Insurance Law

Coverage Limited to Conduct of Business of Insured Post 4787 Jodi Greenlaw, as personal representative of the estate of her late husband Philip J. Greenlaw (collectively, the Estate), appealed from a judgment of the Superior Court granting a motion for summary judgment filed by MMG Insurance Company (MMG) on MMG's complaint seeking a declaratory judgment that it had no duty to indemnify Joseph McNeely, a close friend of Greenlaw, in a separate wrongful death action that the Estate filed against McNeely after Greenlaw's death. In MMG Insurance Company v. Estate Of Philip J. Greenlaw et al., 2024 ME 28, No. Cum-23-228, Supreme Court of Maine (April 18, 2024) the Supreme Court interpreted the policy as written. BACKGROUND In 2019, McNeely operated, as sole owner, a landscaping business called Cutter's Edge Lawn Maintenance. MMG issued a businessowners insurance policy providing both property and liability coverage to McNeely (the MMG Policy). McNeely had discussed with Greenlaw, his close friend, measuring and providing a proposal to hydroseed Greenlaw's backyard. On May 20, 2019, Greenlaw hosted "an informal social group" of men at his house. The group "met year-round on Monday evenings to share their enthusiasm for motorcycles by eating, drinking, telling stories, and taking a ride together if the weather permitted." The group also "discussed business-related topics" and "engaged in frequent business dealings." McNeely attended these meetings when he could. McNeely and Greenlaw went to the backyard, where McNeely measured and provided pricing for the project. Greenlaw said he planned to think about the project and would get back to McNeely about it. At around 8:00 p.m., Jodi returned home, and the men, including McNeely and Greenlaw, "wereinebriated." After 10:00 p.m., Jodi asked how the measuring for the hydroseeding went, and either McNeely or Greenlaw told her about the project's progress. "Late in the evening," while "sitting and gabbing," Greenlaw initiated a wrestling match with McNeely. During the wrestling bout, McNeely put Greenlaw in a chokehold, and Greenlaw lost consciousness and died soon after, despite McNeely's efforts to revive him. The MMG Policy, stated that MMG will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury to which this insurance applies. The MMG Policy defines an "insured" as anyone "designated in the Declarations" as an "individual . . . but only with respect to the conduct of a business of which [the named insured is] the sole owner." (Emphasis added.) DISCUSSION The Estate contends that "whether Greenlaw's death occurred with respect to the conduct of McNeely's business" is a triable issue of fact and that the court "erred by discounting the 'earlier business dealings' and the litany of other facts . . . when summarily finding that the 'wrestling itself was not business-related.'" Unambiguous contract language, however, must be interpreted according to its plain meaning. The Supreme Court concluded that MMG Policy provision was unambiguous. The MMG Policy designated McNeely as an individual, and McNeely was thus covered as an insured, only with respect to the conduct of a business of which he was the sole owner. The Supreme Court found that the trial court did not err in determining that there was no genuine issue of material fact and that McNeely's actions while he was wrestling with Greenlaw were not with respect to the conduct of McNeely's landscaping business. Although it is undisputed that earlier in the evening McNeely had measured Greenlaw's backyard and discussed his landscaping business with several individuals, there is no contention, that McNeely's actions while wrestling with Greenlaw were to further McNeely's business. In the opinion of the Supreme Corut an ordinary person would not think that the policy's language would cover McNeely's actions while wrestling with Greenlaw. ZALMA OPINION Getting drunk with a friend, entering into a wrestling match at the home of the friend, and choking his friend to death, could not be part of the landscaping business of the insured even though the two discussed business before the drinking and wrestling began. Wrestling and a fatal choke hold have nothing to do with landscaping. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk.

