A Video Explaining Controls on the Assessment of Punitive Damages

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Control on Punitive Damages

See the full video at https://youtu.be/j21ZRI2fdkM

The US Supreme Court has clearly stated that “[p]unitive damages may properly be imposed to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition.” [BMW of North America, Inc. v. Gore, 517 U. S. 559]. These damages often exceed the fines assessed by the state if the same person had acted criminally to damage the plaintiff.

The skills of plaintiff’s trial lawyers have convinced juries to award damages in sums that exceed the annual budget of Greece. The jury assesses the enormous damages because it becomes inflamed by the wrongful conduct of the defendant and agrees with the lawyer’s suggestion that the jury “teach the defendant a lesson” to stop it from doing the same to others. The argument has been successful in thousands of suits brought from Vermont to California and Florida to Washington.

For years punitive damage awards were unlimited. A $40 compensatory damage award resulted in a $5,000,000.00 punitive damages verdict. Some juries assessed billions of dollars in punitive damages with no constraint from the courts other than the wealth of the defendant.

In 2003 the US Supreme Court put limited punitive damages in the United States when in State Farm Mutual Automobile Insurance Co. v. Campbell 123 S.Ct. 1513, 538 U.S. 408, 155 L.Ed.2d 585 (U.S. 04/07/2003) by a 6-3 vote, overturned a $145 million verdict against an insurer. The Supreme Court concluded that a punitive damages award of $145 million, where full compensatory damages were $1 million, is excessive and violates the Due Process Clause of the Fourteenth Amendment.

Justice Kennedy, writing for the majority limited the ability of state and federal courts to award huge punitive damages awards and concluded that it was improbable that a punitive damage award more than a single digit multiplier of the compensatory damages award would seldom, if ever, pass the due process test. The Supreme Court, in BMW of North America, Inc. v. Gore, supra, set forth specific tests that must be met before punitive damages could fulfill the requirements of due process.

The State Farm Mutual Automobile Insurance Co. v. Campbell, supra, case arose out of an automobile accident where one party was killed and another severely injured. The Campbells, insured by State Farm attempted to pass six vehicles on a two-lane highway, failed, and caused the driver of an oncoming car to drive off the road to escape collision with the Campbells’ vehicle. The Campbells only had $25,000 coverage per person and $50,000 in the aggregate. The Campbells felt they were not at fault because there was no contact between the two vehicles. State Farm ignored the advice of its adjuster and counsel to accept policy limits demands and took the case to trial. The verdict at trial was more than $180,000 and the State Farm appointed counsel told the Campbells to put their house on the market since they would need the money to pay the verdict. State Farm refused to pay the judgment and to fund an appeal. The Campbells retained personal counsel to pursue an appeal that was not successful, entered into a settlement with the plaintiffs where the plaintiffs agreed to not execute on their judgment in exchange for an assignment of 90% of all money received in a bad faith action by the Campbells against State Farm. Before suit was filed, State Farm paid the full judgment.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Insurer Appointed Defense Lawyer not Required to Act Affirmative for Insured

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Liability Insurance only Pays for Defense and Indemnity not Prosecution of Suit Against Third Party

After a mechanic named Charles Vititoe was injured while working on the rim assembly of a semi-trailer chassis in Charleston, South Carolina  Flexi-Van Leasing, Inc. (“Flexi-Van”) who owned the chassis to which the rim assembly was attached (the “Chassis”) (the “Underlying Action”) he sued.  Flexi-Van obtained defense from the Travelers subject to a reservation of rights. In Flexi-Van Leasing, Inc. v. The Travelers Indemnity Company, No. 19-1847, United States Court Of Appeals For The Fourth Circuit (November 23, 2020) Flexi-Van alleged there was a conflict with its appointed defense lawyer because he refused to file a counter-claim against another party without Flexi-Van paying the lawyer even though the policy only provided for defense and indemnity.

Because Flexi-Van became concerned that there was a “real possibility” that Flexi would not be covered under the Policy if a judgment was rendered against it in the Underlying Action it requested defense counsel to bring a third-party complaint against Interstar. Defense lawyer Wall informed Flexi-Van he was willing to do so, but Flexi-Van would have to pay him to bring the third-party complaint, as Travelers would not. As a result, Flexi-Van then claimed that Wall had a conflict of interest and could no longer protect Flexi-Van’s interests.

Flexi-Van asserted that it was entitled to: (1) declaratory judgment that it is entitled to a defense and indemnity from Travelers for the claims in the Underlying Action; (2) breach of the Policy for failing to defend and indemnify; and (3) breach of the implied obligation of good faith and fair dealing.

The district court issued a series of orders granting Travelers’ Motion for Summary Judgment as to Flexi-Van’s breach of the implied obligation of good faith and fair dealing claim and that Flexi-Van acted prematurely by firing defense counsel Wall before the interests diverged and an actual conflict arose.

ANALYSIS

Flexi-Van challenged the district court’s determination that there was no conflict of interest. Flexi-Van claimed there was a conflict for two reasons. First, it argued the Travelers’ Reservation of Rights Letter created a conflict. There is no South Carolina law directly addressing this issue. The court, unable to conclude that the Supreme Court of South Carolina would profess so little confidence in the integrity of the members of the South Carolina bar it noted that rigorous ethical standards govern South Carolina attorneys. The South Carolina Rules of Professional Conduct mandate that a lawyer cannot accept compensation for representing a client from a third party unless certain conditions are met, including that the lawyer’s judgment must remain independent.

If an insured refuses to consent to an insurer’s choice of counsel without a conflict, the insured foregoes its right to compensation for defense fees.

While not a per se conflict, a reservation of rights letter may still establish an actual conflict where the parties lack a common interest. As the district court found, however, at the time of the issuance of the Reservation of Rights Letter, Flexi-Van and Travelers had a common interest in proving that Vititoe was at fault in the Underlying Action. Given that common interest, the district court properly found the Reservation of Rights Letter did not create a conflict of interest. Flexi-Van’s termination of defense counsel Wall was, therefore, premature.

Flexi-Van also argued a conflict of interest existed based on Wall’s alleged failure to bring a third-party complaint against Interstar. But the record shows that Wall did not refuse to bring a third-party complaint against Interstar. In fact, he expressly stated he would. Wall merely insisted Flexi-Van pay him to do so, as Travelers would not because it believed it had no duty to pay for Flexi-Van’s third-party claim under the Policy and South Carolina law.

The district court rightly found that the refusal to initiate a third-party action against Interstar arose from Travelers’s refusal to pay Wall to file a third-party action, not from any independent decision-making on the part of Wall. In fact, finding a conflict of interest in this scenario would destroy the ability of an insurer to hire counsel to defend its insured solely within the scope of an insurance policy. The existence of a coverage issue alone does not give rise to an actual conflict.

Flexi-Van fired Wall before an actual conflict arose and Flexi-Van was not entitled to indemnification for settlement costs in the Underlying Action.

Since there was a reasonable ground for contesting a claim there is no bad faith.  Travelers had reasonable grounds for believing coverage might not be a certainty under the exclusion, and Flexi-Van failed to submit any additional evidence that Travelers’ Reservation of Rights Letter was unreasonable.  The judgment was affirmed.

ZALMA OPINION

Flexi-Van was hoist upon its own petard by firing a competent defense counsel appointed by its insurer for a conflict of interest that did not exist, by asking an insurer to have its appointed counsel do work that it had not promised to provide by its policy and by seeking defense counsel to work for free. Firing defense counsel when he refused to work without pay and without a true conflict Flexi-Van gave Travelers a gift it did not seek.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

 

 

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A Video Explaining the First Party Property Insurance Adjuster’s Duties and Obligations

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What is a Property Insurance Claims Adjuster?

See the full video at https://youtu.be/I-9ypW4_cpY

An “adjuster” or “insurance adjuster” is by statutory definition, a person, co-partnership or corporation who undertakes to ascertain and report the actual loss to the subject-matter of insurance due to the hazard insured against. Insurance companies create, by issuing an insurance policy, a contractual obligation to pay its insureds’ valid claim. To do so insurers understand that the person insured is not able to prove the cause and extent of loss without assistance. Therefore, insurers dispatch a person with special knowledge – the adjuster – to separate fact from fiction, to establish cause and origin of the claimed loss, and determine sufficient information to enable the insurance company determine the amounts necessary to indemnify the insured as the policy promised. The adjuster is also present to distinguish the valid claim from a claim for which the insurance company is not liable under its policy.

Some policies specifically state that the claimant must use his own judgment in estimating the amount of loss and that the assistance of an insurance adjuster is a “courtesy only” — the claimant must still send a proof of loss within 60 days after the loss even if the adjuster does not furnish the form or help you complete it. As a general rule, when an insurer gives its insured written notice of its desire that proof of loss under a policy of fire insurance be furnished and provides a suitable form for such proof, failure of the insured to file proof of loss within 60 days after receipt of such notice, or within any longer period specified in the notice, is an absolute defense to an action on the policy.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Covid-19 Causes No Property Damage & is Excluded

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Clear & Unambiguous Exclusion Defeats Loss of Business Income

There was a time when litigation over insurance issues had no political consequences. like so many other things, the Covid-19 pandemic has upended that norm. Now local governments have at times issued orders closing spas and other businesses, allegedly, to prevent the virus’s spread. Those businesses have, in turn, unable to fight city hall, looked to recoup their losses from insurers by alleging bad faith refusal to pay claims. In Oppers Salon & Health Spa, Inc. v. Travelers Property Casualty Company Of America, Case No. 2:20-cv-03342-JDW, United States District Court For The Eastern District Of Pennsylvania (November 30, 2020) the USDC was asked to allow Oppers to collect its Business Insurance losses because of an order by the state to close down to avoid spread of Covid-19.

BACKGROUND

The Policy

Among other things, the Policy included a Business Income Coverage Form that offers Toppers coverage in the event of certain interruptions to its business. Relevant here, that Form includes both Business Income coverage and Civil Authority coverage.

The Policy covers Business Income loss that Oppers sustains “due to the necessary suspension of your ‘operations’ during the ‘period of restoration,'” if the suspension was “caused by direct physical loss of or damage to property at [the insured’s] premises.” The Policy defines the period of restoration as the “period of time after direct physical loss or damage” and “when the premises should be repaired, rebuilt, or replaced with reasonable speed and similar quality.” Business Income includes “net income … plus continuing normal operating expenses incurred, including payroll.” (emphasis added).

The “Civil Authority” provision covers loss of Business Income and extra expenses incurred due to damage to property other than property at the insured’s premises, when as a result of “dangerous physical conditions,” a civil authority’s actions prohibit access to both the insured’s premises and the area immediately surrounding the damaged property. The damaged property must be within one mile of the insured’s premises to enable a civil authority to have unimpeded access to the damaged property.

The Policy excludes coverage for any “loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” (the “Virus Exclusion”).) The Virus Exclusion applies to “all coverage under all forms and endorsements” including Business Income and Civil Authority coverage.

The Shutdown Orders

In March 2020, Pennsylvania, New Jersey, and Delaware, issued sweeping stay-at-home orders the states believed would mitigate the further spread of the Covid-19 virus. Those Shutdown Orders referenced that the virus can be transmitted through contact with surfaces and through exposure to airborne particles. As a result of these Orders, Toppers had to suspend operations at all of its locations. In June 2020, Toppers filed a coverage claim for its operating expenses during the suspension period. Travelers denied Toppers’ claim later that month. It explained that Toppers’ loss did not satisfy the Policy’s Business Income or Civil Authority coverage provisions and was also subject to the Policy’s Virus Exclusion, as well as several other exclusions.

Judgment on the Pleadings

After the pleadings are closed–but early enough not to delay trial–a party may move for judgment on the pleadings.

DISCUSSION

When policy language is clear and unambiguous, a court applying Pennsylvania law must give effect to that language. When a provision in the policy is ambiguous, a court must construe the policy in favor of the insured to further the contract’s prime purpose of indemnification and against the insurer, as the insurer drafts the policy, and controls coverage. Contractual language is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense.

The Virus Exclusion

The Virus Exclusion applies to “loss or damage caused by or resulting from any virus … that induces or is capable of inducing physical distress, illness or disease.” The language is not ambiguous, and it applies to Covid-19, which is caused by a coronavirus that causes physical illness and distress. The Virus Exclusion applies to Toppers’ insurance claim.

The Policy’s structure indicates that the parties intended the word “loss” to cover both lost income and continuing expenses. Under the Policy, “Business Income” includes both net income and continuing expenses, and the Policy provides coverage for any “loss of Business Income.”

Coverage

Even if the Virus Exclusion did not bar coverage, Oppers would not be able to show that the Policy covers its claim, either under the Business Income or the Civil Authority coverage because there was no damage to property. The parties’ agreement to measure the period of restoration against the time it takes to repair the premises indicates that they intended the Policy to cover losses for physical damage, and that intent controls the Court’s interpretation of the Policy since Oppers did not lose use because the premises suffered physical damage.

Civil Authority coverage

Oppers did not close because of damage to a nearby premise or because there was some dangerous physical condition at another nearby premise. It closed because the Shutdown Orders applied to its own operations. Its shutdown and resulting losses, the USDC concluded, fall outside the scope of the Civil Authority coverage.

CONCLUSION

Businesses nationwide have struggled to stay afloat during the pandemic. While the pandemic has affected the salons, the Policy’s Virus Exclusion is unambiguous and bars Toppers’ coverage claim. Toppers also cannot show that Covid-19 or the Shutdown Orders caused it physical damage or reparable loss under the Policy. Therefore, Oppers is not entitled to summary judgment. On the contrary, the USDC concluded that Travelers has demonstrated that it is entitled to judgment on the pleadings.

ZALMA OPINION

This is one of many circuit court decisions concluding that Business Interruption and Civil Authority coverages do not cover losses caused by orders from governments designed to prevent the spread of Covid-19 because the insurance policy required – as a minimum before coverage applies – that there is damage to the insured’s property or to property away from the insured’s premises that caused the government to restrict access to the insured’s property. The virus caused no property damage. The insured could not say what was needed to repair their facilities since there was no damage to repair. Finally, the virus exclusion is clear and unambiguous. Even if the court stretched the language of the policy to conclude that the virus caused property damage that could be repaired, the exclusion prevented coverage. This, and all the other similar cases, reveal that no insurance policy covers every possible cause of loss and insurance cannot solve every problem or loss faced by an insured.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Insurance Videos from Barry Zalma at Rumble.com

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  • Free Video Learning for Everyone Interested in Insurance and Insurance Claims

    The Videos that follow are all available, with many more, at https://rumble.com/c/c-262921  and Videos from “Barry Zalma on YouTube. 

    Subscribe to this blog, my videos on Rumble or YouTube.

