mack also asked for USAA to recalculate the class members’ claims using a legal method and make them new offers. Mack conceded, however, that a “correct” calculation method will not necessarily result in higher offers.

THE ISSUES

The question is whether Mack has Article III standing because he requests that USAA make new settlement offers as supplemental relief if his declaratory judgment claim succeeds.

BACKGROUND

Under the policy, USAA will pay up to the “actual cash value” of the covered vehicle in the event of a total loss. To determine that value, USAA uses a third-party service, the CCC ONE valuation system, which purports to automatically calculate actual cash value based on comparable vehicle data from its own computer system and data on the insured’s vehicle input by USAA adjusters. In the event of a disagreement over the amount of loss—which includes actual cash value—the policy allows for either party to demand appraisal.

Mack submitted a claim under the policy, and USAA agreed to coverage. USAA offered to pay Mack the actual cash value of his vehicle as determined by the CCC ONE system, and Mack accepted payment. But about two months after cashing that check, Mack sent USAA a demand letter. He argued that USAA had violated Florida law and breached its policy by failing to pay him license and title transfer fees or a document fee. USAA responded that it was only responsible for “actual cash value and tax.”

USAA interpreted the complaint as contesting its valuation of Mack’s vehicle and invoked its right under the policy to demand appraisal. USAA moved to dismiss the complaint on the basis that it amounted to a dispute over the amount of loss and that the policy required Mack to fully comply with the appraisal and other provisions before filing suit. Mack responded that his claims raised purely legal questions and did not constitute a dispute over the amount of loss, therefore, they were not amenable to appraisal. The district court determined that “[t]his is a case about payment of money,” not “about legal coverage or whether or not a contract provides for anything.” Accordingly, the court dismissed the case without prejudice “pending appraisal.”

After Mack filed his initial brief with this Court, the parties reached a settlement as to the title and license fees claims, thereby mooting the only damages claim. The only remaining count is for declaratory judgment and supplemental relief, in which Mack seeks two declaratory judgments:

  • that USAA’s use of the CCC System violates Florida law and the policy and
  • that Florida law and the policy require that USAA pay dealer fees as part of any total loss settlement.

Supplemental to those declarations, Mack seeks a recalculation of all class members’ total loss claims under a new method and new offers based on those amounts if they are higher than the amount originally offered and an order requiring USAA to offer dealer fees to the class members. Mack insists  that a recalculation of his and other class members’ claims under a new method will not necessarily result in a higher offer by USAA. Instead, he states that “recalculation using a legal method might or might not result in a higher value than the CCC system value” and that he “does not claim his vehicle’s value was greater than USAA’s calculation.”

DISCUSSION

The allegations necessary to establish standing depend on the type of relief sought. To establish standing when seeking retrospective relief, a plaintiff must show that he has suffered “an invasion of a legally protected interest” that is both “concrete and particularized” and “actual or imminent, not ‘conjectural’ or ‘hypothetical.'” But if a plaintiff seeks prospective relief, such as a declaratory judgment, he must “allege facts from which it appears there is a substantial likelihood that he will suffer injury in the future.” Malowney v. Fed. Collection Deposit Grp., 193 F.3d 1342, 1346 (11th Cir. 1999) (citing City of Los Angeles v. Lyons, 461 U.S. 95, 102 (1983)). And that future injury must be “real,” “immediate,” and “definite.”

The possibility that a plaintiff may someday be in another car accident and still be insured by the insurance company under the same or a similar policy being interpreted the same way, thereby having this issue present itself again is too contingent to constitute a substantial likelihood of future injury. The complaint’s allegations  were found to be insufficient to establish the substantial likelihood of future harm necessary to establish standing for a declaratory judgment claim.

The next question is whether Mack has standing to seek, retrospective relief—i.e., more money for his totaled car. Mack chose to frame his claims as seeking prospective relief through requests for declaratory judgments; he specifically chose not to pursue damages for the retrospective harm that he has also arguably alleged.

A court may decide whether Mack is eligible for supplemental monetary relief only after issuing a declaratory judgment in his favor. For a federal court to have jurisdiction to issue a declaratory judgment, a plaintiff must assert a reasonable expectation that the injury they have suffered will be repeated in the future. Because there was no substantial likelihood that Mack will total his car again while insured by USAA, he lacked standing to sue for a declaratory judgment about the method it uses to assess payments under the policy.

If Mack lacks standing to pursue his declaratory judgment claims, then the federal court system is powerless to resolve whether declaratory relief is appropriate to remedy the alleged harm.  Because the District Court had no jurisdiction to entertain this suit, the judgment was vacated and the District Court was ordered to remand the case back to the state court.

ZALMA OPINION

Because Mack tried to turn a declaratory relief action about insurance coverage into a class action that might resolve more money for Mack and the members of the class for additional payments when there was no way the court could grant declaratory relief. He made most of his suit moot by entering into a personal settlement with USAA and simply had no standing to be in federal court. He may still get relief from the Florida court who could easily agree with the Eleventh Circuit’s analysis that he had no standing to go forward.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

 

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It Takes “Chutzpah” to Claim Bad Faith After Admitting Fraud Under Oath

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Insurance Fraud Voids Coverage as a Matter of Law

I once, in an argument to a court, used the term “chutzpah” to make my case. The judge had never heard the term and thought I had used a swear word in his court and was about to hold me in contempt when my opponent, who also happened to be Jewish, joined me explaining the meaning of the word to the court. He and I explained that “chutzpah” means unmitigated gall such that, if he had presided over a trial where the defendant was found guilty of murdering his parents and asked for clemency because he was an orphan. In State Auto Property And Casualty Insurance Company v. Sigismondi Foreign Car Specialists, Inc., Civil Action No. 19-5578, USDC For The Eastern District Of Pennsylvania (April 12, 2021) the insured, after admitting under oath that he had fabricated documents to obtain greater returns from his insurer, had the unmitigated chutzpah to sue his insurer for bad faith for refusing to pay his fraudulent claim.

BACKGROUND

The State Auto policy provided coverage to Sigismondi for a commercial property in Philadelphia where the auto repair shop is located. In January 2019, Sigismondi presented a claim under the policy for water damage to its building and certain inventory, including automobile and audio equipment.

Sigismondi provided the insurer’s salvor with claimed replacement cost figures. Many of those figures were substantially greater than the values determined by the salvor.  Sigismondi admitted that it used computer software to edit at least some of the invoices submitted to State Auto, including by entering price information and dates.  As a result, State Auto requested the Examinations Under Oath of Joseph Sigismondi, Sigismondi’s owner, and Debbie Miller, an employee of Sigismondi.

During his examination, Mr. Sigismondi provided sworn testimony that the invoices provided to State Auto were scanned into a computer and altered. State Auto submitted that the president of the vendor in question submitted an affidavit stating that Mr. Sigismondi did not contact the vendor to ask for pricing information. Based on the discovery of the altered invoices, State Auto denied Sigismondi’s claim.

DISCUSSION

Sigismondi pointed to no record evidence indicating that State Auto lacked a reasonable basis for denying benefits under the policy, let alone that State Auto “knew of or recklessly disregarded” the lack of such a basis. To the contrary, the record reflects that State Auto responded reasonably after learning that Sigismondi had submitted altered vendor invoices to support its claim under the policy.

Generally, to void an insurance policy under Pennsylvania law, an insurer must prove the following factors by clear and convincing evidence:

  1. the insured made a false representation;
  2. the insured knew the representation was false when it was made or the insured made the representation in bad faith; and
  3. the representation was material to the risk being insured.

The clear and convincing evidence standard requires evidence that is so clear, direct, weighty, and convincing as to enable the trier of fact to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue. State Auto argued it was entitled to summary judgment on this Count because Sigismondi materially breached the policy’s concealment or fraud provision by altering the invoices at issue. Pennsylvania courts have long ruled that a violation of the fraud and concealment provision of an insurance policy serves as a complete bar to the insured’s recovery under the policy and Sigismondi does not dispute that it made misrepresentations to State Auto by submitting altered invoices, or that it knew its representations were false when it made them.

Therefore, the Court’s analysis requires a determination that the misrepresentations were material. A fabricated receipt created by a consumer and presented as an official document from a retailer, without the retailer’s knowledge, constitutes false or misleading information, and certainly would be material to the insurance claim. Sigismondi’s fabricated invoices were clearly material to its insurance claim. Construing the record in the light most favorable to Sigismondi, and applying the clear and convincing evidence standard, no reasonable jury could find that Sigismondi did not knowingly make false representations by submitting altered invoices in support of its claim and that the representations were material to its claim. Therefore, State Auto was entitled to summary judgment on this Count.

State Auto also moved for summary judgment on its claim that Sigismondi violated Pennsylvania’s Insurance Fraud Act, which creates a private cause of action for insurers to remedy various types of fraud. Sigismondi does not dispute that it knowingly made false representations to State Auto, and the Court can only conclude as a matter of law that those misrepresentations were material to the claim.

On this record, no reasonable jury could find for Sigismondi even under the heightened clear and convincing evidentiary standard. State Auto is entitled to summary judgment on its Pennsylvania Insurance Fraud Act claim. As a matter of law Sigismondi intended to mislead State Auto into relying on the misrepresentations.

The Court granted State Auto’s motion for summary judgment on the declaratory judgment claim (Count I) and the Pennsylvania Insurance Fraud Act claim (Count II) but denied its motion for summary judgment on the common law fraud claim (Count III). The reverse bad faith claim (Count IV) was dismissed without prejudice. State Auto’s motion for summary judgment on the counterclaim was denied as moot. A hearing on damages will be scheduled at a future date.

