ZIFL Volume 27, Issue 7

See the full video at https://rumble.com/v2fmoze-zalmas-insurance-fraud-letter-april-1-2023.html and at https://youtu.be/J8efTOAEWco

The Source For Insurance Fraud Professionals

Louisiana and Texas Charge Public Adjuster

Not an April Fools Story

Andrew Joseph Mitchell, was indicted by a grand jury in Kimble County, Texas on a second-degree forgery charge for allegedly signing the names of property owners on settlement checks so he could keep the funds for himself. Mitchell is currently jailed in Louisiana after being charged with running a similar scheme in Louisiana.

Read the full article and the full  issue at ZIFL-04-01-2023

The Victims of Fraud

Virtually anyone can fall prey to fraudulent crimes. Con artists do not pass over anyone due to such factors as a person’s age, finances, educational level, gender, race, culture, ability, or geographic location. In fact, fraud perpetrators often target certain groups based on these factors. Very often insurers are the victims of fraud.

Read the full article and the full issue at ZIFL-04-01-2023

More McClenny Moseley & Associates Issues

This is ZIFL’s third installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana. The article will include details on the Suspension of Richard William Huye III by the Louisiana Supreme Court;  The order of Judge James D. Cain, Jr. Suspending MMA from practice in the federal court; Two class action lawsuits filed against MMA and it lawyers; an order from Judge North regarding violation of Rule 11 that started out: “When ego and greed become lawyers’ guiding principles, we get cases like Franatovich versus Allied Trust.”  You can read the full 28 page report at https://www.linkedin.com/in/matthewdmonson/recent-activity/all/; a race discrimination suit filed against MMA; the order of Judge Brian K. Abels restraining MMA from spending any fees collected; the disappearance of MMA from Louisiana; a suit by Apex Roofing against Huye for malpractice; and Huye’s filing of withdrawal as counsel in multiple suits using MMA letterhead.

Read the full article and the full issue at ZIFL-04-01-2023

Free Insurance Videos

See the more than 500 videos at https://www.rumble.com/zalma.

Good News from the Coalition Against Insurance Fraud

Multiple reports of insurance fraud convictions including the following: Estranged from his wife, Scott Lee Smith shot her for $1M of life insurance in Littleton, Colo. He filed for divorce from Nok just 11 days before shooting her in the basement of her home. Smith called 911 after shooting Nok in the face, lying she attacked him with a butcher knife. Yet he had no visible injuries, nor were there signs of a struggle. All three security cameras — which would’ve shown the shooting — were missing. Smith had called his mother after being taken into custody, asking her to recover the cams. Officials also found Smith and his father moving belongings from the house into two vehicles after he was released from custody. And inside the home, they found a duffel bag that was packed for a move elsewhere. Smith also showed “concerning behavior” in the months before shooting Nok. He surveilled her, set odd calendar reminders and obsessed over what would happen to her money once their pending divorce was finalized. Nok told family and friends that she was afraid of Smith and was trying to escape him. She allowed him to live in the basement of the home while she stayed upstairs. Smith received 30 years in prison. His mother is charged as an accessory, plus other crimes.

Read the full article and the full issue at ZIFL-04-01-2023

How to Add to the Professionalism of Insurance Claims Personnel

Every insurer, insurance syndicate, insurance brokerage, insurance sales agency, insurer branch office, and vendors to the insurance industry should add to the libraries of their various offices or employees. See “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.

Read the full article and the full issue at ZIFL-04-01-2023

What is Insurance Fraud?

Insurance fraud is the most popular and perpetrated crime in the world next to, perhaps, tax fraud. The possibility of a tax-free profit, coupled with the commonly held belief (supported by actual arrest and conviction records) that criminal prosecution will probably not occur, is sometimes too difficult for normally honest people to resist.

Read the full article and the full issue at ZIFL-04-01-2023

Health Insurance Fraud Convictions

Hundreds Of Millions of Potential Liability Result from Federal Jury False Claims Act Verdict

Cameron-Ehlen Group, Inc., which does business as “Precision Lens,” and its owner, revealing a prime example of the significant interplay between the Anti-Kickback Statute (“AKS”) and the False Claims Act (“FCA”), a federal jury has returned a verdict of more than $43 million in damages against the Cameron-Ehlen Group, Inc. The verdict in this long-running and closely watched fraud case out of the U.S. District Court for the District of Minnesota comes after a six-week trial, with the jury ultimately finding that the defendants paid kickbacks to ophthalmic surgeons to induce their use of defendants’ products in cataract surgeries reimbursed by Medicare, resulting in the submission of 64,575 false claims between 2006 and 2015.

Read the full article including dozens of convictions and the full issue at ZIFL-04-01-2023

Other Insurance Fraud Convictions

Sady Ribeiro, 72, was sentenced to 36 months in prison for his participation in a scheme to obtain fraudulent insurance reimbursements and other compensation from fraudulent trip-and-fall accidents, by U.S. District Judge Sidney H. Stein. During the course of the fraud scheme, Ribeiro and others attempted to defraud their victims of more than $31 million.

Riberio, a New York-licensed pain management was also sentenced to three years of supervised release.

Ribeiro pleaded guilty last October before Judge Stein. Four other co-conspirators also previously pleaded guilty for their involvement in the same scheme, and three were convicted at trial in May 2019 for their participation  and sentenced in May 2020.

Read the full article including dozens of convictions and the full issue at ZIFL-04-01-2023

It’s Time to Subscribe to Locals or Substack

For Subscribers Only I Have Published Special Insurance Videos

I publish on Locals.com more than 30 videos and two webinars of the Excellence in Claims Handling program. I also publish on Substack.com videos and webinars of the Excellence in Claims Handling Program available only to Subscribers. The subscribers have access to all the videos and a webinar on “The Examination Under Oath A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud” among others. The videos start with the history of insurance and work their way through various types of insurance and how to obtain and deal with insurance claims. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to my publications at substack at substack.com/refer/barryzalma Go to substack at substack.com/refer/barryzalma

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 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Over the last 54 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.

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, 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 the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ to consider more than 50 volumes written by Barry Zalma on insurance and insurance claims handling.

No Contract Compelling Arbitration Between Insurer and Insured No Arbitration

See the full video at https://rumble.com/v2fhaf8-non-signatory-to-agreement-cant-compel-arbitration.html  and at https://youtu.be/ScCmdxVoJTw

In Alex Weingarten v. Certain Underwriters At Lloyd’s, London Subscribing To Policy Number IML-0114N0-190029, B321148, California Court of Appeals, Second District, Fourth Division (March 23, 2023) Certain Underwriters at Lloyd’s, London (Lloyd’s Underwriters) appealed from the trial court’s order denying their motion to compel arbitration of plaintiff Alex Weingarten’s complaint for breach of implied covenant of good faith and fair dealing, intentional infliction of emotional distress, and negligent misrepresentation.

FACTUAL BACKGROUND

The Underlying Malpractice Action

In 2013, Adam Levin, Tristen Lazareff, and Criterion Capital Partners, LLC, retained Weingarten Brown LLP to defend them in the case entitled MXB Holdings LP, et al. v. Adam Levin, et al (the MXB action). The retainer agreement (the Levin/Weingarten retainer agreement) contained an arbitration provision.

Adam Levin and Criterion Capital Partners, LLC, filed an action in the Los Angeles Superior Court for legal malpractice and breach of fiduciary duty against Weingarten et al (the malpractice action). The complaint alleged Weingarten negligently represented the defendants in the MXB action. The parties later stipulated to arbitration before JAMS based on the arbitration provision in the retainer agreement. Weingarten notified Lloyd’s Underwriters about the malpractice action, and Lloyd’s Underwriters accepted the defense of the Weingarten defendants.

The arbitrator found in favor of Adam Levin and Criterion Capital Partners, LLC, and issued an award that exceeded Weingarten’s insurance coverage.

The Bad Faith Action

Weingarten sued Lloyd’s Underwriters for breach of the implied covenant of good faith and fair dealing, intentional infliction of emotional distress, and negligent misrepresentation. In the operative complaint (the SAC) Weingarten alleged Lloyd’s Underwriters acted in bad faith in the malpractice action by, among other things, “[r]ejecting settlement within the policy limits…”

On January 31, 2022, Lloyd’s Underwriters filed a motion to compel arbitration of the SAC based on the arbitration provision in the Levin/Weingarten retainer agreement. Weingarten opposed the motion, arguing: the insurance policy issued by Lloyd’s Underwriters does not contain an arbitration provision; Lloyd’s Underwriters are not intended, or third party, beneficiaries of the Levin/Weingarten retainer agreement; and the doctrine of equitable estoppel is inapplicable. After a hearing on the motion to compel arbitration, the trial court denied the motion.

DISCUSSION

Motion to Compel Arbitration

Lloyd’s Underwriters contended that the trial court erred by denying their motion to compel arbitration based on the arbitration clause in the Weingarten/Levin retainer agreement. A third party beneficiary is someone who may enforce a contract because the contract is made expressly for his or her benefit. The terms of the contract must demonstrate the express intent to confer the benefit.

The Court of Appeal concluded that Lloyd’s Underwriters were not third party beneficiaries of the Levin/Weingarten retainer agreement. The retainer agreement describes the scope of legal services to be provided by Weingarten’s law firm to the defendants in the MXB action.  Nothing in the retainer agreement demonstrates an express intent to benefit a third party-whether Lloyd’s Underwriters specifically or any other insurance company generally.

The FAC does not assert claims against Lloyd’s Underwriters that are based on the Levin/Weingarten retainer agreement; the claims are based on the insurance policy provided to Weingarten by Lloyd’s Underwriters. The FAC, therefore, does not rely on or use any terms of the Levin/Weingarten retainer agreement as a foundation for its claims. Accordingly, the Court of Appeals concluded there was no basis in law or equity for preventing Weingarten from suing Lloyd’s Underwriters in court.

Before referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists. Thus, the trial court properly determined the threshold issue of whether the nonsignatory defendants (Lloyd’s Underwriters) could compel the signatory plaintiff (Weingarten) to arbitrate his claims.

ZALMA OPINION

If the Lloyd’s Underwriters wished to arbitrate disputes between themselves and their insureds it would have been easy to include in the contract of insurance an arbitration agreement like the agreement in the Weingarten retainer agreement. Although the Lloyd’s Underwriters provided a defense to the malpractice agreement they refused a proposed settlement within the policy limits. Weingarten claims it was harmed because Lloyds’ Underwriters failed to accept the settlement, a common bad faith claim. The attempt to compel arbitration was designed to avoid trial on the bad faith issue and, although creative, it did not have a basis in fact or law that the Court of Appeal was willing to accept.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

Satisfaction of Mortgage Eliminates Right of Mortgagee to Recover from Homeowners Policy

See the full video at https://rumble.com/v2f6d7o-mortgagee-has-no-right-to-insurance-proceeds-after-debt-paid.html and at https://youtu.be/5YPVlG8p1rU

In Thomas P. Williams, Sr. v. Nationwide Insurance a/k/a Nationwide Mutual Insurance Company, Civil Action No. 22-1090, United States District Court, E.D. Pennsylvania (March 24, 2023) Nationwide denied the claim of its insured because they failed to comply with the Policy’s post-loss duties by failing to appear for scheduled examinations, not producing requested documents, making material misrepresentations to Nationwide and because Nationwide’s investigation of the fire revealed that it was “intentionally set.”

The homeowners sold the fire-damaged property to the plaintiff. The money from the sale was used to satisfy the entirety of the homeowners’ outstanding mortgage with a bank.

The plaintiff requested that the insurer reimburse him for the amount he claims he paid toward satisfying the homeowners’ mortgage. He based his request on a standard mortgage clause in the homeowners’ insurance policy, which stated that a denial of the homeowners’ claim would not preclude payment to a valid claim of the mortgagee.

PNC Bank was the original mortgagee. The plaintiff claims that he stepped into the shoes of the bank once he allegedly paid the balance of the mortgage. Thus, the plaintiff claims that he is entitled to the same payment the insurer would have had to pay to the bank, namely the amount it would cost to repair the property.

The insurer refused to pay the plaintiff’s claim and the plaintiff sued.

PROCEDURAL HISTORY

The plaintiff Thomas P. Williams alleged that he had purchased a fire-damaged property and paid off the mortgage encumbering the property.

FACTUAL BACKGROUND

The Ruchs owned property located in Albrightsville, PA (“the Property”). They had insured the Property for property damage under a policy with Nationwide (“the Policy”) and had a mortgage on the Property with PNC Bank NA (“PNC”).

A fire caused damage to the Property. The Ruchs submitted a claim to Nationwide under the Policy, and Nationwide eventually determined that the amount of the adjusted claim was $103,000.00. However, Nationwide later denied the claim because of breach of condition and fraud.

The Policy contained a mortgage clause allowed payment to the bank upon receipt of a proof of loss. Williams purchased an assignment of the proceeds of the Policy from the Ruchs but not the bank.

At the time of the sale, the Ruchs owed $135,490.13 on the mortgage to PNC and used the funds from the sale to satisfy the outstanding balance. At that time, Nationwide had not made any payment to PNC pursuant to the mortgage clause. After receiving the payment, PNC filed a Satisfaction of Mortgage with the Carbon County Recorder of Deeds.

DISCUSSION

Williams argued that because his funds paid to the Rauch’s satisfied the mortgage on the Property and because Nationwide would have had to pay PNC if it fulfilled the policy conditions, he stepped into the shoes of PNC. Nationwide argued that it had no obligation to pay under the mortgage clause because the mortgage was satisfied. Further, Nationwide contended that Williams misconstrues his property interest because he stepped into the shoes of the mortgagor (the Ruchs), not the mortgagee (PNC). When he bought the property Williams’ interest in the property became that of owner, not mortgagee. He had no rights under Nationwide’s Policy.” The court concluded that Nationwide was correct on both points.

There was no evidence demonstrating Williams assumed any legal rights under the mortgage. While Williams novel argument demonstrates a logical creativity, he cites no case law, and the court found none to support his contention that a purchaser of a property steps into the shoes of the mortgagee when the funds from the purchase are used to satisfy an outstanding mortgage.

Duty to Pay Pursuant to the Mortgage Clause

Nationwide averred that Williams had no cognizable claim because the Ruchs satisfied the mortgage at closing and there was no present obligation to pay. Because the law permits a mortgagee to recover the amount necessary to satisfy the mortgage but no more, the court found that because the mortgage was satisfied and there is no evidence of a new mortgage, the mortgagee is not entitled to any further payment under the Policy’s standard mortgage clause.

The fire damaged the Property and after the loss, Williams obtained his interest in the Property. The insured mortgage was fully satisfied and neither party presented any evidence that once Williams obtained his interest, there was any outstanding mortgage on the Property. Therefore, any further recovery under the Policy would constitute an unjust enrichment for the mortgagee.

At bottom, the mortgagee cannot seek further payment under the Policy and Nationwide had no obligation to pay. The court granted Nationwide’s motion for summary judgment and  denied Williams’ cross-motion for summary judgment.

ZALMA OPINION

Nationwide had two contracts: first with the Ruch’s as named insured and second with PNC Bank as mortgagee. Once Nationwide denied the claim of the named insureds it had the obligation to pay PNC if it presented a sworn proof of loss. Before PNC even attempted to protect its rights under the policy Williams purchased the property and the money he paid to the owners was used to satisfy the mortgage, thereby eliminating the right of PNC to make a claim to Nationwide. Had Williams obtained an assignment from PNC rather than the Rauch’s he would have a claim. He did not and his “creative” argument failed.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

WILFUL ACT EXCLUDED BY CALIFORNIA STATUTE

See the full video at https://rumble.com/v2f0w4e-intentional-and-inherently-or-predictably-harmful-conduct-cannot-be-covered.html and at https://youtu.be/bJgXcnZCUAM

Markel American Insurance Company (“Markel”) issued a management liability policy to United Talent Agency (“UTA”). UTA was sued by a competitor, Creative Artists Agency (“CAA”) for allegedly stealing its clients and employees. Markel declined coverage for the action, based on the policy’s professional liability exclusion and California Insurance Code § 533, which provides that “[a]n insurer is not liable for a loss caused by the wilful act of the insured.” UTA sued Markel for breach of contract and bad faith. The district court held that § 533 did not apply but concluded that coverage was precluded by the policy’s professional liability exclusion, and entered judgment in favor of Markel.

United Talent Agency, LLC, a Delaware limited liability company v. Markel American Insurance Company, a Virginia company, Nos. 22-55205, 22-55357, United States Court of Appeals, Ninth Circuit (March 15, 2023)

The Ninth Circuit disagreed with the district court’s conclusion that CAA’s allegations that UTA illegally stole clients and agents from CAA come within the purview of the policy’s professional liability exclusion.

The allegations by CAA that UTA stole clients and agents from CAA does not bring the conduct within the meaning of rendering professional services.

Application of § 533 is a matter of statutory construction, not of contract interpretation. Section 533 reflects a fundamental public policy of denying coverage for willful wrongs and discouraging willful torts. Liability arising from intentional and inherently or predictably harmful conduct cannot be covered by liability insurance. The Ninth Circuit concluded that the legislative purpose is both clear and unequivocal. It is to deny insurance coverage for wilful wrongs.

Section 533 creates a statutory exclusion which is read into every insurance policy. The policy’s requirement of a judgment establishing a wilful act for the exclusion to apply is not pertinent to the § 533 analysis. A wilful act for purposes of § 533 means either an act deliberately done for the express purpose of causing damage or intentionally performed with knowledge that damage is highly probable or substantially certain to result. A wilful act also includes an intentional and wrongful act in which the harm is inherent in the act itself.

Section 533 precludes coverage of litigation when the allegations of the underlying complaint can be established only by showing wilful misconduct. The court must examine the allegations in the underlying complaint to determine whether those allegations necessarily involve a wilful act within the meaning of § 533. The district court did not do so.  The Ninth Circuit, therefore remanded the case for the district court to make a determination that § 533 applies to the allegations of wilful misconduct.

In light of the remand, the Ninth Circuit declined to consider the parties’ other contentions on appeal and reversed the grant of Markel’s summary judgment motion on the professional liability exclusion, reversed the denial of Markel’s summary judgment motion as to § 533, and remanded the case for the district court to make the appropriate determination on Markel’s summary judgment motion as to the application of § 533 because the allegations of the underlying complaint could only be proved if CAA proves the conduct of UTA was wilful.

ZALMA OPINION

Liability insurance protects the insured from suits seeking damages for its liability due to the insured’s negligent acts. Most liability insurance policies exclude intentional acts like assault or battery. California, by statute, compels the existence of an exclusion not written in the policy that states there is no coverage for a: “loss caused by the wilful act of the insured.” That section applies and cannot be changed by the wording of the policy even if the insured and the insurer wish to insure against such wilful acts, they cannot do so in California although other states that do not have a similar statute may require coverage.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

Occupancy Provision Prevents Coverage for Insured Injured as a Pedestrian

See the full video at https://rumble.com/v2eqo7y-no-contact-with-vehicle-no-coverage.html  and at https://youtu.be/u1pG63KgYMc

George Mims was injured when he was struck by an automobile while walking toward his own vehicle. At the time of the accident Mims had no contact with his vehicle, either before or after the accident, and there was no causal connection between his vehicle and the injuries he suffered.

In George Mims; Cecilia Mims v. USAA Casualty Insurance Company, No. 21-1654, United States Court of Appeals, Fourth Circuit (March 21, 2023), George and Cecilia Mims appealed the district court’s orders granting USAA Casualty Insurance Company’s motion for summary judgment and denying the Mimses’ subsequent motion to alter or amend the judgment or for certification of questions to the South Carolina Supreme Court on the Mimses’ declaratory judgment action related to the stacking of underinsured motorist coverage under their insurance policy with USAA.

SOUTH CAROLINA LAW

Summary judgment is only warranted if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.

Under South Carolina law, stacking allows an insured motorist to recover damages under more than one policy until he satisfies all of his damages or exhausts the limits of his available policies. An insured may stack unless limited by statute or a valid provision in his insurance policy. South Carolina law limits stacking of underinsured motorist coverage if none of the insured’s or named insured’s vehicles is involved in the accident. Instead, coverage is available only to the extent of coverage on any one of the vehicles with excess or underinsured coverage.

THE RECORD

The record made clear that Mims had no contact with his vehicle, either before or after the accident, and established that there was no causal connection between his vehicle and the injuries he suffered. Mims was walking to his vehicle at the time he was struck but, according to his own testimony, he had not yet reached his vehicle or physically engaged with it besides unlocking it remotely from across the parking lot.

ANALYSIS

Regardless of whether the Mims’ policy provision broadens or narrows the circumstances in which stacking is allowed, the circumstances here are not encompassed by the provision, as Mims was not “in, on, getting into or out of” his vehicle at the time of the accident.

Under South Carolina law, act of getting to or approaching a vehicle is beyond terms of insurance policy with occupancy provision.

ZALMA OPINION

Although stacking is important to a person injured by an uninsured or underinsured motorist, when there is a policy that requires the insured to occupy his vehicle for there to be coverage, the right to stacking becomes irrelevant. since Mr. Mims was not “in, on, getting into or out of his vehicle” at the time of the accident. When there is no coverage at all there is no need to stack coverages.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

Forum Non Conveniens Dismissal Is Not A Judgment On The Merits

See the full video at https://rumble.com/v2el72o-broker-only-agent-of-insured.html and at https://youtu.be/hKu4Ps_HcXw

The Fifth Circuit Court of Appeals resolved insurance issues concerning cable-damage in the Arabian Gulf by recognizing the difference between a broker and an agent, the place where – and to whom – a policy was delivered, and how to deal with the issue personal jurisdiction the court has over the parties and that a forum non conveniens dismissal is not a judgment on the merits; it is, instead a determination that the merits should be adjudicated elsewhere.

In Dynamic Industries, Incorporated; Dynamic Industries International, L.L.C.; Dynamic Industries Saudi Arabia, Limited v. Walaa Cooperative Insurance Company; Marsh & McLennan Companies, Inc., doing business as Marsh, Inc.; Marsh USA, Inc., doing business as Marsh USA Risk Services, No. 22-30033, United States Court of Appeals, Fifth Circuit (March 13, 2023) the disputes were resolved.