    A Video Explaining How To Become a Professional Liability Claims Adjuster

    A Video Explaining How To Become a Professional Liability Claims Adjuster

    Zalma’s Insurance Fraud Letter – December 1, 2020Zalma’s Insurance Fraud Letter – December 1, 2020

    A Video Explaining Ethics and the Development of the Covenant of Good Faith

    A Video Explaining Ethics and the Development of the Covenant of Good Faith

  • A Video Explaining Some Appellate Decisions on the Equitable Remedy of Rescission

    A Video Explaining Some Appellate Decisions on the Equitable Remedy of Rescission

    A Video Proposal to Defeat Insurance Fraud Because It Takes Courage to Fight Insurance Fraud

    A Video Proposal to Defeat Insurance Fraud Because It Takes Courage to Fight Insurance Fraud

  • A Video Explaining Insurance Fraud by “Staged” Losses

    A Video Explaining Insurance Fraud by "Staged" Losses

  • A Video Explaining the Preparation Necessary for a Statement or an Examination Under Oath

    A Video Explaining the Preparation Necessary for a Statement or an Examination Under Oath

  • A Video Explaining The Role of the Insurer’s Attorney After Ending the EUO

    A Video Explaining The Role of the Insurer’s Attorney After Ending the EUO

  • A Video Explaining the Consideration for Early Settlement of a Construction Defect Suit

    A Video Explaining the Consideration for Early Settlement of a Construction Defect Suit 

    A Video Explaining the Statutes of Repose

    A Video Explaining the Statutes of Repose

     

  • A Video Explaining Some Grounds for the Tort of Bad Faith

    A Video Explaining Some Grounds for the Tort of Bad Faith

     

  • A Video About The Statutory Fair Claims Settlement Practices Statute and Regulations

    A Video About The Statutory Fair Claims Settlement Practices Statute and Regulations

     

  • A Video Explaining Ethics and the Public Insurance Adjuster

    A Video Explaining Ethics and the Public Insurance Adjuster

     

    A Video Explaining What Liability Insurance is and How to Acquire It

    A Video Explaining What Liability Insurance is and How to Acquire It

     

  • A Video Explaining What Mold Inspections Cannot Do

    A Video Explaining What Mold Inspections Cannot Do

     

    A Video Explaining Insurance Policy Interpretation and Construction

    A Video Explaining Insurance Policy Interpretation and Construction

     

  • Just for Fun – A “Heads I Win, Tails You Lose” Story

    Just for Fun - A "Heads I Win, Tails You Lose" Story

     

    A Video Explaining the Underwriting Concerns About Unacceptable Risks

    A Video Explaining the Underwriting Concerns About Unacceptable Risks

     

  • A Video Explaining What is Needed to Make the Decision to Defend Under a CGL Policy

    A Video Explaining What is Needed to Make the Decision to Defend Under a CGL Policy

     

  • A Video Explaining Some Construction Defects that Result in Claims or Litigation

    A Video Explaining Some Construction Defects that Result in Claims or Litigation

     

  • A Video Explaining The Tort of Negligence and Construction Defect Insurance

    A Video Explaining The Tort of Negligence and Construction Defect Insurance 

  • Zalma’s Insurance Fraud Letter – November 1, 2020

    Zalma's Insurance Fraud Letter - November 1, 2020

     

  • A Video Explaining how to Calculate and Award Punitive Damages

    A Video Explaining how to Calculate and Award Punitive Damages 

  • A Video About a Conviction for Insurance Fraud

    A Video About a Conviction for Insurance Fraud 

  • A Video Explaining Uberrimae Fidei the Ethical Basis of Insurance

    A Video Explaining Uberrimae Fidei the Ethical Basis of Insurance

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A Video Explaining How To Become a Professional Liability Claims Adjuster

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The Third-Party Liability Claim

See the full video at https://youtu.be/Ia5UQlvS758

The investigation of a liability insurance claim is conducted to fulfill the promise made by the insurer to defend and indemnify the insured in the event of a contingent or unexpected loss resulting in the injury to person or property as a result of actions of the insured.

To fulfill the promises made by the policy insurers must establish a professional group of insurance adjusters who are competent investigators and insurance claims people. The adjusters, at a bare minimum, with regard to third party liability claims, must be capable of fulfilling, at a minimum, each of the topics that follow.

Read the Policy

Establish Coverage

Read the Loss Notice

Meet with the Insured and Witnesses

Once the adjuster has completed this basic preparation by confirming coverage, reading the policy and reviewing the loss notice, he or she should arrange to meet with the insured and witnesses.

The adjuster should explain to the insured that the policy requires the insured to cooperate and assist the insurer in completing a thorough investigation of the claim being made against the insured. The explanation should include that the insurer, in order to provide the best service possible. It is the adjuster who acts in good faith on behalf of the insurer to its insureds.  The insurer hired the adjuster to help the insured protect himself or herself from claims by the third party claiming injuries as a result of the negligence of the insured. The adjuster must also explain that he or she cannot provide the defense alone. The adjuster needs the assistance of the insured and is present to help the insured obtain the defense needed.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Ninth Circuit Affirms a Mold Exclusion

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Insurers Should Never Sue Other Insurers for Bad Faith

CSAA Insurance Exchange (“CSAA”) is a homeowner’s insurance company. Premier Restoration and Remodel, Inc. (“Premier”) is a home-repair contractor in CSAA’s network whose misapplication of an anti-mold chemical caused property damage to a residence insured by CSAA. Premier was insured by Rockhill Insurance Companies (“Rockhill”), and CSAA believed that coverage for the damage was available under Rockhill’s policy. 

In Rockhill Insurance Companies v. CSAA Insurance Exchange, dba AAA Insurance Exchange and Premier Restoration And Remodel, Inc., No. 19-16716, United States Court Of Appeals For The Ninth Circuit (November 20, 2020) after paying what it believed was the amount available under its policy, Rockhill filed an action against CSAA and Premier in the Nevada District Court, seeking a declaratory judgment that it had satisfied its obligations to Premier.

Applying Nevada law, the District Court granted Rockhill’s motion for summary judgment, finding:

  1. that Rockhill had paid the full available amount of its applicable Contractors Pollution Liability coverage (“Pollution Coverage”),
  2. that Rockhill’s Commercial General Liability coverage (“General Coverage”) did not apply because it contained a Mold, Fungus and Organic Pathogen Exclusion (“Mold Exclusion”) barring the kind of property damage that Premier caused; and
  3. The District Court dismissed CSAA’s counterclaim of bad faith.

ANALYSIS

The General Coverage provision in Rockhill’s insurance policy precluded coverage of CSAA’s claim because the provision is subject to the Mold Exclusion, which excludes any “property damage . . . which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, growth, release or escape of [mold] at any time.”

But for the actual, alleged, or threatened growth of mold in CSAA’s insured’s residence, the damaging application of the anti-mold chemical would not have occurred. Therefore, the General Coverage provision does not provide a means of recovery for the damage, and Rockhill’s obligation is limited to its Pollution Coverage provision, pursuant to which it has paid the full remaining amount of the policy limits.

Under Nevada law, an insurer does not waive its right to assert an exclusion where it has provided its insured with adequate notice of an unambiguous exclusion and here there is no reasonable basis in the record for finding Rockhill’s notice was prejudicially inadequate, because Premier conceded that it received Rockhill’s reservation of rights letter.

Bad faith can only be established where the insurer acts unreasonably and with knowledge that there is no reasonable basis for its conduct. Here, Rockhill followed the advice of its legal counsel in making multiple settlement offers, and CSAA failed ever to make a settlement demand within the coverage limits. Viewing the record as a whole, the Ninth Circuit concluded that no reasonable trier of fact could find that Rockhill acted unreasonably or in bad faith.

ZALMA OPINION

Insurance companies, professional litigants, should be able to avoid litigation especially with another insurer. In this case CSAA took a definite position that it was entitled to money from Rockhill even though there was no question Rockhill’s policy included a clear and unambiguous mold exclusion and added to the offensive action by accusing another insurer of committing the tort of bad faith. They failed because Rockhill followed the advice of its counsel and CSAA refused all reasonable settlement offers.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

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Insurance Books from Barry Zalma

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Everything Needed by the Insurance Claims Professional

Read the full article at https://www.linkedin.com/pulse/everything-needed-insurance-claims-professional-from-barry-12c and Go to the Insurance Claims Library –https://zalma.com/blog/insurance-claims-library/

THE HOMEOWNERS INSURANCE POLICY

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

Insurance is a contract between a person seeking insurance and an insurer. It is obtained by making contact with the insurer as a prospective insured seeking insurance. The book explains how to buy a homeowners policy and how to collect on any claim made to the homeowners insurer.

Zalma on Insurance Claims – Second Edition

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

Zalma’s series of books is a terrific blend of both the legal underpinnings and the practical implications for the claim practitioner.

 


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Zalma’s Insurance Fraud Letter – December 1, 2020

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ZALMA’S INSURANCE FRAUD LETTER

Read last two issues of ZIFL here.

See the full video here https://youtu.be/Phva0x6RNYQ

Evidence of A Prior Fire Is Available to Prove Fraud

Arson for Profit Conviction Affirmed

Evidence that is “inextricably intertwined” with the charged arson conspiracies is admissible in an arson for profit trial especially when the earlier fire was used as a “playbook” for the fire that is the subject of the appeal.

In United States Of America v. James Edward Lester, a/k/a Punkin, No. 19-4333, United States Court Of Appeals For The Fourth Circuit (June 9, 2020) a jury convicted James Lester of arson conspiracy, in violation of 18 U.S.C. § 844(m) (2018), money laundering conspiracy, in violation of 18 U.S.C. § 1956(h) (2018), mail and wire fraud conspiracy, in violation of 18 U.S.C. §§ 1349, 1341, 1343 (2018), arson to commit wire fraud, in violation of 18 U.S.C. § 844(h)(1) (2018), aiding and abetting an unlawful monetary transaction, in violation of 18 U.S.C §§ 2, 1957 (2018), and structuring transactions, in violation of 31 U.S.C. §§ 5324(a)(3), (d) (2018). He received a 204-month sentence.

Read the rest of the article and the full ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2

2020 Canadian Insurance Fraud Report

Fighting Fraud in the Pandemic Era

From Insurance Canada, good news: the desire to fight insurance fraud is getting stronger. In past studies, respondents gave fraud fighting a priority of 7/10, according to FRISS, but this year it scores closer to 8/10.

At the same time, fraudsters are watching for the “gaps” as insurers focus on their digital transformation.

Read the rest of the article and the full ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2

Minnesota Fraud Bureau: Insurance Fraud Referrals Up In 2019

From the Minnesota Fraud Bureau reports were provided that Minnesota insurance regulators saw an uptick in the number of fraud case referrals during 2019, agent and broker fraud referrals down significantly that year, the most recent for which insurance fraud statistics for the state are available.

No Harm, No Foul When Instruction Error Favorable to Defendant

Podiatrist Jailed for Participation in Kickback Scheme Prescribing Compounded Medications Solely to Obtain Kickbacks

Dr. Alap Shah was convicted of participating in a Kickback scheme where he was paid for prescribing expensive compounded medications in United States of America v. Alap Shah, No. 19-12319, United States Court of Appeals for The Eleventh Circuit (November 24, 2020). He appealed the conviction based on what he and the government admitted was an erroneous instruction to the jury.

Health Insurance Fraud Convictions

Other Insurance Fraud Convictions

Zalma on Insurance Videos

Zalma on Insurance

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals available at http://zalma.com/blog/insurance-claims-library/. My original channel does not allow me to add posts so I have created a new channel, Barry Zalma available at Zalma on Insurance Videos and at https://rumble.com/c/c-262921 where I post a new video almost every day

Consider Books to Show Your Appreciation to Your Insurer Clients or Claims Employees

Many insurers refuse to allow their employees to receive gifts from vendors.

If you wish to thank your insurance company clients for allowing you to represent their interest or if you wish to honor your claims personnel it is time to give them something that will be useful to them throughout the coming year and that will not offend insurer’s rules to avoid attempts to extort clients for business from insurer employees.

 

 


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

 

 

 

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A Video Explaining Ethics and the Development of the Covenant of Good Faith

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The Development of the Implied Covenant of Good Faith and Fair Dealing

See the full video at https://youtu.be/hNzPoyGxw2s

The Covenant of Good Faith and Fair Dealing is a general assumption of the law of contracts, that people will act in good faith and deal fairly without breaking their word. When insurers use shifty means to avoid obligations or deny what the other party obviously understood was a violation of the duty of good faith. The covenant, with regard to insurance, has been implied in every contract of insurance since the beginning of modern insurance at the Lloyd’s Coffee shop more than three centuries ago.

The implied duty of good faith and fair dealing is a centuries-old concept. It is aimed at ensuring that the parties to a contract do not interfere with the other party’s performance or destroy the other party’s reasonable expectations with respect to the benefits of the contract. Given that the duty has been in place for hundreds of years and is firmly rooted in the common law, it is unlikely that it will disappear in the near future. The implied duty of good faith and fair dealing protects the ability of the parties to rely on their contract, the promises and risks undertaken, and the parties’ reasonable expectations.

The first recognized statement of the covenant of good faith and fair dealing was issued by Lord Mansfield in the British House of Lords in 1766 in Carter v. Boehm S.C. 1 Bl.593, 3 Burr 1906, 11th May 1766 provided that the reason for the rule “obliges parties to disclose is to prevent fraud, and to encourage good faith. It is adapted to such facts as vary the nature of the contract; which one privately knows, and the other is ignorant of, and has no reason to suspect.” Lord Mansfield was faced with a need to determine whether there was, under all the circumstances at the time the policy was underwritten, a fair representation; or a concealment; fraudulent, if designed; or, though not designed, varying materially the object of the policy, and changing the risks understood to be run.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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No Harm, No Foul When Instruction Error Favorable to Defendant

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Podiatrist Jailed for Participation in Kickback Scheme Prescribing Compounded Medications Solely to Obtain Kickbacks

Dr. Alap Shah was convicted of participating in a Kickback scheme where he was paid for prescribing expensive compounded medications in United States Of America v. Alap Shah, No. 19-12319, United States Court Of Appeals For The Eleventh Circuit (November 24, 2020). He appealed the conviction based on what he and the government admitted was an erroneous instruction to the jury.

At the request of the government, the district court instructed the jury that Dr. Alap Shah violated the statute prohibiting kickbacks if one reason he accepted the payment was because it was in return for writing prescriptions. In his written briefs on appeal, Shah argued that the district court erred and should have instructed the jury that the government was required to prove that his main or only reason for accepting the payment was because it was made in return for writing prescriptions.

Both parties agreed at oral argument that the jury instruction was erroneous and that the statute requires no proof of the defendant’s motivation for accepting the illegal payment, so long as he accepts the kickback knowingly and willfully. The Issue presented to the Eleventh Circuit was whether the instruction prejudiced Shah.

BACKGROUND

Dr. Alap Shah was a podiatrist in Columbus, Georgia. He sometimes prescribed compounded medicines to his patients. Compounded medicines are custom-formulated drugs that can vary from off-the-shelf drugs in strength, delivery method, or combinations. For example, a compounded medicine might be a cream that combines three pain-reducing drugs ordinarily produced in pill form at a lower strength than available off the shelf. Specialized pharmacies produce compounded medicines, which are much more expensive than off-the-shelf prescription medications. A single tube of a compounded cream can cost $15,000 or more.

Shah and about 20 others participated in a kickback conspiracy that involved writing prescriptions for compounded drugs. Each of them faxed prescriptions for compounded drugs to a company called PGRx Group, which in turn directed a compounding pharmacy to fill the prescriptions. The pharmacy paid PGRx Group a kickback, usually around 50 percent of its profits, for each prescription PGRx Group referred to it. PGRx Group passed part of that kickback on to the prescribing doctor.

Shah received his share of the profits as a flat monthly payment of $5,000. PGRx Group disguised the nature of the payments by hiring the doctors to be “medical directors,” by calling the payments speaker fees for promoting PGRx Group and compounded drugs at professional events, and by routing payments to the prescribing doctors’ family members or employees.

Shah joined the conspiracy in May 2014 after being recruited by its masterminds, Paul Meek and Gary Small. Meek and Small offered him $5,000 each month for his participation.  Shah corrected a typo in the contract  from PGRx before signing it. The contract provided Shah’s duties as a medical director included performing on-site supervision and training, management, and administrative responsibilities. And the contract required PGRx Group to provide Shah with office space in its facility. Shah performed none of his duties under the contract. he did not even know where PGRx Group was located. And PGRx Group never provided him with office space. Regardless, PGRx Group always paid Shah $5,000 a month.

Shah prescribed compounded medications far more often after he signed the contracts with PGRx Group than before he signed the contract. At trial, Shah nevertheless insisted that he never wrote a prescription that a patient did not need.

Tricare, a federal program for members of the military and their families, paid for many of the prescriptions Shah wrote. It reimbursed at a higher rate than other insurance companies.  Shah continued in this role until around May 2015, when Tricare made the conspiracy less profitable by instituting a prior-authorization requirement for compounded drugs. All told, he received checks from PGRx Group totaling $55,350.43. The prescriptions he wrote during the conspiracy cost Tricare more than a million dollars.

Shah’s closing argument focused on mens rea and the good-faith defense. He began by telling the jury that “[t]he case is about whether Dr. Shah acted willfully.” The jury convicted Shah. The district court sentenced him to 36 months of incarceration on each count, to run concurrently, and ordered him to pay $55,340 in restitution.

DISCUSSION

The statute on which he was convicted says nothing about the defendant’s motivation for accepting the payment. The text does not require proof of a defendant’s “purposes in soliciting or receiving” a payment. The statute’s key phrase—”remuneration . . . in return for [writing Tricare prescriptions]”—says nothing about the reasons the defendant accepted the payment. The Eleventh Circuit found no reason to stretch that phrase into a description of the defendant’s mental state. Congress specified the necessary mental state by requiring that the defendant must accept the payment “knowingly and willfully.”

