Construction Defect Experts

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A Video Explaining Construction Experts

See the full video at https://rumble.com/c/c-262921 and at https://youtu.be/zEY0UFsJpxc

In construction defect cases, the standard of care and its breach must generally be shown through expert testimony. Lay testimony is sometimes sufficient where the defects are of common knowledge.

In construction cases and other cases involving licensed professionals, standard of care evidence in negligence matters generally must be provided by expert testimony, because the standard of care involved in construction is not an area that comes within the realm of common knowledge. Expert testimony regarding a standard of care is generally not required to establish a breach of contract rather than conduct beneath the standard of care. There are many experts involved, not only in the construction of a building, but also the investigation of any defects that surface after a building is complete. A person faced with liability for a defective structure or a potentially dangerous structure should consider involving various experts.

The Construction Consultant

There are few schools that teach construction except those that assist individuals to become licensed general contractors. Consequently, a construction consultant develops his or her expertise by a combination of education, training, and experience as a general contractor in the state where the property is located. He or she also usually has experience in evaluating the work of people in the construction trades. The construction consultant can also establish his or her credentials by earning a license to construct buildings (and in fact doing so), and by being well-read in the field of construction, publishing peer-reviewed articles and books in his or her fields of expertise, and testifying in court on the subject. A construction expert is a person with practical experience, rather than one whose knowledge comes from schooling alone. Such experts are considered to be the most effective in providing advice, and in convincing a jury of the correctness of their advice and stated conclusions.

The Structural Engineer

Structural Engineering is the science and art of designing and making, with economy and elegance, buildings, bridges, frameworks and other similar structures so that they can safely resist the forces to which they may be subjected

The Geotechnical Engineer

Along with the structural engineer, the geotechnical engineer is responsible for the stability of the structure. The structural engineer is responsible for the structure itself while the geotechnical engineer is responsible for the ground upon which the structure is built. No matter how strong the foundation or footings are, if the soil in which the foundation is placed is not stable, the entire structure can fail.

The Forensic Roofing Consultant

The forensic roofing consultant is a specialized construction consultant whose expertise is limited to roofs, roof structures, and the damages that occur when a roof fails to perform as designed.

Building Code Compliance Expert

The Architect

The Insurance Consultant


© 2021 – Barry Zalma

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

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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False Claim on the Theft of a Cadillac Results in a Ten Year Sentence

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Falsely Reporting an Auto Stolen is Insurance Fraud

A grand jury indicted J.B. Black for insurance fraud. Following his not guilty plea, the case was tried to a jury, which found Black guilty. The trial court sentenced Black to 10 years’ confinement. After his conviction Black appealed asserting multiple claims that the trial court erred and in J.B. Black v. The State Of Texas, NO. 01-20-00178-CR, Court of Appeals For The First District of Texas (July 13, 2021) the Court of Appeals was asked to keep Black out of jail.

BACKGROUND

Black bought a 2015 Cadillac Escalade for $98,860.24. He insured it with USAA and filed a claim after reporting his vehicle stolen.

The Grand Jury charged that J.B. Black on or about April 4, 2016, asserting that he did unlawfully, with intent to defraud and deceive an insurer, and in support of a claim present and cause to be presented a statement that the Defendant knew to contain false and misleading material information, namely, that the Defendant’s Cadillac Escalade was stolen on March 23, 2016, and that claim a false claim was presented to an insurer USAA.

Harris County Sheriff’s Office Deputy R. Parker testified that he responded to a call for vehicle recovery the same day. He arrived at the address that Black had provided to Deputy Horace. Black told Deputy Parker that he had tracked his vehicle to this location. Black used a key fob he had in his hand to either activate the horn or start the engine. Deputy Parker testified that he could not see the vehicle in the garage, but he “heard something.” Deputy Parker went to the front door of the home and knocked on the door, but no one answered. He asked Black to return to the home later. Deputy Parker intended to meet the homeowner and further investigate the theft.

USAA assigned Barbier as the lead investigator in Black’s case. Barbier testified that Black called USAA and added the Cadillac Escalade to his auto insurance policy at 5:41 p.m. the day he reported it stolen to the Sheriff’s Office. The policy became effective the next day.

Barbier testified that he suspected that Black had made a false statement to USAA because Black reported his car stolen one day before he insured it and that the date of the theft is a material factor in determining coverage for an insurance claim. He also testified that USAA did not pay his insurance claim after his investigation because Black’s vehicle was uninsured at the time of the reported theft.

The jury found Black guilty of insurance fraud as alleged in the indictment. The trial court assessed punishment at 10 years’ confinement in the Texas Department of Criminal Justice.

MOTION TO SET ASIDE INDICTMENT

Black contends that the trial court erred by denying his motion to set aside the indictment because the indictment was vague.

APPLICABLE LAW

An indictment that tracks the statutory language is “ordinarily sufficient.” The accused may move to set aside a vague or indefinite indictment. The trial court may, however, deny a motion to set aside an indictment if the accused received notice of the State’s theory against which he would have to defend

ANALYSIS

A person commits insurance fraud “if, with intent to defraud or deceive an insurer, the person, in support of a claim for payment under an insurance policy (1) prepares or causes to be prepared a statement that: (A) the person knows contains false or misleading material information; and (B) is presented to an insurer; or (2) presents or causes to be presented to an insurer a statement that the person knows contains false or misleading material information.” [TEX. PENAL CODE § 35.02(a).]

The plain language of Section 35.01(2) of the Penal Code defines “insurer” using the Insurance Code’s definition that “insurance company . . . engaged in the business of insurance in this state.” [TEX. INS. CODE § 560.001.]

Black had sufficient notice of the nature of the offense alleged in the indictment and the State’s theory of the case against him, including the identity of the alleged defrauded insurer.

The Penal Code assigns “insurer” the definition in the Insurance Code, and that definition is now located in a different section. The jury instruction here, defining “insurer” as “a person who engages in the business of insurance in this State,” tracks the statute. It did not function as an improper comment on the weight of the evidence. The jury charge accurately sets out the law applicable to the case.

ZALMA OPINION

Texas refused to honor Black’s spurious claims of error since the evidence proved that in Texas the quality of insurance fraud perpetrators is woefully inadequate. Purchasing insurance the day after reporting the theft and making a claim the next day is stupid. Pursuing the claim, after the insurer discovers that the policy was not in effect on the date the car was claimed stolen, is silly. Appealing the conviction with such overwhelming evidence of fraud is contumacious. The Texas Court of Appeal wasted a great deal of time overruling all of Black’s arguments was honorable but unnecessary.  Black should enjoy his stay at the gray bar hotel.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

 

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To Deal With Construction Defects It is Necessary to Understand Construction – THREE

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A Video Explaining Some More of the Construction of a Dwelling

See the full video at https://rumble.com/c/c-262921 and at https://youtu.be/97BN-ObZlB8

Interior Floor Finishes

Concrete is poured in place from 3½ to 6 inches thick at various areas. It is usually poured into a form built with lumber or uses already placed foundation walls as forms for basement and first floor slabs. The concrete floors are usually reinforced with #3, #4, and/or #5 rods, welded in a 6 by 6 inch mesh.

Hardwood floors are usually prefinished standard red or white oak with dimensions of 3/8 inch by 7/8 inch, or 3/8 inch by 1½ inch, and other variations depending on the needs of the builder. New materials that imitate hardwood are becoming more popular. These materials are marketed under the brand names “Pergo” and “Formica,” among others, and are usually made of wood or composition wood materials laminated with designs that simulate wood, marble or ceramic tile.

Interior Ceiling and Wall Finishes

Walls and ceilings are finished with almost any material that is available and aesthetically pleasing to the owner.

Improper or defective installation of interior wall coverings can allow the growth of fungi or mold, cause cracking in the finishes, allow the entry of unwanted outside air and drafts, and otherwise make living in the dwelling less than pleasant if not injurious to health.

Painting and Wallpaper

There is paint for almost every type of surface and surface condition. The large variety makes it impractical to consider each type of paint. Whatever type of paint is selected can be applied by brush, roller, or spray gun.

Most wall coverings used in normal practice are not really wall “papers.” Wallpaper is a paper material that may or may not be coated with a washable plastic. The products used in most modern construction, although still called “wallpapers,” are actually composed of a vinyl on a fabric backing, not a paper backing. Some vinyl fabric coverings come pre-pasted.

Miscellaneous Exterior Items

Failure or defective installation of any of the components can cause damage to the dwelling, other structures, or the occupants.

ZALMA OPINION

Construction defects lawsuits are almost ubiquitous. To deal with such litigation it is necessary for the lawyer or insurance claims person to understand construction and the parts needed to build a structure. This, and the previous videos work to provide the information needed as adapted from my books on Construction Defects and Insurance.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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Refusal to Testify at Examination Under Oath is a Breach Condition Precedent

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Court of Appeal Requires Third Trial of Breach of Condition Precedent Case

Generally, across the country, testifying at a properly noticed Examination Under Oath (EUO) is a condition precedent to coverage for any claim. In SAFECO Insurance Company Of Illinois v. Fleurimond Barthelemy, No. 4D20-1045, Florida Court of Appeals, Fourth District (July 14, 2021), in its second trip to the Florida Court of Appeal, the insurer appealed a verdict in favor of the insured.

FACTS

The insured filed a claim with his insurer, seeking coverage for injuries sustained in an automobile accident. The insurer asked the insured for a statement regarding the accident, but the insured refused to give one. This prompted the insurer to investigate the insured’s prior claim history.

The insurer ran a report revealing multiple bodily injury claims. The extensive loss history caused the insurer to suspect fraud. As a result, the insurer asked the insured to submit to an examination under oath (“EUO”). The insured refused. The insurer scheduled two more EUOs, but once again the insured refused or failed to appear. The insured’s failure to submit to an EUO caused the insurer to deny coverage. It also refused to defend the insured against the other parties’ claims.

The insured sued the insurer for declaratory relief, seeking coverage for the policy limits. The insurer moved for summary judgment, arguing that, as a matter of law, the insured’s failure to comply with the EUO constituted a material breach of the policy that caused the insurer substantial prejudice. The trial court denied the motion.

The First Trial

The insurer raised fraud and breach of contract as affirmative defenses.

The jury answered three questions:

  • the insured failed to comply with his post-loss obligations;
  • the insurer was “actually” prejudiced by the insured’s failure to comply; and
  • the insurer failed to prove the insured engaged in fraudulent conduct.

Because the insurer proved the insured breached the contract with resulting prejudice, the trial court entered final judgment in its favor.

The insured appealed.  See Barthelemy v. Safeco Ins. Co. of Ill., 257 So.3d 1029, 1031 (Fla. 4th DCA 2018)where the Court of Appeal concluded that the trial court erred in instructing the jury and reversed and remanded the case for a new trial.

The Second Trial

Before the second trial, the insured moved in limine to prevent the insurer from mentioning or implying the insured committed fraud or that the insurer suspected fraud. The insured argued that because the insurer did not cross-appeal the jury’s unfavorable finding on fraud in the first trial, the issue could not be retried. The insurer responded that it needed to address fraud to show that the insured’s material failure to comply with the EUO substantially prejudiced the insurer. The trial court reasoned that any reference to fraud was precluded by the previous verdict in the first trial. The trial court granted the motion in limine and ruled that no party was to mention or imply fraud or any wrongdoing on the part of the insured. At most, the parties and witnesses could use general terms like “concerns.”

This time, the jury once again found the insured materially breached his post-loss obligations but the jury found the insurer did not prove substantial prejudice. The trial court entered a final judgment for the insured. The insurer moved for new trial and for directed verdict. The trial court denied both motions. From these rulings, the insurer now appeals.

THE APPEAL

The insurer argued at the second appeal that the trial court erred in denying its motions for directed verdict and new trial because the trial court incorrectly excluded all evidence of fraud and wrongdoing. This prevented the insurer from proving substantial prejudice resulting from the insured’s material breach of the policy. The insurer argued the question of whether it was prevented from conducting a proper fraud investigation was not settled as the law of the case.

The appropriate standard of review applied to a trial court’s denial of a motion for a new trial is whether the trial court abused its discretion

The doctrine of “law of the case,” a principle of judicial estoppel, requires that questions of law actually decided on appeal must govern the case in the same court and the trial court, through all subsequent stages of the proceedings.

When the case was retried, the trial court excluded all evidence of the insured’s wrongdoing and prevented the insurer from proving the insured’s material breach substantially prejudiced its fraud investigation. The fact that the insurer demanded an EUO to investigate the possibility of fraud was relevant and material to determine substantial prejudice to the insurer. As the insurer argued, without the EUO it had almost no information about the details of the accident that it could have used to assess and defend against the insured’s liability. This information could have avoided all the litigation, including this case. The jury could not have possibly understood the importance of an EUO without knowing the insurer wanted to investigate insurance fraud.

The purpose of an EUO is to enable the insurer to possess itself of all knowledge and all information as to other sources and means of knowledge, in regard to the facts, material to its rights, to enable it to decide upon its obligations and to protect it against false claims. [Claflin v. Commonwealth Ins. Co., 110 U.S. 81 (1884).]

The trial court’s ruling on the motion in limine impacted the witnesses’ testimony, the documentary evidence, and the insurer’s case. The trial court’s exclusion of evidence and limitation on the insurer’s argument directly related to the core issue of the case — whether the insured’s failure to cooperate prevented the insurer from conducting a meaningful fraud investigation.

Indeed, an implication that the insured committed fraud would have been prejudicial. Nevertheless, the probative value of the highly relevant evidence outweighed the danger of unfair prejudice. Therefore, the case was remanded to the trial court so that the parties my try the case again.

ZALMA OPINION

The Florida Court of Appeal, although reaching a correct result that reversed the trial court finding in favor of the insured, should have followed the decision of the U.S. Supreme Court in Claflin, found that the refusal to testify at an EUO was a breach of a material condition precedent and entered judgment in favor of the insurer. Rather, it now requires SAFECO to go through a third trial to again prove the breach of a material condition sufficient to allow it to refuse to pay neither defense nor indemnity.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

 

 

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To Deal With Construction Defects it is Necessary to Understand Construction – Two

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A Video Explaining Some More of the Construction of a Dwelling

See the full video at https://rumble.com/c/c-262921 and at https://youtu.be/0581meq2zG4

Roofing

Asphalt shingles account for close to 90 percent of all residential roofs. Sheet metal, cement tiles, wood shakes or shingles, and traditional slate or ceramic tile are used across the country. For low-slope roofs, polymer membranes compete with asphalt roll roofing, coal tar, and asphalt-mop technologies.

A historic home or home style will normally be repaired using the original material or a carefully manufactured imitation. The traditional materials of earlier times—wood shingles, slate, tile, and sheet metal—are still used.

Sheet Metal

Structures require use of sheet metal parts to complete the structure. Sheet metal parts include galvanized flashing (a material used to stop water intrusion), gravel stops, gutters and downspouts, roof edging, and vents.

The sheet metal worker locates and marks reference points and, using shop mathematics, calculates angles and curves needed to manufacture the sheet metal parts. The sheet metal worker cuts the flat material and shapes it into a three-dimensional form, using hand and power-driven tools and fabricating machines.  When the parts are completed they are assembled and riveted, welded, bolted, soldered, or otherwise bonded together. Finally the parts are smoothed or polished and installed and anchored in place.

Mechanical

The structure’s mechanical parts include, in addition to HVAC systems, electrical and plumbing components.

Because of environmental concerns and difficulties experienced with the power grid, many homeowners are considering solar or wind power for their homes and businesses. Solar power is practical and can provide an economic benefit over purchasing electricity from the power grid although it takes many years to recover the cost even when subsidized by local governments.

Insulation

Failure of insulation can increase the cost of heating and cooling the property and, if improperly installed, allows release of insulation fibers that might be dangerous to the occupants.

Windows and Glass

ZALMA OPINION

Construction defects lawsuits are almost ubiquitous. To deal with such litigation it is necessary for the lawyer or insurance claims person to understand construction and the parts needed to build a structure. This, and the previous videos work to provide the information needed as adapted from my books on Construction Defects and Insurance.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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The US DOJ Takes on Insurance Fraud

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Insurance Fraud as a Federal Crime

Fear of hard federal jail time should be rampant among fraud perpetrators in the United States who stage automobile accidents, fake trip-and-fall accidents, present or assist fraudulent workers’ compensation claims, or abuse health insurers because the U.S. Department of Justice (DOJ) is now awake to insurance fraud. Unlike most states, when convicted of a federal crime, the defendant will actually serve almost all of the time given at sentencing.

Staged accident perpetrators who, in the past, understood that if they were caught, they faced no more than an order of restitution and a few weeks in the county jail, now face hard time. When prosecuted in federal court the same people now face up to ten years in the federal penitentiary.

The reason for federal prosecution of insurance fraud was stated in United States v. Lucien, 347 F.3d 45 (2d Cir. 10/14/2003) where the 2nd Circuit Court of Appeal, in a case of first impression, upheld the convictions of people involved in staging automobile accidents, for violation of Federal Health Care Fraud statutes. The Second Circuit explained that because health care fraud drains billions of dollars from public and private payers annually, Congress has since 1992 sought a tool to combat the problem. [See Comm. on Gov’t Reform and Oversight, Health Care Fraud All Public and Private Payers Need Federal Criminal Anti-Fraud Protections, H.R. Rep. No. 104-747 (1996)]  “In 1996 Congress enacted the latest in a series of health care fraud statutes making any fraud perpetrated against a public or private payer a federal criminal offense.

The U.S. Department of Justice has created a Health Care Fraud Prevention and Enforcement Action Team (HEAT) that includes senior officials from DOJ and HHS and aims to strengthen existing anti-fraud initiatives while also investing new resources and technology to prevent fraud, waste and abuse. Past efforts have included the expansion of joint DOJ-HHS Medicare Fraud Strike Force teams that have been successfully fighting fraud in South Florida and Los Angeles since 2007. The Medicare Fraud Strike Force team operating in South Florida has convicted 146 defendants and secured $186 million in criminal fines and civil recoveries as of May 2009. After the success of operations in South Florida, the Medicare Fraud Strike Force expanded in May 2008 to phase two in Los Angeles, where 37 defendants have been charged with criminal health care fraud offenses. To date in the Los Angeles cases, more than $55 million has been ordered in restitution to the Medicare program.

Strike Force teams currently operate in the following areas: Miami, Florida; Los Angeles, California; Detroit, Michigan; Houston, Texas; Brooklyn, New York; Baton Rouge and New Orleans, Louisiana; Tampa and Orlando, Florida; Chicago, Illinois; Dallas, Texas; Washington, D.C.; Newark, New Jersey/Philadelphia, Pennsylvania; and the Appalachian Region. Strike Force teams have shut down health care fraud schemes around the country, arrested more than a thousand criminals, and recovered millions of taxpayer dollars. For a listing of recent HEAT enforcement actions go to https://oig.hhs.gov/fraud/strike-force/.

