Complying With Insurance Fraud Regulations and How to Defeat Insurance Fraud

From Barry Zalma: Everything Needed by the Insurance Claims Professional

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

 

Insurance Fraud – Volume I & Volume II

In Two Volumes

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

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

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

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

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

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

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

Volume One available as a Kindle book and a paperback.

Volume Two Available as a Kindle book and a paperback

The Compact Book of Adjusting Property Insurance Claims – Second Edition

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

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

Available as a Kindle book.

Available as a paperback.

California SIU Regulations 2020

The State of California Imposes Control on the Investigation of Insurance Fraud Effective October 1, 2020 – New Regulations to Enforce Statutes Requiring Insurers to Maintain a Special Investigative Unit

California SIU Regulations 2020 is designed to assist California insurance claims personnel, claims professionals, independent insurance adjusters, special fraud investigators, private investigators who work for the insurance industry, the management in the industry, the attorneys who serve the industry, and all integral anti-fraud personnel working with California admitted insurers who must comply with the requirements of California SIU Claims Regulations that were rewritten and made operative October 1, 2020.

The state of California, by statute, requires all admitted insurers to maintain a Special Investigative Unit (an “SIU”) that complies with the requirements set forth in the Special Investigative Unit Regulations (the “SIU Regulations”) and train all integral anti-fraud personnel to recognize indicators of insurance fraud. It is necessary, therefore, that insurance personnel who are engaged in any way in the presentation, processing, or negotiation of insurance claims in California to be familiar with the SIU Regulations.

The state has imposed on all claims personnel duties to deal with insurance fraud if the insurers are doing business in the state. California licensed insurers are required by California Insurance Code Sections 1875.20-24 and California Code of Regulations, Title 10, Sections 2698.30 -.41 to establish and maintain Special Investigative Units that identify and refer suspected insurance fraud to the California Department of Insurance (CDI) and directly to the local California County District Attorney’s Office for workers’ compensation only. The regulations also require each insurer to submit an SIU Annual Report to CDI which provides important information regarding the insurer’s SIU anti-fraud operations, procedures, and training material. The SIU Compliance Review Program evaluates the accuracy, completeness, and timeliness of the report. The reports are used to conduct a risk assessment to help determine which insurers are selected for SIU compliance review. R

The Appendices include outlines to be used by a staff member of the insurance company SIU, its trainers, educators, or lawyers to present a training class for all of the “integral anti-fraud personnel” of the insurers as defined by the SIU Regulations. Insurers must understand that every claims employee must be trained in accordance with the requirements of the SIU Regulations no later than 30 days after the person is hired and annually thereafter. As it is not economically reasonable to train one new employee California SIU Regulations 2020 cam provide the needed training without the additional expense of a training class for one or two persons.California SIU Regulations 2020, and its appendices, will provide the insurer and its staff with the information needed to comply with the SIU Regulations and will provide the training required for what the SIU Regulations describe as an insurer’s “integral anti-fraud personnel.”

Available as a Kindle book here. 

Available as a paperback here.

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A Video Explaining the Duty of Good Faith Owed by the Insured to the Insurer

The Duty of the Insured

See the full video at https://youtu.be/ecm2FdbiZIE

The purpose of the implied covenant of good faith and fair dealing is to protect the reasonable expectations of both parties to the contract. The duty to act in good faith is a mutual duty imposed on both the insured and the insurer. However, regardless of the clear statements of the law that the duty is mutual, in practice it requires the insured to deal only with a modicum of fairness toward the insurer while the insurer must deal with its insured with the utmost good faith.

In Washington, a statute provides:

The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance. [RCW 48.01.030

Even if an insured is found to have treated his insurer maliciously, and with bad faith, the insurer can only recover actual contract damages and may not, in California, recover punitive damages from its insured. The courts will allow the insurer to offset the bad faith damages it owes to an insured by a percentage the jury attributes to the bad faith of the insured.

This statement of the law may seem unreasonable: if an insured is entitled to tort damages for the bad faith conduct of the insurer, the law should fairly and equitably allow the insurer to recover tort damages as a result of the bad faith conduct of the insured. At present this is not the case.

Examples of bad faith conduct by the insured include:

  • presentation of a fraudulent claim;
  • misrepresentation of material facts, which if known by the insurer, would have caused the insurer to refuse the insurance; and
  • willful refusal to attend trial.

Since the insurer’s obligation is “absolute and independent,” such bad faith conduct would not bar the insured’s action. It could result in a comparative bad faith analysis by the trier of fact and the reduction of any award the insured might have otherwise received. It would not, however, result in a reduction of punitive damages based upon an insurer’s malicious, oppressive, or fraudulent behavior.

An insurer argued to the Sixth Circuit that the Court should recognize a cause of action of reverse bad faith in the insurance context and award the insurer damages associated with Plaintiff’s fraudulent claim. Defendants maintained that there is a strong public policy against allowing insureds to profit from their own wrongdoing while simultaneously subjecting insurers to inordinate increased costs for investigation, defense, and litigation.


© 2020 – Barry Zalma

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

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance –

 

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Insurer Loses Summary Judgment for lack of Claiming the Existence of Evidence it Had

Insurer Properly Excluded claim for Plaintiff who was not Hospital Confined but Failed to Prove All Elements of Motion

Appellate courts will often reverse a motion for summary judgment in favor of an insurer on technical grounds even when the decision made by the insurer to deny benefits appeared to be appropriate. In Vanessa Hartwell v. American Fidelity Assurance Company, No. SD36561, Missouri Court of Appeals Southern District Division Two (September 17, 2020) the insurer’s motion was granted by the trial court but was reversed.

FACTUAL BACKGROUND

Vanessa Hartwell (“Hartwell”) appealed the trial court’s judgment granting summary judgment in favor of American Fidelity Assurance Company (“AFA”) on Hartwell’s petition for breach of insurance contract (Count I) and vexatious refusal to pay an insurance claim (Count II). In three points, Hartwell contended that the trial court erred in granting summary judgment.

Hartwell was the holder of and an insured under an insurance policy issued by AFA (“the Policy”) that was in full force and effect. Hartwell filed an insurance claim with AFA seeking the “Hospital Confinement Benefit” under the Policy for a period of hospitalization from June 11, 2018, through July 4, 2018. AFA agreed with Hartwell that she was hospitalized at Saint Francis Medical Center (“SFMC”) from June 11, 2018, through June 19, 2018, and paid the benefits Hartwell claimed for those dates. It denied, however, that she was entitled to the Hospital Confinement Benefit for the remainder of the days at issue, June 20, 2018, to July 4, 2018.

AFA’s Policy provides that eligibility for the Hospital Confinement Benefit requires that the insured be confined as a patient in a “Hospital” as defined within the Policy (“the Hospital definition”). Furthermore, the Hospital definition contains language excluding from that term an institution used by the insured as “a place for rehabilitation” or as “an extended care facility for the care of convalescent, rehabilitative or ambulatory patients.” With respect to the portion of Hartwell’s claim for Hospital Confinement Benefits that it denied, AFA alleged,

Hartwell was inpatient from June 20, 2018 to July 4, 2018 at a rehabilitation facility located on the SFMC grounds and her stay during this time was used by her as “a place for rehabilitation” and/or “an extended care facility for the care of convalescent, rehabilitative or ambulatory patients.”

DISCUSSION

A court construing the terms of an insurance policy must apply the meaning which would be attached by an ordinary person of average understanding if purchasing insurance, and resolves ambiguities in favor of the insured. An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaning of the language of the policy. An insured cannot create an ambiguity by reading only a part of the policy and claiming that, read in isolation, that portion of the policy suggests a level of coverage greater than the policy actually provides when read as a whole.

With these principles in mind the Hospital definition states:

HOSPITAL means a licensed institution which: (a) has on its premises: (1) laboratory, X-ray equipment and operating rooms where major surgical operations maybe [sic] performed by licensed Physicians; (2) permanent and full-time facilities for the care of overnight resident bed patients under the supervision of a licensed Physician; (3) 24-hour-a-day nursing service by graduate registered nurses; and (4) the patient’s written history and medical records; or: (b) is accredited by the Joint Commission on Accreditation of Hospitals. The term Hospital shall not include an institution used by You as: (a) a place for rehabilitation; (b) a place for rest or for the aged; (c) a nursing or convalescent home; (d) a long term nursing unit or geriatrics ward; or (e) an extended care facility for the care of convalescent, rehabilitative or ambulatory patients.” (Emphasis added by the court.)

No duplicity, indistinctness, or uncertainty exists between the first and second parts of the Hospital definition. When read as a whole it requires that, in order to qualify for inclusion within the Hospital definition, a licensed institution must satisfy the definition’s first part but an institution is excluded from that term if it is used by the insured in any manner described in the definition’s second part. Thus, to an ordinary person of average understanding, an institution qualifies under the Hospital definition if it (1) satisfies the definition’s first part and (2) was not used by the insured in a manner proscribed in the second part. The same person would also understand that, in a different context, an institution, although meeting the Hospital definition’s first part, does not qualify as a Hospital if it was used by an insured in a manner described and excluded by the second part.

Where there is no ambiguity in an insurance policy, a court must enforces the policy as written.

However, a summary judgment can only be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Hartwell argued that AFA’s motion for summary judgment failed to make a prima facie showing of a right to judgment as a matter of law under the Hospital definition because its statement of uncontroverted material facts (“SUMF”) omitted the material fact that between June 20, 2018, through July 4, 2018, she used SFMC as either “a place for rehabilitation” or “an extended care facility for the care of convalescent, rehabilitative or ambulatory patients.”

If a movant’s motion for summary judgment fails to make a prima facie showing of a right to judgment as a matter of law, any further inquiry into the summary judgment record should end and the motion for summary judgment should be denied. In its attempt to refute the claim she was hospital confined AFA failed to state as an alleged material fact in its SUMF that Hartwell used SFMC in a manner proscribed in that definition.

AFA was required to make a prima facie showing of a right to judgment as a matter of law based upon its asserted uncontroverted material facts. When, and only when, AFA makes the necessary prima facie showing of a right to judgment as a matter of law based upon its SUMF does the burden shift to Hartwell to show that one or more of AFA’s material facts are genuinely disputed. In sum, AFA’s SUMF fails to support a prima facie showing of AFA’s right to judgment as a matter of law under the Hospital definition.

The trial court’s judgment in favor of AFA was reversed, and the case was remanded for further proceedings consistent with the opinion.

ZALMA OPINION

To paraphrase Shakespeare: For want of a nail a horse was lost and for want of a horse a kingdom was lost. In this case, for want of a statement in AFA’s SUMF that Hartwell was not in a “Hospital” but in a care facility, its favorable judgment was reversed. The victory for Hartwell is Pyrrhic since all AFA need do is rewrite its motion and add the language that explains Hartwell’s non-Hospital stay. Hartwell and AFA should settle for the costs of bringing a new motion.


© 2020 – Barry Zalma

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

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance –

 

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Are You an Insurer Who Does Business in California?

You Must Know how to Comply with the California SIU Regulations that are Effective October 1, 2020

New Regulations to Enforce Statutes Requiring Insurers To Maintain A Special Investigative Unit

See the full video at https://youtu.be/gy_3jDhDaNI

I have completed a resource for everyone involved in the insurance industry in the state of California to enable them to comply with the newly revised California SIU Regulations since the revisions add much to the obligations of insurers doing business in California.

The new book: California SIU Regulations 2020 a book explaining the revised SIU Regulations is now available from Amazon.com here.

The following is from the table of contents explaining what is contained in the book:

The SIU Regulations; Fraud Division; California SIU Regulations; The SIU Investigator; Full Text And Commentary On Special Investigative Unit Regulations; Identifying Insurance Fraud; The Insurance Frauds Prevention Act — Full Text; Outline For Training Of Integral Anti-Fraud Personnel; Property Insurance Fraud Red Flags; Red Flags Of Fraud At Time Policy Is Acquired; Red Flags Of Fraud Associated With The Insured; Red Flags Of Fraud — Personal Injury Fraud; Red Flags Of Fraud — Premiums; Red Flags Of Fraud — Vehicle; Red Flags Of Fraud — Occupation; Red Flags Of Fraud — Personal Demeanor; Red Flags Of Fraud — Timing Of Visit; Red Flags Of Fraud; How To Make A Fake Appraisal; Plan For Document Recording & File Retention Insurance Company; And Forms.

The book is designed to assist California insurance claims personnel, claims professionals, independent insurance adjusters, special fraud investigators, private investigators who work for the insurance industry, the management in the industry, the attorneys who serve the industry, and all integral anti-fraud personnel working with California admitted insurers who must comply with the requirements of the California SIU Claims Regulations that were rewritten and made operative October 1, 2020.

The state of California, by statute, requires all admitted insurers to maintain a Special Investigative Unit (an “SIU”). The SIU must comply with the requirements set forth in the Special Investigative Unit Regulations (the “SIU Regulations”) and train all integral anti-fraud personnel to recognize indicators of insurance fraud.

It is necessary, therefore, that insurance personnel who are engaged in any way in the presentation, processing, or negotiation of insurance claims in California to be familiar with the SIU Regulations. The state has imposed on all claims personnel duties to deal with insurance fraud if the insurers are doing business in the state. California licensed insurers are required by California Insurance Code Sections 1875.20-24 and California Code of Regulations, Title 10, Sections 2698.30 -.41 to establish and maintain Special Investigative Units that identify and refer suspected insurance fraud to the California Department of Insurance (CDI) and directly to the local California County District Attorney’s Office for workers’ compensation only.

The regulations also require each insurer to submit an SIU Annual Report to CDI which provides important information regarding the insurer’s SIU anti-fraud operations, procedures, and training material. The SIU Compliance Review Program evaluates the accuracy, completeness, and timeliness of the report. The reports are used to conduct a risk assessment to help determine which insurers are selected for SIU compliance review. Risk criteria includes, but is not limited to:

  • Prior SIU compliance review finding(s), as well as follow up on recommendations and corrective action compliance plans;
  • Discrepancies and/or non-compliance issues identified by analyzing the SIU Annual Report;
  • Quantity and/or quality of suspected insurance fraud referrals to CDI, known as eFD-1s, FD-1s, or SFCs and referrals to California County District Attorneys’ Offices for workers’ compensation only;
  • lines of insurance that are relatively risky and susceptible to fraud;
  • Nature and/or quantity of complaints received against a particular insurer;
  • Market share of the insurer;
  • Late or no response to written information demand letters from CDI or other authorized governmental agencies (e.g., district attorneys); and
  • CDOI executive directive.

By following the training recommendations in the book insurers can inoculate themselves against the potential for paying enormous fines to the CDOI for failure to fully comply with the amended SIU Regulations.

The Appendices include outlines to be used by a staff member of the insurance company SIU, its trainers, educators, or lawyers to present a training class for all of the “integral anti-fraud personnel” of the insurers as defined by the SIU Regulations.

Insurers must understand that every claims employee must be trained in accordance with the requirements of the SIU Regulations no later than 30 days after the person is hired and annually thereafter.

As it is not economically reasonable to train one new employee California SIU Regulations 2020 cam provide the needed training without the additional expense of a training class for one or two persons.

California SIU Regulations 2020, and its appendices, will provide the insurer and its staff with the information needed to comply with the SIU Regulations and will provide the training required for what the SIU Regulations describe as one of the insurer’s “integral anti-fraud personnel.”

The book is available as a Kindle book and as a paperback at amazon.com.


© 2020 – Barry Zalma

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

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance –

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Win Some, Lose Some: Wear and Tear, Deterioration, Needs to be Established by a Preponderance of the Evidence

Construction Defect Exclusion Established While Deterioration Exclusion Must be Determined at Trial

A house that was defectively constructed was damaged slowly over a long period of time because the defects allowed entry of water that eventually caused portions of the house to deteriorate and cause damages that cost more than $300,000 to repair. The owner made a claim to the homeowners insurer who rejected the claim because of exclusions for defective construction, wear and tear, and deterioration and the insured sued and faced a motion for summary judgment in George H. Rountree v. Encompass Home And Auto Insurance Company, CV 619-008, United States District Court For The Southern District Of Georgia Statesboro Division (September 17, 2020)

BACKGROUND

This case arises from damage allegedly caused by faulty workmanship on Plaintiff George Rountree’s Statesboro, Georgia home. Plaintiff first became aware of issues with his home in “early 2017” when his wife, Anne Rountree, noticed sagging trim above the garage door. Plaintiff hired Tim Durden to repair the home. Mr. Durden observed workmanship defects in the flashing, weatherproofing, and shingles that led to substantial water intrusion and damage. Architect Frank D’Arcangelo assessed the home and made similar findings and concluded that these construction defects would have been present when the house was constructed. Mr. D’Arcangelo and Mr. Durden both described much of the damage as “deterioration.”