To act “corruptly” means to act knowingly and dishonestly for a wrongful purpose. In the same way, the phrase “in return for” speaks to the nature of the payment, not Shah’s reasons for accepting it.The payor crime, which prohibits “knowingly and willfully offer[ing] or pay[ing] any remuneration . . . to induce” the same set of enumerated activities, prohibits payments that are meant by the payor to induce one of the enumerated actions. Motive matters for the payor crime even though it does not for the Dr. Shah’s payee crime.

The district court erred by instructing the jury that the government had to prove Shah accepted the payments at least in part because they were made in return for the prescriptions he wrote. No such proof was required. The government met its burden of proving beyond a reasonable doubt that the error did not harm Shah. The erroneous instruction required the government to prove more than the statute required, so if anything, the error worked to Shah’s advantage.

The district court correctly instructed the jury about the burden the government bore in proving willfulness. And it correctly instructed the jury that Shah committed no crime if he accepted the payments in good faith.

Shah’s own closing argument focused on the mens rea requirements and the good-faith instruction. Adding an unnecessary “one purpose” instruction could not have prejudiced Shah by detracting from the otherwise correct willfulness and good-faith instructions. In the absence of any prejudice to Shah, the conviction was affirmed.

ZALMA OPINION

This is a classic case of a convicted criminal claiming that his conviction should be reversed because of an erroneous instruction. The problem for Dr. Shah was that the erroneous instruction placed a higher burden on the prosecution than a correct instruction. The jury convicted him because the government proved his criminal conduct beyond a reasonable doubt even though the erroneous instruction made the job of proving the crime more difficult. No harm, no foul, go directly to jail and do not collect $200.00.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining Some Appellate Decisions on the Equitable Remedy of Rescission

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A Video Explaining Some Appellate Decisions on the Equitable Remedy of Rescission

See the full video at https://youtu.be/VCvRj0DsWoo

Resure, Inc. v. Superior Court

In Resure, Inc. v. Superior Court, 42 Cal.App.4th 156, 49 Cal.Rptr.2d 354 (Cal.App. Dist.2 01/31/1996) the California Court of Appeal dealt with a problem raised by statute and who won the race to the courthouse. Resure, Inc., filed a complaint for rescission and declaratory relief against respondents Dan Palmer and Geoffrey Palmer, doing business as G. H. Palmer Associates. The complaint alleged that the Palmers misrepresented material facts or failed to disclose facts concerning potential claims in their application for insurance which would have affected Resure’s decision to underwrite coverage. Resure’s offer to rescind and restore the premiums was stated in the complaint, but not in any notice or letter sent prior to filing it. Resure moved for summary judgment based on its claim for rescission.

The Legislature did not, as the plaintiffs argued in the Resure case, state it intended to abolish the insurers right to rescind. Since that language did not exist the court reasonably concluded that the only rational decision it could draw from the Legislature’s choice of words is that the Legislature did not understand “action on the contract” to mean equitable action to rescind an insurance contract. Rather, it only meant to describe an action brought at law to enforce the insurance policy and obtain as damages the benefits promised by the policy.

Whenever an insured attempts to avoid the effect of a rescission by an insurer it will allege that the insurer waived its right to rescind or is estopped – by its actions – to assert a right to rescind.

Also see descriptions of other cases dealing with the equitable remedy of rescission.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

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Evidence of a Prior Fire is Available to Prove Fraud

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Arson for Profit Conviction Affirmed

Evidence that is “inextricably intertwined” with the charged arson conspiracies is admissible in an arson for profit trial especially when the earlier fire was used as a “playbook” for the fire that is the subject of the appeal.

In United States Of America v. James Edward Lester, a/k/a Punkin, No. 19-4333, United States Court Of Appeals For The Fourth Circuit (June 9, 2020) a jury convicted James Lester of arson conspiracy, in violation of 18 U.S.C. § 844(m) (2018), money laundering conspiracy, in violation of 18 U.S.C. § 1956(h) (2018), mail and wire fraud conspiracy, in violation of 18 U.S.C. §§ 1349, 1341, 1343 (2018), arson to commit wire fraud, in violation of 18 U.S.C. § 844(h)(1) (2018), aiding and abetting an unlawful monetary transaction, in violation of 18 U.S.C §§ 2, 1957 (2018), and structuring transactions, in violation of 31 U.S.C. §§ 5324(a)(3), (d) (2018). He received a 204-month sentence.

Lester contended that the district court abused its discretion in admitting the evidence of a prior arson fire (the “Wharncliffe fire”) evidence. The district court admitted the evidence as intrinsic to the charged crimes. Alternatively, the district court determined that the evidence was admissible, pursuant to Fed. R. Evid. 404(b), as probative of Lester’s motive, knowledge, and intent.

Lester challenged the district court’s admission of the Wharncliffe fire evidence as intrinsic to the fraud charges, and he argued that the story of the crime was complete in itself and that there was no need to introduce evidence of the Wharncliffe fire. Lester also argues that the prejudicial effect of the Wharncliffe fire evidence substantially outweighed any probative value it may have had to prove the criminal nature of the fires that occurred at properties owned by the coconspirators in Matoaka and Ikes Fork, West Virginia. The Government contended that the district court properly admitted the Wharncliffe fire evidence as direct evidence of the Matoaka and Ikes Fork schemes because the evidence was intrinsic to the charged conspiracies.

Rule 404(b) applies only to evidence of other acts that are extrinsic to the one charged. Acts intrinsic to the alleged crime do not fall under Rule 404(b)’s limitations on admissible evidence.

Evidence is intrinsic if it is necessary to complete the story of the crime on trial. Other criminal acts are intrinsic when they are inextricably intertwined or both acts are part of a single criminal episode or the other acts were necessary preliminaries to the crime charged. Such evidence is inextricably intertwined with the evidence regarding the charged offense if it forms an integral and natural part of the witness’s accounts of the circumstances surrounding the offenses for which the defendant was indicted.

The Fourth Circuit, therefore, concluded that the district court did not abuse its discretion in admitting the Wharncliffe fire evidence as intrinsic to the charged conspiracies. This evidence laid the foundation for the arson and insurance fraud schemes, and it was necessary to complete the story of Lester’s relationships with his coconspirators. Moreover, the Wharncliffe fire evidence was “inextricably intertwined” with the charged arson conspiracies because the Wharncliffe fire was used as a “playbook” for the Matoaka and Ikes Fork fires.

In fact, the Wharncliffe fire insurance claim contents list was overwhelmingly similar to those of the Matoaka and Ikes Fork fire claims.

The district court’s judgment was affirmed.

ZALMA OPINION

Arson for profit is the most dangerous and vicious form of insurance fraud. Often firefighters or innocent neighbors are injured or killed by an arson fire. In this case the defendant had tried fraud with a fire before working with co-conspirators to set two more fires making claim for the destruction of the same property involved in the earlier fire. That fact made the evidence of the earlier fire – the Wharncliffe fire – inextricably intertwined with the fires for which he was tried and convicted.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Everything Needed by the Insurance Claims Professional from Barry Zalma

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Insurance Claims Library

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.

Ethics for the Insurance Professional – Second Edition

How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives

Insurance is, by definition, a business of the utmost good faith. This means that both parties to the contract of insurance must act fairly and in good faith to each other and do nothing that will deprive the other of the benefits the contract of insurance promised.

Without the covenant of good faith and fair dealing and ethical people who work in the insurance industry applying and fulfilling the covenant, insurance is impossible. One cannot act fairly and in good faith without being a person with a well-formed ethical compass.

In Carter v. Boehm S.C. 1 Bl. Burr 1906, 11th May 1766. 593, 3 Lord Mansfield in the British House of Lords stated: “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.” Insurers, when making a decision to insure or not insure a risk, rely on the information provided to them by the insured. As Lord Mansfield instructed, the insured must provide the information requested honestly and in good faith.

The implied covenant explains that no party to a contract of insurance should do anything to deprive the other of the benefits of the contract.

The implied covenant of good faith and fair dealing imposes obligations not only as to claims by a third party but also as to those by the insured. When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort. For the insurer to fulfill its obligation not to impair the right of the insured to receive the benefits of the agreement, it again must give at least as much consideration to the latter=s interests as it does to its own.

Therefore, since, at least 1766, the business of insurance is a business of the utmost good faith, that is, each party to a contract of insurance must deal with each other ethically. The general duty of good faith and fair dealing incorporated by reference into every policy of insurance requires a complete understanding of ethics and ethical behavior.

In every insurance contract there is an implied covenant of good faith and fair dealing that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.

Available as a Paperback   

Available as a Kindle Book.

The Little Book on Ethics for the American Lawyer

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

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

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

What is Ethical Behavior?

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

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

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

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

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

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

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

Available as a Kindle book here.

Available as a paperback here.

Random Thoughts on Insurance

After more than 53 years acting as a claims person and insurance coverage lawyer I enjoy reading court decisions concerning insurance. The idea of this blog is to find new cases that are interesting to me and then write a summary. Some of the cases reviewed will be important. Some may be of first impression. Others will be totally unimportant. All will be interesting.

The case digests and articles from 2010 to the present, now in elenven volumes, where I digest cases published by courts of the various states and the United States.

The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Available as a paperback.

Available as a Kindle book.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Proposal to Defeat Insurance Fraud Because It Takes Courage to Fight Insurance Fraud

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There Must be a Special Unit of Insurance Fraud Prosecutors in the Offices of the Attorneys General

See the full video at https://youtu.be/JkdqUDDK-s0

The legislatures of the various states, the United States Congress, the National Association of Insurance Commissioners, The National Insurance Crime Bureau and insurance industry groups have finally decided that the war against insurance fraud is worth fighting. Until the states, the local police agencies, the district attorneys, the United States Attorneys, and the Attorneys General of the various states join in the battle it will be fought to a stalemate. The insurance industry cannot successfully fight insurance fraud alone.

Insurance industry sources estimate insurance fraud from lows of $80,000,000,000 ($80 billion) a year to highs of $300,000,000,000 ($300 billion) a year. Regardless of which, if any, estimate is accurate the amount of money going to insurance criminals is staggering and approaches no less than 3% to 10% of premium collected.

Every two weeks Zalma’s Insurance Fraud Letter publishes lists of convictions. The major volume of such convictions deals with Medicare and Medicaid fraud. Basic property and casualty fraud convictions are seldom described except when the perpetrator confesses or pleads guilty. Few go to trial.

Proposal

Insurance fraud is not a local problem. It is a depletion of the wealth of the entire country. The lawyer for the Department of Insurance of each state is the State Attorney General. A special unit could be established in the office of the Attorney General, funded with the monies taken from the insurance industry to support the war against insurance fraud. This unit should be given a simple mandate:

  • File and prosecute every insurance fraud brought to the unit by the Fraud Division that has a better than 50% chance of success.
  • The unit should not concentrate its efforts on major insurance frauds. Those can best be prosecuted by major fraud units already existing in the District Attorney’s offices and in offices of the US Attorney.

The state’s unit should concentrate on prosecuting every-day insurance fraud, the frauds of opportunity that take 90% of the money paid to fraud perpetrators, in the range of $5,000 to $50,000. Single counts should be prosecuted. When prosecutors file multiple charges against individual defendants the case becomes a major action requiring a great deal of time to prosecute. Judges and juries do not want to be involved in a prosecution that takes months to prosecute. If there are multiple counts available, the prosecutor should charge only the one where the evidence of fraud is overwhelming. If the jury finds for the defendant the prosecutor can charge the next count continuously until the statute of limitation runs. If all available are charged in one case the prosecutor will offend the judge and jury and the defendant will get mercy from the jury.  Overcharging prosecution is as bad as not charging at all.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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The Covenant of Good Faith Requires Insured to Honestly Report Health Conditions on Application for Life Insurance

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Material Misrepresentations on Life Insurance Application Requires Rescission

Howard Tenzer (Howard) appealed from the district court’s grant of summary judgment in favor of Minnesota Life Insurance (Minnesota Life) in Howard Tenzer, Legal Guardian on behalf of A.T. v. Minnesota Life Insurance Company, United States Court Of Appeals for The Ninth Circuit (October 21, 2020) and sought reversal.

FACTS

All of Howard’s claims stem from the rescission by Minnesota Life of an insurance contract with Howard’s brother, Mark Tenzer (Mark).

Rescission of a life insurance contract under Nevada law is lawful when a putative insured made material misrepresentations to the insurer, or when an insurer would not have issued the policy, or would have issued the policy on different terms, had the putative insured provided accurate information. The materiality of misrepresentations is only subject to summary judgment where reasonable minds cannot differ and materiality is established as matter of law.

Mark made numerous health-related misrepresentations on his life insurance policy application. He failed to disclose his history of exogenous steroid use, sleep apnea, abdominal issues, doctors’ visits, surgery and diagnostic tests. Minnesota Life’s underwriter, John Helberg, testified in a sworn affidavit and at his deposition that Mark’s misstatements were material to the risk to be assumed by Minnesota Life and that, given accurate health information, Minnesota Life would have rejected Mark’s application.

DISCUSSION

Howard did not offer evidence to rebut Helberg’s sworn testimony. Viewing the evidence in the light most favorable to Howard, the Ninth Circuit concluded that rescission was proper as a matter of law because reasonable minds could not differ on whether Mark’s misrepresentations were material . The was no problem that Minnesota Life would not have issued the same policy given accurate information.

Further, the district court properly held that Minnesota Life did not waive its right to rescind Mark’s policy. Under Nevada law, an insurer waives its right to rescission if, before issuing a policy, the insurer already has “full information” about the misrepresentations it later relies upon to justify rescinding that policy.

The insurer was entitled to rely on Mark’s representations. Howard provided no authority for the proposition that Nevada law imposes an affirmative obligation to investigate further rather than rely on the representations in the application.

Because Minnesota Life was entitled to rescind Mark’s life insurance policy, it cannot be held liable for breaching that policy since, by rescission, the policy never existed. When an insurer is legally entitled to rescind a policy, there can be no breach of the contract of insurance nor can there be a finding of bad faith.

Finally, the district court correctly granted summary judgment on the claimed violations of Nevada’s Unfair Claims Practices Act, which are unsupported by any evidence and are wholly meritless.

ZALMA OPINION

In its brief, concise, and easy to understand opinion the Ninth Circuit established that it does not pay to lie to an insurance company from whom you are seeking insurance. The fact that the decedent made multiple, material, misrepresentations on the application the insurer had every right to rescind. It was contumacious for Howard to sue for bad faith and appeal when he even admitted that Mark lied on the application and had no evidence to counter the testimony of the underwriter, Helberg, that established the insurer would have refused the insurance if it was told the truth. Helberg, and the insurer, were entitled to rely on the good faith of Mark when he applied and was not required to investigate the application to disprove the representations before issuing the policy.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining Insurance Fraud by “Staged” Losses

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The Staged Loss

See the full video at https://youtu.be/qf-ZGRwQ8sc

Some losses are fictions created for the sole purpose of presenting a claim like those engaged in by convicted attorneys in my book, Insurance Fraud, Volume I. The number of variations on types of staged losses are limited only by the imagination of the insurance criminals. Some of the variations follow:

AUTOS

Staged Theft.

A staged theft occurs when “the owner contracts with an intermediary to dispose of a vehicle. The owner ‘gives up’ the vehicle and then reports it to the insurer as stolen.” The person to whom the vehicle is given up will pass it to a salvor who breaks it up into its component parts and sells the parts (a “chop shop.”)

The staged theft is difficult to detect unless the perpetrator is sloppy, aggressive or forgets his prepared script as to the loss facts. For example, in United States of America v. Rocky Glen Beasley, No. 11-30228 (5th Cir. 10/27/2011) Rocky Glen Beasley was convicted by a jury of wire fraud and conspiracy to commit wire fraud. He was sentenced to one year and one day of imprisonment and a two-year term of supervised release.

Beasley’s convictions stem from the staged theft of his Ford F-150 pickup truck by Stephen Yates. According to the evidence adduced at trial, Beasley and Yates prearranged the staged theft of Beasley’s truck. Overwhelming evidence required the conviction to be affirmed,

A staged theft of an automobile performed to defraud an insurer is a crime and can be punished in federal and state courts. Rocky Glen Beasley was unfortunate enough to be tried and convicted in federal court where fraud convictions bear definite sentences.

Abandonment

The owner abandons a vehicle on a city street or in a parking lot, creating a morale hazard where the car will usually be stolen. The insured will report the vehicle stolen and attempt to collect from an insurer before the vehicle is recovered.