Each Strike Force team brings the investigative and analytical resources of the FBI, HHS-OIG and other law enforcement agencies, as well as the prosecutorial resources of the Criminal Division’s Fraud Section and the local United States Attorney’s Offices (USAOs), to analyze data obtained from CMS and bring cases in federal district court.

Each Medicare Fraud Strike Force team brings the investigative and analytical resources of the FBI and HHS-OIG and the prosecutorial resources of the Criminal Division’s Fraud Section and the United States Attorney’s Office (USAO) to analyze data obtained from CMS and bring cases in federal district court. Strike Force accomplishments from cases prosecuted in all nine areas during FY 2014 include:

  • 165 indictments, informations, and complaints involving charges filed against 353 defendants alleged to have collectively billed the Medicare program more than $830 million;
  • 304 guilty pleas negotiated and 38 jury trials litigated, with guilty verdicts following trial against 41 defendants; and
  • Imprisonment for 248 defendants sentenced during the fiscal year, averaging more than 50 months of incarceration.

In the seven and a half years since its inception, Strike Force prosecutors filed more than 963 cases charging more than 2,097 defendants who collectively billed the Medicare program more than $6.5 billion; 1,443 defendants pleaded guilty and 191 others were convicted in jury trials; and 1,197 defendants were sentenced to imprisonment for an average term of approximately 47 months. These efforts, as you can see, have reduced Medicare payments in several arenas, as you can see in the chart below.

In addition, since Lucien, the Second Circuit, in United States v. Zakhary, 357 F.3d 186 (02/04/2004) concluded that the Mandatory Victims Restitution Act of 1996, as codified at 18 U.S.C. § 3663A and the post-1996 version of 18 U.S.C. § 3664, “requires a court to order full restitution to the identifiable victims of certain crimes, including fraud,” without regard to a defendant’s economic circumstances.  Similarly, in United States v. Gelin, 712 F.3d 612 (1st Cir., 2013) the First Circuit reported that throughout the United States judges, prosecutors, police officers and insurance professionals are seeing organized criminal groups, compromising doctors, chiropractors, attorneys, hospitals, and these groups establish store front clinics, diagnostic testing companies, as well as bogus law offices. “They stage phony car accidents. Fake patients visit the clinics where expensive medical procedures like MRIs and x-rays are billed to insurers, even though not provided to the persons posing as patients. In addition, unfilled prescriptions are billed, kickbacks are paid, and lawyers collect false personal injury claims.”

Therefore, in addition to serving definite time in jail for insurance fraud, the Federal Court can order the criminal to pay the insurer victim full restitution without regard for the defendant’s ability to pay. This does not guarantee payment but since restitution is a condition of probation the thought of spending time in jail becomes a great incentive to the criminal to pay the restitution if the money is available.

All three defendants in the Lucien case participated in staged automobile accidents and fabricated personal injury claims to take advantage of the operation of the New York Comprehensive Motor Vehicle Insurance Reparations Act. The government proved at trial that other conspirators recruited the Lucien defendants to participate in the health care fraud charged by the government.

The trial in the Lucien case was one of six trials arising from related indictments charging numerous individuals with participating in an overarching scheme of health care fraud based on a series of deliberately staged automobile accidents in several boroughs of New York City. Following the accidents, the recruited passengers were referred, in exchange for a fee, to various medical clinics in New York City. The recruited passengers assigned their no-fault insurance benefits to the health care clinics (medical providers), which billed the insurance companies directly. The recruited passengers subsequently pursued their own civil causes of action for their feigned injuries.

To receive no-fault reimbursements, the health care clinics generated fictitious treatment records for the passengers in the accidents. The accident participants used these fictitious medical records to support their claims of personal injury and to obtain settlements from insurance companies.

18 U.S.C. Section 1347 provides

As used in this title, the term “‘health care benefit program’ means any public or private plan or contract, affecting commerce, under which any medical benefit, item, or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item, or service for which payment may be made under the plan or contract.

The statute, 18 U.S.C. § 1347, as the 2nd Circuit explained directs that whoever “knowingly and willfully executes, or attempts to execute, a scheme or artifice. . . to defraud any health care benefit program … shall be fined under this title or imprisoned not more than 10 years, or both.” The common meaning of the word “whoever” is “whatever person, any person at all, no matter who.”

Excerpted from my book, “Insurance Fraud Volume II” available as a Kindle book or a paperback at https://zalma.com/blog/insurance-claims-library/


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

 

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To Deal With Construction Defects it is Necessary to Understand Construction

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A Video Explaining Some of the Construction of a Dwelling

See the full video at  https://rumble.com/c/c-262921 and at https://youtu.be/3vB2cshzSEU

To understand the construction defect claim and the litigation surrounding construction defects, it is necessary to first have a basic understanding of construction, what is proper and prudent and what can go wrong. Building codes prescribe basic standards. When these standards are not followed, or not followed carefully enough, a building can fail. It may leak or lean or even fall down.

Typical single-family homes built during the last century were constructed with a wood frame built on top of a concrete foundation. The foundations are either raised on piers or poured flat on grade. The lumber that makes up the wood frame is usually jacketed with lath (thin wood strips) or a moisture barrier paper with a wire covering that is covered with stucco (a durable porous concrete product), exterior insulation and finish systems (artificial stucco) or wood or vinyl siding. The interior walls are usually finished with drywall (gypsum covered in paper that, when finished, gives the appearance of lath and plaster) or, in older structures, wood lath and plaster. Basic single-family dwellings are usually one to two stories in height and range from 900 to 3,500 square feet. Of course, there are also “mansions” where a single family may reside in a 20,000 square foot structure. It is becoming common to remodel old dwellings of 900 – 1100 square feet into 5,000 to 7,000 square foot “McMansions” on small residential lots. These extreme remodeling efforts often run afoul of claims of construction defect.

Footings

Failure of footings can cause the dwelling to sink, slip, or lean, causing plaster walls and stucco to crack; roofs, windows, and doors to lose their watertight seals; and doors to creak.

Foundations

In addition to footings, foundations can be created using piles of wood, concrete or sometimes metal columns that are driven into the ground and used to support the structure and prevent it from sinking. Piles are either driven down until they hit bedrock, or if bedrock is too difficult to reach, the piles are driven to a depth where the soil friction against the side of the pile is sufficient to prevent any further downward movement.

Framing

Standard walls are 8 to 12 feet high. Boards approximately two inches by six inches (2x6s) are commonplace in residential construction because they provide a wider cavity that accommodates more insulation than the standard; approximately two inch by four inch boards (2x4s). The 2×4 is still most popular for most remodeling and add-ons.

Framing consists of top and bottom plates, wall studs, headers, and trimmers/king studs as needed for window and door openings.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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Convicted Insurance Fraudster Appeals Finding She Breached Probation

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Fraud Perpetrators Have Unmitigated Gall

Kristi Heffington appealed from the revocation of her probation. She argued on appeal that the revocation court’s decision was error even though it was proved that she had sent text messages to herself claiming it came from her past employer dentist who fired her for stealing from his practice and defrauding insurers. In Kristi Heffington v. State Of Maryland, No. 1899, Court Of Special Appeals Of Maryland (July 1, 2021) the appellate court wasted much time dealing with her spurious allegations in an attempt to avoid jail.

FACTS

In 2018, Kristi Heffington pleaded guilty to identity fraud, insurance fraud, and conspiracy for using electronic communications to steal thousands of dollars from her employer, Dr. Ron Moser’s Maryland-based dental practice. In Moser v. Heffington, 465 Md. 381, 388-89 (2019) The circuit court sentenced her to ten years’ incarceration (with all but nine months suspended) and five years’ probation. The conditions of Heffington’s probation included paying restitution and following a “no contact” condition, which required Heffington to “[h]ave no contact with Anne Moser [or Dr.] Ron Moser … including no harassing contact or through third parties.”

Four months later, Heffington filed a motion to terminate her restitution obligation. Her motion alleged that the victims of her crimes, Dr. Ron Moser and his wife, Anne, were harassing her in several ways, most notably by sending an anonymous text message to Heffington’s husband that read “YOUR WIFE WILL DIE IN PRISON.” Attached to Heffington’s motion was a copy of the message, which had been sent through a messaging service called SENDaTEXT. The circuit court denied Heffington’s motion to terminate restitution.

The State thereafter filed a petition to revoke Heffington’s probation. The petition alleged, among other things, that Heffington had violated the conditions of her probation by sending the threatening text message herself and then framing the Mosers for having sent the message. Heffington made it appear that the victims were harassing her and to hide her actions. Heffington also posted numerous items on social media that appeared to come from family members and friends, but were, in fact, generated by Heffington with the intent of threatening and harassing the victims, who remain in fear.

The revocation court held a hearing on the State’s petition. The State presented evidence that Heffington fabricated the threatening text message by remotely logging into the computer of a Colorado dental practice, Relaxation Dental Specialties (“Relaxation”), and using Relaxation’s computer to send the threatening text message through SENDaTEXT. The State established this through the testimony of Relaxation’s business manager, Jessie Brown.

The revocation court admitted the SENDaTEXT email chain into evidence over Heffington’s objection. The revocation court ultimately found that Heffington had fabricated the threatening text message and used it to harass the Mosers in violation of the “no contact” condition of Heffington’s probation.

The revocation court rescinded Heffington’s probation; resentenced her to a term of 10 years’ imprisonment, with all suspended but 18 months and time served credit for 9 months; and imposed a new condition on Heffington’s probation, that she was to make no social media post directed at or involving the victims.

DISCUSSION

The first page of the State’s “Petition to Revoke Probation” alleges that Heffington harassed the Mosers in violation of the conditions of her probation by fabricating a threatening text message and claiming it had been sent by the Mosers. Heffington, by harassing the Mosers in the way she did, engaged in contact with them — contact that violated the “no contact” condition of her probation. It was clear from the petition’s first page that the State was alleging that Heffington violated the “no contact” condition by harassing the Mosers.

Heffington is correct that the State did not explicitly allege that the threatening text message violated the “no contact” condition in the first substantive allegation of the petition to revoke, but the standard for reviewing the petition is not whether Heffington was given perfect notice, but rather whether she was given “focused formal notification” of the allegations against her. A reasonable person reading the petition would have understood that the allegation of harassment in the “Summary” was an allegation of violating the “no contact” condition.

Heffington challenges the sufficiency of the evidence supporting the revocation court’s finding that she violated a condition of her probation.

Hearsay evidence can be admitted under the business record exception. In short, otherwise inadmissible hearsay evidence can be admitted under the business record exception when the document was made by someone at the business with knowledge of the document’s subject, and when the business normally produces such a document as part of its normal business.

In fact, the email chain meets the requirements to be admitted under the standard application of the business record exception. The SENDaTEXT email chain identified Relaxation’s computer’s IP address. Immediately prior to moving to admit the email chain, however, the State had established through witness testimony the same IP address as being the one from which the threatening text message had been sent. Thus, the essential content of the SENDaTEXT email chain—the IP address—was already admitted into evidence and we would not reverse the revocation court even if it had erred in admitting the email chain.

The revocation court had sufficient evidence from which to find that Heffington sent the threatening text message. Competent material evidence existed in support of the revocation court’s factual finding. As a result, it was not clear error for the revocation court to find that Heffington violated her probation.

The State’s petition put Heffington on notice of her alleged violation of probation, and that the revocation court had sufficient evidence to find that Heffington violated her probation.

ZALMA OPINION

I am always amazed at the unmitigated gall, the “chutzpah,” of those convicted of insurance fraud, who use the courts to spend more time and money than the fraudster stole. Ms. Heffington pleaded guilty to the crime. She was lucky, she only had to serve 9 months of a ten year sentence and leave the dentist she stole from alone. She couldn’t resist. She harassed the dentist and tried to get the court, with false evidence, to remove her obligation to make restitution. She got caught and was sentenced to spend another 9 months and she appealed that. She should have been sentenced to serve the full 10 years. Punishment needs to be real if it is to deter future wrongful actions.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

 

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Construction Defects and Insurance

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A Video Explaining the Remedies Available for Defects

See the full video at https://rumble.com/c/c-262921 and at https://youtu.be/VX2IyOOZUns

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

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

Construction Defects and Insurance addresses a wide audience about this escalating, expensive and excessive problem that makes it hazardous to build any structure without sufficient and broad insurance protection. The attorney representing a defendant or plaintiff in a construction defect suit will find this series of books a useful resource to help counsel understand the claims of multiple parties, insurers, and experts involved.

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

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

Construction Defects and Insurance addresses a wide audience about this escalating, expensive and excessive problem that makes it hazardous to build any structure without sufficient and broad insurance protection. The attorney representing a defendant or plaintiff in a construction defect suit will find this series of books a useful resource to help counsel understand the claims of multiple parties, insurers, and experts involved.

Negligence has the same definitions regardless of the state where it is alleged. It has been defined as: “a legal duty owed to the Plaintiff by the Defendant; a breach of that duty; an actual injury to the Plaintiff; and a showing that the breach was a proximate cause of the injury.” “A breach of duty exists when it is foreseeable that one’s conduct may likely injure the person to whom the duty is owed.”

The California Supreme Court upheld a judgment for property damage caused by negligent residential construction in Sabella v. Wisler, 59 Cal.2d 21, 27-30 (1963). The defendant had built a house and offered it for sale to the general public. As it turned out, the defendant’s negligent preparation of the lot, in combination with a subcontractor’s careless plumbing work, later caused leaks, subsidence, and damage to the house. The purchasers sued for negligence.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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Anti-SLAPP Motion by Doctor Charged in Qui Tam Case for Fraud Fails

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Preparing False Medical Reports to Defraud Insurers is not Protected Activities

Strategic Lawsuits Against Public Participation (SLAPP suits) are meritless lawsuits designed to punish parties for constitutionally protected activities (free speech or the right to petition). A defendant can seek to strike a SLAPP suit by filing an anti-SLAPP motion. (Code Civ. Proc., § 425.16.) The defendant must first show the lawsuit arises from its protected activities; if so, the plaintiff can defeat the anti-SLAPP motion by showing its lawsuit has merit.

In The People ex rel. Allstate Insurance Company et al., Plaintiffs and Respondents v. Sonny Rubin, M.D., et al., G059446, California Court of Appeals, Fourth District, Third Division (June 28, 2021) Allstate Insurance Company et al. (Allstate) filed a complaint on behalf of itself and the People (qui tam) against Dr. Sonny Rubin and related medical providers (Rubin). Allstate generally alleged Rubin prepared fraudulent patient medical reports and billing statements in support of insurance claims. Rubin filed an anti-SLAPP motion, arguing the preparation and submission of its medical reports and bills were protected litigation activities.

The trial court denied Rubin’s motion because Rubin failed to show its medical reports and bills were prepared outside of its usual course of business in anticipation of litigation that was under serious consideration.

FACTS

Dr. Sonny Rubin is a physician who controls two medical companies (Sonny Rubin, M.D., Inc., and Coastal Spine and Orthopedic Specialists, Inc.). A portion of Rubin’s practice involves “lien patients” involved in automobile accidents who are referred by attorneys. Lien patients have signed a “medical lien” authorizing their attorney “to pay directly to [Rubin] such sums as may be due and owing… and to withhold such sums from any settlement, judgment, or verdict as may be necessary to pay for” the patient’s treatment (this case only involves lien patients). After providing medical treatment for lien patients, Rubin prepares medical narrative reports, operative reports, and billing statements to be used in support of claims for insurance benefits under policies of insurance issue by Allstate.

Allstate sued on behalf of itself and the People of the State of California (qui tam). The complaint pleaded two causes of action: insurance fraud and unfair competition. Allstate generally alleged Rubin violated the law by: “Presenting or causing to be presented false or fraudulent claims for the payment of a loss of injury under a contract of insurance[.]” (Ins. Code, §1871.7; Pen. Code, §§ 549, 550.) Allstate specifically alleged Rubin recommended unnecessary medical treatments, falsely represented it had treated injuries, engaged in deceptive billing practices, and prepared false invoices for insurance claims. According to Allstate, Rubin “engaged in a conspiracy, scheme, or plan to prepare and present false, fraudulent, and/or misleading narrative reports, operative reports, and billing statements… in support of, or in connection with” claims against Allstate and other insurers.

Rubin filed an anti-SLAPP motion. Rubin argued in its motion to strike that “preparing and providing to the patient’s attorney the necessary documents supporting the medical services provided on a lien, falls within the definition of pre-litigation activities” under the anti-SLAPP statute.

Allstate argued the submission of insurance claims, even where litigation ultimately arises, does not constitute protected conduct under the anti-SLAPP statute. Allstate filed a declaration from a claims investigator that provided:

From 2012 through the present, Plaintiffs received a minimum of 639 claims for payment under contracts of insurance in which services were provided by [Rubin]. Rubin’s billing statements, narrative reports, operative reports, and other medical records were submitted to Allstate to support payment of those claims. This number is conservative, as Plaintiffs continue to receive claims associated with Dr. Rubin.

The trial court ruled that Rubin failed to establish that Allstate’s claims arise from protected activity.

DISCUSSION

Under the anti-SLAPP statute, a defendant ordinarily has the burden of establishing a plaintiff’s claims arise from its protected activity; if the defendant met its burden, the burden shifts to the plaintiff to establish its claims have merit.

An act in furtherance of a person’s right of petition includes:

  1. any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, and
  2. any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body.

Pre-litigation communications may constitute protected activity, but only if those communications are related to litigation that is contemplated in good faith and under serious consideration. Litigation is not under serious consideration if it is only a “possibility.”

The submission of claims to an insurer for payment in the regular course of business prior to the commencement of litigation is not an act “in furtherance of the right of petition” within the meaning of the anti-SLAPP statute. The filing of purportedly false insurance claims is also generally not protected right-to-petition activity under the anti-SLAPP statute.

The possibility of litigation in the event of nonperformance is not enough to conclude the claim is made in anticipation of litigation contemplated in good faith and under serious consideration. An insurance claim cannot be transformed from a simple claim for payment submitted in the usual course of business into protected pre-litigation conduct solely on the basis of the subjective intent of the attorney submitting the claim.

That the patients have retained attorneys to pursue their claims is of no moment. Even communications directly from attorneys were unprotected if they were attempts to resolve claims without filing suit.

The Court concluded that the documents were prepared in the regular course of business and therefore are not protected activity. A review of Rubin’s claims about billing further supports this conclusion that its written reports were prepared in the regular course of business. The purpose of a bill is to recover payment owed. Rubin’s bills might eventually become evidence of damages in personal injury litigation, and Rubin may expect that payment will come from the proceeds of that litigation. However, the bills themselves are an accounting of services rendered for which Rubin expects payment. The form medical lien states that “payment for medical services rendered by said Doctor is not contingent upon any settlement, judgment, or verdict.” The patient is responsible for the bill no matter what happens-whether he litigates his case, settles it, or chooses to abandon his claim entirely. The invoices were, therefore, documents prepared in the regular course of business to secure payment for services rendered.

Rubin has failed to establish that Allstate’s claims arise from Rubin’s protected right-to-petition activity. Neither Rubin’s declaration, nor the medical lien form, support Rubin’s contention that his alleged conduct qualified as protected third party litigation activity under the anti-SLAPP statute as a matter of law.