CLAIM OF INSUREDS

The insureds (Dynamic) assert that their insurance brokers (Marsh) failed to procure adequate insurance coverage from the insurer (Walaa), or in the alternative, that Walaa breached the insurance policy by declining coverage for an incident involving undersea cable-damage in the Arabian Gulf. The district court granted Marsh’s motion to dismiss the suit as untimely under Louisiana law. The district court also granted Walaa’s motion to dismiss the suit for forum non conveniens, reasoning that the insurance policy at issue designates Saudi Arabia as the exclusive forum.

DISCUSSION

First, as for Marsh, Louisiana law requires insureds who wish to sue their insurance broker to do so “within one year from the date that the alleged act, omission, or neglect . . . should have been discovered.” [La. Rev. Stat. § 9:5606].

Case Against Broker

Dynamic sued Marsh after Walaa denied coverage. But Dynamic received a copy of the insurance policy from Walaa almost 18 months earlier. When Dynamic received that copy, it also received constructive notice of any deficiencies that the policy contained. Dynamic’s claims against Marsh are therefore untimely.

Dynamic rejects constructive notice, arguing that the policy contains “absolutely no indication that coverage would be denied.” But the denial was Walaa’s choice, not Marsh’s. According to Dynamic, the policy either omits coverage that Marsh is liable for failing to procure or offers coverage that Walaa must honor. For purposes of asserting its in-the-alternative claims against Marsh Dynamic asked the Fifth Circuit to assume that the policy omitted coverage. Any such omission was present when Dynamic received the policy so its suit is time barred.

Choice of Jurisdiction

Dynamic argued that the Walaa policy’s choice of Saudi Arabian law is unenforceable, under Louisiana law, if the policy was “delivered” in Louisiana. Dynamic says that it received delivery in Louisiana from Walaa’s agent – a Marsh affiliate known as Marsh KSA. Walaa responded that Marsh KSA was actually Dynamic’s agent, and that delivery therefore occurred in Saudi Arabia (where Walaa delivered the policy to Marsh KSA). The Fifth Circuit agreed with Walaa since Marsh, as a broker, is an agent of the insured not the insurer.

Under Louisiana law, an insurance broker is generally deemed to be the agent of the insured rather than the insurer. A broker who is asked by the client to procure coverage wherever possible at the best price is not the agent of the insurer. Marsh KSA “approached” multiple insurers looking for a “competitive price” for Dynamic. Marsh KSA was thus Dynamic’s agent.

After conducting an independent assessment of the clause’s enforceability, the district court properly concluded that delivery occurred in Saudi Arabia to the agent of the insured.

LACK OF PERSONAL JURISDICTION

Separately, the district court concluded that it lacked personal jurisdiction over a Marsh affiliate known as Marsh & McLennan Companies, Inc. (“Marsh Inc.). Yet the district court’s judgment dismissed Dynamic’s claims against Marsh Inc. “with prejudice” – that is, on the merits. ” A federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the parties i.e., personal jurisdiction.

Because the district court lacked personal jurisdiction, it also lacked power to issue a merits judgment regarding Marsh Inc. Likewise, the district court dismissed Dynamic’s claims against Walaa “with prejudice.” That too was an error, because a forum non conveniens dismissal is not a judgment on the merits; it is, instead a determination that the merits should be adjudicated elsewhere.

The Fifth Circuit, therefore, reversed dismissal as to Walaa Cooperative Insurance Company and Marsh & McLennan Companies, Inc., and remanded with instructions for the district court to enter judgment dismissing Dynamic’s claims against Walaa Cooperative Insurance Company and Marsh &McLennan Companies, Inc. without prejudice.” In all other respects, the District Court’s decision was affirmed.

ZALMA OPINION

The parties won some arguments and lost others. The case established the fact that an insurance broker is not an agent of the insurer but is the agent of the insured who, on the insured’s behalf, transacts insurance. The District Court exceeded its authority and the Fifth Circuit set it straight affirmed part of the decision and reversed others.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

Claims Made Policy May Not Respond to Claims Made After Expiration of the Policy

See the full video at https://rumble.com/v2eamuc-failure-of-lawyer-to-report-claim-fatal-to-coverage.html  and at https://youtu.be/zXQSOOxKzrE

Twin City Fire Insurance Company sold a malpractice insurance policy to John S. Xydakis, an attorney and one of the Defendants. Xydakis made claims under the policy based on lawsuits and motions filed against him in Illinois state court. Twin City sought a declaratory judgment that it owes no insurance coverage to Defendants for these claims or, in the alternative, rescission of the policy. In Twin City Fire Insurance Company v. Law Office Of John S. Xydakis, P.C., et al., No. 18 C 6387, United States District Court, N.D. Illinois, Eastern Division (March 20, 2023) the USDC resolved the dispute.

In the affidavit to which Xydakis objected, Twin City’s counsel avered that several publicly filed documents were either served on Twin City or retrieved from the Cook County Clerk of Court or the Illinois Appellate Court and his objection failed because the Court could take judicial notice of publicly filed documents in other courts if, as in this case, their existence was not subject to reasonable dispute.

BACKGROUND

Underlying Lawsuits

• The Chen Lawsuit.

Fiona Chen Consulting Company (“Chen Consulting”) sued Xydakis for failing to pay retained expert witness fees.  Xydakis filed a sworn Answer, Affirmative Defenses, and Counterclaim against Chen Consulting, demonstrating that all the acts and conduct related to the Chen Lawsuit occurred between January 2012 and November 2012.

• The Spiegel Motions for Sanctions.

Litigants in a separate set of lawsuits (collectively the “Spiegel Lawsuits”) brought three motions for sanctions The presiding Cook County judge ruled on all three motions and entered judgment against Spiegel and Xydakis for over $1,000,000.

• The Klein Lawsuit.

On August 14, 2019, Tiberiu Klein filed a complaint against Twin City and Xydakis alleging legal malpractice, breach of contract, and breach of fiduciary duty. The Klein Lawsuit alleged that Xydakis’s wrongful conduct caused Klein to lose his “statutory deadlines” and his opportunity to collect a “significant recovery” of settlement proceeds in an underlying 2014 tort action. The Klein Lawsuit alleged that Xydakis knew of his malpractice on March 9, 2018 after the Seventh Circuit Court of Appeals “issued a damning decision criticizing Xydakis for his various failures in representing [Klein], which amounts [to] legal malpractice ” [see also Klein v. O’Brien, 884 F.3d 754, 757 (7th Cir. 2018)]

The Twin City Insurance Policy

In December 2016, Xydakis applied for legal malpractice insurance coverage from Twin City. Twin City underwrote and issued a claims-made-and-reported Lawyers’ Professional Liability Policy to the Law Office of John S. Xydakis (the “Policy”).

Xydakis sought coverage from Twin City for liability in the Chen Lawsuit and for the Spiegel Motions for Sanctions. Twin City denied it owed Xydakis defense or indemnity obligations in these matters. Additionally, the Klein Lawsuit sought damages in connection with Xydakis’s alleged malpractice. Twin City likewise denied it owed defense or indemnity obligations for the Klein Lawsuit.

DISCUSSION

Under Illinois law, the insurer’s duty to defend arises when the facts alleged in the underlying complaint fall within, or potentially within, the policy’s provisions. The insured bears the burden of proving that its claim falls within the policy’s coverage. Once the insured has established coverage, the burden shifts to the insurer to prove that a limitation or exclusion applies.

Claims-made insurance policies protect against the risk of an injured party bringing a claim against the insured during the covered period. Xydakis entered into a claims-made policy with Twin City that began on January 26, 2017 and specified January 26, 2016 as the retroactive date. By its plain language, the Policy covers only damages arising from Xydakis’s acts or omissions that occurred on or after January 26, 2016. The policy ended on January 26, 2018 and was not renewed. It allowed up to sixty calendar days after its termination to report a claim. So, Xydakis had until March 27, 2018 to make claims under the Policy. The Chen Lawsuit, the Spiegel Motions for Sanctions, and the Klein Lawsuit each fall outside the Policy’s scope of coverage, either for underlying conduct occurring before its retroactive date or for claims made after its expiration.

ESTOPPEL

Xydakis argued that a genuine issue of material fact exists as to whether Twin City should be estopped from denying coverage. Estoppel only applies where the insurer has breached its duty to defend.

When the policy and the underlying complaint are compared there was clearly no coverage or potential for coverage, estoppel does not apply.  Estoppel may not be used to create or extend coverage where none exists.

DUTY TO INDEMNIFY

Where no duty to defend exists and the facts alleged do not even fall potentially within the insurance coverage, such facts alleged could obviously never actually fall within the scope of coverage. Under no scenario could a duty to indemnify arise. Twin City owed Defendants no duty to defend in any of the underlying actions; therefore, no duty to indemnify existed.

The Court, therefore, granted Twin City’s Motion for Summary Judgment. The Court further declared that Twin City Fire Insurance Company owed no duty to defend or indemnify Xydakis under all his professional and individual forms.

ZALMA OPINION

A lawyer should know how to read an insurance policy. Ask one if he or she has read their policy and almost all will answer in the negative. Since a claims made policy requires that there is only coverage if the claim is made during the policy period. Xydakis failed to report the existence of the claims during the policy period so there was neither a duty to defend nor a duty to indemnify. In addition, he concealed the fact of litigation against him that predated the inception of the policy. Xydakis is properly out of business and no longer practices law and must pay any judgment against him from his own assets.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

California Insurance Code § 533 Prohibits Insurance for Wilful Acts of the Insured

See the full video at https://rumble.com/v2ea5rw-malicious-prosecution-not-insurable-in-california.html and at https://youtu.be/-S5NoSvtdMY

Aspen Specialty Insurance Company appealed from the district court order dismissing its complaint against Miller Barondess, LLP, and several of its partners (collectively “MB”). Aspen appealed to the Ninth Circuit in Aspen Specialty Insurance Company v. Miller Barondess, LLP Louis R. Miller; James Goldman; Alexander Frid; Jason Tokoro, No. 22-55032, United States Court of Appeals, Ninth Circuit (March 15, 2023) who interpreted California Insurance Code § 533 as it related to a suit for malicious prosecution.

DISCUSSION

Under California statutory law, “[a]n insurer is not liable for a loss caused by the wilful act of the insured.” [Cal. Ins. Code § 533.]

Section 533 is considered a statement of the public policy of the state of California. It was enacted to prevent encouragement of wilful torts.

Section 533 is a codification of the jurisprudential maxim that no man shall profit from his own wrong. It is an implied exclusionary clause which, by statute, must be read into all insurance policies. As a result, the parties to an insurance policy cannot contract for such coverage.

THE TRIAL COURT

The district court concluded that § 533 did not apply because there was no final adjudication that the insureds engaged in malicious prosecution. The California Court of Appeal had concluded that § 533 precluded indemnification for an underlying malicious prosecution action, even though the matter had been settled without a final adjudication. California precedent confirmed that courts examine the allegations of the underlying complaint, not whether there has been an adjudication of the allegations, in determining whether § 533 bars coverage. Insurance coverage is precluded by Insurance Code § 533 as a matter of law.

The underlying complaint against MB alleged malicious prosecution, which is categorically a willful act within the meaning of § 533. This is so because malicious prosecution requires a wilful act.

DISCUSSION

Since the malicious prosecution action was not based on an innocent party’s vicarious liability for the wrongdoing of another the complaint alleged that the insureds themselves, not an agent or third party, engaged in the acts of malicious prosecution. For example, the complaint alleged that the insured  knowingly submitted NMS’ perjured testimony to the trial court, and actively and knowingly assisted NMS in its fraudulent and malicious scheme.

The law firm thus could have been vicariously liable for the partner’s conduct. There was no question that the MB partners were acting in their capacity and within their authority when they litigated the action that became the subject of the malicious prosecution allegations.

The district court order dismissing Aspen’s complaint was reversed and the matter remanded for further proceedings and Aspen was awarded its costs on appeal.

ZALMA OPINION

When a law firm maliciously brings an action a knowing that the action is false and fraudulent and then presents false, perjured evidence in an attempt to prove the false case, it has acted wilfully and maliciously against the defendant. When the law firm lost the suit the defendant sued seeking damages for malicious prosecution and the lawyers sought defense and indemnity from its insurer. The Ninth Circuit found that since malicious prosecution is always wilful, § 533 prevented the insurer from defending or indemnifying the law firm Miller Barondess, LLP and lawyers Louis R. Miller; James Goldman; Alexander Frid; Jason Tokoro.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

MCS-90 Is a Surety Agreement Different from the Insurance Policy

See the full video at https://rumble.com/v2dzulg-mcs-90-endorsement-not-insurance.html  and at https://youtu.be/LrjPKYEFt0M

An insurer and tort claimants dispute the insurer’s maximum theoretical liability under a surety agreement. In Wesco Insurance Company v. Edward Eugene Rich, as wrongful death beneficiary of LaDonna C. Rich, Deceased; Edward Shayne Rich, as wrongful death beneficiary of LaDonna C. Rich, Deceased, No. 22-60283, United States Court of Appeals, Fifth Circuit (January 12, 2023) resolved the dispute over the limits created by the federally required MCS-90 endorsement.

The MCS-90 is surety endorsement that Wesco Insurance Company included with a liability-insurance policy that it issued to Sam Freight Solutions, LLC. The insurance policy provides up to $1,000,000 in insurance coverage for a specific “covered auto,” a 2012 Volvo Tractor (and certain trailers attached thereto). The MCS-90 surety endorsement, on the other hand, is a policy endorsement by which Wesco, by the endorsement’s terms, assumed up to “$750,000” in liability for “any final judgment recovered against Sam Freight for public liability resulting from negligence in the operation” of any vehicle.

The MCS-90 Endorsement is Not Insurance.

Instead, it “creates a suretyship, which obligates an insurer to pay certain judgments against the insured . . ., even though the insurance contract would have otherwise excluded coverage.”

Facts

On July 29, 2018, LaDonna Rich died in an automobile collision involving a 2010 Freightliner.  The Defendants are her beneficiaries, and they filed a wrongful-death suit against Sam Freight in Mississippi state court. The insurance policy (as distinct from the MCS-90 surety endorsement) that Sam Freight purchased from Wesco does not name the 2010 Freightliner as a covered auto. Therefore, the Wesco policy does not independently offer coverage for the collision.

The issue before the Fifth Circuit was the amount of coverage that the MCS-90 endorsement would provide in the event of a judgment against Sam Freight. The Beneficiaries argued that the MCS-90 endorsement would provide up to $1,000,000 in coverage, while Wesco argued that $750,000 would be the maximum available amount.

The district court granted summary judgment for Wesco, declaring that the MCS-90 endorsement unambiguously provides that Wesco shall not be liable for amounts in excess of $750,000. While this appeal was pending, the parties reached a settlement agreement under which Wesco agreed that it “will pay” whichever of the two amounts the Fifth Circuit determined the surety agreement to require.

Since the MCS-90 is a “federally mandated” endorsement the operation and effect of a federally mandated endorsement is a matter of federal law.

As a result the Fifth Circuit’s analysis focused on the plain language of the endorsement. To the extent that Mississippi substantive law governs any residual questions, such as those regarding only the policy, construction of an insurance policy is a question of law, which we the Fifth Circuit was required to review.

The insurance policy offers coverage of up to $1,000,000 per accident, but only for “covered autos.” The parties agreed that the 2010 Freightliner was not a “covered auto” under the insurance policy’s definition of that term.

The MCS-90 endorsement makes Wesco “liable,” as a surety, for up to “$750,000 for each accident.” The endorsement applies “regardless of whether or not each motor vehicle is specifically described in the policy.”

The MCS-90 attached to the Wesco policy consists of a fill-in-the-blank form that provides spaces for the parties to identify, among other things: the insurer’s name, the insured for whom the insurer is acting as surety, and the policy number that the endorsement supplements. In this case, the following amount appears in the blank space on the MCS-90: “[T]he company shall not be liable for amounts in excess of $750,000 for each accident.” As a result, Wesco agreed to provide $1 million in insurance coverage for Sam Freight’s covered autos, but only $750,000 in public liability coverage for all other vehicles.

The defendants argued that number that appears in the blank space ($750,000) is a “change” of the policy. But, it is a change, only if the Beneficiaries are otherwise correct that the MCS-90 and the insurance policy must have identical coverage limits.

The MCS-90, for instance, contains the following language:

In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against [Sam Freight] …. [emphasis added]

The language quoted above sets up an unambiguous distinction between the policy and the endorsement. Likewise, the words “this endorsement” show that the liability limit described “herein” is the limit that appears in the endorsement, not the policy.

Neither the policy nor the endorsement required Wesco to provide suretyship liability in the exact same amount that it offers insurance coverage. The MCS-90’s plain text limits Wesco’s suretyship liability to $750,000.

The District Court’s decision was affirmed.

ZALMA OPINION

The MCS-90 endorsement is a creation of federal law. It is not insurance. It is an act of Congress to require an insurer to indemnify a person injured by a trucker insured who did not pay a premium for the insurance of a specific vehicle it was operating. Sam Freight identified a single vehicle when it acquired insurance from Wesco with limits of liability up to $1 million. The MCS-90 endorsement – compelled by federal law – limited the exposure of Wesco, acting as a surety not an insurer, up to $750,000. The language of the MCS-90 was clear and unambiguous and if the wrongful death beneficiaries received a judgment up to or more than $750,000 Wesco would be required to pay no more than $750,000 and any additional damages would be the responsibility of Sam Freight.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

One Year Suit Provision Defeats Late Suit

See the full video at https://rumble.com/v2dkrps-no-breach-of-contract-no-bad-faith.html and at https://youtu.be/V61YWSTcE7s

GEICO Marine Insurance Company sued Lee Mandel seeking a declaratory judgment as to the rights and obligations of the parties under two yacht insurance policies. In GEICO Marine Insurance Company v. Lee Mandel, No. 19-CV-3107 (GRB)(AYS), United States District Court, E.D. New York (March 10, 2023) the USDC dealt with the private limitation of action provision of the GEICO policy and the late demand for appraisal.

FACTS

Lee Mandel was the owner of a 52′ SeaRay sedan bridge-model seafaring vessel. GEICO issued Mandel two yacht insurance policies for 2015-16 and 2016-17. Both policies required that: “With respect to any claim or loss to insured property, the action must begin within one year of the date of loss or damage.”

In December 2015, Mandel submitted a claim for damage to the starboard, i.e., right-side, engine. GEICO approved piecemeal repairs of approximately $92,400. In July 2016, Mandel submitted a supplemental claim for damages caused by a crack in the engine cylinder.  In August 2016, Mandel submitted a claim for damages to the port, i.e., left-side, engine. Afterward, the starboard engine began emitting blue-white smoke. GEICO inspected the vessel in September and November 2016 to investigate Mandel’s claims.

In December 2016, Mandel removed and replaced the starboard and port engines. In February 2017, GEICO gave Mandel a supplemental and final payment of approximately $17,400 for damage to the starboard engine. GEICO inspected the vessel once again in November 2017. GEICO’s February 2018 report declined to pay Mandel the replacement cost of the engine because the decision to proceed with the replacement of Mr. Mandel’s engines was made at his direction and not in accordance with the previous settlements issued since replacements of both engines and auxiliary components do not represent, as set forth by the policy, a reasonable cost of repair, but instead constituted betterment. Later that month, GEICO paid Mandel approximately $23,200 for damage to the port engine.

Over a year later, in April 2019, Mandel renewed his demand for the cost of replacing the starboard and port engines – approximately $213,500 after payments received – and advised that he would pursue litigation if not paid.

The complaint for declaratory relief asserted three causes of action based on the insurance policies’ exclusions and the one-year limitation for bringing legal action.

THE MOTION FOR SUMMARY JUDGMENT

In December 2019, GEICO moved for partial summary judgment on its third cause of action regarding the policies’ one-year limitation, and on Mandel’s counterclaims for breach of contract and “bad faith.” The Court held that Mandel’s breach of contract counterclaim accrued in February 2018 when GEICO advised Mandel that it declined to pay his demands. Since the breach of contract counterclaim was filed more than a year after liability accrued, it was time-barred under the policies’ one-year time limitation provision.

As to the claim for the breach of the implied covenant of good faith and fair dealing, the Court held that this claim was also time-barred with respect to the allegedly negligent and/or inadequate investigation and failure to promptly conclude its investigation.

DISCUSSION

A prima facie case of bad faith requires showing a “gross disregard” of the insured’s interests. Mandel claimed GEICO initiated this action instead of an appraisal and rejected multiple settlement offers in order to “punish Mr. Mandel for attempting to get the insurance coverage he paid for.” Mandel also argued that GEICO had no reasonable belief that the claims were not covered.

Mandel’s claim for breach of the implied covenant of good faith and fair dealing fails for a panoply of reasons including all of his claims were time-barred by the policies’ one-year time limitation and Mandel did not seek an appraisal within a reasonable time because the one-year deadline for submitting his claim had already passed.

GEICO acted well within its rights by seeking a judicial declaration that it had no legal obligations with respect to the subject vessel’s engines because they were time-barred under the policies.  Moreover, an appraisal is not the appropriate remedy because the dispute turns on whether engine replacement constituted an excludable “betterment” under the policies.

Therefore, the Court granted GEICO’s summary judgment on Mandel’s counterclaim for breach of the implied covenant of good faith and fair dealing, and found that GEICO Marine has no further obligations to Mandel under the insurance policies or at law with respect to claims involving the vessel’s starboard and port engines.

ZALMA OPINION

The private limitation of action provisions in most first-party insurance policies have been universally upheld by the courts of the United States and the individual states. They have been enforced because they protect insurers against stale claims and protect the insurer’s right to have an insured promptly fulfill the requirement to prove the loss. Mandel failed to act promptly to protect his rights and even if his claims were well founded his claim against GEICO Marine failed because of his failure to act promptly.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

Convicted Insurance Fraud Felon Must Stay in Jail

See the full video at https://rumble.com/v2dkckk-arsonist-acting-as-his-own-lawyer-fails.html and at https://youtu.be/4moG6M9DkK0

Charles Moss, a federal inmate proceeding pro se, appealed the district court’s dismissal of his habeas corpus petition for lack of statutory jurisdiction. In Charles Moss v. D. Jones, Acting Warden, No. 22-1210, United States Court of Appeals, Tenth Circuit (February 21, 2023) the Tenth Circuit gave respect to a pro se appellant and showed he failed in his attempt to get out of jail.