Dumping

“[T]he owner disposes of a vehicle by dumping it into a lake or other body of water.” Cars have even been found buried underground and some lakes have been found to have more than 50 cars underwater.

© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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No Good Deed Goes Unpunished

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Bad Faith Attempted Set Up Fails

Nya Yanitza Montanez appealed the district court’s grant of summary judgment for Liberty Mutual Fire Insurance Company on her bad faith claim. The son of Defendant’s insured caused an automobile accident involving two other cars and resulting in the death of Plaintiff’s daughter and the injury of four other individuals. Although Defendant made the entire policy limits available to the various claimants, Plaintiff rebuffed Defendant’s efforts to settle the case and instead proceeded with a lawsuit against Defendant’s insured. She then obtained the agreement of Defendant’s insured to a consent judgment in the amount of $8.25 million against the insured on the wrongful death claim made on behalf of her daughter.

Thereafter, Plaintiff filed a bad faith claim against Defendant, contending that because Defendant had failed to timely settle the wrongful death claim, she is entitled to the damages awarded in the consent judgment, an amount that greatly exceeds the insured’s policy limits.

In Nya Yanitza Montanez, as Personal Representative of the Estate of Yanely Gonzalez, deceased v. Liberty Mutual Fire Insurance Company, No. 19-13941, United States Court Of Appeals For The Eleventh Circuit (August 28, 2020) sought reversal of the summary judgment.

BACKGROUND

Jason Brown was driving his father’s vehicle in West Palm Beach, Florida, when he violently rear-ended Plaintiff’s vehicle and spun into another car. The collisions injured five individuals riding in the two vehicles. Plaintiff was injured while driving her two minor children, three-month-old Yanely Gonzalez and eight-year-old Eduardo Gonzalez, Jr. Sadly, Yanely was killed. In short, the accident resulted in five victims, each with claims against Jason (the driver) and his father (the owner of the vehicle).

Jason’s father, Douglas Brown, had a Liberty Mutual automobile insurance policy, which provided liability limits of $250,000 per person and $500,000 per accident. Douglas Brown reported his son’s accident to Defendant informing them that a child had been killed.

Defendant’s coverage investigation was thorough, prompt and concluded in favor of coverage.

The PIP insurer advised the adjuster that Plaintiff had retained Toral, Garcia & Franz as counsel. That same day, the adjuster telephoned Mr. Toral’s office.  Plaintiff’s counsel did not return the adjuster’s calls for more than a month.  The PIP adjuster similarly informed Defendant that Eduardo Gonzalez Jr. had also sustained “serious injuries,” including a head injury, after being ejected from the vehicle. Despite not receiving any communication from Plaintiff and not receiving any medical records or bills for any of the four claimants undergoing medical treatment, Defendant sent a letter to counsel for all claimants on March 4, 2010, stating that it was making its full $250,000 per-person and $500,000 per-accident policy limits available to settle the claims arising from the accident. Defendant stated that it would be arranging a settlement conference to assist all claimants in reaching an apportioned settlement.

Finally, after a few months, Lewis Jack called the claims adjuster and stated that he and Toral represented the plaintiff. Nearly four weeks later Plaintiff’s counsel sent its first correspondence to Defendant regarding Plaintiff’s claims. In that letter, Plaintiff preemptively rejected any offer by Defendant to settle Plaintiff’s wrongful death claim, stating that Defendant should have immediately tendered the $250,000 policy limit instead of attempting to resolve the claims of all the victims at a settlement conference. Notably, Plaintiff never made a demand to settle the wrongful death claim for the $250,000 per-person policy limits. As for the personal injury claims, Plaintiff’s letter requested that Liberty Mutual tender $125,000 for Plaintiff’s personal injury claims and $125,000 for Eduardo Gonzalez Jr.’s personal injury claims.

Defendant responded by promptly accepting Plaintiff’s offer and issued two $125,000 checks to settle Plaintiff’s and Eduardo Gonzalez Jr.’s personal injury claims. Defendant also offered the remaining available policy limit of $250,000 to settle the wrongful death claim brought on behalf of the infant killed in the accident, later forwarding a check to Plaintiff’s counsel.

Rather than settle, Plaintiff and Eduardo Gonzalez Jr. filed suit against the insureds, raising their personal injury claims and the wrongful death claim, among others. All claims except the wrongful death claim were eventually settled with the cooperation of the insured,  a $8.25 million consent judgment against the insured on the wrongful death claim.

DISCUSSION

Florida law provides that an insurer owes a duty of good faith to its insured. The insurer’s duty of good faith obligates the insurer to advise the insured of settlement opportunities, to advise as to the probable outcome of the litigation, to warn of the possibility of an excess judgment, and to advise the insured of any steps he might take to avoid the same. The duty also requires the insurer to investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so. When an insurer breaches its duty a cause of action for bad faith may be brought against the insurer.

No Reasonable Jury Could Find Defendant Acted in Bad Faith

The Eleventh Circuit concluded that upon notification of the accident, Defendant immediately opened a claim file and began an investigation. Through its own research, Defendant quickly determined that there were multiple victims not disclosed by the insured and that there were five total claimants. Defendant diligently investigated the claims arising from the occupants of the second vehicle, obtaining updates regarding the extent of their injury and their medical care. Defendant worked to do the same for Plaintiff and was able to obtain limited information from Plaintiff’s Personal Injury Protection carrier. Defendant identified Plaintiff’s counsel, initiated contact, and repeatedly attempted to engage Plaintiff’s counsel, all to no avail. Consequently, Defendant remained in the dark regarding Plaintiff’s counsel’s assessment of the personal injury claims of Plaintiff and Eduardo Gonzalez Jr. Given counsel’s radio silence, Defendant also lacked any knowledge whether Plaintiff would be willing to settle the wrongful death claim for $250,000.

Upon completion of the coverage investigation, and within 32 days of being notified of the accident, Defendant offered the full policy limits in furtherance of a global settlement of the multiple claims. Despite the fact that Plaintiff never even attempted to communicate with Defendant—much less make a settlement demand—before Defendant made the full policy limits available.

Moreover, given the lack of communication from Plaintiff, the Eleventh Circuit could see no evidence in the record suggesting that Defendant knew it was exposing its insured to excess liability by failing to immediately tender the full policy limits for the wrongful death claim and by proposing a global settlement conference 32 days after first learning of the accident and before receiving any of the medical records that it repeatedly sought during that period.

Viewing the facts in the light most favorable to Plaintiff, and considering the totality of the circumstances, the Eleventh Circuit could find no evidence indicating Defendant unreasonably exposed its insured to a judgment in excess of his policy limits. Accordingly, no reasonable jury could find that Defendant acted in bad faith.

ZALMA OPINION

When an insurer is faced with multiple claims of injuries from a single accident and policy limits inadequate to compensate all of the plaintiffs it is faced with an important and difficult situation for itself and its insured. Liberty did what it needed to do: it conducted a thorough investigation quickly determining the inadequacy of the available limits offered it to all of the injured and sought alternative dispute resolution to work out distribution of the available funds. Rather than work fairly the plaintiff and her lawyers entered into an agreement with the insured to agree to a multi-million dollar judgment collectable from the bad faith case. Since there was no bad faith and the rather, exceptionally fast, thorough investigation and offer of full policy limits, that good deed was punished with a bad faith suit that Liberty was required to defend by summary judgment and defeat an appeal to the Eleventh Circuit. The other injured persons were left with only the personal assets of Liberty’s insured and their PIP or UIM coverage available. In some states, leaving an insured with no available insurance could be considered bad faith but was not an issue in this case.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining the Preparation Necessary for a Statement or an Examination Under Oath

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The Six Key Questions Whose Answers are Needed to Complete Every Statement or EUO

See the full video at https://youtu.be/8YSmZL8PZKI

Every interview is directed toward determining the answer to six questions:

  • Who?
  • What?
  • When?
  • Where?
  • Why?
  • How?

When these key questions are answered, the professional will know all that is necessary to decide to agree to or decline to pay a claim. The EUO can only be a success after all of the six questions are answered fully.

The questions are universal. They are the outline for every EUO. The information needed to make any decision in any EUO situation rests on the answers to the six questions.

No interviewer who is assigned to take an EUO should think his or her work is complete until the subject of the EUO has answered all six questions in detail with follow-up questions called for by each answer.

There is no better way to ensure the quality of the investigative package than with clear and detailed interviews. The organizations whose professionals are good interviewers will save a great deal of money, as well as time and effort. No professional can call him- or herself a professional interviewer until he or she has mastered this most productive of all investigative techniques — obtaining complete answers to the “who, what, where, when, why, and how” questions.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Expert Testimony Needed to Prove Insurance Agent’s Duty of Care

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Summary Judgment for Agent Because Plaintiff Had No Expert Testimony Proving Breach of Fiduciary Duty

While Omar Alabassi, was covered by an insurance policy obtained through T.I.B. Insurance Brokers (“TIB”), he was involved in a hit-and-run collision with another driver who fled the scene. Alabassi brought a negligence claim against TIB, alleging that TIB failed to meet its standard of care in (1) providing him with adequate insurance coverage and (2) preparing and submitting his insurance application. The district court granted summary judgment in favor of TIB because Alabassi failed to present expert testimony establishing that TIB breached its duty of care. In Omar Alabassi v. T.I.B. Insurance Brokers, Inc., No. 19-1183, United States Court Of Appeals For The Tenth Circuit (September 17, 2020) the Tenth Circuit was asked to rule an expert was not necessary.

FACTS

At the time of the accident, Alabassi owned his own limousine service but was driving his personal vehicle to pick up a customer at Denver International Airport. Before the accident, TIB sold Alabassi a commercial auto insurance policy issued by Columbia Insurance that covered both Alabassi and his limousine company. TIB advised Alabassi about which insurance policy to purchase and then helped Alabassi to prepare and submit his insurance application.

The insurance application contained a Colorado Coverage Selection Form, which allows the insured to choose the amount of uninsured motorist coverage that will be covered by his policy.  Alabassi selected the minimum coverage required by Colorado law but he also checked a box for $50,000 single limit coverage. Alabassi asserts that these two options conflict with each other.

Following the accident, Alabassi claimed that he suffered over $86,000 in medical expenses but Columbia Insurance offered him only $55,000. Alabassi alleged in his complaint that TIB was negligent in (1) providing him with adequate insurance coverage and (2) preparing and submitting his insurance application.

At trial, TIB moved for summary judgment on the ground that Alabassi failed to offer expert testimony establishing essential elements of his negligence claim. The district court granted summary judgment for TIB, agreeing that expert testimony was required to prove Alabassi’s claim that TIB had breached its duty of care.

ANALYSIS

To succeed on a negligence claim a plaintiff must show that the defendant breached a duty of care owed to the plaintiff and thereby caused the plaintiff’s damages. When a claim of negligence is based on an allegation that a professional was negligent, the plaintiff must show that the professional’s conduct fell below the standard of care associated with that profession.  For those practicing a profession involving specialized knowledge or skill, reasonable care requires the actor to possess a standard minimum of special knowledge and ability consistent with members of the profession in good standing. In such professional negligence cases, expert testimony is ordinarily necessary to help the factfinder determine the applicable standard of care because in most cases such standards are not within the purview of ordinary persons.

A defendant’s standard of care must be established by expert testimony when the applicable standard is outside the common knowledge and experience of ordinary persons. The standard of care in Alabassi’s suit was based on TIB’s determination of the proper insurance for Alabassi—a determination requiring knowledge of terms and practices specific to the insurance industry. For instance, Alabassi’s complaint alleged that TIB failed to meet its standard of care in providing Alabassi with adequate insurance for the following reasons:

  1. TIB failed to offer uninsured motorist limits equal to the bodily injury limits included in Alabassi’s policy.
  2. TIB failed to provide proper disclosure and guidance by failing to advise, confer, and evaluate plaintiff’s needs; and
  3. TIB failed to procure insurance that would cover any rented, borrowed, or temporary prudent insurance broker would determine the proper policy for a client nor whether TIB’s conduct was consistent with those practices.

Consequently, the district court did not err when it decided that expert testimony was necessary to establish whether TIB failed to meet its duty of care in providing Alabassi with adequate insurance coverage. In response, Alabassi appears to argue that expert testimony is never needed to prove that an insurer breached its duty of care because insurers have a duty to act with only “reasonable care” toward their insureds.

Expert testimony was necessary to prove Alabassi’s claim that TIB failed to use reasonable care in preparing and submitting Alabassi’s insurance application. Alabassi contended that expert testimony was not needed because submitting an application with inconsistent answers is an error that does not require specialized skill or knowledge to comprehend. His argument failed, however, because the coverage selection form at issue contains terms specific to the insurance industry that are outside the knowledge of ordinary persons.

Because Alabassi’s allegations that TIB was negligent were based on an understanding of terms and practices outside the common knowledge and experience of ordinary persons. Therefore, the USCA concluded that the district court did not err by deciding that expert testimony was required and affirmed the trial court.

ZALMA OPINION

As a person who testifies occasionally as an expert witness concerning insurance claims and claims handling that is outside the experience of ordinary persons, the decision of the Tenth Circuit makes reasonable sense. To try to hold an insurance agent liable for the failure to advise about the proper limits to acquire from an insurer and which type of limits to acquire, it should always be necessary to call an expert witness to explain the custom and practice of insurance agents in the state and explain why, or why not, the agent breached the duty of care to the damage of the insured.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Primer on Rescission

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The Insurance Advocate Cover Story

Primer: Rescission of Insurance

The article starts out as follows:

An insurance policy is nothing more than a contract. It is a special type of contract because – by law – it contains an implied covenant of good faith and fair dealing. What that means is that neither party to the contract must do nothing to prevent the other from obtaining the benefits of the contract.

When a prospective insured violates the covenant of good faith and fair dealing by misrepresenting or concealing a material fact that deceives an insurer to take on a risk that would not have been taken had the truth been known the law allows the insurer – upon a presentation of sufficient admissible evidence – to rescind the policy and treat it as if it never came into existence.

Developing the evidence is not easy. It requires the effort of an insurance professional to collect the evidence – whether documentary or by oral testimony – to convince a judge or jury that the insurer acted properly, that the insured deceived the insurer and that the court should order that the policy was void ab initio (from its inception).

What an Insurer Must Prove to Rescind a Policy of Insurance

In many states, following ancient British precedent that predated the formation of the United States, an insurer that discovers a factual basis establishing that an insured obtained a policy by deceiving the insurer about the risk applied for by the insured the insurer may declare the policy void from its inception and treat it as if it never existed. In simple language, if the insurer discovers, either before or after a loss, that the policy was acquired as a result of a misrepresentation or concealment of a material fact, it may rescind the policy. In most states the ancient Marine Rule (first stated in 1766 in the British House of Lords in a case called Carrter v. Boehn) is followed and rescission is available regardless of whether the insured fraudulently or innocently misrepresented or concealed a material fact.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining The Role of the Insurer’s Attorney After Ending the EUO

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The Need for the Advice of the Coverage Lawyer Who Takes the EUO

See the full video at https://youtu.be/6LSCmmwDhtM

A well-executed EUO is not only one of the insurer’s most effective weapons against fraud. It can also be highly instructive for the adjuster. If an attorney is responsible for performing the examination, the adjuster must make clear that it is his or her obligation to provide sufficient factual information supported by legal authority for the insurer to make a decision on the claim.

The adjuster should also, if possible, attend the EUO to help the attorney and to study questioning techniques. Attorneys, whose job it is to ask questions, will usually do a more thorough job of EUO than will insurance claims staff.

After the EUO, the attorney will usually suggest additional investigation and can also give the adjuster legal advice as to the insurer’s rights, duties, and obligations.

Counsel’s report should include all the facts necessary to support any decision, whether learned in the course of the investigation or from testimony at the EUO. The adjuster must analyze the facts in relation to statutory and case law; only then will he or she be in a position to make a fully informed decision on the claim. More often than not, the examination will cause the insurer’s attorney to recommend payment of full indemnity to the insured.

If the attorney advises the insurer that indemnity should not be paid, the adjuster should carefully analyze the recommendations to independently verify that there are sufficient facts, supported by policy language and legal precedent, to support the conclusion. It is the claims person who makes the decision, not the attorney. Decisions made by insurers must sometimes be based on reasons other than the law.

