Barry Zalma, Inc. on Insurance Law

"Caused by" is Synonymous with "Arises From"

No Coverage if Person Fails to Qualify as an Insured Plaintiff CSAA Fire & Casualty Insurance Company (CSAA) sued Roman Ramirez and eventually filed a Motion for Summary Judgment. In CSAA Fire & Casualty Insurance Company v. Roman Ramirez, No. 2:22-cv-00318-RFB-EJY, United States District Court, D. Nevada (March 10, 2023) the USDC resolved the coverage issue. Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. If a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact the court may: give an opportunity to properly support or address the fact; consider the fact undisputed for purposes of the motion; grant summary judgment if the motion and supporting materials - including the facts considered undisputed - show that the movant is entitled to it; or issue any other appropriate order. FACTUAL BACKGROUND The Court accepted the following facts as undisputed, based on Plaintiff's Motion for Summary Judgment and the supporting materials in the record. Plaintiff is an insurance company who maintains a homeowner's insurance policy (“The Policy”) held by the named insured, Maria M. Armendarez. The policy was in full force and effect on May 4, 2017, and covers the property located at 2421 Old Forge Lane, Unit 104, Las Vegas, Nevada 89121 (“Unit 104”). While the property covered by the policy was Unit 104, the policy agreement lists Ms. Maria Armendarez's residence at a different location, namely 219 La Paz Avenue, Henderson, Nevada 89015. An incident took place on May 4, 2017 (“the Incident”) involving Defendant that resulted in an underlying state court case being filed against him by Mr. Juan Severin. At the time of the Incident, Unit 104 was being rented out by Ms. Maria Armendarez to an unrelated family of three individuals: Loraine Gonzalez, Tony Gonzalez, and their child Luke Gonzalez. At the time of the Incident, certain repairs and remodeling was taking place at Unit 104. In connection with those repairs and remodeling. Ms. Maria M. Armendarez's daughter, Ms. Carrie Armendarez, hired a handyman, the plaintiff in the underlying action, Mr. Juan Severin, to perform some of the work on Unit 104. An argument between Ms. Carrie Armendarez and Mr. Servin ensued regarding whether Mr. Servin should perform any additional work and/or receive additional payment. As the argument ensued, Ramirez allegedly punched Mr. Severin in the face, causing him injury. As a result of the Incident, Mr. Servin sued in the underlying state court action, raising claims for injuries and damages against Mr. Ramirez (and others). Defendant then tendered the defense of the Incident and ensuing underlying action to Plaintiff. On May 10, 2022, Plaintiff took Defendant's deposition. In the deposition, Plaintiff asked Defendant whether he had any blood, marital, or domestic relationship with Ms. Maria M. Armendarez and/or whether he had ever lived as a resident of the household of Ms. Maria M. Armendarez. Defendant unequivocally confirmed that he was neither a relative (blood or marriage) of Ms. Maria M. Armendarez, that he never lived with Ms. Maria M. Armendarez, and that he was neither a resident of her household. Defendant further confirmed that he has never lived at 219 La Paz Avenue, Henderson, Nevada, which is the resident household of Ms. Maria M. Armendarez, nor at Unit 104, where the subject Incident occurred. Defendant further confirmed that he has never been married in his entire life, only lived with his girlfriend, Loretta Vargas and not Ms. Maria M. Armendarez, and is not a blood relative of Ms. Maria M. Armendarez or her late husband, Mr. Fernando Armendarez. DISCUSSION In Nevada, when the facts are not in dispute, insurance contract interpretation is a question of law that may be decided by the reviewing Court. An insurance policy, like any other contract, must be construed and enforced as written, absent any ambiguity. In this case the four requirements for declaratory relief were met. There is an underlying proceeding between Mr. Severin and Defendant, currently before the Clark County District Court. Defendant cannot establish that he is covered by the Policy because the Policy is not ambiguous as to defining “insured” and the scope of coverage to “insured” persons. Defendant admitted that at the time of the Incident, he was a resident of 3909 San Andreas Avenue, Las Vegas, NV 89121. He stated that he moved from that residence to a home he purchased, at 4388 Gibraltar Way, Las Vegas, NV, 89121, in 2020 and was not a resident of Unit 104 nor did he reside at Ms. Maria M. Armendarez's residence. Through his sworn deposition testimony, Defendant has confirmed that he does not qualify as an “insured” under the Policy. ZALMA OPINION Insurance policies must be interpreted as written. When a policy defines "insured" as a person who is named or who resides at the premises and is a relative of the named insured. Since Ramirez failed to fit any variation of the definition of "insured" he is not entitled to coverage for defense or indemnity. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Investigation of Suspected Fraud Every first-party property adjuster will face in his or her career attempts to defraud the insurer for whom the adjuster works. It is necessary that the adjuster is aware of each type of property insurance fraud he or she may encounter. Some, but surely not all, fraud types follow: Arson-for-Profit. Arson is the intentional burning of property. It no longer is limited to specific types of property. Although perhaps the most dangerous of all methods of insurance fraud, people continue to attempt insurance fraud by burning their homes, vehicles, and business structures. The FBI advises that: In 2010, 15,475 law enforcement agencies provided 1-12 months of arson data and reported 56,825 arsons. Of the participating agencies, 14,747 provided expanded offense data regarding 48,619 arsons. Arsons involving structures (e.g., residential, storage, public, etc.) accounted for 45.5 percent of the total number of arson offenses. Mobile property was involved in 26.0 percent of arsons, and other types of property (such as crops, timber, fences, etc.) accounted for 28.5 percent of reported arsons. The average dollar loss due to arson was $17,612. Arsons of industrial/manufacturing structures resulted in the highest average dollar losses (an average of $133,717 per arson). Arson offenses decreased 7.6 percent in 2010 when compared with arson data reported in 2009.... Nationwide, there were 19.6 arson offenses for every 100,000 inhabitants. By use of technical devices, chemical analysis, and even trained dogs it has become more difficult for the arsonist to cause a fire that appears to a trained investigator to be accidental. Arson is not excluded in any first party fire policy. It is, in fact, a specifically covered peril: fire. There is no arson defense available to an insurer. The defense for an arson caused by an insured to defraud an insurer is misrepresentation, concealment, or fraud, an exclusion in every fire policy. If an insured sets fire to his furniture or car to defraud the insurer, the defense available to the insurer is fraud: not arson. To defend a claim based upon fraud by arson, the insurer must prove the following: The property was insured under a contract of insurance. The contract of insurance contained a provision allowing the insurer to void insurance because of misrepresentation, concealment, false swearing, fraud. An exclusion for intentional acts of the insured similar to that in the New York Standard Fire Insurance Policy. The fire was not accidental. The fire was caused by the acts of a person or persons. The fire was set by the insured or someone acting for the insured. The fire was set for the purpose of defrauding the insurer. Under Michigan law, however, in order to establish an arson defense the insurer need only show that the fire was of incendiary origin and that the insured had both motive and opportunity to set it. Each element may be established by circumstantial evidence. There is rarely direct evidence that a fire was set by an insured. Without an eyewitness or other direct evidence, the insurer can prove the insured was involved in an arson-for-profit circumstantially by presenting evidence of the insured’s motive, opportunity and ability to cause the fire. Motive is not required to prove arson although showing a trier of fact a motive makes it easier for the trier of fact to believe the insured caused the fire to occur to defraud the insurer. For example, showing an insured’s financial difficulties or anger at a spouse or significant other can establish motive. Also, an insured who has access to a building shortly before a fire has “opportunity.” If opportunity and motive combine and all accidental causes are eliminated, fraud by arson or arson-for profit can be proved. In Fitzgerald v. Great Central Insurance Co., 842 F.2d 157 (6th Cir. 03/18/1988) following a fire, plaintiffs’ claim for benefits was denied. The insurers claimed that Gerald Fitzgerald set or procured the setting of the fire. Plaintiffs then filed a complaint against Aetna and Great Central for breach of contract. On the night of the fire, Gerald Fitzgerald, his son and the family dog, who lived in the apartment above the tavern, were all absent from the building. Gerald Fitzgerald spent the night at the Coho Club in Traverse City and left his son and dog with a friend. Michael Husby, who also lived in Fitzgerald’s apartment and had recently bought into the corporation, visited the bar during the evening but spent the rest of the night at his girl-friend’s house. The bar closed at 10:30 that night. Nothing unusual was noted in or around the building until flames and smoke were spotted at 1:30 a.m. The doors to the bar were locked but the separate entrance to the upstairs apartment was unlocked. There was no sign of breaking and entering. Testimony at trial regarding why the insurer denied the insurance claim meets the standard for relevancy. The insurer testified that it was the insurer’s belief that the insured’s planned to defraud the insurer from the beginning, when they first acquired their homeowners insurance policy even though they were not living at the property. This is significant because a requirement for a valid homeowners insurance policy is that the homeowner occupy the premises and was part of the insurer’s arson for profit defense. [Banks-Williams v. Allstate Vehicle & Prop. Ins. Co. (6th Cir., 2019)] Staged Theft The staged or fake residential theft where the insured reports the theft of property from a residence or business when none actually occurred. In U.S. v. Tam, 240 F.3d 797, 2001 Daily Journal D.A.R. 885, three defendants were convicted of conspiracy to commit mail fraud and to transport stolen cars in foreign commerce, mail fraud, and transporting stolen cars in foreign commerce, and two of them were also convicted of conspiracy to launder money, following a jury trial. The appellate court concluded evidence was sufficient to support one defendant's convictions. Considering the fact that plaintiff was arrested and cited for making a false insurance claim and that the individual he identified in a photo lineup as having stolen his car later testified to the police that he had been approached by a woman with connections to Plaintiff who paid him $200 for participating in a staged theft of Plaintiff's vehicle the denial of the claim was appropriate. In New Hampshire, a defendant participated in a staged theft of his wife's jewelry at a Brockton, Massachusetts restaurant in order to fraudulently collect $1,500 in insurance proceeds. Joseph Butler, an off-duty police officer dining at the restaurant, observed the activities of the defendant, his wife, his daughter, and a friend, surrounding the staged theft. The evidence was sufficient to affirm the conviction. [State v. Matiyosus, 134 N.H. 686, 597 A.2d 1068 (N.H., 1991)] Staged Water Damage or Mold Claim Where the insured intentionally promotes damage by wetting down the residence or business property with a hose or disconnecting a plumbing fixture to generate water damage and encourage mold growth. A staged loss, regardless of the type, is fraud. Even if no claim is filed an insured can be accused of attempted fraud and face criminal penalties. For example, in a New York case, a man gave his car keys to a third party who was to sell or otherwise dispose of the car. The insured was told by the third party to file a fraudulent claim against his own policy and claim that the car was stolen. After reporting the theft, the insured became frightened and did not move forward with the claim. Regardless, the insured was arrested and the court found him guilty of insurance fraud because he took active steps to commit the fraud. The insured could not avoid criminal liability by failing to fulfill every requirement of a false claim. Staged Mold Claim The most famous staged mold claims occurred in Texas in 2002. The seven conspirators were arrested on June 27, 2002 by federal investigators, working in conjunction with the Texas Department of Insurance. The defendants were charged with presenting insurance claims for water and mold damage to a succession of homes that they purchased, bought policies for and then intentionally flooded the houses with water hoses or by damaging water pipes. At least one house was “cooked” to speed up mold. Other members of the ring, posing as vendors and contractors, filed false claims to repair the damage and sold the homes to each other to repeat the process. Six of the conspirators were found guilty. The remaining conspirator, Ramnatah Ramcharan was found guilty by a federal jury in October for conspiracy, four counts of mail fraud and ten counts of money laundering. As insureds and public adjusters become “mold savvy,” the temptation to create a covered loss scenario where none would otherwise exist became almost irresistible. This article was adapted from my book The Compact Book of Adjusting Property Claims Third Edition" available at amazon.com and Available as a Kindle book or as a paperback at https://www.amazon.com/Compact-Adjusting-Property-Claims-Third-ebook/dp/B08YP7X3H7/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1616593513&sr=8-1

No Compelling Reason to Release Convicted Arsonist and Murderer A person with no compassion for his many victims, with an expression that defines chutzpah, sought compassionate release from his 110 year sentence in United States Of America v. John T Veysey III, No. 99 CR 00381-1, United States District Court, N.D. Illinois, Eastern Division (March 2, 2023). John T. Veysey III, while currently serving a 110-year sentence for wire fraud, arson, and felony by fire, moved the USDC for compassionate release because he was fat, had high blood pressure and was afraid of the Covid pandemic. BACKGROUND Throughout the 1990s, Veysey devised various deadly schemes to cause losses and collect insurance proceeds. Among other offenses, Veysey fraudulently obtained $959,849.47 in insurance proceeds from a car “accident” involving his first wife, from the death of his first wife, and from arson-for-profit fires to three of his residences. He tried to obtain an additional $1.3 million in insurance proceeds by attempting to kill his second wife and then-infant son in a house fire, and he schemed to fake the deaths of another woman and her sons. On March 6, 2001, following a six-week trial, a jury found Veysey guilty on 18 counts. Consistent with the then-binding Sentencing Guidelines, the USDC sentenced Veysey to the statutory maximum of 110 years' imprisonment. Veysey argued that several factors justify a sentence reduction, including his health conditions, ongoing risks associated with COVID-19 in the federal prison system, alleged sentencing disparities between him and other offenders, his purported rehabilitation, and his preparations for reintegrating into the community. On July 6, 2022, Veysey submitted an updated motion in which he discusses COVID-19 risks, his ongoing health concerns, and his recidivism risk level. DISCUSSION As a general matter, a federal court may not modify a term of imprisonment once it has been imposed. The court may reduce a sentence if “extraordinary and compelling reasons” justify release. Extraordinary and Compelling Reason The kind of extraordinary and compelling circumstances contemplated by the statute include some new fact about an inmate's health or family status, or an equivalent post-conviction development, not a purely legal contention for which statutes specify other avenues of relief. Legal arguments that an initial sentence was made in error do not qualify. Veysey first points to his health conditions-including hypertension, atrial fibrillation, and obesity-as circumstances justifying a sentence reduction. Veysey may not use a motion for compassionate release to argue that the court's original sentencing decision was incorrect. In addition, Veysey offered evidence of his rehabilitation while in prison. But rehabilitation alone is not an extraordinary and compelling reason for release, nor can rehabilitation render otherwise ordinary circumstances extraordinary. Also, the fact that Veysey has now spent several years in prison and has made efforts to prepare for life outside of prison does not qualify as an extraordinary and compelling reason that could justify his release. Even if Mr. Veysey were to present an extraordinary and compelling reason for compassionate release, the court would still deny his motion under the § 3553(a) factors. “Consideration of even one § 3553(a) factor may show that the others do not matter.” The first § 3553(a) factor, which addresses the “nature and circumstances” of a defendant's offenses and personal circumstances, strongly militates against a sentence reduction. His crimes were shocking: Veysey killed his first wife, tried to kill his second wife and then-toddler son, torched multiple houses, and purchased life insurance coverage on another woman shortly before he was arrested-all to collect insurance money. Veysey carried out these extraordinarily serious offenses over several years, destroyed numerous lives, and caused enormous emotional and physical pain and monetary damage. Even if Veysey had presented the court with an extraordinary and compelling reason for his release, consideration of § 3553(a)(1) alone would provide a sufficient basis for denying his motion. ZALMA OPINION Veysey is proof that insurance fraud is a violent crime. He managed to murder and commit arson-for-profit and insurance fraud for years before he was arrested, tried, convicted and jailed for 110 years. Like the person who murdered his parents and sought empathy because he was an orphan, Veysey defined the Yiddish term "chutzah" by asking to be released because, in prison he became obese, had high blood pressure and AFIB. The USDC, wisely, refused his request since his condition was neither extraordinary nor compelling reasons for release but the opposite, a compelling reason existed to keep him in prison forever. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Arbitrator's Factual Errors Not Ground to Vacate Award In Martinique Properties, LLC v. Certain Underwriters at Lloyd's of London, Subscribing to Policy Number W1551E160301; Beazley Lloyd's Syndicate 2623; Beazley Lloyd's Syndicate 623, No. 21-3561, United States Court of Appeals, Eighth Circuit (March 1, 2023) the Eighth Circuit interpreted the Federal Arbitration Act as applied to an insurance appraisal. FACTS Martinique Properties, LLC sued the Certain Underwriters at Lloyd's, London (Underwriters) seeking to vacate an arbitration award. The district court dismissed the complaint for failure to state a claim for vacatur. Martinique Properties appealed. Martinique Properties owned apartments in Omaha, Nebraska, for which it had property insurance coverage through Underwriters. In May 2016, while the policy was in effect, the apartments sustained hail and wind damage. Martinique Properties submitted an insurance claim for reimbursement of its repair costs and the Underwriters and Martinique disputed the amount owed for the repairs. The insurance policy included an appraisal provision, which governed the process for resolving disagreements as to the amount of loss or the value of the property. Under the provision, a panel of appraisers was to evaluate the property damage and determine the amount of loss. If the panel came to a decision, its agreed-upon appraisal award would be binding on the parties. Martinique Properties invoked the appraisal provision. A panel of appraisers agreed on a binding appraisal award in June 2020. The suit against Underwriters sought a declaration that the appraisal process and award were invalid. According to Martinique Properties, the award incorporated incorrect figures and measurements. The district court granted Underwriters' motion to dismiss, finding that none of Martinique Properties' allegations presented appropriate grounds for vacatur. ANALYSIS The Arbitration Act is a congressional declaration of a liberal federal policy favoring arbitration agreements. Under the Act a court may only vacate an arbitration award in four limited circumstances, and in the absence of one of these grounds, the award must be confirmed. Martinique Properties argued that the appraisal award must be vacated because the appraisers used figures and measurements which are contrary to the actual conditions of the Property and failed to consider certain buildings and certain portions of a damaged roof when determining the appraisal award. Martinique Properties alleged only factual errors that challenge the merits of the appraisal award, and the Eighth Circuit had no authority to reconsider the merits of an arbitration award, even when the parties allege that the award rests on factual errors. An arbitrator does not exceed his or her powers by making an error of fact. Accordingly, the appraisers' use of certain figures and measurements in calculating the amount of loss and their alleged failure to consider particular buildings and portions of roof damage, even if incorrect, are not sufficient for vacatur under the act. Since the parties bargained for the arbitrator's decision; if the arbitrator got it wrong, then that was part of the bargain. ZALMA OPINION Appraisal of the extent of loss in a first party property insurance policy is an arbitration. Arbitration is designed to avoid or limit litigation. When insured and insurer agree to appraisal in accordance with the terms of the policy is binding on both parties except in the case of fraud or misconduct. Arguments over fact belong in the appraisal proceedings and neither a state nor a federal court may place its evaluation over that of the appraisers. Martinique chose appraisal and must accept the findings of the appraisers. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Failure to Fulfill Protective Safeguards Endorsement Defeats Fire Claim In Frankenmuth Mutual Insurance Company v. Fun F/X II, Inc. and Cao Enterprises II, LLC, No. 22-1933, United States Court of Appeals, Seventh Circuit (February 28, 2023) the insurer rejected a fire claim because the named insured knew, and didn't tell, Frankenmuth, that the sprinklers in his warehouse had no water, a material condition precedent of the policy. Fun F/X II, Inc. and Cao Enterprises II, LLC (collectively "FUN”) sought insurance coverage after a warehouse fire. The relevant insurance policy issued by appellee Frankenmuth Mutual Insurance Company provides that it does not cover losses if prior to the fire the policy holder knew of a suspension or impairment in an automatic sprinkler system yet failed to notify Frankenmuth of the issue. Based on this policy exclusion, the district court granted summary judgment for Frankenmuth. UNDISPUTED FACTS FUN is a costume and theatrical supply retailer that stored its inventory in a warehouse in South Bend, Indiana owned by Cao Enterprises II, LLC. Victor Cao is the sole member of Cao Enterprises II, LLC and the sole stockholder of FUN. Cao purchased the warehouse in 1999. It then had a Functional sprinkler system with a working supply of water. Cao replaced the sprinkler heads around 2004 and hired inspection companies for routine system testing. In 2016, an inspector from Legacy Fire Protection found no problems. When the same inspector returned on September 28, 2017, the sprinkler system had no water pressure. The inspector notified Cao, and the two called South Bend Water Works immediately. On November 15, 2017, Cao spoke with the city fire inspector to try to solve the problem. Cao never heard from any water works personnel and did nothing else to check whether the water was in fact restored. No one ever told Cao the source of the problem, let alone that the problem was fixed. The next year, a different employee from Legacy Fire Protection performed the annual inspection in the warehouse. Cao was not present for that September 2018 inspection and was not notified of any problems. THE FIRE A fire destroyed the warehouse and all of its contents on July 26, 2019. FUN claimed losses exceeding $7 million. The sprinkler system still did not have any water flowing to it. After the fire, the source of the problem was discovered: The city apparently had cut and capped the pipe supplying the sprinkler system in April 2017 when the building next door was demolished. Cao was told that the worker cutting the pipe incorrectly believed the FUN warehouse was being demolished as well. Frankenmuth Mutual Insurance Company’s policy contained an exclusion providing that Frankenmuth "will not pay for loss or damage caused by or resulting from fire if, prior to the fire, you: 1. Knew of any suspension or impairment in any protective safeguard listed in the Schedule above and failed to notify us of that fact." The referenced schedule listed automatic sprinkler systems as protective safeguards. It was undisputed that Cao never notified the insurer after he learned in September 2017 that the sprinkler system lacked a working water supply. It is also undisputed that no one ever told Cao before the fire that the water flow had been restored. Frankenmuth sued seeking a declaratory judgment that it did not owe insurance coverage to FUN for losses from the fire. FUN asserted a counterclaim for breach of the insurance policy. The district court granted summary judgment in favor of Frankenmuth based on the policy's notice-of-impairment exclusion. The court found the sprinkler system had no water flowing to it-and that FUN, through Cao, knew of this impairment yet failed to notify Frankenmuth. ANALYSIS Insurance policies are generally construed using familiar contract analysis rules and the interpretation is often a question of law. Where the policy language is unambiguous, plain meaning controls. The protective safeguards endorsement is clear and easy to apply to the facts at hand. Cao admits that he knew there was no water flowing to the sprinkler system on at least two occasions: the September 2017 inspection and his November 2017 communications with the city fire inspector. He admits that no one ever told him that water flow had been restored. Cao also admits that he never told Frankenmuth about this lack of water flow. The sprinkler system's function was to deliver water in the event of fire. When Cao learned that there was no water in the system, he learned that there was a "suspension or impairment in" the system and needed to report the problem to Frankenmuth if he wanted to keep the fire insurance in effect. Since there is no genuine factual dispute on the decisive question that FUN knew of a suspension or impairment in the sprinkler system prior to the fire and failed to report that problem to Frankenmuth. Cao had knowledge in September and November of 2017 that the system had no water flowing to it yet never reported that impairment to Frankenmuth. ZALMA OPINION The protective safeguards endorsement created a condition precedent to recovery of indemnity under the policy. Since the insured knew there was no water flowing to the sprinkler system and did not tell his insurer of the fact, the seven million dollar loss was not covered by the policy. FUN and Cao are not without a remedy. The City cut off his water supply negligently and he may sue to recover his loss because of its negligence. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

She Did It This is a fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story, and many other is my book "Insurance Fraud Costs Everyone" will help the public Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime. See the full video at and at https://youtu.be/7zm-lqdJMbI Being a good neighbor is hard work. Sometimes it’s impossible. Marsha was not a good neighbor. She would “borrow” things from her neighbors and never return them. Most of her small kitchen appliances arrived because of such loans. Marsha had an extensive collection of CDs and long-playing records, none of which she purchased. Marsha would invite herself to lunch, but never invite her neighbors to her home for lunch. She would play her stereo at its highest volume level at all hours of the day and night. Everyone who lived within six houses of Marsha lost sleep because of her actions. None of her neighbors liked Marsha. Marsha kept a bull terrier named “Jaws” whom she did not allow in her house. Jaws, however, would escape the backyard weekly. Neighborhood cats, rabbits and small dogs disappeared with some regularity. The entire neighborhood universally detested Marsha and Jaws. If Marsha ever decided to move, the neighbors would throw a going away party to which they would not invite her. Everyone in the neighborhood was afraid of Marsha and Jaws. They tolerated her because they did not know how to remove her from the neighborhood. One summer evening while Marsha was attending a concert, burglars entered her house. Jaws, sensing the burglars in the house, barked furiously but could do nothing since Marsha tied him up in the backyard. The neighbors ignored Jaw’s barking since they were afraid to offend Marsha by complaining about the noise. Marsha lost her jewelry, two television sets, two VCR’s, her stereo set and her microwave oven. The neighbors, when questioned by the police about the burglary, could only report that they heard the dog barking but saw nothing. Most smiled upon learning of the burglary and whispered under their breath their pleasure at Marsha’s loss. Two days later Marsha’s adjuster arrived and parked in front of her house. On the adjuster’s car was a sticker identifying the company for which she worked. The adjuster spent an hour interviewing Marsha and considered the report to be that of a routine burglary. The adjuster asked Marsha to complete a form listing all of the personal property stolen, its purchase date, purchase price, replacement cost and its actual cash value. Once the adjuster received the list, she expected to go through the list, arrive at an actual cash value for the items and negotiate a quick settlement with Marsha. Marsha’s neighbors had other plans. Harry and Louise, who lived next door, looked up the address of the insurance company in their telephone book. They then sat at an old Underwood manual typewriter and wrote a letter to the insurance company that said: “We are neighbors of Marsha, the person you insure. We know she has reported a burglary at her house to the police and is making claim for losses due to that burglary. “The claim is a fraud. Marsha’s house was not burglarized. She did not have the items she is claiming stolen. “If you need further detail please call us at 555- 5555.” They then signed their names. Three other neighbors did the same. The insurance company, faced with the accusations, had no option but to report Marsha’s claim to the fraud division of the State of California Department of Insurance as a suspected fraudulent claim; assign investigation to its special investigation unit (SIU) and conduct a thorough investigation into the facts alleged. The SIU investigator interviewed Harry and Louise and all of the other neighbors. They convinced the investigator that Marsha was not a credible person. The investigator believed Marsha was a despicable person. He knew she was the one who the three neighbors spoken to believed to be a fraud. The insurance company retained the services of a lawyer to examine Marsha under oath and confront her with the accusations of fraud. The fraud division, faced with the compelling evidence of the statements of the neighbors, started its own investigation and presented the case the district attorney for prosecution. Marsha, totally innocent and the victim of a crime, was dumbfounded. Her insurance company would not pay her claim and insisted on interrogating her endlessly in front of a court reporter. She could not understand the reasons for the interrogation. She explained to the lawyer for the insurance company why her claim was valid. Marsha faced the lawyer for the insurance company with her sworn testimony that her claim was legitimate. He also had available the reasonable and the unsworn testimony of the three neighbors. There seemed to be compelling evidence that the claim was a fraud and equally compelling evidence it was a valid burglary claim. The lawyer, the SIU investigator and a court reporter, went back to the home of Harry and Louise. They asked Harry and Louise to give testimony under oath to establish the fraud they had reported. Harry and Louise agreed to the sworn testimony and were ready to continue with their false accusations until the lawyer for the insurance explained to them the penalties of perjury. Harry and Louise decided that although Marsha deserved punishment for her lack of neighborliness, to have her punished was not worth prison. They told the truth. They explained to the lawyer why they had told the SIU investigator that they believed Marsha had committed fraud. On the advice of counsel, the insurance company settled Marsha’s claim promptly. The Fraud Division was advised of the false report. Harry and Louise were not punished. No one told Marsha why it took so long to resolve her claim. If the insurance company and its lawyers took Harry and Louise’s statement at face value and denied Marsha’s claim, the insurer would have faced a lawsuit from Marsha for falsely accusing her of the fraud. The law of California, and several other states, now require that insurers have special fraud investigation units. The law requires that those specially trained investigators investigate claims of fraud to protect the insurer and the public from the crime. The SIU investigators, however, must remember that they are also claims people whose duty is to pay all legitimate claims and to investigate the basis for any denial thoroughly. It was this thorough investigation, including the examination under oath of Marsha and the attempted sworn statement of the neighbors that saved Marsha from a possible criminal prosecution and the insurer from a bad faith lawsuit. Every professional claims person understands that not all obvious frauds are fraud, not all innocent claims are innocent, and it is the obligation of every claims person and SIU investigator to thoroughly investigate every claim with the intent to find that a claimed loss is appropriate and compensable. If fraud is proved by a thorough investigation then the claim should be denied and the person making the claim should face the ire of the local prosecutor or the US Attorney. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Suing an Insurer & its Chairman as Racist for Denial of Claim is not Viable After a car accident, Nehemiah Rolle filed a claim with his insurer, Founders Insurance Company, a member company of the Utica National Insurance Group. Founders responded with a request for more information, and when none came, the company denied the claim only to find it and its Chairman sued claiming their racism resulted in the denial of Rolle's claim. In Nehemiah Rolle, Jr. v. Richard P. Creedon, No. 22-1720, United States Court of Appeals, Seventh Circuit (February 23, 2023) the Seventh Circuit heard the appeal and warned Rolle that further frivolous filings would cause sanctions to be imposed against him. FACTS A few months after the denial Founders sent Rolle a notice that his policy was due to expire and would not be renewed. Rolle then sued Richard Creedon, the chairman and chief executive officer of Utica National, alleging that Founders breached its insurance contract by not paying his claim and discriminated against Rolle because he is Black by "aiding and abetting" white employees to "criminally defraud" Rolle by accepting his insurance premium while denying coverage. Rolle sought compensatory damages of 1 billion dollars and punitive damages of 500 million dollars. Creedon moved to dismiss the case for lack of personal jurisdiction. In the meantime, Rolle filed a motion requesting an "Emergency Order" for "A Stay or Restraining Order" requiring that his insurance coverage continue beyond its expiration date and until the insurance company was required (through this lawsuit) to pay for the repairs to Rolle's car. The district judge construed Rolle's motion for an "Emergency Order" as a request for a temporary restraining order under Rule 65(b) and denied it. Rolle, unhappy with the result, then moved for the district judge's recusal because of alleged racial bias, which, he argued, is what caused the judge to deny the "Emergency Order" and say there was no emergency. Rolle filed an interlocutory appeal after the denial of his two motions. The essence of a TRO is its brevity, its ex parte character, and (related to the second element) its informality. A preliminary injunction requires notice to the opposing party, and typically involves a hearing held before the injunction is issued. Here, the district court labelled the motion as a request for a TRO and, consistent with such proceedings denied it without a hearing in a brief order. On the merits, Rolle argues the judge erred by finding it unlikely he would suffer irreparable harm without injunctive relief. Rolle contends that if his coverage is not maintained, he cannot be insured by another company because of the damage to his car that his insurer refused to pay. ANALYSIS To obtain a preliminary injunction, a plaintiff must show that it is likely to succeed on the merits, and that traditional legal remedies would be inadequate, such that it would suffer irreparable harm without the injunction. The Seventh Circuit concluded that the district judge did not err in determining that Rolle failed to demonstrate that the denial of his insurance claim (even if wrongful) or the non-renewal of his auto insurance policy would cause irreparable harm in these circumstances. The harm Rolle claims is measurable in monetary terms (the cost to repair his car or a higher insurance premium), and can be adequately addressed with damages. VEXATIOUS LITIGANT Rolle's litigation history demonstrates a concerning pattern of misconduct against this defendant and others. Rolle filed a second suit against Creedon in the Northern District of Illinois four months after filing this one. The second complaint alleges that Creedon "defam[ed] and libel[ed]" Rolle by notifying the court of Rolle's litigation history that was otherwise identical to the complaint before the Seventh Circuit. Rolle is a prolific litigant. He has filed at least 55 federal lawsuits in the Eastern, Northern, and Southern Districts of New York, the Southern District of Ohio, and the District of New Jersey. Most allege that businesses, elected officials, judges, and government employees engaged in racist actions that violated his constitutional rights, but none went far. The majority of these cases have been frivolous and dismissed for lack of subject-matter jurisdiction. Two courts (E.D.N.Y. and S.D. Ohio) imposed restrictions on Rolle because of his vexatious filings. The Seventh Circuit warned Rolle that further frivolous filings within this circuit may lead to monetary sanctions that, if unpaid, can result in a filing bar. On the jurisdictional issue, the Seventh Circuit sided with Rolle but affirmed the denial of relief. ZALMA OPINION Insurance companies are often disliked, especially when a claim is denied. People like Mr. Rolle believe that filing a suit claiming bad faith and racism will result in a monetary settlement to avoid the costs of defending the suit. Mr. Rolle is a vexatious litigant who has received the kindness of federal courts who take the time to hear his frivolous lawsuits and claims that anyone who disagrees with him is a racist who must pay him millions of dollars for his hurt feelings. A warning after 55 frivolous suits is too little too late. Mr. Rolle should be severely sanctioned with sanctions that hurt - not just a refusal to allow him to file suits. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