Plaintiff incurred over $300,000 in expenses in repairing and remediating the water damage and defective construction, which included removing and replacing the entire roof and all of the flashing.

Plaintiff maintains a home insurance policy with Encompass that provides coverage for all claims or damages not otherwise excluded by the policy. One exclusion excludes coverage for damage to the covered real property due to faulty, inadequate, or defective workmanship. However, any ensuing loss not excluded or excepted in this policy is covered.

Another provision of the policy – referred to as the “deterioration exclusion” – excludes coverage for losses “caused by or consisting of: (1) Wear and tear, aging, marring, scratching or deterioration; . . . (3) Rust or other corrosion . . . .”

Plaintiff asserts a breach of contract claim, alleging that Encompass’s denial of coverage is a breach of the policy. Encompass moved for summary judgment on the portions of Plaintiff’s claim that are not covered by the policy.

DISCUSSION

There are three issues in this case:

  1. Whether Plaintiff’s claim was timely filed.
  2. Whether and how the ensuing loss provision applies.
  3. Whether the policy’s exclusions apply to Plaintiff’s losses.

Insurance Contracts in Georgia

In Georgia, three well known rules used in the construction of insurance contracts apply. Any ambiguities in the contract are strictly construed against the insurer as drafter of the document; any exclusion from coverage sought to be invoked by the insurer is likewise strictly construed; and insurance contracts are to be read in accordance with the reasonable expectations of the insured where possible.

The Contractual Limitations Period

The Encompass policy contains a contractual limitations period, which requires any suit on the policy to be brought within two years of the inception of the loss. “Inception of the loss” is not defined in the policy. Georgia courts enforce contractual limitations periods in insurance policies. While water may have begun to intrude shortly after the completion of construction, it did not do so instantaneously as Encompass argues; the water must have intruded at some point between the completion of construction and Plaintiff’s discovery of the damage.

“Inception of the loss” can be a nebulous moment in time. In cases of discrete or acute loss, such as a fire, the inception of loss is the date of the fire. The problem in the case at hand is that the damage began on a date unknown following the faulty construction but continued and worsened until discovery. Unlike a fire, latent and progressive damage like mold, wet rot, and water intrusion can fester undetected for years. Many states apply a “delayed discovery” rule, which treats latent and progressive losses as having occurred on the earlier of either the discovery of the loss or when a reasonable insured would have become aware of it. The discovery rule is a logical one to apply to this type of loss.

The Ensuing Loss Provision

Encompass argues that all of Plaintiff’s claims flow from defective construction and thus are excluded from coverage under the defective construction exclusion unless the ensuing loss exception applies. Defined generally, an ensuing loss provision provides coverage for loss which follows as a consequence of some preceding excluded event or circumstance. Logically and by the policy language, if both causes are excluded, the ensuing loss provision does not apply and there is no coverage for the loss.

The purpose of the ensuing loss provision is to ensure that the insurer does not try to avoid coverage for a covered loss by attributing that loss’s cause to an excluded loss. The ensuing loss provision does not provide for any coverage independent of already existing coverage. In other words, if an ensuing loss is otherwise excluded, it remains excluded.

Exclusions

Encompass invokes the defective construction and deterioration exclusions.  As for any of the losses caused by defective construction, summary judgment for Encompass is appropriate because these are losses excluded under the policy and there is no dispute of fact as to their classification. This would include the improperly installed flashing, weatherproofing, roof edge, and shingles, as well as any other repairs necessary to properly address those issues – like replacing the roof.

Deterioration

This leaves discussion of losses designated as “deterioration.” Encompass points to numerous examples of “deterioration” caused by water exposure, including Mr. Durden’s testimony that approximately fifty percent of the home’s sheathing had deteriorated. The Encompass policy excludes coverage for “wear and tear, aging, marring, scratching or deterioration . . . .” The policy does not further define deterioration.

While the word “deterioration” may have a broad dictionary definition, its meaning within the policy is informed by the words surrounding it. A canon of construction holding that the meaning of an unclear word or phrase, especially one in a list, should be determined by the words immediately surrounding it. Here, deterioration is accompanied by the words “wear and tear, aging, marring,” and “scratching.” Taken as a whole, this exclusion contemplates an impairment to property that occurs with normal and reasonable use over time. The damage identified as deterioration in this case is some sort of impairment caused by rainwater intrusion. The District Court found a question of fact exists as to whether that damage identified as deterioration is excluded under the policy.

CONCLUSION

Despite the Parties’ contentions regarding the ensuing loss provision, the result was whether the losses were excluded under the policy. The ensuing loss provision states as much.

The policy provides for coverage for any loss not otherwise excluded; thus, Encompass bears the burden of demonstrating the applicability of an exclusion. Encompass did so as to the defectively constructed components, as well as those components that must be necessarily replaced to fix the defective ones – effectively, everything except the damage identified as deterioration. Accordingly, the motion for summary judgment was granted as to those components. Summary judgment, however, was denied as to the damage Encompass identifies as deterioration.

ZALMA OPINION

Win some, lose some. This is now a case ripe for settlement since the court has granted summary judgment as to most of the costs of repair and left for trial a small part – deterioration and wear and tear – which should be easily resolved. The exclusions that were applied by the court were clear and unambiguous and the evidence from plaintiffs’ own witnesses were damning. If it goes to trial, the trial will be short and limited to the issue of what parts of the damage are due to deterioration.


© 2020 – Barry Zalma

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

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance –

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A Video Explaining The Fortuity Doctrine

Expected or Intended: The Fortuity Doctrine

See the full video at https://youtu.be/0hS8OhnATME

The fortuity doctrine arises from the basic concept upon which insurance is founded: that insurance covers risks, not losses that were planned, intended, or anticipated by the insured. It has always been the view of insurers that losses that were expected by the insured could not be insured. To do so would have a counterproductive effect. No one would buy insurance until they were certain they would have a loss. The concept of spreading the risk on which insurance is based would be defeated. The creation of losses would be encouraged.

An accident or occurrence is never present when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage. When the injury was caused by the insured’s manufacture and sale of products the manufacture and sale of products without right were deliberate and intentional acts, and there was no additional, unexpected, independent, and unforeseen happenings that caused the infringement alleged by the plaintiff or the indemnity obligation. The court concluded that the conduct giving rise to the underlying action was not an “accident” nor an “occurence” within the coverage provision. Because there was no potential basis for coverage, there is no duty to defend.

The loss-in-progress rule codifies a fundamental principle of insurance law that an insurer cannot insure against a loss that is known or apparent to the insured. (See Bartholomew v. Appalachian Ins. Co. (1st Cir. 1981) 655 F.2d 27, 28-29.) The public policy rule is premised on the view that to hold the insurer liable for a progressive and continuing property loss that was discovered before the carrier insured the risk would be to impose upon the insurer a guaranty of the good quality of the property insured, which liability under the policy the insurer had not assumed. (Greene v. Cheetham (2d Cir. 1961) 293 F.2d 933, 937.)

In Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 691, 693 where the existence and extent of injuries were unknown from the insured’s “standpoint,” coverage of continuous or progressively deteriorating property damage under a CGL policy did not offend the loss-in-progress rule.

The fortuity doctrine or “loss in progress” rule, where damage began to occur prior to the inception of the policy, requires that, as a matter of law, no part of the loss may be insured against. The fortuity doctrine only precludes a party from insuring against a loss that has occurred or is certain to occur within the term of the policy.


© 2020 – Barry Zalma

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

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance –

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Claim of Negligence by Insurance Broker Requires Expert Testimony to Establish Duty of Care

Insured Failed to Prove Agent Breached Duty of Care

It is not unusual for an insured to select the minimum required uninsured or underinsured motorist coverage to save money. Only after an accident, with 20/20 hindsight, does the insured understand the need for higher limits. When the injuries are serious and the limits are inadequate, invariably the agent is sued for failing to acquire sufficient limits.

Such was the case in Omar Alabassi v. T.I.B. Insurance Brokers, Inc., No. 19-1183, United States Court Of Appeals For The Tenth Circuit (September 17, 2020) when the plaintiff, Omar Alabassi, was covered by an insurance policy obtained through T.I.B. Insurance Brokers (“TIB”). He was involved in a hit-and-run collision with another driver who fled the scene.

Alabassi brought a negligence claim against TIB, alleging that TIB failed to meet its standard of care in (1) providing him with adequate insurance coverage and (2) preparing and submitting his insurance application. The district court granted summary judgment in favor of TIB because Alabassi failed to present expert testimony establishing that TIB breached its duty of care.

FACTS

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

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

Following the accident, Alabassi claimed that he suffered over $86,000 in medical expenses but Columbia Insurance offered him only $55,000. Alabassi alleged in his complaint that TIB was negligent. At trial, TIB moved for summary judgment on the ground that Alabassi failed to offer expert testimony establishing essential elements of his negligence claim.

ANALYSIS

The parties suggest, without any citation to this circuit’s precedent, that the Tenth Circuit review a grant of summary judgment for failure to present expert testimony for abuse of discretion. Finding no need to decide the appropriate standard of review to be applied in this case, however, because it determined that the district court properly held expert testimony to be required.

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

The standard of care in this case is based on TIB’s determination of the proper insurance for Alabassi—a determination requiring knowledge of terms and practices specific to the insurance industry. An ordinary person, even an experienced judge, would neither understand how a reasonably prudent insurance broker would determine the proper policy for a client nor whether TIB’s conduct was consistent with those practices.

Alabassi selected the minimum coverage required by Colorado law. Colorado law requires minimum coverage of $25,000 for one person and $50,000 for two or more persons in any one accident. Because knowledge of terms specific to the insurance industry is needed to determine whether selecting the Colorado minimum conflicts with selecting a $50,000 single limit, the district court needed expert testimony to resolve the issues.

Expert testimony was required to determine whether the options selected in Alabassi’s insurance application were inconsistent. No specialized or technical knowledge was required to determine that the insurer failed to act in good faith under those circumstances. Conversely, in this case, Alabassi’s allegations that TIB was negligent were based on an understanding of terms and practices outside the common knowledge and experience of ordinary persons. Thus, the district court did not err by deciding that expert testimony was required.

ZALMA OPINION

When a professional – an insurance agent or broker, a physician, a lawyer, an architect, an insurer or an accountant – is sued for breach of his or her duty of care (negligence) it is the obligation of the plaintiff to prove, first, the professional’s duty of care and that the duty was breached and that the breach caused the plaintiff damage. To establish a duty of care of a professional, like TIB in this case, requires an expert witness to explain to the trier of fact (a judge or jury) what the duty was and whether it was breached by the professional acting outside the custom and practice of the profession.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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A Video Explaining the Latent Defect and Inherent Vice Exclusions

Latent Defect

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

Cases that provide coverage despite an exclusion for latent defects fall generally within two categories. The court determines either that:

  • the defect could have been discovered through appropriate testing and it is therefore not latent; or
  • the loss resulted from a contributory covered risk.

“A policy will define latent defect” as “a hidden flaw inherent in the material existing at the time of the original building of the yacht, which is not discoverable by ordinary observation or methods of testing.” “The word “inherent” requires that a latent defect be characteristic of or intrinsic to the material. The word “flaw” imposes the exact opposite requirement. It includes problems with a specific piece of material, but not problems characteristic of the material itself. In short, giving the terms their plain and reasonable meaning, there can be no such thing as an inherent flaw.” (Ardente v. Standard Fire Ins. Co., 744 F.3d 815 (1st Cir. 2014))


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Claim Must be Made Against Insured During Policy Period to Recover on a Claims Made Policy

No Cover for Defense of Criminal Charges Made Years After Claim Made by Prosecutors

Appellant Denis M. Field challenged a final summary judgment in favor of dozens of insurers (appellees) in his suit to recover defense costs he incurred in a criminal trial in which he was acquitted. The trial court determined that the costs for which he sought reimbursement were not made in connection with a “claim,” as defined in the policy, during the policy term in Denis M. Field v. Certain Underwriters At Lloyd’s et al, No. 4D19-2429, District Court Of Appeal Of The State Of Florida Fourth District (September 16, 2020)

FACTS

Appellant was a partner and the CEO of a global accounting firm, BDO Seidman, LLP., until his resignation from the firm in 2003. During the years 2000 through late 2003, BDO, appellant, and others came under government investigation for tax services that the IRS considered to be abusive tax shelters. In 2009, appellant and others were criminally charged in connection with the tax services that they provided. Appellant was eventually acquitted of all charges in 2013.

During the years 2000-2017, BDO and its partners were insured under “towers” of Lloyd’s of London primary and excess insurance policies. Each policy was written for a single year of coverage. In May of 2003, BDO sent to Lloyd’s representative a notice of circumstance. The notice arose out of the tax shelter services which BDO had provided to its high value tax clients. The IRS considered those shelters to be abusive tax shelters, and they were under IRS examination. The notification triggered coverage for the policy year 2002-2003. By the time of appellant’s criminal charges, the 2002-03 underwriters had paid out their limits under the policy.

In 2017, appellant made a claim to the appellees, the 2017-2018 Underwriter Insurers, seeking indemnification for defense costs incurred in the 2009-2013 criminal proceedings, which claim was denied. In his suit appellant claimed coverage for his defense costs under the 2017-18 policy.

Appellees moved for summary judgment on the complaint, attaching the policy. Among their several arguments, they contended that no claim, as defined in the policy was made during the policy period. The trial court held that the plain language of the policy did not allow for the recovery of appellant’s defense costs for his criminal prosecution which ended over four years earlier. The trial court granted judgment in favor of the insurer.

RULES OF INSURANCE INTERPRETATION

Insurance contracts are construed according to their plain meaning, with any ambiguities construed against the insurer and in favor of coverage. When the language of an insurance policy is plain and unambiguous, a court must interpret the policy in accordance with the plain meaning in order to give effect to the policy as written. Insurance contracts are to be reviewed as a whole, viewing all words in context.

THE POLICY

The important provisions of the appellee’s policy for consideration of appellant’s claims include the operative clause and the definitions of “claim” and “defense costs.” The “Operative Clause” of the Policy provides: “Subject to all other provisions of this Policy, the Insurer will indemnify the Assured against: “(1) Loss arising from a Claim first made against the Assured during the Policy Period; (2) Defense Costs; (3) Regulatory Loss; (4) Regulatory Defense Costs.”

A “Claim” in the Policy is defined as: “a written demand for monetary or non-monetary relief, which may include a civil legal proceeding or binding arbitration proceeding, made against the Assured by reason of a Wrongful Act[.]”

The first page of the policies state: “THIS IS A CLAIMS MADE POLICY WHICH APPLIES ONLY TO CLAIMS FIRST MADE DURING THE POLICY PERIOD.” The Policy Period is stated to be June 1, 2017 to June 1, 2018.

ANALYSIS

As the trial court concluded, the policy requires a claim to be a written demand for monetary relief against the Assured as a result of a wrongful act. The wrongful act in this case constituted the professional advice given by appellant with respect to the tax shelter services, which was the origin of the criminal prosecution. The operative clause allows indemnification under the policy for losses from claims, and defense costs. The definition of defense costs plainly requires those costs to be incurred with respect to a claim.

For the purposes of the motion, the trial court accepted appellant’s contention that the criminal prosecution could constitute a claim for non-monetary relief. But that “claim” was not made within the policy period of 2017-18. The criminal prosecution was commenced in 2009. If the claim was not made within the policy period, then there could be no indemnification of defense costs which had to be associated with a claim.

The term Policy Claim is used in the “Conditions” section of the policy. In those provisions, notice to the appelees is a condition of the policy. That provision states, “For the purposes of this Policy, the date on which such Claim . . . is made against the Assured during the Policy period is the date upon which the resulting Policy Claim shall attach to this policy.”  Because the Claim giving rise to the claim of indemnification was not made during the policy period, there was no Policy Claim for indemnification on this policy.

In a thorough and well-reasoned opinion, the trial court determined that the costs for which he sought reimbursement were not made in connection with a “claim,” as defined in the policy, during the policy term and the appellate court agreed and affirmed the judgment in favor of the insurers.

ZALMA OPINION

Claims made policies, like those involved in this case, are severely limited to claims made during the effective dates of the policy. Since the claim was made in 2009 when the criminal prosecution started or in 2003 when the insured first reported the investigation of the Department of Justice, neither were during the effective dates of the policies of the insurers that Field sued whose policy did not come into effect until 2017. A claim is not made when the insured seeks money from his insurer but when someone makes a claim against the insured.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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A Video Explaining the Duties of the Public Insurance Adjuster

Duties of the Public Adjuster

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

Most policyholders do not have the in-house capability to investigate, evaluate, and negotiate significant property insurance losses. While some losses, such as a small fire loss requiring only minor repairs, may be dealt with easily, others, which involve more complex damages and different potential causes of loss, are much harder to assess. Resolving them may require expertise in understanding the scope of coverage provided by the applicable property insurance policy, scientific or other specialized background to determine the cause of a specific loss, the ability to determine the cost to repair or replace the damaged property, and the calculation of the amount of a time element (business interruption) loss.

