Barry Zalma, Inc. on Insurance Law

The Business Of Insurance Is Subject To The Law Of Unintended Consequences As If It Were On Steroids The law of unintended consequences is not statutory. No state or federal government has enacted it into law. No executive has signed the law. It is, rather, a law of the nature of people. It is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes. General observation requires the hypothesis that actions of people, especially of governments, will always have effects that are unanticipated or unintended, has been proved. Economists and other social scientists have heeded its power for centuries. Regardless, for just as long, politicians, insurers and popular opinion have largely ignored the law of unintended consequences to their detriment. There is no common-law duty for a court, especially in a heavily regulated sector of the economy like insurance to create new rules. Every court should be loathe to invent duties unmoored to any existing precedent. The law of unintended consequences counsels against it. A good illustration of the law of unintended consequences can be To find a good illustration of the law of unintended consequences, one need look no further than the Supreme Court's decision in Williamson County Regional Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). The Court's actual holding was pedestrian: that Hamilton Bank's takings claim was unripe because the bank had not exhausted its administrative remedies, specifically its right to ask the County for a variance to develop the property in the manner proposed. In dictum, however—dictum in the sense that the Court's pronouncement was at that point unnecessary to its decision—the Court went on to say that the bank's claim was "not yet ripe" for a "second reason. That reason too was couched in terms of exhaustion: that under state law "a property owner may bring an inverse condemnation action to obtain just compensation for an alleged taking of property"; and that, until the bank "has utilized that procedure, its takings claim is premature." The Court's implicit assurance, of course, was that once a plaintiff checks these boxes, it can bring its takings claim back to federal court. That assurance proved illusory. State-court judgments are things to which the federal courts owe full faith and credit. That obligation means that takings claims litigated in state court cannot be relitigated in federal. Thus—by all appearances inadvertently— Williamson County all but guarantees that claimants will be unable to utilize the federal courts to enforce the Fifth Amendment's just compensation guarantee against state and local governments. [Lumbard v. City of Ann Arbor, 913 F.3d 585 (6th Cir. 2019)] The law of unintended consequences applies as much in jurisprudence as anywhere else; bending a rule to accommodate one litigant doesn't always achieve better justice — sometimes it just sows confusion in anyone trying to figure out what a court might do in other cases in the future. A prudent court will take the lesson to leave rulemaking to the legislators and administrators, even when the outcome appears unjust. The orderly development of the law is not without rough patches, but it is better than living under the law of unintended consequences. [United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822 (6th Cir. 2018)] In addition, as one dissenter said that the majority’s desire to cure all wrongs by eviscerating the doctrine of governmental immunity, while well-intentioned, is fraught with the law of unintended consequences. Depriving governmental officials of governmental immunity when making policy decisions, when making sentencing decisions, and when running the government would certainly cause most of us to rethink the traditional notion of public service. [Doe v. Dep't of Corr., 323 Mich.App. 479, 917 N.W.2d 730 (Mich. App. 2018)] Philosophers, Economists and Politicians The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, “is led by an invisible hand to promote an end which was no part of his intention,” that end being the public interest. “It is not from the benevolence of the butcher, or the baker, that we expect our dinner,” Smith wrote, “but from regard to their own self-interest.” Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation, regulation and the decisions of appellate courts. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. The law of unintended consequences provides the basis for many criticisms of government programs. Unintended consequences can add so much to the costs of some programs that they make the programs unwise even if they achieve their stated goals. For instance, the U.S. government-imposed quotas on imports of steel in order to protect steel companies and steelworkers from lower-priced competition. The quotas do help steel companies. But they also make less of the cheap steel available to U.S. automakers. As a result, the automakers have to pay more for steel than their foreign competitors do. So, a policy that protects one industry from foreign competition makes it harder for another industry to compete with imports. Similarly, Social Security has helped alleviate poverty among senior citizens and the disabled. Many economists argue, however, that it has carried a cost that goes beyond the payroll taxes levied on workers and employers. Martin Feldstein, and others, maintain that today’s workers save less for their old age because they know they will receive Social Security checks when they retire. If Feldstein and the others are correct, it means that less savings are available, less investment takes place, and the economy and wages grow more slowly than they would without Social Security. The law of unintended consequences is at work always and everywhere. People outraged about high prices of plywood in areas devastated by hurricanes, for example, may advocate price controls to keep the prices closer to usual levels. An unintended consequence is that suppliers of plywood from outside the region, who would have been willing to supply plywood quickly at the higher market price, are less willing to do so at the government-controlled price. Thus, a shortage of a good resulted where it was badly needed. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive. In the United States alone, people pay insurers more than $1.2 trillion in premiums, and insurers pay out in claims and expenses as much or more than they take in. Profit margins are small because competition is fierce, and a year’s profits can be lost to a single firestorm, hurricane, or flood. (c) 2022 Barry Zalma & ClaimSchool, Inc. 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 at http://www.zalma.com and zalma@zalma.com. Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. 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/

No Good Deed Goes Unpunished Why A New Market for Insurers to Protect Small Businesses is Needed The Americans with Disabilities Act (ADA) was signed into law by President George H. W. Bush on July 26, 1990 with the good intentions of helping people with disabilities. It is a federal civil rights law that prohibits discrimination against people with disabilities in everyday activities. The ADA guarantees that people with disabilities have the same opportunities as everyone else to enjoy employment opportunities, purchase goods and services, and participate in state and local government programs. The stated goal of the ADA was to eliminate discrimination against individuals with disabilities. A major source of discrimination suffered by disabled individuals is the inability to gain access to public accommodations such as restaurants, hotels, movie theaters, gas stations and the facilities of other small businesses. The intent of the statute was to ascertain that businesses that want to comply with the law should be able to do so without undue cost, delay, or uncertainty. Although the statute was full of good intentions the law of unintended consequences took hold and those good intentions, were taken advantage of by unscrupulous people and their lawyers. Lawsuits proliferated by persons who claimed to be disabled or simply took the position that they were advocates for the disabled. In truth, the ADA advocates and their lawyers litigated under the ADA with the sole purpose of making money. Most had no intention or concern about the needs of those with disabilities. They took advantage of the provisions of the statute that allow individuals to enforce the accessibility requirements to bring a private right of action against individual businesses and property owners. This important reform in advancing equal access for the disabled has been used by some bad actors for monetary gain more than disability advocacy and threatens the small business economy in some states. The people abused by these bad actors are the owners of small businesses and owners and tenants of small retail establishments like the owners of bodegas, liquor stores, chiropractors, health care providers, and lessors. Under the private right of action allowed by the ADA an aggrieved party can seek injunctive relief remedying the violation and attorney's fees and costs. Monetary damages are not available to private parties seeking to enforce the requirements of the ADA. By providing differing remedies for private and public enforcement revealed to abusers a method to profit from the underlying intent of Congress to prevent private plaintiffs from recovering monetary relief under the ADA. Although the ADA sets its intent clearly, Small business owners have found they are added to the growing evidence of abuse of the private remedies provided by the ADA where, as a small business and small property owner, he or she either must litigate with the ADA advocates or succumb to the abusive lawsuit with a settlement. If they contact a lawyer, they will be advised that they will lose the litigation if there is even small technical errors of compliance and be required to pay fines and attorney’s fees to the advocates and their lawyers. The litigants and their lawyers know this and will offer to settle for a sum close to reasonable so that they can negotiate down to a reasonable amount. The complaints, and discovery are all computer generated by the advocate’s lawyers with only the names of the plaintiff, defendants and non-compliant part of the property, changed. The litigation expense for the plaintiff and counsel is minimal and for the defendant it is excessive. Small business people don’t have the funds necessary to protect themselves from an action legally filed under the ADA and concurrently pay to bring the property into compliance. Agreeing to an offer of settlement is the only choice available to a small business owner because no liability policy provides coverage for the defense or indemnity of the suit brought under the ADA. In a case with which I am familiar a law firm specializing in filing ADA lawsuits, and nothing else, sued a small business owner allegedly on behalf of a person claiming disabilities who met with the receptionist and made an appointment to which she never appeared. Shortly after her scheduled appointment the plaintiff filed and served an ADA lawsuit claiming that the doorbell to the business was mounted about 60 inches above the ground rather than the 40 inches required for the use of a person in a wheelchair, a technical violation of the ADA. In the 30 years since the building was acquired by its owner and leased by its tenant there were no complaints of the inability to use the doorbell. Regardless, the suit was filed and served, and defense counsel was required to be retained to avoid default at the expense of the owner and the tenant from their limited private funds. The abuse of the ADA started with its enactment. The abuse of the ADA is well known to Federal District Court and state judges, who see the same plaintiffs over and over again. There is nothing the judges can do, because of the clear language of the ADA statutes, require that the judge fulfill the requirements of the statute. Attempts have been made to curb the abuse. For example, in 2006, the Hastings Womens Law Journal, 17 Hastings Women's L.J. 93 2006 published an article entitled Private Enforcement of the Americans with Disabilities Act via Serial Litigation: Abusive or Commendable? by Carri Becker, then a JD candidate. The cases Ms. Becker described were identical to the suit I became aware of and whose defendant found itself to be one of a multitude of ADA lawsuits filed across the country and that the minor abuses claimed would cost thousands of dollars to cure plus the fees of the lawyers who brought the suit and the fees of counsel retained to defend the small business owner. Since 2006 ADA lawsuit abuse continued to be prolific throughout the nation. Profitability of ADA litigation has given rise to what courts have described as "a cottage industry" that has little or nothing to do with assisting people with disabilities. Ms. Becker noted that, for example, “a single law firm in Philadelphia has filed hundreds of lawsuits on behalf of two disabled men, reaping thousands in attorney's fees.” Adding to the burden, small businesses are forced to comply not only with the federal standards outlined in the ADA, but also with any state, county, or city-specific regulations. With so many different regulations to follow, it is not surprising that many, if not most, buildings constructed before 1990 are out of compliance. Compounding the problem is the fact that the regulations differ substantially. For example, California's Title 24 regulations require that curb ramps have a one-half inch lip at the bottom, beveled at a 45-degree angle, whereas the ADA requires a flush transition at the bottom of the ramp. Total compliance with both state and federal regulations becomes impossible. It becomes obvious that the intent of almost all the parties filing suits on behalf of people with disabilities are really designed to bring about a cash settlement. For example, although the property owner cured the deficiency with the placement of a new $5 doorbell the demand to settle the lawsuit before discovery and adding lawyers fees was $15,000. In addition, a check of court records indicated that the plaintiff who sued the small business had filed multiple ADA lawsuits. One explanation for many people's distaste for the enforcement of the ADA via serial litigation is that the plaintiffs and their attorneys stand to financially gain from each of the suits they file and often fail to make the property ADA compliant. EXAMPLES OF ADA LAW SUITS Common examples of ADA lawsuits may include when individuals visit several business establishments within the intent to identify ADA violations, which may include the lack of handicapped parking spaces or the lack of wheelchair ramps, and then suing that business for the violation although the plaintiff was not injured. In certain instances, the individual may drive by the establishment and search for violations in the parking lot or outside of the business and never actually enter the establishment or attempt to conduct any business there. These individuals can target several businesses at once, often with the intent to win a large sum of money from the business for their claimed lack of compliance. As the Los Angeles Times reported in November 2018, about 10,000 ADA lawsuits were filed in the first six months of that year. Businesses are able to handle the cost of the upgrades to ensure access. The lawyers that file the ADA lawsuits demand huge payouts. The law lets them do so without first giving the business owner a chance to fix the lack of availability of a compliant property. For example, according to the Orange County Register one Orange County firm filed 335 ADA cases in the past year, including three dozen for a visually impaired Montana woman. The Register concluded that: “This isn’t about access — it’s simple extortion.” [https://www.ocregister.com/2018/11/20/the-latest-abuse-of-the-americans-with-disabilities-act/] What the Register did not report was that the “extortion” is perfectly legal as a result of the ADA statute. In some cases, the lawsuits are collected from the comfort of the attorney’s car or even couch, driving by handicapped parking spots to assess violations or using Google Earth to find motels without accessible pool lifts for the disabled. Lawsuits aiming to bring about compliance with an important equal rights law like the ADA are important in advancing the cause. Some of the serial litigators are doing more to rake in damages than increase accessibility. As many states have statutes that go beyond the federal bill and offer individual lawsuit filers cash payments as well as attorney expenses, the incentives to file a lawsuit shift from accessibility to cash recovery. THE COSTS IMPOSED In California, in addition to having both sides’ legal fees covered by the defendant, a plaintiff may recover a fine of a minimum of $4,000 per ADA violation and the plaintiff is not required to offer a grace period for the violation to be rectified. ADA regulations are poorly dealt with by the nearly 30 million small businesses in the US. Small businesses