Costs on appeal are awarded to Allstate

ZALMA OPINION

Insurance companies like Allstate, frustrated by the failure of state prosecutors to charge fraud perpetrators with the crime of insurance fraud, are becoming proactive by suing the fraudsters in qui tam lawsuits to take the profit out of the crime. Dr. Rubin attempted to avoid the qui tam action with an Anti-SLAPP motion only to find his lien agreement turned his involvement into regular business activities not protected by the Anti-SLAPP laws. Insurance Fraud is a very profitable business for the perpetrators and, as a result, they have funds to fight attempts to reduce or deter their attempts at fraud. Allstate refused to be deterred and should be commended for being proactive against insurance fraud.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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Domicile v. Residence in Homeowners Insurance Claims

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A Video Explaining the Hazards of Failing to Reside in the Dwelling the Risk of Loss of Which Was Insured

See the full video at https://rumble.com/c/c-262921 and at https://youtu.be/wHdmDoumNLw

Insurance companies often see disputes relating to the terms “domicile” and “residence” when dealing with a homeowners policy. It is important, therefore, that everyone in the business of insurance must understand the meaning, and application, of the terms to insurance claims and how they relate to individuals and corporations that are insured or insurers.

Although a person may have more than one residence, he or she may only have one domicile at any one time. [Nat’l Artists Mgmt. Co. v. Weaving, 769 F. Supp. 1224, 1227 (S.D.N.Y. 1991)].

The controlling factor in determining residency, on the other hand, is intent, as evidenced primarily by the acts, of the person whose residence is questioned. [Farmers Auto Insurance Ass’n v. Williams, 213 Ill. App. 3d 310, 314 (2001), Direct Auto Ins. Co. v. Grigsby, 2020 IL App (1st) 182642-U (Ill. App. 2020).]

In the context of automobile insurance exclusions, residence is determined on a case-by-case basis using factors such as intent and relative permanence. [Potter v. State Farm Mut. Auto. Ins. Co., 996 P.2d 781, 783 (Colo. App. 2000); Grippin v. State Farm Mut. Auto. Ins. Co., 409 P.3d 529 (Colo. App. 2016)]

In Holland v Trinity Health Care Corp, 287 Mich App 524, 527-528; 791 NW2d 724 (2010) the Court defined the verb “reside” as to dwell permanently or for a considerable time, to live. In doing so, the Court expressly explained that the definition of “reside” is not synonymous with the legal definition of “domicile,” which may have a more technical meaning than intended in the home insurance context under the policy language at issue. The term “reside” requires that the insured actually live at the property.

The homeowners policy language unambiguously requires that the property at issue be the insured’s “residence premises” for coverage to apply. It does not require that the property be the Insured’s domicile.

The “insured location” was defined in relevant part to mean “the residence premises,” and the “residence premises” was defined to mean the dwelling where the insureds “reside and which is shown as the ‘residence premises’ in the Declarations.” Faced with such clear and unambiguous language, a court is required to enforce the exact language of the policy that unambiguously required the insured to reside at the insured premises at the time of the loss. If the insured resided in a different location there could be no coverage.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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Pollution Exclusion Applies to Coal Dust

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Refusal to Defend Criminal Conspiracy to Fake Amount of Coal Dust in Mine

The Department of Justice has indicted several former employees of Armstrong Coal Company for conspiring to submit fraudulent coal-dust samples to federal regulators. The plaintiffs seek defense from Armstrong’s insurer, Arch Insurance Company. The district court granted summary judgment in favor of Arch. Some of those  charged sought defense from Arch in Charley Barber; Glendel “Buddy” Hardison; Brian Keith Casebier; Steve Demoss; John Ellis Scott; Dwight Fulkerson v. Arch Insurance Company, No. 20-6307, United States Court Of Appeals For The Sixth Circuit (July 7, 2021)

FACTS

Mining coal creates coal dust, and inhaling coal dust causes “black lung.” To prevent miners from contracting black lung, the Department of Labor’s Mine Safety and Health Administration (“MSHA”) limits the concentration of coal dust that can be in the air in a mine and requires coal companies to monitor and report their dust levels. If a mine is too dusty or the coal company fails to follow the MSHA’s regulations, the agency can halt production and assess fines.

Armstrong Coal Company was subject to these monitor-and-report requirements but had a checkered history of compliance. According to the Department of Justice, Armstrong’s coal-dust violations were intentional. In 2018, a federal grand jury indicted eight Armstrong employees on one count of conspiracy to defraud the United States, in violation of 18 U.S.C. § 371. Plaintiffs are among those charged.

The employees were charged with conspiracy to falsify coal-dust samples. Throughout the criminal proceedings, the employees have sought defense against their charges from Armstrong’s insurer, Arch Insurance Company, under the coal company’s directors, officers, and organization liability insurance policy (the “D&O Coverage”). Generally, the policy provided that Arch would pay any Armstrong employee’s defense costs related to a criminal proceeding that resulted from the employee’s wrongful act.

Regardless, Arch denied the employees’ claims, concluding that a pollution exclusion barred coverage. The exclusion provided that Arch would not be liable for any claim “arising from, based upon, or attributable to” any discharge (or threat of discharge) of any “pollutant” or any “direction, request or voluntary decision” to test for or monitor any “pollutant.” Arch determined that coal dust was a “pollutant” and that the criminal proceedings arose from a direction to monitor and test for coal dust. A

The employees sued Arch. The district court held that the pollution exclusion precluded coverage of the criminal action.

ANALYSIS

Because no facts are disputed, the case turned on the interpretation and construction of an insurance contract, which is a matter of law for the court.

Although Kentucky prefers liberal construction of ambiguous insurance policies that does not mean that every doubt must be resolved against the insurer and does not interfere with the rule that the policy must receive a reasonable interpretation consistent with the parties’ object and intent or narrowly expressed in the plain meaning and/or language of the contract.

Despite the seemingly broad initial grant of coverage, the policy provided that Arch “shall not pay Loss for any claim against an Insured” “arising from, based upon, or attributable to any: ‘a. discharge, dispersal, release, escape, seepage, migration or disposal of Pollutants, nuclear material or nuclear waste or any threat of such discharge, dispersal, release, escape, seepage migration or disposal; or b. direction, request or voluntary decision to test for, abate, monitor, clean up, remove, contain, treat, detoxify or neutralize Pollutants, nuclear material or nuclear waste[.]’”

Arch and the district court concluded that this pollution exclusion applied to the employees’ claims, and that they were not entitled to coverage.

The employees argued that substances are not pollutants if they are “used for their intended purposes, used in an appropriate confined space, or when they are disposed of properly.” Because the coal dust here never left the mine, the employees argued that it cannot be considered a pollutant. In their view, “coal dust will not qualify as a pollutant when it remains confined to the space in which it belongs.”

The question before the court was not really whether coal dust is generally a pollutant, but rather whether coal dust is a “contaminant or irritant,” terms that do not fit the employees’ proposed wrong-place test but are part of the exclusiion. The employees conceded that “coal dust may be considered a contaminant or irritant, especially when released into an environment where it does not belong,” but argued that “it should not automatically be considered one under Kentucky law.”

The presence of an additional exclusionary category indicates that “pollutant” means something different here; it is not only a substance that actively pollutes, but also a substance that is regulated because of its potential to pollute. Given the strict monitor-and-report requirements imposed by the MSHA, coal dust falls within the scope of this term.

Concluding that coal dust is a contaminant or irritant under the terms of these policies and the circumstances of these claims. The scope of this pollution exclusion is broader than usual because it includes claims arising from Armstrong’s regulation of contaminants and irritants.

Because coal dust contaminates and irritates, and because it is regulated by Armstrong, it fits comfortably within the exclusion’s intended scope.

In this case the substance involved is a byproduct that has no intended purpose and that is regulated precisely because of its inherent ability to pollute, contaminate, and irritate. The court insisted, appropriately, by applying the literal terms of a pollution exclusion.

Since there is a causal connection between the criminal proceedings and a direction to test for and monitor coal dust, there are likely other causes that also contributed to the criminal charges, such as the conspiracy itself and the unsatisfactory conditions in the mines. If the employees had submitted honest samples of a dusty mine or if the mine had been clean enough to pass muster without resorting to fraud, prosecutors likely would not have pressed charges. But for a claim to arise from a direction to test for or monitor coal dust, it need only have some causal connection to those regulatory requirements. Absent the regulations, the employees would not have had to monitor or submit samples at all, and therefore would not have conspired to commit fraud against the United States. Accordingly, the criminal proceedings arose from a direction to test for or monitor a pollutant, and the pollution exclusion bars coverage for the criminal proceedings.

Since the employees are not entitled to coverage under the policies disposes of the employees’ ancillary arguments the pollution exclusion relieves Arch of any duty related to the employees’ claims. The Kentucky Supreme Court has squarely rejected the employees’ other argument that they can proceed on a bad-faith denial claim even if they are not entitled to coverage. Without an obligation to provide coverage, the bad faith claim must fail as a matter of law.

ZALMA OPINION

It is essential to every duty of defend case to read the entire policy and its provisions as they apply to the facts that bring about the claim. In this case the Sixth Circuit read the entire policy, refused to accept the creative interpretations posed by the plaintiffs who tried to limit the review to parts of the policy not the policy exclusions as a whole and the facts as determined. Since there was no coverage for defense there could be no bad faith.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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Actual Cash Value Applied to Appraisal of Property Losses

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A Video Explaining the Interpretation of Actual Cash Value

See the full video at https://rumble.com/c/c-262921; and at https://youtu.be/_m3lbfaeFX4

Determining the actual cash value of an item of personal property is often difficult and is subject to different interpretations across multiple jurisdictions. When an insurer and insured cannot agree on the amount of actual cash value loss they have the right to seek appraisal — a limited form of arbitration that may only determine the amount of actual cash value and loss.

Depending on the wording of the policy or local state law Actual Cash Value (ACV) can be determined by subtracting from full replacement cost depreciation, based on the age and usefulness of the property involved. In other jurisdictions or because of various policy wordings, ACV can be the difference between the fair market value (FMV) of the item before the loss and its FMV after the loss.

Some states apply the broad evidence rule and will take into consideration the use of depreciation, consideration of FMV, or any other evidence that will provide true ACV to the insured.

Limiting coverage to ACV does result in lower premiums, but it could end up leaving the insured with a large gap between the amount of the indemnity recovered after a loss. ACV may not be sufficient to rebuild the dwelling or replace the contents.

For example, if the structure of the dwelling is in poor physical condition, is old, or was constructed with a design that is no longer popular its FMV might be very small with most of its value in the land. In some cases, the structure even detracts from the full value of the land and structure so its ACV may be zero while its replacement cost could be $500,000 or more. It is imperative, therefore, before selecting a policy limit that the insured understands the structure’s ACV and its full RCV.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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Zalma’s Insurance Fraud Letter – July 15, 2021

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ZIFL – 7-15-2021

Three Types of Insurance Fraud

See the full copy of Zalma’s Insurance Fraud Letter at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-barry-zalma-esq-cfe-6821410667199905792 and see the full video at See the full video at https://rumble.com/c/c-262921 and at https://youtu.be/pFJvZHq8nXc 

Post-dating a Loss

This fraud technique involves a loss at a time when an individual has no or inadequate insurance. Following the loss, the individual applies for insurance or increases the limits of existing coverage. After a period of time (usually several days or weeks), a fraudulent claim is submitted for a loss reported to have happened after the new policy came into effect. Failure of the insurer, or its agent, to see the property (especially if the insurer has included the items on its schedules) before issuance of a policy is an invitation to this type of fraud. There is an unwritten exclusion in every insurance policy that requires that every covered loss must be fortuitous, that is, be the result of a contingent or unknown event. Attempting to post-date an auto loss is often difficult and if there is a police report, impossible.

Insurance policies typically come into effect at 12:01 a.m., standard time on the day the policy is purchased. If a person has an auto accident, fire or theft at 10:00 a.m. he may go to an insurance agent, purchase a policy that goes into effect at 12:01 a.m. that day, and make claim on the new policy.

Because the insurance fraud perpetrator will report that the loss occurred the day after the policy date, this type of scheme usually fails. When there is evidence that the insured knew about the incident before the policy was acquired or that there exists evidence when it actually happened, like a police or fire report, this type of fraud will fail.Paper Property

This sort of fraud involves property that never existed or was never owned by the insured. It can be the most difficult type of staged loss to defeat. Paper property can appear in a staged loss or in a legitimate claim, where paper property is used to inflate the claim amount. In the presentation of the claim, the insured produces a receipt (original or duplicate) or an appraisal. The document is either fraudulent (examples include the use of computers or even white-out paint and a photocopier to change the name of the owner) or represent the value of an item owned by another individual.

For example, an insured who purchased jewelry at a department store on a credit card, took the jewelry to an appraiser, returned the jewelry for full credit and then reported it stolen. The jewelry (no longer in her possession) was then insured by means of the appraisal and a loss was reported shortly thereafter. The receipt presented to the insurer was legitimate and if the receipt was not verified with the vendor the fact that it was returned and is still in inventory at the vendor will never be discovered.

In one of my cases my investigator went to the vendor to verify the sales receipt. It was verified and then the vendor asked the investigator: “would you like to see it?” He then pulled the item out of a showcase and provided the investigator with the receipt showing he refunded the insured the purchase price when it was returned.

Health Insurance Fraud

The nation’s bill for health care fraud is enormous ¾ as large as $300 billion or more every year. Fraud takes place at many points in the health care system, in hospitals, nursing homes, and diagnostic facilities, by doctors, attorneys, health care providers, durable equipment providers, and patients.

One large area prone to fraud is the Medicare system. This system processes more than 800 million claims a year with 70 different contractors handling the claims that come from hundreds of thousands of doctors, laboratories, and other health practitioners and facilities.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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

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Rescission of Insurance

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A Video Explaining The Equitable Remedy and Insurance

See the full video at Rumble.com at https://rumble.com/c/c-262921 and at https://youtu.be/CUsYs92Sn6o

Rescission is an equitable remedy as ancient as the common law of Britain. When the United States was conceived in 1776 the founders were concerned with protecting their rights under British common law. They adopted it as the law of the new United States of America modified only by the limitations placed on the central government by the U.S. Constitution approved in 1789. The viability and ability to enforce contracts was recognized as essential to commerce. Courts of law were charged with enforcing legitimate contracts.

Courts of equity were charged with protecting contracting parties from mistake, fraud, misrepresentation and concealment since enforcing a contract based on mistake, fraud, misrepresentation or concealment would not be fair. The common law developed rules that courts could follow to refuse to enforce the terms of a contract that was entered into because of mutual mistake of material fact, a unilateral mistake of material fact, the breach of warranty (a presumptively material promise to do or not do something), a material concealment, or a material misrepresentation.

The remedy – called rescission – created a method to apply fairness to the insurance contract and allow an insurer to void a contract and allowed courts to refuse to enforce such a contract entered into by misrepresentation or concealment of material facts. Before making a decision to rescind, the claims investigator and the insurer should seek the advice of competent insurance coverage counsel for an opinion based upon the investigation and the law of the jurisdiction where the policy was made or where it was made to be performed, and, if counsel believes it necessary, the examination under oath of the insured.


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Arsonist with “Chutzpah” Tries to Get Out of Jail Because of Covid-19

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Go Directly to Jail & Stay for the Full 60 Months

After being convicted of arson and sentenced to sixty months in federal prison asked for compassionate release even though he was in good health claiming fear of Covid 19. In United States Of America v. D-1 Ehab Sitto, Case No. 17-20838, United States District Court Eastern District Of Michigan Southern Division (July 7, 2021) the USDC looked at the evidence presented and determined that the request was not for compassion but was a pleading that defined the Yiddish word “chutzpah” or unmitigated gall.

Ehab Sitto is serving a 60-month sentence after pleading guilty to two counts of Malicious Use of Fire, 18 USC 844(i) based on his hiring of person experiencing homelessness to commit arson for the purpose of insurance fraud. The Court sentenced Defendant on May 23, 2019 and a Judgment was entered June 7, 2019. Defendant moved for compassionate release.

FACTS

Defendant has not asserted any medical conditions that are CDC risk factors, but instead offers family history, and current coronavirus infections by family members as well as a generalized concern regarding the possibility that he will contract the coronavirus at Federal Correction Institution Morgantown (“FCI Morgantown” or “Morgantown”).

LEGAL ANALYSIS

A defendant may move for compassionate release under 18 U.S.C. § 3582(c)(1)(A) only after “fully exhaust[ing] all administrative rights to appeal a failure of the Bureau of Prisons to bring a motion on the defendant’s behalf” or “the lapse of 30 days from the receipt of such a request by the warden of the defendant’s facility, whichever is earlier.” 18 U.S.C. § 3582(c)(1)(A).

Under the statute, a court may reduce a defendant’s term of imprisonment:

  • if it finds that extraordinary and compelling reasons warrant such a reduction;
  • if it finds that a reduction is consistent with applicable statements issued by the Sentencing Commission; and
  • after considering the factors set forth in 18 U.S.C. Section 3553(a) to the extent they are applicable.

The defendant bears the burden of proving that “extraordinary and compelling reasons” exist to justify release under the statute.

The Government did not dispute that Defendant has now properly exhausted all administrative remedies. The Government disputed, however, whether Defendant’s health and family circumstances constitutes an extraordinary circumstance warranting his release.

Defendant admitted that he is not suffering from any serious illnesses but instead, asserts that having A+ blood type, a familial background of heart disease, and the type of care available at Morgantown makes him more susceptible to a coronavirus infection. At the time of his presentence interview in 2019, Defendant informed the Probation Department that he was good health, had no chronic illnesses, and was not taking any prescribed medication. Since July 23, 2019, Defendant has not been prescribed any medicine nor required significant medical treatment for any illness, including heart related illnesses.

None of the Defendant’s concerns are on the CDC list of underlying medical conditions for which people are at increased risk for severe illness from the coronavirus. Additionally, Defendant points to the Bureau of Prisons website as proof that Morgantown is not taking the proper coronavirus precautions because the number of cases increased from 74 to 121 over three days in December. As of January 2021, the cases at Morgantown have significantly decreased. Out of 442 inmates, Morgantown has eight active cases, two inmates and six officers.

Defendant has not shown that he is at a heightened risk of severe complications should he contract COVID-19 or that the prison medical staff is incapable of treating his conditions.

CONCLUSION

For the reasons stated above, the Court concluded that Defendant has not established any extraordinary and compelling reasons for a reduction in his 60-month sentence. Defendant’s Motion for Compassionate Release was denied.

ZALMA OPINION

There is no type of insurance fraud that is more evil than arson-for-profit. Firefighters are injured and die putting out such fires, neighbors are injured or die by the spread of intentionally set and accelerated fires. For a man in good health to claim compassionate release because of fear of contracting Covid-19 is an amazing act of unmitigated gall. His act of chutzpah was rejected and he will serve all 60 months of his reservation at the grey bar hotel.