In such cases, the policyholder may engage a public insurance adjuster (PA). PA’s are licensed by almost every state and their contract forms must be approved by the state. All PAs claim to be experts on property loss adjustment; most are. They represent only policyholders in fulfilling the duty to prepare, file, and adjust insurance claims. The PA should handle every detail of the claim, working closely with the policyholder and the insurer to obtain a prompt and reasonable settlement.

PAs usually charge a contingency fee, which they present to the insured as a fait accompli. But this fee is negotiable. The insured should try to lower it as much as possible. For a major loss, more than one PA will arrive at the site seeking a contract. A fee quoted by one can be reduced by seeking lower fees from the others. Rates can be negotiated from a low of 3% to a high of 40%, although the average charge is 10% to 15%. When considering a PA, the insured must take into account the fact that even if the insurer pays the full amount of the loss, the cost of the adjuster’s fee may not leave enough funds to fully repair the damaged structure.

Upon being retained, the professional PA should:

  1. immediately inspect the loss site;
  2. analyze damages;
  3. assemble the necessary support for the claim;
  4. review the coverage to determine the portions of the loss which are covered;
  5. assess the value of the loss; and
  6. negotiate with the insurance company to reach the end result.

© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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It is not Nice to Seek Predated Insurance After an Accident

Insured May not Assume Coverage Exists if the Insured Fails to Order Collision Coverage

Walter Alvarez appealed the trial court’s entry of summary judgment in favor of Pinnacle Insurance Group of Indiana, Inc. (“Pinnacle”) and Joyce Helsel (“Helsel,” and together with Pinnacle, “Defendants”) on his complaint seeking recovery for damage to one of his automobiles. In Walter Alvarez v. Joyce Helsel & Pinnacle Insurance Group of Indiana, Inc., Court of Appeals Case No. 20A-CT-632, Court Of Appeals Of Indiana (September 16, 2020) the Court of Appeals considered a claim from Alvarez that the addition of collision coverage was automatically added after he started driving his Ferrari 458 (the “Ferrari 458”).

FACTS

On September 27, 2016, Alvarez was involved in a single vehicle accident while driving the Ferrari 458. He sued Defendants alleging that he had a vehicle insurance policy with Pinnacle and that due to the negligent acts and/or omissions of Helsel, he was forced to personally incur $242,000 in property damage and repair estimates for the Ferrari 458 which he had reasonably believed and trusted he was insured for collision coverage.

The trial court entered an order which granted Defendants’ summary judgment motion.  Since he did not drive the Ferrari 458 regularly and would store it for long periods of time Alvarez would limit coverage to comprehensive and only change the coverage to collision and comprehensive when he expected to drive the Ferrari 458. The changes were effected with the agent, Helsel, by e-mail, fax, directly from Alvarez or one of his employees.

Alvarez does not allege Helsel had a duty to unilaterally modify insurance coverage on the Ferrari or other vehicles owned by Alvarez without his direction and consent.

On September 28, 2016, the day after the accident, Alvarez, though his employees, requested Helsel to upgrade coverage from comprehensive to collision for all of his vehicles that only had comprehensive coverage, including the Ferrari. Alvarez alleges Helsel had a duty to send him an “Acord Change Form” when he made the request for the insurance declaration on September 21, 2016 (before the accident), and she negligently failed to do so. As a result of her negligence, Alvarez sustained damages when he drove his vehicle with inadequate insurance coverage at the time of the accident.

Alvarez failed to allege any facts or legal authority to support his claim that Helsel had a duty to provide him with an “Acord Change Form” in the absence of any request to do so before the accident.

DISCUSSION

The moving party bears the initial burden of making a prima facie showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Any doubt as to any facts or inferences to be drawn therefrom must be resolved in favor of the non-moving party.

Alvarez argues that the trial court erred in finding it was not reasonably foreseeable and anticipated that he would drive the Ferrari 458 six days after receiving notice that his insurance was limited and in finding that there was no genuine issue of material fact concerning the parties’ relationship and business practices with respect to his automobile insurance. He contends there was a consistent, ongoing pattern of written correspondence and phone calls between himself and Helsel, where “insurance Change Forms, even before signing, had an ‘Effective Date of Change’ that was the day the change was requested, permitting Alvarez to reasonably believe coverage had been restored to a vehicle on the date of request, not any subsequent date.”

Helsel and Pinnacle maintain that Alvarez never asked for collision coverage to be added for the Ferrari 458 prior to the accident. They argued that numerous times after collision coverage was taken off the Ferrari 458 in 2015, Alvarez was informed there was no collision coverage on the Ferrari, including on September 21, 2016, and since there was no request to reinstate the coverage, there can be no liability for the failure to do so.

The designated evidence included an affidavit by Helsel in which she stated she faxed a message on February 5, 2016, to remind Alvarez that the Ferrari 458 and other vehicles had only comprehensive coverage at the upcoming renewal day of March 17th; faxed a second request on February 23, 2016, for confirmation of the previous fax; faxed and emailed messages on March 15, 2016, notifying him again that the Ferrari 458 and other vehicles had only comprehensive coverage, to which he responded and indicated receipt; and received a memo indicating Alvarez did not want to add collision coverage on the Ferrari 458.

She also stated that on March 22, 2016, an employee of Alvarez called and asked to confirm the coverage on certain vehicles, she sent a text message to Alvarez which referenced the March 15th messages “showing all vehicle coverages” and stated “No changes since last week,” and she sent a copy of the current declarations that showed the Ferrari had comprehensive coverage only.

While Alvarez asserts that he orally requested full coverage be restored to the Ferrari 458 on September 21, 2016, he failed to cite to the record that this is a misstatement and it is unsupported by the record and the only request was the day after the accident. Alvarez does not point to designated evidence that either he or one of his employees requested, either verbally or in writing, that collision coverage be added for the Ferrari before the September 27, 2016 accident and after his December 8, 2015 request that collision coverage be dropped for the Ferrari.

Based upon the designated evidence, and there being no genuine issue of material fact the judgment of the trial court was affirmed.

ZALMA OPINION

Insurance is a contract that requires, for coverage to apply, a fortuitous event during the policy period. In this case, Alvarez, a lawyer, should have known that it is improper and fraudulent to seek insurance the day after an accident. Insurance is not, without the payment of an excessive premium, retroactive. The court found that the presentation of the claim that he asked for coverage before the accident that he misstated the facts. The court was kind to not note that Alvarez attempted a fraud and wasted the time of the trial court and the court of appeal.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining the Trigger of Coverage Concerning Property Damage

Trigger of Coverage

The term “trigger of coverage” means “what event must occur for potential coverage to commence under the terms of the insurance policy” and “what must take place within the policy’s effective dates for the potential of coverage to be ‘triggered.'” [In Re Feature Realty Litig., 468 F. Supp.2d 1287, 1295, n.2 (E.D. Wash. 2006)]

After the California Supreme Court adopted a continuous trigger in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 685, 42 Cal.Rptr.2d 324, 913 P.2d 878 (Montrose) in the case of successive policies, property damage that is continuous or progressively deteriorating throughout several policy periods is potentially covered by all policies in effect during those periods, so that the insurer’s duty to defend arose under those policies. Insurers, trying to limit their coverage, revised the policy wording.

 

Therefore, the precise question is what result follows under the language of the policies of insurance to which the parties agreed. The “continuous injury” trigger has been applied mostly in cases involving gradual release of pollutants and other environmental harms. After Montrose, the insurer revised its policies to use the language for the very purpose of “obviat[ing] the application of the ‘progressive damage-continuous trigger’ articulated in Montrose.” As a result, the defendant’s policies state that property damage “which commenced prior to the effective date of this insurance will be deemed to have happened in its entirety prior to, and not during, the term of this insurance.” [Ins. Co. of Pa. v. Am. Safety Indem. Co., 32 Cal.App.5th 898, 244 Cal.Rptr.3d 310 (Cal. App., 2019)]

In King Cnty. v. Travelers Indem. Co. (W.D. Wash., 2019) the Louisiana Court of Appeals ruled that allegations by a property owner that an environmental consultant failed to detect the presence of pollutants on its property did not trigger coverage under the consultant’s liability policies. The Court found that the “occurrence” giving rise to the claims against the insured took place years prior to the issuance of the policies in question.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Multiple Theft Losses of Amounts Less than the Deductible Defeats Claim

Common Meaning of “Occurrence” Applied Since Policy Did not Define Term

In Port Consolidated, Inc. v. International Insurance Company Of Hannover, PLC, No. 19-13544, United States Court Of Appeals For The Eleventh Circuit (September 8, 2020) Port Consolidated, Inc. (“Port”), a Florida corporation, appealed the district court’s order granting summary judgment in favor of International Insurance Company of Hannover, PLC (“InterHannover”), a foreign corporation, on Port’s breach of contract claim, as well as the district court’s final order dismissing the remaining counts of Port’s complaint and the final judgment in favor of InterHannover.

FACTUAL HISTORY

Port is a fuel distribution company that operates a cardlock fuel facility in Riviera Beach, Florida (the “Garden Road Facility”). According to the parties, cardlock facilities are similar to traditional gas stations, but are unattended fueling facilities at which only authorized customers who have a preexisting contractual relationship can pump gasoline and diesel fuel. A customer  with access to a cardlock facility the customer must apply for and then sign an agreement with the facility’s owner. If approved, the customer receives a “CFN card,” which can be used to pump fuel at a cardlock facility, such as Port’s Garden Road Facility.  Customers can request restrictions on their CFN cards, including limits on the gallons of fuel to be pumped per transaction, the frequency of transactions, and the hours during which fuel may be pumped.

InterHannover issued a commercial property insurance policy (the “Policy”) to Port. Under the Policy, InterHannover provided coverage for “direct physical loss to covered property at a ‘covered location’ caused by a covered peril,” subject to a deductible. As to the deductible InterHannover pays only that part of a loss over the deductible amount stated on the schedule of coverages in any one occurrence and the schedule of coverages form provides that the per occurrence deductible is $1,000.

In February 2015, Port discovered that it had a fuel inventory shortage. Port’s investigation concluded that an incorrectly programmed setting on its fuel pumps at the Garden Road Facility, originating from a 2013 upgrade to that facility had not enforced the CFN card fuel limitation requested by Allied Trucking of Palm Beach (“Allied”), one of Port’s customers. Allied had placed a fuel purchase limitation of seventy-five gallons of fuel per transaction on its CFN cards. The incorrect setting, however, allowed Allied’s affiliated drivers, who work as independent contractors, to exceed the seventy-five-gallon limit by up to an extra hundred gallons despite Allied only being invoiced for seventy-five gallons per transaction.

Port informed InterHannover that it was asserting a claim under the Policy for the loss resulting from the allegedly stolen fuel. After InterHannover denied coverage, Port sued InterHannover.

Eventually InterHannover moved for summary judgment, arguing that Port was not entitled to coverage because the alleged thefts were expressly excluded under the Policy and that each alleged theft was a separate occurrence that did not exceed the $1,000 deductible in the Policy. The district court granted InterHannover’s motion for summary judgment. Applying the Florida Supreme Court’s decision in Koikos v. Travelers Insurance Co., 849 So. 2d 263 (Fla. 2003), the district court observed that, “absent contrary language in the policy, each act of fuel theft was a discrete occurrence for insurance purposes.”

ANALYSIS

Under Florida law, insurance contracts are construed according to their plain meaning.  In order for an insurance policy’s provision to be ambiguous, the provision must actually be ambiguous. If the relevant policy language is susceptible to more than one reasonable interpretation, one providing coverage and the other limiting coverage, the insurance policy is considered ambiguous. However courts may not rewrite contracts, add meaning that is not present, or otherwise reach results contrary to the intentions of the parties.

The term “occurrence” is not defined in the general definitions section of the Policy. Under Florida law, when an insurance coverage term is not defined, the term should be given its plain and ordinary meaning.

Under Florida law, a contract should not be read so as to make one section superfluous, and so all the various provisions of a contract must be so construed as to give effect to each. The Policy only defines “occurrence” to include multiple or a “series” of acts or unauthorized uses within a portion of the supplemental coverages endorsement that had no relationship to the claim of theft. The Eleventh Circuit concluded that determining that specific definitions of “occurrence” within certain supplemental coverages govern the entire Policy would render the absence of “occurrence” from the core Policy’s general definitions section meaningless.

The reasonable interpretation of the Policy as a whole is that the parties specifically expanded the scope of “occurrence” to include a series of actions if, and only if, a claim was made under those specific supplemental coverage provisions. An ambiguity is not invariably present when a contract requires interpretation. coverage does not necessarily render the term ambiguous.  Because “occurrence” is defined in sections of the supplemental coverage endorsement, but not in the Policy’s general definitions section, does not, according to the Eleventh Circuit, make the term ambiguous and concluded that none of Port’s losses exceeded the Policy’s deductible and InterHannover was not required to pay Port under the Policy for those alleged fuel thefts. Summary judgment in favor of InterHannover on Port’s breach of contract claim was found to be proper and the Eleventh Circuit affirmed the trial court because each alleged fuel theft Port suffered constituted a separate occurrence under the Policy and none of those alleged thefts exceeded the Policy’s deductible, the district court properly entered summary judgment in favor of InterHannover.

ZALMA OPINION

Port, the insured, tried to change its error in setting up its computer system into a theft failed because the evidence established that each “theft” was 100 gallons or less over the 75 gallon limit or $400. The $1,000 deductible applied to each “theft” when the drivers pumped more gas than allowed by the contract the incorrect software allowed them to pump more than the contract allowed. The Eleventh Circuit refused to rewrite the policy to help Port and had no choice but to affirm the trial court’s decision.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining Casualty Insurance

Casualty Insurance

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

Many people use the terms “casualty” and “liability” as if they were synonymous. However, casualty insurance includes insurance that does not fall within the definition of liability insurance. “Casualty insurance” is defined as an “agreement to indemnify against loss resulting from a broad group of causes such as legal liability, theft, accident, property damage, and workers’ compensation.” Black’s Law Dictionary 871 (9th ed. 2009).

Liability insurance is part of the casualty line of insurance. A “casualty” is an accidental injury, a fortuitous event.

For every such harm there is a law or legal principle that places the burden of the consequences back on the finances of the initiator of the harm. Applying the ancient maxim of the law that “for every wrong there is a remedy…” liability insurance exists to fund the remedy.

Another feature of casualty insurance policies is that they are limited to injuries to persons other than the insured. The ultimate concern of these policies is the insured—the person who buys the insurance who needs to be protected from claims made by third persons.

At one time, insurers were limited by statute and their charters were limited as to the type of insurance they could write. Casualty insurance could only be written by casualty insurance companies. That is no longer the case and casualty insurance may be written by any insurer willing to do so with sufficient assets to perform.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

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Insurance Fraud is a Crime of Moral Turpitude

Illegal Alien Deported Because of Conviction of Insurance Fraud

Anahi Jaquez-Estrada sought review of a decision of the Bureau of Immigration Appeals (BIA) affirming a decision of an Immigration Judge which found her removable to Mexico. In Anahi Jaquez-Estrada, v. William P. Barr, No. 19-9569, United States Court Of Appeals For The Tenth Circuit (August 25, 2020) after being convicted of the crime of insurance fraud, and years of litigation with the United States Jaquez-Estrada was finally deported to Mexico.  She appealed the decision to the Tenth Circuit Court of Appeals.

BACKGROUND

Jaquez-Estrada, a native of Mexico who was brought to the United States in 1995 as a young child without admission or inspection. She is married to a U.S. citizen and has a U.S. citizen child. In February 2015, she applied for and received relief under the Deferred Action for Childhood Arrivals (DACA) program, which deferred any action by the Department of Homeland Security (DHS) until February 2017.  She received two DACA extensions until February 2018 when she pled guilty to two counts of insurance fraud (one misdemeanor count and one felony count and received a two-year deferred sentence.

DHS then revoked her DACA deferral. Although Jaquez-Estrada had resided in the United States for a significant period of time before the revocation of her DACA status and initiation of removal proceedings, she was classified as an “arriving alien” under 8 C.F.R. § 1.2, part of the implementing regulations for the Immigration and Naturalization Act (INA).