often lack the expertise, capital and legal support to understand and adhere to the regulations. If a business owner’s first notice of non-compliance with the law is a lawsuit the system is askew, and the small businessperson is not equipped nor able to fund defense of the suit. Sadly, a few attorneys – the ADA “trolls” — realized that ADA can be a profit center by simply filing cases that, on the surface, have merit. But instead of pursuing those cases to a conclusion, the “trolls” offer to go away in exchange for a financial payoff. The “trolls” are especially active in California and New York, where state laws permit private individuals to recover money damages. For years, most of the ADA “troll” cases involved people in wheelchairs suing over physical or architectural accessibility. Suits would be filed, and the attorneys would then demand a certain amount of money to simply go away. These are not “frivolous” suits in the sense that they have no merit. What sets these lawsuits apart is that they are filed with such enormous volume that the attorneys involved could not possibly represent the plaintiffs properly in any one of them. The critical element of the “troll” lawyers’ business plan is volume. The attorneys have to file a lot of cases. And they do. One “pioneer” in this area was a wheelchair-bound California plaintiff whose attorney filed some 400 lawsuits claiming that he confronted virtually identical barriers to access at different businesses, mostly restaurants. These became referred to as “drive-by” cases because there was little or no proof that the named plaintiff had ever actually visited the businesses in question. Although only one of those cases ever actually went to trial, his attorney made an estimated $10 million, and it was not clear how many of the businesses actually fixed the supposed problem. A website, adaabuse.com, reports Mega-ADA-suit-filers one of whom was so egregious he was disbarred. Although there have been attempts to modify the ADA to avoid these abuses the statute remains unchanged. LIABILITY INSURANCE UNAVAILABLE Since no insurance policy provides coverage for an ADA suit because there is no claim of bodily injury, property damage or personal injury. Liability insurance, like that provided by a Commercial General Liability (CGL) policy or a Business Owners Policy (BOP) will never provide a defense or indemnity to an insured for lack of covered claimed injuries. Since an ADA suit neither makes a claim for property damage or bodily injury but only seeks an injunction requiring compliance and attorney’s fees there is no coverage under a Commercial General Liability policy or a Business Owners Policy leaving the small business owner to defend and negotiate a settlement with the troll. A PROPOSAL FOR THE INSURANCE INDUSTRY It seems to me that ADA will not be changed to protect against ADA abuse. Every small business in a facility built before 1990 or without concern for ADA requirements, like most, is a potential defendant in an ADA suit and will be held to uninsured ransom. No current liability insurance policy, CGL, BOP, or common liability insurance policy provides coverage for the ADA suit. As a result, a small business owner, lessor or lessee that protects with insurance will find their assets naked to the ADA trolls. The small business owner will need to retain counsel, defend the suit, pay the legal extortion or face a major judgment. The ADA has created a large market for the liability insurance industry who, by use of a simple endorsement to a CGL or BOP, can create coverage to protect the small business owner and work to defeat the ADA trolls ability to profit from the scheme. PROPOSED ENDORSEMENT The Endorsement wording, I propose follows: THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY It is hereby understood and agreed that the policy is revised to read as follows from the date of inception to the date of expiration stated in the Declarations: Americans With Disabilities Act Endorsement Special Limits of Liability Applying to this endorsement: $25,000 for the cost to make your property comply with the requirements of the ADA to conform to the accessibility required by the ADA and alleged to be in violation of the ADA by a civil suit naming you as a defendant. Insuring Agreement: We agree to pay whatever is required by counsel of our choice to defend and indemnify you if you are sued for violation of the Americans With Disabilities Act (ADA) that are claimed to have prevented a person with a disability or disabilities that the plaintiff or plaintiffs claim prevented the plaintiff(s), and/or others similarly situated, to access and use your premises because they were not in compliance with ADA standards as it relates to users with disabilities like the person suing as plaintiff. We also agree to indemnify you of the cost to bring your property in compliance with the ADA and correct the errors or deficiencies alleged in the suit brought against you, up to the limits of liability. All other terms and conditions remain the same. Every owner of a small commercial building, apartment house, rental property, or operating a small business that invites the public should or will rush to buy insurance to protect against the risk. The prudent insurer, with a staff of lawyers, adjusters, and contractors will rush to issue an endorsement that, for a reasonable additional premium, will find thousands of small business, small property owners, and everyone who is open to the public, eager to pay extra to add the coverage to their liability insurance policies. (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 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 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://podcasters.spotify.com/pod/show/barry-zalma/support; 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; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

How an Insurer Can Succeed With Professional Claims Handlers See the full article at EXCELLENCE http://zalma.com/blog/wp-content/uploads/2023/04/EXCELLENCE.pdf In search of profit, insurers have decimated their professional claims staff. They laid off experienced personnel and replaced them with young, untrained, unprepared people. A virtual clerk replaced the old professional claims handler. Process and computers replaced hands-on human skill, empathy and judgment. Money was saved by paying lower salaries. Within three months of firing the experienced claims people gross profit increased. Insurance is a business. Corporate insurers must show their shareholders a profit that pays dividends and increases the share price of the insurer. For centuries insurers understood that catastrophes, firestorms, windstorms, hurricanes and tornados could not be predicted. Some years the insurer will make profits and some years it will incur a loss. The prudent insurer recognizes, because of the impossibility of predicting all possible losses, they measured profitability over a decade or several decades. No insurer can measure its profitability for periods of a quarter of a year. Insurance is a service business. The insurance contract is a collection of promises made by the insurer to those persons or entities who face risks of loss pay for an insurance contract that promises to protect the insured against the risks of loss the insured faces. The person or entity insured relies on the professionalism of the employees of the insurer who are called upon to resolve the claims of the insured and provide the protection promised by the policy. Insurance Claims Professionals Insurers have developed over the last few centuries professional claims personnel who they trained to interpret the terms and conditions of the policy of insurance, investigate every claim thoroughly and assist the insured in the presentation and resolution of claims made by or against the insured. The promises are kept by the professional claims person: the adjuster or claims representative. The prudent insurer understands that keeping a professional claims staff dedicated to excellence in claims handling is cost-effective over long periods of time. A professional and experienced adjuster will save the insurer millions by resolving disputes, paying claims owed promptly and fairly, and by so doing avoiding litigation. The professional claims person exists to resolve claims to the satisfaction of the insured and the insurer. When the claims person does so the person insured will be satisfied that the promises made by the insurance policy were kept both the insured and insurer are satisfied with the interaction. Satisfying an insured that the promises made by the policy were fairly and completely kept is the key fulfillment of the insurer’s desire to avoid the expense and bad publicity of litigation. There will never be a suit for breach of contract or the tort of bad faith. Only when claims professionals resolve more claims for no less than is necessary to satisfy the insured neither party will need to involve counsel. A happy insured or claimant satisfied with the results of his or her claim will never find a need to sue the insurer. On the other hand, barely competent, incompetent or inadequate claims personnel will seldom resolve claims fairly and to the satisfaction of the insured or claimant. Inadequate claims personnel will often force insureds and claimants to public insurance adjusters and lawyers. It is axiomatic that every study performed on claims establishes that claims with an insured or claimant represented by counsel or a public insurance adjuster, cost more to resolve than those where counsel or a public adjuster is not involved. Prompt, effective, professional claims handling is cost effective for both the insured, the claimant and the insurer, and saves money for because there is no need to pay the fees of a lawyer or public adjuster. When the insurer fulfills the promises made by the policy to the satisfaction of the insured when the insured acquired the policy. Insurers who believe they can handle first or third party claims with young, inexpensive, inexperienced and untrained claims handlers should be accosted by angry stockholders whose dividends have plummeted or will plummet as a result. When an insurer compromises on staff, profits, thin as they may have been previously, will move rapidly into negative territory. Tort and punitive damages will deplete reserves. Insurers will quickly question why they are writing insurance. Those who stay in the business of insurance will either adopt a program requiring excellence in claims handling from every member of their claims staff or they will fail. The Need for Change The insurance business must change—this time for the better—if it is to survive. Insurers must rethink the firing of experienced claims staff and reductions in training to save “expenses” recognizing that the expense to train, educate and maintain a staff of professional claims handlers, is a small part of the money that flows out of an insurer’s coffers. The major expense is the cost to pay claims. When inadequate or inexperienced adjusters pay claims the insurer did not owe, refuse to pay claims it did owe, or pays more than is appropriate, the potential for an insurer to make a profit is reduced much more than is saved by reducing the expense incurred by paying a professional claims staff. Insurers should, if they wish to succeed, adopt a program to promote excellence in claims handling. Only with a staff of claims handlers dedicated to excellence in claims handling can insurers promptly, fairly and in good faith keep the promises made by the insurance policy and avoid charges of breach of contract and the tort of bad faith in both first and third party claims. Insurers must understand that they cannot adequately fulfill the promises they make to their insureds and their obligations under fair claims practices acts without a professional, well trained and experienced claims staff. An insurer must work vigorously and intelligently to create a professional claims department or recognize it will lose its market and any hope of profit. Insurance claims professionals are people who: can read and understand the insurance policies issued by the insurer. understand the promises made by the policy and their obligation, as an insurer’s claims staff, to fulfill the promises made. are competent investigators. have empathy and recognize the difference between empathy and sympathy. understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals. understand how to repair damage to real and personal property and the value of the repairs or the property. A Proposal to Create Claims Professionals To avoid claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers must, in my opinion, maintain a claims staff dedicated to excellence in claims handling. They must recognize that they, as representatives of the insurer, are obligated to assist the policyholder and the insurer to fulfill all the promises made by the insurer in the wording of the policy. An insurer can create a claims staff dedicated to excellence in claims handling by, at least: Hiring well trained, educated and empathetic insurance claims professionals. If professionals are not available, train all members of the existing claims staff to be insurance claims professionals. Train each member of the claims staff annually on the local fair claims settlement practices regulations. Supervise each claims handler closely to confirm all claims are handled professionally and in good faith. Explain to each member of the claims staff the meaning of the covenant of good faith and fair dealing from its inception in the 18th Century to the present. Require that staff treat every insured with good faith and fair dealing. Demand excellence in claims handling from the claims staff on every claim whether small or major, whether an individual or a corporate insured. Explain to the claims staff that the insurer is ready to immediately dismiss any claims handler who fails to treat every insured with good faith and fair dealing. If any experienced claims professionals exist on the insurer’s staff, the insurer must cherish and nurture them and use their experience and professionalism to train new claims people. If none are available, the insurer has no option but to train its people from scratch using available materials produced by the National Association of Insurance Commissioners, the State’s Department of Insurance, Insurance associations, and professionals who have – for a reasonable fee – the ability to properly and effectively train claims personnel. When the claims staff is made up of claims people who treat all insureds and claimants with good faith and fair dealing and provide excellence in claims handling litigation between the insurer and its insureds will be reduced exponentially. To keep the professional claims staff operating efficiently and in good faith they must be honored with increases in earnings and perquisites. Conversely, those who do not treat all insureds and claimants with good faith and fair dealing should be counseled and given detailed training if they are willing to learn. If less than professional claims persons continue with less than professional conduct they must be fired. The insurer must make clear to all employees that it is committed to immediately eliminating staff members who do not provide excellence in claims handling and must be ready to fire publicly and quickly those who cannot or do not provide excellence in claims handling. HOW TO CREATE AN EXCELLENCE IN CLAIMS HANDLING PROGRAM An excellence in claims handling program begins with a statement in the insurer’s claims manual or statement of professionalism, that it is dedicated to provide excellence in claims handling to every insured who presents a claim. The excellence in claims handling program should include, at a minimum: A series of lectures supported by text materials explaining: A definition of insurance. How to read and understand an insurance policy. How to interview an insured, witness, or claimant. How to assist an insured in the insured’s obligation to prove a claim. How to repair or replace damaged real or personal property. How to repair or replace damaged vehicles. How to identify causes of loss. How to recognize the red flags of fraud. The duty of the claims person who suspects attempted fraud. How to negotiate with an insured, claimant, public adjuster or lawyer to resolve a claim. How to recognize when retaining counsel to represent the insurer is necessary. How to retain counsel to represent the insured. How to read and understand the contract that is the basis of every adjustment, including but not limited to: The formation of the insurance policy. The rules of contract interpretation. Tort law: including negligence, strict liability in tort, and intentional torts. Contract law including: the insurance contract, the commercial or residential lease agreement, the bill of lading, nonwaiver agreements, proofs of loss, releases and other claims related contracts or documents. In addition the claims professional needs to understand: The duties and obligations of the insured in a personal injury claim. The duties and obligations of the insurer