BACKGROUND

Moss played a role in separate insurance fraud schemes that culminated in arson, murder, and the destruction of a van used in the killing. A federal jury in Louisiana convicted Moss “of conspiracy to commit mail and wire fraud, . .  use of fire to commit obstruction of justice in relation to the van fire[,] . . . [and] use of fire to commit mail fraud in relation to [a] house fire.”

Moss appealed and the Fifth Circuit rejected his arguments. Moss, among other things, then argued actual innocence based on newly discovered evidence and an intervening change in law. The court denied the motion.

The magistrate judge recommended dismissing the petition for lack of statutory jurisdiction noting that the so-called “savings clause” permits a federal prisoner to proceed only when the remedy under the statute is inadequate or ineffective to test the legality of his detention. The Magistrate concluded that Moss failed to demonstrate that the remedy available to him in the sentencing court was inadequate or ineffective and warned Moss about the hazards he faced if he did not promptly respond.

Waiver

Under the Tenth Circuit’s firm waiver rule, the failure to timely object to a magistrate judge’s finding and recommendations waives appellate review of both factual and legal questions. There are two exceptions to the rule when:

1. a pro se litigant has not been informed of the time period for objecting and the consequences for failing to object, or when
2. the interests of justice require review.

Factors relevant to the second exception include a pro se litigant’s effort to comply with the objection requirement, the force and plausibility of the explanation for his failure to comply, and the importance of the issues raised.

The first exception does not apply because the magistrate judge informed Moss of the time period for objecting and warned him of the consequences attendant to his failure to object.

Regarding the second exception, Moss does not assert he made any effort to comply with the objection requirement or offer any excuse for his failure to make such an effort. He instead argued the court should apply the interests of justice exception to the firm waiver rule because the district court plainly erred in dismissing his § 2241 habeas corpus petition. The Tenth Circuit rejected this argument.

Moss did not meet his burden to show that the remedy provided by the statutes was inadequate or ineffective. While he argued that his conviction lacked legal sufficiency, a showing of actual innocence is irrelevant to the savings clause inquiry. Under the Tenth Circuit’s firm waiver rule Moss waived any challenge to the magistrate judge’s factual findings or legal determinations by failing to object to them and the district court’s judgment was affirmed.

ZALMA OPINION

Criminals, by definition, have little or no respect for the law. After being convicted of the serious crimes of insurance fraud schemes that resulted in arson and murder, Moss refused to accept the punishment for his vicious crimes and failed in his first appeal and then filed a habeas corpus action which was given respect it did not deserve, and he is still in jail and has the right to appeal further even though he has no chance of success. Moss, therefore, continues his criminal activity by abusing the judicial system requiring it to give respect to his appeals.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

You Only Get What You Pay For

See the full video at https://rumble.com/v2djpx0-court-refuses-to-rewrite-policy.html  and at https://youtu.be/j_3rWmHE5fc

In Auto-Owners Insurance Company v. Michael Cook, Michael Schuster, and Highland Auto Glass, Inc., No. 21-cv-348-JPG, United States District Court, S.D. Illinois (March 9, 2023) Auto-Owners Insurance Company’s motion for summary sought declarations that its policy owed neither defense, indemnity nor uninsured motorist coverage to the defendants.

BACKGROUND

Schuster and Cook on one side and Devin Dahmer on the other were involved in an auto accident. Schuster, president and sole shareholder of Highland, was driving a van he and Highland jointly owned with Cook as his passenger. Both Schuster and Cook were injured in the accident. Cook sued Highland, Schuster, and Dahmer for negligence.

Auto-Owners seeks declarations regarding a “Tailored Protection” insurance policy. Auto-Owners argued that the Auto-Owners Garage Policy does not cover vehicles owned by Highland or Schuster like the vehicle involved in this accident.

FACTS

Schuster was driving a Ford Econoline van he and Highland owned jointly; Cook was his passenger.  Dahmer pulled his van into the roundabout in front of the Highland van, nearly missing the van. Down the road, Dahmer pulled over, and Schuster pulled the Highland van to the side of the road several car lengths in front of Dahmer’s van. Schuster got out, and then Dahmer drove his van into the Highland van, injuring Schuster and Cook. Dahmer’s insurance paid its limits to Schuster, and then Schuster made a claim for a defense, indemnity, and UIM coverage under Highland’s Garage Policy.

The Garage Policy

When obtaining insurance from Auto-Owners, Highland paid premiums for coverage under Division II only which limited the available coverage.

ANALYSIS

To determine if the underlying suit alleges a situation potentially within the insurance coverage, the Court is required to compare the complaint to the relevant provisions of the insurance policy. If any theory of recovery in the underlying complaint falls within the insurance coverage, the insurer will have a duty to defend.

The Garage Policy is clear that the policy covers bodily injury arising out of an automobile “not owned, hired leased, rented, or registered by the insured or an officer, if it is a corporation.”

Highland was the insured and Schuster was an officer of Highland, and they both owned the Econoline van so there was no coverage under that section for bodily injuries arising from the Econoline van, including from the collision between Dahmer and the van. The only identified Garage Policy provision that would potentially cover bodily injuries arising out of automobiles owned by the insured is Division I coverage, which Highland did not purchase. Since there is no coverage of the Econoline van under Section II, there is also no underinsured motorist coverage arising from an accident with that van.

Schuster agreed but claimed that the “exclusion,” at least to the extent it precludes UIM coverage, violates public policy. The insured bears the heavy burden of showing an insurance provision violates public policy. Schuster pointed to nothing in the Garage Policy that violates Illinois public policy. Rather, he asked the court to award him the coverage he declined to purchase. It does not violate public policy to exclude coverage an insured expressly declined to purchase when it was available.

The court also noted that Schuster was not being left without a remedy for injuries caused by an underinsured motorist. Schuster maintained a separate personal automobile insurance policy from Owners Insurance Company, an affiliate of Auto-Owners, as required by the Financial Responsibility Law and Owners paid the UIM coverage under that policy.

The court granted Auto-Owners’ motion for summary judgment and directed the Clerk of Court to enter judgment accordingly, including declarations that:  Auto-Owners owed no duty to defend or indemnify defendants Highland Auto Glass, Inc. and Michael Schuster in connection with the lawsuit  Cook v. Highland, in the Circuit Court for the Third Judicial Circuit, Madison County, Illinois; and Plaintiff Auto-Owners Insurance Company owes no underinsured motorist coverage to Michael Schuster under the Auto-Owners policy.

ZALMA OPINION

A person seeking insurance is faced with the obligation to determine what coverage to buy before an accident occurs where the coverage is needed. The insureds chose a limited coverage, declined to buy a more extensive coverage, and after an accident tried to get the court cure the error and – with an argument that the policy violates public policy – and give them the coverage they refused to buy. Courts are required to interpret insurance contracts they are not required to, nor will they ever, rewrite a policy.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

The Defeat of a Fake $10 Million Jewelry Robbery Insurance Claim

Barry Zalma, Esq., CFE, a Certified Fraud Examiner and a retired insurance coverage lawyer and active insurance claims, insurance coverage and insurance fraud expert has just published a fictionalized novella about how a thorough investigation defeated an attempted $10 million insurance fraud when a jeweler attempted to defraud the Underwriters at Lloyd’s, London by creating a false $10 million inventory with the assistance of a less than honorable accountant and public adjuster.

His attempted fraud was unexpectedly subject to the investigation of Morpheus Othello McCloskey (called only by his friends by his initials “MOM”) and insurance coverage lawyer Samuel B. Hazan who, at the instructions of the Lloyd’s Underwriters, conducted a thorough and effective good faith investigation of the policy and the claim and defeated the attempted fraud.

A jeweler attempted to defraud the Underwriters at Lloyd’s, London by creating a false $10 million inventory with the assistance of a less than honorable accountant and public adjuster. His attempted fraud was unexpectedly subject to the investigation of Morpheus Othello McCloskey (called only by his friends by his initials “MOM”) and insurance coverage lawyer Samuel B. Hazan who, at the instructions of the Lloyd’s Underwriters, conducted a thorough and effective good faith investigation of the policy and the claim and defeated the attempted fraud.

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

You can learn more about Mr. Zalma’s other books, both nonfiction and fiction at Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

Sexual Abuse of Students not Educational Employment Activities

See the full video at https://rumble.com/v2d9f14-criminal-sexual-abuse-of-students-excluded.html and at https://youtu.be/hkzyvP35B7Q

In Nautilus Insurance Company v. Nicole Dufault, Isaiah Ziyambe-Freeman, Uchechi Ike, Matthew Derilus, Isaiah Gavin, Ormond Simpkins, Frankie Jerome, Brandon Hayes, and John Does 1-10, Civil Action No. 22-cv-836, United States District Court, D. New Jersey (March 9, 2023) Nautilus refused to defend or indemnify a convicted sexual abuser of children. Because Nicole Dufault (“Defendant” or “Dufault”) was convicted of the crime Nautilus sought a declaration form the USDC and brought:

1. A motion for summary judgment seeking a declaration that it is not obligated to defend or indemnify Defendant Nicole Dufault in several underlying civil lawsuits; and
2. A motion for default judgment against defendants Matthew Derilus, Isaiah Gavin, Ormond Simpkins, Frankie Jerome, Brandon Hayes, Isaiah Ziyambe-Freeman, and Uchechi Ike (collectively, the “Default Defendants” or “Underlying Plaintiffs”)

BACKGROUND

The Underlying Plaintiffs, in separate civil actions, alleged that Defendant Nicole Dufault, an insured high-school teacher formerly of Columbia High School in New Jersey, sexually abused them while they were under the age of 16.

On February 11, 2015, an Essex County grand jury returned a 40-count indictment against Defendant, charging her with first-degree aggravated sexual assault and second-degree endangering welfare of a child. The Indictment accused Defendant of engaging in sexual relations with six male students under the age of 16 in 2013 and 2014.

In 2020 Defendant pleaded guilty in the criminal action to three counts of third-degree aggravated criminal sexual contact as to three of the abused minors.

The Nautilus Policies and Coverage Dispute

Plaintiff issued an Excess Educators Employment Liability Insurance Policy to the New Jersey Education Association, of which Defendant is a member, covering September 2013 through September 2015. (hereinafter, the “Nautilus Policies”). The Nautilus Policies provided defense and indemnity coverage on behalf of an insured educator, but only for claims arising from the insured’s “education employment activities.”

For defense and indemnity coverage to attach under the Nautilus Policies, the subject matter of the suit for which coverage is sought must be premised on “education employment activities.” The Nautilus Policies expressly define “education employment activities” as either: “(1) pursuant to the express or implied terms of his or her employment by an educational unit; or (2) at the express request or with the express approval of his or her supervisor, provided that, at the time of such request or approval, the supervisor was performing what would appear to be his or her educational employment activities.”

Even if coverage attaches through “education employment activities,” the Nautilus Policies contain exclusions that disclaim coverage for claims arising out of a “criminal proceeding that has resulted in the Insured’s conviction,” or “[o]ccurrences involving damages which are the intended consequence of action taken by the Insured.”

Nautilus disclaimed all defense and indemnity coverage for the underlying claims.

The Instant Actions for Summary Judgment and Default Judgment

Specifically, Plaintiff sought a declaration from the Court that it has no duty to indemnify or defend Dufault in the civil actions brought by the Underlying Plaintiffs because:

1. her conduct does not fall within the Nautilus Policies’ definition of “educational employment activities;”
2. her convictions for criminal sexual contact, the acts of which constitute the underlying lawsuits, preclude coverage under the Nautilus Policies’ exclusions; and
3. her intentional sexual abuse of minor children excluded her from coverage under the “Intentional Damages” provision of the Nautilus Policies.

DISCUSSION

Plaintiff argued that Defendant’s purported sexual abuse clearly falls outside the definition of covered “education employment activities,” and thus Defendant may not invoke coverage under the Nautilus Policies.

The Court agreed with Plaintiff and granted a declaratory judgment in Nautilus’ favor.

The terms of the Nautilus Policies are clear and unambiguous – Nautilus disclaims its obligation to defend and indemnify civil lawsuits in which the underlying subject matter is not related to “educational employment activities.”

It was undisputed that the alleged sexual abuse of minor students was not conducted pursuant to the terms of Defendant’s (or any educator’s) educational employment. Therefore, the court found that coverage does not attach to Defendant under the Nautilus Policies because the Underlying Plaintiffs’ claims against Defendant do not arise out of her “educational employment activities.”

Plaintiff’s motion for summary judgment against Defendant was granted and Plaintiff’s motion for default judgment against the Default Defendants – was granted.

ZALMA OPINION

No liability insurance policy covers every possible claim against its insureds. Almost all, like the Nautilus policies, exclude intentional and criminal acts. Since defendant was convicted of a crime, the sexual abuse of minor students, was not part of her employment as a teacher and was clearly intentional, there was no possibility that Nautilus had an obligation to defend or indemnify the abusive teacher.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

ZIFL – Volume 27, Issue 6

See the full video at https://rumble.com/v2d3mrk-zalmas-insurance-fraud-letter-march-15-2023.html  and at https://youtu.be/xXjhnGW3rDY

Ohio Insurance Department Warns of ‘Past Posting’ Fraud Scheme

The Ohio Department of Insurance warned of an insurance fraud scheme committed after an auto accident or property damage that is trending in the state. Named the “past posting” scheme, the term describes the action of a person attempting to secure insurance after an incident in which they did not have coverage or making it appear they had insurance when the incident occurred, such as by manipulating paperwork.

Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/03/ZIFL-03-15-2023.pdf

The California Bar Admits It’s Failure to Properly Deal with now Disbarred Tom Girardi

State Bar Employees Bribed to Ignore Wrongful Conduct by Now Disbarred Attorney

• Former State Bar employee Tom Layton, who was terminated in 2015, (and his wife) received gifts and payments estimated at over $1 million from Girardi, through his firm, while Layton was employed at the State Bar. Those payments and gifts were never properly disclosed.
• Other State Bar employees and Board members accepted and failed to report gifts and other items of value from Girardi.
• Relatives of staff members were employed by Girardi’s firm.
• Staff in the Office of Chief Trial Counsel (OCTC) were improperly involved in matters assigned to outside conflict counsel.
• Eight Girardi cases were closed by individuals who May determined had conflicts of interest at the time they worked on the cases. The report found that their conflicts tainted their decisions to close the cases.
• Interim Executive Director Bob Hawley ghostwrote decisions in matters assigned to outside conflict counsel without disclosing that fact, including a decision to recommend closure of a complaint against Girardi.
• Between 2013 and 2015, both the Executive Director’s Office and Office of General Counsel received reports about Girardi’s influence at the State Bar and connection to Layton and others but failed to investigate.
• Former Executive Director Joe Dunn, who was terminated in 2014, and Hawley made questionable terminations of two OCTC attorneys who were advocating for disciplinary actions against Girardi.
• On at least one occasion, Girardi successfully deployed his connections at the State Bar to discourage people from making complaints against him.

Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/03/ZIFL-03-15-2023.pdf

More McClenny Moseley & Associates Issues

Three attorneys who once worked in MMA’s New Orleans office have posted notice on their LinkedIn pages that they are now “self-employed.” Founding partner James M. McClenny has resigned from the law firm. Several attorneys who once worked for the law firm outside of Louisiana are no longer listed on the law firm’s website. After the Louisiana Supreme Court suspended Huey last week, the bios of the three other attorneys who worked with him in the New Orleans office disappeared from MMA’s website.

Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/03/ZIFL-03-15-2023.pdf

Good News from the

A soulless soul-food murder plot was shut down. The owner of a soul-food restaurant featured on the hit TV reality show Welcome to Sweetie Pie’s had his nephew gunned down for a $450K life policy. James “Tim” Norman received life in prison for arranging a hit on his nephew Andre Montgomery in St. Louis. Norman paid Travell Anthony Hill $5K to shoot Montgomery with a .380-caliber handgun outside the rap studio where Montgomery worked. He then disposed of the gun and his burner phone. Exotic dancer Terica Ellis was in a relationship with Norman. He paid her $10K in cash to lure Montgomery to where he was shot. Insurance agent Waiel “Wally” Rebhi Yaghnam helped Norman secretly take out life insurance that named Norman the sole beneficiary if Montgomery died. Yaghnam helped Norman file applications that included false info about Montgomery’s net worth and background. Norman called the insurance agency to collect the insurance money just 16 days after Montgomery was shot. He also fake-played the role of grieving relative. TV clips from Welcome to Sweetie Pie’s circulated showing Norman mourning the death he himself set up. Norman even visited the murder scene with his mother and TV cameras in an episode. “Since Andre’s passing I haven’t gone through this part of the city,” Norman said on the show. “I’ve been avoiding it.” The entire murder crew now stands convicted.

Read this article including dozens of convictions and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/03/ZIFL-03-15-2023.pdf

Health Insurance Fraud Convictions

Former State Lawmaker Sentenced for COVID-19 Fraud Scheme at Springfield Health Care Charity

Patricia “Tricia” Ashton Derges, 64, of Nixa, Mo., was sentenced by U.S. District Judge Brian C. Wimes to six years and three months in federal prison without parole. The court also ordered Derges to pay $500,600 in restitution to her victims.

Read this article including dozens of convictions and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/03/ZIFL-03-15-2023.pdf

Other Insurance Fraud Convictions

LA Business Owner and Conspirator Sentenced In $54 Million Workers’ Compensation Fraud Scheme

Wesley Owens, 54, of Atlanta, Georgia, and Beau Wilson, 38, also of Atlanta, pleaded no contest to multiple felony counts of insurance fraud and conspiracy in Department 50 of the Los Angeles Superior Court before Judge Kerry White. The charges were filed after a California Department of Insurance investigation found the two defendants perpetrated a $54 million workers’ compensation insurance fraud scheme.

Read this article including dozens of convictions and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/03/ZIFL-03-15-2023.pdf

It’s Time to Subscribe to Locals or Substack

For Subscribers Only I Have Published Special Insurance Videos

I published on Locals.com more than 25 videos and two webinars of the Excellence in Claims Handling program. I also published on Substack.com videos and webinars of the Excellence in Claims Handling Program available only to Subscribers. The subscribes have access to all the videos and a webinar on “The Examination Under Oath A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud” among others.

Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/03/ZIFL-03-15-2023.pdf

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

No Coverage if Person Fails to Qualify as an Insured

See the full video at https://rumble.com/v2cxvdg-defense-refused.html and at https://youtu.be/8nK4ZjjHNe0

Plaintiff CSAA Fire & Casualty Insurance Company (CSAA) sued Roman Ramirez and eventually filed a successful Motion for Summary Judgment on the issue of coverage. In CSAA Fire & Casualty Insurance Company v. Roman Ramirez, No. 2:22-cv-00318-RFB-EJY, United States District Court, D. Nevada (March 10, 2023) the USDC resolved the coverage issue.

Where the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. If a party fails to properly support an assertion of fact or fails to properly address another party’s assertion of fact the court may:

• give an opportunity to properly support or address the fact;
• consider the fact undisputed for purposes of the motion;
• grant summary judgment if the motion and supporting materials – including the facts considered undisputed – show that the movant is entitled to it; or
• issue any other appropriate order.

FACTUAL BACKGROUND

The Court accepted the following facts as undisputed, based on Plaintiff’s Motion for Summary Judgment and the supporting materials in the record.

• Plaintiff is an insurance company who maintains a homeowner’s insurance policy (“The Policy”) held by the named insured, Maria M. Armendarez.
• The policy was in full force and effect on May 4, 2017, and covers the property located at 2421 Old Forge Lane, Unit 104, Las Vegas, Nevada 89121 (“Unit 104”).
• While the property covered by the policy was Unit 104, the policy agreement lists Ms. Maria Armendarez’s residence at a different location, namely 219 La Paz Avenue, Henderson, Nevada 89015.

An incident took place on May 4, 2017 (“the Incident”) involving Defendant that resulted in an underlying state court case being filed against him by Mr. Juan Severin. At the time of the Incident, Unit 104 was being rented out by Ms. Maria Armendarez to an unrelated family of three individuals: Loraine Gonzalez, Tony Gonzalez, and their child Luke Gonzalez. At the time of the Incident, certain repairs and remodeling was taking place at Unit 104. In connection with those repairs and remodeling. Ms. Maria M. Armendarez’s daughter, Ms. Carrie Armendarez, hired a handyman, the plaintiff in the underlying action, Mr. Juan Severin, to perform some of the work on Unit 104.

An argument between Ms. Carrie Armendarez and Mr. Servin ensued regarding whether Mr. Servin should perform any additional work and/or receive additional payment. As the argument ensued, Ramirez allegedly punched Mr. Severin in the face, causing him injury. As a result of the Incident, Mr. Servin sued in the underlying state court action, raising claims for injuries and damages against Mr. Ramirez (and others).

Defendant then tendered the defense of the Incident and ensuing underlying action to Plaintiff.

On May 10, 2022, Plaintiff took Defendant’s deposition. In the deposition, Plaintiff asked Defendant whether he had any blood, marital, or domestic relationship with Ms. Maria M. Armendarez and/or whether he had ever lived as a resident of the household of Ms. Maria M. Armendarez. Defendant unequivocally confirmed that he was neither a relative (blood or marriage) of Ms. Maria M. Armendarez, that he never lived with Ms. Maria M. Armendarez, and that he was neither a resident of her household. Defendant further confirmed that he has never lived at 219 La Paz Avenue, Henderson, Nevada, which is the resident household of Ms. Maria M. Armendarez, nor at Unit 104, where the subject Incident occurred. Defendant further confirmed that he has never been married in his entire life, only lived with his girlfriend, Loretta Vargas and not Ms. Maria M. Armendarez, and is not a blood relative of Ms. Maria M. Armendarez or her late husband, Mr. Fernando Armendarez.