© 2021 – Barry Zalma

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

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

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

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

 

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Ethics and the Adjuster

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A Video Explaining how the Adjuster Must Act Ethically

See the full video at https://rumble.com/vjqvg3-ethics-and-the-adjuster.html and at https://youtu.be/xKfPzG_LZ9Q

Independent insurance adjusters serve insurance companies who do not have sufficient claims staff to handle insurance claims on behalf of those various insurers without staff in every jurisdiction where there is property the risk of loss of which was insured.

The professional insurance adjuster recognizes that the work of adjusting insurance claims is a profession of public trust. Independent insurance adjusters should maintain a standard of integrity that will promote the goal of building public confidence and trust in the insurance industry.

Independent insurance adjusters, and company employed insurance adjusters, should follow standard rules of ethical conduct in the business of insurance in order to act fairly and in good faith to the policy holders, claimants and insurers.

On rare occasions, an insured will act unethically in his, her or its relations with an insurer. When they do, if discovered by the insurer or its claims person, the right to indemnity may be lost. As you read about the decision from the United States Supreme Court below consider how the insured acted unethically to the insurer and why the Supreme Court decided to deprive the insured of his right to indemnity.

Although hoary with age this case still states the law of the United States with regard to unethical and fraudulent conduct by an insured and the insured’s obligation to appear for and testify honestly at an examination under oath.


© 2021 – Barry Zalma

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

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

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

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

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Eighth Circuit Court of Appeals Finds No Physical Loss & No Coverage for Covid Shutdown

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Appellate Court Refuses to Re-Write Policy to Provide Coverage Not Paid For by the Insured

Eighth Circuit Requires Physical Loss to Property

No Insurance Policy Insures Against Every Possible Loss

Oral Surgeons, P.C., offers oral and maxillofacial surgery services at its four offices in the Des Moines, Iowa, area. Oral Surgeons stopped performing non-emergency procedures in late March 2020, after the governor of Iowa declared a state of emergency and imposed restrictions on dental practices because of the COVID-19 pandemic. Oral Surgeons resumed procedures in May 2020 as the restrictions were lifted, adhering to guidance from the Iowa Dental Board. When their insurer refused to pay Oral Surgeons sued.

In Oral Surgeons, P.C. v. The Cincinnati Insurance Company, The Restaurant Law Center Amicus on Behalf of Appellant(s), American Property Casualty Insurance Association; National Association of Mutual Insurance Companies Amici, No. 20-3211, United States Court of Appeals For the Eighth Circuit (July 2, 2021) the Eighth Circuit was asked by Oral Surgeons and some Amici to find the loss of use of its offices was physical loss and Oral Surgeons were entitled to business interruption benefits.

FACTS

Oral Surgeons submitted a claim to The Cincinnati Insurance Company (Cincinnati) for losses it suffered as a result of the suspension of non-emergency procedures. The policy insured Oral Surgeons against lost business income and certain extra expense sustained due to the suspension of operations “caused by direct ‘loss’ to property.” The policy defines “loss” as “accidental physical loss or accidental physical damage.”

Cincinnati responded that the policy did not afford coverage because there was no direct physical loss or physical damage to Oral Surgeons’s property. Oral Surgeons sued.  The district court granted Cincinnati’s motion to dismiss, concluding that Oral Surgeons was not entitled to declaratory judgment and that it had

Oral Surgeons alleged that the COVID-19 pandemic and the related government-imposed restrictions on performing non-emergency dental procedures constituted a “direct ‘loss’ to property” because Oral Surgeons was unable to fully use its offices. Oral Surgeons argued that the policy’s disjunctive definition of “loss” as “physical loss” or “physical damage” creates an ambiguity that must be construed against Cincinnati. To give the terms separate meanings, Oral Surgeons suggests defining physical loss to include “lost operations or inability to use the business” and defining physical damage as a physical alteration to property. Amicus Restaurant Law Center contended that “physical loss” occurs whenever the insured is physically deprived of the insured property.

ANALYSIS

An appellate court must construe the policy to give effect to the intent of the parties. Intent is determined by the language of the policy itself, unless there is ambiguity. Ambiguity exists only when policy language is subject to two reasonable interpretations. Generally speaking, the plain meaning of the insurance contract prevails.

The Cincinnati policy clearly requires direct “physical loss” or “physical damage” to trigger business interruption and extra expense coverage. Accordingly, there must be some physicality to the loss or damage of property. Oral Surgeons needed to prove, therefore, that a physical alteration, physical contamination, or physical destruction of its property brought about a loss.

The common usage of “physical” in the context of a loss therefore means the loss of something material or perceptible on some level. The policy cannot reasonably be interpreted to cover mere loss of use when the insured’s property has suffered no physical loss or damage. The Eighth Circuit refused to find “loss of use” and “physical loss or damage” synonymous. Rather, they are opposites.

The unambiguous requirement that the loss or damage be physical in nature accords with the policy’s coverage of lost business income and incurred extra expense from the date of the physical damage to the insured’s property until the insured restores the damaged property to use.  The “period of restoration” begins at the time of “loss” and ends on the earlier of:

  • The date when the property at the “premises” should be repaired, rebuilt or replaced with reasonable speed and similar quality; or
  • The date when business is resumed at a new permanent location.

Property that has suffered physical loss or physical damage requires restoration. That the policy provides coverage until property “should be repaired, rebuilt or replaced” or until business resumes elsewhere assumes physical alteration of the property, not mere loss of use. When the only reason the property was not used was an order of a governmental agency is not a physical loss, or physical damage. In fact, the property where Oral Surgeons practiced was unchanged during the entire time they could not perform Oral Surgery.

The complaint pleaded generally that Oral Surgeons suspended non-emergency procedures due to the COVID-19 pandemic and the related government-imposed restrictions. The complaint thus alleged no facts to show that it had suspended activities due to direct “accidental physical loss or accidental physical damage, regardless of the precise definitions of the terms “loss” or “damage.”

The policy clearly does not provide coverage for Oral Surgeons’s partial loss of use of its offices, absent a showing of direct physical loss or physical damage. Where no ambiguity an appellate court will not write a new policy to impose liability on the insurer.

ZALMA OPINION

There is no question that the orders closing businesses due to fear of spreading Covid-19 caused damage – a loss of business income – to Oral Surgeons and all other businesses who were forced to close down by order of the state or some entity. That order did not damage the property that was the subject of the insurance and there was no need to restore it since once the order was pulled the business of Oral Surgeons was able to begin immediately. No insurance policy insures against every possible loss. The loss claimed by Oral Surgeons was one for which no insurance benefits were available.


© 2021 – Barry Zalma

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

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

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

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

 

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A Video About The Public Adjuster & Fraud

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Every Profession has the Occasional Crook

See the full video at https://rumble.com/vjmohb-a-video-about-the-public-adjuster-and-fraud.html and at https://youtu.be/O6LEJtpb9dk

When a public insurance adjuster exceeds his or her authority and attempts to defraud an insurer on behalf of the adjuster’s client, the standard “Concealment or Fraud” provision precludes the insureds from obtaining any recovery under their policies as the claims submitted by Berson, their public insurance adjuster, in his capacity as their agent, were fraudulent. [Astoria Quality Drugs, Inc. v. United Pacific Ins. Co. Of NY, 163 A.D.2d 82, 557 N.Y.S.2d 339).] “Chubb, therefore, is entitled to full recovery of the claims paid.” [Chubb & Son v. Consoli, 283 A.D.2d 297, 726 N.Y.S.2d 398, 2001 N.Y. Slip Op. 04550 (2001).]

The Texas legislature has statutorily made a contract that is void for illegality under the common law enforceable or voidable at the option of the least culpable party—the insured—when a person contracts with the insured to perform services as a public insurance adjuster but does not have a public insurance adjuster’s license. [Lon Smith & Assocs., Inc. v. Key, 527 S.W.3d 604 (Tex. App. 2017

In U.S. v. Saada, 212 F.3d 210 (3rd Cir., 1999) the government’s evidence at trial showed that:

[i]n 1990, appellants contacted Ezra Rishty, Isaac’s cousin, for help in an insurance fraud scheme. Rishty was a public insurance adjuster in New York City who had conspired with various clients in over 200 fraudulent insurance schemes in the past.

Rishty agreed to assist Isaac in filing a fraudulent insurance claim, and enlisted the help of Morris Beyda, a former employee who by then owned his own business. Rishty also enlisted the help of Sal Marchello, a general adjuster for the Chubb Insurance Group (“Chubb”), which was Scrimshaw’s insurer. Marchello assured Rishty that Chubb would assign him to handle the future Scrimshaw claim.

In U.S. v. Lemm, 680 F.2d 1193 (8th Cir. 1982) a scheme to defraud insurers was defeated with the testimony of a putative PA. He explained to the trial court that the arson and insurance fraud activities underlying the convictions of various defendants resulted from fire to fire, but a general scenario was summarized by Eugene P. Gamst, the government’s chief witness, who was a public insurance adjuster licensed in Minnesota. The government’s case showed that at some point in the early 1970’s Gamst began mixing his legitimate adjustment activities with arson, eventually becoming the center of an arson ring alleged to have existed from April 1, 1975 to September 1, 1978.

The basic mode of operation was that Gamst, or occasionally another coconspirator, would recruit an individual to start an arson fire for insurance proceeds. Gamst would instruct the individual how to start the fire, how to act, and what to tell the authorities. After the fire, Gamst would pose as a legitimate public adjuster of an accidental fire. Occasionally, Gamst would also act as a private contractor and repair the fire damage in order to obtain a larger portion of the insurance proceeds. The roles of the other conspirators included providing seed money for the purchases of property, locating property for burning, providing property to be burned, preparing and torching the property, and recruiting others to the scheme resulted in convictions.

In Everett Cash Mutual vs. Bonnie Sue Gibble, the Court of Common Pleas of Lycoming County, Pennsylvania, NO. 01-01,640 was faced with a motion to exclude expert Testimony of Patrick Cassidy, Defendants’ proposed expert witness.

When Ms. Gibble’s furnace emitted soot into her home and the claim made with her homeowner’s insurance company, was not handled to Ms. Gibble’s satisfaction. Ms. Gibble sought the assistance of Mr. Cassidy, a public adjuster, and signed a “Public Adjustor Contract”, retaining Cassidy Public Adjustment “to advise and assist in the adjustment of the insurance claim”, agreeing to pay a contingent fee comprising a certain percentage “of the amount paid by the insurance companies in settlement of [the] loss and necessary expenses.”

After making several payments, including one which it offered as payment in full satisfaction of the claim, which payment Defendants refused to accept, Plaintiff filed the instant action, seeking a declaratory judgment that it had fulfilled all of its obligations under the insurance contract. Defendants counter-claimed for breach of contract, negligence, intentional infliction of emotional distress, unfair trade practices act violations and bad faith, and also joined the adjusters brought in by the insurance company as additional defendants. In support of their claims, Defendants plan to introduce the testimony of Mr. Cassidy as an expert witness, and in that regard have provided Plaintiff with a copy of his report, in which he opines, inter alia, that Plaintiff and Additional Defendants “did not follow proper claims practice.”

Gibble, in response, argue that Mr. Cassidy is acting as an expert in his role as a consultant, at the rate of $75 per hour, and only his work as a public adjuster is subject to the contingent fee agreement.

The long established rule of law that a special contract to pay more than the regular witness fees in ordinary cases is void for want of consideration and as being against public policy. Section 552 of the Restatement of Contracts, which provides, in subsection (2): “[a] bargain to pay an expert witness for testifying to his opinion a larger sum than the legal fees provided for other witnesses is illegal only if the agreed compensation is contingent on the outcome of the controversy.”

In In Re Mushroom Transportation Co., Inc., Debtor, 70 B.R. 416 (E.D. Pa. 1987), the court precluded an expert witness from testifying at trial because of a contingent fee arrangement whereby the expert had been hired to assist the debtor in a bankruptcy proceeding in collecting monies allegedly due the debtor from a certain party. Public adjusters, when acting as an expert witness, must be paid a reasonable fee. They may not share in the recovery.

The testimony of interested lay witnesses about historical facts generally does not pose a risk of the same proportion as that of an expert with a contingent financial interest. The concealment of a contingent financial arrangement with a witness would be unconscionable. With the disclosure of such an arrangement, an opinion proffered by an expert would likely be so undermined as to be deprived of any substantial value.

Defendants’ attempt to segregate Mr. Cassidy’s work as an expert witness from his work as a public adjuster claiming it was “merely one of form” failed. It was also of no consequence that the public adjuster contract was entered into prior to the commencement of litigation.

Mr. Cassidy’s preparation of the expert report followed the commencement of litigation and, as Defendants admit, Mr. Cassidy will be entitled under the contingent fee agreement to a percentage of any damages awarded for their loss. The Court concluded, therefore, that the opinion rendered in the report is “so undermined as to be deprived of any substantial value”. While he may testify as a fact witness with respect to his adjuster role, Mr. Cassidy must be precluded from giving any opinion as an expert witness.

A contingent fee can bring the expert much more than an hourly rate would provide. Because of the opportunity of a windfall public adjusters and lawyers are willing to gamble they will get nothing for their efforts in exchange for the opportunity of a windfall. That opportunity colors the testimony a public adjuster, who will profit from a verdict, as an expert and such testimony must be precluded.

When I was an adjuster, I dealt with one PA who had a methodology to increase the value of every fire claim he had contracted: his insureds would always lose 10 cans of Libby’s Peas and a Lalique perfume bottle.

When the insured was questioned about the list of claimed losses, she testified that she always bought Green Giant peas, never more than two cans at a time, and had never even heard of Lalique perfume – a brand that does not exist although Rene Lalique made beautiful crystal perfume bottles.

It is incumbent on an adjuster, when dealing with a claim presented by a public adjuster to compel the PA to produce some evidence to support the claim or review the claim in detail with the insured who probably never saw the proof of loss and proof of claim prepared by the PA.


© 2021 – Barry Zalma

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

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

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

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

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Zalma on Insurance Claims – Three New Third Edition Volumes

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Zalma on Insurance Claims Moves to Third Edition

Zalma on Insurance Claims Volume 101 – Third Edition

A Comprehensive Review of insurance, insurance claims, the law of insurance and policy interpretation Paperback– May 26, 20211

This volume covers

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

The author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.

Available as a paperback, Available as a Kindle Book, Available as a Hardcover

Zalma on Insurance Claims Part 102 – Third Edition

Zalma on Insurance Claims, Part 102, Third Edition is the second volume in the latest addition to Barry Zalma’s insurance claims series of books and articles. It is the second part of Zalma on Insurance Claims, a ten-volume treatise on insurance claims, insurance coverage, insurance fraud and insurance law. The ten-volume treatise is one of the most thorough, up-to-date, expert-authored insurance claims guide available today.

Written by nationally-renowned insurance coverage expert Barry Zalma, an insurance coverage attorney, consultant, expert witness and blogger, Zalma on Insurance Claims provides in-depth explanations, analysis, examples, and detailed discussion of:  

  • Other Insurance Clauses.
  • Resolution of Conflicts Involving “Other Insurance” Clauses
  • Trigger of Coverage/Property Damage
  • Underwriting
  • Conditions
  • Warranties
  • Coinsurance and Deductibles
  • Exclusions
  • Other Insurance Clauses Checklist
  • Exclusions Checklist

Available as a hardcover Available as a Kindle book  Available as a paperback

Zalma on Insurance Claims Part 103 Third Edition

This, the third part of a 10-volume treatise on insurance claims is the latest addition to Barry Zalma’s insurance claims series of books and articles is part of the most thorough, up-to-date, expert-authored insurance claims guide available today. Written by nationally-renowned insurance coverage expert Barry Zalma, an insurance coverage attorney, consultant, expert witness and blogger, Zalma on Insurance Claims provides in-depth explanations, analysis, examples, and detailed discussion of:

  • Duties Of The Insured And The Insurer
  • Duties Of The Public Adjuster
  • Excellence In Claims Handling
  • Liability Insurance Claims
  • No Tort Remedy For Non-Insurance Claims Bad Faith.
  • Duties And Liabilities Of Insurance Brokers
  • Declaring A Policy Void
  • Rescission
  • Processing A Claim
  • The Public Adjuster
  • Common Mistakes And Omissions To Avoid.
  • The Proof Of Loss
  • California Insurance Code § 2071.
  •  Letter To Insured From Adjuster.
  • Form Letter To Insured Re: Contractor
  • Amendment To The California Insurance Code Re: Public Adjusters
  • Amendment To The California Insurance Code.
  • Form Letter: Advising Of Right To Appraisal
  •  Form Letter: Reservation Of Rights Letter

The author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Available as a paperback  and Available as a Kindle Book


© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

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Third Party Insurance Fraud

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A Video Explaining the Investigation of Third Party Insurance Fraud

See the full video at https://rumble.com/vjl56t-third-party-insurance-fraud.html and at https://youtu.be/ht5g5QzVBfo

Insured Suspected

If the insured is suspected of involvement in a third party insurance fraud, like a staged automobile accident, it will be necessary for the insurer to retain two attorneys.  One attorney will be required to defend the insured under the terms of the policy.  This attorney owes his or her primary duty to the client, not the insurer, so will not be advised of the potential fraud.  If he or she learns of facts that prove the insured is involved in fraud, the attorney may not disclose that information to the insurer.  He or she is also ethically obligated to refuse to participate in the fraud and would, therefore, withdraw from the defense.

Insured not Suspected

When the insurer suspects that the insured is the victim of a fraudulent claim, counsel is retained to represent the insured and given full information about the fraud. Such an attorney should be a special breed of counsel, ready to take every case presented to them to a trial before a jury. These attorneys are selected not for their negotiation skills but rather for their trial skills.

An insurer intent on defeating fraud will instruct counsel to try to a verdict every case where fraud is suspected and capable of proof. No authority should be provided for settlement other than to accept a dismissal of the suit with prejudice.


© 2021 – Barry Zalma

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

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

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

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

 

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Keeping Public Adjusters Professional

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ETHICS AND THE PUBLIC INSURANCE ADJUSTER

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.

Some insurers, because of the lack of trained staff, denied claims that should not have been denied. The errors caused the state of California to pass a law allowing insureds to sue their insurers as late as 2002, four years after expiration of the statute of limitations and eight years after expiration of the private limitations of action provision of most policies. This change in the limitation period brought about many proper suits and some spurious actions.

Insurers are not the only entities who acted unethically. Some public insurers, acting alone or with the assistance of unscrupulous lawyers, violated the standards set by NAPIA and the covenant of good faith and fair dealing.

In U.S. v. Saada, 212 F.3d 210 (3rd Cir., 1999) the U.S. presented evidence at trial showed that, in 1990, appellants contacted Ezra Rishty for help in an insurance fraud scheme. Rishty was a public insurance adjuster in New York City who had conspired with various clients in over 200 fraudulent insurance schemes in the past. Rishty agreed to assist Isaac in filing a fraudulent insurance claim, and enlisted the help of Morris Beyda, a former employee who by then owned his own business.