in a personal injury claim. The duties and obligations of the insured in a first party property claim. The duties and obligations of the insurer in a first party property claim. The Fair Claims Practices Act and the regulations that enforce it. The thorough investigation: Basic investigation of an auto accident claim. Investigation of a construction defect claim. Investigation of a nonauto negligence claim. Investigation of a strict liability claim. Investigation of the first party property claim. The recorded statement of the first party property claimant. The recorded statement or interview of a third party claimant. The recorded statement of the insured. The red flags of fraud. The SIU and the obligation of the claims representative when fraud is suspected. Claims report writing. The evaluation and settlement of the personal injury claim. How to retain coverage counsel to aid when a coverage issue is detected. How to control coverage counsel. How to instruct coverage counsel on the issue to be resolved. Instruction, by lecture, documents, webinars on: Dealing with a plaintiff’s lawyer. Dealing with personal injury defense counsel. The evaluation and settlement of the property damage claim. The Appraisal process. Arbitration and mediation and the claims representative. Claims handling without excellence is both dangerous and expensive. Insurers should develop a professional claims staff and provide excellence in claims handling because by so doing they will profit more than if they keep an inadequate and unprofessional claims staff. The training lectures must be supplemented by meetings between supervisors and claims staff on a regular basis to reinforce the information learned in the lectures. To guarantee that the training and requirement for excellence in claims handling is effective the insurer must also institute a regular program of auditing claims files to establish compliance with the requirement to deal fairly and in good faith to the insured. The insurer’s management must support the training and repeat it regularly. The insurer’s management must audit claims files to determine the training has taken and is being applied to each claim. There is no quick and easy solution. Training takes time; learning takes longer. If the insurer does not have personnel with the ability to train its staff it should use outside vendors who can do so effectively. Many such sources are available from professional associations, independent claims adjuster firms, independent counsel, insurance related publications, insurance related podcasts, and continuing education providers. I have created, to assist those who wish to create a professional claims staff dedicated to provide excellence in claims handling, a series of publications at my Locals community and at Substack.com. In addition, at Illumeo.com I produced a short Excellence in Claims Handling program available at https://www.illumeo.com/courses/introduction-excellence-claims-handling and multiple insurance claims related programs. I have published at Rumble.com more than 660 videos dealing with insurance, insurance coverage, insurance claims handling, insurance law, and investigation of claims with similar videos at YouTube.com. I have also published more than 4450 blog posts digesting appellate decisions modified from the actual language of the court decisions, condensed for ease of reading, and convey the opinions of the author regarding each case on insurance, insurance coverage, insurance claims handling, insurance law, and investigation of claims available for no cost to anyone who watches. Barry Zalma, Esq., CFE is available at http://www.zalma.com and zalma@zalma.com. Over the last 55 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Assistance in creating an excellence in claims handling program can be obtained from the following: Go to the Insurance Claims Libraryat https://zalma.com/blog/insurance-claims-library/ Subscribe to e-mail Version of Zalma’s Insurance Fraud Letter (ZIFL), it’s Free at https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D Read last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ Go to the Barry Zalma, Inc. web site at https://www.zalma.com Go to the blog at https://zalma.com/blog

It is Time For Insurers to be Proactive Against Fraud There has been much hand wringing and wailing over the malfeasance of the corporate officers and directors of FTX Crypto Exchange, Enron, WorldCom and others. No one, however, has gone to the root causes of the situation. It should be a foremost duty of the insurance industry to do whatever it can to defeat insurance fraud and work to compel prosecutors, police officers, fraud division of fraud bureau investigators, SIU investigators, and claims handlers to work to deter or defeat insurance fraud. It is not that some corporate executives, suddenly turned to the dark side and became evil. It is not that police and prosecutors have turned to the dark side. It is, I submit, because they were all trained by the Department of Justice and local prosecutors to believe that there was almost no penalty for their crimes. White-collar crime, especially insurance fraud, has been ignored for the last three decades as a serious crime. A crime unpunished emboldens others who might never consider a life of crime to pursue wealth the easy way. Prosecution of what the Coalition Against Insurance Fraud contends is a $308 billion annual insurance fraud take, the massive crime perpetrated against insurers and government “insurance” programs like Medicare are miniscule, to the point of non-existence. Fraud is rampant and almost universally unpunished. Every year more than $100 billion is stolen from Medicare and Medicaid programs across the country while private property and casualty insurers lose a similar loss closer to $200 billion every year to insurance criminals. Even with the recent push against Medicare and Medicaid fraud by the U.S. Department of Justice, it is still so easy, with so little chance of being caught, to commit insurance fraud. Schools were formed to teach gang members to commit insurance fraud so that they can move out of the dangerous field of armed robbery where, if not killed by the convenience store operator, the robber will surely be hunted down and prosecuted. In my 55 year career trying to defeat or deter insurance fraud I have been told by a prosecutor that the robbery of a convenience store, with a gun, where no one is hurt and $300 is stolen is more important than a $2,000,000 fraud against an insurer perpetrated by the stroke of a pen in the hands of an insurance criminal. The prosecutor refused to prosecute the insurance criminal and the insurer was compelled to defend the lawsuit filed by the fraud without any assistance from the criminal justice system. It appears to me: that the police and prosecutors ignore the person who commits a white-collar crime. Insurers, as victims of crime, are disfavored. Some police officers, prosecutors and judges believe that an insurance company cannot be a victim of a crime. Unlike all other crime victims insurers are required by statute to fund local police agencies and prosecutors, conduct the entire investigation, and present the case to the prosecutor on pain of losing the right to do business. The prosecutor will then review the materials and usually refuse to prosecute for lack of sufficient evidence. Police agencies – except for insurer paid for Insurance Fraud Bureaus – ignore insurance fraud and many other white-collar crimes. CALIFORNIA SIU REGULATIONS The full set of the Regulations are available at https://insurancefraud.us1.list-manage.com/track/click?u=a440c5b647697de580a2fd586&id=193011d9cb&e=5e34ee91b1 The California SIU Regulations were approved in their final form effective October 1, 2020. The SIU Regulations attempt to micromanage the work of insurance company efforts against insurance fraud and were enacted following a model act of the National Association of Insurance Commissioners (NAIC). The California Department of Insurance (CDOI), since the first enactment of the Regulations, has audited hundreds of insurers regarding the SIU Regulations and found that most insurers doing business in California that were audited were in violation of some portion of the SIU Regulations. Major fines, as much as $10,000 per violation, may be imposed on those insurers who refuse, or fail to, comply with the SIU Regulations. Failure to train 100 employees, as an example, can result in a fine from $500,000 to $1 million. In addition to the special assessments enacted to fund the fight against fraud, the California Department of Insurance audits insurers regularly to be sure that each insurer works hard to investigate and seek prosecution of the crime of insurance fraud in accordance with the California SIU Regulations. Simultaneously, the same Department of Insurance punishes insurers for not paying claims rapidly or for not treating insureds or claimants fairly, many of whom are experienced insurance cheats who use the Department’s consumer unit to brow-beat insurers into paying fraudulent claims. In addition, when an insurer’s state mandated SIU accuses an insured of fraud by reporting to the California Department of Insurance or denying a claim for fraud, the insurer will invariably be sued for fraud. Courts and juries, believing the bad reputation that insurers have in the press and public, will assess punitive and exemplary damages against insurers who accuse their insured’s of fraud looking with 20/20 hindsight at the investigation. Similar businesses in the financial sector, who are also regular victims of fraud and other crimes, are not taxed or compelled to investigate crimes committed against them. No one demands that the banking industry pay for prosecuting embezzlers or bank robbers. No one demands that convenience store operators pay for prosecuting people who hold up their stores on a daily basis. No Regulator requires stockbrokers to investigate fraudulent transactions. The imposition upon the insurance industry – and the attendant cost passed to the insurance consumer – is unique. Insurers are treated differently than all other businesses in the United States. George Orwell was right when, to paraphrase, what he had a character in “Animal Farm” say, “all businesses are equal, some are more equal than others.” Clearly, insurers are less equal with regard to crimes perpetrated against them than are other businesses. The SIU Regulations set forth minimum standards. They are not intended to be a text on the handling of suspected fraudulent insurance claims that must be followed slavishly. They do not even claim to be a complete guide to handling suspected fraudulent claims or the investigation of suspected insurance fraud. The Regulations are, rather, an outline of basic claims handling techniques when dealing with a suspected insurance fraud. Common findings of SIU compliance reviews, that insurers should attempt to avoid, include: SIU inadequate or non-existent; Suspected fraud not reported to District Attorneys, CDOI; Fraud referrals (FD-1s) contain errors/omissions; Fraud referrals submitted on outdated forms (FD-1s); Written anti-fraud procedures inadequate; SIU investigation procedures inadequate or non-existent; Continuing training not received by SIU; Anti-fraud training not provided by SIU; Training records incomplete or non-existent; Annual compliance report delinquent; Annual compliance report inaccurate or incomplete; and, Third Party Administrators (TPAs), contracted SIU's not monitored by insurer. When an insurer is found wanting it will be fined by the CDOI and could even lose its right to do business in the state. Other states have similar statutes to the California statute and Regulations following model statutes and regulations created by the NAIC. Do Insurers Get Their Money’s Worth From The Special Taxes Paid for Fighting Fraud? Not really. Since what drives fraudsters to pursue this type of crime is the fact that insurers and insurance regulators are unwilling to prosecute offenders. According to insurance fraud in the U.S. statistics, only a tiny portion — not even 2% — of frauds are prosecuted. The reasons for avoiding prosecution include high trial expenses and unpredictable outcomes. But even though it might be costly and demanding, the prosecution may serve as a plausible threat and thus deter fraudsters. What Do The Results Really Show? Insurance fraud prosecutions and investigations are anemic. Every two weeks I publish in Zalma’s Insurance Fraud Letter, reports of convictions for insurance fraud. Most convictions appear to be about frauds directed against federal “insurance” programs like Medicare, Medicaid, Flood and Crop Insurance programs. Many of the conviction are really the result of a qui tam or whistleblower suit. The criminals are laughing at the insurance industry, the police agencies and the prosecutors. If they are one of the few criminally convicted, they face an average sentence of only five years’ probation and 60 days in jail. Jail time is usually served on weekends so that they can still ply their fraudulent trade on weekdays. Some few convictions are other than health insurance fraud pursued by the state agencies. Fraud bureaus are not as effective as they want to be or want insurers to believe. Because Fraud Bureaus and Fraud Divisions in the various states have minimal staff. Very few of the cases referred for prosecution resulted in a conviction. Those convicted were a minimal percentage of the cases referred by insurers to the Fraud Bureaus. In California, and many other states, the law requires insurers to report suspected fraudulent claims to the Fraud Bureau. California insurers report approximately 2,000 – 3,000 suspected fraudulent claims each month. Few are investigated; fewer are reported to prosecutors for prosecution and even fewer reported to prosecutors for prosecution result in a trial or conviction. Contrary to the belief of many prosecutors, even though people are seldom physically injured by insurance fraud, it is a major crime with a statutory maximum punishment in most of those states where it is a crime, of five years in state prison. When an insured tries fraud by an arson-for-profit it is also a violent crime that often results in injury to bystanders, firefighters, or police officers. Specialists who know insurance and insurance fraud investigate it. It is, at least in California and those states that have a criminal insurance fraud statute, a rather simple crime to prove. It should be the type of case a prosecutor would want to file and take to trial since simply presenting a single false document to an insurer is sufficient to involve a conviction for violation of the local Insurance Frauds Prevention Act like California Penal Code Section 550. Instead, as an ex-prosecutor said to me: “insurance fraud is a crime prosecutors run away from because the cases are usually heavy with documentary evidence and are complex.” It is easy to prosecute an armed robber. A witness and a video of the robbery is all that is needed. When the public is told that a group of criminals steals $300 billion every year from the insurance industry the response is either a cheer or a yawn. Everyone involved in the business of insurance and everyone who buys insurance must make it clear that they are angry with what is happening to their insurance premium dollar. (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 Insured is Obligated to Read the Insurance Policy Every person that acquires a policy of insurance, whether designed to protect a dwelling, a commercial property, agriculture, crops from destruction by the actions of nature, or from liability arising from claims of torts, or cyber-attacks, must read and understand the policy before it is acquired to determine it provides the coverage requested. It must be read again before making a claim to an insurer. A majority of the courts that have been called upon to interpret an insurance policy require that the person seeking insurance must read the insurance contract or - at the very least - have, a lawyer or insurance professional read, understand and explain the policy to the person acquiring the insurance. For the last 55 years I have asked people making claims on an insurance policy whether they have read and understood their insurance policy. Most just laughed and claimed they never tried. Two, in my career, answered "yes." After further questioning it became obvious that both lied since they knew nothing about the terms or conditions of the policy, they claimed they had read and understood. These facts horrify me as an insurance coverage lawyer, a consultant and an expert witness testifying in courts across the United States about the purchase and sale of insurance contracts and insurance claims handling. My career, starting as a trainee adjuster in 1967 and later as an insurance coverage lawyer required that I read, understand and apply insurance policies issued by my clients to individuals and businesses. I have written, edited or revised, policies of insurance on behalf of insurer clients. I even read insurance policies I acquire to protect my property and protect me