DISCUSSION

In Nevada, when the facts are not in dispute, insurance contract interpretation is a question of law that may be decided by the reviewing Court. An insurance policy, like any other contract, must be construed and enforced as written, absent any ambiguity. In this case the four requirements for declaratory relief were met. There is an underlying proceeding between Mr. Severin and Defendant, currently before the Clark County District Court.

Defendant cannot establish that he is covered by the Policy because the Policy is not ambiguous as to defining “insured” and the scope of coverage to “insured” persons. Defendant admitted that at the time of the Incident, he was a resident of 3909 San Andreas Avenue, Las Vegas, NV 89121. He stated that he moved from that residence to a home he purchased, at 4388 Gibraltar Way, Las Vegas, NV, 89121, in 2020 and was not a resident of Unit 104 nor did he reside at Ms. Maria M. Armendarez’s residence.

Through his sworn deposition testimony, Defendant has confirmed that he does not qualify as an “insured” under the Policy.

ZALMA OPINION

Insurance policies must be interpreted as written. When a policy defines “insured” as a person who is named or who resides at the premises and is a relative of the named insured no one else is covered by the policy for defense or indemnity. Since Ramirez failed to fit any variation of the definition of “insured” he was not entitled to coverage for defense or indemnity.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

Investigation of Suspected Fraud

See the full video at https://rumble.com/v2cioga-first-party-property-fraud.html  and at https://youtu.be/-34uhXJ50bg

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 FBI advises that:

In 2010, 15,475 law enforcement agencies provided 1-12 months of arson data and reported 56,825 arsons. Of the participating agencies, 14,747 provided expanded offense data regarding 48,619 arsons.

Arsons involving structures (e.g., residential, storage, public, etc.) accounted for 45.5 percent of the total number of arson offenses. Mobile property was involved in 26.0 percent of arsons, and other types of property (such as crops, timber, fences, etc.) accounted for 28.5 percent of reported arsons.

• The average dollar loss due to arson was $17,612.
• Arsons of industrial/manufacturing structures resulted in the highest average dollar losses (an average of $133,717 per arson).
• Arson offenses decreased 7.6 percent in 2010 when compared with arson data reported in 2009….
• Nationwide, there were 19.6 arson offenses for every 100,000 inhabitants.

By use of technical devices, chemical analysis, and even trained dogs it has become more difficult for the arsonist to cause a fire that appears to a trained investigator to be accidental.

Arson is not excluded in any first party fire policy. It is, in fact, a specifically covered peril: fire. There is no arson defense available to an insurer. The defense for an arson caused by an insured to defraud an insurer is misrepresentation, concealment, or fraud, an exclusion in every fire policy.

If an insured sets fire to his furniture or car to defraud the insurer, the defense available to the insurer is fraud: not arson. To defend a claim based upon fraud by arson, the insurer must prove the following:

1. The property was insured under a contract of insurance.
2. The contract of insurance contained a provision allowing the insurer to void insurance because of misrepresentation, concealment, false swearing, fraud.
3. An exclusion for intentional acts of the insured similar to that in the New York Standard Fire Insurance Policy.
4. The fire was not accidental.
5. The fire was caused by the acts of a person or persons.
6. The fire was set by the insured or someone acting for the insured.
7. The fire was set for the purpose of defrauding the insurer.

Under Michigan law, however, in order to establish an arson defense the insurer need only show that the fire was of incendiary origin and that the insured had both motive and opportunity to set it. Each element may be established by circumstantial evidence.

There is rarely direct evidence that a fire was set by an insured. Without an eyewitness or other direct evidence, the insurer can prove the insured was involved in an arson-for-profit circumstantially by presenting evidence of the insured’s motive, opportunity and ability to cause the fire. Motive is not required to prove arson although showing a trier of fact a motive makes it easier for the trier of fact to believe the insured caused the fire to occur to defraud the insurer.

For example, showing an insured’s financial difficulties or anger at a spouse or significant other can establish motive. Also, an insured who has access to a building shortly before a fire has “opportunity.” If opportunity and motive combine and all accidental causes are eliminated, fraud by arson or arson-for profit can be proved.

In Fitzgerald v. Great Central Insurance Co., 842 F.2d 157 (6th Cir. 03/18/1988) following a fire, plaintiffs’ claim for benefits was denied. The insurers claimed that Gerald Fitzgerald set or procured the setting of the fire. Plaintiffs then filed a complaint against Aetna and Great Central for breach of contract.

On the night of the fire, Gerald Fitzgerald, his son and the family dog, who lived in the apartment above the tavern, were all absent from the building. Gerald Fitzgerald spent the night at the Coho Club in Traverse City and left his son and dog with a friend. Michael Husby, who also lived in Fitzgerald’s apartment and had recently bought into the corporation, visited the bar during the evening but spent the rest of the night at his girl-friend’s house.

The bar closed at 10:30 that night. Nothing unusual was noted in or around the building until flames and smoke were spotted at 1:30 a.m. The doors to the bar were locked but the separate entrance to the upstairs apartment was unlocked. There was no sign of breaking and entering.

Testimony at trial regarding why the insurer denied the insurance claim meets the standard for relevancy. The insurer testified that it was the insurer’s belief that the insured’s planned to defraud the insurer from the beginning, when they first acquired their homeowners insurance policy even though they were not living at the property. This is significant because a requirement for a valid homeowners insurance policy is that the homeowner occupy the premises and was part of the insurer’s arson for profit defense. [Banks-Williams v. Allstate Vehicle & Prop. Ins. Co. (6th Cir., 2019)]

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.

Considering the fact that plaintiff was arrested and cited for making a false insurance claim and that the individual he identified in a photo lineup as having stolen his car later testified to the police that he had been approached by a woman with connections to Plaintiff who paid him $200 for participating in a staged theft of Plaintiff’s vehicle the denial of the claim was appropriate.

In New Hampshire, a defendant participated in a staged theft of his wife’s jewelry at a Brockton, Massachusetts restaurant in order to fraudulently collect $1,500 in insurance proceeds. Joseph Butler, an off-duty police officer dining at the restaurant, observed the activities of the defendant, his wife, his daughter, and a friend, surrounding the staged theft. The evidence was sufficient to affirm the conviction. [State v. Matiyosus, 134 N.H. 686, 597 A.2d 1068 (N.H., 1991)]

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.

Regardless, the insured was arrested and the court found him guilty of insurance fraud because he took active steps to commit the fraud. The insured could not avoid criminal liability by failing to fulfill every requirement of a false claim.

Staged Mold Claim

The most famous staged mold claims occurred in Texas in 2002. The seven conspirators were arrested on June 27, 2002 by federal investigators, working in conjunction with the Texas Department of Insurance. The defendants were charged with presenting insurance claims for water and mold damage to a succession of homes that they purchased, bought policies for and then intentionally flooded the houses with water hoses or by damaging water pipes. At least one house was “cooked” to speed up mold.

Other members of the ring, posing as vendors and contractors, filed false claims to repair the damage and sold the homes to each other to repeat the process.  Six of the conspirators were found guilty. The remaining conspirator, Ramnatah Ramcharan was found guilty by a federal jury in October for conspiracy, four counts of mail fraud and ten counts of money laundering.

As insureds and public adjusters become “mold savvy,” the temptation to create a covered loss scenario where none would otherwise exist became almost irresistible.

This article was adapted from my book The Compact Book of Adjusting Property Claims Third Edition” available at amazon.com and Available as a Kindle book or  as a paperback.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

“The Passover Seder For Americans”

For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.

Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand that when G_d began to create the world there was nothing and that time, as we know it, had no meaning. G_d created all.

Because of the creation we are able to track time and celebrate Passover every year at the same time. We do so based on the lunar calendar used by our ancestors not the Julian calendar modern people use. As a result, Passover se We feel G_d gave people a conscience hoping it would help us decide right from wrong, to do our best to make good choices, to try to help others, not hurt others and to try to make right the wrongs we have done to others. The rituals that make up the Jewish holidays help remind us how thankful we are for how much we have accomplished with G_d ’s help and how grateful we are to G_d for everything we have and everything we are.

Thea and Barry Zalma have created this English only Seder that works for our family and will allow you and your families to tell the story of the Exodus painlessly and with the joy and celebration it deserves so that no member of our family forgets what G_d did for us when He took us out of slavery in Egypt and led us to a promised land.

If you are interested in why Jesus celebrated the Passover at the “Last Supper” with his disciples this will explain what he and the disciples were celebrating.

The books are available for only $5.95.

Available as a Kindle Book  Available as a Paperback

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE  is available at http://www.zalma.com and zalma@zalma.com

Insurance Claims Library

No Compelling Reason to Release Convicted Arsonist and Murderer

See the full video at https://rumble.com/v2ce08q-chutzpah-claim-from-killer-refused.html  and at https://youtu.be/k_7qCHSI1Fs

A person with no compassion for his many victims, with an expression that defines chutzpah, sought compassionate release from his 110 year sentence in United States Of America v. John T Veysey III, No. 99 CR 00381-1, United States District Court, N.D. Illinois, Eastern Division (March 2, 2023).  John T. Veysey III, while currently serving a 110-year sentence for wire fraud, arson, and felony by fire, moved the USDC for compassionate release because he was fat, had high blood pressure and was afraid of the Covid pandemic.

BACKGROUND

Throughout the 1990s, Veysey devised various deadly schemes to cause losses and collect insurance proceeds. Among other offenses, Veysey fraudulently obtained $959,849.47 in insurance proceeds from a car “accident” involving his first wife, from the death of his first wife, and from arson-for-profit fires to three of his residences. He tried to obtain an additional $1.3 million in insurance proceeds by attempting to kill his second wife and then-infant son in a house fire, and he schemed to fake the deaths of another woman and her sons.

On March 6, 2001, following a six-week trial, a jury found Veysey guilty on 18 counts. Consistent with the then-binding Sentencing Guidelines, the USDC sentenced Veysey to the statutory maximum of 110 years’ imprisonment.

Veysey argued that several factors justify a sentence reduction, including his health conditions, ongoing risks associated with COVID-19 in the federal prison system, alleged sentencing disparities between him and other offenders, his purported rehabilitation, and his preparations for reintegrating into the community. On July 6, 2022, Veysey submitted an updated motion in which he discusses COVID-19 risks, his ongoing health concerns, and his recidivism risk level.

DISCUSSION

As a general matter, a federal court may not modify a term of imprisonment once it has been imposed. The court may reduce a sentence if “extraordinary and compelling reasons” justify release.

Extraordinary and Compelling Reason

The kind of extraordinary and compelling circumstances contemplated by the statute include some new fact about an inmate’s health or family status, or an equivalent post-conviction development, not a purely legal contention for which statutes specify other avenues of relief. Legal arguments that an initial sentence was made in error do not qualify.

Veysey first points to his health conditions-including hypertension, atrial fibrillation, and obesity-as circumstances justifying a sentence reduction. Veysey may not use a motion for compassionate release to argue that the court’s original sentencing decision was incorrect.

In addition, Veysey offered evidence of his rehabilitation while in prison. But rehabilitation alone is not an extraordinary and compelling reason for release, nor can rehabilitation render otherwise ordinary circumstances extraordinary.

Also, the fact that Veysey has now spent several years in prison and has made efforts to prepare for life outside of prison does not qualify as an extraordinary and compelling reason that could justify his release.

Even if Mr. Veysey were to present an extraordinary and compelling reason for compassionate release, the court would still deny his motion under the § 3553(a) factors. “Consideration of even one § 3553(a) factor may show that the others do not matter.”

The first § 3553(a) factor, which addresses the “nature and circumstances” of a defendant’s offenses and personal circumstances, strongly militates against a sentence reduction. His crimes were shocking:

• Veysey killed his first wife,
• tried to kill his second wife and then-toddler son,
• torched multiple houses, and
• purchased life insurance coverage on another woman shortly before he was arrested-all to collect insurance money.

Veysey carried out these extraordinarily serious offenses over several years, destroyed numerous lives, and caused enormous emotional and physical pain and monetary damage.

Even if Veysey had presented the court with an extraordinary and compelling reason for his release, consideration of § 3553(a)(1) alone would provide a sufficient basis for denying his motion.

ZALMA OPINION

Veysey is proof that insurance fraud is a violent crime. He managed to murder and commit arson-for-profit and insurance fraud for years before he was arrested, tried, convicted and jailed for 110 years. Like the person who murdered his parents and sought empathy because he was an orphan, Veysey defined the Yiddish term “chutzah” by asking to be released because, in prison he became obese, had high blood pressure and AFIB. The USDC, wisely, refused his request since his condition was neither extraordinary nor compelling reasons for release but the opposite, a compelling reason existed to keep him in prison forever.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

“Caused by” is Synonymous with “Arises From”

See the full video at https://rumble.com/v2c8orc-indemnification-required.html and at https://youtu.be/u7bqqUnbWHsIn John Caruso v. OMNI Hotels Management Corporation, d/b/a OMNI Hotel, Ultimate Parking, LLC, No. 21-1745, United States Court of Appeals, First Circuit (March 2, 2023) the First Circuit Resolved, with reference to insurance law, an indemnification agreement between a hotel and its valet operator, after a suit for damages for a trip and fall.

FACTS

While staying at the Omni Hotel in Providence, Rhode Island, John Caruso was injured when he tripped and fell on the curb that separates the hotel’s valet driveway from its main entrance. Caruso sued both the hotel’s valet operator, and the hotel’s owner, Omni Hotels Management Corp. (“Omni”), blaming his accident on their allegedly negligent maintenance of the premises and the allegedly dangerous driveway curb. After the valet operator, Ultimate, settled the case with Caruso on behalf of itself and Omni, Omni sought indemnification from Ultimate for its attorney’s fees.

The district court granted summary judgment for Ultimate on Omni’s indemnification crossclaims, holding that neither the parties’ contractual agreement nor Rhode Island common law entitled Omni to such relief.

Caruso’s accident occurred in May 2016 and his suit alleged that Ultimate had “negligently parked vehicles within and up against the curbing of the valet circle” and thereby caused, or contributed to causing, him “to trip and fall and sustain serious personal injuries.”

Ultimate operates the hotel’s valet and parking services pursuant to a contract with Omni that includes provisions in which the two companies agreed to defend and indemnify each other in certain circumstances.

Both defendants moved for summary judgment on Caruso’s claims, but the district court denied the motions on the ground that a factfinder needed to decide “whether either or both [d]efendants were negligent and whether any negligence was a proximate cause of the [p]laintiff’s injuries.”

The District Court’s Indemnification Decision

The district court ruled that the contractual exclusion for a “claim [that] ‘arises from’ Omni’s negligence, intentional acts, or misconduct” was triggered by Caruso’s allegation that Omni’s negligence contributed to his fall and injuries. The court also rejected Omni’s common-law indemnification claim.

ANALYSIS

Omni challenged the district court’s indemnification rulings and the court’s earlier denial of its motion for summary judgment on Caruso’s negligence claims. Omni further claimed that, even if it is not entitled to contractual indemnification, common-law indemnification applies here because “Caruso alleg[ed] active negligence on Ultimate’s part and only passive negligence on Omni’s.”

Rhode Island courts have long treated indemnity provisions as “valid if sufficiently specific,” but have directed that such provisions “are to be ‘strictly construed against the party alleging a contractual right of indemnification.'”

“Arises from” vs. “Caused by”

The district court rejected Omni’s argument that a judicial determination of negligence on the part of Omni is required before indemnification is precluded.

The First Circuit disagreed that Rhode Island law draws the distinction in terminology on which the district court relied. Rhode Island cases reveal that the state’s courts would view “arising from” as used in the Concession Agreement as largely synonymous with “caused by.”

The view that “arising from” may be used synonymously with “caused by” also is reflected in cases addressing indemnification provisions in insurance policies – another context in which one party (the insurer) typically is assigned the obligation to defend and indemnify the other party (the insured) based on an underlying negligence claim.

The expression “arising out of” indicates a wider range of causation than the concept of proximate causation in tort law. But such variations in the breadth of causation play no role in this case, where the debate concerns the need for a finding of negligence versus allegations of negligence. The First Circuit opined that the Rhode Island Supreme Court would treat the Concession Agreement’s reference to an injury that “arises from” a negligent act no differently from a provision referring to an injury that is “caused by” a negligent act. “Arises from” in the pertinent phrase of the Concession Agreement carries materially the same meaning as “caused by.”

The Indemnification Obligation

It would make no sense for the Concession Agreement to excuse Ultimate from its contractual responsibility for its own actions based on third-party allegations against Omni that, as a factual matter, are meritless. The concept of indemnity is based upon the theory that one who has been exposed to liability solely as the result of a wrongful act of another should be able to recover from that party.

Only the indemnitee’s “sole negligence” would negate indemnification.

In a business contract, “the agreement to defend and indemnify . . . is incidental to the main purpose of the agreement.” The pleadings test for insurance coverage also recognizes the unequal bargaining power that often exists in that context, another contrast with commercial agreements executed between two business entities.

Ultimate’s obligation to indemnify Omni for “expenses and judgments of every kind whatsoever” – with the exception for claims involving Omni’s own negligence – and then refers specifically to the obligation to employ counsel and provide a defense. The commitment to indemnify Omni is negated only if Omni in fact bears some culpability for the third party’s alleged harm – a finding that to this point in the litigation has not been made.

Ultimate waived any argument against Omni’s theory that it is entitled to indemnification because no factfinder could attribute Caruso’s fall to negligence by Omni.

The First Circuit vacated the summary judgment for Ultimate on Omni’s contractual crossclaim for indemnification and remanded the case to the district court with instructions to enter judgment for Omni on that claim after whatever proceedings the court deems appropriate to determine the amount due to Omni.

ZALMA OPINION

Like an insurance policy’s promise to indemnify, the agreement between Ultimate and Omni contained a promise from Ultimate to indemnify Omni if its actions caused Omni to be sued. Since Omni did nothing to cause Caruso’s injury it was entitled to indemnification regardless of the fact that Caruso alleged, but did not produce evidence to prove, that Omni was negligent or contributed to his injury. The use of language “arises from” was logically found to be synonymous with “caused by” and Ultimate (or its insurer) was obligated to defend and indemnify Omni.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Arbitrator’s Factual Errors Not Ground to Vacate Award

See the full video at https://rumble.com/v2c3gbi-arbitrator-factual-error-must-stand.html   and at https://youtu.be/o5jyJyG9Vo8

In Martinique Properties, LLC v. Certain Underwriters at Lloyd’s of London, Subscribing to Policy Number W1551E160301; Beazley Lloyd’s Syndicate 2623; Beazley Lloyd’s Syndicate 623, No. 21-3561, United States Court of Appeals, Eighth Circuit (March 1, 2023) the Eighth Circuit interpreted the Federal Arbitration Act as applied to an insurance appraisal.

FACTS

Martinique Properties, LLC sued the Certain Underwriters at Lloyd’s, London (Underwriters) seeking to vacate an arbitration award. The district court dismissed the complaint for failure to state a claim for vacatur. Martinique Properties appealed.

Martinique Properties owned apartments in Omaha, Nebraska, for which it had property insurance coverage through Underwriters. In May 2016, while the policy was in effect, the apartments sustained hail and wind damage. Martinique Properties submitted an insurance claim for reimbursement of its repair costs and the Underwriters and Martinique disputed the amount owed for the repairs.

The insurance policy included an appraisal provision, which governed the process for resolving disagreements as to the amount of loss or the value of the property. Under the provision, a panel of appraisers was to evaluate the property damage and determine the amount of loss. If the panel came to a decision, its agreed-upon appraisal award would be binding on the parties.

Martinique Properties invoked the appraisal provision. A panel of appraisers agreed on a binding appraisal award in June 2020. The suit against Underwriters sought a declaration that the appraisal process and award were invalid. According to Martinique Properties, the award incorporated incorrect figures and measurements.

The district court granted Underwriters’ motion to dismiss, finding that none of Martinique Properties’ allegations presented appropriate grounds for vacatur.

ANALYSIS

The Arbitration Act is a congressional declaration of a liberal federal policy favoring arbitration agreements. Under the Act a court may only vacate an arbitration award in four limited circumstances, and in the absence of one of these grounds, the award must be confirmed.

Martinique Properties argued that the appraisal award must be vacated because the appraisers used figures and measurements which are contrary to the actual conditions of the Property and failed to consider certain buildings and certain portions of a damaged roof when determining the appraisal award.

Martinique Properties alleged only factual errors that challenge the merits of the appraisal award, and the Eighth Circuit had no authority to reconsider the merits of an arbitration award, even when the parties allege that the award rests on factual errors.

An arbitrator does not exceed his or her powers by making an error of fact. Accordingly, the appraisers’ use of certain figures and measurements in calculating the amount of loss and their alleged failure to consider particular buildings and portions of roof damage, even if incorrect, are not sufficient for vacatur under the act.

Since the parties bargained for the arbitrator’s decision; if the arbitrator got it wrong, then that was part of the bargain.

ZALMA OPINION

Appraisal of the extent of loss in a first party property insurance policy is, in the Eighth Circuit, an arbitration. Arbitration is designed to avoid or limit litigation. When insured and insurer agree to appraisal in accordance with the terms of the policy is binding on both parties except in the case of fraud or misconduct. Arguments over fact belong in the appraisal proceedings and neither a state nor a federal court may place its evaluation over that of the appraisers. Martinique chose appraisal and must accept the findings of the appraisers.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Failure to Fulfill Protective Safeguards Endorsement Defeats Fire Claim

See the full video at https://rumble.com/v2byhfq-no-water-to-sprinklers-no-coverage.html  and at https://youtu.be/_oSRoKJOi_0

In Frankenmuth Mutual Insurance Company v. Fun F/X II, Inc. and Cao Enterprises II, LLC, No. 22-1933, United States Court of Appeals, Seventh Circuit (February 28, 2023) the insurer rejected a fire claim because the named insured knew, and didn’t tell Frankenmuth, that the sprinklers in his warehouse had no water, a breach of a material condition precedent of the policy.