In a not officially published opinion the California Court of Appeal dealt a serious blow to an attorney who filed an apparently malicious and unfounded lawsuit against Scottsdale Insurance Company (Scottsdale). The Court of Appeal decided that the attorney must stand trial on an action from an insurer for malicious prosecution because it was highly probable that the suit would be successful.

In bringing the action Scottsdale took an important step that will protect insurers against lawyers and public adjusters who use the courts as a bludgeon – whether proper or not – to force insurers to pay to avoid the costs of litigation. If they take the case to trial and prove the malice a punitive damages award against the lawyer and the public adjuster will go far to chill the proclivity of some lawyers to file suit without sufficient facts on the assumption that everything an insurer does is wrong and in bad faith.

The action began in 1994 after the Northridge earthquake when Regency Royale Homeowners Association (Regency) claimed it sustained damage. Five months later, Regency submitted an application to Scottsdale for earthquake insurance and represented that it was insured through Homestead Insurance Company and had sustained no losses during the previous five years. Scottsdale relied on those representations in issuing a policy to Regency providing coverage from July 1, 1994 to July 1, 1995. On December 26, 2001, Regency’s public insurance adjuster, Kapilow & Son (Kapilow), requested that Scottsdale assign an adjuster to investigate Regency’s claim of earthquake damage under the policy. On December 31, 2001, Stephen Zelig, the lawyer for Regency, filed suit in Los Angeles Superior Court against Scottsdale and others, entitled Waldman et al. v. Golden Bear et al., case No. BC265308 (Waldman).

The complaint was filed under the statute that revived time-barred Northridge earthquake insurance claims provided that the insured had contacted his, her or its insurer prior to January 1, 2000 and the lawsuit was filed prior to January 1, 2002. Zelig was provided the Regency file from Kapilow with insufficient time prior to the filing deadline under the revival statute to undertake an independent investigation of whether Scottsdale was the proper insurer.

Zelig claimed he relied on Kapilow’s representation that Scottsdale insured Regency for the earthquake risk in filing the complaint. Kapilow likewise had not independently investigated whether Scottsdale was the proper insurer. In January 2002, Scottsdale informed Kapilow that Regency’s policy did not provide coverage until six months after the Northridge earthquake and that Homestead Insurance was likely the proper insurer. Scottsdale also advised that Regency had not initiated a claim prior to January 1, 2000 as required under the revival statute. Regardless, Zelig served the Waldman complaint on Scottsdale on July 8, 2002.

In October 2002 Scottsdale responded to Regency’s request for documents in part by producing the declarations page of the insurance policy it had issued to Regency for inception six months after the earthquake. In November 2002, Kapilow informed Zelig’s office that Farmers and State Farm carried coverage on the Regency property at the time of the earthquake. Scottsdale had additional communications with Zelig in April and July asserting it had not insured the risk of the earthquake.

After Scottsdale filed its motion for summary judgment, new counsel, associated in on behalf of Regency, acknowledged that Scottsdale was not the proper insurer. The new lawyer dismissed Scottsdale without prejudice before the summary judgment hearing. Scottsdale incurred in excess of $30,000 in attorney fees in the evaluation and defense of the Waldman action. The trial court concluded that the voluntary dismissal without prejudice in the prior action was a favorable termination of the lawsuit in favor of Scottsdale.

The reasons underlying the voluntary dismissal must be reviewed in each case. The focus is on whether the termination reflected on the merits of the case. The court concluded that evidence that reflects “the opinion of the prosecuting party that, if pursued, the action would result in a decision in favor of the defendant is evidence of a favorable termination. [Minasian v. Sapse (1978) 80 Cal.App.3d 823, 827] Coupled with the evidence tending to show that Scottsdale was not the proper insurer, the dismissal showed that the case against Scottsdale had no merit. The court found such information damning and was satisfied that a “favorable termination” – an element that must be proved to proceed with a malicious prosecution action – was demonstrated by Scottsdale. The court found that Zelig waived his argument about no probable cause or malice by providing no facts or law to back his contentions on appeal.

The essence of allegations of Scottsdale’s suit is malicious prosecution. The suit also claimed that Zelig and Kapilow conspired to commit a malicious prosecution that resulted in damage to Scottsdale.

The court found the allegations were sufficient to state a cause of action against Zelig. Zelig, Kapilow and their client were looking at a probable judgment for $30,000 in attorney’s fees and as much as nine times that amount in punitive damages.

Scottsdale properly took an aggressive stand against a lawyer and public adjuster who it believed blatantly abused the process of the court and maliciously forced Scottsdale to defend a lawsuit that could not possibly succeed. That it gave Zelig and Kapilow the opportunity to avoid the suit by informing them of the true nature of the policy, its effective dates and that it would be impossible for it to respond with indemnity to a claim for damages occurring before the policy came into effect, was kind. Kindness was returned with aggression.

Scottsdale’s reasonable conduct and attempt to resolve the situation in a non-confrontational manner was rewarded by abuse and a refusal by Zelig to be confused with facts. The Court of Appeal was neither confused nor cowed. The results of the trial would have been interesting but the defendants settled. Another appeal resulted when the settlement amount was not paid to Scottsdale.

Adapted from Insurance Fraud – Volume I by Barry Zalma, Volume One available as a Kindle book and a paperback.


© 2021 – Barry Zalma

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

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

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

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

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Tools Available to Insurers to Fight Fraud

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 The Special Investigative Unit

See the full video at https://rumble.com/vjje29-tools-available-to-insurers-to-fight-fraud.html and at https://youtu.be/wLMUAIpp3V4

California, Washington, New Jersey, and Florida are among many states that require each insurer to have an SIU in place.  SIUs help identify and investigate suspicious claims, although some insurance companies outsource this work to other insurers and investigative agencies. An SIU may be a small team whose primary role is to train claim representatives to deal with the more routine kinds of fraud cases or may consist of teams of trained investigators, including former law enforcement officers, attorneys, accountants, and claim experts who work together to investigate fraudulent activities thoroughly. More complex cases, involving large-scale criminal operations or individuals who repeatedly stage accidents, may be turned over to the NICB.

In some cases, the SIU has grown to be a multifaceted organization whose duties are not limited to the investigation of fraudulent claims.

Depending on the way it is organized, the SIU’s work as an integral part of an anti-fraud program that includes the following:

  • investigation of potentially fraudulent claims;
  • education of claims and underwriting personnel about how to recognize potential fraud;
  • education of the public about how insurance fraud affects the average insurance buyer; and
  • liaison with fraud division, police, and prosecutorial agencies.

The CFE

The Certified Fraud Examiner (CFE) is a fraud-fighting professional.  The Association of Certified Fraud Examiners is an international, 25,000-member professional organization dedicated to fighting fraud and white-collar crime.  It was established in 1988, and is based in Austin, Texas.  With offices in North America and chapters around the globe, the Association is networked to respond to the needs of anti-fraud professionals everywhere.

The Expert Attorney

When an insurer suspects fraud, it will usually ask an attorney to get involved.  Attorneys who are retained in such situations are specialists who have either received specialized training or have sufficient experience concerning fraud and the evidence necessary to prove fraud to handle these cases.  Many are CFEs and all make it a practice to attend continuing education classes that relate to fraud issues.

The role of the expert attorney varies depending on the type of claim where fraud is suspected.


© 2021 – Barry Zalma

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

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

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

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

 

 

 

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Waiver of Punitive Damages Must be Clear, Unmistakeable and Unambiguous

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Pre-Injury Waiver Must be Unmistakeably Clear

Jessica Kruger, a doTERRA International, LLC (doTERRA) distributor or Wellness Advocate, purchased a doTERRA product and applied it to her skin before visiting a tanning salon. Shortly thereafter, Kruger was diagnosed with second and third-degree chemical burns. In doTERRA International, LLC v. Jessica Kruger, 2021 UT 24, No. 20191040, Supreme Court Of The State Of Utah (July 1, 2021) the Supreme Court was asked to allow a pre-injury waiver of punitive damages.

Kruger sued doTERRA, seeking, among other things, punitive damages based on doTERRA’s failure to warn about the potential dangers of its product. doTERRA moved for partial summary judgment arguing that Kruger waived the right to seek punitive damages in the paperwork she signed to become a doTERRA distributor. The district court denied that motion and ruled that Utah law does not allow preinjury waivers of punitive damages.

BACKGROUND

Kruger wanted to become a doTERRA Wellness Advocate, which is the term that doTERRA uses for its independent distributors. doTERRA required her to sign a Wellness Advocate Agreement (Agreement). Once a Wellness Advocate, Kruger purchased ClaryCalm, a doTERRA product intended to address “normal symptoms associated with PMS and the transition through menopause.” The labeling did not mention that the product contained a high concentration of an ingredient that causes sensitivity to the sun. In fact, the label said: “Does not cause sun sensitivity.”

Kruger went tanning several hours after she had applied ClaryCalm to her abdomen and back.  After going to a hospital she was diagnosed her with second and third-degree chemical burns. Subsequent testing revealed that ClaryCalm contained a compound called bergapten. Bergapten can cause increased sensitivity to the sun at 15 ppm. ClaryCalm contained the ingredient at a concentration of 347 ppm.

Prior to Kruger’s injury, other customers had complained to doTERRA about burns after using ClaryCalm. doTERRA eventually reformulated the product to remove the phototoxic compound that Kruger claims caused her burns.

Kruger sued doTERRA seeking recovery for her injuries. She also sought punitive damages “to deter future similar conduct.” doTERRA moved for partial summary judgment.

doTERRA argued that Kruger was contractually restricted from seeking punitive damages because, as a doTERRA Wellness Advocate, she had waived her ability to claim punitive damages. doTERRA based its motion on the Agreement. That document states that

doTERRA . . . shall not be liable for special, indirect, incidental, consequential, punitive, or exemplary damages.  … I release and agree to indemnify doTERRA and its affiliates from any and all liability, damages, fines, penalties, or other awards or settlements arising from, or relating to my actions in the promotion or operation of my doTERRA independent business and any activities related to it . . . .

The Agreement incorporated the doTERRA Policy Manual by reference. The Policy Manual provides that doTERRA

shall not be liable for any: . . . special, indirect, incidental, punitive, or consequential damages, including loss of profits, arising from or related to the operation or use of the products including, without limitation, damages arising from loss of revenue or profits, failure to realize savings or other benefits, damage to equipment, and claims against the [Wellness Advocate] by any third person . . . .

The district court denied doTERRA’s motion. The district court acknowledged that the Agreement and Policy Manual expressly reference a waiver of punitive damages. But the district court concluded that Utah law prohibits a party from enforcing a preinjury waiver of liability for its own egregious conduct.

The court further reasoned that since the standard for proving punitive damages is set quite high—”willful and malicious conduct”—it would be “a remarkable thing” for punitive damages to fall below the bar set for conduct that cannot be waived.

ANALYSIS

The district court found that Russ v. Woodside Homes, Inc., 905 P.2d 901 (Utah Ct. App. 1995), stands in the way of preinjury waivers of punitive damages. doTERRA asks whether Utah law permits a party to waive punitive damages and to conclude that it does. In doTERRA’s view, Utah law should respect freedom of contract and allow a party to preemptively bargain away her right to seek punitive damages.

Kruger argued to the district court that even if Utah law permitted a preinjury waiver of punitive damages, that waiver would have to be “clear and unequivocal.” Kruger contended that the Agreement she signed with doTERRA lacked such clarity.

The law does not look with favor upon one exacting a covenant to relieve himself of the basic duty which the law imposes on everyone: that of using due care for the safety of himself and others. The presumption is against any such intention, and it is not achieved by inference or implication from general language.

The Supreme Court could see no reason why a preinjury waiver of punitive damages —assuming that Utah law permits such a creature — should require anything less than the “clear and unequivocal” language required for waivers of liability. If such a waiver is to be given effect, it is easy enough to use unequivocal and unambiguous language and to thus make that intent clear and unmistakable.

In Utah punitive damages are believed to serve a societal interest of punishing and deterring outrageous and malicious conduct which is not likely to be deterred by other means. Punitive damages, therefore, are part of the system that the law imposes to enforce the “basic duty” of due care for the safety of others that “the law imposes on everyone. Attempts to relieve oneself from the consequences of a blatant disregard of that duty should not be looked upon with favor. To be effective, a pre-injury waiver of punitive damages must be clear and unequivocal.

The broad waiver the Agreement contained might cover personal injury claims—after all, it uses language like “any and all liability” and covers “any activities related to” the operation of Kruger’s distributorship—but it does not do so clearly and unambiguously. doTERRA might have a persuasive argument that this language could be read to include a waiver of punitive damages arising out of the “operation or use” of its products. But doTERRA does not explain how the Policy Manual clearly and unambiguously gives notice that it effectuates a waiver of punitive damages arising out of an injury caused by using its products.

By signing up to be a distributor of doTERRA’s products, Kruger did not give an “unmistakable” waiver of her right to sue doTERRA for personal injuries caused by its products. Nor did Kruger expressly disclaim her right to seek punitive damages for “injury” or other forms of “bodily harm” to her own person.

Kruger did not waive her right to sue doTERRA for punitive damages arising out of a personal injury when she signed doTERRA’s Agreement. Utah law requires that such a waiver be clear and unambiguous. doTERRA’s was neither. The trial court was affirmed.

ZALMA OPINION

Waiver, to be enforceable, must be intentional, knowing, clear, unambiguous and unmistakable. To give up an important right like the right to sue for punitive damages for the sale of a dangerous product without warning about its propensity to cause burns if applied to a human body that is then exposed to sun or a tanning bench requires knowledge. She waived some damages as a seller of the product but not to be the victim of second degree burns.


© 2021 – Barry Zalma

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

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

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

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

 

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The Fifth Amendment & the Bad Faith Plaintiff

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A Video Explaining Why a Plaintiff Has no Right to Assert Fifth Amendment Protection

See the full video at https://rumble.com/vjhmk5-the-fifth-amendment-and-the-bad-faith-plaintiff.html  and at https://youtu.be/tVvD8-KGO9M

The Fifth Amendment to the U.S. Constitution protects an individual from being forced to testify in a manner that might incriminate him or her and subject the witness to prosecution. It is a defense, however, not a weapon that can be used against a defendant in a civil suit. Since civil litigation is entered into voluntarily, testimony in a civil suit brought by a plaintiff is not a compulsion to self-incrimination because the plaintiff can protect his or her privilege by dismissing the suit.

In Fremont Indemnity Co. v. Superior Court of Orange County, 137 Cal. App. 3d 554, 187 Cal. Rptr. 137 (Cal.App.Dist.4 11/19/1982), plaintiff owned a restaurant. Fremont, the defendant, issued a policy insuring against its loss by fire. The policy included an exclusion under which the insurer would be relieved of liability on the policy if it were shown that the insured’s arson caused the loss.

After the fire, a criminal investigation into the origin of the fire was undertaken, and plaintiff came under suspicion. As a consequence, the defendant declined to pay plaintiff’s claim. Because of this, plaintiff filed suit against his insurer.

Before his scheduled deposition counsel for plaintiff notified counsel for defendant that plaintiff would not appear for his deposition because he had been indicted for arson and therefore was asserting his constitutional privilege against self-incrimination.

Since it was the plaintiff who claimed the privilege as to his own behavior which was vitally relevant to a coverage exclusion contained in the very fire insurance policy upon which he sought recovery, the Court of Appeal issued a peremptory writ of mandate to the Orange County Superior Court directing it to compel the testimony, and if plaintiff continued to  refuse to appear for deposition as ordered or refused to provide the documentary evidence as already ordered, the Court of Appeal instructed the trial court to dismiss plaintiff’s action. He continued to refuse and his case against his insurer was dismissed.

 


© 2021 – Barry Zalma

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

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

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

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

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Lessee’s Agreement to Self-Insure Lessor Treated Like Insurance

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Self Insured Lessee Must Defend Lessor

Contracts, like leases, often determine who is stuck with the obligation to defend and/or indemnify against bodily injuries occurring on the leased premises. This is usually accomplished by requiring the lessee to acquire liability insurance naming the lessor as an additional insured. In Anthony Foti and Cristina Foti, his wife v. JG Elizabeth II, LLC D/B/A The Mills At Jersey Garden Mall et al, No. A-1638-19, Superior Court of New Jersey, Appellate Division (July 2, 2021) the lease required JG Elizabeth (Elizabeth) to self-insure the risk and refused to defend.

FACTUAL HISTORY

In a concurrent appeal the Appellate Division affirmed the trial court’s orders granting summary judgment to defendants City of Elizabeth (Elizabeth), and JG Elizabeth II, LLC,  (collectively, JG), and dismissing the negligence complaint brought by Anthony Foti (plaintiff) and his wife, Christina. After the court entered summary judgement, JG moved for an order compelling Elizabeth to reimburse JG for counsel fees, costs, and expenses incurred in defense of plaintiff’s negligence claims. The trial court conducted oral argument and subsequently entered the September 27, 2019 order entitling JG to reimbursement. The judge’s December 12, 2019 order required Elizabeth to pay $62, 041.65 in counsel fees and costs. Elizabeth appealed.

ANALYSIS

Elizabeth argues that an oral lease existed between JG and the County of Union (the County) that superseded the written lease between Elizabeth and the Glimcher Group (Glimcher), the developer of the mall and JG’s predecessor in interest. In the alternative, Elizabeth argues the provisions of the written lease did not impose a duty to defend JG against plaintiff’s lawsuit.

Elizabeth first executed a lease for the space in 2000 (the Lease) and, pursuant to its terms, Glimcher charged Elizabeth no rent. Section 11.01 of the Lease was entitled “Tenant’s Insurance.” Subsection (a) provided various insurance coverage Elizabeth was required to procure; Section 11.01(d) included an alternative for Elizabeth to satisfy its obligations “by means of self-insurance.” The parties crossed out the underlying text of the entire section and wrote in its place, “Tenant and Landlord hereby acknowledge and agree that all insurance requirements of Landlord under this Lease shall be satisfied by Tenant by means of Tenant’s self-insurance.”

It is undisputed that when plaintiffs’ filed suit naming Elizabeth and JB as defendants, JB tendered its defense to Elizabeth. Elizabeth declined without any reservation of rights, denying it was obligated to provide a defense or indemnification.

It is well-settled that courts enforce contracts based on the intent of the parties, the express terms of the contract, surrounding circumstances and the underlying purpose of the contract.

A reviewing court must consider contractual language in the context of the circumstances at the time of drafting and apply a rational meaning in keeping with the expressed general purpose. If the contract into which the parties have entered is clear, then it must be enforced as written. Whether a contract term is clear or ambiguous amounts to a question of law.

There is nothing ambiguous about the meaning of self-insurance as used in the Lease. Self-insurance is a plan under which a business maintains its own special fund to cover any loss. Unlike other forms of insurance, there is no contract with an insurance company. Rather than retaining a specific insurance policy, the parties agreed that Elizabeth had its own special fund to provide insurance coverage.

Elizabeth argues that the Lease did not require it provide a defense to JB because the Lease specifically did not require Elizabeth to indemnify JB for its own negligence. Since plaintiff’s complaint alleged both Elizabeth and JB were negligent, Elizabeth had no obligation to defend JB.