Because Jaquez-Estrada was an arriving alien, however, jurisdiction to adjust her status lay with the United States Citizenship and Immigration Services (USCIS), not the Immigration Judge (IJ). The IJ instructed Jaquez-Estrada he would not grant any further continuances. She thereafter filed an application for asylum, withholding of removal, and relief under the Convention Against Torture (CAT), and a hearing was set for March 2019. After the March hearing, the IJ denied her requests for relief. She appealed to the BIA, which affirmed the denial.

DISCUSSION

The BIA affirmed the IJ decision in a detailed decision entered by a single Board member. Section 242 of the INA imposes significant jurisdictional limitations over claims brought by aliens who are found inadmissible by reason of having committed a crime involving moral turpitude. No court has jurisdiction to review any final order of removal against an alien who is removable by reason of having committed a criminal offense covered involving a crime involving moral turpitude .

Jaquez-Estrada was found inadmissible by reason of having committed felony insurance fraud. She does not dispute that felony insurance fraud is a crime involving moral turpitude under the INA. She instead argues she is protected by the exception in the statutes. Felony insurance fraud, though, is a class five felony under Colorado law, the maximum penalty for which does exceed imprisonment for one year. The exception in the statute is therefore inapplicable, and the jurisdictional.

Jaquez-Estrada raises several interrelated constitutional claims in connection with the denial of her twelfth request for continuance before the IJ and her designation as an “arriving alien”.

To the extent her due process claims are reviewable, they fail because there is no protected liberty or property interest in obtaining discretionary immigration relief, i.e., adjustment of status. Because aliens do not have a constitutional right to enter or remain in the United States, the only protections afforded are the minimal procedural due process rights for an opportunity to be heard at a meaningful time and in a meaningful manner. Jaquez-Estrada does not assert, and there is no indication in the record to suggest, that she was denied an opportunity to be heard at a meaningful time and in a meaningful manner through her removal proceedings. The Tenth Circuit, therefore, concluded there was no violation of due process in her removal proceedings.

Jaquez-Estrada also argued she was denied due process because the BIA did not review the decision of USCIS to revoke her eligibility for the Deferred Action for Childhood Arrivals (DACA) program. However, the Tenth Circuit’s jurisdiction is limited to final orders of removal. The decision to extend or deny DACA status is not such an order.

Claims for Asylum, Withholding of Removal, and Protection Under the United Nations Convention Against Torture

Jaquez-Estrada also argues the BIA erred in its review of her claims for asylum, withholding of removal, and protection under the CAT. These arguments do not present constitutional claims or questions of law and so do not overcome the jurisdictional bar. She was removed to Mexico and is no longer in the United States.

To the extent the petition alleges Jaquez-Estrada was denied due process before the IJ and BIA, it is denied.

ZALMA OPINION

The key to this long, drawn out, and egregious immigration case – regardless of the alleged constitutional arguments – was that Jaquez-Estrada took advantage of her DACA status to commit the crime of insurance fraud, a crime of moral turpitude, that required the US to deport her. She stayed for almost three years by dealing with the system but could not overcome the fact that she was a criminal alien.

 


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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Zalma’s Insurance Fraud Letter – September 15, 2020

The Essential Resource for The Insurance Fraud Professional

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

Florida High Court Rejects Attorney Strems Bid to Dissolve Suspension; Contempt Petition Filed

Scott Strems, about whom ZIFL has reported earlier, a Florida attorney accused of causing great public harm through a “vast campaign of unprofessional, unethical, and fraudulent conduct,” by way of thousands of insurer lawsuits has lost his latest battle to overturn his suspension and now faces a petition for contempt over alleged violations of the order.

Ladera Ranch, California Self-Storage Management Company Fined for Unlicensed Activity

New SIU Regulations Effective October 1, 2020 – Are You Ready?

The California Department of Insurance (CDI) amended the Special Investigative Unit (SIU) regulations that are set to take effect October 1, 2020. (10 CCR 2698.30 et seq.) The new rules tighten the compliance requirements already in place. Some of the changes include:

  • Stronger oversight on entities that insurers contract with – directly or indirectly – to perform SIU and antifraud duties;
  • An increased emphasis on using patterns or trends as red flags for fraud;
  • New guidelines for releasing information to the CDI’s Fraud Division;
  • Guidelines around the written procedures used by the insurer’s SIU;
  • A requirement to investigate all credible referrals of fraud;
  • Enhanced requirements leading up to and in the reporting of fraud to the CDI’s Fraud Division;
  • More detailed and strenuous requirements for training of insurer personnel;
  • More detailed resources used by insurer claims and anti-fraud personnel;
  • Requiring certain information in SIU Annual reports;
  • Allowing insurers in holding company systems to reference holding company system SIU information in their SIU Annual Reports; and
  • Setting forth additional details on the finalization and resolution of SIU examination by the CDI.

Health Insurance Fraud Convictions

Videos on YouTube And Zalma On Insurance from Barry Zalma

Other Insurance Fraud Convictions

Guilty of Sawing Off Own Hand for Pay-Out Sentenced to Two Years in Prison

Guilty of Insurance Fraud – Go Directly to Jail

Artis Layson, appealed the judgment of the Lucas County Court of Common Pleas, finding that he committed a community control violation, insurance fraud, and sentenced him to continue serving community control with added conditions. In State of Ohio v. Artis Layson, Court of Appeals No. L-19-1204, 2020 Ohio 4336, Court of Appeals of Ohio Sixth Appellate District Lucas County (September 4, 2020) was asked to reverse his conviction.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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A Video Explaining The California Fair Claims Settlement Practices Regulations 2020

The Reasons Why the California Department of Insurance Imposed the California Fair Claims Settlement Practices Regulations on All Insurers Doing Business in California

See the full video at https://youtu.be/AHuIuZile3I

In 1993, after waiting five years after receiving direction from the California Supreme Court, the state of California determined that the insurance industry needed to be regulated to stop insurers from treating the people insured badly and without good faith. It created a set of Regulations called the “California Fair Claims Settlement Practices Regulations” (the “Regulations) that were designed to enforce the mandate created by the California Fair Claims Settlement Practices statute, California Insurance Code Section 790.03 (h).  in response to the direction of the California Supreme Court in its decision, Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal. 3d 287 (1988).

In so doing the California Department of Insurance (CDOI) issued rules that were designed to micro manage the business of insurance claims and create a method to punish those insurers who failed to comply with the Regulations. Some of the Regulations recited what had always been recognized by the insurance industry as good faith and proper claims handling. Others imposed draconian mandates on what and when to do everything in the claims process.

The Regulations also provided a guide to insureds, public insurance adjusters and policyholders’ lawyers to assert any violation of the Regulations to be evidence of an insurer’s breach of the implied covenant of good faith and fair dealing.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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A Loss Caused by Wear and Tear is not Fortuitous

First Party Property Insurance only Provides Coverage for a Fortuitous Loss

This insurance coverage dispute concerns damage to a building that resulted from rainwater ponding on the roof and eventually finding its way inside. The issue on appeal is whether the damage is covered under the relevant policy or excluded by one or more of its numerous “exclusions” or “limitations.” In O.L. MatthewS, M.D., P.C. v. Harleysville Insurance Co., No. 19-1994, United States Court Of Appeals For The Sixth Circuit (September 9, 2020) the Sixth Circuit was asked to reverse a motion for summary judgment granted because the loss was due to wear and tear on an old roof and was not fortuitous.

FACTS

Plaintiff O.L. Matthews, M.D., P.C. (“OLM”) owned a building in Inkster, Michigan and used it as a medical office. OLM bought the building in the early 1980s, and for many years, neither OLM nor its owner, Dr. O.L. Matthews, paid much attention to the condition of the roof. That changed in January of 2017, when the roof started leaking. OLM filed a claim under the “Businessowners policy” (“the Policy”) it held with defendant Harleysville Insurance Company, but Harleysville denied coverage and its agent told OLM that the roof needed maintenance.

After the roof continued to leak OLM promptly filed a  claim with Harleysville, which hired David Walenga, a structural engineer, to investigate and determine the “cause of loss.” Walenga examined the roof and reached three major conclusions:

First, Moisture was intruding into the subject building due to the exploitation of breaches in the roof from latent defects and a lack of proper and timely maintenance or repair. The roof lacks sufficient pitch or drainage to prevent ponding. Ponded moisture is capable of intruding into the building via defects such as failed or weak membrane seams, and failed penetration flashings.

Second, based on the corrosion of metal in the ceiling and damage to the ceiling tiles, “[m]oisture ha[d] been intruding into the subject building to some degree for a duration well exceeding the timeframe between the claimed loss period, and [the] inspection date.”

Third, Walenga found “no indication that the roof ha[d] been displaced or damaged by a singular weather-related event, such as wind.”

Relying on Walenga’s report, Harleysville concluded that “loss was caused by the exploitation of breaches in the roof from latent defects and a lack of proper and timely maintenance or repair” and that the Policy “does not provide coverage for this loss.” Harleysville denied OLM’s second claim in December 2017.

OLM hired its own expert who characterized the rainfall that led to the damage to the building in August 2017 as the “straw that broke the camels’ [sic] back,” as “several areas . . . failed and could no longer support the weight of the roof and the ponded water.”

OLM sued Harleysville  and  Harleysville eventually moved for summary judgment, arguing that several “exclusions” or “limitations” contained in the policy precluded coverage for the damage to the building. The district court agreed, granted the motion, and entered judgment in favor of Harleysville. O.L. Matthews, M.D., P.C. v. Harleysville Ins. Co., 412 F. Supp. 3d 717 (E.D. Mich. 2019).

ANALYSIS

Here, the parties agree as to the relevant facts, and this appeal turns on a legal issue: the interpretation of an insurance policy. Interpretation of an insurance policy ultimately requires a two-step inquiry:

First, a determination of coverage according to the general insurance agreement; and

Second, a decision regarding whether an exclusion applies to negate coverage.

Exclusionary clauses in insurance policies are strictly construed in favor of the insured, but clear and specific provisions that limit coverage must be given effect because an insurance company cannot be held liable for a risk that it did not assume.

OLM repeatedly emphasizes that the Policy is an “all-risk” insurance policy. An “all-risk” policy creates coverage of a type not ordinarily present under other types of insurance, and recovery is allowed for fortuitous losses unless the loss is excluded by a specific policy provision. But an “all-risk” policy does not cover every risk.

The Policy excludes from coverage “loss or damage caused by or resulting from”: Faulty, inadequate or defective: (1) Planning, zoning, development, surveying, siting; (2) Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction; (3) Materials used in repair, construction, renovation or remodeling; or (4) Maintenance; of part or all of any property on or off the described premises.

According to Harleysville, the drain’s placement led to the ponding of water on the roof, which led to the membrane tearing and the damage to the inside of the building. Expert testimony supports this contention. Even OLM’s expert, testified that “the drain is set too high,” and explained that between the placements of the roof joists and the drain, “the roof deck must support the weight of almost five inches of water before it can discharge into the roof drain.” He also stated that the weight of the water on the roof was caused by “the bad design of the roof,” which included “the bad design of where the drain was.” Harleysville’s expert, stated in his report that “[t]he region surrounding the roof drain is relatively higher than the field of the roof,” which “prevents drainage.” This is also consistent with the roofers’ observations.

The policy also excluded “Wear and tear” which is defined as “[d]eterioration caused by ordinary use; the depreciation of property resulting from its reasonable use.” Wear and Tear, Black’s Law Dictionary 1827 (10th ed. 2014). Damage resulting from normal wear and tear is often excluded from coverage because it is a type of nonfortuitous loss. Unlike the Negligent Work Exclusion, this “Wear and Tear Exclusion” does not have an ensuing-loss clause. So the default, anti-concurrent causation rule applies, and if wear and tear contributed to the loss, the Policy does not cover it.

The record shows that wear and tear was a cause of the loss. OLM’s expert, testified that “the wear and tear that [the roof] has received is from the weight of the water pulling the membrane apart.” To be sure, a broad interpretation of “wear and tear” combined with the application of the anti-concurrent causation rule could lead to coverage being denied in nearly any situation, even with an all-risk policy. But in this case, where the roof had outlived its intended life twice over and had been poorly maintained and monitored during that time the Wear and Tear Exclusion is not the only provision of the Policy that bars coverage in this case.

Under Michigan law, an insured loses coverage under a policy if one of the policy’s exclusions applies to the insured’s particular claims. The Wear and Tear Exclusion and the Leakage Limitation both apply here, and as a result, the damage to the inside of the building did not result from a “Covered Cause of Loss” under the Policy.

ZALMA OPINION

An “All Risk” policy only covers those risks of physical loss not excluded. It is not an all claim policy. No “All Risk” policy insures against every possible cause of loss. Insurance, by definition, requires fortuity – an accident – and that is why Harleysville’s position was correct. A roof that leaks because it was old and not maintained did not incur a fortuitous loss and OLM had no right to recover the benefits of the policy.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Newest Book from Barry Zalma on the Fair Claims Settlement Practices Regulations

The California Fair Claims Settlement Practices Regulations 2020

The Reasons Why the California Department of Insurance Imposed the Regulations

In 1993, after waiting five years after receiving direction from the California Supreme Court, the state of California determined that the insurance industry needed to be regulated to stop insurers from treating the people insured badly and without good faith. It created a set of Regulations called the “California Fair Claims Settlement Practices Regulations” (the “Regulations) that were designed to enforce the mandate created by the California Fair Claims Settlement Practices statute, California Insurance Code Section 790.03 (h). in response to the direction of the California Supreme Court in its decision, Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal. 3d 287 (1988).

The California Fair Claims Settlement Practices Regulations 2020: The Reasons Why the California Department of Insurance Imposed the California Fair Claims ... Practices Regulations on All Insu by [Barry  Zalma]In so doing the California Department of Insurance (CDOI) issued rules that were designed to micro manage the business of insurance claims and create a method to punish those insurers who failed to comply with the Regulations. Some of the Regulations recited what had always been recognized by the insurance industry as good faith and proper claims handling. Others imposed draconian mandates on what and when to do everything in the claims process.

The Regulations also provided a guide to insureds, public insurance adjusters and policyholders’ lawyers to assert any violation of the Regulations to be evidence of an insurer’s breach of the implied covenant of good faith and fair dealing.

The Reason for This Book

This book was designed to assist insurance personnel who do business in the state of California.

It will provide advice to:

•all insurance claims personnel,
•claims professionals,
•independent insurance adjusters,
•special fraud investigators,
•private investigators who work for the insurance industry,
•the management in the industry,
•the attorneys who serve the industry,
•public insurance adjusters,
•policyholders and
•counsel for policyholders working with insurers doing business in California
the information needed to properly, efficiently, and fairly resolve insurance claims.

All insurers doing business in California must comply with the requirements of the Regulations or face the ire of, and attempts at financial punishment from, the CDOI. That punishment was found to be questionable and limited because of one courageous insurer who fought the CDOI and succeeded before an administrative law judge who limited the right to punish. That success, as far as I have been able to determine, has not been emulated.

Regardless of difficulties in assessing punishment the state of California requires all who are involved in the claims process — even if only tangentially — to be trained with regard claims handling in compliance with the Regulations and attest to completion of such training under oath. To avoid the required annual training the claims person can submit a sworn document to the insurer or insurers for whom the claims person works that avers that he or she has read and understood the Regulations.

Reviewing this book, the Regulations and commentary set forth below should be sufficient to comply with the training requirements of the Regulations.

It is necessary that insurance personnel who are engaged in any way in the presentation, processing, or negotiation of insurance claims in California be familiar with the Regulations. Counsel for insurers and policyholders should also be familiar with the Regulations since they establish a minimum standard for claims handling in the state.

There is also an outline for a training course in the appendix.

Available as a paperback

Available as a Kindle Book

 


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining Why Rescission Is a Remedy That Must be Used with Care

Rescission Is a Remedy That Must be Used Cautiously

See the full video at https://youtu.be/tQB3yB4geoA

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

Rescission without sufficient evidence is wrongful. Rescission without the advice of competent counsel is a tactic fraught with peril. Rescission without a thorough investigation is dangerous. Where no valid ground for rescission exists, the threat or attempt to seek such relief may constitute a breach of the covenant of good faith and fair dealing which is implied in the policy and expose the insurer to tort damages for that breach, including punitive damages.

One plaintiffs’ lawyer became wealthy when he learned that claims people were given a rubber stamp that said “RESCISSION” and had no idea what it was, what was needed to prove rescission and even how to spell “rescission” jurors were angered and punished the insurer.

The policyholder’s lawyer would take the claims person’s deposition and ask them to spell the word. When the claims person failed his bad faith case was established. When they spelled the word correctly, he would ask the adjuster to state the elements necessary to effect a rescission. Almost none could answer appropriately.