Insurer Files Interpleader to Allow Claim Payment to Proper Competing Claims Against Funds Post 4773 In an interpleader action arising out of a jury trial in Hanover Am. Ins. Co. v Tattooed Millionaire Entertainment, LLC, No. 2:16-cv-02817-JPM-tmp (W.D. Tenn. 2016) (“Hanover I”). In Hanover I, a jury trial was held on “insurance claims submitted to Hanover [by Defendants in the instant case] in connection with a 2015 arson fire and alleged theft at the House of Blues recording studio located on Rayner Street in Memphis, Tennessee.” In Hanover American Insurance Company v. Tattooed Millionaire Entertainment, LLC, Christopher C. Brown, and John Falls, No. 2:20-cv-02834-JPM-cgc, United States District Court, W.D. Tennessee, Western Division (April 4, 2024) the USDC distributed the available funds. PUBLIC POLICY CAN BAN PAYMENT The Hanover I jury held that: Christopher C. Brown (“Brown”) and Tattooed Millionaire Entertainment, LLC (“TME”) were indistinguishable; and Brown/TME made material misrepresentations with the intent to deceive and committed unlawful insurance acts during the claims process, and thus Hanover was entitled to recover the advance payments made to Brown/TME. The Hanover I jury also held that Falls did not make material misrepresentations or commit unlawful insurance acts, and thus awarded him the maximum amount covered by his policy: $2.5 million in Business Personal Property (“BPP”) and an additional $250,000 in Business Income (“BI”). After the jury trial concluded, the USDC granted Hanover's Rule 50(b) motion for judgment notwithstanding the verdict and entered an amended judgment denying Falls' recovery. The Sixth Circuit, however, reversed the post-trial ruling and remanded with instructions to reinstate the jury verdict as to Falls, which the USDC did. INTERPLEADER & DECLARATORY RELIEF ACTION In the current action: “Hanover II,” Hanover filed its Complaint for interpleader and declaratory relief. Hanover claims that the $2.5 million BPP insurance awarded to Falls is subject to multiple competing claims. Hanover's Declaratory Relief Complaint seeks a declaration that the $2.5 million BPP award is null and void as a matter of Tennessee public policy. It also pleads in the alternative that the Court must resolve the various competing claims to the BPP insurance proceeds and declare to whom, and in what amount, those funds should be paid. Stipulated to Facts Prior to trial the Parties stipulated to the following facts during pre-trial conference: John Falls leased Studio B at the former House of Blues studio located on Rayner Street in Memphis, Tennessee, and the equipment therein from Christopher Brown who owned TME. Falls obtained insurance from Hanover that included, inter alia, $2.5 million in coverage for BPP and $500,000 in coverage for BI. Brown/TME had a separate policy that covered, inter alia, the structure of the studio building. On November 5, 2015, an arson fire occurred at the House of Blues recording studio located on Rayner Street in Memphis, Tennessee, causing substantial damage to the building and the BPP therein. The evidence presented at the trial of the original action (Hanover I) established that Brown/TME falsified documents and submitted fake invoices, phony receipts, and doctored bank account statements in connection with the insurance claims following the fire. In the appeal regarding the original action, the Sixth Circuit wrote: “The jury awarded Falls $2,500,000 as the amount of insurance he was owed, up to his policy limit, for Business Personal Property coverage .... The BPP payment covers the loss of the gear in Falls' studio. However, Brown is the ultimate owner of the lost gear, on which Falls had a perpetually renewable leasehold.” The public-policy argument, an ancient equity maxim that no one should benefit from his own wrongdoing does not mean that Falls takes nothing of the $2,500,000 BPP award. The Court's Previous Rulings The Court ruled on several Summary Judgment motions and held that claim preclusion prevents Hanover from asserting claims or arguments against Falls regarding his interests in BPP but does not prevent Hanover from pursuing claims and arguments against TME/Brown. The Court also dismissed TME/Brown's counterclaim for conversion against Hanover. ANALYSIS The key determination in this case is whether and what type of interest did Falls have regarding the BPP. As the Sixth Circuit already noted “Falls had a property interest in the ‘gear,' in the form of his leasehold with unlimited renewal options. Leaseholds have been held to be insurable interests.” Public Policy Question Because the jury in Hanover I found Brown/TME to be interchangeable and Brown himself admitted to fraud in connection with Studio B, awarding Brown/TME any of the BPP profits would go against long standing public policy of not benefiting the wrongdoer for his own wrongdoing. Therefore, the Court held that Brown is not entitled to any of the BPP profits. Summary of Court Findings The Court found: Hanover is precluded from arguing against Falls' recovery; Falls' lease