However, the duty to defend is independent of or broader than the duty to pay. In other words, potentially coverable claims require a defense.

The Lease was not ambiguous because it is not susceptible to at least two reasonable alternative interpretations. Indeed, Elizabeth has never offered an alternative interpretation to JB’s claim that it was an additional insured through Elizabeth’s self-insurance program.

In general the intention of the parties as disclosed by the language used in the lease is controlling. Taken in its entirety, and evidence of the attendant circumstances may be considered, not to change the agreement made but to secure light by which to measure its actual significance. Terms will be implied in a contract where the parties must have intended them because they are necessary to give business efficacy to the contract as written

An insurer’s obligation to defend becomes an obligation to reimburse for defense costs to the extent that the defense is later determined to have been attributable to the covered claims and, if coverage is not determinable in the underlying action, it is later determined that there was in fact coverage. Here, the only reasonable interpretation of the Lease was that the parties intended Elizabeth would, through its self-insurance program, provide a defense to the landlord, JB, against plaintiff’s claim for injuries that occurred in Space 1158 unless they were caused by the landlord’s own negligence.

ZALMA OPINION

The Appellate Division treated the lease’s agreement to allow the tenant to replace the requirement for insurance in the lease with its self-insurance program. It then interpreted the lease provision as if it was an insurance policy which, necessarily, would have provided for a defense. If the parties wanted the agreement to be limited to indemnity only, they could easily have included that language in the lease. Sloppy contract language resulted in unnecessary litigation.


© 2021 – Barry Zalma

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

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

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

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

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The Role of Victims in Criminal Investigations

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A Video Explaining the Right of Insurers to Assist Prosecutors

See the full video at https://rumble.com/vjg1wh-the-role-of-victims-in-criminal-investigations.html and at https://youtu.be/aFXs3PNfmk4  

Insurance fraud is a major component of white-collar crime. It is slowly becoming a more significant component of the law-enforcement agenda. The insurance industry plays a leading role in assisting prosecutors in the investigation and prosecution of insurance fraud. The industry has been compelled to do so by statutes enacted by most states. Insurers help prosecutors establish criminal cases involving health care providers, lawyers, bogus claimants, arsonists, and a vast array of participants in infinite number of schemes to defraud insurance companies and their customers.

Throughout the country, insurers routinely cooperate with law enforcement officials that are investigating insurance fraud by providing information, specialized expertise, and technical and administrative support for these complicated investigations. The recent federal health insurance fraud statute, and state statutes in various states, require cooperation between private insurers and law enforcement officials on fraud investigations.

A conflict exists whenever there is a reasonable possibility that the district attorney’s office may not exercise its discretionary function in an evenhanded manner. The conflict is disabling only if it is so grave as to render it unlikely that the defendant will receive fair treatment.

In the criminal justice system, the prosecutor bears responsibility for determining what crimes will be prosecuted. The legal system has traditionally allowed wide discretion to criminal prosecutors in the enforcement process. The Government retains broad discretion as to whom to prosecute.

Prosecutorial discretion is not unlimited. “Selectivity in the enforcement of criminal laws is … subject to constitutional constraints.  The decision to prosecute may not be based upon an unjustifiable standard like religion, race or sexual orientation. Beyond these constitutional limitations, a trial judge “must accord a presumption of constitutionality to prosecutorial decisions and approach the inquiry with appropriate respect for the judgments exercised by officers of a coordinate branch of government


© 2021 – Barry Zalma

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

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

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

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

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Failure to Initial a Form Became Purchase of UM/UIM Coverage

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Louisiana Compels UM/UIM Coverage When New Policy Issued Without New Rejection of UM/UIM

Louisiana’s Legislature enacted a statute compelling Uninsured and Underinsured Motorist insurance unless the insured specifically rejects it on a form prepared by the state. In Martin Baack And Brenda Baack v. Michael Mcintosh, Et Al., No. 2020-C-01054, C/W No. 2020-C-1117, Supreme Court Of Louisiana (June 30, 2021) the insured rejected UM/UIM coverage properly but, when the policy was renewed, it failed to fulfill all of the requirements of the statute. The Louisiana Supreme Court interpreted the failure to initial parts of a form at renewal required that UM/UIM coverage even though the insured signed the rejection form.

FACTS

Martin Baack, an employee of Pilgrim’s Pride Corporation (“Pilgrim’s Pride”), was driving his work vehicle when he was struck by a vehicle driven by Michael McIntosh. The vehicle Mr. Baack was driving belonged to PPC Transportation Company (“PPC Transportation”). Both Pilgrim’s Pride and PPC Transportation are subsidiaries of JBS USA Holdings, Inc. (“JBS”).

Mr. McIntosh was determined to be solely at fault for the accident and pled guilty to improper lane usage. Mr. Baack and his sued individually and on behalf of their minor daughter naming as defendants Mr. McIntosh, his insurer, and Zurich American Insurance Company (“Zurich”) in its capacity as the UM provider for PPC Transportation’s vehicle.

The Zurich policy at issue was initially procured in 2002 by Swift Foods Company (“Swift”), the predecessor of JBS. At that time, Swift properly rejected UM coverage via a UM form initialed and signed by its corporate controller, William Trupkiewicz. The policy was renewed on an annual basis and Zurich sent new UM forms to Swift, and subsequently its successor JBS, every year. In 2011, JBS increased its liability limits from $3,000,000 to $5,000,000 necessitating a new UM form. Mr. Trupkiewicz initialed and signed a new form properly rejecting UM coverage.

In 2012, 2013, and 2014, JBS’s risk manager, Stephany A. Rockwell, submitted new signed and dated UM forms without initialing the blanks provided to reject UM coverage or select UM coverage with limits lower than the policy’s bodily injury liability limits. The 2014 form was attached to the policy which was in effect at the time of Mr. Baack’s accident.

Zurich maintained the initial rejection by Mr. Trupkiewicz remained valid for the life of the policy, including the 2014 renewal in effect at the time of the accident. The trial court denied Zurich’s motion for summary judgment and subsequent writs to the court of appeal and this Court were also denied.

The matter proceeded to a five-day jury trial. The jury found the Zurich policy did not provide UM coverage because JBS had rejected it.

The Court of Appeal reversed the trial court’s judgment and observed that “[p]roof of an insured’s rejection of UM coverage … is satisfied solely by the existence of a properly completed and signed UM form, and the insured’s intent is irrelevant in this determination.” The Court of Appeal ruled that the 2014 form was properly completed and that Zurich bore the consequences of JBS’s failure to initial the form signifying its rejection of UM coverage. Finding the jury legally erred in its determination of no UM coverage, the court of appeal performed a de novo review of the facts and awarded Mr. Baack damages but rejected the Baacks’ request for penalties and attorney fees. In a separate appeal pertaining to costs, the court of appeal reversed the trial court and rendered judgment assessing Zurich with all court costs.

DISCUSSION

Zurich averred that the court of appeal erred in finding UM coverage exists under the 2014 policy. In Louisiana, UM coverage is determined not only by contractual provisions, but also by applicable statutes. Thus, whether coverage exists turns on the interpretation of the policy and UM statute.

UM coverage is not required by Louisiana statute if any insured named in the policy either rejects coverage, selects lower limits, or selects economic-only coverage, in the manner provided in the statute. The UM statute is liberally construed. Exclusions are strictly construed and the insurer bears the burden of proving any insured named in the policy rejected, in writing, the UM coverage.

A proper rejection of UM coverage remains valid for the life of the policy and does not require the completion of a new form when a policy is renewed. The fact that a UM form rejecting coverage was properly executed by JBS in 2011, however, did not prevent JBS from changing that rejection by submitting a new form to Zurich.

The form allows for the insured to initial one of only four selections: UMBI coverage at lower limits than liability coverage; economic-only coverage with same limits; economic-only UMBI coverage at lower limits; or no UMBI coverage. Critically, the insured is not able to actively select UM coverage on the form.

The only way to “select” UM coverage on the form is to not initial any of the provided choices. Under the statute, a signed and dated UM form with no selection equates to a selection of UM coverage. Zurich was aware JBS signed and returned these forms every year and should have known that signing and submitting these forms could have specific legal consequences. If Zurich believed the failure to make a selection on the forms was a mistake, it was incumbent on Zurich to follow up with JBS to make any necessary corrections.

The plain language of the UM statute dictates that the failure to initial any of the options available on the UM form necessarily results in statutory UM coverage. Courts lack the authority to alter the terms of insurance contracts under the guise of contractual interpretation when the policy’s provisions are couched in unambiguous terms. This is not a case where a minor mistake or omission on the UM form occurred. Rather, the forms signed by Ms. Rockwell in 2012, 2013, and, specifically, 2014 demonstrate that JBS did exactly what is statutorily required to change its prior rejection of UM coverage.

Ms. Rockwell’s 2014 form was part of the Zurich policy in effect at the time of the accident and clearly meets all the statutory requirements to change JBS’s 2011 rejection of UM coverage. Therefore, the Supreme Court affirmed the court of appeal’s determination that UM coverage exists at the time of the accident.

Louisiana law provides for the imposition of penalties against insurance companies who act in bad faith. However, the sanctions of penalties and attorney fees are not assessed unless a plaintiff’s proof is clear that an insurer’s failure to pay is arbitrary, capricious, or without probable cause. Given Zurich’s reliance on prior appellate jurisprudence, the Supreme Court found it had a reasonable basis to dispute the issue of UM coverage and was not obligated to pay penalties. The judgment of the court of appeal was affirmed.

ZALMA OPINION

Three justices dissented. The Supreme Court, faced with a severely injured plaintiff, decided that by not selecting one of four options on the state created form, although the insured signed the rejection form, was a selection of UM/UIM coverage. The blamed the underwriters for not forcing full compliance. The decision seems to be an act of sophistry, the Court of Appeal and Supreme Court wanted to help the injured person and found a way to interpret the policy and statute to change a rejection of UM/UIM coverage into a request for coverage.


© 2021 – Barry Zalma

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

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

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

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

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Professional Conspiracies to Commit Insurance Fraud

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A Video Explaining Professional Conspiracies

See the full video at https://rumble.com/vjc4sp-professional-conspiracies-to-commit-insurance-fraud.html and at https://youtu.be/IsgAy8s3c-0

The Doctor Lawyer Conspiracy

The doctor–lawyer conspiracy will often begin in one of two ways. An attorney uses individuals, called “chasers,” “runners,” or “cappers,” to recruit a clientele of auto accident victims, usually for a flat fee. They look for victims of actual automobile accidents and convince these individuals to visit the attorney, who is, in fact, running a personal injury mill. The recruit may either be solicited to become a knowing participant in the scheme and receive payment for his or her involvement, or can remain an unwitting participant, unaware that his or her claim has been manipulated for fraudulent purposes. Some of the “victims” are paid a flat fee of $100 to $500 and are never heard of again, while the physicians create fake reports of injuries and treatments and the unscrupulous lawyer presents the claim on behalf of his “victim” client and shares any settlement equally with the physician.

Organizers of such schemes may also recruit friends, acquaintances or illegal aliens to play the role of victims in staged automobile accidents. In this type of scheme, the claimant is a knowing, cooperative participant in the fraudulent activity and may be involved in many different claims involving the same corrupt professionals. The attorney refers the accident victim to a cooperating medical practitioner who fabricates medical diagnoses and reports and prepares false bills.

Fraud in the Medical Profession

A doctor can initiate a medical fraud scheme by having a patient schedule a number of visits even though the actual medical treatment is minimal or non-existent. The doctor then bills as if the services were rendered.

In another version of the scheme, a physician will “rent” Social Security numbers from economically disadvantaged people who are not even ill, and bill for services that they did not receive. There have been cases where a medical provider purchases computer records of legitimate patients from a hospital employee, submits invoices to Medicare or Medicaid, which wires funds to the provider for the services claimed—although not rendered—and then disappears only to obtain a Medicaid and Medicare provider number under a different name.

Fraud in the Legal Profession

Attorneys conspire with insureds and other attorneys to bring suit and counter suit against each other, with allegations that require a defense under a reservation of rights. Then, demanding independent counsel because of the conflict caused by the reservation of rights, the so-called “independent” counsel run up excessive billing to be paid by the insurer. The lawsuits seem to never be in a position to settle and the attorneys’ billings often exceed the amounts claimed in the lawsuits. The billings may be for legal work not done at all or be simply excessive for the work done. One attorney regularly billed various insurers more than 80 hours for work allegedly done in a single day, although he never billed a single client more than eight hours in any one day, he billed ten or more clients each day.

The most notorious example of this kind of fraud is often called “Cumis” fraud because of a decision in the California Court of Appeal case, San Diego Navy Fed. Credit Union v. Cumis Ins. Soc’y Inc., 208 Cal. Rptr. 494 (Cal. Ct. App. 1984) involving an attorney named Lynn Boyd Stites.


© 2021 – Barry Zalma

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

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

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

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

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Policy only Insures Members of Same Household

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Transferring Title & Entering into Lease Destroys Coverage

Insurance is a contract. It must be read and enforced as written. When title to the property changes it is incumbent on the owners to advise the insurer of the changes. Failure to do so can be very expensive and destroy coverage.  After a trial court concluded that there was no coverage for a fire because the owner was not an “insured” Virginia Brenner and Amber Osmun, appealed the judgment of a trial granting summary judgment in favor of Goodville Mutual Casualty Company (“Goodville”). In Goodville Mutual Casualty Company v. Virginia C. Brenner, et al., 2021-Ohio-2252, No. WM-20-007, Court of Appeals of Ohio, Sixth District (June 30, 2021) the Court of Appeals was asked to reverse since the two plaintiffs were relatives.

FACTS

Goodville sued seeking declaratory judgment asking the trial court to declare the rights of the parties under a homeowner’s insurance policy it issued to Brenner seeking benefits after a fire. The residence coverage refers to a farmhouse while the related private structures coverage refers to a two-story detached garage structure located approximately 150 feet from the farmhouse.

The garage consisted of a first-floor storage area and a second-floor apartment. At the time of the fire, Brenner resided in the farmhouse. Osmun, Brenner’s granddaughter, resided in the apartment with her son. The fire destroyed the detached garage structure, including the storage area and the apartment, and all of their contents. The farmhouse was not damaged.

Brenner and Osmun appeared for an examination under oath regarding their respective personal property claims. In their testimony, it was revealed that Brenner had purchased insurance coverage for the property from Goodville annually since 2007 when her husband passed away. Brenner did not purchase any separate insurance coverage for the property of any renters that might occupy the apartment. Osmun likewise did not purchase any renter’s insurance for her personal property or contact Brenner’s agent to inquire about obtaining renter’s insurance when she moved into the apartment.

Both the farmhouse and the apartment share a single address. The parties agree that their intention was to ultimately transfer the entirety of the property to Osmun after she moved into the apartment. Brenner believed that she was still the owner of the property at the time of the fire. Brenner executed a quitclaim deed transferring ownership of the property to Osmun. Osmun testified that she would be taking over the mortgage on the property but that process had not yet been completed at the time of the fire.

In conjunction with that transfer, Brenner and Osmun executed a lease agreement which granted Brenner a 99-year lease to remain on the property. The lease identified Osmun as the “landlord” and Brenner as the “tenant.”

Following the examinations, Goodville filed their declaratory judgment action alleging that Osmun was not an “insured” as defined by the policy. Goodville argued that although Osmun was a relative of Brenner’s, she was not a member of Brenner’s household and, therefore, not an “insured.”

The trial court granted Goodville’s motion for summary judgment and denied appellant’s cross-motion for summary judgment. The trial court found that Osmun was not a resident of Brenner’s household under the plain meaning of those terms and, therefore, was not an “insured” as defined in the policy.

ANALYSIS

The trial court did not err in granting summary judgment in favor of Goodville.

The Policy Definition “Resident Of Your Household” Is Not Ambiguous.

It is well settled that insurance policies should be enforced in accordance with their terms as are other written contracts. Where the provisions of the policy are clear and unambiguous, courts cannot enlarge the contract by implication so as to embrace an object distinct from that originally contemplated by the parties. The court must examine the contract as whole and presume that the parties’ intent is reflected in the language used. When the policy language is clear, the court may look no further to find the intent of the parties.

In granting summary judgment, the trial court found that the term “household” was not ambiguous. The trial court cited Brenner’s testimony that Osmun was renting the apartment from her as evidence that Osmun was not residing under the same roof as Brenner and, therefore, not an insured. The term “household” as used in the Goodville policy is not ambiguous as a matter of law.

The appellate court concluded that the trial court did not err in finding that the term “household” as used in the Goodville policy was not ambiguous and that the trial court did not err in determining that the plain and ordinary meaning of “household” is limited to those residing in the same dwelling place.

Osmun Was Not A Member Of Brenner’s Household When She Resided In The Related Private Structure.

Summary judgment can only be granted when there are no material facts in dispute. A “material fact” is one which would affect the outcome of the suit under the applicable substantive law.

The disputed facts in this case were not material. Brenner testified that Osmun lived as her tenant in the apartment and paid her a monthly rent. Osmun, in turn, testified that she was the owner of the property and that Brenner was her tenant. Osmun’s testimony was supported by a signed lease agreement which identified the relationship of the parties as landlord and tenant. In either scenario, Brenner and Osmun are in a landlord and tenant relationship, not members of the same social unit.

Brenner also purchased a separate endorsement for the “Related Private Structures Rented to Others” (emphasis added). This endorsement describes which terms and exclusions from the homeowner’s policy were applicable to the “family rental.” The endorsement specifically states that the policy’s “business” exclusion did not apply to coverage for the rental property, allowing Brenner to rent the apartment without affecting the policy’s coverage for the structure itself. Put simply, Brenner and Goodville’s anticipated use of the apartment was as a rental property from which Brenner could earn income, not an extension of Brenner’s household.

In sum, there were no facts which show appellants were dwelling under the same roof or members of the same social unit comprised of those living together in the same dwelling place. Osmun was, therefore, not a member of Brenner’s household and was not an insured under the plain and ordinary terms of Brenner’s policy with Goodville.  Therefore, judgment in favor of Goodville was proper.

ZALMA OPINION

Ms. Brenner and Ms. Osmun were their own worst enemies. They changed title and relationships from grandma to grand daughter while only insuring grandma as the only insured. Since grandma didn’t have an insurable interest in the garage she was not entitled to recover benefits from the policy, and since granddaughter Osmun was not an insured she could recover nothing. This problem could have been avoided by simply calling the insurance agent and changing the policy to comport with the change in ownership and the rental agreements.


© 2021 – Barry Zalma

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

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

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

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

 

 

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Catastrophe Fraud & Criminal Acts

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Catastrophe Fraud

See the full video at https://rumble.com/vj973h-catastrophe-fraud-and-criminal-acts.html and at https://youtu.be/7pO3PwPMWfo

According to the Coalition Against Insurance Fraud, and general experience, natural disasters are always followed by fraud. The sheer size of the cleanup created by Katrina and the other hurricanes since 2005 has ignited the biggest glut of litigation and insurance fraud attempts in the history of US disasters.