Fun F/X II, Inc. and Cao Enterprises II, LLC (collectively “FUN”) sought insurance coverage after a warehouse fire. The relevant insurance policy issued by appellee Frankenmuth Mutual Insurance Company provides that it does not cover losses if prior to the fire the policy holder knew of a suspension or impairment in an automatic sprinkler system yet failed to notify Frankenmuth of the issue. Based on this policy exclusion, the district court granted summary judgment for Frankenmuth.

UNDISPUTED FACTS

FUN is a costume and theatrical supply retailer that stored its inventory in a warehouse in South Bend, Indiana owned by Cao Enterprises II, LLC. Victor Cao is the sole member of Cao Enterprises II, LLC and the sole stockholder of FUN. Cao purchased the warehouse in 1999. It then had a Functional sprinkler system with a working supply of water. Cao replaced the sprinkler heads around 2004 and hired inspection companies for routine system testing. In 2016, an inspector from Legacy Fire Protection found no problems.

When the same inspector returned on September 28, 2017, the sprinkler system had no water pressure. The inspector notified Cao, and the two called South Bend Water Works immediately. On November 15, 2017, Cao spoke with the city fire inspector to try to solve the problem.

Cao never heard from any water works personnel and did nothing else to check whether the water was in fact restored. No one ever told Cao the source of the problem, let alone that the problem was fixed.

The next year, a different employee from Legacy Fire Protection performed the annual inspection in the warehouse. Cao was not present for that September 2018 inspection and was not notified of any problems.

THE FIRE

A fire destroyed the warehouse and all of its contents on July 26, 2019. FUN claimed losses exceeding $7 million. The sprinkler system still did not have any water flowing to it. After the fire, the source of the problem was discovered:

The city apparently had cut and capped the pipe supplying the sprinkler system in April 2017 when the building next door was demolished. Cao was told that the worker cutting the pipe incorrectly believed the FUN warehouse was being demolished as well.

Frankenmuth Mutual Insurance Company’s policy contained an exclusion providing that Frankenmuth “will not pay for loss or damage caused by or resulting from fire if, prior to the fire, you: 1. Knew of any suspension or impairment in any protective safeguard listed in the Schedule above and failed to notify us of that fact.” The referenced schedule listed automatic sprinkler systems as protective safeguards.

It was undisputed that Cao never notified the insurer after he learned in September 2017 that the sprinkler system lacked a working water supply. It is also undisputed that no one ever told Cao before the fire that the water flow had been restored.

Frankenmuth sued seeking a declaratory judgment that it did not owe insurance coverage to FUN for losses from the fire. FUN asserted a counterclaim for breach of the insurance policy. The district court granted summary judgment in favor of Frankenmuth based on the policy’s notice-of-impairment exclusion. The court found the sprinkler system had no water flowing to it-and that FUN, through Cao, knew of this impairment yet failed to notify Frankenmuth.

ANALYSIS

Insurance policies are generally construed using familiar contract analysis rules and the interpretation is often a question of law. Where the policy language is unambiguous, plain meaning controls.

The protective safeguards endorsement is clear and easy to apply to the facts at hand. Cao admits that he knew there was no water flowing to the sprinkler system on at least two occasions: the September 2017 inspection and his November 2017 communications with the city fire inspector. He admits that no one ever told him that water flow had been restored. Cao also admits that he never told Frankenmuth about this lack of water flow.

The sprinkler system’s function was to deliver water in the event of fire. When Cao learned that there was no water in the system, he learned that there was a “suspension or impairment in” the system and needed to report the problem to Frankenmuth if he wanted to keep the fire insurance in effect. Since there is no genuine factual dispute on the decisive question that FUN knew of a suspension or impairment in the sprinkler system prior to the fire and failed to report that problem to Frankenmuth. Cao had knowledge in September and November of 2017 that the system had no water flowing to it yet never reported that impairment to Frankenmuth.

ZALMA OPINION

The protective safeguards endorsement created a condition precedent to recovery of indemnity under the policy. Since the insured knew there was no water flowing to the sprinkler system and did not tell his insurer of the fact, the seven million dollar loss was not covered by the policy. FUN and Cao are not without a remedy. The City cut off his water supply negligently and he may sue to recover his loss because of its negligence.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Being a Bad Neighbor is not a Crime

This is a fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story, and many other is my book “Insurance Fraud Costs Everyone”  will help the public 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.

See the full video at https://rumble.com/v2bu2e6-being-a-bad-neighbor-is-not-a-crime.html and at https://youtu.be/7zm-lqdJMbI

Being a good neighbor is hard work. Sometimes it’s impossible. Marsha was not a good neighbor. She would “borrow” things from her neighbors and never return them. Most of her small kitchen appliances arrived because of such loans. Marsha had an extensive collection of CDs and long-playing records, none of which she purchased. Marsha would invite herself to lunch, but never invite her neighbors to her home for lunch.

She would play her stereo at its highest volume level at all hours of the day and night. Everyone who lived within six houses of Marsha lost sleep because of her actions. None of her neighbors liked Marsha.

Marsha kept a bull terrier named “Jaws” whom she did not allow in her house. Jaws, however, would escape the backyard weekly. Neighborhood cats, rabbits and small dogs disappeared with some regularity.

The entire neighborhood universally detested Marsha and Jaws. If Marsha ever decided to move, the neighbors would throw a going away party to which they would not invite her. Everyone in the neighborhood was afraid of Marsha and Jaws. They tolerated her because they did not know how to remove her from the neighborhood.

One summer evening while Marsha was attending a concert, burglars entered her house. Jaws, sensing the burglars in the house, barked furiously but could do nothing since Marsha tied him up in the backyard. The neighbors ignored Jaw’s barking since they were afraid to offend Marsha by complaining about the noise. Marsha lost her jewelry, two television sets, two VCR’s, her stereo set and her microwave oven.

The neighbors, when questioned by the police about the burglary, could only report that they heard the dog barking but saw nothing. Most smiled upon learning of the burglary and whispered under their breath their pleasure at Marsha’s loss.

Two days later Marsha’s adjuster arrived and parked in front of her house. On the adjuster’s car was a sticker identifying the company for which she worked. The adjuster spent an hour interviewing Marsha and considered the report to be that of a routine burglary. The adjuster asked Marsha to complete a form listing all of the personal property stolen, its purchase date, purchase price, replacement cost and its actual cash value. Once the adjuster received the list, she expected to go through the list, arrive at an actual cash value for the items and negotiate a quick settlement with Marsha.

Marsha’s neighbors had other plans. Harry and Louise, who lived next door, looked up the address of the insurance company in their telephone book. They then sat at an old Underwood manual typewriter and wrote a letter to the insurance company that said:

“We are neighbors of Marsha, the person you insure. We know she has reported a burglary at her house to the police and is making claim for losses due to that burglary.

“The claim is a fraud. Marsha’s house was not burglarized. She did not have the items she is claiming stolen.

“If you need further detail please call us at 555- 5555.”

They then signed their names. Three other neighbors did the same.

The insurance company, faced with the accusations, had no option but to report Marsha’s claim to the fraud division of the State of California Department of Insurance as a suspected fraudulent claim; assign investigation to its special investigation unit (SIU) and conduct a thorough investigation into the facts alleged.

The SIU investigator interviewed Harry and Louise and all of the other neighbors. They convinced the investigator that Marsha was not a credible person. The investigator believed Marsha was a despicable person. He knew she was the one who the three neighbors spoken to believed to be a fraud.

The insurance company retained the services of a lawyer to examine Marsha under oath and confront her with the accusations of fraud. The fraud division, faced with the compelling evidence of the statements of the neighbors, started its own investigation and presented the case the district attorney for prosecution.

Marsha, totally innocent and the victim of a crime, was dumbfounded. Her insurance company would not pay her claim and insisted on interrogating her endlessly in front of a court reporter. She could not understand the reasons for the interrogation. She explained to the lawyer for the insurance company why her claim was valid.

Marsha faced the lawyer for the insurance company with her sworn testimony that her claim was legitimate. He also had available the reasonable and the unsworn testimony of the three neighbors. There seemed to be compelling evidence that the claim was a fraud and equally compelling evidence it was a valid burglary claim.

The lawyer, the SIU investigator and a court reporter, went back to the home of Harry and Louise. They asked Harry and Louise to give testimony under oath to establish the fraud they had reported. Harry and Louise agreed to the sworn testimony and were ready to continue with their false accusations until the lawyer for the insurance explained to them the penalties of perjury. Harry and Louise decided that although Marsha deserved punishment for her lack of neighborliness, to have her punished was not worth prison. They told the truth. They explained to the lawyer why they had told the SIU investigator that they believed Marsha had committed fraud.

On the advice of counsel, the insurance company settled Marsha’s claim promptly. The Fraud Division was advised of the false report. Harry and Louise were not punished. No one told Marsha why it took so long to resolve her claim.

If the insurance company and its lawyers took Harry and Louise’s statement at face value and denied Marsha’s claim, the insurer would have faced a lawsuit from Marsha for falsely accusing her of the fraud.

The law of California, and several other states, now require that insurers have special fraud investigation units. The law requires that those specially trained investigators investigate claims of fraud to protect the insurer and the public from the crime. The SIU investigators, however, must remember that they are also claims people whose duty is to pay all legitimate claims and to investigate the basis for any denial thoroughly.

It was this thorough investigation, including the examination under oath of Marsha and the attempted sworn statement of the neighbors that saved Marsha from a possible criminal prosecution and the insurer from a bad faith lawsuit.

Every professional claims person understands that not all obvious frauds are fraud, not all innocent claims are innocent, and it is the obligation of every claims person and SIU investigator to thoroughly investigate every claim with the intent to find that a claimed loss is appropriate and compensable.

If fraud is proved by a thorough investigation then the claim should be denied and the person making the claim should face the ire of the local prosecutor or the US Attorney.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Suing an Insurer & its Chairman as Racist for Denial of Claim is not Viable

See the full video at https://rumble.com/v2bh53c-vexatious-litigant-warned.html  and at https://youtu.be/TG59DxSOL8k

After a car accident, Nehemiah Rolle filed a claim with his insurer, Founders Insurance Company, a member company of the Utica National Insurance Group. Founders responded with a request for more information, and when none came, the company denied the claim only to find it and its Chairman sued claiming their racism resulted in the denial of Rolle’s claim.  In Nehemiah Rolle, Jr. v. Richard P. Creedon, No. 22-1720, United States Court of Appeals, Seventh Circuit (February 23, 2023) the Seventh Circuit heard the appeal and warned Rolle that further frivolous filings would cause sanctions to be imposed against him.

FACTS

A few months after the denial Founders sent Rolle a notice that his policy was due to expire and would not be renewed. Rolle then sued Richard Creedon, the chairman and chief executive officer of Utica National, alleging that Founders breached its insurance contract by not paying his claim and discriminated against Rolle because he is Black by “aiding and abetting” white employees to “criminally defraud” Rolle by accepting his insurance premium while denying coverage.

Rolle sought compensatory damages of 1 billion dollars and punitive damages of 500 million dollars. Creedon moved to dismiss the case for lack of personal jurisdiction. In the meantime, Rolle filed a motion requesting an “Emergency Order” for “A Stay or Restraining Order” requiring that his insurance coverage continue beyond its expiration date and until the insurance company was required (through this lawsuit) to pay for the repairs to Rolle’s car.

The district judge construed Rolle’s motion for an “Emergency Order” as a request for a temporary restraining order under Rule 65(b) and denied it.  Rolle, unhappy with the result, then moved for the district judge’s recusal because of alleged racial bias, which, he argued, is what caused the judge to deny the “Emergency Order” and say there was no emergency.

Rolle filed an interlocutory appeal after the denial of his two motions. The essence of a TRO is its brevity, its ex parte character, and (related to the second element) its informality. A preliminary injunction requires notice to the opposing party, and typically involves a hearing held before the injunction is issued.

Here, the district court labelled the motion as a request for a TRO and, consistent with such proceedings denied it without a hearing in a brief order. On the merits, Rolle argues the judge erred by finding it unlikely he would suffer irreparable harm without injunctive relief. Rolle contends that if his coverage is not maintained, he cannot be insured by another company because of the damage to his car that his insurer refused to pay.

ANALYSIS

To obtain a preliminary injunction, a plaintiff must show that it is likely to succeed on the merits, and that traditional legal remedies would be inadequate, such that it would suffer irreparable harm without the injunction. The Seventh Circuit concluded that the district judge did not err in determining that Rolle failed to demonstrate that the denial of his insurance claim (even if wrongful) or the non-renewal of his auto insurance policy would cause irreparable harm in these circumstances. The harm Rolle claims is measurable in monetary terms (the cost to repair his car or a higher insurance premium), and can be adequately addressed with damages.

VEXATIOUS LITIGANT

Rolle’s litigation history demonstrates a concerning pattern of misconduct against this defendant and others. Rolle filed a second suit against Creedon in the Northern District of Illinois four months after filing this one. The second complaint alleges that Creedon “defam[ed] and libel[ed]” Rolle by notifying the court of Rolle’s litigation history that was otherwise identical to the complaint before the Seventh Circuit.

Rolle is a prolific litigant. He has filed at least 55 federal lawsuits in the Eastern, Northern, and Southern Districts of New York, the Southern District of Ohio, and the District of New Jersey. Most allege that businesses, elected officials, judges, and government employees engaged in racist actions that violated his constitutional rights, but none went far. The majority of these cases have been frivolous and dismissed for lack of subject-matter jurisdiction. Two courts (E.D.N.Y. and S.D. Ohio) imposed restrictions on Rolle because of his vexatious filings.

The Seventh Circuit warned Rolle that further frivolous filings within this circuit may lead to monetary sanctions that, if unpaid, can result in a filing bar.

On the jurisdictional issue, the Seventh Circuit sided with Rolle but affirmed the denial of relief.

ZALMA OPINION

Insurance companies are often disliked, especially when a claim is denied. People like Mr. Rolle believe that filing a suit claiming bad faith and racism will result in a monetary settlement to avoid the costs of defending the suit. Mr. Rolle is a vexatious litigant who has received the kindness of federal courts who take the time to hear his frivolous lawsuits and claims that anyone who disagrees with him is a racist who must pay him millions of dollars for his hurt feelings. A warning after 55 frivolous suits is too little too late. Mr. Rolle should be severely sanctioned with sanctions that hurt – not just a refusal to allow him to file suits.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

ERISA Plan Must be Enforced as Written

See the full video at https://rumble.com/v2bd9ve-employer-provided-life-policy-expired.html   and at https://youtu.be/oqaF9V2VtwY

When Anthony Hayes’ employment ended, so did his employer-provided life insurance. Hayes then missed the deadline to convert his coverage to an individual policy. After Hayes died, his surviving spouse filed suit seeking relief under a provision of the Employee Retirement Income Security Act allowing “a participant or beneficiary” of an employee benefit plan “to recover benefits due” “under the terms of [the] plan.”

In Kathy Hayes v. Prudential Insurance Company Of America, No. 21-2406, United States Court of Appeals, Fourth Circuit (February 23, 2023) Ms. Hayes sought benefits under an employee life insurance policy based on equity – that the decedent was too ill to convert his employee life policy to a personal policy even though he did not comply with the requirement of the ERISA plan.

FACTS

Hayes worked as an environmental engineer for DSM North America, Inc., and had an employer-provided life insurance policy with defendant Prudential Insurance Company. Prudential was both the insurer and the administrator of the employer-provided benefit plan. The plan gave Prudential “the sole discretion to interpret [the plan’s] terms . . . and to determine eligibility for benefits.”

In 2015, Hayes lost his job because of medical issues and his employer-provided life insurance coverage ended. The terms of the plan, however, allowed former employees to convert employer-provided coverage to an individual policy. To do so, the plan required Hayes to initiate the conversion process “by the later of” 31 days after his employer-provided coverage ended or 15 days after receiving “written notice of the conversion privilege.” The parties agree Hayes’ conversion deadline was December 23, 2015.

Hayes did not contact Prudential about converting his life insurance policy until 26 days after the conversion deadline. Hayes’ health continued to deteriorate, and he died in June 2016.

Plaintiff submitted a request for benefits, which Prudential denied. The claim administrator explained Hayes’ employer-provided “coverage terminated on 11/16/15,” and although Hayes “was eligible to convert his Group Basic Life Insurance,” “there is no conversion policy on file.”

The district court entered judgment for Prudential. The court concluded Prudential “reasonably denied [p]laintiff’s request for benefits” because “Hayes received timely notice of his conversion rights” and “did not convert his life insurance to an individual policy during the [c]onversion [p]eriod.”

ANALYSIS

ERISA regulates employee benefit plans by establishing standards of conduct, responsibility, and obligation for fiduciaries of those plans, and by providing for appropriate remedies, sanctions, and ready access to the federal courts. ERISA creates a wide range of public and private enforcement mechanisms.

The statute allows suits to recover benefits owed under the terms of the plan but it does not permit a court to alter those terms. As plaintiff admits, Hayes failed to convert his life insurance coverage in the time set forth in the policy. Awarding benefits would thus require the very step the statute does not permit: modifying the plan’s terms to provide a workaround to its conversion deadline.

Plaintiff countered that she is not asserting that the plan terms should be rewritten. Instead, she asks the Court to apply the doctrine of equitable tolling to allow for an exception to the life insurance conversion deadline set forth in the policy because Hayes was incapacitated during the conversion period.

It does not matter that Congress enacted a statute-here, ERISA – to enable courts to help “implement” the agreement. The statute neither addresses the availability of equitable tolling nor does it purport to alter the terms of any ERISA plan. For that reason, the Fourth Circuit was unwilling to apply equitable tolling principles that would, in practice, rewrite the plan.

The life insurance conversion deadline at issue here is not a statute of limitations, nor does it operate as one.

In contrast, no cause of action for benefits accrues when a participant misses a conversion deadline. Indeed, a participant whose policy has expired, unconverted, has no benefits due under the plan for any later occurrence because that participant lacked coverage.

Employers have large leeway to design employee benefit plans as they see fit, but once a plan is established, the administrator’s duty is to see that the plan is maintained pursuant to that written instrument. Prudential did not abuse its discretion by fulfilling its duty and the district court correctly resolved the single claim before it based on the agreed-on facts and consistent with well-established law. The judgment of the district court was affirmed.

ZALMA OPINION

Equitable tolling is a means of dealing with an unfair result between litigants. However, ERISA plans are required to be enforced by the plan administrator as written. Although it was sad that the decedent was unable to promptly change his employer provided life insurance to a personal policy, the plan was clear and the administrator had no choice but to refuse to pay for a life insurance policy that was no longer in effect.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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.

Random Thoughts on Insurance

Volume XV

Blog Posts from Zalma on Insurance from July 2022 to February 2023 Kindle Edition

Since 2010 I have been writing a blog post at least five days a week. This e-book is a collection of those posts that reveal my interest in insurance case law. Some of the cases reviewed were important. Some were of first impression. Others will be unimportant. All were interesting to me and I hope are interesting to the reader. This is the fifthteenth collection of those blog posts. This volume covers the posts from July 2022 to February 2023.

Some of the articles include:

• An Undisclosed Intent Cannot Create Coverage
• Failure To Advise Insurer Of New Car Fatal To Claim
• Insurance Agent Should Not Sell Unregistered Securities
• Convicted Of Wire & Insurance Fraud
• Fraud Perpetrator’s Attempt To Avoid Jail Fails
• Rescission Does Not Defeat Negligence Claim
• No Bad Faith
• Fortuity Is An Affirmative Defense
• No Contract Without Offer & Acceptance
• Evil Employee Still Allows Employer To Be Defended
• He Who Represents Himself Has A Fool For A Client
• Search For Deep Pocket Fails
• Substantial Compliance With Statute Transfers Title To Vehicle
• Surveillance Establishes Fraud Defense

The book is available as a Kindle book and as a paperback.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

ZIFL Volume 27, Issue Number 5

See the full video at https://rumble.com/v2b9mt4-zalmas-insurance-fraud-letter-march-1-2023.html and at https://youtu.be/KhITzgBsOsA

Read the full text of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf.

McClenny Moseley & Associates & Insurance Fraud

The McClenny Moseley & Associates (MMA) series of lawsuits, court hearings and insurance department actions have brought about some very serious problems for MMA, including court orders, lawsuit dismissals, administrative cease and desist orders and litigation, all of which have created a poster child for Zalma’s Insurance Fraud Letter.

Since MMA has admitted that it reported a claim to various insurers, including Allied Insurance, that it was presenting claims against Allied and at least 856 claims to Allied and other insurers, that it represented the insured when, in truth and fact, it did not represent the insurer’s insureds, but, rather Apex Roofing who is not an insured of any of the insurers to whom MMA made claims, demanded appraisal and settled claims, cashed checks and took attorneys fees from people it did not represent the insurer is obligated to report each claim to the Louisiana Department of Insurance as a suspected insurance fraud effected or attempted.

Therefore, it appears, subject to the review of the Louisiana Attorney General and/or local prosecutors, MMA violated Louisiana fraud statutes, and each insurer who is a victim of one or more of the minimum of 856 fraudulent claims where MMA represented it was the attorney of the insurers’ insureds was a criminal fraudulent act.

Since the actions of Velawcity and Apex Roofing appear to meet the definition of a “runner” the prosecutors in the state of Louisiana should consider prosecution for their fraudulent activities.

In addition, the federal judges involved in these cases should consider reporting MMA, Velawcity and Apex Roofing to the U.S. Attorney for investigation of the potential crime of wire fraud.

There will be more hearings in March 2023 that will be reported in the March 15, 2023 issue of ZIFL.

Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf.

The Arson for Profit Defense

To prove the “arson for profit defense” the insurer must prove the three elements needed to establish arson plus proof that the insured violated the misrepresentation, concealment, or fraud condition, and/or that the act was an intentional act to defraud the insurer.

A successful “arson for profit defense” depends on a wide range of evidence, including expert testimony, knowledgeable and convincing witnesses, and effective counsel for the insurer. Where any of the evidence as to each element is non-existent, weak, or sufficiently
rebutted by the insured’s experts and witnesses, the insurer’s “arson for profit defense” will likely fail.

Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf.