ERISA Plan Must be Enforced as Written When Anthony Hayes' employment ended, so did his employer-provided life insurance. Hayes then missed the deadline to convert his coverage to an individual policy. After Hayes died, his surviving spouse filed suit seeking relief under a provision of the Employee Retirement Income Security Act allowing "a participant or beneficiary" of an employee benefit plan "to recover benefits due" "under the terms of [the] plan." In Kathy Hayes v. Prudential Insurance Company Of America, No. 21-2406, United States Court of Appeals, Fourth Circuit (February 23, 2023) Ms. Hayes sought benefits under an employee life insurance policy based on equity - that the decedent was too ill to convert his employee life policy to a personal policy even though he did not comply with the requirement of the ERISA plan. FACTS Hayes worked as an environmental engineer for DSM North America, Inc., and had an employer-provided life insurance policy with defendant Prudential Insurance Company. Prudential was both the insurer and the administrator of the employer-provided benefit plan. The plan gave Prudential "the sole discretion to interpret [the plan's] terms . . . and to determine eligibility for benefits." In 2015, Hayes lost his job because of medical issues and his employer-provided life insurance coverage ended. The terms of the plan, however, allowed former employees to convert employer-provided coverage to an individual policy. To do so, the plan required Hayes to initiate the conversion process "by the later of" 31 days after his employer-provided coverage ended or 15 days after receiving "written notice of the conversion privilege." The parties agree Hayes' conversion deadline was December 23, 2015. Hayes did not contact Prudential about converting his life insurance policy until 26 days after the conversion deadline. Hayes' health continued to deteriorate, and he died in June 2016. Plaintiff submitted a request for benefits, which Prudential denied. The claim administrator explained Hayes' employer-provided "coverage terminated on 11/16/15," and although Hayes "was eligible to convert his Group Basic Life Insurance," "there is no conversion policy on file." The district court entered judgment for Prudential. The court concluded Prudential "reasonably denied [p]laintiff's request for benefits" because "Hayes received timely notice of his conversion rights" and "did not convert his life insurance to an individual policy during the [c]onversion [p]eriod." ANALYSIS ERISA regulates employee benefit plans by establishing standards of conduct, responsibility, and obligation for fiduciaries of those plans, and by providing for appropriate remedies, sanctions, and ready access to the federal courts. ERISA creates a wide range of public and private enforcement mechanisms. The statute allows suits to recover benefits owed under the terms of the plan but it does not permit a court to alter those terms. As plaintiff admits, Hayes failed to convert his life insurance coverage in the time set forth in the policy. Awarding benefits would thus require the very step the statute does not permit: modifying the plan's terms to provide a workaround to its conversion deadline. Plaintiff countered that she is not asserting that the plan terms should be rewritten. Instead, she asks the Court to apply the doctrine of equitable tolling to allow for an exception to the life insurance conversion deadline set forth in the policy because Hayes was incapacitated during the conversion period. It does not matter that Congress enacted a statute-here, ERISA - to enable courts to help "implement" the agreement. The statute neither addresses the availability of equitable tolling nor does it purport to alter the terms of any ERISA plan. For that reason, the Fourth Circuit was unwilling to apply equitable tolling principles that would, in practice, rewrite the plan. The life insurance conversion deadline at issue here is not a statute of limitations, nor does it operate as one. In contrast, no cause of action for benefits accrues when a participant misses a conversion deadline. Indeed, a participant whose policy has expired, unconverted, has no benefits due under the plan for any later occurrence because that participant lacked coverage. Employers have large leeway to design employee benefit plans as they see fit, but once a plan is established, the administrator's duty is to see that the plan is maintained pursuant to that written instrument. Prudential did not abuse its discretion by fulfilling its duty and the district court correctly resolved the single claim before it based on the agreed-on facts and consistent with well-established law. The judgment of the district court was affirmed. ZALMA OPINION Equitable tolling is a means of dealing with an unfair result between litigants. However, ERISA plans are required to be enforced by the plan administrator as written. Although it was sad that the decedent was unable to promptly change his employer provided life insurance to a personal policy, the plan was clear and the administrator had no choice but to refuse to pay for a life insurance policy that was no longer in effect. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

ZIFL Volume 27, Issue Number 5 McClenny Moseley & Associates & Insurance Fraud The McClenny Moseley & Associates (MMA) series of lawsuits, court hearings and insurance department actions have brought about some very serious problems for MMA, including court orders, lawsuit dismissals, administrative cease and desist orders and litigation, all of which have created a poster child for Zalma’s Insurance Fraud Letter. Since MMA has admitted that it reported a claim to various insurers, including Allied Insurance, that it was presenting claims against Allied and at least 856 claims to Allied and other insurers, that it represented the insured when, in truth and fact, it did not represent the insurer’s insureds, but, rather Apex Roofing who is not an insured of any of the insurers to whom MMA made claims, demanded appraisal and settled claims, cashed checks and took attorneys fees from people it did not represent the insurer is obligated to report each claim to the Louisiana Department of Insurance as a suspected insurance fraud effected or attempted. Therefore, it appears, subject to the review of the Louisiana Attorney General and/or local prosecutors, MMA violated Louisiana fraud statutes, and each insurer who is a victim of one or more of the minimum of 856 fraudulent claims where MMA represented it was the attorney of the insurers’ insureds was a criminal fraudulent act. Since the actions of Velawcity and Apex Roofing appear to meet the definition of a “runner” the prosecutors in the state of Louisiana should consider prosecution for their fraudulent activities. In addition, the federal judges involved in these cases should consider reporting MMA, Velawcity and Apex Roofing to the U.S. Attorney for investigation of the potential crime of wire fraud. There will be more hearings in March 2023 that will be reported in the March 15, 2023 issue of ZIFL. Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf. The Arson for Profit Defense To prove the “arson for profit defense” the insurer must prove the three elements needed to establish arson plus proof that the insured violated the misrepresentation, concealment, or fraud condition, and/or that the act was an intentional act to defraud the insurer. A successful “arson for profit defense” depends on a wide range of evidence, including expert testimony, knowledgeable and convincing witnesses, and effective counsel for the insurer. Where any of the evidence as to each element is non-existent, weak, or sufficiently rebutted by the insured’s experts and witnesses, the insurer’s “arson for profit defense” will likely fail. Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf. Good News from the Coalition Against Insurance Fraud A firm that administered health care claims stole $18M of funds intended for paying the claims. Anthony Riccardi started by administering third-party healthcare claims for a car dealership chain in New Canaan, Conn. Employee Benefit Solutions created invoices for the car dealership brand, which submitted payments and expected the funds to be paid to health care providers. EBS stole almost $18M of $26M the dealership paid. Most of this money was transferred into the EBS operating account and used for non-company expenses — mortgages, boats, golf and luxury cars. Riccardi only paid claims from health care providers he thought were likely to complain, or involved the car dealership execs. The scam also included inflated or bogus medical claims, including some by a phony company under Riccardi’s name. Unpaid financial obligations began to mount, prompting Riccardi to apply for millions in fraudulent bank loans and cash advances. They were used in part to pay financial obligations to the car dealership brand. To cover up the loan scheme, Riccardi forged invoices from a fake company that supposedly sold upgraded billing software to EBS. Ricardi pled federally guilty. He faces up to 30 years in prison when sentenced and agreed to repay $14.8M. Read the full article plus many more reports of convictions and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf. How to Add to the Professionalism of Insurance Claims Professionals Every insurer, insurance syndicate, insurance brokerage, insurance sales agency, insurer branch office, and vendors to the insurance industry should add to the libraries of their various offices or employees. Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf. Health Insurance Fraud Convictions Ronald A. Beasley II, 33, of Portsmouth, Florida was the pharmacist in charge at NH Pharma, a pharmacy located in Lake Mary, Florida. Through NH Pharma, Beasley and his co-conspirators billed Medicare for expensive compound drug creams that they never actually purchased or dispensed, and instead provided Medicare patients an inexpensive compound drug cream not covered by Medicare. Inventory records showed that NH Pharma did not buy enough of the expensive prescription drugs to fill all the prescriptions NH Pharma billed to Medicare. In total, Beasley and his co-conspirators received more than $1 million in fraudulent proceeds from Medicare. A federal jury in the Middle District of Florida convicted Beasley, a Virginia man February 9, 2023 for his role in a scheme to defraud Medicare of over $1 million in prescription drug benefits. Beasley was convicted of conspiracy to commit health care fraud and three counts of health care fraud. He is scheduled to be sentenced on April 25 and faces a maximum penalty of 10 years in prison on each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. Read the full article including more than a dozen convictions and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf. The Brothers Ben-Cohain The story that follows is a fictionalized True Crime Story of Insurance Fraud from my 55 Years in Insurance that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. This is one of more than 80 stories in my book “Insurance Fraud Costs Everyone“ Available as a Kindle Book and Available as a Paperback from Amazon.com. In 1990 Moshe Ben-Cohain and Menashe Ben-Cohain started a course of conduct that led to their arrest for insurance fraud. They failed to appear after posting bond and are, along with their co-conspirator, Raz Rosenberg, fugitives. Read the full article and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf. Other Insurance Fraud Convictions Herbert Allen, age 38, and Dion Ridley, age 23, pleaded guilty to Conspiracy to Commit Mail Fraud in violation of Title 18, United States Code, Section 371 Allen was to 37 months in prison, followed by 3 years of supervised release and Ridley was sentenced to 6 months in prison, followed by 1 year of supervised release. The defendants admitted to being in a conspiracy to commit mail fraud in connection with a staged automobile collision. In the scheme, Allen falsely claimed that he was the driver of a car that was struck by a tractor-trailer on June 28, 2017. Ridley, a passenger in the car, falsely claimed that Allen was driving the car and they were struck by a tractor-trailer. In fact, the government’s evidence showed that the defendants conspired with Damien Labeaud, Roderick Hickman, and others to intentionally collide Allen’s 2007 Chevrolet Impala with a tractor-trailer in the area of Tchoupitoulas Street and Calliope Street in New Orleans. Read the full article and about many more insurance fraud convictions and the full ZIFL at http://zalma.com/blog/wp-content/uploads/2023/02/ZIFL-03-01-2023.pdf. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Insurance Agent Who Kept Premium Money Loses License Vincent Alexander, appealed the trial court judgment which affirmed the March 23, 2021 decision of the Louisiana Division of Administrative Law that revoked his insurance agency license. He appealed and the Louisiana Court of appeal reviewed the appeal in Vincent Alexander v. Louisiana Department Of Insurance, No. 2022 CA 0769, Court of Appeals of Louisiana, First Circuit (February 24, 2023) FACTS Alexander was an insurance agent licensed by the State of Louisiana, doing business as Vincent Alexander Insurance Agency (the agency). He was married to Tacey Ann Tolliver, who was also an insurance agent licensed at one time by the State of Louisiana and worked with him at the agency. Ms. Tolliver's insurance license expired on August 31, 2018. The Louisiana Department of Insurance (LDI) received a complaint from Kendall Lewis, one of the agency's customers, that was filed against Progressive Insurance Company (Progressive). In the complaint, Mr. Lewis stated he had paid premiums to the agency on a policy that went into effect December 7, 2018, but the policy was cancelled on January 22, 2019. Mr. Lewis provided premium receipts as proof of payment, dated from January 2019 to May 2019, of which were signed "T. Alexander." Progressive informed Mr. Lewis that the policy was cancelled due to non-payment, but he was not made aware of the cancellation until he was involved in a motor vehicle accident. LDI directed Mr. Alexander to respond to Mr. Lewis's complaint and to explain why Mr. Lewis's policy was cancelled despite his payment of premiums. Mr. Alexander failed to respond. Representatives from Progressive met Ms. Tolliver at the agency, but Mr. Alexander was not present. Ms. Tolliver explained to the representatives that she began working there in 1997, and that she and Mr. Alexander were the only two employees of the agency. When the Progressive representatives asked Ms. Tolliver about her expired insurance license, she stated she was not aware that it had expired. Progressive, for obvious reasons, terminated Alexander’s producer's agreement with the agency, and the agency refunded to Mr. Lewis his premium payments and paid his reinstatement fees to the Office of Motor Vehicles (OMV) for not having vehicle insurance. LDI then issued a Notice of Proposed Regulatory Action and Wrongful Conduct via certified mail to Mr. Alexander regarding Mr. Lewis's complaint and the failure to pay the fine. On the same date, LDI mailed its intent to suspend and revoke Mr. Alexander's license. After receiving multiple complaints similar to that of Mr. Lewis from other customers of the Agency LDI eventually notified Mr. Alexander of violations pursuant to La. R.S. 22:1554(A)(4), which provides for the suspension or revocation of an insurance license for "[u]sing fraudulent, coercive, or dishonest practices or misrepresentation, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business such as might endanger the public." The Louisiana Division of Administrative Law (LDA) reviewed LDI's decision, and, on March 23, 2021, signed an order affirming the revocation of Mr. Alexander's insurance license. LDA found that Mr. Alexander was particularly irresponsible in allowing Ms. Tolliver to run the business after he had been made aware of Mr. Lewis's complaint, which then led to other consumer complaints being filed against the agency. Alexander appealed and after a full hearing the district court signed a judgment on November 16, 2021, affirming LDA's decision to revoke his license. Mr. Alexander appealed to the Court of Appeal. DISCUSSION Louisiana Revised Statutes 22:1554(A) authorizes LDI to take a number of actions, including revocation of license, upon anyone who holds an insurance license issued by LDI, who commits any of a number of enumerated actions, which include "demonstrating incompetence, untrustworthiness, or financial irresponsibility in conduct of such business as might endanger the public. The judgment of the Nineteenth Judicial District Court, which affirmed the March 23, 2021 decision of the Louisiana Division of Administrative Law, thereby revoking the insurance license of the appellant, Vincent Alexander, was affirmed. All costs of the appeal were assessed to the appellant, Vincent Alexander. ZALMA OPINION The LDI properly revoked Mr. Alexander's license. It took too long to do so because, while it was investigating, the Agency defrauded multiple additional customers by taking premium and not forwarding the funds to the insurer causing fully paid for policies to be cancelled for non-payment of premium. What Alexander and his wife did was criminal and just revoking their licenses is insufficient and the court should have referred them to the local prosecutor or the state Attorney General. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Business Pursuits Exclusion Defeats Claim In a declaratory judgment action to determine whether the plaintiffs were obligated to defend and indemnify the named defendant under certain insurance policies for damages awarded against the named defendant in a separate action, where the court denied the plaintiffs' motion for summary judgment and granted the motion for summary judgment filed by the named defendant et al. as to the duty to defend under the policies. In Nationwide Mutual Insurance Company et. al. v. Jeffrey S. Pasiak et al., No. SC 20617, Supreme Court of Connecticut (February 21, 2023) Nationwide asked the Supreme Court to apply its business pursuits exclusion. This case reached the Supreme Court for the second time following lengthy litigation of a declaratory judgment action brought by the plaintiffs, Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company, against the defendant Jeffrey S. Pasiak. The action concerned whether the plaintiffs were obligated to indemnify the defendant, a business owner, under a personal umbrella insurance policy for liability arising from his false imprisonment of his company's employee at her workplace. The trial court rendered judgment for the plaintiffs, concluding that they have no obligation to indemnify the defendant. The defendant appealed. FACTS The defendant owned Pasiak Construction Services, LLC (Pasiak Construction), which had its sole office in the defendant's home in Stamford. The defendant maintained a homeowners insurance policy and an umbrella insurance policy through the plaintiffs at the time of the incident. He did not hold any commercial liability insurance for his business. Pasiak Construction employed Sara Socci as a part-time office manager with working hours of 9:30 a.m. to 2:30 p.m., four days per week. Socci worked out of the office in the defendant's home and would help with both the defendant's business tasks and personal tasks. One day in May, 2006, Socci was working at her desk when an individual entered the office wearing a mask and carrying a gun. The individual demanded that Socci show him to the defendant's safe and open it. Socci had no knowledge of the safe or its combination. The individual became enraged, and he bound, gagged, and blindfolded Socci and forced her down on the floor of the bedroom. He put a gun to her head and told her he would kill her and her family if she did not open the safe. The defendant eventually returned home and was attacked by the individual at the top of the stairs. The defendant was eventually able to unmask the individual, revealing his identity to be Richard Kotulsky, a longtime friend of the defendant. When the defendant asked about Socci's whereabouts, Kotulsky led him to the bedroom, where the defendant made Kotulsky untie Socci. The defendant and Kotulsky reached some degree of resolution of their dispute and spoke amicably. Despite Socci's requests to leave, the defendant prevented her from leaving. Following Kotulsky's exit, Socci resigned from Pasiak Construction and informed the defendant that she could no longer work for him because she was terrified that Kotulsky would return. The trial court also noted that she felt intimidated because the defendant and Kotulsky were each twice as large as she was. Socci, her husband, and a friend later returned to the defendant's home, at which point the defendant called the police. After being charged with kidnapping in the second degree and witness tampering, the defendant pleaded guilty under the Alford doctrine to charges of interfering with an officer and threatening in the second degree. Socci and her husband sued the defendant, alleging false imprisonment, negligence, intentional, reckless and negligent infliction of emotional distress, and loss of consortium. The plaintiffs provided the defendant with an attorney to defend him in the Socci action but notified him that they were reserving their right to contest coverage. The plaintiffs then sued seeking a declaration that they had no duty to defend or indemnify the defendant in the Socci action. The trial court concluded, by way of summary judgment, that the allegations of the complaint were sufficiently broad to obligate the plaintiffs to provide the defendant with a defense under his homeowners and umbrella insurance policies, but the court deemed it improper, at that juncture, to determine the plaintiffs' duty to indemnify. Socci and the defendant proceeded to trial in the tort action, in which the jury awarded Socci $628,200 in compensatory damages and $175,000 in punitive damages. The jury also awarded Socci's husband $32,500 in compensatory damages. The plaintiffs then filed a second motion for summary judgment in the declaratory judgment action regarding their duty to indemnify the defendant. The plaintiffs argued, among other things, that the defendant's policies did not cover his liability for the Socci action because coverage was barred under the policy exclusion for business pursuits. The court concluded that the plaintiffs were entitled to summary judgment under the homeowners insurance policy-which did not cover injury for emotional distress unless caused by a physical injury-but not under the umbrella insurance policy-which covered "personal injury," defined to include false imprisonment. The trial court issued a decision and rendered judgment for the defendant, requiring the plaintiffs to indemnify the defendant for his liability in the Socci action. The Supreme Court reversed the judgment of the Appellate Court with direction to remand the case to the trial court for a trial de novo on the business pursuits exclusion issue. The trial court concluded that the plaintiffs satisfied their burden by a preponderance of the evidence. ANALYSIS There is a distinction between the standard of proof in a civil trial and the interpretive presumptions the Supreme Court applies to insurance contracts. The interpretation of an insurance contract is "a question of law," not a matter of fact. No one questions that the activities of Pasiak Construction meet the two elements of a business pursuit. Nor does anyone contend that false imprisonment constitutes a business pursuit. Therefore, the question is whether the defendant's false imprisonment of Socci arose out of his business pursuits in operating Pasiak Construction. The Supreme Court concluded that it is sufficient to show only that the accident or injury was connected with, had its origins in, grew out of, flowed from, or was incident to the specified subject in order to meet the requirement that there be a causal relationship between the accident or injury and the subject. The Supreme Court concluded that the defendant's remaining claims were without merit, and the judgment of the trial court should be affirmed. Specifically, the Supreme Court concluded that: the trial court did not err when it found in the plaintiffs' favor on the basis that they failed to produce new, credible evidence that was not raised during the first trial, and with respect to the second and third claims, the record, viewed as a whole, contains evidence that supports the factual findings of the trial court. CONCLUSION The trial court properly applied the preponderance of the evidence standard at the trial de novo to determine the factual question of whether the plaintiffs established that the business pursuits exclusion of the umbrella insurance policy barred coverage. It did, and the judgment was affirmed. ZALMA OPINION A construction company seeking insurance protection usually needs a commercial general liability (CGL) policy to protect its commercial interests. A homeowners policy, like that issued by Nationwide is designed to protect against the liability faced by a homeowner, not a business, and exclude coverage for business pursuits. In this case, as part of the defendant's business a jury found he wrongfully imprisoned his employee and caused her and her husband tort damages. The exclusion applied and the insurer was not required to indemnify the insured although it was required to defend him to the allegations of the employee's suit. The insured, Pasiak Construction, intentionally caused damage to an employee who was abused by a "friend" of Pasiak who held her at gunpoint and threatened to kill her and her family. Pasiak got more than he deserved with a full, paid for, defense. I expect Pasiak will file bankruptcy to avoid paying the judgment. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Judgment Damages Needed for CGL Coverage Hausmann Construction, Inc. (Hausmann) appeals the district court's grant of summary judgment to Nationwide Mutual Insurance Company (Nationwide) on Hausmann's breach-of-contract claim. In Hausmann Construction, Inc. v. Nationwide Mutual Insurance Company, f/k/a Allied Property And Casualty Insurance Company, No. 21-1430, Court of Appeals of Iowa (February 22, 2023) resolved the dispute. FACTS In 2017, Iowa Western Community College entered into a contract with Hausmann for the construction of a new wellness facility on the college's campus. The contract provided Hausmann would be responsible for property damage arising during the construction process. Hausmann entered into a subcontract with Advanced Trenching &Utilities, LLC, (Advanced Trenching) for utility and excavation work on the project. The subcontractor agreement provided that Advanced Trenching would be responsible for property damage arising from its work. Additionally, Advanced Trenching was required to include Hausmann as an additional insured under its insurance policy, which it did. Advanced Trenching entered into a subcontract with Torco Enterprises, Inc. (Torco). Torco's employee struck a water main while performing work on the project, rupturing the water main and causing flooding of the work site. Hausmann paid $199,509.54, the costs and expenses for repairing the water main and replacing a damaged retaining wall. Hausmann asked Advanced Trenching to submit a claim to Nationwide for the damages, but Advanced Trenching refused. Hausmann then submitted a claim to Nationwide, claiming it was covered by Advanced Trenching's policy with Nationwide as an additional insured, and Nationwide refused. Hausmann sued Nationwide, claiming there was a breach of contract. SUMMARY JUDGMENT Nationwide filed a motion for summary judgment. It argued that the lawsuit was a direct action against an insurer, which is prohibited by Iowa Code section 516.1 (2021). Nationwide pointed out that Hausmann had not obtained a judgment against Advanced Trenching or Torco and it would be premature to permit Hausmann to collect from Nationwide the costs and expenses of repairs due to the water main break. Nationwide also stated that although Hausmann was an additional insured, it did not allege that Nationwide breached any duty to defend or indemnify Hausmann as an additional insured. The district court granted Nationwide's motion for summary judgment. The court determined the phrase, "legally obligated to pay as damages" meant "sums resulting from legal action by a third party on the additional insured." The court noted the college did not make a claim against Hausmann and there were no damages proven against Hausmann by a third party in a lawsuit. The court also concluded Hausmann's claims against Nationwide were barred by Iowa Code section 516.1. INTERLOCUTORY APPEAL Hausmann's claims against Nationwide are distinct and severable from its claims against Advanced Trenching and Torco. Hausmann claimed Advanced Trenching and Torco were negligent in performing their work. Additionally, Hausmann claimed Advanced Trenching abandoned its work, failed to act in a good and workmanlike manner, breached the subcontract agreement, and breached implied warranties. Hausmann's claims against Advanced Trenching and Torco arose from their work on the construction site for the wellness facility. Hausmann's claims against Nationwide arose from the terms of the insurance policy and are distinct and severable from the claims against Advanced Trenching and Torco. The district court ruled: “If Hausmann wants to seek remedy for its expenses in relation to the water main break, it still has the opportunity to prove recovery against [Advanced Trenching] or Torco since the incident itself lies in tort action. This would put Hausmann in the position that Nationwide presumed it would be in when, as the insurer of [Advanced Trenching], Nationwide sought to have the action dismissed as a violation of Iowa Code [section] 516.1. Because a third-party's direct action against an insurer is barred by this statute, Hausmann is effectively prevented from bringing claims against Nationwide at this time.” To the extent Hausmann's claim against Nationwide is an attempt to circumvent its claims against Advanced Trenching as a tortfeasor and proceed directly against Advanced Trenching's insurance company instead, the district court correctly ruled that the claim is barred by state statute until such time as Hausmann obtains a judgment against Advanced Trenching and the judgment remains unsatisfied. Coverage Under the Policy Hausmann has the initial burden of showing that its claim falls within the policy's coverage. Hausmann claims that it was legally obligated to pay the amount it did to fix the damages caused by the water main break. Nationwide counters that no one asserted any claims against Hausmann, so Hausmann's voluntary decision to pay for the repairs does not make the payment a sum that Hausmann was legally obligated to pay as damages. Based on the arguments of the parties, the case hinged on what "becomes legally obligated to pay as damages" means. In common usage, the plural noun "damages" has a specific meaning in a legal context, such as here, where a "legal obligation" is involved. The phrase "legally obligated to pay as damages" in the CGL policy is not ambiguous. A contractual duty to incur the repair costs without more, is not sufficient to bring the repair costs within the scope of the CGL policy's insuring agreement. No one demanded Hausmann pay the costs of repairing the damage from the water main break, and there was no claim, order, or adjudication requiring them to do so. As such, there was no coercive legal obligation for Hausmann to pay. Therefore, there is no coverage for the repair costs Hausmann incurred and the district court got it right in granting summary judgment on this basis. As the district court properly granted summary judgment in favor of Nationwide, the trial court’s decision was affirmed. ZALMA OPINION A CGL policy, whether to a named insured or an additional insured like Hausmann, is a third party liability policy and can only respond to a claim or a judgment made against the person or entity insured. No one made a claim against Hausmann. It paid to keep its customer happy. It could only obtain coverage for defense or indemnity if a claim was made against Hausmann, a suit filed against Hausmann or a judgment entered against Hausmann. Since no claims were made, no judgment was entered, Hausmann had no claim against the CGL and the trial court was correct. Had Housmann sued the subcontractors for their negligence Nationwide would have defended and if they were negligent would have negotiated a settlement with Hausmann. This suit and appeal were a waste of the time of Hausmann, Nationwide and the courts of Iowa. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Acquittal is not a Finding of Innocence People who attempt insurance fraud are always upset when the fraud fails. When that failure results in an arrest and trial, the upset grows. When the jury acquits the fraudster it is never enough to give thanks there is no need to go to jail, the fraudster wants - to paraphrase Shakespere - a pound of flesh from those who stopped the attempt. In Joseph Fehl v. Borough Of Wallington; et al, No. 21-3019, United States Court of Appeals, Third Circuit (January 25, 2023) Joseph Fehl sued the Borough of Wallington; Witold Baginski, the Borough's former business administrator; and Sean Kudlacik, a captain in the Borough's police department, alleging civil rights violations. Finding no material facts in dispute, the District Court granted the Defendants' motions for summary judgment. FACTS Fehl served as a volunteer EMT and firefighter for the Borough of Wallington. He filed for worker's compensation, claiming he was "hit by [a] car" during an emergency response. Kudlacik conducted an investigation that raised questions about Fehl's story, as it found no physical evidence, no indication of serious injury, and no vehicle matching the description Fehl provided. Nor did video from the scene show any vehicles in the area where the accident allegedly occurred. As a result, Fehl was indicted for criminal insurance fraud and tampering with public records. Following trial, a jury acquitted him of those charges. Based on the acquittal, Fehl sued asserting several claims arising from his arrest and prosecution. The District Court granted the Defendants' motions for summary judgment, concluding their acts were supported by probable cause. PROBABLE CAUSE Fehl argued that a reasonable jury could have concluded Kudlacik lacked probable cause to investigate his employment claim. However, probable cause exists when there is a "fair probability" that the person to be arrested committed the crime. Police officers are not required to correctly resolve conflicting evidence and their determinations of credibility need not, in retrospect, be accurate. For those reasons, probable cause is not a high bar. Drawing all reasonable inferences in Fehl's favor, the Third Circuit could see no error in the District Court's analysis. The facts known to Kudlacik at the time of Fehl's arrest provided a sufficient basis to doubt Fehl's credibility and to believe he committed the charged crimes. Consider Fehl's statement in his benefits application that he was struck by a car, with the absence of any corroborating physical evidence. Or consider Fehl's claim that he suffered nerve damage from the accident-an injury that conflicts with the extent and type of physical harm a victim would typically suffer in a hit-and-run. Fehl also, after he was confronted, changed his story conceding that he might have merely tripped and fallen. The finding of probable cause is not negated by the jury verdict. The mere fact that a defendant is later acquitted of the offense for which he is arrested is irrelevant to the validity of the arrest. Guilt in a criminal case must be proven beyond a reasonable doubt, a standard enforced by the rules of evidence. Probable cause imposes no such burden on the Government-rather, it demands that police officers find merely a "fair probability" that a crime was committed. That standard was satisfied at the time of Fehl's arrest, and the jury's verdict does not alter that finding. CONSTITUTIONAL VIOLATIONS Fehl contended that Baginski, as Borough administrator, infringed Fehl's First and Fourteenth Amendment rights. Fehl alleged that Baginski concocted a scheme to force Fehl to submit his worker's compensation claim, directed a third-party administrator not to pay the benefits, and conspired with Kudlacik to launch a police investigation. Even if true, these allegations cannot state a constitutional claim. To state a First Amendment claim for retaliatory arrest or retaliatory prosecution, a plaintiff must plead and prove the lack of probable cause for the criminal charge. Fehl's arrest and prosecution were, contrary to his claims, supported by probable cause. Fehl needed to show that Baginski participated in, directed, or acquiesced to retaliation. Baginski affirmed he had no role in investigating, or directing any risk manager in the investigation of, any injury claims, including Fehl's. Nor did Baginski direct Kudlacik or anyone else to arrest Fehl. ZALMA OPINION The facts established that there was clear probable cause to arrest Fehl, especially after he changed the claim that he was hit by a car to he tripped and fell, established a lack of veracity in the claim and an attempt to defraud the employer to obtain Workers' Compensation fraud. His attempt at First Amendment and tort claims failed because there was sufficient probable cause to arrest and try Fehl for insurance fraud. That he was acquitted did not change the conclusion that there was probable cause for the arrest and trial. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Seventh Circuit Applies Contractual Limitation of Action Provision Late Filing Defeats Suit In Waseem Daker v. State Farm Fire And Casualty Company, No. 21-3210, United States Court of Appeals, Seventh Circuit (February 3, 2023), more than a year after he suffered property damage, Waseem Daker sued State Farm Fire and Casualty Company for insurance coverage, despite knowing that his policy with State Farm required that he file suit within a year of loss. The district court granted State Farm's motion to dismiss. It ruled that the policy's provision was enforceable, and Daker's suit was time-barred. FACTS Daker, who had been in prison in Georgia for over a decade, maintained ownership of a home in Georgia. According to Daker, the property was insured by State Farm, a company incorporated in Illinois. Daker alleges that two incidents warrant coverage: First, tenants "abused and vandalized" the home through June 2017; then, in January 2018, Daker's brother burglarized the home, damaging it further. Daker filed two insurance claims with State Farm for the damage to his property (one claim relating to each incident). State Farm denied both claims. In the denial letter, which Daker received in March 2018, State Farm alerted Daker to the provision of his insurance policy that required him to sue within one year of the dates of damage, it provided: Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions and the action is started within one year after the date of loss or damage. About two years later, in February 2020, Daker sued in a federal court in Illinois, asserting diversity jurisdiction. As relevant on appeal, he alleged that State Farm breached its insurance policy by declining coverage for his property damage. Daker conceded that he sued past the one-year limitations period in his contract with State Farm, but he argued that the period did not matter because, among other reasons, the provision was unreasonable, and State Farm had misled him about it. After permitting Daker to amend his complaint three times, the district court granted State Farm's motion to dismiss it, with prejudice. Moreover, Daker lacked a valid defense to the provision, given that State Farm told him of it in denying his claims. The one-year limitations provision barred Daker's suit, which he filed nearly two years after the most recent date of property damage. Daker contended that his complaint was not time-barred because promissory estoppel, equitable estoppel, and equitable tolling defeat the limitations defense. Daker relied primarily on his argument in his motion for reconsideration that State Farm never delivered to him a copy of the policy that he says he needed to timely sue. He contacted his State Farm agent in early 2018 to ask for another copy of his insurance policy, and she promised to send it to him, but never did. Daker contends that he detrimentally relied on the State Farm agent's promise, so that promissory and equitable estoppel should toll the limitations period. Daker adds that equitable tolling also applies because he was unable for a time to access his prison's law library, which he also needed to prepare his complaint. ANALYSIS Under Illinois law, limitations rules - and defenses to it - are governed by the law of the forum. Illinois's law regarding the validity of contract terms that displace statutes of limitations, and tolling, such a contract term is upheld if it was accepted knowingly and voluntarily, is reasonable, and is consistent with public policy. Georgia law, which Daker prefers, is similar: these provisions are generally enforced if they are not unconscionable or so unreasonable that they raise a presumption of undue advantage. An equitable-tolling defense requires a showing that, despite exercising due diligence, Daker could not discover the facts essential to his claim within the limitations period. The one-year limitations provision in State Farm's policy is valid. The provision is reasonable because it allowed Daker sufficient time to sue after his dates of loss. He knew about the deadlines because State Farm notified him of the limitation in its denial of his claim and it reminded him about the one-year deadlines. Daker asserted that he needed the policy to help him prepare his complaint, but his own actions refuted that assertion: He successfully prepared and filed his complaint without the promised copy of the policy, and no one has suggested that his complaint inadequately alleges breach of contract. He also based the defense on his inability to access his prison's law library. But he did not need the library to allege that State Farm breached its contract, which he told the court he knew when he received the letters from it declining coverage. ZALMA OPINION State Farm took no chances with the litigious felon, Daker, by not only denying his claims in writing and warning him - as state Regulations require - that the policy contained a one-year private limitations of action provision. Daker ignored the warning and with the ingenuity of a jail-house-lawyer claims that equity required the limitation provision to be ignored because State Farm did not provide a copy of the policy and Georgia did not give him access to the prison law library. Both arguments failed because without the policy or the law library he filed an effective law-suit, but filed it too late. Because the District Court gave Daker three attempts to plead a viable cause of action State Farm was required to pay a great deal of money to counsel to defend the allegations and waste the time of the court, perhaps because, Daker was bored after serving ten years in prison. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Crime Protection Policy Protects Insured Against Fraud Valero Followed Instructions from Fraudster In Valero Title Incorporated, doing business as Valero Title Company v. RLI Insurance Company, No. 22-20155, United States Court of Appeals, Fifth Circuit (February 1, 2023) Valero sued its insurer RLI Insurance Company that denied Valero's proof of loss claim, which RLI determined was not covered by the funds transfer fraud endorsement in Valero's crime protection insurance policy. The district court disagreed and granted partial summary judgment to Valero. RLI appealed. FACTS Valero purchased a crime-protection policy from RLI that included a funds transfer fraud endorsement providing that "we will pay for loss of funds resulting directly from a fraudulent instruction directing [sic] financial institution to transfer, pay or deliver funds from your transfer account. The relevant definition for "fraudulent instruction" is "[a] written instruction . . . issued by you, which was forged or altered by someone other than you without your knowledge or consent, or which purports to have been issued by you, but was in fact fraudulently issued without your knowledge or consent." A Valero employee was discussing a loan payoff transaction over email with a lender's employee when a fraudster posed as the lender's employee and sent the Valero employee fraudulent wiring instructions with a fraudulent routing number. Because the Valero employee did not recognize that these instructions were fraudulent, she instructed Valero's bank to wire $250,945.31 to the fraudster. When Valero learned of the loss, it submitted a proof of loss claim to RLI. RLI determined that the loss was not covered by the funds transfer fraud endorsement. The parties filed cross motions for summary judgment. The only issue before the district court was the interpretation of the insurance policy. The parties stipulated to the amount of attorney's fees and agreed to the dismissal of Valero's remaining extracontractual claims, which the court accepted to make the judgment final and appealable. RLI timely appealed. ANALYSIS A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the non-moving party. Under Texas law, the interpretation of an insurance policy is a question of law for the court to determine. RLI appealed the district court's interpretation of Valero's insurance policy funds transfer fraud endorsement. The relevant provision of the policy at issue here, the funds transfer fraud endorsement, provides for reimbursements of funds lost to certain forms of fraud: We will pay for loss of funds resulting directly from a fraudulent instruction directing [sic] financial institution to transfer, pay or deliver funds from your transfer account. The endorsement contains the following relevant definition: A written instruction . . . issued by you, which was forged or altered by someone other than you without your knowledge or consent, or which purports to have been issued by you, but was in fact fraudulently issued without your knowledge or consent. RLI argued that because the instruction here was issued as it was authorized and approved by Valero, it cannot be "a written instruction . . . issued by you, which was forged or altered by someone other than you without your knowledge or consent." The district court held that the only interpretation of Clause A that does not render Clause B meaningless is one in which a written instruction is forged or altered by someone other than the insured without the insured's knowledge or consent prior to being issued by the insured. RLI argued that the district court ignored plausible scenarios under which Clause A could apply without making Clause B redundant. RLI proposes that if Valero had forwarded the exact e-mail forged by the fraudster (posing as the lender) to Valero's bank, instead of issuing its own wiring instructions, Clause A would apply. The instruction Valero issued to its bank included the name of the recipient institution, the routing number, the recipient account numbers, the account name, the payment date, and the total amount of payment. It was the same instruction Valero received from the fraudster posing as the lender. Unknown to Valero, the instruction was not the same as the instruction provided by the lender; it was altered to include different recipient account information. Thus, when Valero issued the instruction to its bank, it was a fraudulent instruction that was "forged or altered by someone other than [Valero] without [Valero's] knowledge or consent." As the district court held, the only interpretation of Clause A that does not render Clause B meaningless is one in which a written instruction is forged or altered by someone other than the insured without the insured's knowledge or consent prior to being issued by the insured. The district court correctly applied this interpretation and found that coverage was trigged under the funds transfer fraud endorsement for Valero's claimed loss. ZALMA OPINION Insurance contracts are interpreted as written. The insuring agreement provided coverage for frauds perpetrated against an insured causing the insured to send money to a fraud perpetrator rather than to the lender it had agreed to pay off. Since the language of the policy was clear and unambiguous, it covered the error of the Valero employee who accepted an e-mail instruction to send the money it owed to a fraud perpetrator's account rather than to the account of the lender to whom the money was owed. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Independent Agent Represents his Principal, the Insured Michigan's Common Law Considers an Independent Insurance Agent is an Agent of the Insured When an independent-insurance agent is ordinarily an agent of the insured, not the insurer, while on appeal the court of Appeals was asked whether to decide whether the Legislature abrogated this principle of Michigan's common law when it amended the Insurance Code, MCL 500.100 et seq., in 2018. In Ahmed Al-Hajjaj v. Hartford Accident And Indemnity Company, and Ahmed Odah Salem Alderawi, Safeco Insurance Company Of Illinois, Sam Saeidi, Golden Insurance Agency, LLC, And GOLDEN INSURANCE AGENCY OF OHIO, LLC, and PRime Transportation Service, LLC, and Batol Alyunisi, No. 359291, Court of Appeals of Michigan (January 26, 2023). The key question in the interlocutory appeal is whether our Legislature abrogated the principle of Michigan's common law when it amended the Insurance Code, MCL 500.100 et seq., in 2018. BACKGROUND Ahmed Al-Hajjaj is the co-owner of Prime Transportation Service, LLC, and he sought insurance coverage for Prime's vehicles from Golden Insurance Agency, LLC. Al-Hajjaj talked with Sam Saeidi, a principal and insurance agent of Golden. Golden is an independent-insurance agency that places policies for over ten different insurers, including Hartford Accident and Indemnity Company. Saeidi recommended that Al-Hajjaj purchase a policy for his company through Hartford, and Al-Hajjaj agreed to do so. The policy application that Saeidi filled out with Al-Hajjaj listed "Prime LLC" as the company, as opposed to the full name, "Prime Transportation Service, LLC." More critically, the application incorrectly indicated that the company was a physical-therapy office that did not transport patients, when in fact the company provided medical-transportation services for patients. Based on the application it received from Golden, Hartford issued an insurance policy to "Prime LLC." Al-Hajjaj was subsequently injured in a vehicle collision, and he sought personal injury protection benefits from Hartford. As part of its coverage investigation, Hartford discovered the errors in the application. The insurance company rescinded the policy based on what it characterized as material misrepresentations in the application, and Al-Hajjaj sued Hartford, Golden, and others. Plaintiff argued that Golden, the insurance agent, was a contractual agent of Hartford, the insurer. Golden had a contract with Hartford that only gave the agency the authority to "solicit, quote and bind insurance" for certain lines of insurance offered by Hartford. The insurer could cancel any policy that Golden placed with the insurance company. As a limitation on the relationship, the agreement provided: 2.2 Limitations. You [Golden] have the authority and power to act as our agent only to the extent expressly granted in this Agreement and no further authority or power is implied. You are an independent contractor and not an employee of ours for any purpose, and your right to represent other companies is not restricted by this Agreement. Any authority granted hereunder to solicit, quote or bind insurance products on our behalf is non-exclusive, unless we agree otherwise in writing. Al-Hajjaj also argued that the Legislature abrogated Michigan's common-law principle that an independent-insurance agent was an agent of the insured, not the insurer, for purposes of applying for and placing insurance policies. The trial court denied Hartford's motion for summary disposition, concluding that the contractual relationship between Hartford and Golden meant that the latter was the agent of the former. ANALYSIS With respect to statutory interpretation the Court is required to give effect to the Legislature's intent. The Legislature is presumed to intend the meaning clearly expressed, and this Court must give effect to the plain, ordinary, or generally accepted meaning of the Legislature's terms. There were two issues before the Court of Appeal: whether the Legislature abrogated the common-law principle regarding independent-insurance agents; and, if not, whether the contract between Hartford and Golden made the latter the agent of the former for purposes of any errors in the application. ABROGATION OF THE COMMON LAW The record confirmed that Golden is an independent-insurance agency, not a captive one. It offers to place policies from at least ten different insurance companies. It has long been the common law of Michigan that, when an insurance policy is facilitated by an independent insurance agent or broker, the independent insurance agent or broker is considered an agent of the insured rather than an agent of the insurer. This principle makes sense in the context of an independent-insurance agent, who can offer a single customer an array of options from any of the insurers with which the agent has contracted. A customer can approach an independent-insurance agent and expect to comparison shop between all the available insurers, unlike when a customer goes to a captive-insurance agent, who has but one insurer to offer. An independent-insurance agent who had to balance fiduciary duties of loyalty between competing insurers would effectively be frozen into inaction by a web of crossing and conflicting duties and interests. Instead, in recognition of the materially different circumstances faced by a customer who deals with an independent-insurance agent versus a captive-insurance agent, courts have concluded that an independent-insurance agent owes its primary fiduciary of loyalty to the customer. Al-Hajjaj argues that this principle of common law was abrogated by our Legislature. Prior to enactment of the new public act, MCL 500.1201(a) defined "agent" as "an insurance producer," and, in turn, subdivision (e) defined "insurance producer" as "a person required to be licensed under the laws of this state to sell, solicit or negotiate insurance." Where Al-Hajjaj sought an insurance policy through Golden, an independent-insurance agent, and not through an agent-to-agent transaction, the independent agent only represents the insured. THE HARTFORD/GOLDEN CONTRACT Hartford and Golden entered into an agency agreement, which covered Saeidi as a principal of Golden. By all accounts, this was a standard contract between an insurance company and an independent-insurance agent. The contract authorized Golden to "solicit, quote and bind insurance" on behalf of Hartford, but the contract also materially limited Golden's authority. Moreover, the contract recognized that Golden was an independent-insurance agent that had the right to select and place insurance policies with other insurers. The Hartford/Golden contract established that the independent insurance agent or broker is considered an agent of the insured rather than an agent of the insurer. Here Golden owed its primary fiduciary duty of loyalty to Al-Hajjaj as its customer, rather than to Hartford as one of the ten insurers for which it placed policies. Given the standard language used in the contract between the independent-insurance agent and insurer here, the trial court erred in concluding that the independent-insurance agent was the agent of the insurer in this instance and denying summary disposition on that basis. The Court of Appeals reversed and remanded for further proceedings consistent with its opinion. Independent-insurance agents continue to owe their primary fiduciary duty of loyalty to their customers, i.e., the insureds, rather than the insurance companies whose policies they place. This common-law principle survived the Legislature's amendments to the Insurance Code in 2018 PA 449. The trial court erred when it concluded that the contract between Hartford and Golden altered this principle. ZALMA OPINION An "independent insurance agent" in Michigan is similar to a "broker" in California who is defined as a person who transacts insurance with but not on behalf of an insurer and is, therefore, only concerned with its duty to the insured. A minor statutory change in definition did nothing to change the fact that the independent insurance agent's obligation, in Michigan, is to the insured. The case will go to trial to determine who was responsible for the misrepresentation on the application that allowed the insurer to rescind. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Conviction for Second-Degree Reckless Homicide Could be an Accident When there is a severe injury, like the criminal death of a child, litigation results in an attempt to collect from an insurer since the convict will have little or no assets to pay for the loss. In Lindsey Dostal, Individually and as Special Administrator of the Estate of Haeven Dostal v. Curtis Strand and ABC Insurance Company, State Farm Fire and Casualty Company, Intervening, No. 2020AP1943, 2023 WI 6, Supreme Court of Wisconsin (January 26, 2023) the Wisconsin Supreme Court was asked to allow the mother of the child to seek the criminal whose conduct - the father of the child - accidentally caused the death so that State Farm, the convicted father's insurer, must pay the mother for the loss of her child. FACTS Lindsey Dostal (Dostal) sought review of a court of appeals decision affirming the circuit court's grant of summary and declaratory judgment in favor of State Farm. The court of appeals determined that Curtis Strand's conduct did not constitute an "occurrence" covered by the State Farm policy at issue because his conviction for second-degree reckless homicide established that the death was not the result of an accident. State Farm asserted that issue preclusion bars relitigation of the issue of whether Haeven's death was the result of an accident. It argued that Strand's criminal conviction is dispositive on the issue of available insurance coverage under Strand's policy, and that there is no coverage for Dostal's claims. State Farm further contends that the policy's resident relative and intentional acts exclusions preclude coverage. Dostal gave birth to Haeven on April 3, 2017, and Strand was subsequently adjudicated the father. On July 11, 2017, Haeven passed away as a result of head trauma that occurred while she was in Strand's care. After a jury trial, at which Dostal was a witness, the jury convicted Strand of second-degree reckless homicide and resisting or obstructing an officer. Dostal sued Strand for negligence and wrongful death. Strand tendered the matter to State Farm, his homeowner's insurer, seeking defense and indemnification. State Farm argued that its policy did not provide coverage for Dostal's claims and that it thus had no duty to defend or indemnify Strand. State Farm asserted that there was no "occurrence" (defined as an "accident") triggering coverage. The circuit court agreed with State Farm and granted its motion for summary and declaratory judgment. The court of appeals affirmed the circuit court's decision in a published opinion. Dostal v. Strand, 2021 WI.App. 79, 399 Wis.2d 781, 967 N.W.2d 157. ANALYSIS The insurance policy in this case sets forth that coverage is provided for an "occurrence." An "occurrence," in turn, is defined under the policy as an "accident," which results in, as relevant here, "bodily injury." The offense of second-degree reckless homicide requires that the actor creates an unreasonable and substantial risk of death or great bodily harm to another human being and the actor is aware of that risk. RESIDENT RELATIVE EXCLUSION State Farm contended that the resident relative exclusion applied to bar coverage here. In State Farm's view, Haeven was a "resident" of Strand's household as a matter of law. It points to facts in the record indicating that the paternity court had ordered Strand "frequent" physical placement of Haeven, that Strand physically cared for Haeven, and that Strand intended the duration of his relationship with Haeven to be substantial such that he would consider her when contracting about insurance. However, contrary to State Farm's argument, in Dostal's deposition she testified that Haeven's "residency" with Strand was disputed. According to Dostal's deposition testimony, Strand only cared for Haeven without Dostal present four times, a count which includes two overnight stays. Dostal further testified that there was no formal schedule for placement and that Strand "was usually too busy or didn't have time for the baby or didn't want her over there." Given this testimony, the Supreme Court concluded that it could not conclude that Haeven was a resident relative of Strand as a matter of law. The parties' submissions demonstrate that there are genuine issues of material fact as to the question of whether Haeven was a resident relative of Strand. Accordingly, summary judgment was inappropriate on this issue. INTENTIONAL ACT EXCLUSION If the conduct is intentional and if the conduct is substantially certain to cause injury, the Supreme Court could infer intent to injure only if the degree of certainty that the conduct will cause injury is sufficiently great to justify inferring intent to injure as a matter of law. However, the Supreme Court cannot infer intent to injure as a matter of law merely because the insured's intentional act violated the criminal law. Conviction of a crime gives rise to an inference that an insured intended injury as a matter of law in two circumstances, but only: (1) if intent to injure is an element of the crime, and (2) if the crime in question involves the insured committing an intentional act that carries with it a substantial risk of injury or death. However, intent is not an element of a reckless crime. Thus, if the intentional acts exclusion is to apply, the crime must involve the insured committing an intentional act that carries a substantial risk of injury or death. A determination that Strand's conduct was reckless does not preclude a finding that his conduct was an accident for purposes of insurance coverage. In sum, the Supreme Court concluded that issue preclusion does not bar Dostal from seeking insurance coverage for her claims against Strand; the issue of whether Strand's conduct constituted an "accident" was not actually litigated in the prior criminal proceeding; and there are genuine issues of material fact regarding the application of the resident relative and intentional acts exclusions such that summary judgment is inappropriate. THE DISSENT Chief Justice Annette Kingsland Ziegler, and two other justices, dissented, because 12 jurors at Strand's criminal trial unanimously decided beyond a reasonable doubt that Haeven's death was not an "accident," and this precludes relitigating the issue of Strand's coverage. Strand's conviction for his act of reckless homicide, killing his own child ,Haeven, precludes Strand from claiming that Haeven's death was an accident. If the defendant did not act with an awareness required for this crime, he was not guilty of this crime. Since he was convicted by the unanimous vote of 12 jurors, he acted with the awareness required for the crime. Strand's criminal trial is not binding any nonparties to that trial. The Chief Justice and two colleagues, concluded that the criminal trial "only binds Strand by precluding him from claiming that his criminally reckless act was a covered "accident" absolving him of liability to Dostal." ZALMA OPINION Since this is a decision reversing the granting of a motion for summary judgment it gives Dostal the right to attempt to bring sufficient evidence to a civil jury that convinces them that the death of Haeven was an accident and that she was not really in the house with her father as a resident relative. It will be difficult but since she only needs to convince nine of twelve jurors that the preponderance of the evidence contradicts the conviction of the crime found by a unanimous vote of a jury convicting Strand for the death of his child. The jury may feel sorry for the mother and punish Strand's insurer to help the mother. To me, the dissent is much more convincing than the decision of the majority. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Third Party Insurance Only Protects Damage to Other than the Insured Finger Oil &Gas, Inc. ("Finger Oil"), the insured, and Mid-Continent Casualty Company ("Mid-Continent") disputed coverage and the magistrate judge granted Mid-Continent's motion for summary judgment, and Finger Oil appealed the dismissal of its misrepresentation and breach of contract claims. In Finger Oil & Gas, Incorporated v. Mid-Continent Casualty Company, No. 22-50432, United States Court of Appeals, Fifth Circuit (January 27, 2023) Finger Oil demanded coverage to its property because it was told it had coverage for damage to third parties. The Fifth Circuit resolved the dispute. FACTS Finger Oil is an insured under a policy issued by Mid-Continent, which provides general liability insurance. On July 19, 2019, Finger Oil was drilling at its own natural gas well, named Drushel #1, located in Jackson County, Texas when a valve failed and the well blew out. In response, Finger Oil contacted Desiree Scrimger, the commercial-lines account manager at Marsh USA, Inc. ("Marsh"), Finger Oil's insurance agent, to inquire whether it was covered for the blow out. Because Scrimger was unfamiliar with the policy, she reached out to an underwriter at Mid-Continent requesting that it "confirm that this insured has Blow Out and Cratering coverage and advise the limit." Mid-Continent's underwriter replied in an email stating: “The policy ML1419 Oil & Gas Endorsement IV Blow-Out and Cratering has a box to X if the coverage is excluded. The ML1419 for this policy is not X'd. ...” Based on this response, Scrimger emailed Finger Oil as follows: “Per the underwriter regarding coverage, the Blowout and Cratering are included within the limit of insurance. Limits are $1M occurrence/$2M aggregate. Please note that each claim is based on its own merit and this is just verifying the coverage in place.” Finger Oil, without reading the policy or seeking advice interpreting the coverage, relying on Scrimger's email as confirmation that it was covered for the incident, hired several contractors to work on the well and incurred bills for these services in the amount of $641,590.90. THE CLAIM DENIAL Mid-Continent subsequently denied Finger Oil's insurance claim, which was for expenses incurred while repairing property from the well blow out and the costs to bring the well under control. Mid-Continent determined that there was no coverage under the policy for these damages based on two exclusions. First, Mid-Continent stated that the policy included an exclusion for damage to property owned by the insured which excluded from coverage "property damage" to: “Property you own, rent, or occupy, including any costs or expenses by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property.” The policy also excluded "any loss, cost or expense incurred by you or at your request or by or at the request of any ‘Co-owner of the Working Interest’ in connection with controlling or bringing under control any oil, gas, or water well.” THE SUIT Finger Oil sued Mid-Continent. Eventually Mid-Continent filed a motion for summary judgment, which the magistrate judge granted in part. It dismissed all of Finger Oil's claims, except the breach of contract claim to the extent it involved Mid-Continent's failure to pay costs and expenses for repair of the well. The magistrate judge granted Mid-Continent's motion for reconsideration and denied Finger Oil's motion for reconsideration. Finger Oil appealed the magistrate judge's dismissal of its misrepresentation and breach of contract claims. DISCUSSION The Fifth Circuit agreed with the Magistrate that MidContinent's statement that blow out coverage existed did not amount to an actionable misrepresentation. Finger Oil's agent asked MidContinent whether it had blow out and cratering coverage, to which MidContinent correctly replied that it did. MidContinent's statement was more akin to a general statement that the policy included such coverage, rather than it was to a misrepresentation of specific policy terms. Indeed, Finger Oil was warned in the same email to "[p]lease note that each claim is based on its own merit and" that the statement was "just verifying the coverage in place." The summary judgment evidence, therefore, did not support Finger Oil's misrepresentation claims. In Texas, insurance policies are contracts subject to the rules of contract construction. As with other contracts, courts interpret and enforce them according to settled rules of construction and must give the policy's words their plain meaning, without inserting additional provisions into the contract. Accordingly, courts must begin their analysis with the terms of the policy because they presume parties intend what the words of their contract say. The words of the policy are given their ordinary and generally-accepted meaning unless the policy shows the words were meant in a technical or different sense. The Fifth Circuit concluded that the magistrate judge did not err in dismissing Finger Oil's breach of contract claims. Recovering costs and expenses for the repair of Finger Oil's well was expressly excluded from the policy. The policy only provides third-party liability coverage-i.e., coverage for property not owned or controlled by Finger Oil. The purpose of owned property exclusions in general liability policies is to effectuate the intent that liability insurance is designed to provide compensation for damages to property not owned or controlled by the insured. It does not, nor can it, provide first party coverage for losses sustained by the insured on its own property. Finger Oil provided no basis for the court to question the clear terms of the exclusion, nor does it dispute that it owned the well in question. ZALMA OPINION This case should never have reached the trial court let alone the Fifth Circuit. If anyone representing Finger Oil had read the full policy it would have been obvious that a third-party liability policy only provides indemnity for damage to property owned or controlled by others and is not a first party policy that protects the property of the insured. The Fifth Circuit, and the Magistrate Judge before the appeal, read the full policy and reached the only decision available. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

GOOD CAUSE FOR IME ESTABLISHED THE INDEPENDENT MEDICAL EXAMINATION AS A TOOL TO DEFEAT FRAUD In Costa Rwagasore v. Grange Property & Casualty Insurance Co., No. 2022-CA-0413-MR, Court of Appeals of Kentucky (January 27, 2023) the insurer sought an Independent Medical Examination (IME) of the claimant, Rwagasore and the claimant claimed there was no good cause for an IME. FACTS After the insurer sought a medical examination of the claimant. Costa Rwagasore appealed from an order of the Jefferson Circuit Court granting the petition of Grange Property and Casualty Insurance Company (Grange) to appear for a medical examination by a physician of its choice as a part of its investigation of Rwagasore's insurance claim. Rwagasore argued that Grange failed to present evidence showing "good cause" in support of its petition as required by the provisions of Kentucky's Motor Vehicle Reparations Act (MVRA), KRS 304.39-010 et seq. KRS 304.39-270(1). On October 19, 2020, Rwagasore was driving in Louisville. While he was stopped at a traffic signal, his vehicle was rear-ended by a vehicle that immediately fled the scene. The accident report prepared by an officer of the Jeffersontown Police Department indicated: "no injuries, no pictures taken, and no vehicles were towed." Eleven days later, Rwagasore sought treatment at a medical clinic. He complained of pain in his back, chest, neck, shoulder, left knee, right leg, and right foot. Ultimately, Rwagasore received extensive medical care and treatment from numerous medical providers. Upon evaluating the claim, Grange suspected that the injuries allegedly sustained were not caused by the motor vehicle accident. After reviewing medical records submitted by Rwagasore, Grange requested that Rwagasore participate in an examination under oath to which he participated. Grange then requested an expert peer review of Rwagasore's medical records. After it received the results of the peer review of the records, Grange requested that the court order Rwagasore to appear for a medical examination. Grange argued that Rwagasore put his physical condition at issue and that a real dispute surrounded whether the allegedly significant injuries arose from the minor motor vehicle accident. It observed that Rwagasore had an extensive medical history of pre-existing issues with his right knee; that he had been involved in four prior motor vehicle accidents in a short span of time; that his alleged injuries appeared inconsistent with the nature of the motor vehicle accident of October 2020; and that a peer review of his medical records indicated that an examination of the medical records alone was insufficient to determine the cause of the alleged injuries or the necessity of the care and treatment provided. Following a hearing, the trial court found that Grange had demonstrated good cause to warrant a physical examination pursuant to the statute and ordered the examination. THE APPEAL Rwagasore contended that the circuit court erred by ordering him to submit to a physical examination because Grange failed to show that it had utilized less intrusive means of evaluating his claim and failed to show that an in-person physical examination was warranted. However, the statute expressly permits an insurer to require a claimant to submit to a medical examination, it cannot compel the examination without a showing of "good cause." DISCUSSION Good Cause is more than a mere suspicion that the insured's care was unnecessary or unreasonable. The insurer must present some proof that it has taken measures to determine the validity or extent of the insured's injuries that were less intrusive than an unwanted medical examination. In this case, Grange employed numerous measures to evaluate Rwagasore's claim before it petitioned the court to compel him to appear for a physical examination. Grange set forth specific reasons supporting its suspicions concerning the nature of Rwagasore's treatment and care and explained to the trial court how the physical examination could be expected to address its suspicions about the cause of his alleged injuries. Following his review of the available medical records, the insurer's expert Dr. Best reported to Grange that: the only objective means by which this patient can be evaluated is with a hands-on physical examination with functional testing. A simple records review, without examining the patient, would fail to adequately identify pathology and need for treatment. We could not adequately determine the cause of a gap in treatment, the necessity of 30 physical therapy visits and whether all treatment was provided secondary to the effects of the motor vehicle accident. Therefore, an independent medical evaluation with functional capacity testing should be performed in order to adequately assess this patient's injuries. The Court of Appeal concluded that Grange amply explained the basis of its doubts concerning the nature of Rwagasore's alleged injuries and cited evidence sufficient to place causation at issue. Moreover, as noted above, a peer review of the insured's medical records by an independent medical expert may be sufficient to establish good cause for a physical examination. Under the circumstances of this case Grange satisfied its burden to show good cause. The Court of Appeal found that the trial court did not err by ordering Rwagasore to submit to the medical examination sought by Grange. ZALMA OPINION Kentucky statutes allow insurers, on a showing of good cause, to compel a claimant to submit to an IME. Based on the facts of the case: (1) a minor collision with little impact; (2) a history of multiple claims of injuries due to auto accidents; and (3) a review of records by a physician that concluded it was impossible to evaluate the alleged injuries without the physical presence of the claimant, the court ordered the IME. An IME is an important tool in discovering and/or defeating attempts at fraud by people who over-treat alleged injuries. The state should consider making the process easier since the cost of a motion and then a response to an appeal may exceed the entire value of the claim. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