California, with a Draconian rescission law, still makes it clear that if an insurer elects rescission without sufficient evidence it will bring the wrath of the courts down on it. A failure of evidence will be the basis for allegations, easily proven, of extra-contractual torts.[1]

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


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

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USDC in New Jersey Bends Over Backwards to Help a Pro Se Plaintiff

To Sustain a Suit Against an Insurer it is Necessary to Allege Adequate Facts

No one likes to have an insurance claim denied. However, many times the insurance company made the correct decision. When an insured finds it difficult or impossible to get a lawyer to bring a suit against an insurer there is a good chance the insurer was right. When the insured sues, as a pro se (a non lawyer acting as if he is a lawyer) the courts will try to find a way – regardless of how poor the case is — to help the pro se keep the suit alive.

In Thomas I. Gage v. Preferred Contractors Insurance Company Risk Retention Group LLC, et al., Civil Action No. 19-20396 (MAS) (ZNQ), United States District Court District Of New Jersey (August 31, 2020) Preferred Contractors Insurance Company Risk Retention Group LLC (“Preferred Contractors”) and Golden State Claims Adjusters, Inc.’s (“Golden State”) (collectively, “Defendants”) filed an unopposed Motion to Dismiss pro se Plaintiff Thomas I. Gage’s (“Plaintiff”) Complaint. The Court has carefully considered Defendants’ submission and decides the matter without oral argument.

BACKGROUND

Plaintiff owns and operates a home improvement business in New Jersey called Virtue Builders, Inc. (“VBI”). Plaintiff purchased for VBI a commercial general liability insurance policy (the “Policy”) with Preferred Contractors through a third-party seller, Affordable Insurance Group, Inc. (“Affordable Insurance”). On or about July 17, 2019, a heavy rainstorm damaged a retaining wall VBI was hired to construct. Plaintiff filed a claim under the Policy for the damage, but Golden State, Preferred Contractors’ third-party claims adjuster, denied the claim for the repair or replacement of work performed where the insured performed operations.

Following the coverage denial, Plaintiff sued alleging twelve-counts action against Defendants and Affordable Insurance that were  loosely structured, often repetitive and lacked sufficient factual allegations.

ANALYSIS

When analyzing a Rule 12(b)(6) motion to dismiss, the district court conducts a three-part analysis. First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court must accept as true all of a plaintiff’s well pleaded factual allegations and construe the complaint in the light most favorable to the plaintiff. The court, however, may ignore legal conclusions or factually unsupported accusations that merely state the-defendant-unlawfully-harmed-me. Finally, where a plaintiff proceeds pro se, the complaint must be “liberally construed,” and however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers. A pro se litigant, however, is not absolved from complying with the federal pleading requirements merely because the litigant proceeds pro se.

Claims involving fraud are subject to a narrower pleading standard than that of standard claims and plaintiff failed to even come close to a sufficient pleading.

Plaintiff also alleges breach of contract against Defendants for failing to (1) “objectively and fairly evaluate Plaintiff’s claim[,]” (2) “reasonabl[y] and properly investigate Plaintiff’s claim[,]” (3) “follow the company’s established investigation procedures[,]” (4) “hire a qualified structural engineer” to investigate the claim, (5) inform Plaintiff why a structural engineer was not needed, and (6) interview witnesses.

The Complaint failed to point to a specific provision which Defendants breached. Failure to identify a specific provision of a contract that was breached is grounds for dismissal. Plaintiff, accordingly, failed to state a claim for breach of contract, and the Breach of Contract Count (Count One) was dismissed without prejudice.

Bad Faith Counts

Plaintiff alleges the Defendants engaged in bad faith and violated the implied covenant of good faith and fair dealing when they denied Plaintiff payment under the Policy without thoroughly investigating Plaintiff’s claim. To state a claim for bad faith denial of insurance coverage, Plaintiff must show: (1) the insurer lacked a reasonable basis for its denying benefits, and (2) the insurer knew or recklessly disregarded the lack of a reasonable basis for denying the claim. To establish a first-party bad faith claim for denial of benefits in New Jersey, a plaintiff must show that no debatable reasons existed for denial of the benefits. Plaintiff fails to allege that Defendants lacked a fairly debatable reason for its denial of coverage.

Rather, the Policy illustrates that Defendants did possess a reasonable basis for its denying benefits. The denial for the repair or replacement of work the insured performed or to real property upon which it performed operations was clearly excluded. The Court, however, provides Plaintiff an opportunity to amend his Complaint. If Plaintiff chooses to amend his pleading, Plaintiff must provide additional factual allegations detailing how Defendants lacked a reasonable basis for denying Plaintiff’s insurance claim.

Plaintiff’s Fraud Counts neither place the Defendants on notice of the precise misconduct with which they are charged, nor allege the who, what, when, where, and how of the fraud at issue. Accordingly, the Fraud Counts (Counts Nine and Ten) are dismissed without prejudice. The Court, however, provides Plaintiff an opportunity to amend his Complaint

Defendants’ Motion to Dismiss is granted. Plaintiff’s Complaint is dismissed without prejudice. Plaintiff may, however, amend his Complaint. If Plaintiff chooses to amend his pleading, Plaintiff must provide additional factual allegations detailing how Defendants breached the Policy.

ZALMA OPINION

Hopefully the plaintiff – who saw no reason to oppose the insurers’ motion – will not take up the court’s offer to consider an amended complaint. If he does the plaintiff must accept the judge’s advice and allege sufficient factual allegations to support his suit. The judge was kind. The plaintiff was not able to allege a viable lawsuit. With the advice provided by the judge, if the plaintiff is willing or able, the court will need to rule on another spurious complaint brought by a plaintiff who is unwilling to recognize that a clear and unambiguous exclusion for damage to work done by the insured is enforceable. If the complaint is amended the court and the litigants will spend a great deal of money that is totally unnecessary.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Everything Needed by the Ethical Insurance Claims Professional from Barry Zalma

Ethics for the Insurance Professional – Second Edition

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

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

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

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

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

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

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

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

Available as a Paperback   

Available as a Kindle Book.

The Little Book on Ethics for the American Lawyer

(c) 2020 Bary Zalma

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

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

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

What is Ethical Behavior?

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

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

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

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

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

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

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

Available as a Kindle book here.

Available as a paperback here.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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A Video Describing Insurance Fraud by Insurers and Agents

Insurer and Insurance Agents Jailed for Fraud

See the whole video at https://youtu.be/bHlu5qI8R_E

Maryland Insurance Executive Guilty of Wire Fraud

Jeffrey Brian Cohen, 39, of Reisterstown, Md., after four days of trial, pled guilty on June 5, 2015 to wire fraud, aggravated identity theft, making false statements to an insurance regulator, and obstruction of justice.

According to information in his plea agreement, Cohen acted as the president and chairman of the board of a Delaware corporation known as Indemnity Insurance Corporation RRG. Cohen previously controlled a District of Columbia corporation called Indemnity Insurance Corporation of DC, Risk Retention Group (Indemnity-DC), which was a predecessor entity to Indemnity.

Iowa Agent Gets 41 Months in Prison for Defrauding Insurance Companies

Melissa Ilene Williams, of Dike, Iowa, was ordered to pay restitution for fabricating and submitting life insurance policies to two separate insurance companies between July 2011 and January of 2012. Williams pled guilty to one count of mail fraud on March 3, 2014.

Williams, a former Des Moines, Iowa, insurance agent was sentenced to 41 months in prison for insurance fraud, the Iowa Insurance Division announced.

Iowa Insurance Division revoked Williams’ insurance producer’s license in November of 2013.

Williams was ordered in federal court to pay full restitution in the amount of $139,137.13 to Funeral Directors Life Insurance Co., a Texas based insurer and $36,010.19 to National Guardian Life Insurance Co. in Madison, Wis.

Upon her release, Williams will also be supervised by authorities for an additional three years.

The insurance division said the investigation found that during 2011 and 2012, Williams forged the signatures of people she knew on bogus life insurance policies and collected $170,292 in fraudulently obtained commissions from Funeral Directors Life Insurance Co. and National Guardian Life Insurance Co.

Williams was sentenced on June 19, 2014, in United States District Court for the Northern District of Iowa in a prosecution filed by the United States Attorney’s Office for the Northern District of Iowa. The prosecution was the result of a collaborative effort of the Federal Bureau of Investigation, the United States Postal Inspection Service and the Iowa Insurance Fraud Bureau.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Settlement Agreement of Insurance Litigation is not an Insurance Policy

Settlement of a Lengthy Lawsuit Changed the Meaning of a Long Term Care Policy

More than ten years ago policyholders sued Continental Casualty Company (CNA) over its interpretation of certain long-term care policies. A settlement resulted in CNA agreeing to, among other things, offer a new, alternative benefit to policyholders.  In Kathleen O’Keeffe v. Continental Casualty Company, No. 20-3014, United States Court Of Appeals For The Sixth Circuit (August 27, 2020) challenged the parameters of that alternative benefit.

BACKGROUND

Prior to her death, Vivian O’Connell was insured under a long-term care policy issued by CNA. The policy defrayed the cost of a policyholder’s medical needs later in life by paying a daily “Long-Term Care Facility Benefit” (LTCF Benefit) for a “benefit period” chosen by the policyholder (in this case, six years). In addition to the benefit period limitation, the LTCF Benefit was also subject to a daily reimbursement limit (in this case, $60 per day). Further, the LTCF Benefit could be utilized only at facilities meeting strict qualifications.

In 2009, CNA policyholders initiated a class action challenging CNA’s standard for determining which long-term facilities qualify for LTCF Benefit coverage. Pavlov v. Cont’l Cas. Co., No. 5:07CV02580, 2009 WL 10689011 (N.D. Ohio Oct. 7, 2009). The case settled. As part of the settlement, CNA agreed that a facility would so qualify if it had a nurse on-site for five hours a day, seven days a week. For policyholders in facilities that did not meet even that lower bar, the settlement agreement offered a second option, the “Alternative Plan of Care (‘APC’). For policyholders utilizing non-qualifying facilities, the settlement APC benefit would pay the policyholder the greater of 25% of the daily LTCF Benefit limit or the actual daily cost of the facility, capped by the lesser of the daily LTCF Benefit limit or the actual daily cost of the facility.

The Pavlov Agreement contained a clause asserting that a breach of its provisions would be a breach of contract, not a violation of a court order. A second clause stated that the “claims handling change” relating to the nurse provision—itself exclusively part of the LTCF Benefit, and not the policy’s APC Benefit—”shall not affect any other term of the policy.”

The Current Case

O’Connell received two years of LTCF Benefits before moving to a non-qualifying facility. At the new facility, CNA provided her settlement APC benefits pursuant to the Pavlov Agreement. CNA terminated the settlement APC payments after four years, asserting that O’Connell had exhausted her collective six-year benefit period. O’Connell claimed that CNA breached its Pavlov settlement obligations; that CNA’s conduct amounted to bad faith under Illinois common law; and that she was entitled to attorney’s fees under Illinois law.

The district court granted CNA’s motion to dismiss. Interpreting the Pavlov Agreement and O’Connell’s policy, the district court held that the benefit period limitation applied to both LTCF Benefits and the Pavlov Agreement APC benefits. Likewise, because the policy’s maximum dollar benefit serves as a ceiling (but not a floor) on the sum of APC and LTCF Benefits, the district court rejected O’Connell’s argument that she was entitled to that full amount. Concluding that  CNA did not breach the Pavlov Agreement the district court dismissed O’Connell’s remaining claims.

ANALYSIS

At the crux of this appeal is the district court’s reading of the Pavlov Agreement together with O’Connell’s original policy.

To receive the Pavlov APC benefit, the policyholder must meet all the requirements for the LTCF Benefit, save for the in-patient nursing services requirement. In exchange for the added flexibility in the facilities one can select from, the policyholder receives benefits lower than those guaranteed through the LTCF Benefit. Under the settlement APC benefit, the policyholder at most receives either the actual cost of the facility or a quarter of the LTCF Benefit, with that amount capped by the lesser of either the actual facility cost or the LTCF Benefit limit. And as a reduced version of the LTCF Benefit, the Pavlov APC benefit logically cannot outlast the LTCF Benefit. That is, the Pavlov APC benefit, as a lesser form of the LTCF Benefit, shares the same benefit period limitation, and thus terminates at the same time.

As a general matter, policyholders (including O’Connell) can purchase policies with a longer benefit period, a point O’Connell acknowledges. And as to the Pavlov Agreement specifically, it does not require that O’Connell accept either the LTCF Benefit or the settlement APC benefit offered. She remains free, as she was before the Pavlov settlement, to negotiate an alternative APC Benefit more to her liking. What O’Connell could not do is both accept the Pavlov APC benefit and, at the same time, rewrite the rules for that benefit without agreement from her insurer.

To accept O’Connell’s reading of the Pavlov Agreement, one would need to believe that CNA agreed to extend coverage to make full payments in the form of LTCF Benefits or full payments in the form of Pavlov APC benefits.

The Pavlov Agreement’s APC benefit does not reference a “maximum dollar benefit.” Clues in the Pavlov Agreement further undermine the notion that the Pavlov APC benefit is equivalent to the APC Benefit in O’Connell’s policy. For one, the Pavlov Agreement uses the term “APC Benefit” to refer to the policy’s APC Benefit, but uses the term “APC benefit or accommodation” to refer to the Pavlov APC. For another, those distinct APCs have distinct features. The APC Benefit does not guarantee O’Connell an unlimited benefit period although it entitles O’Connell to an opportunity to negotiate an alternative benefit period, but not a unilateral right to select one.

The Pavlov Agreement is not an insurance policy. Rather it is the product of both fierce litigation and negotiated compromise between sophisticated counsel. The Sixth Circuit concluded that best reading of the Pavlov Agreement is that the Pavlov APC benefit terminates at the end of a policyholder’s benefit period.

Because there is no breach O’Connell’s claims for bad faith and attorney’s fees both fail.

ZALMA OPINION

A settlement of an insurance dispute is not, nor could it ever be, an insurance policy unless the settlement created a new insurance policy. The Pavlov Agreement merely established how to interpret the CNA policy. Since its language was clear the court interpreted as it could be read and understood recognizing that it was created by careful lawyers on both sides of a major litigation. The attempt to turn it into an insurance policy so that ambiguities are construed against the insurer did not work because it was not a take it or leave it contract.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Everything Needed to Become an Insurance Claims Professional

The Importance of Insurance Claims Professionals

The Compact Book of Adjusting Property Insurance Claims – Second Edition

A Manual for the First Party Property Insurance Adjuster

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

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

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

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

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

Available as a Kindle book.

Available as a paperback.

The Compact Book on Adjusting Liability Claims, Second Edition

A Handbook for the Liability Claims Adjuster

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

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

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

Available as a Kindle book

Available as a paperback.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining How a Bad Faith Suit Created a Flood of Mold Claims and Suits

The Ballard Allison Case

See the full video at https://youtu.be/p5uTc4ynvyk

The fear of mold claims was engendered in the insurance industry by the trial court decision in Ballard v. Fire Insurance Exchange, No. 99-05232 (Texas District Court, Travis County, June 1, 2001), cited in Jury Awards: $32 Million to Texas Homeowner in Mold Coverage Action, 6, No. 12, Mealey’s Emerging Insurance Disputes 11 (June 20, 2001 and “What Coverage Attorneys Need to Know About Mold,” Tort and Insurance Practice Law Journal, Fall 2002 (38:1), at page 45). The fear was mostly misplaced.

The verdict was the result of poor claims handling. Almost the entire $32 million verdict was punitive damages that did not withstand appellate review.The Texas Court of Appeals, Third District, at Austin, reversed much of the trial court’s opinion in Ronald Allison/Fire Insurance Exchange v. Fire Insurance Exchange, A Member of the Farmers Insurance Group/Mary Melinda Ballard and Ronald Allison, et. al, 98 S.W.3d 227 (2002), and explained the factual background that resulted in an improper and excessive judgment against the Fire Insurance Exchange (FIE). The Court of Appeals describe the evidence presented at trial in detail necessary to the understanding of the decision.

Although the Ballard Allison trial verdict was touted as a “mold” case, it was, in fact, a claims-handling case. The jury was offended by the admission that the adjuster, McConnell, lied to the insured and decided to punish them with excessive punitive damages.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Prompt Notice of Uninsured Motorist Claim Required by Condition Precedent

Failure to Give Notice of UM Claim Until Two Years After Accident is Fatal to Claim

In Hyde v. State Farm Mutual Automobile Insurance Company, A20A1221, Court of Appeals of Georgia (September 2, 2020) Elizabeth M. Hyde appealed the trial court’s order granting summary judgment to State Farm Mutual Automobile Insurance Company. Hyde contends that the trial court erred in finding that she did not give State Farm sufficient, required notice of her uninsured motorist claim in a timely fashion.