ZALMA OPINION

To sue an insurer for bad faith claims handling after admitting to a blatant attempt at fraud, a misrepresentation and concealment of material fact establishes a person with unmitigated chutzpah. In my opinion the court should have referred Sigismondi to the local prosecutor for attempted insurance fraud which would, based upon his under-oath admissions, be an easy crime to prosecute. Insurance fraud is inimical to the public policy of every state and deserves more punishment than a simple dismissal of Sigismondi’s attempt at fraud.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

 

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Zalma’s Insurance Fraud Letter – May 1, 2021

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ZIFL – Volume 25, No. 9

See the full video at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2021-barry-zalma-esq-cfe/?trackingId=W6wo%2BpTblJ6XC1aCC02AsA%3D%3D https://rumble.com/vgbcof-zalmas-insurance-fraud-letter-may-1-2021.html and at https://youtu.be/hkToYThKE5w 

The May 1, 2021 issue of Zalma’s Insurance Fraud Letter includes the following articles and a video reporting on the key article about the Examination Under Oath at

The Examination Under Oath is an Important Tool for Every Fraud Investigation

The EUO Is a Serious and Important Part of the Insurer’s Investigation

The attorney, insurance claims professional or investigator who conducts the EUO can take a role similar to the role of a prosecutor without the usual constitutional restraints controlling testimony at a deposition or trial. [Hickman v. London Assurance Corporation, 184 Cal. 524, 195 P. 45 (1920)] A false statement as to any material fact during the EUO can cause the policy to be declared void, even if the fact has no relationship to the loss.

In Claflin the false testimony concerned a witness that would not affect the amount payable under the policy but to protect his reputation for veracity. The U. S. Supreme Court found that the witness of the injury was material to the investigation and declared the policy void for fraud because he made false statements under oath.

Contrary to the Belief of Lawyers for the Insured, the EUO Is Not an Adversary Proceeding like a Deposition in a Lawsuit.

Insurance Benefits Not Available to Remodel Fixer Upper

Good News From the Coalition Against Insurance Fraud

Probation for Insurance Fraud Proves Futile

Health Insurance Fraud Convictions

When You Do the Crime & Only Get Probation it is not Wise to Commit a New Crime

Other Insurance Fraud Convictions

OIG’s Most Wanted Fugitives

When Granted Non-Custodial Probation it is Insulting to Appeal the Conviction

New Books for the Insurance Claims Professionals


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4.

 

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A Video Explaining Construction Defect Claims of Sick Building Syndrome & Legionaries Disease

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Construction Defects that Cause Illness or Disease

See the full video at https://rumble.com/vg9jdv-a-video-explaining-construction-defect-claims-of-sick-building-syndrome-and.html and at https://youtu.be/VXHyZIX6xEM

Sick building syndrome (SBS) covers a whole range of health problems that are related to toxin exposure in a building. There are serious questions raised by physicians and mold experts about the existence of a true relationship between the mold and bacterial infections that have been reported to be the cause of SBS. SBS is used to describe situations in which building occupants experience acute health and discomfort effects that appear to be linked to time spent in a building, but no specific illness or cause can be identified. The complaints may be localized in a particular room or zone, or may be widespread throughout the building. In contrast, the term “Building Related Illness” (BRI) is used when symptoms of diagnosable illness are identified and can be attributed directly to airborne building contaminants.

A study concluded that Stachybotrys chartarum produces the mycotoxin Satratoxin H, which is implicated in very high cytotoxicity and several environmental allergic reactions. The various papers concerning the toxicity of contact with mold spores has met with serious concerns that people can really be sickened by exposure to mold spores.

Legionnaires’ Disease acquired its name in 1976 when an outbreak of what was believed to be pneumonia occurred among persons attending a convention of the American Legion in Philadelphia. Later, the bacterium causing the illness was named Legionella. Patients with Legionnaires’ Disease usually have fever, chills, and a cough, which may be dry or may produce sputum. Some patients also have muscle aches, headaches, tiredness, loss of appetite, and, occasionally, diarrhea. Laboratory tests may show that these patients’ kidneys are not functioning properly. Chest X-rays often lead to a diagnosis of pneumonia. It is difficult to distinguish Legionnaires’ Disease from other types of pneumonia by symptoms alone; other tests are required for diagnosis.

Legionellosis is an infection caused by the bacterium Legionella pneumophila. The disease has two distinct forms: Legionnaires’ Disease, the more severe form of infection that includes, as a result of the infection, the development of pneumonia, and Pontiac fever, a milder illness.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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$117 Million Judgment Against Johnson & Johnson Reversed & Turned to Wallpaper

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Judge Failed to Properly Vet Experts Before Trial to the Detriment of the Defendants

In Stephen Lanzo, III and Kendra Lanzo v. Cyprus, Johnson & Johnson et. al., DOCKET NO. A-5711-17, DOCKET NO. A-5717-17, Superior Court Of New Jersey Appellate Division (April 28, 2021) Johnson & Johnson Consumer Inc. (JJCI) and Imerys Talc America, Inc. (Imerys) appealed from a judgment dated April 23, 2018, which awarded plaintiffs Stephen Lanzo III and his wife Kendra Lanzo $117 million in compensatory and punitive damages, and other orders entered by the trial court during the course of this litigation.

Plaintiffs sued Cyprus Amax Minerals Company (Cyprus Amax) and Cyprus Minerals Company (collectively, Cyprus), Johnson & Johnson (J&J), JJCI, Imerys, and Whittaker Clark & Daniels, Inc. (Whittaker) claiming they were responsible for Lanzo’s contracting mesothelioma.

Plaintiffs claimed Mr. Lanzo contracted mesothelioma from his long-term use of Johnson Baby Powder (JBP) and J&J’s Shower to Shower talcum powder (SS). J&J and JJCI produced, marketed, and sold JBP and SS using J&J’s own talc or talc supplied by other defendants. Plaintiffs alleged the products contained asbestos. In the complaint, Ms. Lanzo asserted a claim for the loss of her spouse’s services, society, and consortium.

During the trial, J&J, JJCI, Imerys, and Cyprus Amax moved to bar plaintiffs’ expert, Jacqueline Moline, M.D., from testifying that non-asbestiform cleavage fragments of certain minerals can cause mesothelioma. The judge limited the scope of Moline’s testimony, but allowed her to testify regarding “non-asbestiform cleavage fragments from a medical point of view.”

The jury returned a verdict against JJCI and Imerys finding that Mr. Lanzo had been exposed to asbestos and that such exposure was a substantial factor in causing his mesothelioma.  The jury assigned seventy percent responsibility for the compensatory damage awards to JJCI and thirty percent to Imerys.

Daubert and the Vetting of Experts

The Court explained that when it adopted the more relaxed approach for expert testimony, “it envisioned the trial court’s function as that of a gatekeeper – deciding what is reliable enough to be admitted and what is to be excluded. Those are not credibility determinations that are the province of the jury, but rather legal determinations about the reliability of the expert’s methodology.”

The appellate court concluded that the trial court erred by failing to perform its required gatekeeping function with regard to the testimony of expert Moline because the court did not conduct a Rule 104 hearing to test her theory and conducted no analysis as to whether the Daubert factors had been met. Thus, the court erred by allowing Moline to testify that there was no difference between asbestiform fibers and non-asbestiform cleavage fragments with the same dimensions and chemical composition in terms of their ability to cause disease.

Having concluded that the trial court erred by allowing expert testimony that non-asbestiform minerals can cause mesothelioma, a thorough review of the record, convinced the appellate court that the judge’s erroneous decisions were clearly capable of producing an unjust result, and therefore, new trials were required.

Perhaps anticipating that defendants would claim only non-asbestiform amphiboles were present in some of the talc used in JBP, counsel for plaintiffs argued in his opening statement that non-asbestiform fibers could cause asbestos-related disease. Plaintiffs’ counsel told the jury that:

“[J&J] got together with other companies that were selling talc and they chose to call the asbestos something else. I guess on the theory that if you don’t call it asbestos then it can’t cause asbestos-related disease. You see, [J&J] and the other talc companies argued that these minerals come in different forms, they grow in the ground in different forms. On the right you see something very fibrous, you see all the fibers. On the left it’s rocky, it’s chunky and it’s non-fibrous. And they argued and they claimed that there is a difference when it comes to . . . the ability to cause disease . . . on whether or not the single fiber that gets into the lungs, that gets into the pleura, that attacks the cells grew up one way or grew up another. . . . The defendants will urge everyone to adopt these other definitions. And our experts will tell you it doesn’t matter what you call something. The cells of our body don’t know the difference about where they grew up, . . . whether they grew up as a fiber or as a rock. It’s the same mineral. It’s the same chemistry. It’s the same dimensions. It causes the same diseases. . . . .[Webber is] going to explain to us that it doesn’t matter what you call it, it matters whether or not it can be breathed in and it matters whether or not it can penetrate all the way to where the cancer starts. That’s the important thing.” [(Emphasis added).]

If the jury accepted the experts’ unverified opinions, it could certainly believe that it did not matter, in terms of the ability to cause disease, whether Longo correctly identified the structures he found in the vintage samples as bundles or whether those structures were asbestiform or non-asbestiform.

Based on the testimony of plaintiffs’ experts, and plaintiffs’ opening and closing remarks, the jury could have concluded that the term “asbestos” in the question on the verdict sheet referred to non-asbestiform as well as asbestiform minerals, an unfair and inappropriate conclusion.

Therefore, the trial court did not perform its gatekeeping function and erroneously permitted the “experts” to testify concerning their untested opinion that non-asbestiform minerals could cause mesothelioma.  Therefore, the judgment was reversed and remanded for new trials for both defendants.

Once the jury was permitted to draw an adverse inference that Imerys’ talc was contaminated with asbestos, it would be difficult, if not impossible, for the jury not to make the same finding as to JJCI. Therefore, the trial court erred by failing to sever the claims against JJCI and Imerys.

The trial court erred by allowing the jury instructions improperly constrained consideration of alternative causes of Mr. Lanzo’s illness; and there was insufficient evidence to support the jury’s verdicts.

ZALMA OPINION

Turning a $117 verdict into nothing more than wallpaper was the result of the over-use of experts to render opiniona for which they were not qualified; coupled with unfounded opening and closing statements by plaintiffs’ counsel, resulted in reversal because the trial court allowed the plaintiffs’ counsel and their experts to deceive the jury. Defense counsel protected the record and the appellate court had no option but to reverse, covering its decision with a more than 50 page opinion although the decision was based on a single mistake in allowing overblown testimony from experts. Whichever insurer or insurers insured the defendants can breathe sighs of relief until the new trial and they will be prepared to effectively defend the charge.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4.