Lt. Allen Carpenter, head of the Louisiana state police insurance fraud unit, which is the focal point for suspicious claims from the state, said:

In a normal catastrophe, about 11 percent of claims are fraudulent. I think the percentage of fraudulent claims will be the same, but it’s just such a large catastrophe that the numbers will be greater. What’s going to be different is the wide extent of the flood and the overall number of fraudulent claims.

Criminal Acts Relating to Insurance Fraud

Where a yacht policy contained a provision excluding coverage for “any loss, damage or liability willfully, intentionally or criminally caused or incurred by an insured person,” the First Circuit Court of Appeals found no coverage where the operator of the boat was convicted of criminal negligence that resulted in the death of a passenger in his boat. [Littlefield v. Acadia Insurance Company, 392 F.3d 1 (1st Cir. 12/08/2004)]

The court based its decision on the fact that even in the absence of a statutory requirement of intent, under New Hampshire state law, “a person cannot be convicted of a crime,” including a misdemeanor, “without proof that the unlawful act was accompanied by a culpable mental state.” Negligent operation of a watercraft, in the absence of the requisite culpable mental state, could not be a crime and would not trigger the exclusion provision in Section B of the policy. Hence, criminal negligence differs from civil negligence under New Hampshire law in important ways, and the yacht policy provides meaningful coverage for loss or liability incurred through negligence other than the criminal act.

Rex K. DeGeorge, a lawyer, charged with fraud, unsuccessfully appealed his conviction and sentence following a month-long jury trial for conspiracy, mail fraud, wire fraud, and perjury. The government proved to the trier of fact that DeGeorge participated in a scheme to defraud an insurer by purchasing a yacht, inflating its value through a series of sham transactions, obtaining insurance on the yacht at the inflated value, scuttling it off the coast of Italy, and attempting to collect the insurance proceeds, in part by lying about the cause of the sinking during civil litigation with the yacht’s insurer.


© 2021 – Barry Zalma

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

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

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

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

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Intentionally Harvesting Timber Without Right Not a Peril Insured Against

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Relying on Instruction to Cut Timber from Putative Owner is Expensive

Bee Forest Products, Inc., sued its insurer, Western National Mutual Insurance Company, seeking coverage on a claim arising out of its harvesting timber on property without the owners’ consent. In EE Forest Products, Inc. v. Western National Mutual Insurance Company, 20-cv-338-wmc, United States District Court For The Western District Of Wisconsin (June 25, 2021) the insurer sought summary judgment because of the lack of an occurrence.

UNDISPUTED FACTS

Overview of the Parties and Insurance Policy

Bee Forest Products, Inc., is a Wisconsin corporation, with its principal place of business in Nelson, Wisconsin. Defendant Western National Mutual Insurance Company is a Minnesota corporation, with its principal place of business in Edina, Minnesota. Western National insured Bee Forest under the terms of a Commercial General Liability policy.

The Policy contains the following exclusions applicable to the timber cutting claim at issue here:

Damage to Property

“Property damage” to:
. . .
(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damages” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.

The Policy also contains a timber and logging expansion endorsement. The endorsement adds coverage under Coverage A for “cross over cutting,” which is defined as “property damage for which you are legally obligated to pay due to a bona fide mistake in cutting of timber by you or for you that it outside of your designated or authorized boundaries.”

Underlying Event

On February 19, 2019, Bee Forest entered into a Timber Sale Contract with LeRoy Bechly, via his wife Betty Bechly, who held a power of attorney for her husband. The Contract provided for Bee Forest to cut timber on property in Lincoln Township, Buffalo County, Wisconsin. The Contract identified LeRoy Bechly as the owner of the property and called for Bee Forest to “cut, remove, and pay for . . . merchantable timber” within certain boundaries. Bee Forest checked on-line property records, which also listed Leroy Bechly as the fee simple owner of the property. Bee Forest also attempted to file a cutting notice, but the local courthouse was closed.

In March 2019, Bee Forest began cutting timber on the property, all of which occurred within the boundaries set forth in the contract. Shortly after cutting began, however, Bee Forest received notice from Bechly’s daughters, via a letter from their attorney, that they were the true owners of the property and their father only held a life estate. In the letter, Bechly’s daughters demanded that Bee Forest immediately stop all cutting on the property, which it did.

Bee Forest reported the dispute to its insurer Western National, that denied coverage under the Policy. After ultimately settling the timber cutting dispute, Bee Forest then sued seeking $86,079.45 in damages from Western National, together with attorneys’ fees, costs and disbursements.

OPINION

Court are required to interpret an insurance policy’s terms as a reasonable person in the position of the insured would understand the language. Moreover, if the language of a policy is ambiguous, susceptible of more than one reasonable interpretation, the court will construe it narrowly, against the insurer, and in favor of coverage. At the same time, the court is not to interpret insurance policies to provide coverage for risks the insurer did not contemplate or underwrite and for which it has not received a premium.

Western National sought summary judgment in its favor as to Bee Forest’s coverage claim on three independent grounds:

  1. cutting of timber was not an “occurrence” as that term is defined by the Policy;
  2. any harm or damage was expected or intended or was to property on which Bee Forest was working and, therefore, excluded from coverage; and
  3. the lumbering and logging endorsement does not apply because there was no cross over cutting, as that term is defined in the endorsement.

Occurrence Requirement

The Policy provides coverage for “property damage” only if such damage was caused by an “occurrence,” and further defines “occurrence” to mean an “accident.” Volitional acts that produce a desired event are not “accidents,” even if they produce unexpected and unforeseen results and even if they are precipitated by one or more negligent acts.

Here, there is no dispute that Bee Forest intentionally acted by cutting timber on the property at issue. Because the act that caused the harm was not an accident, there was no occurrence to trigger coverage. Based on the language in the Policy, the definition of “occurrence” under Wisconsin law, and case law from other jurisdictions involving similar claims, therefore, the court concluded that the Policy does not cover plaintiff’s intentional harvesting of timber, even if done with a good faith belief that its act was authorized.

Timber and Logging Expansion Endorsement

The endorsement extends coverage to “cross over cutting,” which is defined as damage to property caused by “cutting of timber by you or for you that is outside of your designated or authorized boundaries.” (emphasis by the court)

The court agreed with defendant that the endorsement covers harvesting of timber outside of a property boundary, something the parties agree did not occur, so the Endorsement was of no assistant to the plaintiff. Since the cutting occurred within the boundaries of the designated property the court agreed with defendant insurer that the Policy provided no coverage of Bee Forest’s claim. As such, the court granted the defendant’s motion for summary judgment.

ZALMA OPINION

The USDC did what every person insured should do before presenting a claim: read the policy. When an intentional act caused damage to property of another – even though it was done with a good faith belief that the Plaintiff had the right to cut the timber – there is no way the action could be considered an accident. A liability policy requires that, for coverage to apply, that the damage was due to an occurrence, an accidental happening, not an intentional act.


© 2021 – Barry Zalma

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

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

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

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

 

 

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Zalma’s Insurance Fraud Letter – July 1, 2021

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ZIFL – Volume 25, Issue 13

Read last two issues of ZIFL here.

See the full video at https://rumble.com/vj99c1-zalmas-insurance-fraud-letter-july-1-2021.html  and at https://youtu.be/mxIs6-WhFtw

Attorneys Should Never Be Involved in Fraud with Clients

The Crime Fraud Exception to The Attorney Client Privilege

In United States of America v. Aron Chervin, Et Al, No. 10 CR 918 (S.D.N.Y. 09/21/2011) an indictment involving multiple health insurance fraud perpetrators attempted to keep from their criminal trial wiretap conversations that seem to establish the crime.

By motion dated June 1, 2011, Defendant Michael Lamond (“Lamond”) moved to suppress nineteen telephone conversations between himself and Defendant Aron Chervin intercepted by the Federal Bureau of Investigation (“FBI”) pursuant to court-authorized wiretaps. Defendant argued that the communications are protected by the attorney-client privilege because Aron Chervin was a client.

The Defendants were charged with creating wholesale and retail shell corporations to perpetuate the fraudulent sale of Durable Medical Equipment (“DME”) to obtain inflated reimbursement from no-fault insurance providers, and financing their scheme through the sale of fraudulent receivables of the clinics to investors who benefitted from the inflated reimbursement generated by the fraud even though New York State prohibits medical professionals from sharing fees for medical services with non-medical professionals.

The sophisticated schemes also utilized the services of lawyers to represent patients, to facilitate payments, and to prevent the insurance companies from detecting the possibility of fraud.

An Insured Cannot Commit A “Little” Fraud Anymore Than Be A “Little Dead”

Kentucky Claimed Millions in Unallowable School-Based Medicaid Administrative Costs

Good News from the Coalition Against Insurance Fraud

Health Insurance Fraud Convictions


© 2021 – Barry Zalma

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

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

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

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

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Owner of Vehicle Determines Who Defends Tort Action

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Who’s on First? By Reading the Full Policy 7th Circuit Refuses to Accept Meaning Different than the Wording of the Policy

In the aftermath of a serious collision between an ambulance and a semi-truck, a question lingered: Who owned the ambulance?  In Continental Western Insurance Company v. Country Mutual Insurance Company, No. 20-2962, United States Court of Appeals For the Seventh Circuit (June 24, 2021) the Seventh Circuit determined who was on first.

This inquiry turned contentious as two insurance companies looked to sidestep primary coverage obligations arising from three post-accident lawsuits. The ambulance service’s formation through a joint enterprise and status as a separately insured party complicated the resultant ownership determination. The district court determined that defendant-appellant Country Mutual Insurance Company’s named insured owned the ambulance, holding Country Mutual responsible for primary coverage for the defense costs in question. The district court found that plaintiff-appellee Continental Western Insurance Company’s named insured did not own the ambulance such that Continental only owed coverage in excess of Country Mutual’s primary coverage. After granting summary judgment to Continental on these grounds, the court awarded Continental attorney’s fees and defense costs equal to the amounts that Country Mutual should have covered but that Continental, in fact, incurred to defend its insured in the three underlying lawsuits.

BACKGROUND

Alhambra and Hamel are two villages located in southern Illinois. In 1989, the Hamel Fire Protection District (“Hamel Fire”) and Alhambra Fire Protection District (“Alhambra Fire”) formed a joint venture called the Alhambra-Hamel Ambulance Service (the “Service”) to provide ambulance service to residents of both fire districts.

On September 17, 2012, a Service-operated ambulance driven by Theodore Berg, Jr., collided with a semi-truck owned by Specialized Transportation, Inc. (hereinafter, the “accident”). The semi-truck driver Daniel Eddinger and his codriver Rayburn Conway were seriously injured in the accident. Ambulance passengers, including Michelle Logue, were also severely injured.

The accident produced three lawsuits (hereinafter, the “underlying lawsuits”). Continental defended Hamel Fire in each of the underlying lawsuits but only after first tendering them to Country Mutual. Country Mutual ignored each tender. All three cases eventually settled, and Continental paid all attorney’s fees assessed for Hamel Fire’s defenses.

Several documents shed light on which entity owned the ambulance. On the one hand, the 2009 “Certificate of Title of a Vehicle” for the ambulance listed “Alhambra Hamel Ambulance Service” as its “owner.” Likewise, the 2009 “Bill of Sale” issued by Truck Centers, Inc. listed the ambulance as “Sold To: Alhambra-Hamel Ambulance Service.” Finally, the “Illinois Traffic Crash Report” that recorded the accident listed the ambulance “owner” as “Alhambra Hamel, Ambulance Service.”

THE POLICIES

Country Mutual issued a multiperil commercial lines insurance policy to the Service, its named insured (the “Country Mutual Policy”). The Country Mutual Policy included business auto coverage subject to a $1,500,000 limit of liability for any one accident or loss, but it only insured certain “covered autos.” Under “Item 3. – Schedule of Covered Autos You Own,” the Country Mutual Policy listed the “2010, Freightliner Ambulance, 1FVACWDU2ADAN8141,” specifying the ambulance was a covered auto.

The policy also circuitously covered Hamel Fire. In clarifying who was insured under the Country Mutual Policy, the “Liability Coverage” section stated that “insureds” span three categories: “[y]ou for any covered ‘auto,'” “[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow,” and “[a]nyone liable for the conduct of any ‘insured’ described above but only to the extent of that liability.”

Under this framework, the Country Mutual Policy insured the Service (as the primary policy holder), Berg (as the driver of a covered auto with the Service’s permission), and Hamel Fire (as one allegedly liable for the conduct of its “agent and driver” or “employee”—Berg—who qualifies as an “insured”).

Continental’s policy, which Continental issued to Hamel Fire, its named insured (the “Continental Policy”). The Continental Policy included business auto coverage subject to a $5,000,000 limit of liability for any one accident or loss. Unlike the Country Mutual Policy, the Continental Policy did not list the ambulance. Nevertheless, the ambulance was still an “auto” covered by virtue of the Continental Policy’s declarations, which stated that any “auto” enjoyed coverage. All told, both parties do not dispute that the ambulance was a covered auto under both the Continental Policy and Country Mutual Policy.

Both policies also spelled out coverage priority in comparably worded “Other Insurance” provisions. Thus, both policies provided primary coverage for owned autos and excess coverage for non-owned autos.

THE ISSUE

The question to the court was which insurance company—Continental or Country Mutual—is responsible for paying the defense fees that Continental incurred to defend Hamel Fire in the underlying lawsuits. The parties agree this question turns exclusively on who owned the ambulance involved in the accident, a 2010 Freightliner Ambulance with a vehicle identification number 1FVACWDU2ADAN8141 (hereinafter, the “ambulance”).

ANALYSIS

The insurance policies issued by Continental and Country Mutual, both in effect during the accident, also speak to ambulance ownership and coverage priority. At a high level, there were four insurance policies implicated by the accident. Of those, only the ones issued by Country Mutual (to its insured, the Service) and Continental (to its insured, Hamel Fire) were relevant to the issue presented to the court.

The outcome determinative question to the court was which entity owned the ambulance. The “Other Insurance” provisions expressly dictate that the insurer for whichever entity owned the ambulance owed primary coverage for defending Hamel Fire in the underlying lawsuits. The record evidence indicates that the involved parties intended for the Service to be the sole ambulance owner.

Both the Country Mutual Policy and the Continental Policy reflect the view that the parties intended the Service, not Hamel Fire, as the ambulance owner. To begin, the Country Mutual Policy designated the Service as the ambulance owner. The Country Mutual Policy unambiguously included the ambulance under the “Item 3. – Schedule of Covered Autos You Own.” Alone, this schedule evidences the Service’s intended ownership of the ambulance and, therefore, Country Mutual’s primary liability because Illinois courts generally place primary liability on the insurer of the automobile owner. In addition the Country Mutual Policy’s “Other Insurance” provision adds that “for any covered ‘auto’ you own”—and the above-referenced schedule lists the ambulance as one such covered auto owned by the Service—the Country Mutual Policy “provides primary insurance.”

Essentially, Country Mutual argues that one of its own insurance policies means the exact opposite of what it says. The court declined to adopt a view so contrary to the plain language found in the Country Mutual Policy. Regardless of Country Mutual’s intent, the Country Mutual Policy is still highly relevant to show the Service’s own intention of ownership of the ambulance.

Beyond the insurance policies, three other documents reinforced the court’s view that the Service, and not Hamel Fire, owned the ambulance. First, in 2009, the Service, not Hamel Fire, purchased the ambulance. Per the ambulance’s Bill of Sale, Truck Centers, Inc. “sold” the ambulance to “Alhambra-Hamel Ambulance Service.” Second, the Service, not Hamel Fire, memorialized its ownership of the ambulance by securing the 2009 Certificate of Title, which listed “Alhambra Hamel Ambulance Service” as the “owner.”

Because there was not a genuine issue of material fact as to which entity owned the ambulance the district court’s grant of summary judgment was affirmed.

ZALMA OPINION

It makes no sense for an insurer, who specifically identified by VIN number the ambulance involved in the accident including an “other insurance” clause that establishes it as a “primary” policy to claim they owed nothing to defend or indemnify its insured. The arguments made by Country Mutual were interesting but not convincing since it ignored the clear and unambiguous nature of its own policy and tried to argue it did not mean what it wrote. The Seventh Circuit slapped down the argument and agreed with the District Court that it should apply the contracts as written, always.


© 2021 – Barry Zalma

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

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

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

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

 

 

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Qui Tam Actions Stop Insurance Fraud

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A Video Explaining How Citizens Can Act to Defeat Insurance Fraud

See the full video at https://rumble.com/vj7lfx-qui-tam-actions-stop-insurance-fraud.html and at https://youtu.be/rzVv-MMlAKo

The False Claims Act, also known as the “Lincoln Law,” dates back to the Civil War. President Lincoln signed the act into law in 1863 because war profiteers were selling the Union Army shoddy supplies at inflated prices. The original law included qui tam [ “Qui tam” is an abbreviation of the Latin phrase “qui tam pro domino rege quam pro si ipso in hac parte sequitur” meaning “Who sues on behalf of the King as well as for himself.”  There are a number of pronunciations of the Latin abbreviation qui tam.  The simplest is key tam (rhymes with “ham.”) Black’s Law Dictionary suggests kweye (rhymes with “eye”) tam.] provisions that allowed a private person (plaintiff) to sue those who defrauded the federal government. If the suit was successful the plaintiff would receive 50% of any recovery from the defendant.

The qui tam provisions were weakened greatly as a result of congressional amendments in 1943, and qui tam legislation became virtually nonexistent. However, in 1986, Sen. Charles Grassley, R–Iowa, and Rep. Howard Berman, D Calif., joined forces to amend the law and strengthen the incentives for citizens to uncover and fight fraud as qui tam relators. (Relators are the private plaintiffs under the False Claims Act).

The 1986 False Claims Act amendments received widespread bi-partisan support, and were signed into law by President Reagan. Since the revitalization, the qui tam provisions have increasingly been used.

The False Claims Act makes it unlawful to knowingly (1) present or cause to be presented to the United States a false or fraudulent claim for payment or approval, 31 U.S.C. § 3729(a)(1) (2006); (2) make or use a false record or statement material to a false or fraudulent claim, § 3729(a)(1)(B); or (3) use a false record or statement to conceal or decrease an obligation to pay money to the United States, § 3729(a)(7) (2006). Under the Act, private individuals … , referred to as “relators,” may file civil actions known as qui tam actions on behalf of the United States to recover money that the government paid as a result of conduct forbidden under the Act.


© 2021 – Barry Zalma

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

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

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

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

 

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The Adjuster and Underwriting

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A Video Explaining the Obligations of an Adjuster to the Underwriting of Insurance

See the full video at https://rumble.com/vj5xh1-the-adjuster-and-underwriting.html?mref=6zof&mrefc=2 and at https://youtu.be/IadRoBcAc-Y

Adjusters are the representatives of the insurers who fulfill the promises made by the underwriter when the risk was taken and a policy was issued. The adjuster (sometimes called a claims representative) must determine that the decision to insure was based upon accurate facts and that the underwriter fully understood the risk he or she was taking.