Insurers should use the EUO tool judiciously. It should only be used in cases where the insured is unable to prove his or her loss, when the insured’s proof is inconsistent or incomplete, or when the insurer has a reasonable belief that a fraud is being attempted.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Lie to Your Insurer in Louisiana and You Lose Everything

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In Louisiana an Intentional Misrepresentation on an Application Supports Rescission of Policy

Insurance is a business of utmost good faith. Both the insured and the insurer owe to the other an obligation to do nothing that will deprive the other of the benefits of the contract. In Geovera Specialty Insurance Company v. Michael Odoms, No. 19-30971, United States Court of Appeals for the Fifth Circuit (November 5, 2020) Michael Odoms lied about his wife’s previous bankruptcy and, as a result, his insurer rescinded the policy after a fire one month after issuance of the policy.

FACTS

Odoms owned several rental properties, including one he purchased in 2018 in Marrero, Louisiana. When he applied to GeoVera Specialty Insurance Company for insurance coverage on that house, Odoms represented that neither he nor his spouse Ericka Odoms had “been involved in a . . . bankruptcy during the [previous] 5 years.”

Odoms bought a house located at 6565 Benedict Drive in Marrero, Louisiana (the “Benedict house”). The same day, Odoms applied for tenant-occupied homeowners’ insurance through Susan Angelica Insurance Agency (“SAIA”).  After GeoVera filed an action seeking declaratory relief and rescission of the policy, the district court entered summary judgment in favor of GeoVera based on its finding that Odoms knowingly misrepresented a material fact on the insurance application in failing to disclose his wife’s bankruptcy. The district court awarded declaratory relief and allowed GeoVera to rescind Odoms’s policy.

After Odoms signed and submitted the insurance application for the Benedict house, GeoVera promptly issued the policy. Exactly one month later, on July 21, 2018, the Benedict house burned down. Odoms then filed an insurance claim with GeoVera, which required him to testify via two examinations under oath (“EUO”). During an EUO he admitted that various applications contained the same bankruptcy-related question as the Benedict house application and were all answered in the negative. Odoms testified that he was aware of Ericka’s bankruptcy when he applied for those insurance policies. Odoms conceded that if Ericka “was involved in a bankruptcy during 2010 to 2015,” that would have made his responses to the applications’ bankruptcy question inaccurate.

During her EUO, Erica testified that Odoms knew about her bankruptcy. Ericka further stated that Odoms’s answer to the bankruptcy question was inaccurate.

GeoVera informed Odoms that it had determined that Odoms had misrepresented Ericka’s bankruptcy status on his insurance application. GeoVera also concluded that Odoms had falsely represented that the Benedict house was connected to public utilities. (The house apparently was not serviced by gas or running water at the time.)

DISCUSSION

Under Louisiana law, that does not follow the Marine Rule that allows rescission for an innocent misrepresentation, to rescind an insurance policy on misrepresentation grounds, the insurer must prove that:

(1)           the insured made a false statement;

(2)           the false statement was material; and

(3)           it was made with intent to deceive. [Willis v. Safeway Ins. Co. of La., 42,665 (La. App. 2 Cir. 10/24/07), 968 So. 2d 346, 350].

Finding that GeoVera sufficiently proved these three elements as to Odoms’s answer to the policy application’s bankruptcy question, the district court entered summary judgment in favor of GeoVera.

Odoms’s own testimony, confirmed by Ericka’s EUO testimony, demonstrates that, when he completed the policy application in 2018, Odoms knew that Ericka’s Chapter 13 bankruptcy case remained pending until the bankruptcy court discharged her debts in December 2015. There was no genuine dispute of material fact that Odoms misrepresented the existence of Ericka’s bankruptcy to GeoVera.

Odoms contends that, assuming his response to the bankruptcy question was false, he nonetheless did not intentionally deceive GeoVera about Ericka’s bankruptcy status.

Intent to deceive must be determined from surrounding circumstances indicating the insured’s knowledge of the falsity of the representations made in the application and his recognition of the materiality of his misrepresentations. Such circumstances exist here. The same record that substantiates the falsity of Odoms’s misrepresentation about Ericka’s bankruptcy demonstrates the insured’s knowledge of the falsity because Odoms’s and Ericka’s testimony make clear that Odoms knew that Ericka’s bankruptcy continued until late 2015 and that his answer to the application’s bankruptcy question was therefore false.

Further, the record showed circumstances which create a reasonable assumption that Odoms recognized the materiality of his misrepresentation. Before completing the application for coverage of the Benedict house, Odoms submitted six separate policy applications to GeoVera, for other properties. On each, Odoms made the same representation that neither he nor his spouse had been involved in a bankruptcy in the preceding five years. The district court found that this fact demonstrated his intent to deceive GeoVera.

Odoms’s affidavit seeking to state a genuine issue of fact iconflicted with his prior testimony where he admitted that his answer to the bankruptcy question was inaccurate. He cannot create a genuine issue of fact sufficient to survive summary judgment simply by contradicting his or her own previous sworn testimony without explaining the contradiction or attempting to resolve the disparity.

The Fifth Circuit concluded that the circumstances create a reasonable assumption that Odoms recognized the materiality of his answer. Odoms , grasping at straws, contended that GeoVera did not prove that it would have declined the policy application had it known about Ericka’s bankruptcy. However, in a sworn declaration, Joseph Belton II, GeoVera’s claim manager, explained GeoVera’s underwriting rules and that, GeoVera would have denied Odoms’s application if he had answered “yes” to the bankruptcy question. In the absence of evidence to the contrary, there is no genuine dispute that, based on Belton’s declaration, Odoms’s misrepresentation was material.

GeoVera demonstrated that Odoms knowingly misrepresented Ericka’s bankruptcy status and that his misrepresentation was material.

ZALMA OPINION

GeoVera, by completing a thorough investigation, including the examinations under oath of both insureds, established that the policy was acquired based upon a misrepresentation of a material fact – denying the existence of a bankruptcy in the five years before the date of the application. The fact that the fire – to a house without gas or electricity – was an obvious reason for an insurer to be concerned about a potential arson-for-profit that resulted in the EUOs of the insureds. Because GeoVera was able to prove the material misrepresentations there was no need to deal with the reason for the fire only a month after the issuance of the policy.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining the Consideration for Early Settlement of a Construction Defect Suit

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Considerations for Early Settlement

See the full video at https://youtu.be/uj04AxGJ41U

It is an axiom followed by almost every attorney that the sooner a suit is settled the less it will cost the defendants. Invariably as suits drag on, as discovery is received and analyzed, the positions of the parties become less amenable to compromise. If defendants and their counsel believe that liability against the defendant is reasonably clear, they should work to bring the parties together to attempt an early settlement. Some of the reasons for the early settlement are discussed below.

Adverse Publicity

The reputation of a builder, developer, engineer, or architect can be destroyed by adverse publicity. Wide dissemination of a single charge of negligent construction can cause the person charged to lose business. Early settlement, if appropriate, can eliminate the concern for the damages caused by adverse publicity. Preferably, settlement should be reached before suit is filed and appropriate language in the settlement agreement should make the settlement confidential. The confidentiality agreement should include an agreement to pay liquidated damages (a damage amount set in the settlement agreement) to the other party if breached.

Court Imposed Terms or Sanctions

Bad Facts and Serious Injuries

Legal Issues

Multiple Claims

If the loss is such that paying all claimants what they want would exhaust the limits of the insured’s policy, the insurer, before effecting any settlement, should do the following:

  • advise the insured of the limits available and that the claims may exceed these limits;
  • advise the insured that he or she has the right to obtain, at his or her expense, independent counsel to advise of the exposure the accident has caused to his or her assets; and
  • advise each claimant, and their counsel, of the limits available.

© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Ninth Circuit Concludes Breach of Contract Exclusion is Enforceable

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No Coverage for Defense of Indemnity of Suit Arising Out of Liability Under any Contract or Any Breach of Contract

Courts dealing with insurance issues often issue opinions that are lengthy and convoluted before getting to the point. In Office Depot, Inc. v.  AIG Specialty Insurance Company, FKA American International Specialty Lines Insurance Company, No. 19-55819, United States Court Of Appeals For The Ninth Circuit (November 13, 2020) the Ninth Circuit Court of Appeal changed the process by issuing a clear, concise and easy to understand opinion.

FACTS

The district court held that AIG did not have a duty to defend or indemnify Office Depot in a 2011 California False Claims Act lawsuit. The court reasoned that the claims alleged in the underlying lawsuit (the“Sherwin lawsuit”) do not fall within the scope of the relevant insuring agreement and, even if they did, multiple policy exclusions precluded coverage.

THE CONTRACT EXCLUSION

The “Contract Exclusion” of the insurance agreement precludes coverage of any claim “alleging, arising out of or resulting, directly or indirectly, from any liability or obligation under any contract or agreement or out of any breach of contract.” This exclusion does not apply to liabilities or obligations “an insured would have in the absence of such contract or agreement.”

Under California law, the term “arising out of” requires “only a minimal causal connection or incidental relationship.” Travelers Prop. Cas. Co. v. Actavis, Inc., 225 Cal. Rptr. 3d 5, 21 (Cal. Ct. App. 2017) This broad interpretation of “arising out of” applies to both coverage provisions and exclusions. These clauses also exclude coverage of tort claims which could not exist without the relevant underlying contracts.

Here, the allegations of the Sherwin lawsuit, directly, and indirectly, arose out of Office Depot’s contractual obligations under the Master Agreements. This suit is based primarily on two contracts between Office Depot and Los Angeles County. In Office Depot’s own words “[t]he heart of this suit is the contention that Office Depot overcharged California government entities under the terms of particular contracts.”

Office Depot’s in-house counsel testified that “the claims are related to [Office Depot’s] performance or nonperformance under [Office Depot’s] government contracts . . . this is a complaint for violation of the False Claims Act, but the claims and the allegations that he made were related to our performance or nonperformance of our government contracts.”

The Ninth Circuit, in clear and easy to understand language concluded, noting the uncomfortable breadth of such contract exclusions, that the allegations in the Sherwin lawsuit are premised directly or indirectly on Office Depot’s contractual obligations and therefore the lawsuit is precluded from coverage under the contract exclusion.

Since an insurer’s duty to indemnify arises when there is coverage of the claim determined in light of the facts the analysis of a contract exclusion, the Sherwin lawsuit is not covered under Office Depot’s policy with AIG. Therefore, AIG did not have a duty to indemnify Office Depot and the Ninth Circuit affirmed the district court. Because there was no duty to defend or indemnify Office Depot, the Ninth Circuit found no reason to consider the other exclusions raised by the insurer.

ZALMA OPINION

Insurance, by definition, provides coverage only for property damage or bodily injury resulting from a contingent or unknown event. Contract damages are excluded, as part of the insuring agreement and specific exclusions, since they do not cause property damage, bodily injury or the Personal Injury offenses, just contract damages. Contract damages, for breach, are a cost of doing business and simply – as the Ninth Circuit found – cannot, and should never, be insured.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

 

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Some Videos Available from Me on Rumble

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Rumble Insurance Videos

A Video Explaining the Statutes of Repose14m15s

Analyzing

A Video Explaining the Statutes of Repose

The Importance of Statutes of Repose Generally, in California and many other states, a lawsuit alleging a latent construction defect must be brought within three or four years (depending on the theory of recovery) after the plaintiff discovers, or should have discovered, the defect. The California Legislature capped the open-ended nature of this “discovery” rule when it enacted Code of Civil Procedure Section 337.15, a statute of repose that “established a further general rule that no action for latent construction defects may be commenced more than 10 years after ‘substantial completion’ of the construction project. This ‘absolute’ 10-year limitations period applies regardless of when the defect was discovered. A statute of repose for actions arising out of improvements to real property differs from a statute of limitations in that the repose period starts to run on the date of the substantial completion of the improvement, while the limitations period starts to run on the date of a plaintiff’s injury. The district’s claim was for damages not subject to the statute of repose and the trial court’s granting of the county’s motion was reversed since there were allegations that could be used to prove a cause of action in favor of the district. The San Diego opinion teaches that the nature of the right sued upon or the principal purpose of the action, rather than the form of action or the relief demanded, determines the applicable statute of limitations or whether a statute of repose applies. In the construction defect context, the opinion should remind those involved with improvements to real property that the mere fact that a damage claim involves, in some way, a construction project does not automatically mean the 10-year absolute statute of repose applies. Other causes of action, not related to construction defects, may allow a plaintiff to recover. The absolute statute of repose is not, therefore, absolute.

date: 6 hours

  views: 1

A Video About The Statutory Fair Claims Settlement Practices Statute and Regulations13m30s

Analyzing

A Video About The Statutory Fair Claims Settlement Practices Statute and Regulations

California’s Fair Claims Settlement Practices & Regulations California Insurance Code Section 790.03 (h) (a) In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant. (h) Knowingly committing or performing with such frequency as to indicate a general business practice any of the following unfair claims settlement practices: (1) Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue. (2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies. (3) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies. (4) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured. (5) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. (6) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds, when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered. (7) Attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application. (8) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured, his or her representative, agent, or broker. (9) Failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made. (10) Making known to insureds or claimants a practice of the insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration. (11) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information. (12) Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage. (13) Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement. (14) Directly advising a claimant not to obtain the services of an attorney. (15) Misleading a claimant as to the applicable statute of limitations. (16) Delaying the payment or provision of hospital, medical, or surgical benefits for services provided with respect to acquired immune deficiency syndrome or AIDS-related complex for more than 60 days after the insurer has received a claim for those benefits, where the delay in claim payment is for the purpose of investigating whether the condition preexisted the coverage. However, this 60-day period shall not include any time during which the insurer is awaiting a response for relevant medical information from a health care provider.

date: 2 days

  views: 0

A Video Explaining Ethics and the Public Insurance Adjuster17m32s

Analyzing

A Video Explaining Ethics and the Public Insurance Adjuster

The Public Adjusting Profession When insured’s are busy professionals they simply do not have the time or patience to deal with the details of a first party property claim. The public insurance adjuster exists to assist insureds in the presentation of a claim to the insurer. The public insurance adjuster is, in most states, licensed by the state insurance department. The insurer’s adjuster is often asked to deal with a public insurance adjuster. The contact between the public insurance adjuster and the insurer’s adjuster is often adversarial since the public insurance adjuster wishes to justify his or her contingency fee to the insured. Both should be working toward the same goal: the payment of proper and complete indemnity to the insured. Public Adjusters claim they are, mostly with good cause, professionals who are employed exclusively by a policyholder who has sustained an insured first party property loss. The public adjuster handles every detail of the claim, working closely with the insured to provide the most equitable and prompt settlement possible. A public adjuster should inspect the loss site immediately, analyze the damages, assemble claim support data, review the insured’s coverage, determine current replacement costs and exclusively serve the client, not the insurance company while working ethically with the insurer’s adjuster. The National Association of Public Insurance Adjusters (NAPIA) publishes a code of conduct which sets forth the ethical standards that all public insurance adjusters should follow. It provides: The following Rules of Professional Conduct and Ethics are applicable to all members of the NAPIA: The members shall conduct themselves in a spirit of fairness and justice to their clients, the Insurance Companies, and the public. Members shall refrain from improper solicitation. No misrepresentation of any kind shall be made to an assured or to the Insurance Companies. Commission rates shall be fair and equitable, and strictly in accordance with the prevailing custom in the locality, and must, where laws or regulations of insurance departments exist, comply fully with such laws or regulations. Members shall conduct themselves so as to command respect and confidence. They shall work in harmony with one another, with their clients, and the Insurance Companies’ representatives, so as to foster a cordial and harmonious relationship with all branches of the insurance business, and with the general public. Members must be fitted, by knowledge and experience, for the work they undertake. They must not endanger the interests of the public adjusting profession, or risk injustice to assureds or to the Insurance Companies, by attempting to handle losses or claims for which they are not qualified, and for which they cannot find competent technical assistance. Members shall not engage in the unauthorized practice of law. Members shall not acquire any interest in salvaged property or participate in any way, directly or indirectly, in the reconstruction, repair or restoration of damaged property, except with the knowledge, consent and permission of the assured. Members shall be cooperative and assist one another in every possible way. Members shall not disseminate or use any form of agreement, advertising, or any printed matter that is harmful to the profession of public adjusting, or which does not comply with the rules and regulations of the Insurance Department of the state in which such member is professionally engaged, or which might subject public adjusting and public adjusters to criticism or disrespect. An example of a public insurance adjuster and the lawyer who failed to follow the requirements set out by NAPIA. Both represented the same client, involved a claim that resulted from the 1994 Northridge, California earthquake. The earthquake caused billions of dollars in damages across Southern California. It drew lawyers and public adjusters seeking large fees like vultures flying over a dead antelope. As a result of the disaster, investigation by insurers was limited because of the extent of losses caused by the earthquake and the need to rapidly serve their needs. Many unnecessary and spurious suits were filed. Insurance fraud was rampant and insurers paid rather than fight because there was inadequate staff available to deal with fraud and governmental agencies threatened insurers with major fines if they did not pay quickly. © 2020 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