FACTS

The record shows Hyde alleged that on August 18, 2016, she was injured when she was rear-ended by Courtney Sawyer while stopped at an intersection. Hyde was driving her employer’s vehicle. After the collision, Hyde returned to her workplace, picked up her own car, and went straight to a doctor’s office. The doctor, who examined her and x-rayed her neck that day, told her that she had whiplash. Hyde had surgery on her neck in March 2018 almost two years after the accident.

At the time of the accident, Hyde was an insured under an insurance policy issued by State Farm. Hyde’s policy with State Farm included uninsured motorist coverage. The policy requires that a person making a claim under uninsured motor vehicle coverage must:

“notify [State Farm] of the claim and give [State Farm] all the details about the death, injury, treatment, and other information that [State Farm] may need as soon as reasonably possible after the injured insured is first examined or treated for the injury.”

The policy also provides that:

“Legal action may not be brought against [State Farm] until there has been full compliance with all the provisions of this policy.”

On December 7, 2016, Hyde’s attorney sent a letter to Hyde’s employer, Massey Restoration Group, regarding Hyde’s accident as notice of a potential uninsured motorist’s claim that may arise from the collision. Massey Restoration Group provided a copy of the letter to its State Farm agent not Hyde’s State Farm’s Agent.

On June 13, 2018, Hyde filed suit against Sawyer seeking damages for injuries allegedly sustained in the collision. Hyde served State Farm, as an uninsured motorist carrier, with the complaint and summons.

State Farm answered the complaint and moved for summary judgment claiming, among other things, that Hyde failed to comply with the notice provisions of her insurance policy. The trial court granted summary judgment to State Farm. The trial court determined that, as a matter of law, Hyde did not give notice to State Farm of her claim and did not provide all of the details about the injury, treatment, and other information as soon as reasonably possible after she was first examined or treated for the injury as required by her policy.

ANALYSIS

Hyde argued that State Farm received notice of her potential claim when Massey Restoration Group’s State Farm agent received the December 7, 2016 letter notifying Massey Restoration Group of Hyde’s potential uninsured motorist claim. In Lankford v. State Farm Mut. Automobile Ins. Co., 307 Ga. App. 12, 15-16 (703 SE2d 436) (2010) Lankford first provided written notice to State Farm that he had been involved in an accident and first raised the issue of uninsured motorist coverage under his own insurance policies almost two years after the accident. On appeal, he argued that State Farm had actual notice of the accident because the defendant also had insurance through State Farm and someone, presumably the defendant or someone on his behalf, notified State Farm of the accident shortly after it occurred. The December 7, 2016 letter from Hyde’s attorney notified Massey Restoration Group of a potential claim under Massey Restoration Group’s insurance policy, not a potential claim under Hyde’s own insurance policy.

It was only a matter of coincidence that Massey Restoration Group and Hyde shared the same insurer. The Court of Appeal found that there is no authority requiring an insurer to cross-reference the names of all parties involved in an accident to determine whether they, too, have insurance through the insurer. A insurer, on the other hand, is entitled to rely upon its contractual notice provisions.

Therefore, State Farm did not receive notice of Hyde’s potential claim under her insurance policy when Massey Restoration Group’s State Farm agent received the copy of the December 7, 2016 letter. The December 7, 2016 letter to Massey Restoration Group did not provide the notice to State Farm required by Hyde’s insurance policy.

Hyde argued that her claim did not arise until it became obvious that she had a claim for uninsured motorist coverage, which she contends was in March 2018 when the seriousness of her injuries began to manifest themselves. Hyde’s policy required otherwise. Notice was required “as soon as reasonably possible after the injured insured is first examined or treated for the injury.”  A general provision that no action will lie against the insurer unless the insured has fully complied with the terms of the policy (as existed in Hyde’s State Farm policy) will suffice to create a condition precedent.

A notice provision expressly made a condition precedent to coverage is valid and must be complied with, absent a showing of justification. Where an insured has not demonstrated justification for failure to give notice according to the terms of the policy, then the insurer is not obligated to provide either a defense or coverage.

Hyde’s argument that notice was only required as soon as reasonably possible after it became obvious she had a claim for uninsured motorist coverage.

PURPOSE OF NOTICE REQUIREMENT

The purpose of a notice provision in a policy of insurance is to allow the insurer to investigate promptly the facts surrounding the occurrence and to prepare a defense or determine whether a settlement is feasible, while the facts are still fresh and the witnesses are still available. Hyde’s excuse that she did not realize how serious she was injured was for delay reporting her uninsured motorist claim failed because on December 7, 2016 her attorney wrote the letter notifying Massey Restoration Group of Hyde’s potential uninsured motorist claim.

Hyde’s 22-month delay in notifying State Farm was unexcused and unreasonable as a matter of law.

ZALMA OPINION

Notice provisions are conditions precedent in many states. Some will apply the notice prejudice rule to allow a late report to survive a claim of breach of material condition if they could show the insurer was not prejudiced by the late report. In this case, although the notice prejudice rule was not mentioned, the facts clearly showed that a two-year delay deprived State Farm of the ability to thoroughly investigate the claim, that Hyde knew she needed a UM or UIM claim because it was immediately reported to her employer. She is not without a remedy, her lawyer should have reported the potential of a UM/UIM claim to both State Farm policies.


© 2020 – Barry Zalma

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

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

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

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

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/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining the Problem Created by the “Manufactured” Lawsuit

Manufactured Litigation & The Bad Faith “Set Up”

See the entire video at https://youtu.be/p5uTc4ynvyk

Some courts recognize “set-up” or manufactured bad faith situations where claimants make settlement demands with unrealistic time limitations or otherwise force the insurance company to make a settlement decision without full access to information bearing on liability and damages. Where the court recognizes these factors, the insurance company may not be liable for failure to accept the settlement because the excess judgment or settlement was not due to the insurance company’s “unreasonable” conduct but was driven by the motives of the plaintiff. [Wade v. Emcasco Ins. Co., 483 F.3d 657 (10th Cir. 2007)]

Plaintiffs’ delay in providing promised medical records and manipulation of settlement deadlines was for the purpose of setting up a bad faith claim was found in Glenn v. Fleming, 799 P.2d 79 (Kan. 1990) and Miel v. State Farm Mutual Auto. Ins. Co., 912 P.2d 1333, 1339 (Ariz. App. 1995).

The emergence of the bad faith set-up has not gone unnoticed by the courts. One of the lead opinions articulating concerns with the conduct of claimant’s counsel in the context of the set-up case is Wade v. Emcaso Ins. Co., 483 F.3d 657 (10th Cir. 2007) (applying Kansas law). After reviewing some of the central historical decisions, the Tenth Circuit summarized its concern over what it referred to as “manufactured” litigation as follows: “In light of these decisions, we agree with the district court’s observation that courts should exercise caution ‘when the gravamen of the complaint is not that the insurer has refused a settlement offer, but that it has delayed in accepting one….”

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

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

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Reliance Required for Agent’s Alleged False Representations of Coverage

Agent Only Required to Obtain the Policy Ordered

The North Carolina Court of Appeal was asked whether a claim for unfair and deceptive trade practices against an insurance agent, based on the agent’s misrepresentation to a third party of the terms of a policy, can be maintained absent evidence that the plaintiff relied on the misrepresentation in D C Custom Freight, LLC v. Tammy A. Ross & Associates, Inc., No. COA 19-1059, Court of Appeals Of North Carolina (September 1, 2020)

FACTUAL HISTORY

Plaintiff D C Custom Freight, LLC, filed suit against its insurance agent, Defendant Tammy A. Ross & Associates, Inc., after Defendant sent documents to a third party implying that Plaintiff’s coverage was broader than what was contained in the policy. Plaintiff was left without coverage when a truck it rented from the third party was involved in an accident. Plaintiff appealed.

Plaintiff is a freight shipping and trucking company operating in North and South Carolina. Defendant is an insurance agent and broker. In 2016 Plaintiff engaged Defendant to procure commercial automobile insurance coverage, providing Defendant with a list of Plaintiff’s equipment and a copy of its former insurance policy to use as a “go-by.” Through Defendant, Plaintiff purchased a policy from Wesco Insurance Company (“Wesco). Trucks rented on a short-term basis were not individually enumerated and were not covered by the policy.

On 6 December 2017, Rush’s insurance company requested that Defendant send a Certificate of Insurance (“COI”) that showed Plaintiff’s liability insurance limits and physical damage deductibles for leased or rented vehicles. Defendant prepared and sent a COI to the insurer and to Plaintiff. This certificate (the “December COI”) indicated only that the policy provided liability coverage. The certificate did not mention collision coverage. Defendant sent a second COI (the “revised December COI”) to the insurer, revised to add the entry “Specified Perils/Collision Deductibles: $2500.” The revised December COI was not sent to Plaintiff.

The next year, Plaintiff renewed the insurance policy it had purchased through Defendant. Defendant sent a third COI to Rush’s insurer (the “March COI”), which was identical to the revised December COI except that it listed a $3000 deductible for “Specified Perils/Collision.” The March COI, like the revised December COI, was sent only to Rush’s insurer and not to Plaintiff.

In June 2018, Plaintiff rented a truck from Rush on a short-term basis. The short-term rental agreement with Rush required Plaintiffs to provide collision insurance for the truck. In July the rented truck was damaged in a collision. Plaintiff submitted a claim to Wesco. The claim was denied because short-term rentals were not covered by Plaintiff’s policy.

Plaintiff sued Defendant. Following a hearing, the trial court denied Plaintiff’s motion for summary judgment on its UDTP claim, and granted Defendant’s motion for summary judgment on all of Plaintiff’s claims. Plaintiff appealed.

ANALYSIS

The appeal only contests the trial court’s grant of summary judgment and denial of its motion to amend as to its claims for negligence, breach of contract, and unfair and deceptive trade practices.

Negligence

Plaintiff contends in its negligence claim that Defendant, because it failed to procure insurance coverage for short-term rental trucks, violated its duty to “use reasonable skill, care and diligence” in procuring insurance for Plaintiff.

An insurance agent’s duty in procuring insurance is limited to securing the coverage that the policyholder has requested. Failure to recommend additional insurance to cover a risk faced by the policyholder does not constitute negligence. Defendant had no duty to procure coverage beyond what Plaintiff actually requested.

The previous insurance policy Plaintiff provided to Defendant as an example of the coverage needed did not include coverage for short-term rentals. Plaintiff presented no evidence that it requested greater or different coverage from that provided in the previous policy.

Breach of Contract

Plaintiff argues that, by failing to procure insurance covering short-term rentals, Defendant breached its contract to act as Plaintiff’s insurance agent and broker. To establish a claim for breach of contract, the party asserting the claim has the burden of showing the existence of a valid contract and a breach of the terms of that contract.

A certificate of insurance is not a policy of insurance and does not amend, extend, or alter the coverage afforded by the policy to which the certificate of insurance makes reference. A certificate of insurance does not confer to a certificate of insurance holder new or additional rights beyond what the referenced policy of insurance expressly provides.

A COI, sent to a third party and never communicated to the insured, without any additional consideration, does not create additional contractual duties owed to the insured.

Unfair and Deceptive Trade Practices

Plaintiff last argues that the trial court erred in granting summary judgment on its claim for unfair and deceptive trade practices. Plaintiff must show reliance and, because Plaintiff has failed to do so, the trial court properly granted summary judgment on this claim.

To prevail on a UDTP claim under Section 75-1.1, a plaintiff must show that (1) the defendant committed an unfair or deceptive act or practice (2) in or affecting commerce which (3) proximately caused injury to the plaintiff.  Determining whether an act is an unfair or deceptive practice that violates Section 75-1.1 is a question of law. Misrepresenting the terms of an insurance policy is a per se deceptive act satisfying the first element of a UDTP claim.

Plaintiff’s claim is likewise based on a misrepresentation by Defendant regarding what was covered under its policy: the policy did not provide comprehensive or collision coverage to short-term rentals, but the revised December COI and the March COI imply that this coverage exists. Misrepresenting the terms of an insurance policy is, as a matter of law, a deceptive act. However, Plaintiff cannot show reliance on the deceptive act because the revised December and March COIs were never seen by Defendant prior to the accident giving rise to this case. A showing of reliance is required to prove causation.

The North Carolina Supreme Court’s decision in Bumpers v. Community Bank of Northern Virginia, 367 N.C. 81, 88, 747 S.E.2d 220, 226 (2013 held that the plaintiffs’ claim was based on a misrepresentation, and they could not show proximate cause without presenting sufficient evidence that they actually relied upon the misrepresentation. Actual reliance requires that the plaintiff have affirmatively incorporated the alleged misrepresentation into their decision-making process.

The Need to Read the Full Policy

The evidence, considered in the light most favorable to Plaintiff, is insufficient to create a disputed issue of fact regarding whether Plaintiff relied on Defendant’s alleged misrepresentations. Since Plaintiff’s representatives could have, at any time, examined the insurance policy and discovered that collision coverage was not provided for short-term rentals, any reliance on such attenuated information was unreasonable. Reliance is not reasonable where the plaintiff could have discovered the truth of the matter through reasonable diligence, but failed to investigate.

In cases of negligent misrepresentation when terms are unambiguously expressed in the policy, reliance on misrepresentations as to those terms is unjustified.

Because the evidence, considered in the light most favorable to Plaintiff, was insufficient to show that (1) Defendant made a misrepresentation to Plaintiff concerning insurance coverage; (2) Plaintiff relied on the representation; or (3) Plaintiff’s attenuated reliance on a third party’s reliance would be reasonable, the trial court did not err in allowing Defendant’s motion for summary judgment.

ZALMA OPINION

Every person who acquires insurance is required to advise the agent or broker about the coverages needed. In this case the insured did not ask the agent to obtain collision insurance on short term rentals. Only after a short term rental was damaged in a collision did they seek the coverage the insured neither ordered nor – with a quick perusal of the policy – obtained. This case also teaches that a COI is nothing more than advice as to the existence of some insurance at a particular point in time and cannot modify the existing policy nor can it provide more coverage than the insurer agreed to provide. Since the lack of coverage for collision of short term rentals was obvious by reading the policy the insured’s claim of deception failed.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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A Video Explaining the Need to Train Claims Personnel to Recognize Insurance Fraud

Training Claims Personnel To Recognize Insurance Fraud

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

The introduction of the tort of bad faith resulted in the insurance industry running scared for many years from investigating fraud. Insurers avoided denying claims fearful that they would subsequently be sued for bad faith. Insurers discouraged their adjusters from looking too closely at claims. As a result, knowledgeable personnel either looked for another career or were laid off by companies interested in improving their bottom line by hiring the less experienced personnel.

Insurance fraud investigations are often expensive. The extent of insurance fraud, depending on which of the various estimates are believed vary from $80 billion to $300 billion dollars every year. The sum is so enormous as to defy understanding. Insurers are finding that they cannot increase premiums to honest insureds fast enough to cover the amounts lost to fraud. They cannot afford to let such an enormous amount of money deplete their assets and destroy their profits without a fight.
The first line of defense to stop the hemorrhage of billions of dollars to fraud perpetrators is a staff of well-trained experienced and professional adjusters and investigators.

 

Although many adjusters will never witness the sorts of frauds described in this book, they must be trained to recognize fraud, and thus be equipped with enough knowledge to separate the suspicious from the honest claim. States, like California, require that insurers train all of their claims personnel to recognize insurance fraud, attempted insurance fraud and the indicators or red flags of insurance fraud. The laws and regulations attempting to force the victim of the crime, insurers, to investigate and prepare prosecutions for the state, are unfortunately honored more in the breach than in the following. Even when the insurer does the work to prepare an investigation sufficient to support a prosecution, the local prosecutor refuses to prosecute an insurance fraud case because it requires dealing with a great deal of paper and other investigative materials and the need for expert witnesses. It is much easier to prosecute a violent crime with an injured victim and a few witnesses.

Every claims person and SIU investigator should be aware that suspicious claims have the common attributes or red flags of fraud. Insurers and their anti-fraud organizations have collated the common attributes into lists of indicators or red flags of fraud.

Barry Zalma, Esq., CFE
Barry Zalma, Inc.
310-390-4455
zalma@zalma.com
https://zalma.com/blog

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Eleventh Circuit Stretches Policy Wording to Find a Duty to Defend

Georgia’s Four Corners Rule Requires a Defense Even When Rape is Alleged

Annalee Hunter sued Five Paces Inn, an Atlanta bar after being drugged, assaulted and raped by an employee of Five Paces. Five Paces’s insurers brought a declaratory judgment action to clarify whether they had an obligation to defend and indemnify Five Paces. Hunter filed a motion to dismiss, which the district court granted.