for Studio B and equipment therein did not terminate with the fire; Loss Payable Clause modifies the language of the Schedule in Fall's insurance contract, requiring Hanover to pay BPP jointly to Falls and Brown/TME as interests may require; Falls is entitled to recover $2,066,217.30 for the destroyed/missing BPP; The decision in the State Court Action is not binding on this Court; Brown/TME are not entitled to recover any part of BPP, as such recovery would violate longstanding Tennessee public policy; and Intervenor's claim is moot, given that Brown/TME are unable to recover any of the BPP. CONCLUSION The Court ORDERED as follows: Hanover SHALL pay John Falls $2,066,217.30 of the BPP; Hanover SHALL NOT pay or credit the remaining $433,782.70 to Brown/TME; and Intervenors' claim is DISMISSED WITH PREJUDICE. ZALMA OPINION Insurance disputes are often difficult to resolve as established by this case that started with a jury verdict, a judgment notwithstanding the verdict, an appeal reversing the USDC, an interpleader action to determine who was on first and could recover more than $2 million, who shall not recover because of public policy and whether any competing claims could recover anything, and Hanover was able to keep$433,782.70 because no one was entitled to the funds. It took many years to resolve and we can only hope this is the end of a case where an insurer is required to pay an innocent person when the named insured was found to have committed fraud in an arson-for-profit scheme. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808 Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk.

How Most Get Away With Insurance Fraud Post 4764 For reasons known only to governmental entities some insist on categorizing fraud into both “hard” and “soft” fraud. By so doing the governmental entities that so categorize fraud make one type of fraud less heinous and less criminal than the other. Fraud, whether categorized “soft” or “hard,” are criminal and if a person is tried and convicted of fraud both can be sent to jail for the same amount of time. The types of insurance fraud some call “soft fraud” are found in every type of claim presented to an insurer. Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or claimant exaggerates a legitimate claim.... According to the Insurance Research Council, soft fraud is far more frequent than hard fraud. Because of the frequency of soft fraud, it adds more to overall claims cost than hard fraud does. Soft fraud occurs when a policyholder exaggerates an otherwise legitimate claim or when an individual applies for an insurance policy and lies about certain conditions or circumstances to lower the policy’s premium. The reality is that Soft Fraud is a criminal violation and a breach of a material condition of the policy. It contributes to increased insurance costs. As a result of increased insurance costs, millions of Americans cannot afford sufficient insurance coverage. One cannot commit an innocent or partial fraud any more than one can be partially dead. Once fraud is committed the contract of insurance is violated and voidable and the crime has been committed. Soft fraud, in contrast, usually involves legitimate losses that are exaggerated by the policyholder. For example, if a person is in a car accident and files a claim with her auto insurance company but overstates the severity of the damage to her car. The insured did not fabricate the accident or the underlying claim, but nevertheless committed soft fraud by not being completely truthful with the insurance company. Regardless of whether or not the fraudulent act is soft or hard, insurance fraud is a felony under the law of most states. The discussion that follows describes the most insidious and prevalent types of soft fraud. PADDING Padding is found when injuries or damages are exaggerated to increase a claim’s value. It is what has been called an insidious type of fraud difficult to detect and often considered harmless by insureds, claimants, police, and prosecutors. Padding can come in a variety of forms. In first party claims, an insured is generally considered to be in the best position to know the value of property for which he or she is making a claim. An insurer depends upon the insured to provide an honest description and estimate of the value of the property, and most courts hold an insured to a high level of honesty when reporting a loss to an insurer. Padding is found in property insurance when insureds inflate the number of items lost or destroyed or exaggerate the value of the items claimed damaged, destroyed, or stolen. This can be as simple as increasing the size of a stolen television from 32 inches to 42 inches; from a cathode ray tube to flat screen; from $100 cash to $500 cash; or from two pairs of jeans to five pair. According to an Insurance Research Council (IRC) study, approximately 90 percent of the costs of insurance fraud are the result of claims padding. Claimants add damage, injuries, and fictitious passengers to their insurance claims. The other 10 percent are the