date: 5 days

  views: 1

A Video Explaining What Liability Insurance is and How to Acquire It14m43s

Analyzing

A Video Explaining What Liability Insurance is and How to Acquire It

What Is Liability Insurance? Insurance, by definition, is a contract where the insurer, for consideration (premium) agrees to indemnify another against a contingent or unknown risk of loss. It is used as a method to spread losses among many people who are insured with the same company. The insurer, by its policy, promises, in exchange for a premium, to pay to defend and indemnify the insured, in the event that a certain type of loss occurs within a specified period of time called the “policy period.” By spreading the risk of loss among many, each individual only pays a minuscule portion of the risk of loss insured against. Liability insurance is limited to insurance against the risk of losses that can be incurred by a person for damages done to the person or property of another by an accidental or fortuitous cause. In exchange for the promise to pay the premium charged, the insurance company agrees to provide the insured protection from various risks faced by an owner, developer, or builder of real property. The risks of loss taken by the insurer are listed on the policy. For each promise made by the insurer it charges a premium. The policy will provide coverage for the following: bodily injury and property damage to persons injured by the insured; medical payments regardless of fault; personal and advertising injury; (a coverage that insures against the insured’s risk of loss for multiple offenses like libel or slander, advertising injury, false imprisonment, etc.) and contractual liability. These are the principal coverages available in CGL policies. There are other coverages available to cover special needs of individual people, corporations, partnerships or joint ventures. If special needs exist for a particular construction project that faces risks not contemplated by a CGL, it is prudent to consult with a professional and major insurance brokerage that specializes in the industry involved in the case. You can find such brokers by conferring with others who specialize in similar projects, your state Department of Insurance, professional risk managers, or Chartered Property and Casualty Underwriters (CPCU), who act as insurance consultants. © 2020 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921 Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts Listen to the Podcast: Zalma on Insurance https://anchor.fm/dashboard/episodesZalma on Insurance 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/ https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! –

date: 6 days

  views: 0

A Video Explaining What Mold Inspections Cannot Do14m02s

Analyzing

A Video Explaining What Mold Inspections Cannot Do

Dealing with Mold Emergency Services When dealing with emergency services (loss-mitigation), restoration, construction, or mold containment, the vendors of such services should understand that the industries they serve are in a business to provide for safety to life and property and protection of human health. When mold is discovered during the evaluation or drying process, steps must be taken to protect the health of workers and occupants within the structure, as well as preserve the structure from further damage. There are no federal or state regulations for loss-mitigation, restoration, or mold remediation industries. Restoration vendors who wish to maintain a professional organization in which the public can place its trust, should institute an internal educational and certification program for all its employees. When retaining the services of a restoration vendor, make inquiries to confirm that it educates its employees continually. Restoration vendors should be able to show customers that they have developed an in-house training program on the use, storage, maintenance, and safety practices of all company owned or rented equipment and all testing procedures and supplies (i.e. chemicals), as well as on their quality control and assurance (QC&A) program. Restoration vendors should have their technicians and managers trained and certified on the Code of Federal Regulations (CFR) safety and health programs and certified with the Federal Insecticide, Fungicide and Rodenticide Act when required by law. Project managers, fire/water managers, and the company’s QC&A manager should receive Certified Restorer (CR) certification and Water Loss Specialists (WLS) certification. Whether estimating, evaluating, or drying losses that involve water, the remediator needs a complete understanding of how structures are built. It is essential to understand air-flow in structures, what water intrusion can do to a structure and its components, and how water flow and humidity works in the structure. In some states, the remediation provider may not be able to obtain payment for the services provided if they are not appropriately licensed. In Louisiana, for example, Tradewinds Environmental Restoration entered into a contract to provide mold remediation services without a license. This action was specifically prohibited by laws intended to protect the public interest, and the contract was therefore ruled absolutely null. Tradewinds was only allowed to recover its “actual cost of materials, services and labor,” but was “not entitled to an allowance for profit and overhead.” Although this is a harsh result, the purpose of the licensing statutes is to protect the public. In some states the unlicensed contractor is not even allowed to collect for the reasonable value of services.

date: 1 week

  views: 0

A Video Explaining Insurance Policy Interpretation and Construction19m35s

Analyzing

A Video Explaining Insurance Policy Interpretation and Construction

A site for the insurance claims professional and anyone who wants to know soThe first thing every person representing an insurer with regard to a potential fraudulent claim must understand that the insurance policy is the basis for every insurance fraud investigation. Without an insurance policy there can be no insurance fraud. The insurance policy contract describes the rights and obligations of the parties to the policy of insurance. It contains, in clear and unambiguous language, weapons to defeat a fraudulent claim. The construction of insurance contracts should be, but often is not, governed by the same rules of construction applicable to all contracts. The courts claim that when they construe an insurance contract it gives the terms of the policy their ordinary and generally accepted meaning. The primary goal of the court is to give effect to the written expression of the intent of the parties to the insurance policy. Some rules that must be followed when construing or interpreting an insurance contract include: If the terms of the policy are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor (the insurer) believed at the time of making it, that the promisee (the insured) understood it. If the language of a policy or contract is subject to two or more reasonable interpretations, it is probably ambiguous. Where an ambiguity involves an exclusionary provision of an insurance policy, courts adopt the construction urged by the insured as long as the construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the intent of the insured and insurer. In reaching the conclusion that a policy exclusion was ambiguous, and the policy, therefore, provided coverage, the courts should follow the settled rule that any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer and that if semantically permissible, the contract will be given such construction as will fairly achieve its object of providing indemnity for the loss to which the insurance relates. It is a maxim of law that a contract should be construed against its drafter. The maxim is sometimes referred to as the contra preferendum Provisions excluding coverage are strictly construed against the insurer. Ambiguities in insurance applications will usually be construed against the insurer to avoid denial of coverage because of alleged misrepresentations. Where the language of a contract is clear and unambiguous, it must be interpreted solely by reference to the four corners of that document. When a policy is interpreted, the provisions of an endorsement controls the interpretation over the body or declarations of a policy when the two are in conflict. The basic rules of construction or interpretation of an insurance contract are all subject to the limitation that a court cannot and should not do violence to the plain terms of a contract by artificially creating ambiguity where none exists. In situations in which reasonable interpretation favors the insurer, and any other would be strained and tenuous, no compulsion exists to torture or twist the language of the contract. An insurance company has the right to limit the coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected. © 2020 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921 Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts Listen to the Podcast: Zalma on Insurance https://anchor.fm/dashboard/episodesZalma on Insurance 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/ https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! –

date: 1 week

  views: 11

Just for Fun - A "Heads I Win, Tails You Lose" Story17m17s

Analyzing

Just for Fun – A “Heads I Win, Tails You Lose” Story

The following is a story from my book, Heads I Win, Tails You Lose, a collection of stories from my experience as an insurance coverage lawyer. The book is available from amazon.com as both a paperback and as a Kindle book. Names and places changed to protect the guilty. THE CREATION OF A LIFE OF CRIME Insurers, if they wish to keep frauds like that described here must stop making the crime easy. Underwriters must understand that insured’s do not always treat their insurers with utmost good faith. Risks must be looked at with skepticism. If fraud is to be defeated insurers must make the crime more of a challenge. It is too easy. Honest insureds are tempted to commit fraud because it is too easy.

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Barry Zalma’s Insurance Claims Library

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Everything Needed by the Insurance Claims Professional from Barry Zalma

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.

The Law of Unintended Consequences and the Tort of Bad Faith

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

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

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

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

Available as a paperback  

Available as a Kindle book

Insurance Fraud – Volume I & Volume II

In Two Volumes

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

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

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

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

The Compact Book of Adjusting Property Insurance Claims – Second Edition

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

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

Available as a Kindle book.

Available as a paperback.

The Compact Book on Adjusting Liability Claims, Second Edition

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

 

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A Video Explaining the Statutes of Repose

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Statutes of Repose

See the full video at https://youtu.be/G0OYCeMAaVw

Generally, in California and many other states, a lawsuit alleging a latent construction defect must be brought within three or four years (depending on the theory of recovery) after the plaintiff discovers, or should have discovered, the defect. The California Legislature capped the open-ended nature of this “discovery” rule when it enacted Code of Civil Procedure Section 337.15, a statute of repose that “established a further general rule that no action for latent construction defects may be commenced more than 10 years after ‘substantial completion’ of the construction project. This ‘absolute’ 10-year limitations period applies regardless of when the defect was discovered.

A statute of repose for actions arising out of improvements to real property differs from a statute of limitations in that the repose period starts to run on the date of the substantial completion of the improvement, while the limitations period starts to run on the date of a plaintiff’s injury.

The district’s claim was for damages not subject to the statute of repose and the trial court’s granting of the county’s motion was reversed since there were allegations that could be used to prove a cause of action in favor of the district. The San Diego opinion teaches that the nature of the right sued upon or the principal purpose of the action, rather than the form of action or the relief demanded, determines the applicable statute of limitations or whether a statute of repose applies. In the construction defect context, the opinion should remind those involved with improvements to real property that the mere fact that a damage claim involves, in some way, a construction project does not automatically mean the 10-year absolute statute of repose applies. Other causes of action, not related to construction defects, may allow a plaintiff to recover. The absolute statute of repose is not, therefore, absolute.

 


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Assert Rights Promptly or Lose

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Insurer Reopening Investigation After Denial Subject to Reservation of Rights is Effective

It is common practice for an insurer to deal fairly and in good faith with its insured. It is not required, however, for an insurer to give up its rights under the policy of insurance because an insured asked it to reconsider a partial denial of a claim. In Write Start Early Christian Education Center, LLC v. National Fire & Marine Insurance, Case No. 20-3456, United States Court Of Appeals For The Sixth Circuit (November 12, 2020) Write Start Early Christian Education Center sued National Fire and Marine Insurance to obtain coverage after a break-in caused damage to the Center. National Fire moved to dismiss the lawsuit as because the suit was filed more than two years after the loss and was, therefore, time barred.

FACTS

National Fire provides Write Start with commercial property insurance. The policy covers damage from various causes of loss subject to several conditions and exclusions. One condition is a contractual period of limitations. If Write Start disputes a coverage decision, it must sue National Fire within two years after the damage occurs.

In May 2016, Write Start suffered property damage from a break-in. It filed a claim with National Fire. On July 21, National Fire largely denied all but a small portion of the claim.

In March 2018, two months before the contractual limitations period ended, Write Start asked National Fire to reopen the claim. The insurance company agreed to examine any new evidence of damage. But it “continue[d] to stand by” its partial denial of coverage and emphasized that it maintained a “complete reservation of rights,” “without waiver of all of [its] rights and defenses under the policy,” “including the contractual period of limitations.” Write Start offered a new repair estimate.

In June 2018, National Fire responded that it had examined the repair estimate and re-inspected the property but found no reason to change its original decision. It also requested documentation required under the policy to support Write Start’s request for reconsideration. The letter again noted that National Fire reserved all contractual rights and could waive them only “expressly and specifically” in writing.

Write Start reaffirmed National Fire’s original claim decision, noting that National Fire’s three-month-old request for supporting documentation had gone unanswered and that the policy required that documentation within 60 days. Almost three years after the break-in, Write Start sued National Fire for breach of contract in state court. National Fire filed a motion to dismiss the case for failure to state a claim, invoking the contract’s time bar. Between March and October after National Fire produced the letters the district court dismissed the complaint as time barred and denied leave to amend on futility grounds.

ANALYSIS

Ohio, the state where the loss occurred, enforces reasonable contractual limitations periods. A two-year limitations period counts is reasonable.

The complaint admits that it stems from a May 11, 2016 incident and that Write Start filed its lawsuit on April 12, 2019. National Fire’s motion to dismiss legitimately incorporated the insurance policy and its two-year limitations period. The policy was referred to in the complaint and was indeed the premise of Write Start’s lawsuit. The complaint did not plead any theories or facts indicating the limitations period did not apply. The district court, therefore, properly dismissed the case on time-bar grounds.

A district court may deny leave to amend a complaint where amendment would be futile and an amended complaint that would not survive a motion to dismiss counts as futile.

The key difference between the original complaint and the amended complaint is Write Start’s new allegation that National Fire waived the limitations period through its correspondence with Write Start. But the new allegations were no better than the old ones.

Under Ohio law, an insurance company may waive a contractual limitations clause by recognizing liability or holding out a reasonable hope of adjustment, such that the insured delays filing a lawsuit. To decide whether an insurance company has done so, the court looks at its “acts” and “declarations.” Mere negotiation or discussion concerning the liability of the company does not suffice. The same is true for investigating a claim or reopening an investigation. Even a partial recognition of liability does not waive the limitations period for the disputed portion of the damage, at least where the insurer clearly states the extent of the liability and refers to the contractual limitations clause.

The letters between Write Start and National Fire, incorporated into the amended complaint by reference, render Write Start’s waiver allegations implausible. All they show is that, when Write Start asked National Fire to reopen investigation to consider new evidence, National Fire agreed while reserving its rights including the right to assert the time bar. The Sixth Circuit affirmed.

ZALMA OPINION

The reason for time bars in insurance policies is to protect the insurer and the courts from dealing with stale claims where the witnesses memories are weakened if not destroyed and evidence is lost. Write Start had two years to sue National Fire. They took three and they were shut down, properly, by the District Court for the delay could not be honored and the claims of waiver were defeated by admissible evidence that National Fire refused to waive anything and even went so far as to advise Write Start and its counsel of the limitation period and that it refused to waive any of its rights.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining Some Grounds for the Tort of Bad Faith

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Grounds for Finding Bad Faith

When an insured asks a question of his or her insurer an answer is expected. An insurer should respond to all inquiries promptly, and in no event later than 15 days. If an insured submits a proof of loss to which the insurer has agreed and asks “when can I expect to be paid?” the insurer should respond with specificity, immediately. Most policies and state regulations require payment within 30 calendar days of agreement to the proof of loss. If the question is ignored and payment is not made, after the insurer agreed to the proof of loss, the insurer is breaching the contract and if without good cause, the covenant of good faith and fair dealing. Often, bad faith is merely the difference between courtesy and lack of courtesy.

See the full video at https://youtu.be/3sCRBHDDcfE

An insurance company will not be allowed to deny coverage where all the relevant facts were known to the insurer at the outset, but it unreasonably delayed in asserting a basis for disclaimer. An unexplained delay of two months can be found to be unreasonable in disclaiming coverage. When the insurer waited an even longer amount of time, with an unexplained delay of approximately one year, before mentioning two new reasons for disclaimer the court found the insurer’s actions to be unreasonable as a matter of law. [Allstate Ins. Co. v. Gross, 27 NY2d 263, 269-270) and Mendoza v. American Country Ins. Co., 19 A.D.3d 300, 797 N.Y.S.2d 492, 2005 NY Slip Op 5432 (N.Y. App. Div., 2005).]

The insurance adjuster knows better than an insured what is needed to prove a claim. If, for example, the adjuster fails to ask for a proof of loss, documentation to support a claim, or the sworn testimony of the insured at examination under oath, until months after the loss the delay in the request can upset the insured and lead to charges of breach of contract and bad faith.

Failure to demand the proof of loss within the time prescribed, when coupled with other acts calculated to lead the insured to believe that the proof need not be furnished within the prescribed time, is sufficient to show an implied waiver in Georgia. [Condon v. Des Moines Mut. Hail Ass’n, 120 Iowa, 80, 94 N. W. 477. The conduct of the insurer throughout the negotiations shows conduct inconsistent with the contention that the insured failed to promptly submit a proof of loss. [Knights of the Ku Klux Klan Inc v. Fid. &. Deposit Co. Of Md., 169 S.E. 514, 47 Ga.App. 12 (Ga. App., 1933)]

Some insurers keep tight control on their adjusters. Each level of management has limited authority to settle claims. If the person who meets with the insured has no authority and must work his or her way through multiple layers of bureaucracy, delays that upset the insured become inevitable. If the insurance adjuster has adequate authority to settle with the insured or claimant without delay it will not evolve into a bad faith claim.