against tort liability before I order the policy. I know I am unusual, but I should not be. My practice should be the norm. What is Insurance? Many states have different definitions of the word "insurance" but each have the same essential elements: It must be a written contract. One party (the insurer) agrees with the other (the insured) as to the insurance provided. The insurer, for consideration (payment of a premium) agrees to indemnify the insured against a contingent or unknown event. The promise to indemnify is limited to certain identified risks of loss arising from a fortuitous, contingent or unknown event. Insurance is a contract like all other contracts. No one should enter into a contract ignorant of its terms and conditions. Many people would never sign a lease without reading it. No businessperson will sign a lease until he or she has been advised by a lawyer representing the businessperson alone, of its terms, conditions, limitations, and whether it is favorable to the person seeking to lease commercial property. No one should agree to the terms of a mortgage without reading the contract. Insurance contracts, however, are almost never read by the person insured. Some are not read by the agent, broker or underwriter who sell the insurance, or the lawyers retained to enforce it. Yet hundreds of hours of the work of insurance professionals are involved in the writing of policies of insurance. There is no viable excuse for not reading an insurance policy. Modern insurance policies, as a result of state statutes, are required to be written in plain language or easy to read language sufficient for anyone with a fourth‑grade education to understand. I describe the modern language of insurance policies as "Sesame Street English." Why, then, do people fail to read their insurance policy? Insurance policies have a bad reputation. People believe insurance policies are impossible to understand. Courts in the past have encouraged this belief. Policies are believed by the common person to be confusing and complicated. Sections of the contract are frequently cross‑referenced to other sections of the policy, often in a convoluted way. Insurance companies strive to make their policies as clear as possible because when coverage is subject to a legal challenge, ambiguity in the language will always be interpreted in a way that favors the insured, not the insurer. For example, in Insurance Company of North America v. Electronic Purification Company, 67 Cal. 2d 679, 689, 63 Cal. Rptr. 382, 433 (1967) the California Supreme Court noted: [T]he insurance company gave the insured coverage in relatively simple language easily understood by the common man in the marketplace but attempted to take away a portion of this same coverage in paragraphs and language which even a lawyer, be he from Philadelphia or Bungy, would find difficult to comprehend. Courts, called upon to interpret or enforce a contract of insurance, will always conclude that if an insurance contract is neither ambiguous nor difficult to comprehend, it will be enforced as written. [Sharbono v. Universal Underwriters Ins. Co., 139 Wash. App. 383, 394 (2007)] If twenty‑first century judges want to make better sense of the insurance area of law, they should start by understanding and admitting that: Almost nobody reads everything he or she signs; Almost nobody is able to read everything he or she signs; What drafters do want is to be able to treat those insured as if he or she had read everything. Drafters of insurance policies do not care if, in fact, he or she has not - and, indeed, in many cases would prefer that he or she did not. Do not call it a duty. That just adds insult to injury. However, it is black letter law that one who knowingly and voluntarily assents to a contract whose terms are contained in a writing should be held legally responsible for his or her actions by being held to those terms, in the absence of fraud, mistake, or other excusing cause. A party cannot negotiate, enter into and perform under a contract, only to later claim that it objected to some provision of the contract and thus retained a mental reservation to the terms of the agreement. Such a holding creates the risk that any disgruntled party may belatedly assert a lack of "voluntary" assent to a contract that it executed and performed. [DJ Mortg., LLC v. Synovus Bank, 750 S.E.2d 797, 325 Ga.App. 382 (Ga. App. 2013)] Whether almost no one reads their insurance policies, and my experience seems to establish the fact, that fact does not make them less effective contracts. An adhesion contract only means the person offering the contract gives the person to whom it is offered only two choices: accept the contract or reject the contract. If accepted the contract is enforceable. Plain Language Policies The need for - plain language - in an insurance policy was first described in the United States in the early 1950s. The Federal Government's most recent plain‑language initiative began in 1998, when President Clinton issued a Memorandum on Plain Language in Government Writing to the heads of executive departments and agencies. He said: We are determined to make the Government more responsive, accessible, and understandable in its communications with the public. By using plain language, we send a clear message about what the Government is doing, what it requires, and what services it offers. Plain language saves the Government and the private sector time, effort, and money. [President Clinton. Memorandum for the Heads of Executive Departments and Agencies on Plain Language in Government Writing. June 1, 1998. There is no one generally accepted definition of plain language or plain English. But most people agree that a plain‑language document is one in which people can: Find what they need, Understand what they find, and Act appropriately on that understanding. Key elements of plain language are to: Organize information so the most important behavioral or action points come first; Break complex information into understandable chunks; Use simple language or define technical terms; and Provide ample white space so pages look easy to read. In addition to the key elements, there are dozens of plain‑language guidelines and techniques such as using short sentences and active voice when possible. Document design principles highlight the importance of organization and format and enhance the impact of plain language. Good document design required bringing together prose, graphics and typography for purposes of instruction, information, or persuasion. Plain language does not require the writer of an insurance policy to - dumb down - the policy or eliminate the required precision necessary to make a contract enforceable. Sometimes, insurance professionals are concerned that using plain language will oversimplify information to the point where it is inaccurate or worthless. Plain language is not anti‑intellectual, unsophisticated, drab, or inadequate. Plain language has to do with clear and effective communication and should be considered nothing more nor less. It is the style of Abraham Lincoln, Mark Twain, and Winston Churchill Plain language is not just about vocabulary or grade level. Writing to a certain grade level does not necessarily ensure that the message is in plain language or understood by the intended audience. All materials, all terms and all conditions, especially in an insurance policy, should be evaluated for understanding with the intended users, regardless of grade‑level score. States followed the direction set by the federal government and required insurers to modify their insurance policies to be written in plain language. In doing so, the plain language insurance policies took away the argument that the policy was too hard to understand and, for that reason, should not be enforced to the detriment of the insurer. So, why, with the new, easy to read, plain language policies, do people fail to read the insurance policy? There is no logical answer. Perhaps it is the imbedded prejudice that makes some people believe they could never understand a policy even if they tried to read it. More likely it is simply the fact that most people trust the insurance agent or broker who obtained the policy for them and trust – often, without cause – the agent or broker to get the coverages they needed. From my 55‑years reading and interpreting insurance contracts I can only say that those people who did not read their policy get very upset when their insurance agent or broker tells them they acquired the best available policy and that it covers almost everything. However, in fact, it does not mean the policy covered every possible contingency. When an adjuster or lawyer points out that there is no available coverage for their claim, they contend they were deceived. Had the insured read the policy before it was acquired, he or she would know that no insurance policy covers every possible risk of loss faced by a person or business. Some risks of loss are difficult, if not impossible, to insure. Consider the risk of loss by war, atomic attack, earthquake, flood, etc. can be insured but only for extremely high premium and deductibles or self‑insured retentions so expensive to make such coverages unsaleable. Most insurance policies, as a result, exclude - in clear and unambiguous language - coverage for those extreme risks. The person insured who does not read the policy will be upset when his property is destroyed by a flood or earthquake. Had he read the policy and wanted coverage for earthquake or flood he or she would have been directed to a specialty insurer who is in business to issue a policy - probably expensive - that provides that coverage. The duty to read a policy appears in multiple jurisdictions. For example: In Georgia, the insured has a duty to read and understand the policy. [Cotton States Mut. Ins. Co. v. Coleman, 530 S.E.2d 229, 231 (Ga. Ct. App. 2000)] An insured who can read is required to read the policy and is presumed to have understood its contents. Any failure of an insured to acknowledge or notice these terms cannot circumvent a clear provision in the Certificate, as “[a]n insured has the duty to read the insurance policy or have it read to him or her.” [Jin Chai-Chen v. Metro. Life Ins. Co., 141 N.Y.S.3d 41, 43 (1st Dept. 2021); Am. S.S. Owners Mut. Prot. & Indem. Assn v. Carnival PLC (S.D. N.Y. 2022)] In Mississippi, a plaintiff is deemed as a matter of law to have read and understood the terms and conditions of his insurance contract. [Mladineo v. Schmidt, 52 So.3d 1154, 1167 (Miss. 2010)]. Under the duty‑to‑read and imputed‑knowledge doctrines, an insured is deemed to have knowledge of his insurance policy. An insured may not neglect or purposefully omit acquainting himself with the terms and conditions of the insurance policy and then complain of his ignorance of them. In Zaremba Equip, Inc v Harco Nat'l Ins Co, 280 Mich.App. 16; 761 N.W.2d 151 (2008) the Michigan Court of Appeal noted that an insured's duty to read insurance policy documents does not preclude a negligence action against the insurance agent. In that case, the plaintiff alleged negligence against the insurance agent on the basis that the agent failed to obtain the requested coverage or accurately represent the coverage obtained in the renewal policy. The jury found in favor of the plaintiff, and on appeal the Court of Appeal held that the trial court erred by failing to instruct the jury on comparative negligence regarding the plaintiff's failure to read the insurance policy and related documents. Because plaintiff's negligence claims in the instant case were tort-based, the Court of Appeal concluded that the plain language of the relevant statutes i.e., the comparative fault statutes, required the trial court to give defendants' requested instruction regarding comparative negligence. In addition, the Court of Appeal concluded that plaintiff's admitted failure to read the policy could qualify as comparative negligence and that the trial court should have permitted the jury to consider whether plaintiff unreasonably failed to read the insurance policy and related documents. [Holman v. Farm Bureau Gen. Ins. Co. (Mich. App. 2022)] In Texas, misrepresentation claims accrue when the policy is issued because the insured has a duty to read the policy and is responsible for understanding the policy's terms and conditions. [Khoei v. Stonebridge Life Insurance Co., No. H‑13‑2181, 2014 WL 585399, at *7 (S.D. Tex. Feb. 14, 2014).] Under Texas law, an insurance agent has no duty to explain policy terms, and the insured has a duty to read his [or her] insurance policy and is bound by its terms even if they were not fully explained. [Avila v. State Farm Fire & Cas. Co., 147 F. Supp. 2d 570, 581 (W.D. Tex. 1999); Dike v. Penn Ins. & Annuity Co., 295 F.Supp.3d 530 (E.D. Pa., 2018)] In Alabama, the insured was under a duty to read his insurance policy. [Alfa Life Ins. Corp. v. Reese, 185 So. 3d 1091, 1102‑04 (Ala. 2015)] Similarly, in West Virginia, a party to a contract has a duty to read the instrument. [Soliva v. Shand, Morahan & Co., Inc., 176 W. Va. 430, 345 S.E.2d 33 (1986)] Finding that an insured had a duty to read the coverage reduction provision, as directed by his insurer. [American States Ins. Co. v. Surbaugh, 231 W. Va. 288, 299, 745 S.E.2d 179, 190 (2013)] In so ruling, the West Virginia supreme court explained: In simple terms, the Court's decision is based on the premise that consumers do not read (and even if they do read, cannot understand) the terms that insurance companies use in insurance policies. Insurance companies give consumers the impression that they have full coverage under a comprehensive policy, and routinely fail to tell the consumer in plain English of the existence and the meaning of the legalistic exclusions that the insurance company has buried in a policy. So, when an insurance company seeks to avoid liability on an automobile insurance policy through the use of an exclusion, courts should first determine whether the insurance company created a reasonable expectation of coverage in the consumer, and whether the insurance company eliminated that expectation by telling the policyholder (1) that their coverage has been reduced or eliminated by the exclusion, and (2) that their premiums have been reduced to reflect the exclusion. [Mitchell v. Broadnax, 208 W.Va. 36, 537 S.E.2d 882 (W. Va., 2000)] In California, the general rule is that one who assents to a contract is bound by its provisions and cannot complain of unfamiliarity with the language of the instrument. [Madden v. Kaiser Found. Hosps., 17 Cal. 3d 699, 710 (1976).] An insured has a duty to read his policy. [Fields v. Blue Shield of Cal., 163 Cal.App.3d 570, 578 (1985).] If the language of an insurance contract is in fact clear and unequivocal, a party will be bound by its plain meaning, because >an insured has a duty to read his insurance policy. [Hallowell v. State Farm Mut. Auto. Ins. Co., 443 A.2d 925] Also, generally, a contracting party should discover mistakes at the time the contract is executed. [John HancockMut. Life Ins. Co. v. Cohen, 254 F.2d 417, 423 (9th Cir. 1958) (noting “one who is presented with an insurance policy has the duty to read it,” and finding this applies equally to the company issuing the policy); Lennar Mare Island, 139 F.Supp.3d at 1165 (finding insurer should have discovered mistake at time of signing insurance contract); Fin. Indem. Co. v. Messick (E.D. Cal. 2022)] In Indiana, an insured has a duty to read and become familiar with the contents of an insurance policy. [National Mut. Ins. Co. v. Curtis, 867 N.E.2d 631, 635 (Ind.Ct.App.2007). However, a different scenario arises if an insured relies upon the representation of the insurer or its agent that a particular loss is covered, as reasonable reliance upon an agent's representations as to what will be covered under a policy can override the insured's duty to read the policy.