 

 

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A Video Explaining the Requirements of “Additional Insured” Provisions in a Construction Contract

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“Additional Insured” Requirements of Construction Contracts and Policies

See the full video at https://rumble.com/vg7oeh-a-video-explaining-the-requirements-of-additional-insured-provisions-in-a-c.html and at https://youtu.be/aBnA3wJkg8g

Although the “additional insured” requirement provides additional security to the owner and architect, it can add to the cost of insurance. Regardless, the requirement is often included in contract documents and, if not carefully drafted, can result in multiple disputes as to which insurer is required to defend which insured. Construction contract language should be designed to avoid such disputes.

An owner and a contractor should make every effort to obtain language in their contract forms that will avoid ambiguous “additional insured” endorsements. The form language in the example above includes a requirement that the contractor provide the owner with a certificate, a copy of the actual endorsement making the owner an additional insured, and a copy of the entire policy. An owner who receives an endorsement should read it carefully and if it is not clear, then the owner should demand that it be clarified.

The requirements are usually verified by the contractor providing to the owner, architect, and others a “certificate of insurance” that is a statement by an insurance agent or broker that insurance exists at the time the certificate is signed in the amounts stated in the certificate by the insurers represented. A certificate is not insurance but only evidence of insurance at a specific time. Certificates often promise to advise the certificate holder if the policy is cancelled or otherwise goes out of force.

Parties to such contracts must carefully review their insurance contracts and be certain that their agents and brokers obtain policies that provide for such waivers of subrogation. Failure to do so can void the insurance contract as was held by the California Court of Appeals in Liberty Mutual Insurance Co. v. Altfillisch Construction Co., 70 Cal.App.3d 789, 139 Cal.Rptr. 91 (Cal.App.Dist.4 1977) where the court held that the waiver was “clearly a breach of the insured’s implied covenant of good faith and fair dealing.”


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Insurers Who are Victims of Insurance Fraud Should Demand Restitution

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Insurance Fraud Perpetrator Must Pay Restitution as a Condition of Probation

Ryan Patrick Natividad appealed from a post-judgment order after the trial court ordered him to pay over $75,000 in restitution. Natividad argued that the trial court abused its discretion by ordering he pay restitution. Failure to pay the restitution can cause Natividad to have his probation revoked and spend time in jail.

In The People v. Ryan Patrick Natividad, G058448, Court Of Appeal Of The State Of California Fourth Appellate District Division Three (April 14, 2021) the Court of Appeal explained why probation requires payment of full restitution if the amount assessed by the trial court is proper and reasonable even if the victim has other potential remedies.

FACTS

A complete recitation of the facts can be found in People v. Natividad (Nov. 8, 2019, G055248) [nonpub. opn.]. Suffice it to say, Natividad, a police officer, claimed he injured his right hand while on duty, but camera footage proved he didn’t. A jury convicted him of insurance fraud.

The trial court suspended imposition of sentence and placed Natividad on formal probation for three years. The court ordered him to serve 180 days in jail on electronic supervision. As a condition of probation, the court ordered he pay restitution in an amount determined by the probation department.

Natividad requested a restitution hearing on the amount of restitution. At the hearing, the prosecution offered five exhibits and the testimony of a Costa Mesa (City) human resource analyst (Employee). Natividad did not dispute the City’s restitution request for medical expenses, attorney’s expenses, and investigation costs related to the workers’ compensation claim for his hand injury. Natividad, however, challenged the City’s payment of insurance premiums, and the City’s payment of salary, benefits, and insurance.

Employee testified the City placed Natividad on administrative leave with pay in January 2015 because it was investigating his workers’ compensation claim for fraud. She stated that in July 2015, the City learned he was not available as required by the administrative leave process and it stopped paying him. She said that same month the City received a doctor’s note from a neurosurgery facility that indicated he had been under medical care since May 2015, but he never notified the City of an illness as required by the memorandum of understanding. As relevant here, Employee explained that when an employee was absent without pay, he was responsible for paying insurance premiums.

She added Natividad exhausted his accrued leave in September 2015 and he was required to personally pay for his insurance. Employee stated the City continued to provide him, and his wife and son, insurance coverage as was the City’s practice, and it invoiced him directly for October, November, and December 2015, and January 2016.

The prosecutor argued that but for Natividad’s criminal act, the City would not have paid him salary and his benefits. The prosecutor acknowledged Natividad’s position the City could recover the over-payment via another remedy, but the City suffered the loss “because of what he started.”

After expressing sympathy for Natividad’s health condition, the trial court concluded “the first cause of all this was the alleged and now established workers’ comp[ensation] fraud, and I don’t think the [C]ity should be compelled to pursue other remedies.” The court added the evidence demonstrated the City provided Natividad and his wife and child health coverage even though he was not entitled to it because he had a brain tumor and he probably could not get other health coverage. Thus, the court ruled that all the requested amounts should be included in the restitution order.

DISCUSSION

Natividad argued the trial court abused its discretion by ordering him to pay restitution of $7,782.56 for insurance premiums that were not related to or resulting from his criminal act.

The trial court is authorized by statute to impose restitution as a condition of probation.  In People v. Anderson (2010) 50 Cal.4th 19, 27 (Anderson), our Supreme Court stated, “While restitution under section 1203.1 may serve to compensate the victim of a crime, it also addresses the broader probationary goal of rehabilitating the defendant. ‘”Restitution is an effective rehabilitative penalty because it forces the defendant to confront, in concrete terms, the harm his actions have caused.”‘ [Citation.] Restitution ‘impresses upon the offender the gravity of the harm he has inflicted upon another, and provides an opportunity to make amends.’ [Citation.]”

California courts have long interpreted the trial courts’ discretion to encompass the ordering of restitution as a condition of probation even when the loss was not necessarily caused by the criminal conduct underlying the conviction. There is no requirement the restitution order be limited to the exact amount of the loss in which the defendant is actually found culpable, nor is there any requirement the order reflect the amount of damages that might be recoverable in a civil action.

The trial court recognized Natividad’s criminal act was not the direct cause of the City paying $7,782.56 for insurance premiums, a point the Attorney General agrees with. However, the court reasoned his criminal act was “the first cause of all this.” The court concluded that on balance, the amount should be made part of the restitution order. The trial court’s comments establish it reasonably concluded justice required Natividad to repay the City because his breach of the law triggered the events that resulted in the City’s loss.

The trial court’s conclusion that based on the facts in this case, Natividad’s conduct was “the first cause” did not exceed the bounds of reason. The court did not abuse its discretion.

ZALMA OPINION

Although victims of insurance fraud have many available remedies – like suing the perpetrator for fraud – it takes time to get a judgment and the judgment may be difficult or impossible – bankruptcy – to collect. A restitution order gives the fraudster two choices: pay the restitution or go to jail. That is a great incentive and the fraudster will invariably find the money rather than go to jail. Therefore, every insurer that is the victim of insurance fraud, must demand restitution and provide the court with the evidence necessary to prove the amount of loss as a result of the fraud, including all investigative and legal costs incurred as well as claim payments made.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

Posted in Zalma on Insurance | Leave a comment

A Video Explaining the Construction Contract

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The Construction Contract

See the full video at https://rumble.com/vg5ryd-a-video-explaining-the-construction-contract.html  and at https://youtu.be/3NxCPmhZJCg

When a construction contract, like every other contract, is unambiguous, the parties’ intent may be determined from the contract alone, and it is the duty of the court—not the jury—to state its meaning.

Construction contracts are governed by the same rules as all other contracts. When a court is called upon to interpret a construction contract its terms are given their ordinary and generally accepted meaning with the court working to give effect to the intent of the parties to the contract unless the contract itself gives special meaning to the contract.

A construction contract should always be written. It should, like all other contracts, set forth in detail the duties and obligations of the parties to the contract. It should communicate the scope of work to be rendered and the extent to which each party is involved in the differing aspects of the project.

Contracts serve as means of documenting the services and assets to be exchanged during the course of a project. The contract is important not only to finalize the deal in the minds of the parties to the construction project, but also to help define the performance of the work and may even determine who bears the tax burden.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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When Granted Non-Custodial Probation it is Insulting to Appeal the Conviction

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Insurance Fraud is is Inimical to Public Safety, Welfare and Order

Alexander Goldinsky appealed from a guilty plea to third-degree insurance fraud and was sentenced to two years’ probation instead of being placed in New Jersey’s Pretrial Intervention Program (PTI). In State Of New Jersey v. Alexander Goldinsky, Docket No. A-1474-19, Superior Court Of New Jersey Appellate Division (April 14, 2021) the Appellate Division was asked to reverse Goldinsky’s plea and place him in the PTI.

FACTS

Defendant staged an accident at his workplace. He alleged that he slipped and fell in the cafeteria. Surveillance video revealed that defendant filled a cup with ice, threw the ice on the floor, and laid on top of it. Defendant was transported by ambulance to the hospital, where he told medical personnel that he had slipped, fallen, and injured himself. Defendant knew this false information would be provided to his health insurer, Oscar Garden State Insurance Company (Oscar). Oscar paid $563.49 to cover the ambulance bill.

Defendant’s fraudulent conduct did not end at the hospital. He falsely claimed that as a result of the accident, he developed stuttering speech, suffered from constant headaches, started dropping items when he holds them in both hands, and experienced painful “frozen spasm sensations” and heavy eyelids that wanted to close. Defendant was examined by a neurologist, who despite defendant’s description of the accident and resulting symptoms, concluded: “The stuttering and hypersomnolence are atypical, even for a concussion. It is questionable whether he had a concussion or not. I suspect the symptoms are mainly psychogenic, perhaps a conversion reaction to the stress of the trauma. I doubt these symptoms are due directly to brain injury or a concussion.”

A Middlesex County grand jury returned a four-count indictment charging defendant with multiple counts of insurance fraud.

Defendant, who had no prior juvenile or adult criminal history, applied for admission to PTI. The PTI director recommended defendant’s acceptance into the program. The PTI recommendation report noted defendant was fifty-seven years old, divorced, and reported his mental health as good. The report stated that “defendant was remorseful about the crime . . . and is willing to provide restitution to the victim for their monetary loss.” The report concluded that “PTI would serve as a sufficient sanction to deter future criminal conduct” and that the crimes defendant was charged with were “not [of] such a nature that the value of supervisory treatment would be outweighed by the public need for prosecution.”