 


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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One Request for Declaratory Relief is all that is Needed

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Policy Changes Must Be Agreed to by Both Parties

Plaintiff Pilkington North America, Inc. (“Pilkington”), a Delaware manufacturer, moved to dismiss counterclaims brought by Defendant Mitsui Sumitomo Insurance Company of America (“MSI” or “MSI-US”), a New York insurance company. In Pilkington North America, Inc. v. Mitsui Sumitomo Insurance Company Of America and AON Risk Services Central, Inc., No. 18 Civ. 8152 (JFK), USDC, District Of New York (November 10, 2020) the USDC was called upon to resolve competing claims for declaratory relief.

Background

Pilkington incurred a $60 to $100 million loss when a tornado (“the Tornado”) struck its glass manufacturing factory in Ottawa, Illinois on or around February 28, 2017. Pilkington seeks compensation for the loss pursuant to a commercial property and business interruption insurance policy that was issued by MSI to Pilkington’s parent company, and other subsidiaries, “the NSG Group”). Pilkington alleges that MSI is liable for fraudulently revising the insurance policy such that the loss caused by the Tornado is not fully compensable. Pilkington also seeks damages against its insurance broker during the relevant time period, Defendant AON Risk Services Central, Inc. (“AON” or “AON-US”), for allegedly providing faulty advice while brokering the insurance policy, which allowed MSI’s fraud to succeed.

Pilkington alleges that MSI misrepresented the changes it proposed by means of a revision (“the Endorsement”) to an active insurance policy MSI had issued to the NSG Group for the 2015-2016 policy period (“the U.S. Local Policy” or “the Policy”). MSI proposed the changes to AON, who failed to notify Pilkington that, in addition to changing certain currency valuations in the Policy, the Endorsement also revised the wording of a sublimit applicable to certain types of windstorms. AON failed to inform Pilkington that the Endorsement would substantially reduce coverage for windstorms such as the Tornado. The gravamen of Pilkington’s claims center on its allegations that MSI represented to AON that the Endorsement would only change currency valuations when in fact it also reduced the types of losses that MSI was obligated to indemnify; and on AON’s negligence in carelessly helping to trick Pilkington into agreeing to the Endorsement and incorporating the same fraudulently revised terms into the following year’s insurance policy, which was in effect when the Tornado struck.

MSI’S ANSWER AND COUNTERCLAIMS

MSI’s asked the court to declare that coverage for losses arising from a windstorm in the United States is subject to a $15 million sublimit and estopping Pilkington from seeking to recover any additional amounts subject to the agreed upon global program.

The Global Program was developed and marketed by AON-UK, and it consists of the interrelated contracts which were designed to enable the NSG Group to save money by self-insuring many of NSG’s business operations.

The Global Program in effect when the Tornado struck limited to $15 million the total coverage afforded to the NSG Group for damages arising from a windstorm in the United States. As was common practice between the parties, AON-US acted as Pilkington’s agent with respect to the negotiation and placement of the U.S. Local Policy. In or around March 2016, AON-US prepared and transmitted a market submission for the 2016-2017 U.S. Local Policy to MSI-US. In accordance with the terms negotiated and agreed to at the global level, AON-US’s submission requested a $15 million windstorm sublimit (“the Windstorm Sublimit”). MSI-US quoted the requested coverage, and AON-US subsequently instructed MSI-US to issue the policy while noting that AON-US had “reconciled [MSI-US’s] quote with our instructions from U.K.” MSI-US issued the U.S. Local Policy with the $15 million Windstorm Sublimit, which was consistent with the coverage provided under the Master Policy for windstorms in the United States every year since 2009, when the MSI group of companies first participated in the Global Program.

In early-2017, the Tornado struck Pilkington’s facility. MSI paid Pilkington $15 million in satisfaction of its coverage obligations under the U.S. Local Policy, after which Pilkington sued to recover the balance of its losses from the Tornado.

DISCUSSION

MSI argued that it fully satisfied its coverage obligations to Pilkington

MSI argues that AON’s 2016 market submission, which included the $15 million Windstorm Sublimit, and AON’s accompanying representation that it had “reconciled” the proffered policy terms with instructions from AON-UK, constitute false statements because Pilkington now claims that it did not knowingly assent to the $15 million Windstorm Sublimit. Further, MSI argues, it is entitled to equitable relief against Pilkington because MSI justifiably relied on AON’s representations when it issued the insurance policy under which Pilkington now seeks to hold MSI liable for tens of millions of dollars.

MSI’s counterclaims do not allege any facts which give rise to an inference that AON’s statements were false when made. Indeed, contrary to MSI’s conclusory assertions, Pilkington’s present claims do not make AON’s earlier statements false where, as here, Pilkington does not contest that AON’s proposal included the $15 million Windstorm Sublimit, nor that it agreed to the 2016-2017 U.S. Local Policy as written. In addition, MSI fails to plausibly allege injustice or unfair prejudice.

If Pilkington is successful on its claims against MSI, there will be no injustice or unfair prejudice to MSI where Pilkington is the aggrieved party entitled to relief due to MSI’s wrongdoing.

The USDC noted that insurance contracts involve unique promises, including an element of trust from a policyholder to its insurer—here, Pilkington’s trust that if it paid an agreed-upon premium to MSI every year, MSI would indemnify Pilkington for certain losses which may or may not arise. MSI offers no facts to support an inference that a sophisticated insurance company such as itself, which repeatedly sought to materially change the terms of its policyholder’s insurance contract, somehow innocently misled that policyholder into agreeing to something that MSI did not intend.

Pilkington’s nearly identical claim to that made by MSI already provides the vehicle for the Court to declare all relevant rights and obligations of the parties with respect to the insurance policy in effect at the time of the Tornado, including the Windstorm Sublimit that is at the center of this dispute.

Indeed, in adjudicating whether Pilkington is entitled to the declaratory relief it seeks, MSI will have a full opportunity to make any counterarguments it wants regarding the Global Program. Accordingly, leave to amend would be futile, and the counterclaim is dismissed with prejudice.

ZALMA OPINION

Declaratory relief is an important tool used by insurers and insureds to resolve disputes over coverage. In this case both parties sought declaratory relief concerning the $15 million windstorm sub-limit. The USDC, with a Solomon-like decision found that it did not need to deal with two competing claims for declaratory relief when one was sufficient to allow the insurer and the insured to resolve the dispute. What seemed complex turned out to be simple and direct: Did the insured agree to the $15 million sub-limit or was the insured or the insurer deceived by the agent? The trial will be shorter and will resolve the issue.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining The Statutory Fair Claims Settlement Practices Statute and Regulations

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California’s Fair Claims Settlement Practices & Regulations

See the full video at https://youtu.be/lYlbUYJgoKQ

California Insurance Code Section 790.03 (h)

(a)   In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.

(h)   Knowingly committing or performing with such frequency as to indicate a general business practice any of the following unfair claims settlement practices:

(1)   Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue.

(2)   Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.

(3)   Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.

(4)   Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured.

(5)   Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.

(6)   Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds, when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered.

(7)   Attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application.

(8)   Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured, his or her representative, agent, or broker.

(9)   Failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made.

(10) Making known to insureds or claimants a practice of the insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.

(11) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.

(12) Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

(13) Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.

(14) Directly advising a claimant not to obtain the services of an attorney.

(15) Misleading a claimant as to the applicable statute of limitations.

(16)      Delaying the payment or provision of hospital, medical, or surgical benefits for services provided with respect to acquired immune deficiency syndrome or AIDS-related complex for more than 60 days after the insurer has received a claim for those benefits, where the delay in claim payment is for the purpose of investigating whether the condition preexisted the coverage. However, this 60-day period shall not include any time during which the insurer is awaiting a response for relevant medical information from a health care provider.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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Zalma’s Insurance Fraud Letter – November 15, 2020

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Zalma’s Insurance Fraud Letter

Insurance Fraud Is Epidemic

Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no certain number. Most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States range from $87 billion to more than $300 billion every year.

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.

The National Insurance Crime Bureau (NICB) estimates that almost 25% of the bodily injury claims related to auto crashes are bogus. Property and casualty claims against auto insurance are not much better, coming in at around a 10% fraud rate.

A person commits the offense of insurance fraud by knowingly and with the intent to defraud any insurer presents or causes to be presented to any insurer any statement forming a part of, or in support of, a claim that contains any false, incomplete or misleading information concerning any fact or thing material to the claim. A person acts “knowingly” when he or she is aware that it is practically certain that his or her conduct will cause such a result.  Likewise, a person acts “intentionally” when “it is his or her conscious object to engage in conduct of that nature or to cause such a result.

Read the full article and the 11-01-2020 issue at https://zalma.com/zalmas-insurance-fraud-letter-2

Knowledge of Insurance is Required to Adequately Investigate Insurance Fraud

Before insurance fraud can be understood, it is important to understand what insurance is and how it works. Politicians continue to misunderstand insurance. Insurance is not a right awarded by the Constitution to every resident of the United States. It is a contract between an insurer and a person or corporation called the insured. Insurance is only a “contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.” [California Insurance Code Section 22] That is all insurance is: a contract.

It is a special type of contract where the insurer agrees to indemnify the insured against a loss, damage to property or liability as long as the event for which indemnity is sought is contingent or unknown at the time the insurance was acquired. A condition pre-existing the contract is not contingent or unknown. One should not be able to buy insurance against the fire loss of a home after it burns down. A person should not be able to buy medical care insurance to treat a cancer only after the cancer is diagnosed. Auto liability insurance purchased after an accident is not insurance and should not indemnify the insured for injuries caused.

Insurance fraud exists because its perpetrators wish to profit by failing to comply with the definition quoted above. Those who perpetrate insurance fraud intend to create the loss, damage or liability rather than join the pool of those who have no losses but wish to protect themselves against contingent or unknown events.

Also read the following articles and reports

Health Insurance Fraud Convictions

Zalma on Insurance Videos

Other Insurance Fraud Convictions

Consider Books to Show Your Appreciation to Your Insurer Clients or Claims Employees


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining Ethics and the Public Insurance Adjuster

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The Public Adjusting Profession

See the full video at https://youtu.be/Rb9F_pM4Fkc

When insured’s are busy professionals they simply do not have the time or patience to deal with the details of a first party property claim. The public insurance adjuster exists to assist insureds in the presentation of a claim to the insurer. The public insurance adjuster is, in most states, licensed by the state insurance department. The insurer’s adjuster is often asked to deal with a public insurance adjuster. The contact between the public insurance adjuster and the insurer’s adjuster is often adversarial since the public insurance adjuster wishes to justify his or her contingency fee to the insured. Both should be working toward the same goal: the payment of proper and complete indemnity to the insured.

Public Adjusters claim they are, mostly with good cause, professionals who are employed exclusively by a policyholder who has sustained an insured first party property loss. The public adjuster handles every detail of the claim, working closely with the insured to provide the most equitable and prompt settlement possible. A public adjuster should inspect the loss site immediately, analyze the damages, assemble claim support data, review the insured’s coverage, determine current replacement costs and exclusively serve the client, not the insurance company while working ethically with the insurer’s adjuster.

The National Association of Public Insurance Adjusters (NAPIA) publishes a code of conduct which sets forth the ethical standards that all public insurance adjusters should follow. It provides:

The following Rules of Professional Conduct and Ethics are applicable to all members of the NAPIA:

  1. The members shall conduct themselves in a spirit of fairness and justice to their clients, the Insurance Companies, and the public.
  2. Members shall refrain from improper solicitation.
  3. No misrepresentation of any kind shall be made to an assured or to the Insurance Companies.
  4. Commission rates shall be fair and equitable, and strictly in accordance with the prevailing custom in the locality, and must, where laws or regulations of insurance departments exist, comply fully with such laws or regulations.
  5. Members shall conduct themselves so as to command respect and confidence. They shall work in harmony with one another, with their clients, and the Insurance Companies’ representatives, so as to foster a cordial and harmonious relationship with all branches of the insurance business, and with the general public.
  6. Members must be fitted, by knowledge and experience, for the work they undertake. They must not endanger the interests of the public adjusting profession, or risk injustice to assureds or to the Insurance Companies, by attempting to handle losses or claims for which they are not qualified, and for which they cannot find competent technical assistance.
  7. Members shall not engage in the unauthorized practice of law.
  8. Members shall not acquire any interest in salvaged property or participate in any way, directly or indirectly, in the reconstruction, repair or restoration of damaged property, except with the knowledge, consent and permission of the assured.
  9. Members shall be cooperative and assist one another in every possible way.
  10. Members shall not disseminate or use any form of agreement, advertising, or any printed matter that is harmful to the profession of public adjusting, or which does not comply with the rules and regulations of the Insurance Department of the state in which such member is professionally engaged, or which might subject public adjusting and public adjusters to criticism or disrespect.

An example of a public insurance adjuster and the lawyer who failed to follow the requirements set out by NAPIA. Both represented the same client, involved a claim that resulted from the 1994 Northridge, California earthquake. The earthquake caused billions of dollars in damages across Southern California. It drew lawyers and public adjusters seeking large fees like vultures flying over a dead antelope. As a result of the disaster, investigation by insurers was limited because of the extent of losses caused by the earthquake and the need to rapidly serve their needs. Many unnecessary and spurious suits were filed. Insurance fraud was rampant and insurers paid rather than fight because there was inadequate staff available to deal with fraud and governmental agencies threatened insurers with major fines if they did not pay quickly.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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HMO’s In State Limitation Upheld

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When an HMO Provides the Same Limitations for Physical as Mental Problems the Limitations are Enforceable

Plaintiff Suzanne Stone had an employer-provided health care plan (the “Plan”) governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461, and administered by Defendant U.S. Behavioral Health Plan, California, dba OptumHealth Behavioral Solutions of California (“Optum”). The Plan excluded coverage for any out-of-state treatment, except for emergency or urgently needed services in Suzanne Stone v. Unitedhealthcare Insurance Company; U.S. Behavioral Health Plan, California, DBA OptumHealth Behavioral Solutions of California, No. 19-16227, United States Court Of Appeals For The Ninth Circuit (November 9, 2020) the Ninth Circuit was asked to compel coverage for out of state services contrary to the stated exclusion.

FACTS

Plaintiff, aware of the exclusion sent her daughter to an out-of-state residential treatment program for anorexia nervosa. After Optum and UnitedHealthcare Insurance Company (together, “Defendants”) denied coverage, Plaintiff sued pursuant to ERISA. The district court granted summary judgment in favor of Defendants.

Both the Federal Parity Act and the California Parity Act require that health plans provide equal coverage for mental illnesses and physical illnesses. Here, the denial of coverage was based solely on the Plan’s exclusion of coverage for out-of-state treatment, which applies equally to mental and physical illnesses.

The Plan, a health maintenance organization (“HMO”) plan, provides that mental health services are covered when medically necessary, preauthorized by Optum, and provided at a participating facility. As pertinent here, the Plan excludes coverage for mental health services rendered outside the service area, except for emergency services or urgently needed services. The service area is defined as “[t]he geographic area in which [Optum] is licensed to arrange for Behavioral Health Services in the State of California by the California Department of Managed Health Care.”

The Plan similarly excludes coverage for physical health services rendered outside the service area, except for emergency services or urgently needed services. As with mental health services, the service area is defined as “[the] geographic region in the State of California where United Healthcare is authorized by the California Department of Managed Health Care to provide Covered Services to Members.”

G.S., Plaintiff’s minor daughter, began receiving treatment in June 2014 at an eating disorder program run by the University of California San Diego (“UCSD”). Optum approved the coverage. UCSD discharged G.S. on July 18, 2014, stating that she “required a higher level of care at a family based treatment residential facility. There are no known FBT residential facilities in California and she was therefore referred to Eating Recovery Center [“ERC”] in Denver, Colorado.”

Prior to G.S.’s discharge from UCSD, Plaintiff called Optum to ask about out-of-state residential treatment centers and was told that the Plan did not cover out-of-state treatment other than for an emergency.

Plaintiff admitted G.S. to the out of state facility, ERC,  on July 21, 2014 and again ws told by Optum that there was no coverage for out of state treatment. Plaintiff was told that Center for Discovery (“CFD”) was an in-network residential treatment center in California for adolescent eating disorders. On July 24, 2014, Optum informed ERC that Plaintiff had a California HMO and that there was no coverage for G.S.’s treatment at ERC.