[Filip v. Block, 879 N.E.2d 1076, 1084 (Ind.2008) (citing Village Furniture, Inc. v. Associated Ins. Managers, Inc., 541 N.E.2d 306, 308 (Ind.Ct.App.1989)] In New Mexico, it is a fundamental tenet of contract law Athat each party to a contract has a duty to read and familiarize himself with the contents of the contract, each party generally is presumed to know the terms of the agreement, and each is ordinarily bound thereby.” [Ballard v. Chavez, 1994‑NMSC‑007, & 8, 868 P.2d 646, 648.] Under Washington law, the insured has an affirmative duty to read her policy and be on notice of the terms and conditions of that policy. [Dombrosky v. Farmers Ins. Co. of Washington, 54 Wash.App. 245, 257, 928 P.2d 1127 (1996); Int'l Marine Underwriters v. ABCD Marine, LLC, 313 P.3d 395, 402 n.14 (Wash. 2013)] In North Carolina, a person of mature years of sound mind who can read or write who signs or accepts a deed or formal contract affecting his pecuniary interest, it is his duty to read it, and knowledge of the contents will be imputed to him. Where an insured failed to use reasonable diligence by not reading the insurance policy he was not allowed to complain. [Holmes v. Sheppard, 805 S.E.2d 371, 376 (N.C. App. 2017)] Generally, in North Carolina, State Farm Mut. Auto. Ins. Co. v. Gaylor, 190 N.C. App. 448, 452, 660 S.E.2d 104, 107 (2008), requires persons entering contracts of insurance, like other contracts, to have a duty to read them and ordinarily are charged with knowledge of their contents. Where a party has reasonable opportunity to read the instrument in question, and the language of the instrument is clear, unambiguous and easily understood, failure to read the instrument bars that party from asserting its belief that the policy contained provisions which it does not. The events, communications, and documents in the record should only have alerted plaintiffs of the need to investigate their potential insurance coverage and make certain of any applicable insurance policies as soon as possible. [JBL Commc'ns, Inc. v. Amco Ins. Co., 865 S.E.2d 373(Table) (N.C. App. 2021)] Applying federal law, an Oregon District Court made clear that the insured had a duty to read the policy and acted unreasonably in relying on adjusters provided only as a A courtesy by an insurer fulfilling a National Flood Insurance policy. [Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 385 (1947)); Surfsand Resort, LLC v. Nationwide Mut. Fire Ins. Co. (D. Or., 2018)] Given the special nature of the insurance relationship involved under the NFIP, courts have made it clear that an insured has a duty to read and understand the terms of its SFIP. [Richmond Printing LLC v. Dir. Fed. Emergency Mgmt. Agency, 72 F. App'x 92, 98 (5th Cir. 2003)] In Illinois, the court has specifically recognized an insured's duty to read an insurance policy. [Perelman v. Fisher, 298 Ill. App. 3d 1007 1011, 233 Ill. Dec. 88, 700 N.E.2d 189 (1998)] When an insured sues his or her insurer after failing to note a discrepancy between the policy issued and received and the policy requested or expected, the insured will be bound by the contract terms because he or she is under a duty to read the policy. [First Mercury Ins. Co. v. Ciolino, 2018 IL App (1st) 171532, 107 N.E.3d 240 (Ill. App., 2018)] In Michigan, an insurance policy is, like any other contract, an agreement between two parties. [Tenneco Inc v. Amerisure Mut. Ins. Co., 281 Mich. App. 429, 444; 761 N.W.2d 846 (2008).] The goal in the interpretation of a contract is to honor the intent of the parties. [Klapp v. United Ins. Group Agency, Inc, 468 Mich 459, 473; 663 N.W.2d 447 (2003)]. The primary source of a policy of insurance is the language of the contract itself. [City of Grosse Pointe Park, 473 Mich. at 197‑198. Thus, insurance policies are enforced according to their terms, and a court may not hold an insurer liable for a risk it did not assume.] [Liparoto Const, Inc. v. Gen Shale Brick, Inc., 284 Mich. App. 25, 35; 772 N.W.2d 801 (2009).] In ordinary circumstances, the insured has no duty to read a renewal policy sent to him or her and may assume that the renewed policy contains the same terms and conditions as the previous policy unless warned that the renewal policy has changed. [Government Employees Ins. Co. v. United States, 400 F.2d 172, 175 (10th Cir. 1968); Whiteside v. New Castle Mut. Ins. Co., 595 F.Supp. 1096 (D. Del., 1984)] Reliance on Superior Expertise of Others An insured Plaintiff had a right to rely on the superior expertise of his, her or its agent and had the right to assume that its agent performed its duty. Thus, contrary to the defendant's contention, the plaintiff had no duty to read the policy if he, she or it relied on the superior expertise of the agent. [United Olympic Life Ins. Co. v. Gunther, 19 F.3d 1441, 1994 WL 96328 (9th Cir., 1994)] In Pennsylvania, the Pennsylvania Supreme Court has stated that the idea that people do not read or are under no duty to read a written insurance policy is not novel [Rempel v. Nationwide Life Ins. Co., Inc., 471 Pa. 404, 370 A.2d 366, 368 (1977); Tran v. Metropolitan Life Ins. Co., 408 F.3d 130 (3rd Cir., 2005); (citing Dowling v. Merchs. Ins. Co., 168 Pa. 234, 31 A. 1087 (1895)]. The Rempel court elaborated on this principle and held that the policyholder had no duty to read the policy unless under the circumstances it is unreasonable not to read it and held that the question of whether policyholders' reliance on the agent's allegedly fraudulent representations was justifiable should be presented to the jury. [Tran v. Metropolitan Life Ins. Co., 408 F.3d 130 (3rd Cir., 2005)] It was also held that the policyholder has no duty to read the policy unless under the circumstances it is unreasonable not to read it. [Tonkovic v. State Farm Mut. Auto. Ins. Co., 513 Pa. 445, 521 A.2d 920 (Pa., 1987)] In Kansas, the courts provide an insured an exception to the requirement that the insured read the policy. The Tenth Circuit found it clear that in Kansas the insured may assume that an insurance policy will conform to the application. The insured may rely on this assumption and is under no duty to read the policy to see whether it does in fact conform. [Stamps v. Consolidated Underwriters, 205 Kan. 187, 468 P.2d 84; German American Ins. Co. v. Darrin, 80 Kan. 578, 103 P. 87. The purpose of allowing such relief is to make the insurance policy reflect the expectations of the insureds when they executed the application. [Rider v. State Farm Mut. Auto. Ins. Co., 514 F.2d 780 (10th Cir., 1975)] Only a Fiduciary is Obligated to Read or Explain the Terms of the Policy to the Insured An agent or broker has no duty to read or explain the terms of the contract to the insured absent a special, fiduciary relationship. [Smith v. Union Nat'l. Life Ins. Co., 286 F.Supp.2d 782, 787 (S.D.Miss. 2003)]. Mississippi law imposes no fiduciary duties on an insurance agent to an insured. [Walden v. Am. Gen. Life, 244 F.Supp.2d 689, 696-97 (S.D.Miss. 2003); Hicks v. N. Am. Co. for Life & Health Ins., 47 So.3d 181, 191 (Miss. Ct. App. 2010; Wilson v. Kemper Corp. Servs. (S.D. Miss. 2022)] When a court held that there may be no duty to read an insurance policy where misrepresentation and concealment are alleged under certain circumstances an insurer may be liable for misrepresentation or failure to deliver agreed‑upon coverage where the agent misleads the insured as to the extent of coverage, even though the insured did not read the policy and discover the actual extent of the coverage. [Lin v. John Hancock Variable Life Insurance Company, B189108 (Cal. App. 4/30/2007) (Cal. App., 2007)] It has long been the law in Oklahoma that an insured's failure to promptly examine a policy and discover departure from an insurance agent's assurances does not defeat reformation of the policy. [Commercial Casualty Insurance Co. v. Varner, 160 Okl. 141, 16 P.2d 118 (1932), followed by Warner v. Continental Casualty Co., 534 P.2d 695 (Okla.App.1975).] Under Oklahoma law, an insured has no duty to read his written policy and notice discrepancies between it and previous representations of a soliciting agent. [Business Interiors, Inc. v. Aetna Cas. and Sur. Co., 751 F.2d 361 (10th Cir., 1984)] The Insurance Contract is Usually Enforceable as Written If the contract is accepted, it should be binding upon both parties as long as it is clear and unambiguous and none of the exceptions to the requirement that the policy must be read by the insured it will be enforced as written. I don't believe it is necessary to change the language used by a court interpreting an insurance contract. I only expect that the court will interpret the contract as binding as long as it is clear and unambiguous and was not obtained as a result of mistake, misrepresentation of material fact, concealment of material fact or fraud. There is no question that most people, regardless of case law, do not read their insurance policy. Whether read or not all of those contracts are enforceable, and no one should argue that the terms should be ignored because they were not read. Courts, interpreting insurance policies, seeking to deal fairly and in good faith with both parties to the insurance contract, must: Recognize that all parties to the insurance contract are required to treat each other with the utmost good faith and do nothing to deprive the other of the benefits of the contract. Read every word in the insurance policy from: the cover sheet, to the declarations page, to the basic wording, to all endorsements, and every other word up to the signature by the insurer. Identify all parties to the contract. Determine whether the policy was acquired from an insurance agent representing the insurer or a broker representing the insured. Determine if the insured actually read the policy before ordering it. Determine if the insured read the policy after it was issued and delivered to the insured. Determine if any specialist B lawyer, risk manager, insurance consultant, agent or broker B advised the insured about the contents of the policy. Determine if any mistakes were made in the production of the policy wording. Determine if either party: Misrepresented a material fact. Concealed a material fact. Deceived the other. Attempted fraud. Defrauded the other. Determine if the policy wording contains any ambiguity that would affect the rights and obligations of the parties. Find the best way for each of the parties to the contract obtain the benefits of the contract. Determine how each party has treated the other with the utmost good faith and fair dealing. Make a ruling that is fair, reasonable, and allows the parties to the contract to keep the promises made. Is Failure to Read a Policy a Defense to Negligence of the Agent or Insurer? An insured has no right to rely on an agent's patently absurd interpretation of a policy. An insured may rightfully rely on an agent's plausible interpretation of a policy, so long as the interpretation does not conflict with the printed policy. [Flamme v. Wolf Ins. Agency, 239 Neb. 465, 476 N.W.2d 802 (1991); Bayer v. Lutheran Mut. Life Ins. Co., 184 Neb. 826, 172 N.W.2d 400 (1969).] If an insured could have read and understood the policy, then the insured should be charged with knowledge of the policy's contents. By analogy to misrepresentation rules and the rationale for those rules, the court will usually hold that absent a reason for the insured's failure to read the policy, if a policy provision is clear and unambiguous, then the insured's failure to read the policy provision will insulate the agent from liability for failure to explain that provision. This holding comports with decisions from other state courts. [Underwriters Adjusting Co. v. Knight, 193 Ga.App. 759, 389 S.E.2d 24 (1989) (insured's claim against agent for failure to procure proper insurance is defeated by the insured's failure to read the policy); Farm Bureau Mut. Ins. Co. v. Arnold, 175 Ga.App. 850, 334 S.E.2d 733 (1985) (insured's claim against agent for failure to procure proper insurance was not defeated because a reading of the policy would not have revealed the defect); Barnes v. Levenstein, 160 Ga.App. 115, 286 S.E.2d 345 (1981) (insured's claim against agent for failure to procure proper coverage is defeated because reading the policy would have informed the insured of the lacking coverage and because there was no good reason why the insured had failed to read the policy); Heritage Manor of Blaylock v. Petersson, 677 S.W.2d 689 (Tex.App.1984) (insured had a duty to read the policy and, failing to do so, would be charged with knowledge of its contents). Town & Country Mut. Ins. Co. v. Savage, 421 N.E.2d 704 (Ind.App.1981) (insured's failure to read the policy can be raised as contributory negligence); Martini v. Beaverton Ins. Agency, Inc., 314 Or. 200, 838 P.2d 1061 (1992) (insured's failure to read the policy can be raised as contributory negligence). Several courts have held, similarly, that an agent has no duty to explain clear and unambiguous policy terms. [Bush v. Mayerstein-Burnell Financial Services, 499 N.E.2d 755 (Ind.App.1986); Banker v. Valley Forge Ins. Co., 363 Pa. Super. 456, 526 A.2d 434 (1987); Dahlke v. John F. Zimmer Ins. Agency, Inc., 515 N.W.2d 767, 245 Neb. 800 (Neb. 1994)] When a plaintiff's admitted failure to read the policy qualifies as comparative negligence a trial court should have permitted the jury to consider whether plaintiff unreasonably failed to read the insurance policy and related documents. [Holman v. Farm Bureau Gen. Ins. Co. (Mich. App. 2022)] Where a party has reasonable opportunity to read the instrument in question, and the language of the instrument is clear, unambiguous and easily understood, failure to read the instrument bars that party from asserting its belief that the policy contained provisions which it does not. [Jasmen Corp. v. Edwards (E.D. N.C. 2022)] The Virginia Supreme Court, in General Ins. of Roanoke, Inc. v. Page, 464 S.E.2d 343, 250 Va. 409 (1995) the defendant agent contended on appeal, as it did at trial, that the insured, Page's, failure to read the insurance policy constituted negligence, as a matter of law, and that such negligence proximately caused his losses and precluded recovery against it. A person who signs an application for life insurance without reading the application or having someone read it to him is chargeable with notice of the application's contents and is bound thereby. [Peoples Life Ins. Co. v. Parker, 179 Va. 662, 667, 20 S.E.2d 485, 487 (1942); Royal Insurance Co. v. Poole, 148 Va. 363, 376-77, 138 S.E. 487, 491 (1927).] Similarly, failure of a grantor to read a deed will not relieve him of obligations contained therein. [Carter v. Carter, 223 Va. 505, 509, 291 S.E.2d 218, 221 (1982).] In Metro Realty v. Woolard, 223 Va. 92, 99, 286 S.E.2d 197, 200 (1982) held that absent fraud, one who has capacity to understand written document and signs it without reading it or having it read to him is bound thereby.] In Oregon, the Supreme Court noted that although the parties and the trial court characterized the issue as whether plaintiff had a "duty to read the insurance policy," it refused to deal with duty but, rather, emphasized that the issue is not whether plaintiff had a "duty." Rather, the issues are framed more precisely this way: May defendant raise plaintiff's failure to read the policy as a specification of comparative fault? Was there evidence from which the jury could have found that, in the circumstances of this case, it was unreasonable in the light of foreseeable risks for plaintiff not to read the policy and that plaintiff's unreasonable failure to read the policy contributed to his damages? The answer both of those questions was "yes." The trial court committed reversible error when it struck defendant's specification of comparative fault alleging that plaintiff failed to read the insurance policy after obtaining the policy from defendant and when it instructed the jury not to consider plaintiff's failure to read the insurance policy in assessing his comparative fault. Accordingly, the Supreme Court reversed the trial court. [Martini v. Beaverton Ins. Agency, Inc., 314 Or. 200, 838 P.2d 1061 (Or. 1992)] In Kentucky, the Supreme Court, unlike other courts, concluded that the trial court erred when it found appellants contributorily negligent by virtue of their failure to read and understand the fire insurance. [Grisby v. Mountain Valley Ins. Agency, Inc., 795 S.W.2d 372 (Ky. 1990)] In New Jersey, the comparative fault defense traditionally will not apply in a plaintiff's suit alleging a professional's malpractice, at least in those cases in which the defendant argues that the plaintiff was at fault in failing to understand or to perform the task for which the professional was hired. The Supreme Court of New Jersey held that the comparative negligence defense is unavailable to a professional insurance broker who asserts that the client failed to read the policy and failed to detect the broker's own negligence. It is the broker, not the insured, who is the expert, and the client is entitled to rely on that professional's expertise in faithfully performing the very job he or she was hired to do. [Aden v. Fortsh, 169 N.J. 64, 776 A.2d 792 (N.J. 2001)] In Frank B. Hall & Co. v. Beach, Inc., 733 S.W.2d 251 the "failure to read" defense was raised after the insured sued the broker, Frank B. Hall & Co., and the carrier for failure to pay a claim, violations of the DTPA and negligence. Hall affirmatively pled failure to read the policies as a defense and the insured's president admitted that he did not read the policies. Hall contended the trial court erred in failing to submit its requested issue to the jury regarding negligence in failing to read the insurance policies. The court agreed that Hall's issues on failure to read the policies should have been submitted as to the negligence issue. The court stated contributory negligence was a common-law defense and thus could not be used to defeat recovery under Texas statutes. The court determined this rule was equally applicable to Insurance Code claims and held any contributory negligence attributable to the insured could not defeat recovery on its Insurance Code claims. [Wyly v. Integrity Ins. Solutions, 502 S.W.3d 901 (Tex. App. 2016)] In conclusion, if insurance companies are to be required to so frame their policies so that the purchaser may easily understand just what he is getting in the way of coverage for his insurance dollar, it is a matter which addresses itself to the sound discretion of the lawmaking authority. It is not the function of courts to make contracts for the parties nor to protect the unwary purchaser of an insurance policy against his failure to read carefully and understand the extreme limitations of the protection afforded him by the terms of a cheap insurance policy. [Foster v. North American Acc. Ins. Co., 86 S.W.2d 476 (Tex. App. 1935)] The Law of Unintended Consequences It took quite a few years but finally the Legislatures enacted the “easy to read” statutes compelling insurers to use common language easily understood by the public. In so doing, policies became less precise and contrary to the intent of the statutes, there is more litigation claiming ambiguities in insurance contracts that must be construed against the insurer. The law of unintended consequences took hold and easy to read policies have grown insurance coverage litigation logarithmically. (c) 2022 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