ZIFL - Volume 27, Issue 3 The Source for Every Insurance Fraud Professional In this, the third issue of the 27th year of publication ZIFL provides the following articles: Soft Fraud No Less a Fraud than so-called Hard Fraud 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” is 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.” [Article by the Idaho Fraud Bureau at http://www.idfbins.com/tips-safe-living/soft-fraud; report of the Coalition Against Insurance Fraud at http://www.insurancefraud.org/learn_about_fraud.htm; article by Arkansas Department of Insurance at http://www.fightfraud.arkansas.gov/] 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. See the full issue here. How Not to Commit Arson Most people do not understand how hard it is to set fire to a house that will destroy the entire dwelling and its contents. Most residences simply do not have sufficient combustibles in the right place to allow for a sustained fire. Many homes, especially the more modern ones, have fail-safe devices everywhere that make accidental fires a thing of the past. An Insured decided that the only possible means of escaping his mortgage was to burn down his house. Being a rather imaginative fellow, he decided to also make the fire look like an accident. On leaving his house in the afternoon, he opened the gas jets on the stove, blew out the pilot on his gas dryer and water heater, and set the thermostat on his electronically ignited furnace to 80 degrees Fahrenheit. It was a hot Summer day, but he assumed it would eventually cool off a little, the thermostat would kick on the furnace, and the electronic starter would cause a gas explosion that would destroy the entire house. What he did not count on was Southern California’s Santa Ana Winds that brought heat from the desert and kept the outside temperature in the hundreds all day and into the night. The Insured was shocked that a nosey neighbor with clear sinuses would smell the gas, turn it off at the meter, and save the house. Of course, when the Insured returned home, he had to hide his disappointment that the house was still there. Undaunted, however, he tried again the next week. This time he took no chances. He went to the hardware store and bought a case of Coleman cooking fuel and spread it throughout the house. Then he tore up a book of paper matches so that there was no cover, only matches. He lit a cigarette and placed it low between the matches and left the house confident that when the cigarette burned down it would ignite the match heads and burn down the house. He was again sorely disappointed when he returned home to find the house still there. See the full issue here. Imposter not a Customer Theft by Fraud, Trick or Device Not Covered BASIC FACTS Plaintiff, a company that provides information technology services, brought suit against defendant for breach of contract and bad-faith denial of a claim under MCL 500.2006 after defendant denied plaintiff’s insurance claim for computer equipment that was fraudulently procured by an imposter. In July 2020, plaintiff received an inquiry from an individual purporting to be from the purchasing department for Macomb County. The individual stated that Macomb County was interested in purchasing new computer equipment and asked plaintiff to facilitate the transaction. Plaintiff did so only to later discover that Macomb County never ordered the equipment. Plaintiff submitted a claim for the loss to defendant for $165,195, which defendant denied. See the full issue here. Good News from The Coalition Against Insurance Fraud A chiro lied he had a medical license while inflating patients’ medical conditions for his cut of more than $3.5M of federal and private disability payments. Despite lacking a license, Thomas G. Hobbs bought and dispensed prescription meds, gave injections and dispensed meds intravenously to patients. The Arnold, Mo. man also fraudulently helped patients receive disability money. He charged patients between $2K-$8.6K to prepare disability forms. He also coached them to lie that they couldn’t perform basic activities such as lifting, standing, walking, sitting, remembering and taking care of personal needs. And Hobbs used a fake medical license number so his medical opinions had more weight than federal and private insurance medical experts. He even forged medical reports to give the appearance he had a long history with the patients. Many of his claimed services were phantom, unneeded or provided by unqualified persons to make it seem patients were disabled. The procedures included MRIs, CT scans and heart tests. Hobbs also submitted numerous claims for office visits when he hadn’t provided the required face-to-face patient evaluation and case management. Hobbs pled federally guilty and will be sentenced April 19. Plus many more reports. See the full issue here. Heath Insurance Fraud Convictions Donald Booker of Charlotte, North Carolina, was convicted of conspiracy to commit health care fraud, multiple violations of the Anti-Kickback Statute, money laundering conspiracy, and money laundering. Booker owned United Diagnostics Laboratories (UDL), a urine toxicology testing laboratory, and United Youth Care Services (UYCS), a mental health and substance abuse treatment services provider. Booker’s co-defendant, Delores Jordan, pleaded guilty to health care fraud conspiracy and money laundering conspiracy in December and owned Legacy Housing, a housing provider. From January 2016 to August 2019, Booker and his co-conspirators defrauded the North Carolina Medicaid program of more than $11 million. Jordan would recruit people who were Medicaid eligible for housing and other programs and services. They would require beneficiaries to submit urine samples when they enrolled in the program, and they provided the samples to Booker and UDL for testing that wasn’t medically necessary. Booker paid illegal kickbacks to Jordan and others in exchange for these urine samples. Booker and Jordan also laundered the proceeds to conceal and disguise the nature and source of the illegal kickback payments. Plus dozens more reports of convictions. See the full issue here. Eleventh Circuit Allows Retrial of Esformes In United States Of America v. Philip Esformes, Nos. 19-13838, 19-14874, United States Court of Appeals, Eleventh Circuit (January 6, 2023) Philip Esformes challenged his convictions of healthcare fraud, illegal kickbacks, and money laundering and the related restitution award and forfeiture judgment. After Esformes filed this appeal, President Trump commuted his sentence of imprisonment and rendered any challenge to it moot. See the full issue here. Other Insurance Fraud Convictions Mark Biegler, a Helena, Montana-based commercial insurance broker has been sentenced to 90 days in jail, given a 10-year suspended prison sentence and ordered to pay $150,000 in restitution for insurance fraud. Biegler pled guilty to six felony charges of insurance fraud and theft, according to the state’s Commissioner of Securities and Insurance, Office of the Montana State Auditor. Mr. Biegler previously worked at Hub International Ltd., but he was terminated by Hub in 2017, a spokeswoman for the brokerage said in an email. The charges relate Premier Insurance LLC, an agency he established, she said. According to court papers filed in state court in 2020, between September 2018 and September 2020, Mr. Biegler, who held insurance and surplus lines insurance producer licenses, was charged with criminal insurance fraud and theft of insurance premium against five businesses. He was also charged with fraud for filing false written statements to State Farm Mutual Insurance Co. in May 2017. The specifics of the fraud allegations vary, but in one case he was charged with having a business pay a premium directly to him instead of to an insurer and altering a declaration by falsely stating the business had insurance coverage. See the full issue here. Motion About McClenny, Moseley & Associates Lawyer Matthew D. Monson of The Monson Law Firm, LLC filed the following motion, a complete copy of which is available at https://www.claimsjournal.com/app/uploads/2023/01/Franatovich-Filing40.pdf, on behalf of Allied Trust Insurance Company. I have excerpted from the Motion to bring out its essence. See the full issue here. 212 Years in Prison for Fraud Insurance Fraud by Killing Children & Attempted Killing of Wife Affirmed United States Of America v. Ali F. Elmezayen, AKA Ali F. Elmeza Yen, AKA Ali Fathelelah Elmezayen, AKA Ali Fathellah Elmezayen, AKA Ali Sayed, AKA Ali Fathelehah Sayed, No. 21-50057, United States Court of Appeals, Ninth Circuit (January 19, 2023) Ali Elmezayen appealed the district court’s judgment entered upon a jury verdict that found him guilty of four counts of mail fraud under 18 U.S.C. § 1341, four counts of wire fraud under 18 U.S.C. § 1343, aggravated identity theft under 18 U.S.C. § 1028A(a)(1), and four counts of money laundering under 18 U.S.C. § 1957. See the full issue here. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Fairly Entered Plea Agreement Sustained In United States Of America v. Joshua Louis Rupp, No. 22-1240, United States Court of Appeals, Sixth Circuit (January 24, 2023) a case involving a fraud that only tangentially deals with insurance fraud, resulted in 16 years in jail for the fraudster. FACTUAL BACKGROUND Pretending to be a licensed securities broker, Joshua Rupp defrauded his in-laws and friends of a total of $2.7 million. Among other tricks, Rupp downloaded an app onto his victims' phones so that they could monitor "dummy" accounts showing excellent (but fictitious) gains. Rupp pleaded guilty to securities fraud. During plea negotiations, the government estimated that his guidelines range would be about 10 to 12 years' imprisonment. Yet the district court calculated his range to be significantly higher and sentenced him to 16 years. Rupp argued that he entered an unknowing and involuntary plea because his decision to plead guilty turned on the government's mistaken estimate of his guidelines range. Rupp also argued that the district court should not have increased his guidelines range with an enhancement that covers those who use "sophisticated means" to commit fraud. He lastly argued that the court imposed a substantively unreasonable sentence. But his plea agreement and plea colloquy both showed that Rupp knew that he could not void his plea simply because the district court chose a higher-than-expected guidelines range. Rupp also used plenty of "sophisticated" means, including the creation of the dummy accounts. And his plea agreement waived his right to bring a substantive-reasonableness challenge to his sentence. In 2015, when Rupp turned to securities fraud, he swindled family and friends alike of millions of dollars over the next four years. Rupp targeted his wife's parents as his first victims. His in-laws initially gave him a small sum after he led them to believe that he had connections with a fictitious broker at an established financial-services firm. Rupp wasted all of these funds, causing his wife's parents to suffer significant tax consequences in the process. His marriage did not survive his fraud. Fraud soon expanded outside his family. Apart from the app that he downloaded onto his victims' phones to monitor the "dummy accounts" that he had created, Rupp engaged in many other fraudulent acts to persuade them to invest with him. He claimed that the victims could not lose the principal that they entrusted to him because of the nature of his investments. (They lost nearly all of it.) All told, Rupp took more than $2.7 million from 19 people. He spent at least $500,000 of this money on vacations, groceries, and other personal expenses. He frittered away the rest on bad stock trades. THE PLEA AGREEMENT He agreed to waive his right to appeal except on a few specified grounds, including that his plea was unknowing and involuntary and that the district court had miscalculated his guidelines range. At Rupp's plea hearing, a magistrate judge found that he had entered a knowing and voluntary guilty plea. Before doing so, the judge confirmed that Rupp understood the nature of the charges and the potential punishment. Rupp recognized that only the district court could determine his guidelines range. He also conceded that nobody had promised him what sentence the court would choose. And he agreed that he could not withdraw his plea if it turned out that the court chose a sentence longer than he anticipated. At sentencing, Rupp's counsel argued against the sophisticated-means enhancement on the ground that its application, when combined with the other enhancements, would result in improper "double counting" by punishing him twice for the same conduct. Adopting the presentence report's calculations, the District Court concluded that Rupp's guidelines range was 168 to 210 months' imprisonment. When speaking to the court, Rupp suggested that the report's recommended range had caught him "off guard" because the government in plea negotiations had predicted that his range would be 10 to 12 years. The court nevertheless chose a sentence of 192 months' imprisonment. When the court told him he would have the opportunity to appeal, he responded: "Oh, I will." Knowing and Voluntary Plea. Rupp's argument rests on discussions from the parties' plea negotiations that he did not introduce into evidence. Rupp's offense level turned out to be 32 and his criminal history category turned out to be IV. His plea agreement and plea colloquy both show that he knew that any earlier sentencing estimate would not bind the court and that he could not void his plea if the estimate turned out to be wrong. Rupp understood that the district court could impose a sentence up to 25 years' imprisonment for his offense. He acknowledged that "only" the district court could "determine" his guidelines range and that the court could vary upward from this range when imposing a sentence. Substantive Reasonableness. Rupp attempted to avoid this unambiguous waiver by alleging that he did not knowingly and voluntarily enter the plea agreement. The record left no doubt that he knowingly agreed to that specific provision. Rupp instead merely reincorporates the general argument that his entire plea was unknowing and involuntary because of the government's mistaken sentencing estimate - it didn't work and the District Court's Order was affirmed. ZALMA OPINION Assuring his victims that they could not lose their principal - a lie only the innocent would believe - Rupp lived the high life on other people's money - until it all ran out, his wife left him and the DOJ brought him towards trial. He plead guilty hoping to receive a lesser sentence with knowledge that he could not force the court to agree. He lost. He is in jail for 16 years and his arguments were dismissed by the Sixth Circuit with alacrity. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Insurance Fraud by Killing Children & Attempted Killing of Wife Affirmed In United States Of America v. Ali F. Elmezayen, AKA Ali F. Elmeza Yen, AKA Ali Fathelelah Elmezayen, AKA Ali Fathellah Elmezayen, AKA Ali Sayed, AKA Ali Fathelehah Sayed, No. 21-50057, United States Court of Appeals, Ninth Circuit (January 19, 2023) Ali Elmezayen appealed the district court's judgment entered upon a jury verdict that found him guilty of four counts of mail fraud under 18 U.S.C. § 1341, four counts of wire fraud under 18 U.S.C. § 1343, aggravated identity theft under 18 U.S.C. § 1028A(a)(1), and four counts of money laundering under 18 U.S.C. § 1957. FACTUAL BACKGROUND After conviction by a jury, the district court sentenced Elmezayen to 212 years in prison. Elmezayen raised five issues on appeal that the court erred: when it failed to conduct an adequate voir dire regarding prospective jurors' experiences with autism and domestic violence, when it permitted Detective Cortez to provide impermissible opinion testimony concerning witness credibility, when it excluded hearsay testimony Elmezayen intended to elicit from Dr. Bruno, when it admitted testimony from Sarah Wickes, and when it denied a motion to continue the trial so that Elmezayen could obtain the testimony of his proffered Egyptian witnesses who had been denied visas. Some of his arguments established error by the trial court but the errors were irrelevant in the face of overwhelming other evidence of his guilt. VOIR DIRE The Ninth Circuit will review a district court's voir dire for an abuse of discretion. To date, the Ninth Circuit has expressly recognized the "strong feelings" exception only in matters involving child sexual abuse, narcotics, and the insanity defense. The district court here first informed the venire (the potential jurors) of the accusations that Elmezayen had intentionally killed his sons and had attempted to kill his wife, Ms. Diab, and then expressly questioned the venirepersons about their experiences with both autism and domestic violence. Because the district court asked broader questions to the venirepersons which elicited the information sought by the defense, there was nothing in the record indicating that the judge's failure to honor Elmezayen's requests amounted to an abuse of discretion. OPINION TESTIMONY OF DETECTIVE Elmezayen argued that the district court should have excluded as improper opinion testimony by Detective Cortez whose statements that he was "looking for truth" and that he assessed whether a suspect was lying by assessing whether the suspect was being "evasive[]," "slouch[ing]," or "rambl[ing]." The Ninth Circuit concluded that the district court clearly erred in overruling Elmezayen's objection - whether the Ninth Circuit analyzed Detective Cortez's testimony through the lens of expert opinion testimony or improper lay witness testimony concerning credibility, the failure to exclude opinion testimony was reviewed for an abuse of discretion as is a district court's admission of lay testimony. Detective Cortez's recitation of his observations of Elmezayen's demeanor that Detective Cortez then implied evinced Elmezayen's lack of credibility impermissibly allowed Detective Cortez to substitute his opinion for that of the factfinder's. Viewed either way, Detective Cortez's testimony was clearly inadmissible. The Ninth Circuit concluded that the district court erred in overruling a timely and proper objection. However, the Ninth Circuit concluded that the error was harmless because properly admitted evidence elsewhere in the record constituted overwhelming evidence of defendant's guilt. In particular, a police report from the accident stated that Elmezayen failed to tell the police the true number of insurance policies he held, and the admitted evidence included eight accidental death policies, including their coverage amounts, which policies covered his children. There is also substantial evidence in the record contradicting Elmezayen's description of the accident to the Detective because the properly admitted evidence was highly persuasive and overwhelmingly pointed to guilt, any error in admitting Detective Cortez's testimony was harmless. DENIAL OF CONTINUANCE Elmezayen challenges the district court's denial of his oral motion to continue the trial so that he could obtain the testimony of four proffered Egyptian witnesses. The Ninth Circuit concluded that the denial of a continuance was not an abuse of the court's discretion. Elmezayen was certainly not diligent: the witnesses were Elmezayen's family members, defense counsel was made aware of them nearly a year earlier when he began representing Elmezayen, Elmezayen had over three months to obtain visas from the date the trial was set, and Elmezayen requested the continuance a week after he knew that the visas were denied-in the middle of trial. The delay would have inconvenienced the court and the jury given the request was made after the government had rested and because the continuance requested was indefinite, it was reasonable to conclude that Elmezayen would be unable to obtain the testimony in a timely fashion. Although the analysis above shows that the trial was not free of error, the record contains overwhelming, untainted evidence of Elmezayen's guilt, and thus provides more than "fair assurance that the jury was not substantially swayed by the errors" in reaching its verdict. ZALMA OPINION An evil man who killed his children for insurance money to defraud the insurers was able to cast some doubt on his conviction only to have the Ninth Circuit conclude that even with errors made by the trial judge the evidence of guilt was overwhelming and affirmed the conviction and sentence. He will serve as much of the 212 year sentence that will probably not expire before he does. He also proved that insurance fraud is a violent crime. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

The Devil’s in Details This is one of many fictionalized True Crime Stories of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The stories help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime. People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime. The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United States. In their hometown of Volgograd they were well-known to the local police. The brothers had conducted a crime wave in the town since they turned ten. They were involved in burglary, armed robbery, smuggling, drug dealing and prostitution. To avoid arrest and a long sentence in a Siberian Gulag, the brothers invented a Jewish mother. They were then eligible to leave as victims of religious persecution. Their application for a Visa to the United States as seekers of religious freedom was accepted immediately. The “Save Soviet Jewry” organization, who knew nothing of their criminal background, financed their trip to the United States. Upon their arrival in the United States they met with acquaintances from the Soviet criminal class who had also escaped to the United States. They learned that the police were quite effective at catching and prosecuting strong armed criminals, but had little concern for perpetrators of fraud. The brothers, being dedicated criminals, realized that they must become familiar with American language and American procedures. They spent their first year in the United States, living off the money they were able to smuggle out of the Soviet Union. They studied English and American business procedure at a local high school. One of their classmates in their English as a Foreign Language class was a salesperson for Blue Sword of California, a health insurer. They bribed their classmate to sell them a health insurance policy so they could learn how the system worked. Pleasantly surprised the brothers learned that if they sent a bill from a health care provider to Blue Sword a check in the same amount would arrive in the mail. No one would telephone the provider or verify that the services had been rendered. All they needed was the proper form filled out in the proper manner. From what they learned in their business class they created their first business entity, Mobile Medical Services. The filing of a fictitious business name statement showing that the brothers Karamazov were the owners of Mobile Medical Services was enough to put them in business. The plan was simple: with money obtained from a Small Business Administration loan fund set up for recent immigrants, they would lease a Ford Econoline van; they would then lease various pieces of medical testing equipment from local vendors. The fact that they had no experience or training in the operation of such equipment was irrelevant. All that was necessary was that the equipment looked real. They were immediately provided a loan from the SBA to pay the first three months’ rent. They visited their local instant printing shop and had a flier printed using the most seductive of all advertising tools. The flier said only, in forty-point type: FREE MEDICAL TESTING and in much smaller type: Only for Union Members and Government Employees They then set their van up in a parking lot of a local grocery store and waited for the customers to come in. Each person coming in for free medical testing would fill out a form and assign all of their medical benefits to Mobile Medical Services. They would be seated on an EKG machine, weighed and have their blood pressures taken. They would then be sent on their way. The brothers Karamazov created a totally fictional account of the medical testing performed on each of their walk-in clients. All of their clients had insurance or were military dependents covered by the CHAMPAS system. The billings were created with the assistance of their classmate, the insurance agent, and averaged between $800 and $1400. Each was justified by a diagnosis of one serious disease or another ranging from pneumonia to cancer. The brothers sent their billings directly to the insurers of the individual customers. The billings were normally paid without question, although the insurers would reduce the amounts billed by 20% to 30%. Every two months the brothers would file bankruptcy for the fictitious business and return the equipment to the lessor who knew better than make a claim on a bankruptcy estate. Investigation by the lessor found that the original business had disappeared and its owners were without assets. They would write off the debt. The brothers would then start a new LLC with the assistance of a typing agency and go to another leasing agent who would find them new equipment. The brothers, within the first two years of their fraudulent business, had managed to effect gross earnings of $5,000,000 a year. They had twenty mobile vans floating throughout the states of California, Arizona, Nevada and New Mexico. Their profits were growing exponentially. Each van was insured. When a lessor got close to repossessing a van or its equipment, it would accidentally catch on fire on the freeway. The brothers would recover the total value of the equipment and the van. The lessors, not named on the policies, would be without recourse. Had the brothers, from their generous earnings, honestly purchased the medical equipment and the vans, they would probably still be making millions in medical insurance fraud. The adjuster assigned to investigate the “accidental” fires had attended a class on automobile arson given by the California Conference of Arson Investigators. It became obvious that the van fire was an arson. He reported this fact to the Fraud Division of the State of California, Department of Insurance and to the local fire department arson unit. The insurer retained counsel to examine the brothers under oath. They refused to testify. Their claim was denied since an examination under oath is a condition precedent to the insurance policy and the breach of that condition eliminates coverage. The brothers did nothing to enforce their claim, they just went on to another insurer. At the Fraud Division, when the fire was recorded into the computer, it noted four other reports concerning the brothers. It appeared they were unrelated, but an investigator was assigned to look into the brothers Karamazov. As the investigation proceeded, the Fraud Division learned more facts about the brothers that required a team of Fraud Division investigators. They were joined by investigators from the United States Postal Service. The team worked for three years developing a prosecution against the brothers Karamazov. When the indictments came down the investigators had established that the brothers were involved in fraud totaling over $80,000,000. Before they could be arrested, the brothers returned, wealthy, to Russia. They were certain that they had succeeded in the fraud of the century. On their return to the former Soviet Union, they lived like kings. They considered themselves inviolable. Confident in their skill as criminals, and tired of living in the Urals, they took a holiday to the South of France. When they arrived, their names were noted by INTERPOL who contacted the United States Marshal Service at the US Embassy. The brothers were arrested and extradited to the United States with the blessings of the French Government. The trial, in the United States District Court, Los Angeles, was lengthy and involved the brothers and dozens of their co-conspirators. Two of the brothers pled guilty and one was convicted after trial. They are all serving time in a federal penitentiary. They have been ordered to make restitution and pay enormous fines. The chance of the insurers ever recovering any of the $80,000,000 to $2.3 billion they admit they stole is minuscule. Whatever remains of the assets they took with then to Mother Russia is well protected in banks in the Cayman Islands and Switzerland. For the brothers Karamazov, the extent of their greed was their downfall. Crime paid very well for three years and now they are paying for their crime in the federal penitentiary knowing that when they are released they will still be wealthy since the U.S. Government was unable to track down their assets. This story is one of the more than 80 fictionalized true insurance fraud crime stories and was adapted from my book Insurance Fraud Costs Everyone Available as a Kindle Book and Available as a Paperback from Amazon.com. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Presidential Commutation Doesn't Stop Retrial On Cases Where Jury was Hung In United States Of America v. Philip Esformes, Nos. 19-13838, 19-14874, United States Court of Appeals, Eleventh Circuit (January 6, 2023) Philip Esformes challenged his convictions of healthcare fraud, illegal kickbacks, and money laundering and the related restitution award and forfeiture judgment. After Esformes filed this appeal, President Trump commuted his sentence of imprisonment and rendered any challenge to it moot. In his remaining challenges, Esformes argued that his indictment should have been dismissed because of prosecutorial misconduct, that the district court erroneously admitted expert opinion testimony against him, that the admissible evidence against him was insufficient to sustain his convictions, and that the restitution award and forfeiture judgment should be vacated. BACKGROUND Esformes owned and operated the "Esformes Network"-several medical facilities in Miami-Dade County, Florida. The Network included "skilled nursing facilities," residential medical facilities that provided services performed by nurses, such as physical therapy or the operation of sensitive medical devices. Medicare or Medicaid will pay for a stay at a skilled nursing facility only if the patient receives medical certification that the admission is necessary and if the patient spent at least three days in an acute care hospital immediately before admission. After a grand jury indicted two of his associates, Gabriel and Guillermo Delgado, Esformes entered into a joint-defense agreement with the Delgados. The government later added a drug charge to Guillermo Delgado's indictment that threatened a significantly higher term of imprisonment. Esformes then "offered to pay a significant sum of money to [Guillermo] Delgado so that he could flee the United States and avoid prosecution in the United States." The Delgados signed a sealed plea agreement, began recording their conversations with Esformes, and passed along to the government multiple recordings, including some that involved conversations between Esformes and his attorneys. The following year, an indictment charged that Esformes and others conspired to use the Network to defraud Medicare and Medicaid of millions of dollars. The Federal Bureau of Investigation executed a search warrant for Esformes's Eden Gardens medical facility to "seiz[e] . . . business records related to the health-care fraud investigation of Esformes." The government knew beforehand that Norman Ginsparg, an Illinois-licensed attorney who worked with Esformes, had an office at Eden Gardens. And a member of Esformes's defense team warned the agents that there were privileged materials at Eden Gardens. The government established a "taint protocol" to identify privileged documents found in the search and to keep the prosecution team from seeing them. It chose agents who were not otherwise involved in the investigation to conduct the search. But these measures failed. The district court concluded that the prosecutors committed misconduct but rejected a finding of bad faith and dishonesty. At Esformes's two-month trial, prosecutors presented three types of evidence material to this appeal. First, Esformes's co-conspirators, including Gabriel Delgado, testified about the conspiracy, its means, and their roles in it. Second, the prosecutors presented summary testimony from Michael Petron, who identified various transactions in Esformes's financial records as bribes, kickbacks, and efforts to conceal illegal proceeds. THE JURY CONVICTIONS The jury convicted Esformes on 20 counts. The jury failed to reach a verdict with respect to the six remaining counts, and the government has stated that it intends to retry Esformes on those counts. After Esformes filed his appeal, then-President Donald Trump commuted Esformes's term of imprisonment to time served but "le[ft] intact and in effect the remaining three-year term of supervised release with all its conditions, the unpaid balance of his . . . restitution obligation, if any, and all other components of the sentence DISCUSSION The Eleventh Circuit, after a lengthy review, concluded: that the presidential commutation renders Esformes's appeal of his prison sentence moot but does not otherwise affect his appeal. the district court did not abuse its discretion when it declined to dismiss the indictment or to disqualify the prosecutors due to misconduct. affirmed the admission of Dr. Cifu's expert-opinion testimony. affirmed the restitution amount as not clearly erroneous. held that there was sufficient evidence for the jury to convict Esformes of money laundering and that the forfeiture judgment based on money laundering was lawfully calculated. The District Court's Restitution Order Was Not Clearly Erroneous. There was plenty of evidence of actual loss to the government; indeed, defrauding the government was the core of the Esformes Network conspiracy. The District Court's Forfeiture Order Was Lawful. It is a federal crime to engage in a transaction knowing that it "is designed in whole or in part . . . to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity ...." When a defendant is found guilty of federal money laundering, the district court "shall order that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property." Legally Sufficient Evidence Supported Esformes's Money-Laundering Convictions. Esformes's Sentence Did Not Violate the Constitution. Esformes does not contest the $38.7 million calculation of the value of the property "involved in" his crimes, so any forfeiture under $77.4 million was presumptively constitutional. And Es-formes offers no basis to rebut that presumption. Esformes will be tried on the six counts not the subject of the Presidential commutation. ZALMA OPINION Health insurance fraud perpetrators who steal millions from U.S. Government programs garner wealth beyond normal health care providers dreams. The wealth Esfromes acquired was not earned, it was stolen. He was properly convicted on many counts and sentence to prison. President Trump allowed him to get out of jail early but refused - because he was so obviously guilty - to pardon him. Since the jury could not decide on six counts, and since the original verdict was proper, the government will be able to try him again on the six counts that were not proved in the first trial. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library