The recommendation was overruled by the prosecutor. In a detailed, eight-page, single-spaced letter, the prosecutor considered the statutory factors and concluded defendant was not a suitable candidate for diversion. The court accepted the recommendation of the prosecutor and on the same day defendant pled guilty to count one in exchange for a recommended sentence of non-custodial probation conditioned upon paying restitution in the amount $563.49 to an insurer, and dismissal of the remaining three counts.

Defendant was sentenced in accordance with the plea agreement to a two-year, non-custodial term of probation subject to certain conditions, including making restitution to Oscar Garden State Insurance Corporation in the amount of $563.48 and performing fourteen hours of community service.

ANALYSIS

Defendant sought reversal because he felt that he was entitled to admission to The Pretrial Intervention Program. PTI is a diversionary program through which certain offenders are able to avoid criminal prosecution by receiving early rehabilitative services expected to deter future criminal behavior.

PTI is essentially an extension of the charging decision, therefore the decision to grant or deny PTI is a quintessentially prosecutorial function. Prosecutorial discretion in this context is critical for two reasons. First, because it is the fundamental responsibility of the prosecutor to decide whom to prosecute, and second, because it is a primary purpose of PTI to augment, not diminish, a prosecutor’s options

In respect of the close relationship of the PTI program to the prosecutor’s charging authority, courts allow prosecutors wide latitude in deciding whom to divert into the PTI program and whom to prosecute through a traditional trial. The deference has been categorized as “enhanced” or “extra” in nature. Thus, the scope of review is severely limited.

Trial courts may overrule a prosecutor’s decision to accept or reject a PTI application only when the circumstances clearly and convincingly establish that the prosecutor’s refusal to sanction admission into the program was based on a patent and gross abuse of discretion. A defendant challenging the prosecutor’s recommendation against enrollment into PTI must establish that the decision was a patent and gross abuse of discretion.

Although this was defendant’s first criminal charge, the interests of society may justify the denial of an application for admission into PTI even though a defendant has led an exemplary life except for the conduct which forms the basis of the pending criminal charges. The trial court stated it disagreed with the prosecutor’s decision. It correctly abided by the principle, however, that a trial court must not substitute its own discretion for that of the prosecutor even where the prosecutor’s decision is one which the trial court disagrees with or finds to be harsh.

The Legislature has declared that “[i]nsurance fraud is inimical to public safety, welfare and order within the State of New Jersey” and that “[a]ll New Jerseyans ultimately bear the societal burdens and costs caused by those who commit insurance fraud,” N.J.S.A. 2C:21-4.4(a).

Defendant did not satisfy his burden. He has not proven by clear and convincing evidence that the prosecutor’s rejection of defendant’s PTI application amounted to a patent and gross abuse of discretion. Defendant has not demonstrated that the prosecutorial veto (a) was not premised upon a consideration of all relevant factors, (b) was based upon a consideration of irrelevant or inappropriate factors, or (c) amounted to a clear error in judgment. Nor has he shown that the prosecutor’s decision clearly subverted the goals underlying PTI. The rejection was neither unjust nor unfair.

Conversely, granting defendant PTI would not necessarily serve all the goals of PTI set forth in the statute. The prosecutor properly considered and weighed each of the relevant factors in reaching the decision to reject defendant’s application. The sentence and rejection of PTI was affirmed.

ZALMA OPINION

Insurance fraud is a serious crime – whether effective in great amounts or small – and deserves punishment. There was no question that Goldinsky was guilty of the crime. He faked the trip and fall on video, admitted the crime, and was luck that he was only sentence to two years of unsupervised probation. Instead, he appealed the chance to avoid a conviction and wasted the time of the appellate court. His crime was clear, premeditated and effective. He deserved jail time and avoided it.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

 

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A Video Explaining the Basics of Construction Defects & Insurance

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Allegations of Construction Defects is one of the Most Active Areas of Litigation in the United States

See the full video at https://rumble.com/vg44bf-a-video-explaining-the-basics-of-construction-defects-and-insurance.html and at https://youtu.be/zRezpACnPeA

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

Construction defect suits are now flooding the courts of North America in greater numbers every year. Construction Defects & Insurance is designed to help the property owner, builder, construction professional, insurer, insurance professional, construction defect plaintiffs’ lawyer, construction defect defense lawyer, and those who support them.

Anyone faced with construction defect issues can use the series of books to effectively avoid or resolve claims of such defects. It covers identification of construction defects, and explains how to insure, investigate, prosecute, or defend litigation that results from claims of construction defect.

All buildings have an expected life span. None, except perhaps the Egyptian Pyramids, were designed to last eons. Yet, even the pyramids in Egypt will erode to a mound of sand given enough time, wind, water and the movement of tectonic plates. Their demise will be an expected result of age and erosion rather than a construction defect. Venerable, well-constructed, structures seldom fail because of their advanced age. Usually, they are torn down and replaced with new structures before they have time to waste away.

The dollars involved in construction defect litigation have grown exponentially. If a problem exists in a multiple unit condominium association or a housing tract, minor repairs of the defects multiply over the various units to millions of dollars. In addition, the complexity of a construction defect suit usually results in hundreds of hours of work for attorneys, and the need for separate counsel for each party defendant like the owner, architect, general contractor and each subcontractor.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Intentional or Criminal Act Exclusion Must be Resolved Before an Appeal

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Piecemeal Appeals are Disfavored

In a case where the plaintiff appealed the trial court’s judgment, which granted a partial summary judgment in favor of the defendant, the Louisiana Court of Appeal was faced with an incomplete judgment. In Gerald J. Asay v. SAFECO Insurance Company Of Oregon, 2020 CA 0852, State Of Louisiana Court Of Appeal First Circuit (April 16, 2021) the court was faced with a situation where it was shown that the case would result in multiple appeals.

FACTS

On October 24, 2014, Gerald Asay, an attorney, was involved in an automobile accident with his estranged wife, Paige, and her boyfriend, Robert Vial. Mr. Asay rear-ended the vehicle being driven by Mr. Vial while it was stopped at a red light. Paige was a passenger in the vehicle, and the Asays’ three-year-old daughter was in the backseat. The accident also caused Mr. Vial’s automobile to collide into the vehicle in front of it. The accident resulted in civil, criminal, and state bar disciplinary proceedings being instituted against Mr. Asay.

On June 16, 2015, Mr. Asay filed a Petition for Declaratory Judgment naming Safeco Insurance Company of Oregon (Safeco) as defendant. In his petition, Mr. Asay alleged that he was the named insured under an automobile insurance policy issued by Safeco that provided coverage for liability on the part of Mr. Asay and coverage for damage to his vehicle. Mr. Asay asserted that he was driving at a high rate of speed in an effort to catch up to Mr. Vial’s vehicle, which was stopped at a red light and that although he “braked heavily,” the accident occurred. He further alleged that, after the accident, he made a claim with Safeco, who declined coverage based on the determinations that the loss arose out of a “criminal act” and an “intentional act” thereby excluding coverage. Mr. Asay averred that there has been no adjudication that he was guilty of either a criminal act or an intentional act, and he requested a judgment declaring that the insurance policy provided coverage for the subject accident.

Thereafter, Safeco filed its answer and defenses, pleading the provisions and exclusions in the automobile policy, as well as in an umbrella policy, both issued to Mr. Asay.  Safeco filed a motion for summary judgment, asserting that Mr. Asay was seeking insurance coverage for his “October 2014 road-rage incident in which he intentionally rammed into a stopped car carrying his estranged wife and her then-boyfriend.” According to Safeco, because Safeco’s policies contained “intentional act” and “criminal act” exclusions, summary judgment excluding coverage was appropriate.

Mr. Asay filed a motion for partial summary judgment, seeking a declaration that the criminal act exclusion did not apply. In connection therewith, he filed one memorandum in support of his cross-motion for summary judgment and in opposition to Safeco’s motion for summary judgment. Mr. Asay asserted that although the automobile policy’s collision coverage section contained an exclusion for intentional acts, the collision coverage section of the policy did not contain a criminal act exclusion. He further averred that the criminal act exclusion with regard to liability coverage did not apply because he had neither been convicted nor entered a guilty plea to any crime as a result of the accident and that all criminal charges against him had been dismissed.

The trial court denied Safeco’s motion for summary judgment based on the applicability of the intentional act exclusion, finding that a genuine issue of material fact existed as to whether Mr. Asay harbored the requisite intent to cause property damage or bodily injury. However, the trial court found no genuine issue of material fact that the criminal act exclusion in Safeco’s policies was applicable. With regard to Mr. Asay’s motion for partial summary judgment, the trial court found that a genuine issue of material fact remained as to Mr. Asay’s intent, precluding the partial summary judgment.

The trial court denied Safeco’s motion for summary judgment with respect to Mr. Asay’s claim for collision coverage under Safeco’s automobile insurance policy. The trial court also denied Mr. Asay’s motion for partial summary judgment.

DISCUSSION

In this case, the judgment was designated as a final judgment under Louisiana Code of Civil Procedure article 1915B. Article 1915B(1) provides: “When a court renders a…partial summary judgment…, as to one or more but less than all of the claims, demands, issues, or theories against a party, whether in an original demand, reconventional demand, cross-claim, third-party claim, or intervention, the judgment shall not constitute a final judgment unless it is designated as a final judgment by the court after an express determination that there is no just reason for delay.”

However, appellate courts are not limited by the findings of a trial court and have the duty to examine subject matter jurisdiction even when the parties do not raise the issue. If no reasons for the certification are given, but some justification is apparent from the record, the appellate court should make a determination of whether the certification was proper.

Historically, Louisiana courts, like those of almost every state, have had a policy against multiple appeals and piecemeal litigation, with a goal of promoting judicial efficiency and economy in the administration of justice.

The trial court judgment partially dismissed Mr. Asay’s claim for a declaration of insurance coverage based on Safeco’s defense regarding the criminal act exclusion. Safeco’s defense that the intentional act exclusion also applies remains and has not been adjudicated. Therefore, even if the appellate court was to find the criminal act exclusion to be inapplicable to Mr. Asay’s claim for liability coverage under the automobile and umbrella insurance policies, the issue of the applicability of the intentional act exclusion would still exist. Moreover, Mr. Asay did not assert a claim for coverage under the umbrella policy in his petition for declaratory judgment, but the trial court granted summary judgment on the liability coverage in the umbrella policy. Whether the trial court properly ruled on coverage under the umbrella policy remains as an issue, adding to the possibility of piecemeal appeals.