Good News from the Coalition Against Insurance Fraud

A firm that administered health care claims stole $18M of funds intended for paying the claims. Anthony Riccardi started by administering third-party healthcare claims for a car dealership chain in New Canaan, Conn. Employee Benefit Solutions created invoices for the car dealership brand, which submitted payments and expected the funds to be paid to health care providers. EBS stole almost $18M of $26M the dealership paid. Most of this money was transferred into the EBS operating account and used for non-company expenses — mortgages, boats, golf and luxury cars. Riccardi only paid claims from health care providers he thought were likely to complain, or involved the car dealership execs. The scam also included inflated or bogus medical claims, including some by a phony
company under Riccardi’s name. Unpaid financial obligations began to mount, prompting Riccardi to apply for millions in fraudulent bank loans and cash advances. They were used in part to pay financial obligations to the car dealership brand. To cover up the loan scheme, Riccardi forged invoices from a fake company that supposedly sold upgraded billing software to EBS. Ricardi pled federally guilty. He faces up to 30 years in prison when sentenced and agreed to repay $14.8M.

Read the full article plus many more reports of convictions and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf.

How to Add to the Professionalism of Insurance Claims Professionals

Every insurer, insurance syndicate, insurance brokerage, insurance sales agency, insurer branch office, and vendors to the insurance industry should add to the libraries of their various offices or employees.

Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf.

Health Insurance Fraud Convictions

Ronald A. Beasley II, 33, of Portsmouth, Florida was the pharmacist in charge at NH Pharma, a pharmacy located in Lake Mary, Florida. Through NH Pharma, Beasley and his co-conspirators billed Medicare for expensive compound drug creams that they never
actually purchased or dispensed, and instead provided Medicare patients an inexpensive compound drug cream not covered by Medicare.

Inventory records showed that NH Pharma did not buy enough of the expensive prescription drugs to fill all the prescriptions NH Pharma billed to Medicare. In total, Beasley and his co-conspirators received more than $1 million in fraudulent proceeds from Medicare.

A federal jury in the Middle District of Florida convicted Beasley, a Virginia man February 9, 2023 for his role in a scheme to defraud Medicare of over $1 million in prescription drug benefits.

Beasley was convicted of conspiracy to commit health care fraud and three counts of health care fraud. He is scheduled to be sentenced on April 25 and faces a maximum penalty of 10 years in prison on each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Read the full article including more than a dozen convictions and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf.

The Brothers Ben-Cohain

The story that follows is a fictionalized True Crime Story of Insurance Fraud from my 55 Years in Insurance that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. This is one of more than 80 stories in my book “Insurance Fraud Costs Everyone“ Available as a Kindle Book and Available as a Paperback from Amazon.com.

In 1990 Moshe Ben-Cohain and Menashe Ben-Cohain started a course of conduct that led to their arrest for insurance fraud. They failed to appear after posting bond and are, along with their co-conspirator, Raz Rosenberg, fugitives.

Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf.

Other Insurance Fraud Convictions

Herbert Allen, age 38, and Dion Ridley, age 23, pleaded guilty to Conspiracy to Commit Mail Fraud in violation of Title 18, United States Code, Section 371 Allen was to 37 months in prison, followed by 3 years of supervised release and Ridley was sentenced to 6 months in prison, followed by 1 year of supervised release.

The defendants admitted to being in a conspiracy to commit mail fraud in connection with a staged automobile collision. In the scheme, Allen falsely claimed that he was the driver of a car that was struck by a tractor-trailer on June 28, 2017. Ridley, a passenger in the car, falsely claimed that Allen was driving the car and they were struck by a tractor-trailer.

In fact, the government’s evidence showed that the defendants conspired with Damien Labeaud, Roderick Hickman, and others to intentionally collide Allen’s 2007 Chevrolet Impala with a tractor-trailer in the area of Tchoupitoulas Street and Calliope Street in New Orleans.

Read the full article and about many more insurance fraud convictions and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Insurance Agent Who Kept Premium Money Loses License

See the full video at https://rumble.com/v2b5io2-agents-license-removed-for-fraud.html  and at https://youtu.be/W-7fFuD4170

Vincent Alexander, appealed the trial court judgment which affirmed the March 23, 2021 decision of the Louisiana Division of Administrative Law that revoked his insurance agency license. He appealed and the Louisiana Court of appeal reviewed the appeal in Vincent Alexander v. Louisiana Department Of Insurance, No. 2022 CA 0769, Court of Appeals of Louisiana, First Circuit (February 24, 2023)

FACTS

Alexander was an insurance agent licensed by the State of Louisiana, doing business as Vincent Alexander Insurance Agency (the agency). He was married to Tacey Ann Tolliver, who was also an insurance agent licensed at one time by the State of Louisiana and worked with him at the agency. Ms. Tolliver’s insurance license expired on August 31, 2018.

The Louisiana Department of Insurance (LDI) received a complaint from Kendall Lewis, one of the agency’s customers, that was filed against Progressive Insurance Company (Progressive). In the complaint, Mr. Lewis stated he had paid premiums to the agency on a policy that went into effect December 7, 2018, but the policy was cancelled on January 22, 2019. Mr. Lewis provided premium receipts as proof of payment, dated from January 2019 to May 2019, of which were signed “T. Alexander.” Progressive informed Mr. Lewis that the policy was cancelled due to non-payment, but he was not made aware of the cancellation until he was involved in a motor vehicle accident.

LDI directed Mr. Alexander to respond to Mr. Lewis’s complaint and to explain why Mr. Lewis’s policy was cancelled despite his payment of premiums. Mr. Alexander failed to respond.

Representatives from Progressive met Ms. Tolliver at the agency, but Mr. Alexander was not present. Ms. Tolliver explained to the representatives that she began working there in 1997, and that she and Mr. Alexander were the only two employees of the agency. When the Progressive representatives asked Ms. Tolliver about her expired insurance license, she stated she was not aware that it had expired.

Progressive, for obvious reasons, terminated Alexander’s producer’s agreement with the agency, and the agency refunded to Mr. Lewis his premium payments and paid his reinstatement fees to the Office of Motor Vehicles (OMV) for not having vehicle insurance.

LDI then issued a Notice of Proposed Regulatory Action and Wrongful Conduct via certified mail to Mr. Alexander regarding Mr. Lewis’s complaint and the failure to pay the fine. On the same date, LDI mailed its intent to suspend and revoke Mr. Alexander’s license. After receiving multiple complaints similar to that of Mr. Lewis from other customers of the Agency LDI eventually notified Mr. Alexander of violations pursuant to La. R.S. 22:1554(A)(4), which provides for the suspension or revocation of an insurance license for “[u]sing fraudulent, coercive, or dishonest practices or misrepresentation, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business such as might endanger the public.”

The Louisiana Division of Administrative Law (LDA) reviewed LDI’s decision, and, on March 23, 2021, signed an order affirming the revocation of Mr. Alexander’s insurance license.

LDA found that Mr. Alexander was particularly irresponsible in allowing Ms. Tolliver to run the business after he had been made aware of Mr. Lewis’s complaint, which then led to other consumer complaints being filed against the agency. Alexander appealed and after a full hearing the district court signed a judgment on November 16, 2021, affirming LDA’s decision to revoke his license. Mr. Alexander appealed to the Court of Appeal.

DISCUSSION

Louisiana Revised Statutes 22:1554(A) authorizes LDI to take a number of actions, including revocation of license, upon anyone who holds an insurance license issued by LDI, who commits any of a number of enumerated actions, which include “demonstrating incompetence, untrustworthiness, or financial irresponsibility in conduct of such business as might endanger the public. The judgment of the Nineteenth Judicial District Court, which affirmed the March 23, 2021 decision of the Louisiana Division of Administrative Law, thereby revoking the insurance license of the appellant, Vincent Alexander, was affirmed. All costs of the appeal were assessed to the appellant, Vincent Alexander.

ZALMA OPINION

The LDI properly revoked Mr. Alexander’s license. It took too long to do so because, while it was investigating, the Agency defrauded multiple additional customers by taking premium and not forwarding the funds to the insurer causing fully paid for policies to be cancelled for non-payment of premium. What Alexander and his wife did was criminal and just revoking their licenses is insufficient and the court should have referred them to the local prosecutor or the state Attorney General.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Business Pursuits Exclusion Defeats Claim

See the full video at https://rumble.com/v2as21o-homeowners-policy-does-never-covers-business-pursuits.html  and at https://youtu.be/q_syTl05WMQ

In a declaratory judgment action to determine whether the plaintiffs were obligated to defend and indemnify the named defendant under certain insurance policies for damages awarded against the named defendant in a separate action, where the court denied the plaintiffs’ motion for summary judgment and granted the motion for summary judgment filed by the named defendant et al. as to the duty to defend under the policies. In Nationwide Mutual Insurance Company et. al. v. Jeffrey S. Pasiak et al., No. SC 20617, Supreme Court of Connecticut (February 21, 2023) Nationwide asked the Supreme Court to apply its business pursuits exclusion.

This case reached the Supreme Court for the second time following lengthy litigation of a declaratory judgment action brought by the plaintiffs, Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company, against the defendant Jeffrey S. Pasiak. The action concerned whether the plaintiffs were obligated to indemnify the defendant, a business owner, under a personal umbrella insurance policy for liability arising from his false imprisonment of his company’s employee at her workplace.

The trial court rendered judgment for the plaintiffs, concluding that they have no obligation to indemnify the defendant. The defendant appealed.

FACTS

The defendant owned Pasiak Construction Services, LLC (Pasiak Construction), which had its sole office in the defendant’s home in Stamford.  The defendant maintained a homeowners insurance policy and an umbrella insurance policy through the plaintiffs at the time of the incident. He did not hold any commercial liability insurance for his business.

Pasiak Construction employed Sara Socci as a part-time office manager with working hours of 9:30 a.m. to 2:30 p.m., four days per week. Socci worked out of the office in the defendant’s home and would help with both the defendant’s business tasks and personal tasks. One day in May, 2006, Socci was working at her desk when an individual entered the office wearing a mask and carrying a gun. The individual demanded that Socci show him to the defendant’s safe and open it. Socci had no knowledge of the safe or its combination. The individual became enraged, and he bound, gagged, and blindfolded Socci and forced her down on the floor of the bedroom. He put a gun to her head and told her he would kill her and her family if she did not open the safe.

The defendant eventually returned home and was attacked by the individual at the top of the stairs. The defendant was eventually able to unmask the individual, revealing his identity to be Richard Kotulsky, a longtime friend of the defendant. When the defendant asked about Socci’s whereabouts, Kotulsky led him to the bedroom, where the defendant made Kotulsky untie Socci. The defendant and Kotulsky reached some degree of resolution of their dispute and spoke amicably.

Despite Socci’s requests to leave, the defendant prevented her from leaving. Following Kotulsky’s exit, Socci resigned from Pasiak Construction and informed the defendant that she could no longer work for him because she was terrified that Kotulsky would return. The trial court also noted that she felt intimidated because the defendant and Kotulsky were each twice as large as she was.

Socci, her husband, and a friend later returned to the defendant’s home, at which point the defendant called the police. After being charged with kidnapping in the second degree and witness tampering, the defendant pleaded guilty under the Alford doctrine  to charges of interfering with an officer and threatening in the second degree. Socci and her husband sued the defendant, alleging false imprisonment, negligence, intentional, reckless and negligent infliction of emotional distress, and loss of consortium. The plaintiffs provided the defendant with an attorney to defend him in the Socci action but notified him that they were reserving their right to contest coverage.

The plaintiffs then sued seeking a declaration that they had no duty to defend or indemnify the defendant in the Socci action. The trial court concluded, by way of summary judgment, that the allegations of the complaint were sufficiently broad to obligate the plaintiffs to provide the defendant with a defense under his homeowners and umbrella insurance policies, but the court deemed it improper, at that juncture, to determine the plaintiffs’ duty to indemnify.

Socci and the defendant proceeded to trial in the tort action, in which the jury awarded Socci $628,200 in compensatory damages and $175,000 in punitive damages. The jury also awarded Socci’s husband $32,500 in compensatory damages. The plaintiffs then filed a second motion for summary judgment in the declaratory judgment action regarding their duty to indemnify the defendant. The plaintiffs argued, among other things, that the defendant’s policies did not cover his liability for the Socci action because coverage was barred under the policy exclusion for business pursuits.

The court concluded that the plaintiffs were entitled to summary judgment under the homeowners insurance policy-which did not cover injury for emotional distress unless caused by a physical injury-but not under the umbrella insurance policy-which covered “personal injury,” defined to include false imprisonment.

The trial court issued a decision and rendered judgment for the defendant, requiring the plaintiffs to indemnify the defendant for his liability in the Socci action. The Supreme Court reversed the judgment of the Appellate Court with direction to remand the case to the trial court for a trial de novo on the business pursuits exclusion issue. The trial court concluded that the plaintiffs satisfied their burden by a preponderance of the evidence.

ANALYSIS

There is a distinction between the standard of proof in a civil trial and the interpretive presumptions the Supreme Court applies to insurance contracts. The interpretation of an insurance contract is “a question of law,” not a matter of fact.

No one questions that the activities of Pasiak Construction meet the two elements of a business pursuit. Nor does anyone contend that false imprisonment constitutes a business pursuit. Therefore, the question is whether the defendant’s false imprisonment of Socci arose out of his business pursuits in operating Pasiak Construction.

The Supreme Court concluded that it is sufficient to show only that the accident or injury was connected with, had its origins in, grew out of, flowed from, or was incident to the specified subject in order to meet the requirement that there be a causal relationship between the accident or injury and the subject.

The Supreme Court concluded that the defendant’s remaining claims were without merit, and the judgment of the trial court should be affirmed. Specifically, the Supreme Court concluded that:

• the trial court did not err when it found in the plaintiffs’ favor on the basis that they failed to produce new, credible evidence that was not raised during the first trial, and
• with respect to the second and third claims, the record, viewed as a whole, contains evidence that supports the factual findings of the trial court.

CONCLUSION

The trial court properly applied the preponderance of the evidence standard at the trial de novo to determine the factual question of whether the plaintiffs established that the business pursuits exclusion of the umbrella insurance policy barred coverage. It did, and the judgment was affirmed.

ZALMA OPINION

A construction company seeking insurance protection usually needs a commercial general liability (CGL) policy to protect its commercial interests. A homeowners policy, like that issued by Nationwide is designed to protect against the liability faced by a homeowner, not a business, and exclude coverage for business pursuits. In this case, as part of the defendant’s business a jury found he wrongfully imprisoned his employee and caused her and her husband tort damages. The exclusion applied and the insurer was not required to indemnify the insured although it was required to defend him to the allegations of the employee’s suit. The insured, Pasiak Construction, intentionally caused damage to an employee who was abused by a “friend” of Pasiak who held her at gunpoint and threatened to kill her and her family. Pasiak got more than he deserved with a full, paid for, defense. I expect Pasiak will file bankruptcy to avoid paying the judgment.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Insurance Claims Books

Over the last 55 years Barry Zalma, Esq., CFE has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.

Some of the Books Available from the Insurance Claims Library include:

1. Zalma on Insurance Claims –  Third Edition – 10 Volumes
2. The Compact Book of Adjusting Property Insurance Claims – Third Edition
3. The Compact Book on Adjusting Liability Claims, Third Edition
4. A Compact Book on How Judges Read, Understand, Interpret and Rule on Insurance Policy Issues
5. The Compact Book on Ethics
6. How to Acquire, Understand, and Make a Successful Claim on a Commercial Property Insurance Policy: Information Needed for Individuals and Insurance Pros to Deal With Commercial Property Insurance
7. The Tort of Bad Faith
8. The Equitable Remedy of Rescission of Insurance
9. Insurance Fraudsters Deserve No Quarter
10. The Examination Under Oath to Resolve Insurance Claims
11. Insurance Fraud – Volume I & Volume II Second Edition
12. Construction Defects and Insurance Second Edition 8 Volumes
13. The Homeowners Insurance Policy Handbook
14. It’s Time to Abolish The Tort of Bad Faith
15. Insurance Fraud Costs Everyone
16. California SIU Regulations 2020
17. Zalma’s Mold & Fungi Handbook
18. Getting the Whole Truth: Interviewing Techniques for the Lawyer
19. Mold Claims – 2 Volumes
    
20. The Little Book on Ethics for the American Lawyer
21. Random Thoughts on Insurance – 15 Volumes
22. Candy and Abel: Murder for Insurance Money – Fiction
23. Murder And Insurance Fraud Don’t Mix -Fiction
24. Murder & Old Lace: Solving Murders Performed for Insurance Money – Fiction
25. Arson for Terrorism and Profit – Fiction
26. M.O.M. & The Taipei Fraud – Fiction
27. Arson-For-Profit Fire at the Cowboy Bar & Grill – Fiction
28. The Insurance Law Deskbook
29. California Insurance Law Deskbook
30. Zalma on Property and Casualty Insurance
31. Insurance Bad Faith and Punitive Damages Deskbook
32. Insurance Law
33. The Commercial Property Insurance Policy Deskbook
34. The Insurance Fraud Deskbook
35. Diminution in Value Damages
36. Property Investigation Checklists Uncovering Insurance Fraud, 13th Edition

Links to all of these books are available at http://zalma.com/blog/insurance-claims-library/ and can be acquired for reasonable prices from amazon.com and from the publishers at reasonable prices.

Each book or series of books are created to provide a complete library for the insurance claims professional whether an adjuster, investigator, or insurance lawyer (whether representing insurers or policyholders).

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Judgment Damages Needed for CGL Coverage

See the full video at https://rumble.com/v2ar6ac-cgl-is-a-third-party-liability-policy.html and at https://youtu.be/EzovLkSWSXo

Hausmann Construction, Inc. (Hausmann) appeals the district court’s grant of summary judgment to Nationwide Mutual Insurance Company (Nationwide) on Hausmann’s breach-of-contract claim. In Hausmann Construction, Inc. v. Nationwide Mutual Insurance Company, f/k/a Allied Property And Casualty Insurance Company, No. 21-1430, Court of Appeals of Iowa (February 22, 2023) resolved the dispute.

FACTS

In 2017, Iowa Western Community College entered into a contract with Hausmann for the construction of a new wellness facility on the college’s campus. The contract provided Hausmann would be responsible for property damage arising during the construction process.  Hausmann entered into a subcontract with Advanced Trenching &Utilities, LLC, (Advanced Trenching) for utility and excavation work on the project. The subcontractor agreement provided that Advanced Trenching would be responsible for property damage arising from its work. Additionally, Advanced Trenching was required to include Hausmann as an additional insured under its insurance policy, which it did.

Advanced Trenching entered into a subcontract with Torco Enterprises, Inc. (Torco). Torco’s employee struck a water main while performing work on the project, rupturing the water main and causing flooding of the work site. Hausmann paid $199,509.54, the costs and expenses for repairing the water main and replacing a damaged retaining wall.

Hausmann asked Advanced Trenching to submit a claim to Nationwide for the damages, but Advanced Trenching refused. Hausmann then submitted a claim to Nationwide, claiming it was covered by Advanced Trenching’s policy with Nationwide as an additional insured, and Nationwide refused. Hausmann sued Nationwide, claiming there was a breach of contract.

SUMMARY JUDGMENT

Nationwide filed a motion for summary judgment. It argued that the lawsuit was a direct action against an insurer, which is prohibited by Iowa Code section 516.1 (2021). Nationwide pointed out that Hausmann had not obtained a judgment against Advanced Trenching or Torco and it would be premature to permit Hausmann to collect from Nationwide the costs and expenses of repairs due to the water main break. Nationwide also stated that although Hausmann was an additional insured, it did not allege that Nationwide breached any duty to defend or indemnify Hausmann as an additional insured.

The district court granted Nationwide’s motion for summary judgment. The court determined the phrase, “legally obligated to pay as damages” meant “sums resulting from legal action by a third party on the additional insured.” The court noted the college did not make a claim against Hausmann and there were no damages proven against Hausmann by a third party in a lawsuit. The court also concluded Hausmann’s claims against Nationwide were barred by Iowa Code section 516.1.

INTERLOCUTORY APPEAL

Hausmann’s claims against Nationwide are distinct and severable from its claims against Advanced Trenching and Torco. Hausmann claimed Advanced Trenching and Torco were negligent in performing their work. Additionally, Hausmann claimed Advanced Trenching abandoned its work, failed to act in a good and workmanlike manner, breached the subcontract agreement, and breached implied warranties.

Hausmann’s claims against Advanced Trenching and Torco arose from their work on the construction site for the wellness facility. Hausmann’s claims against Nationwide arose from the terms of the insurance policy and are distinct and severable from the claims against Advanced Trenching and Torco.

The district court ruled: “If Hausmann wants to seek remedy for its expenses in relation to the water main break, it still has the opportunity to prove recovery against [Advanced Trenching] or Torco since the incident itself lies in tort action. This would put Hausmann in the position that Nationwide presumed it would be in when, as the insurer of [Advanced Trenching], Nationwide sought to have the action dismissed as a violation of Iowa Code [section] 516.1. Because a third-party’s direct action against an insurer is barred by this statute, Hausmann is effectively prevented from bringing claims against Nationwide at this time.”

To the extent Hausmann’s claim against Nationwide is an attempt to circumvent its claims against Advanced Trenching as a tortfeasor and proceed directly against Advanced Trenching’s insurance company instead, the district court correctly ruled that the claim is barred by state statute until such time as Hausmann obtains a judgment against Advanced Trenching and the judgment remains unsatisfied.

Coverage Under the Policy

Hausmann has the initial burden of showing that its claim falls within the policy’s coverage. Hausmann claims that it was legally obligated to pay the amount it did to fix the damages caused by the water main break. Nationwide counters that no one asserted any claims against Hausmann, so Hausmann’s voluntary decision to pay for the repairs does not make the payment a sum that Hausmann was legally obligated to pay as damages.

Based on the arguments of the parties, the case hinged on what “becomes legally obligated to pay as damages” means. In common usage, the plural noun “damages” has a specific meaning in a legal context, such as here, where a “legal obligation” is involved. The phrase “legally obligated to pay as damages” in the CGL policy is not ambiguous.