In Houston Specialty Insurance Company, Scottsdale Insurance Company v. The Five Paces Inn Co., Annalee Hunter, No. 20-10209, United States Court Of Appeals For The Eleventh Circuit (August 27, 2020) the insurers sought reversal of an order compelling them to defend the Inn.

FACTS

On a summer night in 2016, Hunter and several female friends were enjoying themselves at Five Paces. Hunter was in the restroom when the bar began to close at approximately 2:00 a.m. The bar was cleared of patrons, including Hunter’s friends. When Hunter emerged from the restroom, a bartender offered her another drink. He gave her a drink and a “blue shot.” According to Hunter, one or both of these beverages rendered her defenseless, which led to a vicious assault by one of the bartenders. Hunter’s suit names a bartender who she says “assaulted and raped” her “in unspeakable ways,” which caused “severe and permanent harm.” She sued Five Paces, alleging premises liability, negligence, and negligence per se.

At the time of the assault, Five Paces had two commercial liability insurance policies: a commercial general liability policy issued by Houston Specialty Insurance Company and an umbrella policy issued by Scottsdale Insurance Company. The Houston policy excludes from this coverage any injury “arising out of or resulting from” an assault, battery, or other harmful contact. Instead, assault and battery coverage is subject to a $25,000 sublimit. This limited assault and battery coverage excludes injuries “arising, directly or indirectly, out of sexual assault, abuse or molestation.”

Houston and Scottsdale sued seeking a declaration that they have neither a duty to indemnify nor a duty to defend. The district court dismissed as premature the portion of Houston and Scottsdale’s complaint dealing with the duty to indemnify. It further dismissed the portion of their complaint dealing with the duty to defend, ruling that “the allegations on the face of the underlying lawsuit set forth a claim of potential coverage.” Houston and Scottsdale appealed the latter determination.

ANALYSIS

It is axiomatic that an “insurer’s duty to defend is broader than its duty to indemnify,” so a declaration that neither company had a duty to defend Five Paces would necessarily relieve them of a duty to indemnify the bar.  In Georgia, whether an insurer has a duty to defend depends on the language of the policy as compared with the allegations of the complaint. The insurer has a duty to defend an action if the facts as alleged in the complaint even arguably bring the occurrence within the policy’s coverage.

This dispute is essentially about the meaning of the phrase “arising out of” in Houston’s policy. If Hunter’s suit against Five Paces alleges injuries “arising out of” assault or battery (or sexual assault), then Houston and Scottsdale are correct that the lower sublimit (or the sexual assault exclusion) applies.

In Georgia, insurance contracts are liberally construed in favor of coverage. Thus, when the phrase “arising out of” is found in an exclusionary clause of an insurance policy, Georgia courts interpret that phrase narrowly, “applying the ‘but for’ test traditionally used to determine cause-in-fact for tort claims. Like blanket exceptions and exclusions, limitations on coverage, such as sublimits, are subject to the same narrowing construction.

The Eleventh Circuit concluded that neither Houston nor Scottsdale were able to show that assault or battery were “but for” causes of Five Paces’ potential liability. Hunter was injured the moment she consumed an incapacitating beverage, regardless of any subsequent assault by a Five Paces bartender. This point is clearer if we imagine that Hunter had been assaulted at a second bar. In that counterfactual, Five Paces would still potentially have liability because of its negligent service; it was the drink service itself that created that liability.

The Houston policy states that the company is responsible for paying “damages because of ‘injury’ to which this insurance applies if liability for such ‘injury’ is imposed on the insured by reason of the selling, serving or furnishing of any alcoholic beverage.” Houston and Scottsdale cannot escape this fact merely because Hunter had the misfortune of being assaulted in the same bar that served her the incapacitating drink.

The insurance companies also argue that Five Paces’s service of drinks to Hunter constituted an assault under Georgia law. This argument, however, turns on just one possible interpretation of Hunter’s complaint—and not even the best interpretation. By the words of her complaint, Hunter does not allege that she was drugged or poisoned, but that she was served “unwholesome” drinks.

The district court analyzed that allegation, noting that while assault is an intentional tort, Hunter’s complaint says nothing directly about what the offending bartender intended: “while the complaint can certainly be read to support the plaintiffs’ theory that [the bartender] purposefully drugged Hunter with the intent to rape her, it could also be read to allege that he took advantage of her incapacity—caused by his own negligence or that of a coworker—and assaulted her only after the opportunity presented itself.”

The Eleventh Circuit felt compelled to resolve doubt as to an insurer’s duty to defend in favor of the insured. As a result it concluded that there is at least enough doubt as to coverage to sustain that duty.

This is not a suggestion, of course, that Houston or Scottsdale must necessarily indemnify Five Paces. Although an insurer need not indemnify an insured for a liability the insured incurs outside the terms of the insurance contract, an insurer must provide a defense against any complaint that, if successful, might potentially or arguably fall within the policy’s coverage.

ZALMA OPINION

I continue to dislike the four corners or eight corners rule that allow a clever drafter to compel an insurer to defend a lawsuit that would never have dealt with an action that the insurer did not agree to defend or indemnify the insured. The purpose, of course, is to obtain a settlement from the insurer to save the costs of defense. The insurers should be able to obtain evidence from the bartender involved – even if he is in jail for his misconduct – that showed he intentionally drugged Hunter so that he could easily rape her, and bring a new motion. If not, they will be required to defend Five Paces through trial. Extrinsic evidence, not available in such a situation to insurers, could have brought about a different decision that bent over backwards to find drugging a woman to easily rape her was merely negligent conduct.

 

© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

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

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A Video Explaining How to Read Your Homeowners Insurance Policy

Read Your Homeowners Insurance Policy

See the full video at https://youtu.be/e_LdYs0xfVQ

Your home is likely your most valuable asset, and a homeowners insurance policy is an important part of protecting your home and your belongings. If you have a mortgage on your home, your lender probably required you to get an insurance policy that will protect the lender’s interest. Because it provides such broad coverage including both property, liability and workers’ compensation coverage for household employees, most homeowners will obtain a homeowners policy if they expect to occupy the property. Even without a mortgage, homeowners insurance is still your best bet to protect your investment in the home and your exposure to liability.

But do you even know what’s in your policy? Would you know your coverage in the event of an emergency? Are you underinsured?  Are you overinsured?

About two-thirds of American homes are underinsured according to estimates by Nationwide Insurance. Some dwellings are underinsured by up to 60 percent. And, CoreLogic, an insurance research firm, says three out of five American homes are underinsured by an average of 20 percent. The homeowner should not wait until it becomes necessary to file a claim to find out whether the homeowner is insured up to the actual cash value of the home or its full replacement cost. If the homeowner, before a loss, determines he or she is underinsured and responsible for paying a lot of money out-of-pocket, the homeowner will contact the insurance agent or broker who obtained the policy on behalf of the insured, to increase the limits to an appropriate amount.

Despite how important it is, many insureds do not take the time to properly review the homeowners policy. To make certain that a homeowners policy provides the coverage needed it is necessary that the homeowner understand the basics of homeowners insurance.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

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Waiting 21 Months After Incident to Report Claim to Insurer Defeats Liability Coverage

Rape on Premises Known to Insured Must Be Promptly Reported to Insurer

While Paris Evans was checking to make sure a ground-level door located off the parking deck was closed she was sexually assaulted by an unidentified man who threatened her by putting a knife to her neck. The man raped her and then tased her twice before leaving the area.

In Nationwide Property & Casualty Insurance Company, Nationwide Mutual Fire Insurance Company, Plaintiffs – Appellees, v. Renaissance Bliss, LLC, Renaissance Residential, LLC, City Walk Apartments, LLC, Renaissance Retail, LLC, Cohen & Associates, LLC, Paris Evans, No. 19-11733, United States Court Of Appeals For The Eleventh Circuit (August 14, 2020) the Eleventh Circuit was faced with a claim by (“Nationwide”) who insured several firms with ownership interests in Renaissance Walk, claiming a 22 month delay defeated coverage.

FACTS

In September 2013, Paris Evans was attacked near the complex’s parking area, and a corporate officer for five firms affiliated in some way with the complex promptly traveled to Atlanta to investigate. The officer did not notify Nationwide of the incident. Nearly two years later, in 2015, Evans filed a lawsuit in state court seeking damages for her injuries. In an amended complaint, she named each of the Renaissance Entities. Nationwide provided a defense but eventually discovered that it had not been notified when the Renaissance Entities first learned of the incident.

The police report indicates that apartment staff told the responding officers that a security camera in the parking area was not operational. Renaissance Bliss, Renaissance Residential, Renaissance Retail, and Cohen & Associates did not own or manage these common spaces, which were the responsibility of a condominium association at Renaissance Walk.

At summary judgment, the district court concluded that under Georgia law, the Renaissance Entities had unreasonably delayed in notifying Nationwide of the attack on Evans. As a result, the court granted summary judgment to Nationwide, allowing it to recoup $275,000 that it had paid towards the settlement.

The primary policy, under the heading of “Duties In The Event Of Occurrence, Offense, Claim Or Suit,” provides as follows: “You must see to it that we are notified as soon as practicable of an ‘occurrence’ or an offense which may result in a claim,” and it defines an “occurrence” as “an accident.” The primary policy also states that “[n]o person or organization has a right under this Coverage Part . . . [t]o sue us on this Coverage Part unless all of its terms have been fully complied with.” The excess policy includes nearly identical terms.

Twenty-one months after the incident, in letters dated June 12, 2015, counsel for Evans requested disclosure of liability insurance covering Renaissance Residential and City Walk Apartments, among other entities, and requested that they preserve any evidence in advance of potential litigation. Counsel for Renaissance Residential and City Walk Apartments forwarded these letters to Nationwide on July 16, 2015.

On August 20, 2015, Evans filed a state-court lawsuit (the “Evans litigation”) against City Walk Apartments and Renaissance Residential, among other defendants who are not parties to this case. Nationwide initially appointed counsel to defend Renaissance Residential and later wrote to the Renaissance Entities’ general counsel after learning that Renaissance Residential had knowledge of the incident on the same day that it occurred, even though it had not informed Nationwide for nearly two years after that. As a result, the letter advised Renaissance Residential that Nationwide was reserving its rights to disclaim coverage.

Evans alleged that the defendants knew or should have known of past criminal activity at the location. The complaint included three counts of negligence—negligence for failing to keep the property in proper repair, negligence for failing to keep the property safe, and a general theory of negligence.

Nationwide and the Renaissance Entities signed a confidential “Funding and Status Quo Agreement,” under which Nationwide would fund the $375,000 settlement. The agreement specified that this payment would “not be deemed a voluntary payment and [would] not waive Nationwide’s right to litigate” this already-pending lawsuit. Nationwide agreed to forego recoupment of defense costs and $100,000 of the $375,000 it paid towards settlement, “such that the total amount at issue with respect to the coverage dispute is limited to $275,000.” The agreement also provided that the parties did not “waive[] any rights, obligations[,] or defenses except as specifically set forth” in the agreement.

The district court granted Nationwide’s motion for summary judgment and denied the Renaissance Entities’ cross-motion. The district court also held that, as a matter of law, the Renaissance Entities had not shown a sufficient reason to delay in notifying Nationwide of the attack on Evans. As a result, Nationwide had no duty to defend and indemnify the Renaissance Entities, even without a showing of prejudice.

ANALYSIS

Applying diversity jurisdiction federal courts apply the choice-of-law rules of the forum state. When a contract is at issue, Georgia courts generally apply the law of the state where the parties made the contract. But if the contract specifies that performance is to occur in another state, then that state’s laws will apply.

The Renaissance Entities, claiming a right to the “notice-prejudice rule” followed in California and not in Georgia identified no California statute that creates California’s notice-prejudice rule. Under Georgia law a particular rule of decision that comes from the statutes or from the common law of another jurisdiction. And on that count, the notice-prejudice rule is purely a product of California common law meaning that it is subject to Georgia’s choice-of-law rules that decline to apply the common law of other jurisdictions.

Although the Renaissance Entities first notified Nationwide of the attack on Evans over twenty-two months after it occurred, they contend that this delay was not unreasonable as a matter of law. Under Georgia law, clauses requiring timely notice to an insurer are valid as conditions precedent to coverage. The policy behind this rule is to allow insurers an early opportunity to investigate potential claims, prepare for litigation, and evaluate settlement. Georgia courts have held that prolonged periods of unjustified delay are unreasonable as a matter of law. The Renaissance Entities “misplaced confidence” that they owed nothing does not excuse late notice to an insurer under Georgia law.

Under the circumstances of this case, the Renaissance Entities’ twenty-two-month delay in providing notice to Nationwide was unreasonable as a matter of law. In reaching this conclusion, the Eleventh Circuit considered the nature of the event, the extent to which it would appear to a reasonable person in the circumstances of the Renaissance Entities that injuries or property damage resulted from the event, and the apparent severity of any such injuries to Evans.

The insureds considered Evans to be a “team member,” even though the Renaissance Entities did not employ her. The investigation indicates that the Renaissance Entities fully understood the seriousness of the attack on her. The Insureds communicated with the broker for his workers’ compensation insurance because he was concerned about liability. Based on the information available to the Renaissance Entities immediately after the incident their actions were unreasonable as a matter of law.

ZALMA OPINION

It should be axiomatic that when an insured learns of an potential claim it should be reported to all liability insurers promptly. In Georgia a 22 month delay is unexcuseable. In states like California where the notice-prejudice rule is followed by judicial fiat, if there is no prejudice to the insurer, the notice condition is avoided. In Georgia the notice-prejudice rule does not apply. In this case, a 22 month delay obviously prejudiced the insurer’s right to investigate. The Eleventh Circuit, because it properly applied Georgia law, had no reason to decide whether Nationwide was prejudiced. The insureds’ had no one to blame for the $275,000 judgment but themselves.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

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A Video Explaining how to Apply Ethics to the Work of the Insurance Professional

The Ethical Insurance Professional

See the full video at https://youtu.be/ycolZsA8tU0

When the insurance professional has a well-developed ethical compass he or she can always apply that ethical compass to his or her work and will almost always treat the insureds and claimants he or she comes in contact with fairly and in good faith. Failure to do so avoids the essence of insurance.

The insurance professional must comply with the Insurance Company’s system of internal accounting, auditing, and claims controls as well as statutes and regulations imposed on insurers by state insurance departments. No action designed to circumvent such controls, procedures, statutes and regulations should be tolerated.

When reporting to management the insurance professional must ascertain that the records reviewed and reported to management are accurate and must ensure that all business transactions are properly authorized. All records and reports must fairly and accurately reflect the transactions or occurrences to which they relate. All records and reports must fairly and accurately reflect in reasonable detail the Company’s assets, liabilities, revenues and expenses. The Company must never, with the assistance of the insurance professional, contain records or reports that contain any false or intentionally misleading entries.

The insurance professional must ascertain that records and reports are accurate and ensure that no transactions are intentionally misclassified, all transactions are supported by accurate documentation, and no information is concealed from the internal auditors, the independent auditors, the audit committee, management or the full board of directors.

 

© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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The Plaintiff Who Represents Himself Has a Fool for a Client

Pro Se Appeal Fails for Lack of Facts or Evidence

When dealing with a court it should be axiomatic that the party seeking relief have sufficient skills with the presentation of evidence and recitation of legal precedent if he or she wishes a successful result. Although retaining an attorney does not guarantee a favorable result failure to retain an attorney will invariably guarantee an unfavorable result.

In Alvy Childress v. Texas Mutual Insurance Company, NO. 03-19-00284-CV, Texas Court Of Appeals, Third District, At Austin (August 27, 2020) the ancient maxim that a person representing himself in a court proceeding will almost always lose.

FACTUAL SUMMARY

Alvy Childress claimed he suffered an on-the-job injury in 2015. Texas Mutual Insurance Company, his workers’ compensation carrier, determined that a torn tendon in his shoulder was not compensable. An administrative law judge (ALJ) with the Texas Department of Insurance, Division of Workers’ Compensation (the Division), held a contested case hearing and agreed with Texas Mutual; her decision was upheld by an Appeals Panel.  Childress, acting as his own attorney, sought judicial review and the trial court granted summary judgment in favor of Texas Mutual.

Childress owns a steel-fabrication-and-erection business called ACE Fab, and in May 2015, while moving an iron beam weighing between 2,000 and 3,000 pounds, he ruptured his right bicep tendon. Texas Mutual accepted the bicep injury as compensable but determined that a “full thickness tear of his distal supraspinatus tendon” in his right shoulder was “degenerative in nature and not caused or aggravated by the work place injury.”