Given the nature of the claims and the procedural posture of this case, addressing the issues at this time would promote piecemeal appeals and would not make review available at a time that best serves the parties.  As a result the court dismissed the appeal.

ZALMA OPINION

Insurance disputes often involve different issues when more than one condition or exclusion applies to a loss, claim or suit. In this case the trial court resolved one small part of the issues raised by Mr. Asay’s claim for declaratory relief. Since the trial court only resolved one of the issues and left several for resolution later or at trial it was improper to certify the judgment as final allowing an appeal. The Court of Appeal refused to take on the issue until the case is complete in the trial court and sent it back until all issues are resolved and the potential for piecemeal appeals are disposed of by the trial court.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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A Video Explaining the Effect of the Tort of Bad Faith

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Why it is Time to Abolish the Tort of Bad Faith

See the full video at https://rumble.com/vfzibb-a-video-explaining-the-effect-of-the-tort-of-bad-faith.html  and at https://youtu.be/71YiqNf-wQs

It is indisputable that in the 1950’s, 1960’s and 1970’s the insurance industry abused some insureds to avoid paying legitimate claims. Without a factual basis, insureds were accused of arson or other variations on insurance fraud. Indemnity payments were refused on the flimsiest of excuses. People were found to have diseases that only horses could catch. Disability payments were refused because an insured was wheeled in her wheelchair to church one day and, therefore, was not totally house-confined. Insureds were driven into bankruptcy when reasonable demands within policy limits were refused.

To stop this abuse, the courts of the state of California invented the tort of bad faith. It took a universal contract remedy and decided that the breach of an insurance contract without, what the court decided was proper, genuine or even fairly debatable reasons, was transferred from a contract breach into a new tort. Many other states have followed the lead.

Until the invention of the tort of bad faith all that an insured could collect from an insurer that wrongfully denied a claim were the benefits due under the policy. After the creation of the tort of bad faith, the courts allowed the insureds to collect, in addition, the entire panoply of tort damages, including punitive damages.

It worked. Insurers treated the insureds better. The threat of punitive damages made insurers wary of rejecting any claim. The creation of the tort of bad faith was in many ways a good thing for insurers and insureds. What the courts that created the tort of bad faith did not recognize was that it was also the key to Pandora’s box of abusive lawyers who found it to be a new profit center for their practices.

Bad faith litigation is not a game, where insureds are free to manufacture claims for recovery. It is time that it is abolished from litigation in the United States


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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A Release Should be Interpreted to Carry Out the Intent of the Parties

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There Ain’t No Such Thing as a Free Lunch

In an action to recover damages for medical malpractice, etc., the defendant Sandra McCalla appeals an order that granted the plaintiffs’ motion, in effect, to amend an infant compromise order dated August 12, 2014 to eliminate an inadvertent release of McCalla. In Jonathan S., etc., et al. v. Nancy Benjamin, etc., et al., Sandra McCalla, etc., 2019-00330, Supreme Court of New York, Appellate Division, Second Judicial Department (April 21, 2021) McCalla asked that the release be honored and she be released from the litigation.

FACTS

The plaintiffs sued to recover damages for medical malpractice was commenced in 2002 against the defendant St. Vincent’s Catholic Medical Center/St. Mary’s Hospital of Brooklyn (hereinafter St. Vincent) and others, including the defendant Sandra McCalla. After St. Vincent’s bankruptcy in 2005, a settlement was reached, in March 2014, between the plaintiffs and St. Vincent, pursuant to which the plaintiffs were required, to provide general releases to St. Vincent as well as the defendants Michael Tugetman, Jean Clarke-Brown, Lydia Appaiah Dwamena, and Pierre Toussaint Health Center (hereinafter collectively the settling defendants). The settling defendants were all insured by St. Vincent, and it was expressly understood that this action would be allowed to continue against other defendants—including McCalla—who had third-party insurance coverage.

The Supreme Court entered an infant compromise order dated August 12, 2014 (hereinafter the ICO), approving the settlement. Among other things, the ICO expressly discontinued the action insofar as asserted against the settling defendants only, and authorized the plaintiff Nyree Hickman, as the infant’s natural guardian, to execute and deliver general releases required to effectuate the settlement.

Who Was Intended to be Released

The general release executed by Hickman named only the settling defendants and other entities expressly required to be released under the terms of the settlement. Moreover, consistent with the parties’ intent to release only persons who were insured through St. Vincent, the general release contained language extending the scope of the release to “all other potential or possible tortfeasors . . ., whether presently known or unknown, who are insured through and/or owed any obligation or indemnity by [St. Vincent]” (emphasis added). However, the general release also contained boilerplate language purporting to extend the benefit of the release to all “employees, servants [and] agents” of each of the named releasees.

After the entry of the ICO, the action continued against the remaining defendants, including McCalla. More than three years later, McCalla sought to dismiss the action insofar as asserted against her on the ground that she was an employee of St. Vincent at the time of the alleged malpractice and was therefore covered by the terms of the general release. The plaintiff subsequently moved, in effect, to amend the ICO to the extent of vacating any provision of the settlement documents purporting to release the infant plaintiff’s claims against McCalla. The Supreme Court granted the motion, and McCalla appealed.

ANALYSIS

Under the specific circumstances of this case, the appellate division could discern no reason to disturb the Supreme Court’s determination that the benefit of the ICO—including the general release—was never intended to extend to McCalla. Despite the release’s use of “standardized, even ritualistic, language,” there is no direct or circumstantial proof that the purpose of the ICO was to settle the infant plaintiff’s claims against defendants such as McCalla who had the benefit of third-party insurance coverage. A release may not be read to cover matters which the parties did not desire or intend to dispose.

The order was affirmed.

ZALMA OPINION

A release is a contract. A contract may be changed by exercise of the equitable doctrine of reformation. In this case the parties clearly had no intent to release McCalla since she had independent insurance and was not left in the lurch by the bankruptcy. The trial court reformed the “boiler plate” language to keep McCalla in the suit. Equity was done and the intent of the contract was affirmed and McCalla’s insurer will be compelled to indemnify her for any liability she has to the infant.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

 

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New: “Property Insurance Checklists, 13th Edition”

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Now Available from Thomson Reuters a New Book From 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. Available at https://store.legal.thomsonreuters.com/law-products/Forms/Property-Investigation-Checklists-Uncovering-Insurance-Fraud-13th/p/106702361 and as a THOMSON REUTERS PROVIEW eBOOK EDITION https://store.legal.thomsonreuters.com/law-products/Forms/Property-Investigation-Checklists-Uncovering-Insurance-Fraud-13th/p/106702363


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

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A Video Explaining the Marine Rule & Rescission of Insurance

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The Marine Rule

See the full video at https://rumble.com/vfy5av-a-video-explaining-the-marine-rule-and-rescission-of-insurance.html and at https://youtu.be/FjBJNKsg2Fg

In some states, even if the false statements made in the application were not warranties but were merely misrepresentations or concealments (whether innocent or intentional), grounds exist for rescission.  Fraud need not be proved; this is called the Marine Rule.

In Gates v. Madison County Mut. Ins. Co. (5 N.Y. 469, 55 Am.Dec. 360, a “marine rule imposes on the insured, although no inquiry be made, to disclose every fact material to the risk, within his knowledge.” In other words, an applicant for marine insurance must state all material facts which are known to him and unknown to the insurer (Alexander, Ramsey Kerr v. National Union Fire Ins. Co., 104 F.2d 1006, 1008).

The Supreme Court of Rhode Island, applying the Marine Rule in Guardian Life Insurance Company of America v. Alfred E. Tillinghast, 1986 RI 2219 (1986), found there was no need to prove fraud, even if pleaded, where a material misrepresentation is sufficient to rescind the policy.

 


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

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Ninth Circuit Confirms Ability of State to Write into a Policy an Exclusion not Considered by the Parties

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California Statute Prohibits Insurer from Defending a Unfair Competition and False Advertising Law

California enacted a statute, Insurance Code § 533.5(b) to prevent insurers from providing a defense or indemnity to a party sued by the state for Unfair Competition or False Advertising. Adir International challenged the statute in the Ninth Circuit Court of Appeal after California’s Attorney General sued Adir International, LLC for violating state consumer protection laws.

Adir’s insurer, after initially agreeing to provide coverage, Starr Indemnity, refused to continue to pay for Adir’s defense pursuant to California Insurance Code § 533.5(b), which forbids insurer coverage in certain consumer protection cases brought by the state. In ADIR International, LLC, DBA Curacao, FKA La Curacao, a Delaware Limited Liability Company; Ron Azarkman, an individual v.  Starr Indemnity And Liability Company, a Texas Corporation, No. 19-56320, United States Court Of Appeals For The Ninth Circuit (April 15, 2021) the Ninth Circuit resolved the dispute after the District Court agreed with Starr.

ISSUE

California’s Attorney General sued Adir International for violating state consumer protection laws. To defend itself, Adir asked its insurance carrier to pay its legal fees. The insurer agreed, but the Attorney General warned that California Insurance Code § 533.5(b) forbids it from providing coverage in certain consumer protection cases brought by the state. The insurer reversed itself and said it would no longer pay for Adir’s legal defense. Adir challenged the law’s constitutionality, arguing that the state unfairly stripped it of insurance defense coverage based on unproven allegations in the complaint.

BACKGROUND

Adir operates a retail chain called Curacao with stores in California, Nevada, and Arizona. In 2017, the California Attorney General sued Adir and its Chief Executive Officer, Ron Azarkman, for unfair and misleading business tactics that allegedly exploit Curacao’s mainly low-income, Spanish-speaking customer base. The complaint alleged violations of California’s Unfair Competition Law (UCL) and False Advertising Law (FAL), and sought restitution, civil penalties, costs of suit, and other equitable relief. Relevant for this appeal, the complaint sought injunctive relief permanently enjoining Adir from making any false or misleading statements in violation of the FAL and engaging in unfair competition in violation of the UCL.