result of organized accident staging rings. Because of the sheer number of offenders, and the light sentences received by the few that are convicted, pursuing these crimes has not a priority for law-enforcement or insurers. [Whyen v. Summers, 58 Misc.3d 1223(A), 97 N.Y.S.3d 57 (Table) (N.Y. Sup. Ct., 2018)] On third party claims the padding can be as simple as adding a week of lost earnings that, in fact, was not lost; allowing the doctor to bill for three visits not made; or going to a chiropractor who charges for x-rays not taken. Standard fire insurance, all-risk property insurance, package first party property policies and most third party liability policies state that the policy is void if the insured intentionally conceals or misrepresents any material fact or circumstance about the insurance or a claim, whether before or after the loss. When an insured submits fraudulent invoices to inflate a claim the insurer has the right, under the policy wording, to void the entire policy. The insured’s argument that he was entitled to recover that part of his claim not supported by fraudulent documents should be dismissed out of hand. One cannot commit a small fraud any more than a person can be just a little dead. A slight misstatement of value normally will not be sufficient to allow an insurer to void an insurance policy for fraud unless the insured knew at the time the misstatement was made that the statement was false and the insurer can prove that the misstatement was made with the intent to deceive it. Misrepresentation, concealment, and fraud are not limited by the amount of the fraud but by the intent of the person making the claim. An insured who presents, with the intent to defraud, $1,000 in false invoices is as culpable as an insured who presents, with the intent to defraud, $1,000,000 in false claims. In both cases, if proved, the policy of insurance, by its terms and conditions, is void and the claim is forfeited. If the differences in numbers between those presented by the insured and those presented by the insurer are honest differences of opinion or calculation errors a policy cannot, and should not, be declared void. The insured must intend to deceive and the insurer must be in a position to prove that intent and that it was deceived before it can void the policy. Honest people deceive their insurers. They think the deception is just harmless fudging. “Soft fraud” wrongfully takes money from an insurer and is also a crime. Soft fraud, like hard fraud, raises everyone’s insurance costs. The greatest amount of money lost to fraud is lost to schemes designated as “soft fraud.” Since most soft fraud succeeds the amount it costs the insurance industry is difficult, if not impossible, to determine. Prosecuting some “soft fraud” perpetrators can put the fear of prison in the minds of the general public and save more money, in the long run, than prosecuting and convicting a single major fraud perpetrator. Unfortunately, police and prosecutors are often unwilling to prosecute cases of so-called “soft fraud” even when the evidence is damning. Years ago, the author took the Examination Under Oath of an insurance broker who inflated a claim for damage to personal property by creating, with the use of white out paint and a photocopy machine, fake invoices for the replacement of property never replaced to collect the difference between actual cash value and replacement cost value. At Examination Under Oath the insured admitted to faking the receipts and was eventually convicted of insurance fraud and served a few months in jail for her crime. ZALMA OPINION Insurance fraud is working to destroy the economy and the ability of insurers to service their clients properly. States attempt to deter it by enacting statutes making it a crime to defraud an insurer and make the insurers, by statute, to investigate and enforce the crime. Yet prosecutors don't like insurance fraud cases because they are document heavy and no person has been physically injured. Prosecution of insurance fraud is anemic and prosecution of soft fraud is non-existent. Learn from this and defeat fraudulent claims by refusing to pay. You will have no help from police or prosecutors but you can deter the attempts to defraud a proactive insurer. This blog was adapted from my book "Insurance Fraud - Volume One available on Amazon.com (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808 Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Insurer Should Get Premium for Waiver of Subrogation Evanston Insurance appealed from a judgment entered after the trial court granted summary judgment in favor of Southern California Edison Company (SCE) and against Evanston Insurance Company (Evanston) as to Evanston's claims for equitable subrogation, equitable indemnity, restitution, and declaratory relief. In Evanston Insurance Company v. Southern California Edison Company, B320392, California Court of Appeals, (September 29, 2023) Evanston contributed $25 million to settle claims by property owners against its insured, The Original Mowbray's Tree