The work of the underwriter begins with the submission of an application from a prospective insured, directly or by an agent or broker. The underwriter reviews the application and either presents an offer to insure or a refusal to insurer.

The underwriter is obligated by tradition and the history of the insurance industry to believe that the applicant reports facts to the underwriter honestly and in good faith. By considering that the applicant is dealing with the underwriter fairly and in good faith the underwriter is able to be confident in the evaluation of the risk presented. The application presented to an underwriter, either directly or via an agent or broker, is a request for an offer of insurance. Acting on the understanding that the applicant is acting in good faith the underwriter can weigh the hazards faced by a particular property, individual or business before agreeing to take on the risk of loss and make an offer of insurance. After completing a review of the application and all facts available to the underwriter from other sources and his or her experience will either issue an offer of insurance or a refusal to insure.

Underwriters take information from adjusters, after a loss, to reevaluate the risk decision, to be certain they were not deceived and to better evaluate the risk taken so they can deal with future requests for renewal or increases in coverages fairly and in good faith.

Sometimes an insurer will ask an adjuster to perform a pre-risk inspection to determine if the risk is worthy before the underwriter makes the decision to accept a risk for insurance. Underwriters also use the services of inspection companies and engineers to inspect the property or the risk before making a decision to offer or refuse to offer insurance.

Usually, however, information from the adjuster is provided to help the underwriter determine whether to cancel, non-renew, or continue on the risk, or modify the policy and premium before agreeing to continue on the risk on the same terms and conditions or modify terms, conditions and premium amount.


© 2021 – Barry Zalma

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

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

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

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

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Bad Faith Set Up Fails

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Prompt Offer of Policy Limits Defeats Attempt to Set Up Insurer for Bad Faith

Daniel Ilias was badly injured in a multi-vehicle automobile crash. The driver at fault for the accident was insured by Defendant USAA General Indemnity Company. Ilias sued the driver for his injuries and obtained a judgment for $5,230,559.44. Ilias then brought this third-party bad-faith action against USAA, who had insured the driver for $10,000. Ilias sued USAA for its purported bad faith in failing promptly to settle Ilias’s personal injury claim against its insured. USAA moved for summary judgment. In Daniel Ilias v. USAA General Indemnity Co., Case No. 8:20-cv-834-WFJ-TGW, United States District Court Middle District Of Florida Tampa Division (June 24, 2021) the injured person received a more than $5 million Judgment after failing to accept a policy limits offer.

THE FACTUAL RECORD

The Accident

On July 29, 2017, USAA’s insured, Scott Dunbar, was driving on a divided highway in Pasco County, Florida. Dunbar, traveling in the outside southbound lane of the highway, lost control of his van and struck an SUV traveling in the center southbound lane. After hitting the SUV, Dunbar’s van veered toward the median, went airborne over the median, and landed directly on top of the front end of Ilias’s Honda Pilot traveling in the northbound lanes. As a result of the crash, Ilias suffered a torn aorta and broke several bones. Ilias was airlifted from the crash site to the hospital and placed in the intensive care unit (ICU), where he remained for 10 days before spending another three weeks in the hospital and a rehab facility. Others in the wreck were injured also.

The Claims Process and Failure to Reach a Settlement

At the time of the accident, Dunbar was insured under an auto policy with USAA. The policy carried a bodily injury limit of $10,000 per person and $20,000 per accident.

USAA learned of the accident the day it occurred when the owner of the SUV filed a claim of loss. Maryanne Furman, Esq represented Illias. Furman noted that his damages were “pretty significant” and believed they exceeded Dunbar’s $10,000 policy limit.

Raymond attached to the letter a declarations page confirming Dunbar’s coverage and policy limits. The letter also assured that Furman would receive a certified copy of the policy under separate cover, which Furman received a few days later. Raymond accepted liability for Ilias’s property damage claim. Raymond retired from USAA at the end of the month and transferred the claim to adjustor Don Johnson.

USAA inspected Ilias’s vehicle and declared it a total loss. A few days after the vehicle inspection, on September 15th, Furman and Johnson spoke over the phone to discuss Ilias’s injuries and treatment status. Furman confirmed that Ilias had been hospitalized for a few days following the accident and had suffered multiple broken bones. Because this description of Ilias’s injuries aligned with the description provided by Ilias’s prior attorney, Johnson tendered the policy limits as an offer to settle Ilias’s injury claim. The $10,000 policy limits tender came 48 days after the accident. The second letter enclosed a check for $10,000 and a general release from liability. Furman denies receiving the disclosure.

Furman did not respond to USAA’s full tender of September 15th and just filed a personal injury lawsuit on Ilias’s behalf against Dunbar in Florida state court. Johnson learned of the lawsuit when USAA was served with the complaint. Johnson then called Furman to confirm that she was rejecting USAA’s tender of the policy limits. Furman confirmed that she was rejecting the settlement offer and stated that she had filed suit because she needed to depose Dunbar and Brignoni to rule out the possibility that either of them had other insurance coverage. The case proceeded to trial and a jury found Dunbar liable for Ilias’s injuries. Final judgment was entered for Ilias in the amount of $5,230,559.44.

After the final judgment, Ilias sued USAA.

FLORIDA LAW ON BAD FAITH

In Florida, like in almost every state, an insurer owes a duty of good faith to its insureds in handling their claims. Florida case law also allows a third-party claimant—here, Ilias—to step into the shoes of the insured and sue an insurer directly for its bad faith in failing to settle a claim on behalf of its insured. The duty of good faith requires the insurer to exercise the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business.

Whether an insurer has breached its duty of good faith is determined under the totality of the circumstances. The critical inquiry in a bad faith action is whether the insurer diligently, and with the same haste and precision as if it were in the insured’s shoes, worked on the insured’s behalf to avoid an excess judgment.

ANALYSIS

In her deposition, Furman stated that she did not accept the policy limits once tendered because USAA failed to provide an insurance disclosure that addressed her requests for coverage information and complied with the statutory disclosure requirements. Specifically, USAA did not confirm or deny whether Dunbar had an umbrella policy or other coverage as a source available to compensate Ilias for his injuries. Had USAA provided this information when it tendered the policy limits, Furman claimed that, regardless of the other shortcomings with USAA’s claims handling, she would have accepted the policy limits and Ilias would have agreed to settle his claim, thereby avoiding the excess judgment.

No Reasonable Jury Could Conclude that USAA Acted in Bad Faith.

On the evidence presented, a reasonable jury could not find that USAA acted in bad faith. USAA diligently tried to settle Ilias’s claim. Assuming, as Furman claimed, that USAA indeed failed to send the disclosure form, this was evidence of some negligence on its part—but nothing more and with little prejudice to Furman. While negligence is relevant to the bad-faith inquiry— negligence is not the standard. A cause of action based solely on negligence which does not rise to the level of bad faith does not lie. USAA’s actions, though potentially negligent to some degree, did not rise to the level of bad faith.

No Reasonable Jury Could Find that USAA Caused the Excess Verdict against Its Insured.

USAA also was not the cause of the excess verdict. Though Furman testified that she would have settled Ilias’s injury claim had she received a proper disclosure, her actions suggest otherwise. “Her actions suggest a ‘bad faith setup,’ which the Florida law of third-party bad faith seems to encourage in cases like this of great damages but small insurance.”

Furman never made a settlement demand; her initial representation letter was a notice of representation and request for information. She also never discussed with Ilias the possibility of settling for the $10,000 policy limits, though Ilias said he would have followed Furman’s advice had she instructed him to settle his claim.

The District Court noted:

Regrettably, the Florida common law of third-party bad faith encourages costly lawsuits, like the instant one. One cannot fault Ilias’s counsel—her client was badly injured, and Dunbar was underinsured. She is seeking as great a recovery for him as the legal theories permit. But to contend that a $10,000 tender issue caused this $5 million-plus jury verdict—and would have prevented it had USAA acted slightly differently—is not plausible to any realistic Florida personal injury lawyer.

The undisputed evidence establishes that Furman never made a demand for the policy limits; never expressed to USAA that she intended to settle; never followed up with USAA when she did not receive information about possible (nonexistent) umbrella coverage; and did not settle after confirming Dunbar had no coverage beyond his USAA policy. Considering all this, no reasonable jury could conclude that Ilias’s injury claim would have settled had USAA properly executed and mailed the coverage form Furman requested.

USAA’s motion was granted.

ZALMA OPINION

Bad faith set-ups exist because courts often allow them to succeed. Even finding that Furman attempted – although poorly – to set up USAA for a bad faith suit the court was not willing to fault Furman for her attempt because of the serious injuries suffered by her client. The judge was wrong – there is no reason to attempt to create a bad faith suit – when an insurer acts fairly and in good faith and offers up its full policy limits. A bad faith set up is an attempt at fraud and, in this case, the injured person testified he would have accepted the $10,000 policy limit if Furman had so advised him. This type of conduct should not be faultless but should, rather, be condemned.


© 2021 – Barry Zalma

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

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

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

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

 

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Health Insurance Fraud

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A Video Explaining Health Insurance Fraud

Those of you who wished me a happy birthday, thank you. I am now 79 and will continue to work and write every day until I can’t.

See the full video at https://rumble.com/vj1el1-health-insurance-fraud.html and at https://youtu.be/KNPuj-QIUO4

The nation’s bill for health care fraud is enormous  as large as $300 billion or more every year. Fraud takes place at many points in the health care system, in hospitals, nursing homes, and diagnostic facilities, by doctors, attorneys, health care providers, durable equipment providers, and patients.
One large area prone to fraud is the Medicare system. This system processes more than 800 million claims a year with 70 different contractors handling the claims that come from hundreds of thousands of doctors, laboratories, and other health practitioners and facilities.

In 2012 Medicare paid out over $817 billion dollars. If only five percent went to fraud, they took over $40 billion and if ten percent went to fraud more than $81 billion was paid to fraud perpetrators. I have heard estimates up to 30 percent of payouts are fraudulent. The numbers, regardless of the percentage, are excessive.

Surveys show that it is usually the claimant who perpetrates the fraud, as opposed to health care providers, employers, or attorneys. The most common fraudulent activity is a false statement or omission of information, i.e., lying about the severity of an injury or failing to mention a pre-existing condition then profiting by obtaining a portion of the amounts billed from the provider.


© 2021 – Barry Zalma

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

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

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

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

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Statute Requiring Simplified Language in Insurance Policies Does not Add Coverage

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Failure to List Auto Defeats Claim on Commercial Auto Policy

People try to save money on insurance by acquiring the smallest limits available. Then, when they incur a loss, they try to expand the coverages available with arguments to courts that the injured person needs the money, regardless of the policy wording.

In Marilou Marie Hatler v. Mountain West Farm Bureau Mutual Insurance Company, and John Does I-III, 4:20-cv-69-BMM, United States District Court For The District Of Montana Great Falls Division (June 24, 2021) Marilou Hatler (“Plaintiff”) sued to obtain a declaration that she is entitled to medical payments coverage (“MPC”) and underinsured motorist coverage (“UIM”) under her husband’s businessowners motor vehicle insurance policy (“Policy”) issued by Mountain West Farm Bureau Mutual Insurance Company (“Mountain West” or “Defendant”).

Both Plaintiff and the insurer filed motions for summary judgment.

BACKGROUND

Plaintiff was driving her Oldsmobile Alero when another vehicle struck her on September 21, 2017. Plaintiff sustained severe injuries from the accident. Plaintiff settled with the tortfeasor for the full limits of the tortfeasor’s liability policy coverage. Plaintiff received additional coverage through an insurance policy that she purchased for the Alero from Liberty Mutual, but it was not enough to satisfy Ms. Hatler.

Plaintiff’s husband, Pat Hatler, purchased separately a Businessowner’s insurance policy from Mountain West for his drywall and painting contractor business. The Policy lists Pat Hatler as the named insured. The Policy includes a section titled “Commercial Auto Coverage.” This section describes the scope of MPC and UIM for covered accidents.

Plaintiff asserts that the Policy also provides MPC and UIM coverage for her accident. On three separate occasions, Plaintiff requested that Defendant pay the full, stacked limits of the Policy’s MPC and UIM to cover her medical expenses incurred from the accident. Defendant denied coverage. Plaintiff sued.

ANALYSIS

The Policy’s Medical Payments Coverage (MPC) endorsement provides that Mountain West “will pay reasonable expenses incurred for necessary medical” care from an accident for the named insured. The Policy includes medical coverage for a “family member” of the named insured. The Policy also includes several exclusions to the MPC endorsement. Relevant to this case, the Policy excludes coverage for a bodily injury “sustained by any ‘family member’ while ‘occupying’ . . . any vehicle (other than a covered ‘auto’) owned by or furnished or available for the regular use of any ‘family member.'”

Defendant argued that the exclusion covers Plaintiff by its plain terms. The Alero is not listed as a “Covered auto.” Plaintiff suffered injuries in an accident while she occupied the Alero. Defendant argues that the Policy’s plain text requires application of the exclusion.

The exclusion in question appears on the same page of the Policy as the section initially granting MPC. The exclusion itself appears clear and unambiguous in its terms.  The “Covered auto” exclusion carves out a precise exception to the general rule articulated in the endorsement—an exception meant to capture those autos the insured pays a premium to cover under the Policy.

Plaintiff argued that a reasonable insured would not consult any other portion of the Policy to determine which autos are covered under the Policy. Plaintiff’s proposed reading of the Policy by section conflicts with clear requirements of Montana law that require an insured to consult an insurance policy as a whole.

The Policy’s plain text proves clear and unambiguous. Nothing in the Policy language entitles Plaintiff to MPC when she occupied a non-covered auto during her accident. Mountain West has met their burden of demonstrating the MPC exemption applies to the Plaintiff as a matter of law.

Underinsured Motorist Coverage

The UIM lists among those insured “any ‘family member'” and “[a]nyone else ‘occupying’ a Covered ‘auto’ or a temporary substitute for a Covered ‘auto.'”

The Policy also lists several exclusions. One such exclusion stipulates that UIM coverage does not extend to bodily injury sustained by a family member while they occupied “any vehicle (other than a Covered auto).” The scope of “any vehicle” includes a vehicle that was owned by that family member that is “not a Covered ‘auto’ for Uninsured Motorists Coverage under this Coverage Form.”

The Policy language taken in its entirety unambiguously modifies the coverage available rather than changes the operative definition of what qualifies as a “Covered auto.” Plaintiff further asserts the UIM exclusion proves unenforceable because a reasonable insured would have difficulty finding the exclusion, the definitions of “Covered auto,” and the inclusion of underinsured motorist coverage within the gambit of UIM. The UIM exclusion in the Policy applies to Plaintiff in this case and bars UIM coverage to Plaintiff.

The Montana Property and Casualty Insurance Policy Language Simplification Act

Plaintiff separately argues that the Policy violates the Montana Property and Casualty Insurance Policy Language Simplification Act (“Simplification Act”). Montana adopted the Simplification Act to “establish minimum language and format standards to make property and casualty policies easier to read.” The Simplification Act also sought to avoid increasing “the risk assumed under policies” or impeding “flexibility and innovation in the development of policy forms or content.” The Simplification Act requires a policy to include “a table of contents and notice section of important provisions.”

Plaintiff’s argued that the policy needed an expanded index proved to be unavailing. Plaintiff failed to propose a limiting principle for how an insurance company should prepare a lawful table of contents. As Plaintiff argues, a valid table of contents would have to include any coverage feature that potentially could defeat coverage. This requirement would cover nearly all provisions of a given insurance policy, and produce, in essence, a table of contents as long as the insurance policy itself.

The Simplification Act was not written to expand the Policy to cover family members occupying autos that otherwise would not be covered under the Policy. Plaintiff failed to list the Alero in the Policy and failed to pay premiums to cover the Alero under the Policy. Plaintiff instead insured the Alero under a separate policy with Liberty Mutual. The Court refused to invalidate the Policy’s reasonable coverage exemptions to expand coverage to the Alero in conflict with the Simplification Act.

The undisputed facts and plain language of the Policy denies Plaintiff’s coverage. The Policy does not violate the Simplification Act because the Simplification Act does not require every possibly important provision of the Policy to be included in an index or table of contents. Further, invalidation of the MPC and UIM exceptions would expand coverage in violation of the Simplification Act.

ZALMA OPINION

In the 54 years I have been involved with insurance only two insureds were willing to testify that they read and understood their policy: both lied. Whether a policy is simplified, whether it has an extensive table of contents, it will invariably not be read until there is a loss that a creative lawyer can read in an attempt to obtain coverage not intended by the insured or the insurer at the time it was acquired. The argument on the Simplification Act was creative but unavailing since to apply it as the plaintiff suggested the table of contents would be as big as the policy itself. Judges properly refuse to create coverage that does not exist. The court read the full policy and applied it as written.


© 2021 – Barry Zalma

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

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

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

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

 

 

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Published today: Zalma on Insurance Claims Part 102 – Third Edition

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Zalma on Insurance Claims Part 102 – Third Edition

Read the full article at https://www.linkedin.com/pulse/zalma-insurance-claims-part-102-third-edition-zalma-esq-cfe and at Available at https://www.amazon.com/dp/B097X7B79S

Zalma on Insurance Claims, Part 102, Third Edition is the second volume in the latest addition to Barry Zalma’s insurance claims series of books and articles. It is the second part of Zalma on Insurance Claims, a ten-volume treatise on insurance claims, insurance coverage, insurance fraud and insurance law. The ten-volume treatise is one of the most thorough, up-to-date, expert-authored insurance claims guide available today.

Written by nationally-renowned insurance coverage expert Barry Zalma, an insurance coverage attorney, consultant, expert witness and blogger, Zalma on Insurance Claims provides in-depth explanations, analysis, examples, and detailed discussion of:

Property insurance claims;
Third-party liability claims;
Casualty claims;
Insurance coverage;
Insurance claims investigation; and
Insurance Fraud.

Thorough, yet practical, this book is the ideal guide for any professional who works in, or frequently interacts with, the insurance industry. Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from this multiple volume guide.

It is the perfect resource for insurance educators, trainers, and students whose role requires an understanding of insurance claims and insurance claims law.

As you read through the various volumes of Zalma on Insurance Claims, you will find comprehensive—yet comprehensible—coverage of key topics, including:

Insurance;
The History of Insurance;
The Covenant of Good Faith and Fair dealing;
The Tort of Bad faith;
Conditions;
Warranties;
Exclusions;
Declaring a policy void;
Rescission;
Duties of insured and insurer;
Evaluation and settlement;
Identifying insurance fraud
Claims Investigation;
Insurance Fraud Investigation;
Kinds of insurance policies;
Other insurance clauses;
Preparing an insurance case for trial;
Processing a claim;
Responses to fraud;
Subrogation and salvage; and
Underwriting.

The author has provided checklists, sample procedures, form letters, tables and information and references to model statutes, state statutes, administrative regulations, and requirements of insurance departments nationwide.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service.


© 2021 – Barry Zalma

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

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

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

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

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