DISCUSSION

The Federal Parity Act requires that “benefits and treatment limitations for mental health problems shall be ‘no more restrictive’ than those for medical and surgical problems.” Danny P. v. Cath. Health Initiatives, 891 F.3d 1155, 1158 (9th Cir. 2018).

Plaintiff has not shown that the Plan’s requirement that G.S. receive treatment at a residential treatment facility in California is a more restrictive limitation on treatment than limitations on treatment for medical and surgical issues. In fact, she does not contend that the Plan’s geographic limitation applies unequally to physical and mental health issues. Therefore, the Ninth Circuit found that the Federal Parity Act was not violated by Defendants’ denial of coverage.

Plaintiff has not presented any evidence that the Plan’s coverage of mental illnesses is less generous than its coverage of physical illnesses, or that the exclusion for out-of-state treatment limits coverage of mental health conditions, but not physical health conditions. The California Parity Act therefore is not implicated here.

Because Plaintiff did not show that the Plan’s requirement of in-state treatment is applied to mental health conditions, but not to other medical conditions. The Plan’s geographical limitation did not violate either the Federal Parity Act or the California Parity Act.

The Ninth Circuit affirmed the district court’s grant of summary judgment in favor of the defendants in an ERISA action concerning the denial of health care coverage for out-of-state residential treatment for anorexia nervosa. It also held that defendants’ denial of coverage did not violate the Mental Health Parity and Addiction Equity Act or the California Mental Health Parity Act because the denial was based solely on the ERISA plan’s exclusion of coverage for out-of-state treatment, which applied equally to mental and physical illnesses.

ZALMA OPINION

HMO’s exist to allow people to buy inexpensive health insurance and can do so by limiting the availability of the coverage. The treatment needed by GS could be provided in the state of California and would have been covered by the plan. However, the Plaintiff decided to use the facility in Colorado that was believed to be better for GS than what is available in California. She was told there would be no coverage and ignored the fact and decided to sue for coverages clearly and unambiguously excluded. She failed.


© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

 

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A Video Explaining What Liability Insurance is and How to Acquire It

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What Is Liability Insurance?

See the full video at https://youtu.be/8BAPjTJzJ7Q

Insurance, by definition, is a contract where the insurer, for consideration (premium) agrees to indemnify another against a contingent or unknown risk of loss. It is used as a method to spread losses among many people who are insured with the same company. The insurer, by its policy, promises, in exchange for a premium, to pay to defend and indemnify the insured, in the event that a certain type of loss occurs within a specified period of time called the “policy period.” By spreading the risk of loss among many, each individual only pays a minuscule portion of the risk of loss insured against.

Liability insurance is limited to insurance against the risk of losses that can be incurred by a person for damages done to the person or property of another by an accidental or fortuitous cause.

In exchange for the promise to pay the premium charged, the insurance company agrees to provide the insured protection from various risks faced by an owner, developer, or builder of real property. The risks of loss taken by the insurer are listed on the policy. For each promise made by the insurer it charges a premium.

The policy will provide coverage for the following:

  • bodily injury and property damage to persons injured by the insured;
  • medical payments regardless of fault;
  • personal and advertising injury; (a coverage that insures against the insured’s risk of loss for multiple offenses like libel or slander, advertising injury, false imprisonment, etc.) and
  • contractual liability.

These are the principal coverages available in CGL policies. There are other coverages available to cover special needs of individual people, corporations, partnerships or joint ventures. If special needs exist for a particular construction project that faces risks not contemplated by a CGL, it is prudent to consult with a professional and major insurance brokerage that specializes in the industry involved in the case. You can find such brokers by conferring with others who specialize in similar projects, your state Department of Insurance, professional risk managers, or Chartered Property and Casualty Underwriters (CPCU), who act as insurance consultants.

© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

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Protective Safeguard Endorsement Creates a Mandatory Condition Precedent

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Failure to Fulfill a Condition Precedent Defeats Fire Claim

Plaintiffs sued their insurance company to enforce their contractual rights to their insurance coverage. After Plaintiffs’ liquor store burned down, Defendant, the insurance company, AmGuard, refused to pay the claim. It reasoned that the coverage was excluded by Plaintiffs’ failure to maintain an automatic fire alarm.

In EW Hamilton Liquor Store, Inc. Et Al. v. Amguard Insurance Company, Case No. 17-13077, United States District Court Eastern District Of Michigan Southern Division (November 10, 2020) the USDC was asked to recognize the importance of a condition precedent to indemnity from an insurance policy.

FACTS

The plaintiffs were the victim of a fire. They admitted that at the time of the fire there was no automatic fire alarm protecting the premises. They sought indemnity for the damages caused by the fire.

ANALYSIS

Plaintiffs’ argued that “[a]t a minimum, under Michigan law, the issue of whether [they] substantially complied with the [insurance] policy’s condition of maintaining an ‘automatic fire alarm’ is a material fact question.” (emphasis added by the court). They contended that it must be presented to a jury since it was an issued that needed a factual determination. Plaintiffs claimed that conditions precedent, like the requirement of an automatic fire alarm in their policy’s Protective Safeguard Endorsement (“PSE”), need only be satisfied by substantial performance.

The Sixth Circuit, as well as several District Courts therein, have recognized that under Michigan law, the doctrine of substantial performance does not apply to an express condition precedent like the one at issue here. Substantial performance does not satisfy an express condition precedent.

The Court found, and Plaintiffs concede, that the PSE is a condition precedent to coverage under the policy. Indeed, it is an express condition. Failure to abide by its terms will preclude coverage, as contemplated by subpart B of the PSE.

As a result  Plaintiffs’ argument fails. The doctrine of substantial performance is inapplicable to an express condition precedent.

Plaintiffs cited no authority for the proposition that substantial compliance with a condition precedent is sufficient to satisfy the condition precedent. The doctrine of substantial performance applies only when the contract does not explicitly require the obligation that was breached. The foundational error in Plaintiffs’ argument that substantial compliance with a condition precedent is unavailing and the insurer’s motion for summary judgment was granted.

ZALMA OPINION

Conditions precedent are important aspects of every insurance policy. A condition precedent is a promise made by the insured to the insurer to maintain a PSE – to give the insurer confidence that the insured will protect its property from the risk of loss by fire. Failure to fulfill the promise is a breach of a material condition and, as such, the failure defeats the claims made.

© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

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A Video Explaining What Mold Inspections Cannot Do

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Dealing with Mold

Emergency Services

See the full video at https://youtu.be/KTTrF-VZ2G8

When dealing with emergency services (loss-mitigation), restoration, construction, or mold containment, the vendors of such services should understand that the industries they serve are in a business to provide for safety to life and property and protection of human health.

When mold is discovered during the evaluation or drying process, steps must be taken to protect the health of workers and occupants within the structure, as well as preserve the structure from further damage.

There are no federal or state regulations for loss-mitigation, restoration, or mold remediation industries. Restoration vendors who wish to maintain a professional organization in which the public can place its trust, should institute an internal educational and certification program for all its employees. When retaining the services of a restoration vendor, make inquiries to confirm that it educates its employees continually.

Restoration vendors should be able to show customers that they have developed an in-house training program on the use, storage, maintenance, and safety practices of all company owned or rented equipment and all testing procedures and supplies (i.e. chemicals), as well as on their quality control and assurance (QC&A) program.

Restoration vendors should have their technicians and managers trained and certified on the Code of Federal Regulations (CFR) safety and health programs and certified with the Federal Insecticide, Fungicide and Rodenticide Act when required by law.

Project managers, fire/water managers, and the company’s QC&A manager should receive Certified Restorer (CR) certification and Water Loss Specialists (WLS) certification.

Whether estimating, evaluating, or drying losses that involve water, the remediator needs a complete understanding of how structures are built. It is essential to understand air-flow in structures, what water intrusion can do to a structure and its components, and how water flow and humidity works in the structure.

In some states, the remediation provider may not be able to obtain payment for the services provided if they are not appropriately licensed. In Louisiana, for example, Tradewinds Environmental Restoration entered into a contract to provide mold remediation services without a license. This action was specifically prohibited by laws intended to protect the public interest, and the contract was therefore ruled absolutely null. Tradewinds was only allowed to recover its “actual cost of materials, services and labor,” but was “not entitled to an allowance for profit and overhead.” Although this is a harsh result, the purpose of the licensing statutes is to protect the public. In some states the unlicensed contractor is not even allowed to collect for the reasonable value of services.

 

© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

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The Concurrent Cause Doctrine Strikes in North Dakota

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When there Exist Two or More Causes of a Loss and One is Excluded and the Other Not Coverage Exists to Defend and Indemnify

North Star Mutual Insurance appealed from a declaratory judgment holding that a commercial general liability policy it issued to Jayme Ackerman, doing business as Ackerman Homes, provides coverage for Ackerman’s potential liability arising from an accident involving Kyle Lantz and that North Star has a duty to defend Ackerman. North Star argues the district court erred in finding coverage because the policy excludes accidents arising out of the use of an automobile. In North Star Mutual Insurance v. Jayme Ackerman d/b/a Ackerman Homes, Levi Chase, Progressive Insurance Company, and State Farm Mutual, and Kyle Lantz, No. 20190135, 940 N.W.2d 857, Supreme Court of North Dakota. (March 25, 2020) the Supreme Court was asked to reverse because of a clear and unambiguous exclusion.

FACTS

North Star sued Ackerman, Lantz, Levi Chase, Progressive Insurance Company, and State Farm Mutual for declaration of the parties’ rights and responsibilities under the commercial general liability (CGL) policy North Star issued to Ackerman. North Star alleged that on July 13, 2017, Ackerman was driving eastbound on Interstate 94; a wheelbarrow allegedly fell out of Ackerman’s pickup truck and landed on the interstate; Chase was traveling on the interstate behind Ackerman and lost control of his vehicle after he came upon an object on the road; and Chase’s vehicle went through the median and struck Lantz, who received severe injuries.

Lantz and North Star moved for summary judgment. North Star argued the policy did not cover the claims because of exclusions for the use of motor vehicles as well as the loading and unloading of equipment. Lantz agreed the policy contains a motor vehicle exclusion but argued there were also covered non-vehicle related negligent acts and the concurrent cause doctrine applies to provide coverage.

ANALYSIS

The district court granted Lantz’s motion for summary judgment. The court explained that the primary issue was whether the concurrent cause doctrine applies; that Lantz claimed many forms of negligence occurred, including Ackerman’s failure to remove the wheelbarrow from the highway after it fell from the vehicle and Ackerman’s failure to give notice to the public of the presence of the wheelbarrow on the highway; and that Lantz argued those causes are not excluded under North Star’s policy.

The court concluded the policy provides coverage, generally, for portable tools and equipment, including the wheelbarrow, and the policy excludes vehicle-related acts. The court concluded the policy does not exclude nonvehicle acts, including the failure to remove the wheelbarrow from the highway and failure to give notice to the public of the presence of the wheelbarrow on the highway; and a person who causes or permits an item, which creates an unreasonable risk of injury, to be placed on the highway has a duty to remove the item and a duty to give notice of the presence of that item. The court concluded both included and excluded risks contributed to the accident, the concurrent cause doctrine applies, and the policy provides coverage for Ackerman’s potential liability and North Star has a duty to defend Ackerman.

The interpretation of an insurance policy is a question of law. The court must look first to the language of the insurance contract, and if the policy language is clear on its face, there is no room for construction. If coverage hinges on an undefined term, the court applies the plain, ordinary meaning of the term in interpreting the contract. A court will not strain the definition of an undefined term to provide coverage for the insured. The entire contract is to be taken together to give effect to every part, and each clause is to help interpret the others. Exclusions from coverage must be clear and explicit and are strictly construed against the insurer.

CGL policies are intended to protect an insured against certain losses arising out of business operations. The policy states, “We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” The policy excludes: “‘Bodily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft owned or operated by or rented or loaned to any insured.” The district court concluded there were at least two possible acts of negligence that contributed to the accident, including loading and securing the wheelbarrow, failing to remove the wheelbarrow from the highway after it fell from the pickup, and failing to give the public notice of the wheelbarrow on the highway.

The transportation of the wheelbarrow and its fall out of the vehicle onto the interstate are vehicle-related activities, which constitute “use” of an automobile. The policy excludes coverage for injuries arising out of that use. The wheelbarrow also was left on the road for some time before the accident occurred, and Ackerman did not remove it or warn other drivers of its presence. These were independent, nonvehicle-related, acts that did not arise out of the use of the automobile. The exclusion for injuries arising out of the use of an automobile does not apply to these acts.

The Supreme Court of North Dakota noted that several potential acts of negligence exist in this case: the loading and securing of the wheelbarrow in the vehicle and the failure to remove the wheelbarrow from the interstate and failure to warn. These excluded and covered risks under the policy allegedly contributed to the accident.

North Dakota adopted the concurrent cause doctrine which concludes that coverage exists when both a covered risk and an excluded risk contribute to an accident. Under the doctrine, coverage will be found if there is a “causal connection” between the insured risk and the injury, the injury cannot be disassociated from the covered risk, and the potential of creating an unreasonable risk of injury arose just as much from the insured risk as it did from the excluded risk.

The Supreme Court concluded that under the concurrent cause doctrine the GCL policy provides coverage in this case. The failure to remove the wheelbarrow from the road and the failure to warn were independent acts that allegedly were a cause of the injury. The injury potentially arose just as much from failure to remove the wheelbarrow and warn other drivers, which are covered risks, as it arose from the transportation of the wheelbarrow.

ZALMA OPINION

The concurrent cause doctrine applies in third party liability policies to resolve the obvious problem when more than one event causes injury to a third party. Although the wheelbarrow fell off a vehicle and that wheelbarrow was a cause of the the loss the fact that it was not removed from the road for many hours so that the injury causing accident could occur much later, was negligent, not connected to an auto, and, therefore, a covered cause.

© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

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A Video Explaining Insurance Contract Construction and Interpretation

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A Video Explaining Insurance Contract Construction and Interpretation

The first thing every person representing an insurer with regard to a potential fraudulent claim must understand that the insurance policy is the basis for every insurance fraud investigation.  Without an insurance policy there can be no insurance fraud. The insurance policy contract describes the rights and obligations of the parties to the policy of insurance. It contains, in clear and unambiguous language, weapons to defeat a fraudulent claim.

See the full video at https://youtu.be/YfEe1asnDJg

The construction of insurance contracts should be, but often is not, governed by the same rules of construction applicable to all contracts. The courts claim that when they construe an insurance contract it gives the terms of the policy their ordinary and generally accepted meaning. The primary goal of the court is to give effect to the written expression of the intent of the parties to the insurance policy.

Some rules that must be followed when construing or interpreting an insurance contract include:

  • If the terms of the policy are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor (the insurer) believed at the time of making it, that the promisee (the insured) understood it.
  • If the language of a policy or contract is subject to two or more reasonable interpretations, it is probably ambiguous.
  • Where an ambiguity involves an exclusionary provision of an insurance policy, courts adopt the construction urged by the insured as long as the construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the intent of the insured and insurer.
    • In reaching the conclusion that a policy exclusion was ambiguous, and the policy, therefore, provided coverage, the courts should follow the settled rule that any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer and that if semantically permissible, the contract will be given such construction as will fairly achieve its object of providing indemnity for the loss to which the insurance relates.
  • It is a maxim of law that a contract should be construed against its drafter. The maxim is sometimes referred to as the contra preferendum
  • Provisions excluding coverage are strictly construed against the insurer.
  • Ambiguities in insurance applications will usually be construed against the insurer to avoid denial of coverage because of alleged misrepresentations.
  • Where the language of a contract is clear and unambiguous, it must be interpreted solely by reference to the four corners of that document.
  • When a policy is interpreted, the provisions of an endorsement controls the interpretation over the body or declarations of a policy when the two are in conflict.

The basic rules of construction or interpretation of an insurance contract are all subject to the limitation that a court cannot and should not do violence to the plain terms of a contract by artificially creating ambiguity where none exists. In situations in which reasonable interpretation favors the insurer, and any other would be strained and tenuous, no compulsion exists to torture or twist the language of the contract. An insurance company has the right to limit the coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected.

 

© 2020 – Barry Zalma

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

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

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

https://zalma.com/zalmas-insurance-fraud-letter-2/Read last two issues of ZIFL here. 

Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts

Listen to the Podcast: Zalma on Insurance  https://anchor.fm/dashboard/episodesZalma on Insurance 

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/

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3De-mail Version of ZIFL, it’s Free! – 

 

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