Service, Inc. (Mowbray's), which was a subcontractor of Utility Tree Service, Inc. (UTS) under UTS's contract with SCE to manage certain vegetation proximate to SCE's equipment. According to Evanston, the property owners' claims arose out of a wildfire they alleged was caused by a tree hitting power lines that were owned and operated by SCE. Evanston asserted that the wildfire resulted solely from SCE's negligence. In its motion for summary judgment, SCE argued that the following waiver provision in Mowbray's subcontract with UTS barred Evanston's claims: "Subcontractor [(Mowbray's)] waives and will require all of its insurers to waive all rights of recovery against Contractor [(UTS)] or the Owner [(SCE)], their affiliates, their directors, officers and employees, whether in contract, tort (including negligence and strict liability) or otherwise." The trial court agreed and entered judgment in SCE's favor. On appeal, Evanston contended the waiver provision is ambiguous and that the trial court erred in failing to analyze separately whether SCE's waiver defense applied to Evanston's equitable indemnity and restitution causes of action. Regardless, the Court of Appeals concluded that the plain language and context of the waiver provision demonstrated that the provision unambiguously precludes Evanston's equitable subrogation claim against SCE. FACTUAL BACKGROUND In February 2015, a wildland fire ignited in Bishop, California on property owned by the Los Angeles Department of Water and Power (Round Fire). Evanston alleged that property owners and their subrogated insurers filed at least 10 lawsuits in the aftermath of the Round Fire to recover damages. Evanston asserts that the plaintiffs in the lead action (underlying action) alleged that the fire was caused by a tree (subject tree) that contacted power lines owned and operated by SCE. The subcontractor agreement included the obligation to carry $41 million per occurrence in insurance coverage. Evanston alleged that during the underlying action, SCE, which claimed to be an additional insured under the policy, repeatedly threatened to bring a bad faith action if Evanston did not pay the full amount of the policy and it under pressure agreed to contribute the $25 million policy limit to a settlement and reserved its rights to pursue full recovery from SCE ignoring the waiver provision of the contract and Evanston's policy wording. The trial court heard and granted SCE's motion for summary judgment. APPLICABLE INSURANCE LAW A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness. Evanston bore the burden of rebutting the presumption of correctness accorded to the trial court's decision, regardless of the applicable standard of review APPLICABLE SUBROGATION PRINCIPLES In the case of insurance, subrogation takes the form of an insurer's right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid. An insured's contractual waiver defeats an insurer's subrogation claim. DISCUSSION The waiver provision at issue appears in exhibit B of the agreement, which is a two-page document entitled "Insurance." On the first page and under the subheading "Subcontractor's Insurance" (boldface & underscoring omitted), the subcontract required the "Subcontractor" to "obtain and maintain" certain specified "policies of insurance ...." It provided that the subcontractor waived all of its rights against SCE and that its insurer agreed to the waiver. The context of the waiver provision supports the conclusion that it encompasses claims against SCE that Mowbray's would otherwise have been able to transfer to its insurers. In sum the plain language of the waiver provision unambiguously foreclosed Evanston's equitable subrogation claim against SCE. The waiver provision was presumably available for Evanston's review when it underwrote the insurance policy for Mowbray's and it agreed to support the waiver. Because The Waiver Provision Is Unambiguous, The Court Rejected Evanston’s Arguments Supporting Its Construction Of The Provision When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is "reasonably susceptible" to the interpretation urged by the party. If it is not, the case is over. Because the Court of Appeals concluded for the reasons set forth above that the waiver provision's reference to “all rights of recovery against Contractor or the Owner" unambiguously included Evanston's equitable subrogation rights against SCE. The judgment was affirmed. Respondent Southern California Edison Company is awarded its costs on appeal. ZALMA OPINION Insurers like Evanston issuing general liability policies often, if not invariably, agree to waive the insurer's right to subrogation. Evanston's policy allowed for the waiver and had no more rights than its insured who had waived the right by a clear and unambiguous contract and caused its insurer, Evanston, to include the waiver. Evanston tried to change the meaning of the contract on appeal but was unable to explain why it had agreed to the waiver before the issuance of the policy. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library