A contractual duty to incur the repair costs without more, is not sufficient to bring the repair costs within the scope of the CGL policy’s insuring agreement. No one demanded Hausmann pay the costs of repairing the damage from the water main break, and there was no claim, order, or adjudication requiring them to do so. As such, there was no coercive legal obligation for Hausmann to pay. Therefore, there is no coverage for the repair costs Hausmann incurred and the district court got it right in granting summary judgment on this basis.

As the district court properly granted summary judgment in favor of Nationwide, the trial court’s decision was affirmed.

ZALMA OPINION

A CGL policy, whether to a named insured or an additional insured like Hausmann, is a third party liability policy and can only respond to a claim or a judgment made against the person or entity insured. No one made a claim against Hausmann. It paid to keep its customer happy. It could only obtain coverage for defense or indemnity if a claim was made against Hausmann, a suit filed against Hausmann or a judgment entered against Hausmann. Since no claims were made, no judgment was entered, Hausmann had no claim against the CGL and the trial court was correct. Had Housmann sued the subcontractors for their negligence Nationwide would have defended and if they were negligent would have negotiated a settlement with Hausmann. This suit and appeal were a waste of the time of Hausmann, Nationwide and the courts of Iowa.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Plaintiff May not Modify Meaning of Terms of Contract After Loss

In Sayreville Seaport Associates Urban Renewal, L.P. v. Indian Harbor Insurance Company, Appeal No. 17222, Index No. 651626/21, Case No. 2022-02167, 2023 NY Slip Op 00505, Supreme Court of New York, First Department (February 2, 2023) the appellate court, as is usual for New York Appellate Courts, resolved the claim of Sayreville in brief and clear analysis.

FACTS

In 2008, plaintiff entered into a long-term ground lease to develop several parcels of property located in New Jersey. In 2007, plaintiff had retained nonparty Roux Associates, Inc. to perform environmental due diligence relating to the acquisition of the property, and Roux drew a map identifying the geographic boundaries of various areas believed to include radiological soil contamination. Indian Harbor Insurance later issued a policy covering the property for the period between October 15, 2008 and October 15, 2018; the policy contained an endorsement, 15, stating that the policy excluded remediation expenses for costs arising from radiological contamination in soil on particular areas of the property.

Endorsement 15 identified those parcels by reference to the Roux map. After the policy took effect, it was discovered that remediation was required in areas not previously identified as contaminated, and in September 2018, plaintiff submitted claims regarding the discovery of radiological soil contamination in four areas on the property. As relevant here, defendant denied the claims for three of the areas, stating that under endorsement 15, they fell within the excluded geographic region in the Roux map.

ANALYSIS

The plain and ordinary meaning of the unambiguous policy terms presented to the trial, The Supreme Court, required it to correctly conclude that endorsement 15 excluded coverage for the parcels at issue because they were located within the excluded geographic areas plainly designated on the Roux map.

Plaintiff tried, but the appellate court refused, to create an ambiguity in endorsement 15 by referring to its own nomenclature for the subareas that fall within those geographic areas and then claiming that the subareas do not fall within the scope of the exclusion.

To adopt plaintiff’s interpretation of endorsement 15 and the Roux map would render the endorsement meaningless, contrary to the rules of contract interpretation.

ZALMA OPINION

Insurance appellate decisions are often long and annoying to read. New York appellate decisions, like this one, cut to the key issue and rule. Thank you, New York. Clear and unambiguous policy language must be applied as written and imaginative interpretation by insureds seeking coverage for losses for which they did not pay, cannot succeed.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

ZIFL – Volume 27 Issue 4

Sorry I was Late with The Blog & the Newsletter

On 2/15/2023 I had a transcatheter aortic valve replacement (TAVR) procedure that replaced my poorly functioning Aortic Hart valve. I tolerated the procedure well although the recovery process took a couple days unmoving on my back to avoid bleeding. I’m back at work now.

ZIFL-02-15-2023

The following are the type of articles you can read in Issue Number 4.

More Problems for Tom Girardi

Tom Girardi, 83, the disgraced former Los Angeles celebrity lawyer was indicted by federal grand juries in Los Angeles and Chicago on charges of stealing more than $18 million from clients, federal prosecutors announced. He faces a maximum 20-year federal prison sentence, according to the U.S. Department of Justice.

The schemes included stealing funds from a couple whose son was paralyzed in a car wreck, a widow whose husband died when a boat unexpectedly sped up to 120 miles per hour (193 kilometers per hour) and flipped, and family members of victims in a 2018 Lion Air crash that killed 189 people, according to the indictments.

Read the full ZIFL, in Adobe .pdf format, here.

Fiction: I’m Going Into the Insurance Business

This Is One Of A Series Of 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.

The Creation of a Fraudulent Insurance Business

Most insurance companies are formed by major corporations with considerable assets. They are capitalized with serious money needed by the Insurer to cover losses until profits are made. The company is staffed with insurance professionals who believe in the concept of spreading risk. The insurers, whether new or old, provide a definite service to the public.

Betty Bruja wanted to start her own insurance company. She had been an insurance broker for ten years. In those ten years she had trained herself with books and training courses from the Insurance Risk Management Institute, the Society of Certified Property and Casualty Underwriters, the Insurance Institute and the Insurance Claims Library. By devoted and lengthy study Betty obtained the designation CPCU in the minimum time allowed by the Society of CPCU.

Read the full ZIFL, in Adobe .pdf format, here.

More Problems for McClenny Moseley & Associates

Lawyers Cannot File Suit Without Being Retained by Client

Attorneys for McClenny Moseley & Associates appeared in a New Orleans courtroom on February 1, 2023 to explain why they claimed to represent a homeowner who says she didn’t hire the law firm but did sign some paperwork handed to her by a restoration contractor.

Magistrate Judge Michael North ordered both MMA founding partner Zach Moseley and Louisiana office manager William R. Huye III to appear personally before him after an insurance defense attorney accused the law firm of working with contractors to sign up new clients. North ordered the law firm to pay attorney fees to attorneys who were forced to contend with a duplicate lawsuit it filed. It was the third time a Louisiana federal judge has sanctioned McClenny Moseley.

That case number refers to a lawsuit that MMA filed Dec. 4 on behalf of “Trichia” Franatovich, even though another law firm had already filed a lawsuit on behalf of Tricia Franatovich (the correct spelling) for the same hurricane damage. The US District Court for Eastern Louisiana scheduled the hearing after Matthew Monson, a New Orleans defense attorney who represents the insurer named in both lawsuits, filed a lengthy motion accusing MMA of soliciting clients by working with restoration contractors who walked door to door in neighborhoods damaged by Hurricane Ida.

Read the full ZIFL, in Adobe .pdf format, here.

Citizens Sues the Strems Law Firm and Scott Strems

The suit contends that the Defendants conspired, combined and agreed to create or fraudulently increase policy claims to be submitted on behalf of insureds by falsely inflating the value of the claims and falsely asserting claims of costs for services not actually rendered, in order to induce Citizens to settle the claims and that in furtherance of the scheme, the non-lawyer Defendants, acting in concert with Attorney Strems and the Strems Law Firm, also created false and fictitious invoices of services purportedly rendered and repairs purportedly required that were used to deceive Citizens into believing that the claims should be settled for the sums negotiated, when in fact the damages represented were either grossly inflated or non-existent.

Defendants acted individually and in concert to defraud Citizens. Citizens has been directly damaged by the Defendants’ conduct.  Defendants’ scheme to defraud Citizens began in or around 2014 and continues through the present.

Read the full ZIFL, in Adobe .pdf format, here.

Only Probable Cause Needed for Arrest

Acquittal is not a Finding of Innocence

Probable Cause is not a High Bar

People who attempt insurance fraud are always upset when the fraud fails. When that failure results in an arrest and trial, the upset grows. When the jury acquits the fraudster it is never enough to give thanks there is no need to go to jail, the fraudster wants – to paraphrase Shakespeare – a pound of flesh from those who stopped the attempt.

In Joseph Fehl v. Borough Of Wallington; et al, No. 21-3019, United States Court of Appeals, Third Circuit (January 25, 2023) Joseph Fehl sued the Borough of Wallington; Witold Baginski, the Borough’s former business administrator; and Sean Kudlacik, a captain in the Borough’s police department, alleging civil rights violations. Finding no material facts in dispute, the District Court granted the Defendants’ motions for summary judgment.

Read the full ZIFL, in Adobe .pdf format, here.

Good News from the Coalition Against Insurance Fraud

An airport chef was grounded after lying he hurt his back and then getting caught kayaking with his kids in the UK. Ferenc Sumegi said he needed a cane or crutches after straining his back while lifting a fish tray at Heathrow Airport, where he prepped airline meals. He claimed £2.2M for a “significant and continuing disability.” Sumegi said he couldn’t work as a chef or lift or make sudden movements. The injury kept him on his back 18 hours a day and stopped him from kneeling, squatting and taking his kids to the park, he claimed. Sumegi also had to hold onto furniture to get around his Berkshire home, he told a disability doc. Yet surveillance caught Sumegi kayaking with his two kids, “vigorously throwing a stick for his dog,” and kneeling in the sand while burying his daughter at the beach. Surveillance also found him in a river with a daughter on each shoulder and his arms in the air. And he was seen fishing and paddle boarding, walking, filling up his car and shopping with no seeming difficulty. A court dismissed Sumegi’s claim, disallowed him from appealing, and ordered him to repay £75K.

Read the full ZIFL, in Adobe .pdf format, here.

Health Insurance Fraud Convictions

17 Years in Prison for Fraud

Frank Patino, of the Detroit area, was also ordered to pay $30 million in restitution to Medicare and other insurers, the report said.

Patino, a Michigan doctor was sentenced to nearly 17 years in prison for leading a years-long $250 million opioid scheme that made him and others rich, and left patients addicted, The Associated Press reports.

Patino declared his innocence in court Monday. His new attorney, Martin Crandall, is seeking a new trial, claiming Patino’s trial lawyer botched his defense. Crandall also cites Patino’s philanthropic work as at odds with someone who would commit these crimes.

Read about this and dozens more convictions.

Read the full ZIFL, in Adobe .pdf format, here.

Other Insurance Fraud Convictions

Guilty of Providing False Insurance Documents

Oscar Sanchez, a former insurance producer from Marshalltown, Iowa was recently sentenced to a pair of five-year suspended prison sentences after pleading guilty to multiple counts of insurance fraud in December following an investigation by the Iowa Insurance Division Fraud Bureau.

An inquiry into the actions of Sanchez, who pleaded guilty on December 8, 2022 began in September of 2020. According to a press release, the investigation concluded that Sanchez provided fictitious insurance documents to multiple individuals in Marshalltown and collected premium payments for insurance policies that did not exist. Sanchez collected illegitimate cash deductibles from insureds, which he used for his own personal gain.

Read this and about many more convictions.

Read the full ZIFL, in Adobe .pdf format, here.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Sorry I was Late with The Blog & the Newsletter

On 2/15/2023 I had a transcatheter aortic valve replacement (TAVR) procedure that replaced my poorly functioning Aortic Hart valve. I tolerated the procedure well although the recovery process took a day unmoving on my back. The Newsletter will be out soon but this blog post might give you some fun.

Insurance Fraud Defeated by a Thorough Investigation

A Fictionalized True Crime Story 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.

Heads I Win, Tails You Lose

Northern San Diego County, California is avocado country. Trees grow everywhere. The heavy green fruit is a cash crop in an area that cannot resist guacamole.

The hills and valleys of California were once the bottom of the sea. Bedrock, at best, is sandstone. The soil is thin and porous. It is perfect soil for growing avocados because it drains well. Avocado farmers irrigate the roots to have enough, but not too much, water.

The farmers cannot, however, control the rain. If Southern California receives one of its rare, real, rainstorms, the soil turns to viscous slime. Gravity moves the hillsides into the valleys.

Property owners rebuild and replant regularly. Topographical maps become inaccurate after five to ten years. Mapping companies, to keep current, get aerial photographs as often as once every three years.

The insured was a successful businessman. He had made his fortune in manufacturing. The insured sold his business, and, wanting to be a gentleman rancher purchased a fifty-acre avocado ranch on a hillside in Northern San Diego County. He planted the hill with trees ranging in age from three to eight years. All bore the Haas variety of avocado. The insured irrigated with a drip irrigation system that provided the right amount of water to create the maximum amount of crop.

The insured knew nothing about avocado ranching. He intended to learn, on the job. He did not need the income from the crop to survive. He could live a life of luxury without any income from the ranch. He was a businessman. He understood that agriculture was a risky business. Risks he understood. The purchase of insurance can spread risks. He went to his corporate broker, told the broker of his concerns, and got a policy insuring against the loss of the trees. He had talked with his neighbors and knew, from his experience, that the risk faced by an avocado rancher was the loss of the trees from fire or an overabundance of rain.

The broker he used was the same broker who handled his manufacturing business. A major multinational brokerage firm with the purchasing power to insure anything their clients desired. The insured told his broker what he wanted. The insurer created a special policy by adding to the normal perils of fire, lightening, windstorm and hail, the peril of rain.

The Misrepresentations

At the time he bought the policy the insured knew that his ranch had lost, to mudslide, half its trees six years before. He also knew most of the trees fell down the hill five years before that. The insurer, in the application for insurance, only asked if the insured had incurred prior losses. Since he was a new owner of this property, he replied “New venture, no losses.”

The insurer issued the policy and for six months the insured enjoyed his leisure and supervised his small staff of farmhands. The insured harvested his first crop in February. The proceeds equaled his expenses. He was a happy man.

In March, the rains came. First, the gentle Southern California shower that dropped an inch of rain in forty-eight hours and turned the hillside green with new grass. Then, the remnants of typhoon Henry pulled up along the Southern California shore and stopped. Water dropped from the sky as if a giant tap had opened. Raindrops didn’t fall they cascaded out of the sky. The hillside became saturated within the first hour. The hill could absorb no more water. The rain continued. Rivers formed in every crease of every hill. The once stable hillside began to slide. Chunks of earth fifty feet wide and ten feet deep would pop off the hillsides and fall to the valleys below. Looking up through the rain, the insured saw his neat rows of trees begin to waver. Straight lines of trees danced, like an out of-control conga line, down the hillside. By the end of the day only two hundred of his ten thousand trees still stood on his hillside. The remainder were in the pasture of his downhill neighbor with their roots pointing to the sky.

When the rains stopped the insured called his broker to report a loss as a result of rain. The trees had a fair market value between $50 and $300 each. The insured could purchase them from commercial nurseries at various stages of development. The loss seemed a simple one to resolve. The insurer could not question, from the reports of the weather bureau, that the loss of the trees would not have occurred but for the unusual rain.

The Thorough Investigation

The insurer was faced with a massive loss. California law bound it to conduct a thorough investigation before rejecting the claim. The insurer learned that aerial photographs, taken regularly, were available. They purchased those photographs of the insured’s property going back thirty years before the loss. Surprised, the insurer found that in every ten-year span, portions of the hillside, and its trees, washed away. After each storm, the person owning the property replanted the trees. The insurer documented seven landslides destroying trees in the thirty years before the issuance of the policy.

Since the first insurance policy was written on a clay tablet in ancient Sumaria insurers and insureds have recognized that it is a business of the utmost good faith. For an insurance contract to be effective the insurer must be fully informed of the risk it is taking. If the insurer is deceived, whether intentionally or unintentionally, the contract will not survive. Good faith requires the insured to reveal everything he knows about the risk that would be material to the decision of the insurer to insure or not insure him. Failure to reveal material facts is concealment. When an insured conceals a material fact from the insurer, he is committing fraud in the inception of the policy. When an insured conceals or misrepresents a material fact in the presentation of a claim then he has committed fraud.

Arial Photos

The insurer confronted the insured with the aerial photographs. They asked if he had known about the earlier landslides. He admitted knowledge of one or two prior slides. He claimed he did not tell his insurer about the slides because they did not ask him nor did he feel it relevant to the application for insurance and the presentation of his claim for the slide that was the subject of his claim.

The claims man consulted with the underwriter. The underwriter said that he would never have written the policy had he known of the regularity with which the property suffered landslides. The only way he would insure the property was if the insured agreed to a specific exclusion for loss due to landslide, surface water or excessive rain.

The claims man sought advice of counsel. Counsel informed the insurer that the evidence it provided established a material concealment of fact. A concealment of material fact authorizes an insurer in California to rescind even if the concealment was innocent. If it wanted, the insurer could rescind the policy.

Counsel further advised that the insured would almost certainly sue. The suit would include a claim for breach of the covenant of good faith and fair dealing and punitive damages. The suit would be expensive to defend. Counsel further advised that jurors, because of their dislike for insurers, had a tendency to ignore a clear statement of the law given to them by the court. Jurors more frequently find the need to punish insurers.

The insurer’s adjuster had counted all of the trees on the insured’s land and obtained a number of all of the trees owned by the insured. The adjuster was surprised when he noted that the number of trees claimed destroyed exceeded, by a factor of three, the amount that existed at the time of the rain.

The insurer, with evidence that would support a rescission, decided to be practical rather than aggressively pursue its rights. Counsel met with the insured, showed that the number of trees counted from the aerial photographs showed less trees than those for which the claim was presented. Over a fine restaurant meal, the insured and counsel for the insurer settled the claim for the value of the tress counted in the aerial photographs less the value the remaining trees. Both considered the settlement to be favorable settlement. The underwriters for the insurer vowed to never insure trees on a hillside again.

This is not the type of fraud insurers’ normally face. There was no intent of the insured to defraud the insurer when he acquired the policy and he had no idea of the true number of trees since his purchase did not list a number of trees and he never did an inventory.

In fact, he did deceive the insurer but he had none of the malice required to prove fraud with regard to the acquisition of the policy. He did, however, overstate the number of trees he claimed lost.

Paying his claim was an economic decision. If justice could have been done, the insured would have been paid nothing. The insurer appeared to have wasted its assets because it knew it was less expensive to settle than to fight.

The insured and the insurer resolved the claim and the insurer agreed, in the settlement, that the insured wins on heads and the insurer loses on tails.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Acquittal is not a Finding of Innocence

See the full video at https://rumble.com/v28sqfi-only-probable-cause-needed-for-arrest.html and at https://youtu.be/wNvFY-rHv8I

Probable Cause is not a High Bar

People who attempt insurance fraud are always upset when the fraud fails. When that failure results in an arrest and trial, the upset grows. When the jury acquits the fraudster it is never enough to give thanks there is no need to go to jail, the fraudster wants – to paraphrase Shakespere – a pound of flesh from those who stopped the attempt.

In Joseph Fehl v. Borough Of Wallington; et al, No. 21-3019, United States Court of Appeals, Third Circuit (January 25, 2023) Joseph Fehl sued the Borough of Wallington; Witold Baginski, the Borough’s former business administrator; and Sean Kudlacik, a captain in the Borough’s police department, alleging civil rights violations. Finding no material facts in dispute, the District Court granted the Defendants’ motions for summary judgment.

FACTS

Fehl served as a volunteer EMT and firefighter for the Borough of Wallington. He filed for worker’s compensation, claiming he was “hit by [a] car” during an emergency response. Kudlacik conducted an investigation that raised questions about Fehl’s story, as it found no physical evidence, no indication of serious injury, and no vehicle matching the description Fehl provided. Nor did video from the scene show any vehicles in the area where the accident allegedly occurred. As a result, Fehl was indicted for criminal insurance fraud and tampering with public records. Following trial, a jury acquitted him of those charges.

Based on the acquittal, Fehl sued asserting several claims arising from his arrest and prosecution. The District Court granted the Defendants’ motions for summary judgment, concluding their acts were supported by probable cause.

PROBABLE CAUSE

Fehl argued that a reasonable jury could have concluded Kudlacik lacked probable cause to investigate his employment claim. However, probable cause exists when there is a “fair probability” that the person to be arrested committed the crime. Police officers are not required to correctly resolve conflicting evidence and their determinations of credibility need not, in retrospect, be accurate. For those reasons, probable cause is not a high bar.

Drawing all reasonable inferences in Fehl’s favor, the Third Circuit could see no error in the District Court’s analysis. The facts known to Kudlacik at the time of Fehl’s arrest provided a sufficient basis to doubt Fehl’s credibility and to believe he committed the charged crimes.

Consider Fehl’s statement in his benefits application that he was struck by a car, with the absence of any corroborating physical evidence. Or consider Fehl’s claim that he suffered nerve damage from the accident-an injury that conflicts with the extent and type of physical harm a victim would typically suffer in a hit-and-run. Fehl also, after he was confronted, changed his story conceding that he might have merely tripped and fallen.

The finding of probable cause is not negated by the jury verdict. The mere fact that a defendant is later acquitted of the offense for which he is arrested is irrelevant to the validity of the arrest. Guilt in a criminal case must be proven beyond a reasonable doubt, a standard enforced by the rules of evidence. Probable cause imposes no such burden on the Government-rather, it demands that police officers find merely a “fair probability” that a crime was committed. That standard was satisfied at the time of Fehl’s arrest, and the jury’s verdict does not alter that finding.

CONSTITUTIONAL VIOLATIONS

Fehl contended that Baginski, as Borough administrator, infringed Fehl’s First and Fourteenth Amendment rights. Fehl alleged that Baginski concocted a scheme to force Fehl to submit his worker’s compensation claim, directed a third-party administrator not to pay the benefits, and conspired with Kudlacik to launch a police investigation. Even if true, these allegations cannot state a constitutional claim.

To state a First Amendment claim for retaliatory arrest or retaliatory prosecution, a plaintiff must plead and prove the lack of probable cause for the criminal charge. Fehl’s arrest and prosecution were, contrary to his claims, supported by probable cause.

Fehl needed to show that Baginski participated in, directed, or acquiesced to retaliation. Baginski affirmed he had no role in investigating, or directing any risk manager in the investigation of, any injury claims, including Fehl’s. Nor did Baginski direct Kudlacik or anyone else to arrest Fehl.