Meanwhile, Adir had bought an insurance policy from Starr Indemnity. The policy provided that Starr would defend and indemnify Adir and its executives for losses arising from certain claims alleging wrongful acts. When the California Attorney General sued, Starr agreed to defend the action under a reservation of rights.

This all halted in March 2019 when Starr received a written warning from the California Attorney General’s Office. In the letter, the Attorney General’s Office explained that Starr violated California Insurance Code § 533.5. (Adir also apparently received a copy of the same letter.) Section 533.5  provides that “Any provision in a policy of insurance which is in violation of subdivision (a) or (b) is contrary to public policy and void.” [Cal. Ins. Code § 533.5.]  A few weeks after receiving the letter from the Attorney General’s Office, Starr informed Adir that it would “stop making any payments for defense costs” and reserved “its rights to seek reimbursement of all amounts paid to date.”

ANALYSIS

On appeal, Adir challenged both the indemnification and the defense provisions of California Insurance Code § 533.5.

As Adir points out, California has stacked the deck against defendants facing these lawsuits filed by the state: Although the Attorney General has yet to prove any of the allegations in his lawsuit, he has invoked the power of the state to deny insurance coverage that Adir paid for to defend itself.

The Ninth Circuit has held that there is “no constitutional right to counsel in a civil case.” United States v. 30.64 Acres of Land, More or Less, Situated in Klickitat Cty., Washington, 795 F.2d 796, 801 (9th Cir. 1986).

The Due Process Clause, like its forebear in the Magna Carta, was intended to secure the individual from the arbitrary exercise of the powers of government. And as a practical matter, that means due process bars the government from actively preventing a party from obtaining counsel or communicating with his or her lawyer in civil cases.

The limited right to retain counsel does not include the indirect right to fund and retain counsel through an insurance policy.

Although Adir complains that California Insurance Code § 533.5(b) is unfair, the statute does not actively prevent Adir from obtaining counsel or communicating with its lawyers.

California’s law only makes it harder, though not necessarily impossible, for a civil litigant to retain the counsel of their choice. Adir has not alleged that the government actively thwarted it from obtaining counsel, or that the law precluded it from communicating with counsel. Indeed, Adir appears to have obtained an able and competent counsel — without the use of insurance proceeds — for this appeal. The Ninth Circuit concluded that Insurance Code § 533.5(b) does not impinge on a due process right to retain counsel.

The text of the Starr policy defines “claim” to encompass a “written demand for monetary, non-monetary, or injunctive relief.” But “claim” is not the same thing as “coverage.” The word “Loss” is in turn defined to include “damages” but to exclude “any amounts paid or incurred in complying with a judgment or settlement for non-monetary or injunctive relief, but solely as respects the Company.”

In any event, given (1) the premise in California law that the duty to defend is always broader than the duty to indemnify and (2) because there is no duty to defend any criminal or civil proceeding under the UCL or FAL (including this action), there would be no reason to suggest a duty to indemnify in this action under subsection (a) of the statute.

When the law requires a wrongdoer to disgorge money or property acquired through a violation of the law, to permit the wrongdoer to transfer the cost of disgorgement to an insurer would eliminate the incentive for obeying the law. Otherwise, the wrongdoer would retain the proceeds of his illegal acts, merely shifting his loss to an insurer. The plain meaning of the statutory text of California Insurance Code § 533.5(b) forecloses defense coverage for any claim in an UCL or FAL action in which the state seeks monetary relief. Here, the state seeks (among other things) monetary relief against Adir under the UCL and FAL. The statute thus bars defense coverage for Adir.

The text of the insurance policy explicitly provides for a right to reimbursement of defense costs.

The Ninth Circuit affirmed the district court’s ruling that Starr is entitled to a reimbursement of defense costs.

CONCLUSION

Cal. Ins. Code § 533.5(b) did not facially violate the due process right of insurance holders to fund and retain the counsel of their choice in the civil context. The panel also rejected Adir’s statutory argument that section 533.5 applied to actions involving only monetary relief. The panel further held that under the plain text of the statute, it applied to actions that seek injunctive relief along with monetary relief.

California Insurance Code § 533.5(b) — which nullifies an insurance company’s duty to defend — does not facially violate a party’s due process right to retain counsel. In civil cases, courts have recognized a denial of due process only if the government actively thwarts a party from obtaining a lawyer or prevents it from communicating with counsel. Adir has made no such allegation. While it cannot tap into its insurance coverage, Adir has managed to obtain and communicate with counsel. Under the plain text of the statute, it applies to actions that seek injunctive relief along with monetary relief.

ZALMA OPINION

Insurance is a contract of indemnity that provides defense or indemnity for contingent or unknown events. It is also subject to state statutes that control the use of insurance to the public. In this case § 533.5 prohibited Starr from providing a defense or indemnity to Curacao and was entitled to a return of the money it spent under a reservation of right to defend Curacao until it withdrew its defense after it was warned by the state of California that its action was in violation of the statute. In essence, the state effectively rewrote the terms, conditions and provisions of the policy and added an exclusion to defense and indemnity that was not in the contract of insurance.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

 

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A Video Explaining When and How to Advise an Insured a Claim is Denied

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The Denial Must Be in Writing Setting Out All Reasons for the Denial

See the full video at https://rumble.com/vfwjo5-a-video-explaining-when-and-how-to-advise-an-insured-a-claim-is-denied.html and at https://youtu.be/irBuB4NmRL0

Once a claim is denied, the insured no longer need comply with the conditions of the policy.  He or she need not submit a sworn proof of loss nor respond to requests for records or an examination under oath.  Therefore, an insurer should not make the decision to deny a claim until it is convinced that it has completed a thorough investigation.

If the investigation reasonably justifies a denial of the claim, the insured should always be notified in writing.

After the investigator is convinced that the investigation is complete and the file is properly documented, all the information must be gathered and evaluated in an objective and impartial manner. A fair and thorough analysis will negate charges of bad faith or malice to the insured. All information that can be corroborated must be corroborated by the fraud investigator.

Advice of counsel is not an absolute defense to a bad faith action. It is often no defense at all. Sometimes, if the insurer refuses to give the lawyer all of the information, it is evidence of bad faith.  Most courts agree that the advice of counsel is only evidence to be considered in determining whether the insurer denied a claim in bad faith.

On the other hand, denial can be enforced if the insured – even on the advice of counsel – refuses to fulfill a required condition of the policy. Therefore, the insured’s purported reliance on the alleged advice of counsel in refusing to answer an insurer’s questions and failing to supply requested documentation did not excuse her failure to comply with the policy conditions requiring her to supply the requested documents and answer material questions at her EUO. The insurer properly denied coverage on the basis that the insured’s failure to comply constituted material breaches of her contractual duties.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

Posted in Zalma on Insurance | Leave a comment

Felons are Less Likely to be Deterred from Lying Under Oath

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Prior Criminal Convictions of Insured Goes to Credibility and Should be Admitted

American Modern Home Insurance Company, alleging insurance fraud, sued Aaron S. and Aimee Thomas after a fire destroyed their home. The jury found for the Thomases. [American Mod. Home Ins. Co. v. Thomas, 413 F. Supp. 3d 921, 925 (E.D. Mo. 2019]. American Modern appealed. In American Modern Home Insurance Company v.  Aaron Thomas; Aimee Thomas, LLC Thiemann Real Estate, No. 19-3054, United States Court of Appeals For the Eighth Circuit (April 16, 2021) dealt with a judgment based on a claim of erroneous instructions.

FACTS

American Modern issued a renters’ policy to the Thomases for their apartment. In January 2014, it caught fire. They filed a claim for damage to personal property. American Modern concluded that the fire was intentionally set. Over two years after the fire, it sued the Thomases for declaratory relief. They countersued for vexatious refusal to pay.

In 2017, Mr. Thomas was convicted of three felonies—statutory rape and two counts of statutory sodomy—and sentenced to ten years in prison. State v. Thomas, 567 S.W.3d 282, 283 (Mo. App. 2019) (per curiam). American Modern offered this evidence to impeach his credibility and was prevented from doing so.

ANALYSIS

In a civil case, a court must admit evidence of a past felony conviction not involving a dishonest act or false statement, subject to Rule 403’s balancing factors. Fed. R. Evid. 609(a)(1)(A). The district court excluded Mr. Thomas’s past convictions, ruling that the danger of unfair prejudice, undue delay, and confusing the issues substantially outweighed the probative value.

The Eighth Circuit concluded that the district court erred. Rule 609 is based on the common sense proposition that one who has transgressed society’s norms by committing a felony is less likely than most to be deterred from lying under oath.

The issue is whether Mr. Thomas’s credibility was paramount. The Thomases claim that his credibility was not paramount, because other evidence—expert testimony, photographs, interviews, a 911 call, a taped interrogation, and “scores of exhibits”—could support their version of the events.

The district court acknowledged that credibility was important in this case. The parties presented “diametrically opposed” stories. The entire case thus depended on whose story the jury believed, so witness credibility was “paramount.”  Because the jury had to consider such contradictory versions on the only contested element of the charge against the defendant, permitting evidence relevant to his credibility regarding a felony that is not highly prejudicial, was reasonable and not an abuse of discretion. While it is part of the conventional wisdom to regard crimes such as robbery, rape, and forcible sodomy as being less probative of a witness’s veracity than are offenses involving crimen falsi, a number of courts have approved the admission of evidence of such crimes for the purposes of assessing credibility.

American Modern suggested that the district court include the names, dates, and dispositions of the felonies but exclude the details. The ability to introduce the specific crime is not a license to flaunt its details, however; cross-examiners are limited to eliciting the name, date and disposition of the felony committed.  The Thomases objected that even if the district court omitted the details of the convictions, the jury would speculate about them.

The district court here focused on the danger of unfair prejudice, undue delay, and confusing the issues, especially prejudice to Mrs. Thomas and delay by requiring more voir dire. But, the Eighth Circuit concluded, the three felony convictions were highly probative. Their probative value is not substantially outweighed by the danger of unfair prejudice, undue delay, and confusing the issues.