In her Decision and Order, the ALJ stated that she had considered Childress’s proffered “letters of causation” from multiple physicians including and also reviewed the opinion of  an expert provided by Texas Mutual. The ALJ noted there was no explanation how Childress was able to continue working for 3 months after his date of injury, nor persuasively explain how, if the tear was a pre-existing condition aggravated by the workplace injury, the condition was enhanced, accelerated, or worsened.

The ALJ summarized Childress’s medical records as starting more than three months after the date of injury and as stating that Childress uses arm normally—concerned about further damage. She said the first record diagnosed only a non-traumatic rupture of the bicep tendon and stated that Childress’s symptoms and pain levels were “mild”; that at the time, Childress told medical staff that he had “full range of motion”; and that an exam confirmed that his range of motion was “intact in all extremities.” The ALJ concluded the injury was not compensable.

Texas Mutual filed a motion for summary judgment, arguing first that Childress had not stated a claim on which relief can be granted because his amended petition only leveled claims for negligence and violations of various statutes and rules, rather than seeking judicial review of the appeals panel’s final decision.

The trial court signed an order granting Texas Mutual’s motion for summary judgment.

DISCUSSION

The court, being kind to a non-lawyer, stated that: “Although it is not entirely clear, it appears that Childress is arguing that the underlying administrative record was wrongfully excluded from evidence. However Childress failed to have the record filed in accordance with the rules” so the court was unable to consider the record.

Childress’ amended petition seems only to assert a claim for negligence, contending that Texas Mutual knowingly violated provisions of the insurance code, labor code, and administrative code and that as a result, Childress suffered an under treated, under diagnosed, under documented biceps and shoulder injury which produced by causation the manifestly unjust ALJ’s Decision and Order, Independent Injury actual damages, Physical harm a new injury as a direct result of one or more of the above stated violations. Construing his pleadings liberally and in the interest of justice, the appellate court considered whether Texas Mutual showed itself entitled to a summary judgment affirming the Appeals Panel’s order and eventually concluded that Texas Mutual was entitled to summary judgment.

Childress, as the party challenging the decision, had the burden of proving by a preponderance of the evidence that the decision should be overturned. The issues before the trial court were whether Childress’s supraspinatus tear was part of his compensable injury.  Texas Mutual’s no-evidence motion required Childress to put on evidence to rebut the Appeals Panel’s decision on those issues. He did not do so.

The appellate court found that a party, when faced with a no-evidence motion for summary judgment, Childress, as the nonmovant, cannot avoid judgment by simply filing voluminous evidence and stating generally that a genuine fact issue has been raised. The non-movant bears the burden to file a written response that raises issues preventing summary judgment, and that points to evidence supporting those issues. Where the nonmovant fails to meet that burden, the trial court is not required to supply the deficiency, but instead must grant the motion.

Although the appellate court attempted to read Childress’s pleadings liberally and with patience, it was unable to grant him so much leeway as to give him a procedural advantage it would not extend to a party represented by counsel.

Childress did not present understandable argument as to how there was a genuine issue of material fact, nor did he point to evidence or authority to support any such argument. Therefore, the appellate court held that Childress did not meet his burden to explain to the trial court how his attached evidence raised a fact issue as to each element challenged by Texas Mutual. Since the trial court did not err in granting Texas Mutual’s motion for no-evidence summary judgment, and the appellate court overruled Childress’s arguments to the contrary and affirmed the trial court decision.

ZALMA OPINION

Any non-lawyer believing he or she can argue a case without a lawyer should take heed of this case. Childress attempted to get workers’ compensation benefits from an injury he claimed he incurred more than three moths before he sought medical attention and whose claims for the tendon tear were not supported by medical evidence, even medical evidence he presented with his retained experts. He may have had a compensable injury – he will never know – but was unable as a pro se plaintiff to prove the entitlement.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Recitation of Guebara v. Allstate Insurance Co., 237 F.3d 987 (9th Cir. 01/12/2001)

A Recitation of the Establishment of the Genuine Dispute Doctrine

See the full video at https://youtu.be/uXORQsD3vzw

The full text of Guebara v. Allstate Insurance Co., 237 F.3d 987 (9th Cir. 01/12/2001), follows. It established that testimony at an EUO can prove that there existed a genuine dispute between the insured and the insurer sufficient to defeat a claim of the tort of bad faith.

The opinion of the court was delivered by: D.W. Nelson, Circuit Judge

OPINION

Argued and Submitted October 7, 1999

Pasadena, California

Dissent by Judge B. Fletcher

OPINION

The issue this case presents is whether the district court violated California law in dismissing appellant Lana Guebara’ s bad faith claims because there were genuine issues as to coverage. Guebara argues that the “genuine issue” rule should be limited to disputes over contractual language and California insurance law. We hold that the district court did not err in applying the genuine issue rule to this case, and we affirm.

© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Expert Testimony Does not Establish Existence of Direct Physical Loss

Failure to Prove Direct Physical Loss to the Property Defeats Claim

In Mama Jo’s Inc., d.b.a. Berries v. Sparta Insurance Company, No. 18-12887, United States Court Of Appeals For The Eleventh Circuit (August 18, 2020) the Eleventh Circuit was asked to determine whether the district court properly excluded the opinions of Plaintiff’s experts and granted Defendant’s motion for summary judgment based upon the conclusion that Plaintiff failed to establish that it suffered a direct physical loss that would trigger coverage.

BACKGROUND

Mama Jo’s Inc. d/b/a Berries (“Berries”) owns and operates a restaurant located in Miami, FL 33133.  The restaurant is located less than one mile from the ocean and is partially enclosed by a retractable awning, wall, and roof system. When the system is opened, the restaurant’s interior areas are exposed to the elements. The restaurant’s front entrance, bar, and seating areas are adjacent to SW 27th Avenue.

The Road Construction

From December 2013 until June 2015, there was roadway construction at different locations in the general vicinity of the restaurant. During that time, dust and debris generated by the construction migrated into the restaurant. Berries performed daily cleaning using its normal cleaning methods, employing dust pans, hoses, rags, towels, and blowers.

Berries was open every day throughout the time period of the roadwork. Although the restaurant maintained the ability to serve the same number of customers as it had before the construction began, customer traffic decreased during the roadwork.

The Insurance Policy

From September 19, 2013 to September 19, 2014, Berries was insured by Sparta Insurance Company (“Sparta”). Sparta issued an “all risk” commercial property insurance policy, which included, in relevant part, a Building and Personal Property Coverage Form and a Business Income (and Extra Expense) Coverage Form. The Building and Personal Property Coverage Form contained in the policy covers “direct physical loss of or damage to Covered Property . . . caused by or resulting from any Covered Cause of Loss.” The policy defines “Covered Causes of Loss” as “Risks of Direct Physical Loss unless the loss is” excluded or limited.

The policy’s Business Income (and Extra Expense) Coverage Form provides that Sparta will pay for “the actual loss of Business Income you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration.'” The policy provides that the “‘suspension’ must be caused by direct physical loss of or damage to” covered property.

On December 12, 2014, Berries submitted a claim to Sparta under the policy. Berries asserted that the claim was related to dust and debris generated by the roadway construction. Sparta assigned Corey Buford, an insurance adjuster, to review the claim on behalf of Sparta. Berries hired a public adjuster, Robert Inguanzo of Epic Group Public Adjusters, to assist with its claim.

In April 2015, Inguanzo sent Buford a “Sworn Statement in Proof of Loss” for the building claim, including a preliminary damage estimate in the amount of $13,775.58. (This amount was calculated based on the amount of the estimate — $16,235.58 — minus a deductible. Inguanzo also sent Buford a “Sworn Statement in Proof of Loss” and supporting documentation regarding a business income claim in the amount of $292,550.84. Berries contended that its 2014 sales were lower than expected when compared to its rate of sales growth in previous years.

On January 30, 2017, Sparta denied the claim because it was “not covered under the [] policy.” As Sparta explained: “[w]ith regard to Building coverage, . . . the Proof of Loss Form does not reflect the existence of any physical damage. It is also questionable whether a direct physical loss occurred.”

The Litigation and Presentation of a New Claim for Damages

Berries sued. In its initial disclosures in the lawsuit, Berries claimed the same damages it had before the suit was filed: $16,275.58 for cleaning and painting the restaurant, and $292,550.84 for lower-than-expected sales in 2014. Berries later served amended answers to interrogatories. In those responses, it identified for the first time new categories of damages totaling $319,688.57. Berries contended that the newly claimed damages were due to replacement of the restaurant’s awning and retractable roof systems, HVAC repairs, and replacement of the restaurant’s audio and lighting systems.

Berries’ Experts

Berries relied on three experts to causally link its newly-claimed damages to the construction dust and debris generated more than two and a half years earlier, i.e., during Sparta’s policy period ending on September 19, 2014.

The district court determined that Berries’ initial claim for cleaning was not covered because property that must be cleaned, but is not damaged, has not sustained a “direct physical loss.” The district court also concluded that direct physical loss refers to tangible damage to property, which causes it to become unsatisfactory for future use or requires repairs. Finally, the district court decided that Berries’ claim for lower-than-expected sales in 2014 was not covered because Berries could not establish that it suffered a “necessary ‘suspension'” of its “operations” as the result of a “direct physical loss.”

ANALYSIS

In Daubert, the Supreme Court explained that trial courts must act as “gatekeepers” and are tasked with screening out speculative, unreliable expert testimony. In that important role, trial courts may consider a non-exhaustive list of factors including: (1) whether the expert’s theory can be and has been tested; (2) whether the theory has been subjected to peer review and publication; (3) the known or potential error rate of the technique; and (4) whether the technique is generally accepted in the scientific community.

Even experienced experts must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts.

Berries offered Brizuela as a cause and origin expert. He opined as to the source or origin of the damage to the restaurant. Brizuela opined that “[i]t is evident that the source of the damage was from the nearby roadway construction on 27th [A]venue in front of the property.” In reaching this conclusion, he conducted a visual inspection of the restaurant, again over two years after the road construction ended. He conducted no sampling or testing of the dust and sediment he found at that time. His “methodology” was simply observation and a review of photographs.

The district court correctly excluded the expert opinions proffered by Berries and this inexorably led to the swing of the summary judgment axe.

Berries Failed to Show any “Direct Physical Loss or Damage”

Under Florida law, the interpretation of an insurance contract, including resolution of any ambiguities contained therein, is a question of law to be decided by the court.

With regard to the cleaning claim, Berries’s public adjuster, Inguanzo, testified that “cleaning and painting” was all that was required. He also testified that there was no need for removal or replacement of items at that time. Based on this testimony, the district court held that Berries had failed to establish that it had suffered a “direct physical loss” as that term is defined under Florida law.

As to the Business Income Loss claim, the Business Income Coverage Form requires that a “suspension” of operations “be caused by direct physical loss of or damage to property.” Again, even if Berries had shown a “suspension” of operations, Berries did not put forward any evidence that it suffered a direct physical loss of or damage to its property during the policy period. Therefore, the district court’s entry of summary judgment on Berries’ Business Income Loss claim was also proper. Berries failed to show it suffered a “direct physical loss.”

Berries Did Not Establish that it Suffered a Covered Suspension of Operations

The policy’s Business Income Coverage Form provides that Sparta will pay for “the actual loss of Business Income you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration.'”  Conceivably, a slowdown caused by closing parts of the restaurant for cleaning could be attributed to a “period of restoration.” But, even if Berries is correct that the district court got this part of the analysis wrong, Sparta was still entitled to summary judgment on the Business Income Claim because any “‘suspension’ must be caused by direct physical loss of or damage to property.”

ZALMA OPINION

This case establishes that any claim to an insurer for property damage or loss of income requires that the insured establish the existence of direct physical loss to the property, the risk of loss of which was insured. Berries, and its less than adequate experts, failed to establish direct physical loss – only that it needed to clean dust from the premises. Those seeking indemnity due to Covid-19 forced shutdowns should take note since they will have similar difficulty establishing the existence of direct physical loss.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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A Video Explaining The Law of Unintended Consequences and its Effect on the Tort of Bad Faith

Why the Tort of Bad Faith has Outlived its Purpose

The Fourteenth Amendment to the U.S. Constitution

https://youtu.be/H0-YmDB40sw

Insurance companies are understood to be persons who operate in the United States and are entitled to all the rights, benefits and protections of the U.S. Constitution. The Fourteenth Amendment provides in clear and unambiguous language:

No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

If the law allows an insured to sue for tort damages as a result of a breach of the covenant of good faith and fair dealing equal protection should allow an insurer to sue the insured for tort damages as a result of the breach of the same covenant. Some litigants cannot, under our system of constitutional law, be more equal than others. Yet, until a court agrees, insureds are more equal than their insurer.

Although the courts may think so, the insured’s breach of the covenant of good faith and fair dealing is also separately actionable as a contract claim and that some forms of misconduct by an insured will void coverage under the insurance policy. (Imperial Cas. & Indem. Co. v. Sogomonian (1988) 198 Cal.App.3d 169, 182.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

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Zalma’s Insurance Fraud Letter — September 1, 2020

ZIFL – Volume 24 Issue 17

In this issue of Zalma’s Insurance Fraud Letter speaks to:

A Primer on Rescission of Insurance

The Fifth Amendment Is No Use to A Plaintiff – A Video Explaining Why the Fifth Amendment Is of No Use to An Insurance Bad Faith Plaintiff See the full video at https://youtu.be/gMbXpqCxV6I

Buying Insurance After Accident Is Fraud

Health

Insurance Fraud Convictions

Videos on YouTube And Zalma On Insurance from Barry Zalma

Other Insurance Fraud Convictions

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

Subscribe to e-mail Version of ZIFL, it’s Free!

Read last two issues of ZIFL here.


© 2020 – Barry Zalma

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

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

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

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

Go to Barry Zalma on YouTube- https://studio.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/videos/upload?filter=%5B%5D&sort=%7B%22columnType%22%3A%22date%22%2C%22sortOrder%22%3A%22DESCENDING%22%7D

Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Subscribe to e-mail Version of ZIFL, it’s Free! –

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

Go to the Barry Zalma, Inc. web site here https://www.zalma.com/

Listen to my podcast, Zalma on Insurance, at:

https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance – 

 

 

 

 

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A Video Explaining Interpretation Of Coverage For “Collapse”

What is “Collapse” and is it Covered?

See the full video at https://youtu.be/kUT9FigPiJ0

A collapse is a sudden or relatively abrupt occurrence causing serious structural damage, and not a gradual occurrence over a period of time:

[A] homeowners insurance policy will most likely provide “collapse” coverage for “any serious impairment of structural integrity…” Consequently, the term “collapse,” in its plain, common and ordinary sense “means a falling down, falling together, or caving into an unorganized mass.’

In Rosen v. State Farm General Insurance Co., 30 Cal.4th 1070, 70 P.3d 351, 135 Cal.Rptr.2d 361 (Cal. 06/12/2003), the California Supreme Court reversed the Court of Appeal’s choice to not enforce a clear, unambiguous, and explicit policy clause because it found the existence of “an overriding public policy that mandates such coverage. In reversing the dangerous Court of Appeal decision, the Supreme Court refused to follow the so-called “public policy” basis for the Court of Appeal’s decision to compel coverage because such logic, without restraint, would allow courts to convert life insurance into health insurance. Re-writing the coverage provision to conform to their subjective notions of sound public policy, “the trial court and the Court of Appeal exceeded their authority,” disregarded the clear language of the policy, and the equally clear holdings of the Supreme Court.

To rewrite the provision imposing the duty to indemnify in order to remove its limitation to actual collapse would compel the insurer to give more than it promised and would allow the insured to get more than it paid for, thereby denying their freedom to contract as they please.

The Washington state Supreme Court, answering an inquiry from a U.S. District Court, concluded that rather than adopt a fixed definition of “collapse” for all insurance contracts, it would apply Washington law to interpret the ambiguous term “collapse” in the insurance contract before the Ninth Circuit. The Supreme Court concluded “that in the insurance contract, ‘collapse’ means ‘substantial impairment of structural integrity.’ ‘Substantial impairment of structural integrity’ means substantial impairment of the structural integrity of a building or part of a building that renders such building or part of a building unfit for its function or unsafe and, under the clear language of the insurance policy here, must be more than mere settling, cracking, shrinkage, bulging, or expansion.” [Certification from the U.S. Court of Appeals for the Ninth Circuit in Queen Anne Park Homeowners Ass’n v. State Farm Fire & Cas. Co., 183 Wash.2d 485, 352 P.3d 790 (Wash., 2015)]


© 2020 – Barry Zalma

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

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