How Courts Deal With Defenses to the Tort of Bad Faith When the Court found that an insureds claim was debatable, the bad-faith claim must fail. Bad-faith claims were insufficient as a matter of law where the status of Kentucky law on the issue was "fairly debatable." [Willowbrook Invs., LLC v. Md. Cas. Co., 325 F.Supp.3d 813 (W.D. Ky. 2018) The courts, legislatures and the insurance departments of the various states must recognize that an insurer with the best of all possible fraud investigation units will, on occasion, err. A company with a highly trained and motivated fraud investigation unit made up of professional investigators and attorneys who are human, will err on occasion. The public, and those who serve on juries, must understand that an aggressive fraud investigation, even if it reaches an incorrect result, is not malicious and if negligent, not an act of bad faith. Today, if a jury believes the insurer was wrong in its decision, it must award punitive damages, regardless of the instructions read to it by the judge about the elements of the tort. Because of the bad publicity created by the policyholders’ bar and the press reports of massive bad faith judgments, insurers are not liked by a majority of the people who serve on juries. The prudent defense lawyer will assume that at least three of the jurors will voted for the policyholder, regardless of the evidence presented, and defense counsel must win over the remaining nine. The bad publicity that was given to insurers by the early bad faith cases has poisoned the public image of insurers. The plaintiff insured only needs to convince six of the jurors who may sit in judgment without anti-insurer prejudice to receive a majority verdict with 9 votes. As a business necessity, insurers must have the confidence of the public that they are financially sound, secure and have an overabundance of funds available to pay claims. The need to show the security of the company to the public has the effect of convincing juries that a multimillion-dollar verdict against the insurer will not hurt it. Plaintiffs’ lawyers disingenuously tell juries that they don’t want to harm the insurance company, all they want to do is get its attention. They argue that a $10 million verdict might cause an itch in the corporate pocketbook sufficient to cause management to scratch away the need to improperly reject claims. The argument is hard for a jury of working people to withstand. The Tort of Bad Faith Has Served its Purpose The tort of bad faith, and the punitive damages that seem to go with it, have, in my opinion, served their purpose. Insurers now have professional claims departments. Insureds are almost universally treated with courtesy and respect. More than 90% of all claims are resolved without litigation or argument. Legitimate claims are paid with alacrity. Insurance fraud continues to grow. The amount of money taken from insurers every year are in the tens or hundreds of billions of dollars. The fear of punitive damages has made the fight against fraud difficult and almost impossible. Even when an insured is arrested, tried and convicted of the crime of insurance fraud, or attempted insurance fraud. Attempts will still be made to sue the insurer for the tort of bad faith. Before I retired from the practice of law, I contended daily with insurers who wanted to fight fraud but who found they must decide to pay a claim rather than face the exposure of a punitive damage judgment. Sometimes, the settlement of bad faith lawsuits, where there has been no bad faith and an appropriate denial of a claim or refusal to pay a policy limits demand, the insurer concludes it must pay more to avoid a potential run-away jury. I can, as my mentors taught me 53 years ago, state with confidence the opinion that an insurer should spend millions of dollars for the defense of a non-covered or fraudulent claim and not a dime for tribute to an insured who brings a spurious bad faith law suit. However, practical insurance professionals have a need to resolve litigation as inexpensively as possible to protect the shareholders who want the insurer to make a profit. As a result, the insurer will disobey the millions for defense covenant and will make a business decision to pay the non-covered loss or the fraud, rather than take a chance on an adverse verdict. As with all things in insurance, the attitudes of insurers move in cycles. More often than not, I am now called upon to testify as an expert in bad faith cases that the insurer insists on taking to trial by jury rather than pay off a scofflaw. I can only hope that this cycle continues and more attempts at fraud are defeated. The Fourteenth Amendment to the U.S. Constitution No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. If the law allows an insured to sue for tort damages as a result of a breach of the covenant of good faith and fair dealing equal protection should allow an insurer to sue the insured for tort damages as a result of the breach of the same covenant. Some litigants cannot, under our system of constitutional law, be more equal than others. Yet, until a court agrees, insureds are more equal than their insurer. Although the courts may think so, the insured’s breach of the covenant of good faith and fair dealing is also separately actionable as a contract claim and that some forms of misconduct by an insured will void coverage under the insurance policy. (Imperial Cas. & Indem. Co. v. Sogomonian (1988) 198 Cal.App.3d 169, 182. To paraphrase what George Orwell opined in his novel Animal Farm some litigants are more equal than other litigants. Since both the insured and the insurer freely entered into the contract of insurance it would appear only fair if one is allowed to obtain tort damages for breach of the covenant of good faith and fair dealing the other should also have the same opportunity. While Connecticut, like California, recognizes that every insurance policy carries "an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement," [De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 432–33, 849 A.2d 382 (2004)] no Connecticut court has recognized a tort of “reverse bad faith” against insureds, nor are Connecticut courts likely to do so in light of established precedent. It follows that because an insured's breach of the covenant is not actionable in tort, an insurer cannot lessen responsibility for its own tortious conduct by putting forth an affirmative defense of bad faith. [Hartford Roman Catholic Diocesan, Corp. v. Interstate Fire & Cas. Co., 199 F.Supp.3d 559 (D. Conn. 2016)] An insurer can commit the tort and is obliged to pay tort and punitive damages. An insured, who is totally evil, whose only interest in the insurance agreement is to defraud the insurer, who refuses to cooperate with the insurers investigation, who does everything possible to harm the insurer, cannot commit the tort. The abuse of the tort of bad faith has become so extreme that the tort must, in my opinion, be eliminated. Since the weight of authority is that no matter how reasonable are the arguments to do away with the tort of bad faith, the tort must be applied fairly and equally to both insureds and insurers and if that is impossible the tort of bad faith is contrary to the requirements of the Fourteenth Amendment to the U.S. Constitution and its requirement for equal protection. An insurer who is wronged by its insured should have the same right to tort damages and punitive damages for breach of the covenant as can the insured. No litigant should ever be more equal than another.

Professional Insurance Adjusting At the turn of the century, insurers, in a search for profit, decimated their professional claims staff. They laid off experienced personnel and replaced them with young, untrained and unprepared people. A virtual clerk replaced the old professional claims handler. Process and computers replaced skill and judgment. Insurers intentionally forgot that the promises made by an insurance policy are kept by the professional claims person. A professional claims staff is a cost-effective method to avoid litigation. The professional claims person is an important part of the insurer's defense to litigation against insurers for breach of contract. A staff of claims professionals dedicated to excellence in claims handling are a profit center for an insurance company. Experience establishes that claims professionals resolve more claims for less money without the need for either party to involve counsel. A happy insured or claimant satisfied with the results of his or her claim will never sue the insurer. Incompetent or inadequate claims personnel force insureds and claimants to lawyers. Every study performed on claims establish that claims with an insured or claimant represented by counsel cost more than those where counsel is not involved. Prompt, effective and professional claims handling saves money and fulfills the promises made when the insurer sold the policy. Insurers who believe they can handle first or third-party claims with young, inexperienced and inexpensive claims handlers will be faced with the screams of angry stockholders. Profits, thin as they are, will move rapidly into negative territory. Punitive damages as punishment for bad faith claims handling will deplete reserves. Insurers will quickly question why they are writing insurance. Those who stay in the business of insurance will either adopt a program requiring excellence in claims handling from every member of their claims staff, or they will fail. Insurance is a business. It must change if it is to survive. It must rethink the firing of experienced claims staff and reductions in training to save “expense.” Excellence in Claims Handling Excellence in claims handling is a program that can help insurers avoid charges of bad faith in both first and third party claims. An insurer must understand that it cannot adequately fulfill the promises it makes to it insured and the Fair Claims Practices Act which exist in almost every state, when dealing with claimants without excellence in claims handling. An insurer must work intelligently and with vigor to create a professional claims department. Insurance claims professionals are: People who can read and understand the insurance policies issued by the insurer. They understand the promises made by the policy and their obligation, as an insurer’s claims staff, to fulfill the promises made. They are all competent investigators. They have empathy and recognize the difference between empathy and sympathy. They understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals. They understand how to repair damage to real and personal property and the value of the repairs or the property. An insurer whose claims staff is made up of people who are less than Insurance Claims Professionals will be destroyed by expensive and counter-productive litigation. A Proposal to Create Claims Professionals To avoid claims of bad faith; to avoid punitive damages; to avoid losses; and to make a profit insurers must maintain claim staffs who are dedicated to excellence in claims handling. That means they will make sure every promise made in every policy is satisfied by the: Insurers who only hire insurance claims professionals. Insurers who train the claims staff to be insurance claims professionals. Insurers who require that the claims staff treat every insured with good faith and fair dealing. Insurers who demand excellence in claims handling from the claims staff. The insurance industry for the last 25 years has decimated the number of insurance claims professionals for insurers to hire. If any experienced claims professionals exist in the insurer’s staff, the insurer must cherish and nurture them. If none are available, the insurer has no option but to train its people. Those who treat all insureds and claimants with good faith and fair dealing and provide excellence in claims handling must be honored with increases in earnings and perquisites. The insurer must immediately eliminate those who do not provide excellence in claims handling from the claims staff. What Sources Are Available to Obtain Training? Insurance training is available across the country by correspondence, in local colleges and universities and from law firms that will provide the training as a marketing tool. None of these sources are directed to producing insurance claims professionals. They do provide the basic background information necessary to begin the process of becoming an insurance claims professional. In that regard, I have created electronic training programs on professional claims handling that are available from experfy.com and a different set of courses from illumeo.com. An excellence in claims handling program can include a series of web-based lectures supported by text materials like my claims books available at amazon.com and over the insurance claims library at my web site at https://zalma.com. The web lectures must be supplemented by meetings between supervisors and claims staff on a regular basis to reinforce the information learned in the lectures. In addition, the insurer must institute a regular program of auditing claims files to establish compliance with the subjects studied. There is no quick and easy solution. The training takes time. Learning takes longer. The insurer’s management must support and reinforce the training regularly. The excellence in claims handling program requires a minimum of the following: The insurance policy — how to read and understand the contract that is the basis of every adjustment. The formation of the insurance policy. Tort law including negligence, strict liability in tort, and intentional torts. Contract law including the insurance contract, the lease agreement, the bill of lading, non-waiver agreements, proofs of loss, releases and other claims related contracts. The duties and obligations of the insured in a personal injury claim. The duties and obligations of the insurer in a personal injury claim. The duties and obligations of the insured in a first-party property claim. The duties and obligations of the insurer in a first-party property claim. The Fair Claims Practices Act and the regulations to enforce it. The thorough investigation. Basic investigation of an auto accident claim. Basic investigation of a construction defect claim. Basic investigation of a non-auto negligence claim. Basic investigation of a strict liability claim. Basic investigation of the first-party property claim. The recorded statement of the first-party property claimant. The recorded statement or interview of a third-party claimant. The recorded statement of the insured. The red flags of fraud. The SIU and the obligation of the claims representative when fraud is suspected. Claims report writing. The evaluation and settlement of the personal injury claim. How to retain coverage counsel to aid when a coverage issue is detected. How to control coverage counsel. How to retain an expert. How to control the expert. Dealing with a plaintiffs’ lawyer. Dealing with personal injury defense counsel. The evaluation and settlement of the property damage claim. Arbitration and mediation and the claims representative. It Takes Courage to Fight Insurance Fraud The legislatures of the various states, the United States Congress, the National Association of Insurance Commissioners, The National Insurance Crime Bureau and insurance industry groups have finally decided that the war against insurance fraud is worth fighting. Until the states, the local police agencies, the district attorneys, the United States Attorneys, and the Attorneys General of the various states join in the battle it will be fought to a stalemate. The insurance industry cannot successfully fight insurance fraud alone. Insurance industry sources estimate insurance fraud from lows of $80,000,000,000 ($80 billion) a year to highs of $300,000,000,000 ($300 billion) a year. Regardless of which, if any, estimate is accurate the amount of money going to insurance criminals is staggering and approaches no less than 3% to 10% of premium collected. Every two weeks Zalma’s Insurance Fraud