American Modern argued that in the jury instruction, the district court misstated the law about the meaning of “material” in the insurance policy. The Thomases’ policy stated it “shall be void if any insured, whether before or after a loss, has intentionally concealed or misrepresented any material fact or circumstance or made false statements or engaged in fraudulent conduct relating to this policy.” (Emphasis added.)

The jury instruction defined “material” as: “[A] misrepresentation is material if the fact misrepresented, if stated truthfully, would likely affect the conduct of those engaged in the insurance business acting reasonably and naturally, in accordance with the practice usual among such companies under such circumstances.”

In the absence of guidance from the Missouri Supreme Court for fraudulent proof-of-loss cases, the district court used the definition of “material” from fraudulent application cases. In a fraudulent application case, a fact is material “if stated truthfully, [it] would likely affect the conduct of those engaged in the insurance business acting reasonably and naturally, in accordance with the practice usual among such companies under such circumstances”. In view of the uncertainty in Missouri law, the district court did not abuse its discretion in its instruction about the meaning of material.

The judgment is reversed, and the case remanded for further proceedings consistent with this opinion.

ZALMA OPINION

When veracity is the key to a case evidence of multiple felony convictions should always be available to allow the jury to test the veracity of a witness. In this case, by keeping the insurer from producing evidence that would put in question the veracity of the insured’s claims, it made it difficult, if not impossible, for the insurer to prove its defense of insurance fraud and breach of a material condition of the policy.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

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A Video on a True Crime Story: “Help, My House Is Falling Into the Sea”

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Even Honest People are Tempted To Commit Insurance Fraud

See the full video at https://rumble.com/vfv2g1-a-video-on-a-true-crime-story-help-my-house-is-falling-into-the-sea.html and at https://youtu.be/ZcAbj9S5bsY

Career criminals are not the only people who perpetrate insurance fraud. The temptation has become so great that almost anyone who is given the opportunity, will try. Those who do not premeditate insurance fraud are called perpetrators of soft frauds. Most are small. Some are not. The story that follows is a not a soft fraud but one that was premeditated for a great deal of money by a person who should have known better.

Some years ago, residents of a hillside community received a letter from the county engineer informing them that their houses sat on an active landslide. The engineers concluded that an unusual amount of irrigation water, water from septic systems, and rainfall lubricated an ancient landslide under their homes and that the slide was moving. The engineers were concerned because it was moving at the rate of three inches a year. The houses sitting on the landslide were also moving a few inches a month. Within ten years the houses would be torn apart by the movement if nothing was done to stabilize the hillside.

Homeowners, living on the hill, noticed cracks in the plaster walls. Concrete block walls split at the mortar seams. Cracks formed in the foundation systems. Since the homes on the hill were all valued from $500,000 and $5,500,000, the monetary value of the potential loss of 300 homes on the landslide was enormous. Many of the homeowners gathered and hired counsel to pursue persons responsible for their damage.

As a lawyer the intentional concealment of a material fact with the intent to deceive an insurer to its detriment is fraud, a criminal act, and if convicted, grounds for disbarment. For that reason, the insured accepted the denial and did nothing further about the claim.

Had the insurer not done the minimum investigation and retained the services of a competent engineer it would have paid the $2,500,000.00 claim. Had the insured’s fraud been presented to a prosecutor he could have been arrested, tried and convicted of attempted insurance fraud and would have been disbarred.

He was lucky that the insurer agreed to a mutual rescission of the policy, a return of the premium, and to forget what was attempted.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

Posted in Zalma on Insurance | Leave a comment

When an Insurer Disputes Some Elements of Coverage its Files are Protected

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The Work Product Protection & Insurance

Avatar Property & Casualty Insurance Company sought a writ of certiorari quashing an order granting a motion by its Insureds, Niulsury S. Flores and Ernesto Valdes, to compel production of documents in the Insureds’ breach of contract action for insurance coverage. Avatar Property & Casualty Insurance Company v. Niulsury S. Flores And Ernesto Valdes, Case No. 2D20-2458, District Court Of Appeal Of Florida Second District (April 16, 2021)

BACKGROUND

After their home was damaged in Hurricane Irma in September 2017, the Insureds submitted a claim under their home insurance policy with Avatar. Avatar determined that “there is coverage under [the] policy” and paid the Insureds over $24,000 in January 2018. In July 2018, the Insureds filed a single-count breach of contract action against Avatar alleging that it owed them additional payments under the same policy.

The Insureds sought discovery from Avatar, which produced some documents but withheld others on the basis of work product protection and other objections. The Insureds moved to overrule Avatar’s objections. Their motion was referred to and heard by a magistrate, who entered a recommended order granting the Insureds’ motion. The only finding of fact or conclusion of law in the recommended order states: “This is a dispute over scope and pricing of damages where coverage is not at issue. Therefore, anticipation of litigation is the standard by which to determine protection by the work product doctrine.”

The trial court entered an order generally denying Avatar’s exceptions and approving the magistrate’s recommended order but directing Avatar to submit copies of all objected-to documents for in camera inspection. Following its review of the documents, the trial court entered an order requiring production of four discrete documents (referred to as Documents #3, #5, #6, and #10) but ruling that five other requested items “are privileged and shall not be disclosed.” The trial court noted that one other disputed item had not been provided to the court for review, but the court did not order its production or otherwise address the omission. Avatar then filed its petition for writ of certiorari, contending that the trial court impermissibly ordered it to produce protected documents from its claims file.

Avatar filed the disputed documents under seal with this court. All four documents concern the same Insureds, although they are split between the hurricane loss claim at issue in the Insureds’ lawsuit and another prior claim for a water leak. Documents #5 and #6 predate the loss at issue and address Avatar’s investigation of a different claim for a pre-hurricane leak in the same home. By contrast, Documents #3 and #10 postdate the loss and address the Hurricane Irma claim now at issue. Document #3 is a composite of investigative photographs taken by Avatar’s adjuster. Document #10 is a printout of a Claim Payment Screen from Avatar’s Claims Management System addressing the Insureds’ claim.

ANALYSIS

Avatar asserts that these four documents from its claims file are investigative and claims handling material that are protected from disclosure because coverage remains in dispute. Despite the fact that Avatar has admitted that some coverage exists under the policy, the amount and nature of that coverage remains in dispute, and thus the trial court departed from the essential requirements of the law by overruling the work product objection and directing production of these privileged documents on the express basis that “coverage is not at issue.”

Material injury and a lack of an adequate appellate remedy constitute the jurisdictional threshold for our certiorari review; the first element concerns the merits of the petition. Discovery of “cat out of the bag” material, like documents protected by the work product protection, satisfies the jurisdictional prongs of this test because disclosure of such information may cause irreparable harm.

Case law in Florida is replete with opinions holding that ‘[a] trial court departs from the essential requirements of the law in compelling disclosure of the contents of an insurer’s claim file when the issue of coverage is in dispute and has not been resolved.'” Owners Ins. Co. v. Armour, 303 So. 3d 263, 267 (Fla. 2d DCA 2020).

It is true that there is no privilege under Florida law that automatically attaches to “claims file” material. Nonetheless, without question, materials within an insurer’s claim file will frequently fit within the definition of work product.

Work product is broadly defined to include documents that can fairly be said to have been prepared or obtained because of the prospect of litigation. Consequently, even preliminary investigative materials are privileged if compiled in response to some event which foreseeably could be made the basis of a claim.

Consistent with these principles, Florida courts routinely hold that materials generated during an insurer’s investigation of a claim for coverage constitute protected work product. The magistrate’s express finding, which the trial court adopted, was that the investigative and claims handling materials were not privileged because “coverage is not at issue,” presumably because Avatar admitted that some coverage existed under the policy. That finding is contrary to Florida law, which holds that, regardless of the binary question of whether any coverage exists, the issue of coverage remains disputed for these purposes where the amount of coverage remains to be determined.

When the extent of coverage  remained in dispute despite a partial payment of the policy limits, thereby precluding the simultaneous litigation of breach of contract and bad faith claims the insured’s breach of contract suit against the insurer raised a coverage issue, which was not settled by the insurer’s payment of only part of what the insured was claiming in the breach of contract action.

Since the issue of coverage remains in dispute despite Avatar’s payment of some benefits to the Insureds, the payment was made before the lawsuit was filed, and Avatar’s answer raises several affirmative defenses to coverage, including alleging that the Insureds breached their post loss obligations under the policy. Under the circumstances, the trial court departed from the essential requirements of law by ordering production of Avatar’s investigative and claims handling materials based on the express contrary conclusion that “coverage is not at issue.”

Finally, the mere fact that no litigation arose directly from the Insureds’ prior leak claim that caused Avatar to produce some of the materials at issue does not affect the determination of work-product protection. The view that materials in an insurer’s claim file could not be work product if that claim was settled without litigation is an overly circumscribed view of what constitutes work product. Instead, “the work product doctrine protects documents created in anticipation of terminated litigation as well as anticipated litigation that never materializes.

Because the trial court departed from the essential requirements of the law by ordering production of these protected claims file materials on the mistaken basis that “coverage is not at issue,” the Court of Appeal granted the petition and quashed the order.

ZALMA OPINION

The work product protection – sometimes erroneously called a “privilege” – allows a party’s lawyer’s work to be protected from disclosure to the adversary. When an insurer disputes the amount of money it owes its insured on a claim coverage is disputed and the work done by the insurer is in anticipation of litigation or by its lawyer in preparation for trial is protected from the adversary. If one side gets to read the preparation and analysis of its opponent any litigation would be unfair.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

 

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Some New Books from Barry Zalma

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Insurance and Claims Law Books

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

Of all insurance acquired in the United States, the most common is the homeowners policy and its sister the tenant’s policy that covers everything a homeowners policy covers but the structure.Homeowners insurance is nothing more than a contract between a person seeking insurance and an insurer who promises to protect the insured against the risks of loss to certain described property or liability to third parties. The insurer can be set up as a stock insurance corporation, a mutual insurance company, an interinsurance exchange or a syndicate of insurers writing through an insurance market place like Lloyd’s, London. The person insured can be an individual, a corporation, a partnership, a limited liability company, a limited liability partnership, a joint venture or any other legal entity.

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

It’s Time to Abolish 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.