ZALMA OPINION

The facts established that there was clear probable cause to arrest Fehl, especially after he changed the claim that he was hit by a car to he tripped and fell, established a lack of veracity in the claim and an attempt to defraud the employer to obtain Workers’ Compensation fraud. His attempt at First Amendment and tort claims failed because there was sufficient probable cause to arrest and try Fehl for insurance fraud. That he was acquitted did not change the conclusion that there was probable cause for the arrest and trial.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Seventh Circuit Applies Contractual Limitation of Action Provision

Late Filing Defeats Suit

See the full video at https://rumble.com/v28no82-private-limitation-of-action-enforced.html and at https://youtu.be/medT74mKW3Q

In Waseem Daker v. State Farm Fire And Casualty Company, No. 21-3210, United States Court of Appeals, Seventh Circuit (February 3, 2023), more than a year after he suffered property damage, Waseem Daker sued State Farm Fire and Casualty Company for insurance coverage, despite knowing that his policy with State Farm required that he file suit within a year of loss. The district court granted State Farm’s motion to dismiss. It ruled that the policy’s provision was enforceable, and Daker’s suit was time-barred.

FACTS

Daker, who had been in prison in Georgia for over a decade, maintained ownership of a home in Georgia. According to Daker, the property was insured by State Farm, a company incorporated in Illinois. Daker alleges that two incidents warrant coverage: First, tenants “abused and vandalized” the home through June 2017; then, in January 2018, Daker’s brother burglarized the home, damaging it further.

Daker filed two insurance claims with State Farm for the damage to his property (one claim relating to each incident). State Farm denied both claims. In the denial letter, which Daker received in March 2018, State Farm alerted Daker to the provision of his insurance policy that required him to sue within one year of the dates of damage, it provided:

Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions and the action is started within one year after the date of loss or damage.

About two years later, in February 2020, Daker sued in a federal court in Illinois, asserting diversity jurisdiction. As relevant on appeal, he alleged that State Farm breached its insurance policy by declining coverage for his property damage. Daker conceded that he sued past the one-year limitations period in his contract with State Farm, but he argued that the period did not matter because, among other reasons, the provision was unreasonable, and State Farm had misled him about it.

After permitting Daker to amend his complaint three times, the district court granted State Farm’s motion to dismiss it, with prejudice. Moreover, Daker lacked a valid defense to the provision, given that State Farm told him of it in denying his claims. The one-year limitations provision barred Daker’s suit, which he filed nearly two years after the most recent date of property damage.

Daker contended that his complaint was not time-barred because promissory estoppel, equitable estoppel, and equitable tolling defeat the limitations defense. Daker relied primarily on his argument in his motion for reconsideration that State Farm never delivered to him a copy of the policy that he says he needed to timely sue. He contacted his State Farm agent in early 2018 to ask for another copy of his insurance policy, and she promised to send it to him, but never did. Daker contends that he detrimentally relied on the State Farm agent’s promise, so that promissory and equitable estoppel should toll the limitations period. Daker adds that equitable tolling also applies because he was unable for a time to access his prison’s law library, which he also needed to prepare his complaint.

ANALYSIS

Under Illinois law, limitations rules – and defenses to it – are governed by the law of the forum. Illinois’s law regarding the validity of contract terms that displace statutes of limitations, and tolling, such a contract term is upheld if it was accepted knowingly and voluntarily, is reasonable, and is consistent with public policy. Georgia law, which Daker prefers, is similar: these provisions are generally enforced if they are not unconscionable or so unreasonable that they raise a presumption of undue advantage. An equitable-tolling defense requires a showing that, despite exercising due diligence, Daker could not discover the facts essential to his claim within the limitations period.

The one-year limitations provision in State Farm’s policy is valid.

The provision is reasonable because it allowed Daker sufficient time to sue after his dates of loss. He knew about the deadlines because State Farm notified him of the limitation in its denial of his claim and it reminded him about the one-year deadlines.

Daker asserted that he needed the policy to help him prepare his complaint, but his own actions refuted that assertion: He successfully prepared and filed his complaint without the promised copy of the policy, and no one has suggested that his complaint inadequately alleges breach of contract.

He also based the defense on his inability to access his prison’s law library. But he did not need the library to allege that State Farm breached its contract, which he told the court he knew when he received the letters from it declining coverage.

ZALMA OPINION

State Farm took no chances with the litigious felon, Daker, by not only denying his claims in writing and warning him – as state Regulations require – that the policy contained a one-year private limitations of action provision. Daker ignored the warning and with the ingenuity of a jail-house-lawyer claimed that equity required the limitation provision to be ignored because State Farm did not provide a copy of the policy and Georgia did not give him access to the prison law library. Both arguments failed because without the policy or the law library he filed an effective law-suit, but filed it too late. Because the District Court gave Daker three attempts to plead a viable cause of action State Farm was required to pay a great deal of money to counsel to defend the allegations and waste the time of the court, perhaps because, Daker was bored after serving ten years in prison.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Crime Protection Policy Protects Insured Against Fraud

Valero Followed Instructions from Fraudster

See the full video at https://rumble.com/v28jm1u-fraudster-collects-over-250000.html and at https://youtu.be/0V7fLX8x1v0

In Valero Title Incorporated, doing business as Valero Title Company v. RLI Insurance Company, No. 22-20155, United States Court of Appeals, Fifth Circuit (February 1, 2023) Valero sued its insurer RLI Insurance Company that denied Valero’s proof of loss claim, which RLI determined was not covered by the funds transfer fraud endorsement in Valero’s crime protection insurance policy. The district court disagreed and granted partial summary judgment to Valero. RLI appealed.

FACTS

Valero purchased a crime-protection policy from RLI that included a funds transfer fraud endorsement providing that “we will pay for loss of funds resulting directly from a fraudulent instruction directing [sic] financial institution to transfer, pay or deliver funds from your transfer account. The relevant definition for “fraudulent instruction” is “[a] written instruction . . . issued by you, which was forged or altered by someone other than you without your knowledge or consent, or which purports to have been issued by you, but was in fact fraudulently issued without your knowledge or consent.”

A Valero employee was discussing a loan payoff transaction over email with a lender’s employee when a fraudster posed as the lender’s employee and sent the Valero employee fraudulent wiring instructions with a fraudulent routing number. Because the Valero employee did not recognize that these instructions were fraudulent, she instructed Valero’s bank to wire $250,945.31 to the fraudster. When Valero learned of the loss, it submitted a proof of loss claim to RLI. RLI determined that the loss was not covered by the funds transfer fraud endorsement.

The parties filed cross motions for summary judgment. The only issue before the district court was the interpretation of the insurance policy. The parties stipulated to the amount of attorney’s fees and agreed to the dismissal of Valero’s remaining extracontractual claims, which the court accepted to make the judgment final and appealable. RLI timely appealed.

ANALYSIS

A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the non-moving party. Under Texas law, the interpretation of an insurance policy is a question of law for the court to determine.

RLI appealed the district court’s interpretation of Valero’s insurance policy funds transfer fraud endorsement.

The relevant provision of the policy at issue here, the funds transfer fraud endorsement, provides for reimbursements of funds lost to certain forms of fraud:

We will pay for loss of funds resulting directly from a fraudulent instruction directing [sic] financial institution to transfer, pay or deliver funds from your transfer account.

The endorsement contains the following relevant definition:

A written instruction . . . issued by you, which was forged or altered by someone other than you without your knowledge or consent, or which purports to have been issued by you, but was in fact fraudulently issued without your knowledge or consent.

RLI argued that because the instruction here was issued as it was authorized and approved by Valero, it cannot be “a written instruction . . . issued by you, which was forged or altered by someone other than you without your knowledge or consent.” The district court held that the only interpretation of Clause A that does not render Clause B meaningless is one in which a written instruction is forged or altered by someone other than the insured without the insured’s knowledge or consent prior to being issued by the insured.

RLI argued that the district court ignored plausible scenarios under which Clause A could apply without making Clause B redundant. RLI proposes that if Valero had forwarded the exact e-mail forged by the fraudster (posing as the lender) to Valero’s bank, instead of issuing its own wiring instructions, Clause A would apply.

The instruction Valero issued to its bank included the name of the recipient institution, the routing number, the recipient account numbers, the account name, the payment date, and the total amount of payment. It was the same instruction Valero received from the fraudster posing as the lender. Unknown to Valero, the instruction was not the same as the instruction provided by the lender; it was altered to include different recipient account information. Thus, when Valero issued the instruction to its bank, it was a fraudulent instruction that was “forged or altered by someone other than [Valero] without [Valero’s] knowledge or consent.”

As the district court held, the only interpretation of Clause A that does not render Clause B meaningless is one in which a written instruction is forged or altered by someone other than the insured without the insured’s knowledge or consent prior to being issued by the insured.

The district court correctly applied this interpretation and found that coverage was trigged under the funds transfer fraud endorsement for Valero’s claimed loss.

ZALMA OPINION

Insurance contracts are interpreted as written. The insuring agreement provided coverage for frauds perpetrated against an insured causing the insured to send money to a fraud perpetrator rather than to the lender it had agreed to pay off. Since the language of the policy was clear and unambiguous, it covered the error of the Valero employee who accepted an e-mail instruction to send the money it owed to a fraud perpetrator’s account rather than to the account of the lender to whom the money was owed.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Independent Agent Represents his Principal, the Insured

Michigan’s Common Law Considers an Independent Insurance Agent is an Agent of the Insured

See the full video at https://rumble.com/v28c19u-broker-not-agent-of-insurer.html  and at https://youtu.be/4CTE52lBbKQ

When an independent-insurance agent (called a “broker” in most states) is ordinarily an agent of the insured, not the insurer, the Court of Appeals was asked to decide whether the Legislature abrogated this principle of Michigan’s common law when it amended the Insurance Code, MCL 500.100 et seq., in 2018.

In Ahmed Al-Hajjaj v. Hartford Accident And Indemnity Company, and Ahmed Odah Salem Alderawi, Safeco Insurance Company Of Illinois, Sam Saeidi, Golden Insurance Agency, LLC, And GOLDEN INSURANCE AGENCY OF OHIO, LLC, and PRime Transportation Service, LLC, and Batol Alyunisi, No. 359291, Court of Appeals of Michigan (January 26, 2023). The key question in the interlocutory appeal is whether our Legislature abrogated the principle of Michigan’s common law when it amended the Insurance Code, MCL 500.100 et seq., in 2018.

BACKGROUND

Ahmed Al-Hajjaj is the co-owner of Prime Transportation Service, LLC, and he sought insurance coverage for Prime’s vehicles from Golden Insurance Agency, LLC. Al-Hajjaj talked with Sam Saeidi, a principal and insurance agent of Golden. Golden is an independent-insurance agency that places policies for over ten different insurers, including Hartford Accident and Indemnity Company. Saeidi recommended that Al-Hajjaj purchase a policy for his company through Hartford, and Al-Hajjaj agreed to do so.

The policy application that Saeidi filled out with Al-Hajjaj listed “Prime LLC” as the company, as opposed to the full name, “Prime Transportation Service, LLC.” More critically, the application incorrectly indicated that the company was a physical-therapy office that did not transport patients, when in fact the company provided medical-transportation services for patients. Based on the application it received from Golden, Hartford issued an insurance policy to “Prime LLC.”

Al-Hajjaj was subsequently injured in a vehicle collision, and he sought personal injury protection benefits from Hartford. As part of its coverage investigation, Hartford discovered the errors in the application. The insurance company rescinded the policy based on what it characterized as material misrepresentations in the application, and Al-Hajjaj sued Hartford, Golden, and others.

Plaintiff argued that Golden, the insurance agent, was a contractual agent of Hartford, the insurer. Golden had a contract with Hartford that only gave the agency the authority to “solicit, quote and bind insurance” for certain lines of insurance offered by Hartford. The insurer could cancel any policy that Golden placed with the insurance company. As a limitation on the relationship, the agreement provided:

2.2 Limitations. You [Golden] have the authority and power to act as our agent only to the extent expressly granted in this Agreement and no further authority or power is implied. You are an independent contractor and not an employee of ours for any purpose, and your right to represent other companies is not restricted by this Agreement. Any authority granted hereunder to solicit, quote or bind insurance products on our behalf is non-exclusive, unless we agree otherwise in writing.

Al-Hajjaj also argued that the Legislature abrogated Michigan’s common-law principle that an independent-insurance agent was an agent of the insured, not the insurer, for purposes of applying for and placing insurance policies. The trial court denied Hartford’s motion for summary disposition, concluding that the contractual relationship between Hartford and Golden meant that the latter was the agent of the former.

ANALYSIS

With respect to statutory interpretation the Court is required to give effect to the Legislature’s intent. The Legislature is presumed to intend the meaning clearly expressed, and this Court must give effect to the plain, ordinary, or generally accepted meaning of the Legislature’s terms.

There were two issues before the Court of Appeal:

• whether the Legislature abrogated the common-law principle regarding independent-insurance agents; and, if not,
• whether the contract between Hartford and Golden made the latter the agent of the former for purposes of any errors in the application.

ABROGATION OF THE COMMON LAW

The record confirmed that Golden is an independent-insurance agency, not a captive one. It offers to place policies from at least ten different insurance companies. It has long been the common law of Michigan that, when an insurance policy is facilitated by an independent insurance agent or broker, the independent insurance agent or broker is considered an agent of the insured rather than an agent of the insurer.

This principle makes sense in the context of an independent-insurance agent, who can offer a single customer an array of options from any of the insurers with which the agent has contracted. A customer can approach an independent-insurance agent and expect to comparison shop between all the available insurers, unlike when a customer goes to a captive-insurance agent, who has but one insurer to offer.

An independent-insurance agent who had to balance fiduciary duties of loyalty between competing insurers would effectively be frozen into inaction by a web of crossing and conflicting duties and interests. Instead, in recognition of the materially different circumstances faced by a customer who deals with an independent-insurance agent versus a captive-insurance agent, courts have concluded that an independent-insurance agent owes its primary fiduciary of loyalty to the customer.

Al-Hajjaj argues that this principle of common law was abrogated by our Legislature.

Prior to enactment of the new public act, MCL 500.1201(a) defined “agent” as “an insurance producer,” and, in turn, subdivision (e) defined “insurance producer” as “a person required to be licensed under the laws of this state to sell, solicit or negotiate insurance.”

Where Al-Hajjaj sought an insurance policy through Golden, an independent-insurance agent, and not through an agent-to-agent transaction, the independent agent only represents the insured.

THE HARTFORD/GOLDEN CONTRACT

Hartford and Golden entered into an agency agreement, which covered Saeidi as a principal of Golden. By all accounts, this was a standard contract between an insurance company and an independent-insurance agent. The contract authorized Golden to “solicit, quote and bind insurance” on behalf of Hartford, but the contract also materially limited Golden’s authority. Moreover, the contract recognized that Golden was an independent-insurance agent that had the right to select and place insurance policies with other insurers.

The Hartford/Golden contract established that the independent insurance agent or broker is considered an agent of the insured rather than an agent of the insurer. Here Golden owed its primary fiduciary duty of loyalty to Al-Hajjaj as its customer, rather than to Hartford as one of the ten insurers for which it placed policies.

Given the standard language used in the contract between the independent-insurance agent and insurer here, the trial court erred in concluding that the independent-insurance agent was the agent of the insurer in this instance and denying summary disposition on that basis. The Court of Appeals reversed and remanded for further proceedings consistent with its opinion.

Independent-insurance agents continue to owe their primary fiduciary duty of loyalty to their customers, i.e., the insureds, rather than the insurance companies whose policies they place. This common-law principle survived the Legislature’s amendments to the Insurance Code in 2018 PA 449. The trial court erred when it concluded that the contract between Hartford and Golden altered this principle.

ZALMA OPINION

An “independent insurance agent” in Michigan is similar to a “broker” in California who is defined as a person who transacts insurance with but not on behalf of an insurer and is, therefore, only concerned with its duty to the insured. A minor statutory change in definition did nothing to change the fact that the independent insurance agent’s obligation, in Michigan, is to the insured. The case will go to trial to determine who was responsible for the misrepresentation on the application that allowed the insurer to rescind.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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

Conviction for Second-Degree Reckless Homicide Could be an Accident

See the full video at https://rumble.com/v287ymy-wisconsin-finds-killing-the-insureds-child-a-potential-accident.html  and at https://youtu.be/X9wrUeDnAeo

When there is a severe injury, like the criminal death of a child, litigation results in an attempt to collect from an insurer since the convict will have little or no assets to pay for the loss.

In Lindsey Dostal, Individually and as Special Administrator of the Estate of Haeven Dostal v. Curtis Strand and ABC Insurance Company, State Farm Fire and Casualty Company, Intervening, No. 2020AP1943, 2023 WI 6, Supreme Court of Wisconsin (January 26, 2023) the Wisconsin Supreme Court was asked to allow the mother of the child to seek the criminal whose conduct – the father of the child – accidentally caused the death so that State Farm, the convicted father’s insurer, must pay the mother for the loss of her child.

FACTS

Lindsey Dostal (Dostal) sought review of a court of appeals decision affirming the circuit court’s grant of summary and declaratory judgment in favor of State Farm. The court of appeals determined that Curtis Strand’s conduct did not constitute an “occurrence” covered by the State Farm policy at issue because his conviction for second-degree reckless homicide established that the death was not the result of an accident.

State Farm asserted that issue preclusion bars relitigation of the issue of whether Haeven’s death was the result of an accident. It argued that Strand’s criminal conviction is dispositive on the issue of available insurance coverage under Strand’s policy, and that there is no coverage for Dostal’s claims. State Farm further contends that the policy’s resident relative and intentional acts exclusions preclude coverage.

Dostal gave birth to Haeven on April 3, 2017, and Strand was subsequently adjudicated the father. On July 11, 2017, Haeven passed away as a result of head trauma that occurred while she was in Strand’s care.  After a jury trial, at which Dostal was a witness, the jury convicted Strand of second-degree reckless homicide and resisting or obstructing an officer.

Dostal sued Strand for negligence and wrongful death.  Strand tendered the matter to State Farm, his homeowner’s insurer, seeking defense and indemnification.

State Farm argued that its policy did not provide coverage for Dostal’s claims and that it thus had no duty to defend or indemnify Strand. State Farm asserted that there was no “occurrence” (defined as an “accident”) triggering coverage. The circuit court agreed with State Farm and granted its motion for summary and declaratory judgment. The court of appeals affirmed the circuit court’s decision in a published opinion. Dostal v. Strand, 2021 WI.App. 79, 399 Wis.2d 781, 967 N.W.2d 157.

ANALYSIS

The insurance policy in this case sets forth that coverage is provided for an “occurrence.” An “occurrence,” in turn, is defined under the policy as an “accident,” which results in, as relevant here, “bodily injury.”

The offense of second-degree reckless homicide requires that the actor creates an unreasonable and substantial risk of death or great bodily harm to another human being and the actor is aware of that risk.

RESIDENT RELATIVE EXCLUSION

State Farm contended that the resident relative exclusion applied to bar coverage here. In State Farm’s view, Haeven was a “resident” of Strand’s household as a matter of law. It points to facts in the record indicating that the paternity court had ordered Strand “frequent” physical placement of Haeven, that Strand physically cared for Haeven, and that Strand intended the duration of his relationship with Haeven to be substantial such that he would consider her when contracting about insurance.

However, contrary to State Farm’s argument, in Dostal’s deposition she testified that Haeven’s “residency” with Strand was disputed. According to Dostal’s deposition testimony, Strand only cared for Haeven without Dostal present four times, a count which includes two overnight stays. Dostal further testified that there was no formal schedule for placement and that Strand “was usually too busy or didn’t have time for the baby or didn’t want her over there.” Given this testimony, the Supreme Court concluded that it could not conclude that Haeven was a resident relative of Strand as a matter of law.

The parties’ submissions demonstrate that there are genuine issues of material fact as to the question of whether Haeven was a resident relative of Strand. Accordingly, summary judgment was inappropriate on this issue.

INTENTIONAL ACT EXCLUSION

If the conduct is intentional and if the conduct is substantially certain to cause injury, the Supreme Court could infer intent to injure only if the degree of certainty that the conduct will cause injury is sufficiently great to justify inferring intent to injure as a matter of law.

However, the Supreme Court cannot infer intent to injure as a matter of law merely because the insured’s intentional act violated the criminal law. Conviction of a crime gives rise to an inference that an insured intended injury as a matter of law in two circumstances, but only: (1) if intent to injure is an element of the crime, and (2) if the crime in question involves the insured committing an intentional act that carries with it a substantial risk of injury or death.

However, intent is not an element of a reckless crime. Thus, if the intentional acts exclusion is to apply, the crime must involve the insured committing an intentional act that carries a substantial risk of injury or death. A determination that Strand’s conduct was reckless does not preclude a finding that his conduct was an accident for purposes of insurance coverage.

In sum, the Supreme Court concluded that issue preclusion does not bar Dostal from seeking insurance coverage for her claims against Strand; the issue of whether Strand’s conduct constituted an “accident” was not actually litigated in the prior criminal proceeding; and there are genuine issues of material fact regarding the application of the resident relative and intentional acts exclusions such that summary judgment is inappropriate.

THE DISSENT

Chief Justice Annette Kingsland Ziegler, and two other justices, dissented, because 12 jurors at Strand’s criminal trial unanimously decided beyond a reasonable doubt that Haeven’s death was not an “accident,” and this precludes relitigating the issue of Strand’s coverage. Strand’s conviction for his act of reckless homicide, killing his own child ,Haeven, precludes Strand from claiming that Haeven’s death was an accident. If the defendant did not act with an awareness required for this crime, he was not guilty of this crime. Since he was convicted by the unanimous vote of 12 jurors, he acted with the awareness required for the crime.

Strand’s criminal trial is not binding any nonparties to that trial. The Chief Justice and two colleagues, concluded that the criminal trial “only binds Strand by precluding him from claiming that his criminally reckless act was a covered “accident” absolving him of liability to Dostal.”

ZALMA OPINION

Since this is a decision reversing the granting of a motion for summary judgment it gives Dostal the right to attempt to bring sufficient evidence to a civil jury that convinces them that the death of Haeven was an accident and that she was not really in the house with her father as a resident relative. It will be difficult but since she only needs to convince nine of twelve jurors that the preponderance of the evidence contradicts the conviction of the crime found by a unanimous vote of a jury convicting Strand for the death of his child. The jury may feel sorry for the mother and punish Strand’s insurer to help the mother. To me, the dissent is much more convincing than the decision of the majority.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. 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