Letter publishes lists of convictions. The major volume of such convictions deal with Medicare and Medicaid fraud. Basic property and casualty fraud convictions are seldom described except when the perpetrator confesses or pleads guilty. Few go to trial. Those who are convicted usually are sentenced to short stays in jail or to home confinement. Proposal Insurance fraud is not a local problem. It is a depletion of the wealth of the entire country. The lawyer for the Department of Insurance of each state is the State Attorney General. A special unit could be established in the office of the Attorney General, funded with the monies taken from the insurance industry to support the war against insurance fraud. This unit should be given a simple mandate: File and prosecute every insurance fraud brought to the unit by the Fraud Division that has a better than 50% chance of success. The unit should not concentrate its efforts on major insurance frauds. Those can best be prosecuted by major fraud units already existing in the District Attorney’s offices and in offices of the US Attorney. The state’s unit should concentrate on prosecuting every-day insurance fraud, the frauds of opportunity that take 90% of the money paid to fraud perpetrators, in the range of $5,000 to $50,000. Single counts should be prosecuted. When prosecutors file multiple charges against individual defendants the case becomes a major action requiring a great deal of time to prosecute. Judges and juries do not want to be involved in a prosecution that takes months to prosecute. If there are multiple counts available, the prosecutor should charge only the one where the evidence of fraud is overwhelming. If the jury finds for the defendant the prosecutor can charge the next count continuously until the statute of limitation runs. If all available are charged in one case the prosecutor will offend the judge and jury and the defendant will get mercy from the jury. Overcharging prosecution is as bad as not charging at all. Teeth must be put in the posters that say “commit insurance fraud, go to jail.” Departments of Insurance are receiving reports from insurers of thousands of potential fraudulent claims a month. They do not have the staff, the ability or the desire to investigate and prosecute every case brought to them. If only 5 percent of those claims are investigated and prosecuted to conviction, the deterrent effect will be enormous. The Department of Insurance should issue a press release concerning every arrest and conviction. Newspapers should report daily that insurance criminals have been arrested and are going to trial or were convicted and are going to jail. Jail sentences should be made mandatory and remove from local judges the right to grant convicted felons probation and restitution only. Sentences across the state must be consistent and true punishment. I have seen such inconsistency where cases, after conviction, the criminals received sentences that ranged from 24 hours to 24 years. It is not enough for the state to say that the insurance companies must investigate and work to fight fraud. The state must also aggressively and vigorously fight insurance fraud. Today, a person perpetrating an insurance fraud need only be concerned that an aggressive fraud investigation might delay, or reduce, the amount he might recover from his crime. Criminal prosecution for the crime of insurance fraud is so minuscule, in relation to the amount of fraud, as to be nonexistent. It certainly does not act as a deterrent. In conjunction with the formation of a special insurance fraud prosecution unit in the attorney general’s office, the legislatures should enact the following statutes: As of the effective date of this statute there is no tort of bad faith in this state. Punitive damages may not be awarded in this state. Any insurer that, without malice, reports to the Fraud Division, Department of Insurance that it has rejected a claim because of fraud may not be sued in any court of this state, for any tort cause of action. This section is not intended to eliminate the right of any insured to sue its insurer for breach of the insurance contract. If the legislatures really want insurers to fight insurance fraud; if the legislatures wish to keep strong and viable this important industry; if the legislatures want to reduce the insurance premiums paid by their constituents, they must make practical the war on insurance fraud. As long as the tort of bad faith and the exposure of punitive damages hangs over insurance companies, the war will be one of attrition where no one will win. The stories I have fictionalized in this book were written to show how insurance fraud is taking money out of the pockets of innocent and honest people who buy insurance. For every dollar taken by a fraud an insurer must collect two dollars in premiums. Every person in the US who does not commit fraud is paying to support those who do. A minimum of $20.00 for every $100.00 every person insured pays in premiums goes into the pockets of insurance criminals. If the stories in this book make the reader angry, write to your local District Attorney, States Attorney, Attorney General or US Attorney and let them know of your anger. If enough people complain perhaps, the prosecution levels will increase. Although each of the Videos I have published and in my book "Insurance Fraud Costs Everyone" are based in fact, the names, locations and facts of the claims have been changed to protect the guilty. No resemblance to any person, except those specifically named, is intended and any resemblance is purely coincidental. This is mostly a work of fiction based on the real experiences of a practicing lawyer and Certified Fraud Examiner. Go to https://claimschool.com. (c) 2022 Barry Zalma & ClaimSchool, Inc. 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 at http://www.zalma.com and zalma@zalma.com. Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. 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/

Fire! Why Arson-for-Profit is Dangerous The crime of arson is violent. Not only is property damaged, people die. Most arson fires are set for spite, anger, vengeance or spousal abuse. Approximately 25 per cent are set to defraud insurers. Fires set to defraud an insurer are called, by arson investigators, “arson for profit.” Because most perpetrators do not understand uncontrolled fires, they believe arson is simple and risk free. The nascent arsonist believes all the evidence that might tie him to the crime will be consumed by the fire. He or she is mistaken. Ben Standish was an arsonist who might have tried a less violent crime if he knew more about fire. Had he known that evidence will remain after the fire is extinguished by the fire fighters his house would not be a charred hulk. Had he known that it is difficult to avoid injury he would have filed a personal bankruptcy rather than use arson as a method to get out of debt. Ben Standish was upside down on his mortgage and a balloon payment was due. The value of his house had decreased $200,000 in the last two years. He could not find a lender willing to lend him enough to cover the balloon payment which was $100,000 more than the fair market value of the house. He was desperate. Ben decided that his only solution was to burn down his house and sell it to his insurance company. An honest man, faced with the shame of bankruptcy, decided that defrauding an insurance company was not criminal. He had paid them premiums for 10 years with no claims. They owed him. Ben owned a shoe store. He was very successful and had no problem making the monthly payments on his $600,000 home loan. Ben Standish was cash poor. He couldn’t make up the difference between the amount a bank would lend and the amount he needed to pay the balloon payment. He had three weeks and, to his mind, no choice. A graduate of Venice High School who had taken two business classes at Pasadena City College, Ben had no training, knowledge or background in the activities and uses of fire or flammable liquids. Ben had seen a movie on television called “Batteries Not Included” where a professional arsonist burned down an apartment building in the Bronx. Standish decided to emulate the person in the movie. A fire at his house would pay off the mortgage. His debt problem would be solved. He would then borrow the money needed to rebuild a house on the soon to be empty lot. The day after his wife left for Atlanta, Ben rented, under the name George Johnson, a public storage unit approximately 12 feet by 10 feet. He carefully moved into that unit his jewelry, his wife’s jewelry (that she didn’t take to Atlanta), a new Sony 60-inch Plasma T.V., DVR and Surround Sound system. All the family DVDs. video tapes, photographs and accounting records that would be impossible to replace, he moved to the storage unit. When he was finished, the storage unit was filled. He purchased a separate policy through the facility to cover more than $150,000 of valuable goods and all of the private papers and photographs of the family he had stored at Public Storage unit. Friday afternoon, after closing his shoe store, Ben visited his local Shell Service Station and filled a five-gallon can with gasoline. He went to the PayLess Drug Store and bought a package of balloons and at the Ace Hardware store next to the PayLess he purchased a carpenter’s staple gun. The fire department arrived at the scene of the fire within minutes. Streams of water were placed on the scene and the fire was extinguished. Because of the flash of the explosion most of the balloons, Ben had stapled to the ceilings remained intact. The firefighters, expecting a simple residential fire sat down on the front steps and curb and shook with fear. They recognized that if one of those balloons had let loose it would have caused an explosion that could have killed any one or all of the firefighters. Their Captain, so angry at the danger his men had faced, was almost speechless as he called for an arson unit to come to the scene of the fire. “It’s O.K. Orson. I’m calmed down now. But the sonofabitch hung balloons full of gasoline all over the ceiling. If we didn’t have the fire out immediately, we would have dead firefighters here on the grass. You’ve got to get the person who did this fire.” “Have you done any overhaul, Captain?” “No. As soon as the fire was out and no longer a danger to the rest of the neighborhood, I had the firefighters stand down and set up a security perimeter. No one has been in the house but the firefighters.” Campizi grabbed his camera and slung it over his shoulder, pulled a shovel and a broom from his car trunk and walked into the house. Four hours later Campizi had taken 72 photographs of the scene of the fire, collected four gasoline filled balloons, six one-gallon cans of cloth and carpeting Campizi believed were soaked in gasoline, a small plastic package with a label stating that it contained 10 “Happy Birthday” balloons. The bar-coded price tag was still visible and showed the balloons were purchased from a PayLess Drug Store. The Captain, and two uniformed police officers stood next to the pumper drinking from Styrofoam cups what appeared to be coffee. As Campizi approached, they stood to attention anxiously awaiting his arrival. Behind the yellow tape there were 10 men in business suits holding clip boards. Campizi recognized them as solicitors for various firms of public insurance adjusters who seemed to appear at every fire scene. They were all talking to each other since the owner had yet to arrive. “Mr. Standish, you are under arrest. I must inform you that you have the right to remain silent and refuse to answer any questions I pose to you; you have the right to have a lawyer present while I question you. Do you want to waive the rights I have just explained to you?” “Sure, I will waive the rights. You’ve got me red-handed.” “And those vultures trying to sign him up will get nothing.” “Not really. They’ll find the mortgage holder and sign it up. Even when we prove Standish burned down his house his insurance company still must pay the mortgagee.” “You’re kidding. You mean if he goes to jail, he still succeeds in getting out of the debt?” “Yes. And you thought crime doesn’t pay.” “Orson, I’ll never say anything bad about my insurance company again.” ZALMA OPINON Arson is the least effective and most dangerous method to defraud an insurer. Even a hot-burning gasoline fed arson for profit leaves physical evidence. A fire will seldom destroy everything. (c) 2022 Barry Zalma & ClaimSchool, Inc. 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 at http://www.zalma.com and zalma@zalma.com. Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. 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/

Fraud by Divine Right They were All-American girls. Muffy and Buffy met each other as cheerleaders in high school. They were best friends. They did everything together. The two young women shared everything from clothes to boyfriends. When they graduated from high school, both started to work as trainee tellers at the Fresno Friendly Loan and Mortgage Corporation. They learned to handle money. More than anything else, they learned how to beat the system. When the need to shop came upon them, they called in sick simultaneously. They were the antithesis of modern liberated women. They did not do the same job that men did. They did less. They were rewarded by their male supervisors more for their tight sweaters and skinny jeans than their ability as bankers. Muffy and Buffy needed money so they acquired an insurance policy and decided to make a fraudulent claim. Muffy and Buffy, honestly, reported that they had not replaced a single item they had claimed stolen in their first burglary. The things taken in this burglary from their vehicle were all items they purchased before the first loss. They even provided receipts and canceled checks establishing the purchase and the date of purchase of each item. After that the adjuster was convinced. There was no doubt, they had attempted a fraud. He reported his conviction to the Fraud Division of the California, Division of Insurance, and to Buffy and Muffy. Buffy and Muffy admitted to the adjuster that the watches were never stolen in either claim. They withdrew the claim for the two watches. They still tried to convince him that the rest of their claim resulted from a legitimate auto burglary. He was not convinced. He denied the claim on the spot. He followed up with a written denial. He reported the claim to the Fraud Division who agreed it was a fraudulent claim and presented it to the local district attorney. The District Attorney refused to prosecute on the grounds that there was insufficient evidence to guarantee a conviction. Muffy and Buffy went back to work at the bank. They hired a lawyer who threatened to sue if the claim was not paid in full. Since there was no arrest the insurer felt vulnerable. It paid $60,000 to obtain a general release. Muffy and Buffy lived comfortably for a while on the money the lawyer obtained for them. They were determined to, and continued to, commit insurance fraud once every few years, to supplement their income. For Muffy and Buffy crime pays well. (c) 2022 Barry Zalma & ClaimSchool, Inc. 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 at http://www.zalma.com and zalma@zalma.com. Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. 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/

Insurance Fraud by Insurance Professionals Bill and Libby were very successful insurance brokers. From their offices in Walnut Creek, California, the Bill and Libby Agency generated $100 million in premium volume for fourteen different insurers with whom they held an agency appointment. They were one of the biggest retail insurance agencies in northern California. Success brought the good life. They owned a six thousand five hundred square foot mini-mansion in the hills of Oakland. They built the house over a lot purchased from a victim of the great Oakland Hills fire storm. Bill and Libby furnished the house with antiques and antique replicas. On every wall Libby hung her collection of ceramic plates and fine art prints. On every shelf sat Lladro sculptures, Hummel figurines and limited-edition sculptures and plates depicting English country scenes. Their daughter, Sassy, had a glass display case in her bedroom with a collection of more than 200 antique or collectible dolls. The home was destroyed by fire. After minimal investigation established that fraud might have been attempted, the already six inches thick with invoices and estimates of repair costs were photocopied and delivered to L.G.L. Eagle. Eagle, appeared to be the twin brother of Gabby Hayes — with teeth was an effective and experienced insurance lawyer. After submitting to an examination under oath Libby corrected her denials to an admission of fraud because her lawyer did not want her prosecuted for perjury. Eagle reviewed the items for which Bill and Libby returned the money in detail. He found that some items he knew were fraudulent were not admitted to being fraudulent while some items he thought were legitimate were admitted to be false. He advised Secure and Stable to cash the check since the fraud had not been cured. Libby continued to lie to herself and her husband in an attempt to reduce her wrongdoing. He recommended that the entire claim be denied, that the policy be declared void for fraud, and that the full amount paid on the void policy be demanded. If payment was not made instantly he further recommended that Secure and Stable file a suit in U.S. District Court under the Racketeer Influenced and Corrupt Organization Act (RICO) demanding three times the amount paid as punishment. Secure and Stable could not allow insurance professionals who attempted to defraud their own insurer to profit from a crime against their profession. A business built on the idea of Uberrima fides (utmost good faith) will not do business with people who have proven they cannot be trusted. © 2022 – Barry Zalma B arry 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. Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome. You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, zalma@claimschool.com and zalma@zalma.com . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma; you can follow Mr. Zalma on Twitter at; you should see Barry Zalma’s videos on https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/featured; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims–library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/