INSURANCE AS A NECESSITY

Neither the courts nor the governmental agencies seem to be aware that in a modern, capitalistic society, insurance is a necessity. No prudent person would take the risk of starting a business, buying a home, or driving a car without insurance. The risk of losing everything would be too great. By using insurance to spread the risk, taking the risk to start a business, buy a home, or drive a car becomes possible.

Insurance has existed since a group of Sumerian farmers, more than 5,000 years ago, scratched an agreement on a clay tablet that if one of their number lost his crop to storms, the others would pay part of their earnings to the one damaged. Over the eons, insurance has become more sophisticated, but the deal is essentially the same. An insurer, whether an individual or a corporate entity, takes contributions (premiums) from many and holds the money to pay those few who lose their property from some calamity, like fire. The agreement, a written contract to pay indemnity to another in case a certain problem, calamity, or damage that is fortuitous, that is that occurs by accident, is called insurance.

In a modern industrial society, almost everyone is involved in or with the business of insurance. They insure against the risk of becoming ill, losing a car in an accident, losing business due to fire, becoming disabled, losing their life, losing a home due to flood or earthquake, or being sued for accidentally causing injury to another. The insurers, insureds, or people damaged by those insured are dependent on one another.

In a country where human interactions are governed solely by the terms of written contracts, insurance would be a simple means of spreading risk and providing indemnity based on the promises made by the contract of insurance. But, in this the real world, insurance contracts are controlled by statutes enacted to ostensibly protect the consumer of insurance, regulations imposing obligations on the conduct of insurers and the decisions of trial and appellate courts interpreting insurance contracts.

A simple insurance contract between two parties might say: “I insure you against the risk of loss of your engagement ring valued at $15,000 by all risks of direct physical loss except wear and tear for a premium paid by you of $15.00.” Anyone who could read would understand that contract. If something happens to damage, destroy or lose the ring the insurer will pay you $15,000.00. However, insurers cannot write such a simple contract because the state requires many terms and conditions that complicate the policy wording and confuse the common person. The states and courts that did so had nothing but good intentions to protect the consumer against the insurer and control the actions of the insurer.

The tort of bad faith was created because courts felt that insurers treated their insureds badly and defeated the purpose for which insurance is acquired. It has served its purpose. Fair Claims Settlement Practices laws and regulations are now available to control insurers who do not act in good faith. Insurance fraud statutes and Regulations provide assistance to insurers who have been deceived by those they insure or who are victims of attempted insurance fraud.

It is time that all contracts, including insurance contracts, are treated like any other contract, and insureds who believe the insurer breached the contract of insurance can sue to recover the benefits promised by the policy.

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

Insurance Fraud Costs Everyone

Fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

Fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

The stories help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.

This book started as a collection of columns I wrote and 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. Since the last edition I have added more stories that were published in my twice monthly newsletter, Zalma’s Insurance Fraud Letter which is available free to anyone who clicks the links.

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

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

by Barry Zalma, Esq., CFE

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

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

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

$59 NON-MEMBERS, $44 MEMBERS

The Insurance Examination Under Oath Second Edition

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

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

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:.about the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or 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 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.

Available as a paperback here   Available as a Kindle book here

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A Video Explaining Some “Hard Fraud”

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Hard Fraud is a Crime

See the full video at https://rumble.com/vftjrz-a-video-explaining-some-hard-fraud.html  and at https://youtu.be/-tySYDbnp24

The following types of fraud are premeditated and intentionally committed.  Those who differentiate between types of fraud would place these in the category of “hard fraud,” which is considered more egregious than “soft fraud” since it is performed with malice aforethought.

Hard fraud takes planning, scheming, and even someone on the inside to help you get money from an insurance company. An example of hard fraud would be getting into an accident on purpose so that you can claim the insurance money. This example is fairly prevalent lately; someone hits the brakes so that the person behind them can’t stop quickly enough.

Another really severe form of hard fraud would be faking your own death or murder for the life insurance death benefit.

The following types of fraud are premeditated and intentionally committed. Those who differentiate between types of fraud would place these in the category of “hard fraud,” which is considered more egregious than “soft fraud” since it is performed with malice aforethought.

Hard fraud takes planning, scheming, and even someone on the inside to help you get money from an insurance company. An example of hard fraud would be getting into an accident on purpose so that you can claim the insurance money. This example is fairly prevalent lately; someone hits the brakes so that the person behind them can’t stop quickly enough.

Abandonment:

The owner abandons a vehicle on a city street or in a parking lot, creating a morale hazard. The insured will report the vehicle stolen and attempt to collect before it is recovered.

Dumping:

When the owner disposes of a vehicle by dumping it into a lake or other body of water.  Cars have even been found buried underground and some lakes have been found to have more than 50 cars underwater.

False registration; Exaggerated Repair Costs After A Car Accident; Fires to Avoid Lease Payments; Arson for Profit


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

 

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When You Do the Crime & Only Get Probation it is not Wise to Commit a New Crime

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Probation for Insurance Fraud Proves Futile

Hassan Wilcox, appealed from the judgment of sentence of an aggregate term of 2-4 years’ incarceration, followed by one year of probation, imposed after the trial court revoked his probation. In Commonwealth Of Pennsylvania v. Hassan Wilcox, J-S02011-21, No. 1121 EDA 2020, Superior Court Of Pennsylvania (APRIL 16, 2021) Appellant argued that the evidence introduced at the probation revocation hearing was insufficient to establish a technical violation by a preponderance of the evidence.

THE CLAIMS ON APPEAL

Wilcox claimed that whether the lower court abused its discretion by imposing a concurrent sentence of two to four years state incarceration, plus one year of probation, on the counts of insurance fraud and conspiracy, a manifestly excessive violation of probation sentence for a technical violation of probation.

Wilcox says that his actions have not shown that probation has been an ineffective vehicle to accomplish rehabilitation and not sufficient to deter against future antisocial conduct. He asked the Superior Court to reverse the revocation, contending that the evidence, specifically relating to the incident where he took personal items from a woman he had been driving in a hack/taxi, is so tenuous as to connect him with criminal activity. Where a probation revocation is based on evidence that so tenuously connects an appellant to criminal activity, a probation revocation is not predicated upon evidence of sufficient probative value’ and must be vacated.

No relief is due on this basis. Trial Judge Coyle’s opinion accurately and thoroughly disposes of the sufficiency claim raised by Appellant.

ANALYSIS

A challenge to an alleged excessive sentence is a challenge to the discretionary aspects of a sentence. However, before reaching the merits of this issue, we must determine if Appellant has preserved it for our review. Issues challenging the discretionary aspects of a sentence must be raised in a post-sentence motion or by presenting the claim to the trial court during the sentencing proceedings. Absent such efforts, an objection to a discretionary aspect of a sentence is waived. Here, Appellant only stated in his post-sentence motion that the sentence was excessive, and provided no further elaboration.

There was no consideration of Appellant’s being referred to the rehabilitative services of the probation department, such as referrals for drug treatment, employment, and anger management — is raised for the first time on appeal. It was therefore waived. Nevertheless, even if not waived, the appellate court would ascertain no abuse of discretion by the trial court in sentencing.

When reviewing sentencing matters, it is well-settled that an appellate court must accord the sentencing court great weight as it is in the best position to view the defendant’s character, displays of remorse, defiance or indifference, and the overall effect and nature of the crime.

An appellate court will not disturb the lower court’s judgment absent a manifest abuse of discretion. In order to constitute an abuse of discretion, a sentence must either exceed the statutory limits or be so manifestly excessive as to constitute an abuse of discretion. Further, a sentence should not be disturbed where it is evident that the sentencing court was aware of sentencing considerations and weighed the considerations in a meaningful fashion.

As a threshold matter, a sentencing court may select one or more options with regard to determining the appropriate sentence to be imposed upon a defendant. These options include probation, guilt without further penalty, partial confinement, and total confinement. In making this selection, the Sentencing Code offers general standards with respect to the imposition of sentence which require the sentence to be consistent with the protection of the public, the gravity of the offense as it relates to the impact on the life of the victim and on the community, and the rehabilitative needs of the defendant. Sentencing is individualized; yet, the statute is clear that the court must also consider the sentencing guidelines adopted by the Pennsylvania Commission on Sentencing.

In considering an appeal from a sentence imposed following the revocation of probation, the court’s review is limited to determining the validity of the probation revocation proceedings and the authority of the sentencing court to consider the same sentencing alternatives that it had at the time of the initial sentencing. Revocation of a probation sentence is a matter committed to the sound discretion of the trial court and that court’s decision will not be disturbed on appeal in the absence of an error of law or an abuse of discretion.

It is the law of Pennsylvania that once probation has been revoked, a sentence of total confinement may be imposed if any of the following conditions exist in accordance with Section 9771(c) of the Sentencing Code: (1) the defendant has been convicted of another crime; or (2) the conduct of the defendant indicates that it is likely that he will commit another crime if he is not imprisoned; or (3) such a sentence is essential to vindicate the authority of the court.

The Commonwealth establishes a probation violation meriting revocation when it shows, by a preponderance of the evidence, that the probationer’s conduct violated the terms and conditions of his probation, and that probation has proven an ineffective rehabilitation tool incapable of deterring probationer from future antisocial conduct. It is only when it becomes apparent that the probationary order is not serving this desired end of rehabilitation the court’s discretion to impose a more appropriate sanction should not be fettered.

Judge Coyle determined that “Appellant had amply established that probation had been a futile rehabilitative vehicle. Zero deterrence of his anti-social and criminal conduct had resulted.” She also stated that she “had thoroughly considered Appellant’s family and community ties, as well as his rehabilitative needs when determining an appropriate sentence. Accordingly, even if Appellant’s sentencing argument was properly preserved the judgment of sentence was needed to be, and was, affirmed.

ZALMA OPINION

The kindness of the court after convicting Wilcox of Insurance Fraud allowing him to avoid jail and be placed on probation, was rewarded with an assault on an innocent person riding in his cab, resulted in revocation of his probation. He had the unmitigated gall – chutzpah – to seek further probation only to have the trial court properly conclude that probation was, as to Wilcox, a “futile rehabilitative vehicle.” He will serve his time in jail.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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

Over the last 53 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 podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/

 

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