True Crime Stories of Insurance Fraud Number 25 Barry Zalma, Esq., CFE presents videos so you can learn how insurance fraud is perpetrated and what is necessary to deter or defeat insurance fraud. This Video Blog of True Crime Stories of Insurance Fraud with the names and places changed to protect the guilty are all based upon investigations conducted by me and fictionalized to create a learning environment for claims personnel, SIU investigators, insurers, police, and lawyers better understand insurance fraud and weapons that can be used to deter or defeat a fraudulent insurance claim. Honest People Venture into Fraud The insureds had wealth. He was a successful lawyer and she owned and operated a chain of chiropractic clinics. They lived in Marin County in a multi-million-dollar home. They had two small children who excelled at school. They entertained frequently. They contributed to political campaigns. The Governor, State Senators, Members of Congress and U.S. Senators stayed at their home as honored guests. Insurance fraud was not in their vocabulary. It was a crime committed by people below the insured’s’ social status. The insureds’ venture into crime began innocently. They discovered, on a family outing, a one acre lot atop a hill overlooking San Francisco Bay. Its owner had recently died. The executor needed to sell the land to pay taxes. They could “steal” the lot for only $2,750,000. Finally, they could build their dream home. The carpenter was a graduate of Loyola University. He had trained under Jesuits. He had a moral sense and was racked with guilt. He admitted working with the insureds and their counsel in presenting the documentation to establish the amount actually spent in fire repairs. He did not want to lie and place his ex-employers in any difficulty. He therefore, for three days of cross-examination, provided almost no information. Every clear answer he gave came only after the same question was asked at least four times in four different ways. Counsel for the insurance company, the day before she was to finish the cross examination, received a telephone call from the witness. The witness told counsel: “I must tell the appraisers why I have been such a difficult witness.” Counsel explained that was not a proper question to ask but, when she finished his cross-examination she would give the witness the opportunity to tell the appraisers anything he wanted. Appraisal, being informal and not bound by rules of civil procedure found in a trial allowed for narrative responses that could not be heard in a court trial. The insured succeeded in their fraud. They did not succeed as they wished but they succeeded. The insurance company, and all of its customers lost. To even partially defeat this fraud the insurance company spent more than it would have spent to pay the initial demand. It stood on principle until principle became too expensive. The lethargy of the court system frustrated it since it allowed the bad faith lawsuit to continue even after the appraisal award showed that the insurer had overpaid the claim. The insurer succumbed to settlement negotiations because of frustration in the criminal justice system that refused to accept that it is a crime to steal from an insurance company. Everyone who buys insurance lost. The insurance company will think twice before it disputes a claim with an insured. The insurance company will refuse to believe the next time a prosecutor tells them he intends to prosecute insurance fraud counts against an insured. The next person who attempts a fraud against this insurance company will find his job easy and profitable. © 2022 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He 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. Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome. You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, zalma@claimschool.com and zalma@zalma.com . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma; you can follow Mr. Zalma on Twitter at; you should see Barry Zalma’s videos on https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/featured; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims–library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/

A Video Explaining the Efforts Needed to Deter or Defeat Insurance Fraud Insurance fraud is a crime in most states of the United States. The victims of the crime of insurance fraud are insurers – no one else. The crime is committed by every race, gender, national origin, religion, or sexual orientation. The crime of insurance fraud takes from the insurance industry and, as a result, the insurance buying public, anywhere from $80 to $300 billion dollars every year. No one knows the real amount because most insurance fraud attempts succeed. I have been involved in insurer’s attempts to defeat insurance fraud for almost 54 years. I have seen frauds succeed. I have had clients compel settlement of a fraudulent claim with voluminous evidence sufficient to prove the fraud beyond a preponderance of the evidence, to avoid the possibility of a bad faith. The only way, in my experience, to defeat insurance fraud is to take the profit out of the crime. Criminal prosecutions don’t take the profit out of the crime since there are few arrests, fewer convictions and most sentences, even after a conviction, are mild and often do not require full restitution. To complete a thorough investigation of a suspected fraudulent claim should include: Detailed recorded statements of the insured and all independent witnesses. In a case of amazing and surprising perspicacity, the California Legislature recognized the problem and added to The California Insurance Frauds Prevention Act (“CIFPA”) a qui tam provision that made it possible for insurers to file whistleblower suits against fraud perpetrators. This powerful tool should be emulated by every state as well as every federal court under the false claims act. Take the money from the fraudsters, take the profit out of the crime, and they will move on to other less prosecuted crimes like taking benefits from the U.S. Government’s efforts to ease the public’s cost of the Covid-19 pandemic. What to do if There is No Available Qui Tam Statute A Proposal that Every Insurer Should Establish a Corporate Position to Refuse to Pay a Fraud The insurer who truly desires to defeat insurance fraud must: Require that the entire staff of claims handlers be trained to recognize attempts at insurance fraud. Require that the entire staff of claims handlers be trained to recognize the “red flags of fraud.” Create, maintain and effectively fund an SIU staffed with insurance and fraud trained investigators. Require a thorough investigation of every claim. Require the claims staff to refer suspected insurance fraud attempts to the SIU when a claims investigation establishes no less than three red flags of fraud. Require the SIU to conduct a thorough suspected fraud investigation. When the SIU collects what it believes to be an attempt at insurance fraud it should refer, for advice and counsel, the claim to an experienced insurance coverage lawyer in the state where the claim was presented. If, after review of the claims investigation, coverage counsel opines that there is a preponderance of evidence establishing a fraud was attempted and claims management is convinced the advice is proper the claim must be rejected as a fraud. Setting up such company policy will go a long way to reduce insurance fraud attempts against the insurer. Fraud perpetrators will move from that insurer to another. Those insurers who do not have such a corporate policy will find more attempts at insurance fraud and will be encouraged to take on the aggressive anti-fraud position taken by the insurer following the anti-fraud position proposed © 2022 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. Subscribe to "Zalma on Insurance" at https://zalmaoninsurance.locals.com/subscribe and "Excellence in Claims Handling" at https://barryzalma.substack.com/welcome. You can contact Mr. Zalma at https://www.zalma.com, https://www,claimschool.com, zalma@claimschool.com and zalma@zalma.com . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. You may find interesting the podcast "Zalma On Insurance" at https://anchor.fm/barry-zalma; you can follow Mr. Zalma on Twitter at; you should see Barry Zalma's videos on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/

A Video Explaining Common Law Bad Faith In the 1950’s the California Supreme Court, recognizing that some insurers took advantage of their customers by refusing to pay claims that were clearly owed under the terms and conditions of the policy; failed to negotiate settlements within policy limits, and left insureds to fend for themselves, a new tort grew was created. The California Supreme Court, concluding that some insurers failed to deal fairly with those they insured. Because contract remedies did not provide, in the reasoning of the California Supreme Court, a procedure by which adequate damages could be provided to the person wronged by his or her insurer, the tort of bad faith arose to the joy of the plaintiffs’ bar. The concept of the tort of bad faith developed as a means of providing a recovery in tort for the breach of what had previously been regarded as a simple contract action. Contract damages are traditionally limited the injured party’s recovery to those damages within the contemplation of the parties at the time the contract was made. Since an insurance policy is a contract that establishes the respective rights and obligations to which an insurer and its insured have mutually agreed it must be enforced as written. Generally, an appellate court will construe a policy using the same rules that govern the construction of any other contract. An insurance policy, however, is a unique type of contract because an insurer generally has exclusive control over the evaluation, processing, and denial of claims, and it can easily use that control to take advantage of its insured. Because of this inherent unequal bargaining power, between the insured and the insurer courts, like those in Texas and California concluded the "special relationship" between an insurer and insured justifies the imposition of a common-law duty on insurers to "deal fairly and in good faith with their insureds." [USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex., 2018)] Compensatory Damages Available for Breach of Contract These are damages for a monetary amount that is intended to compensate the non-breaching party for losses that result from the breach. The aim is to "make the injured party whole again". Expectation Damages: These are damages that are intended to cover what the injured party expected to receive from the contract. Calculations are usually straightforward as they are based on the contract itself or market values. Consequential Damages: These are intended to reimburse the injured party for indirect damages other than contractual loss; for example, loss of business profits due to an undelivered machine. In order to recover, the injuries must "flow from the breach," i.e., be a direct result of the breach, and be reasonably foreseeable to both parties when they entered into the contract. Liquidation Damages: Damages that are specifically stated in the contract. These are available when damages may be hard to foresee and must be a fair estimate of what damages might be if there is a breach. Both parties determine what would be an appropriate amount during contract negotiations. [Fleming Co. v. Thriftway Medford Lakes, Inc., 913 F. Supp. 837, 847 (D.N.J. 1995)] Restitution: These are not really legal damages per se, but rather are an equitable remedy awarded to prevent the breaching party from being unjustly enriched. For example, if one party has delivered goods but the other party has failed to pay, the party that delivered the goods may be entitled to restitution, i.e., the cost of the delivered goods, in order to prevent unjust enrichment. Specific Performance: Specific performance is an available remedy for breach of contract where the non-breaching party asks the court to issue a decree that requires the breaching party to perform their part of the bargain indicated in the contract. Damages from Insurer for Breach Before the advent of the tort of bad faith, if an insurer breached the contract and wrongfully refused to pay a claim the most that could be recovered would be the benefits promised by the insurance policy, the only damages envisaged by the insurance policy. Contract damages, in the eyes of some courts, seldom compensate the insured sufficiently if he or she has been abused by the insurer. Courts decided that the measure of damages for a breach of contract is inadequate where the wrongful conduct results in damages that were not foreseen at the time of contracting. Tort Damages If a tort theory can be used in an insurance dispute, then the possibility exists for a much broader recovery by the plaintiff. The measure of damages for a tort can include consequential damages, including all of the damages proximately resulting from the wrongful conduct even if they could not have been anticipated at the time of the contract, emotional distress, bodily injury, and consequential damages. Limitations on Punitive Damages The US Supreme Court has restricted the extent of available punitive damages in State Farm Mutual Automobile Insurance Co. v. Campbell, 123 S.Ct. 1513, 155 L.Ed.2d 585 (U.S. 2003), where it overturned a $145 million verdict against an insurer. It said that a punitive damages award of $145 million is excessive and violates the Due Process Clause of the Fourteenth Amendment. By reducing the exposure to excessive and debilitating punitive damages claims professionals can hope the Supreme Court’s ruling gives insurers more courage to fight insurance fraud since their exposure to punitive damages is limited. Regardless, Campbell allows recovery of punitive damages for tortious breach of the insurance contract and the tort of bad faith. © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or media tor for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to training available at https://claimschool.com; articles at https://zalma.substack.com, 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 https://www.rumble.com/zalma ; 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 last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

A Christmas Fable of Fraud ZIFL publishes this Story at Christmas Time Every Year. I Hope You like it Again. Editorial – Anti-Fraud Resolutions In 2009 ZIFL posted an editorial with New Year’s Resolutions for every person involved in the business of insurance. I repeat it again in this issue and add some thoughts for 2022. Insurance fraud of all types continues to grow to epidemic levels. It is perpetrated by people of every race, religion, national origin, financial situation, sexual orientation, age, or physical condition. As the US economy tanks and the value of the dollar drops people turn to insurance fraud as a “safe” crime where their financial problems can be cured. Arson for profit, fake thefts, fake injuries all grow logarithmically as it becomes more difficult to earn an honest living. Even when convicted the fraud perpetrators receive as little as probation or one day in jail and rarely are sentenced to multiple years in jail regardless of the extent of the fraud. It often seems that everyone is involved in fraud. Governmental agencies designed to protect consumers, prosecutors, and judges all add to the problem because they have no empathy for insurers, investors, or Wall Street brokers, as victims. Fraudster Cannot Obtain Cash Under the California Unclaimed Property Law Money Held by the State Can’t be Given to a Fraud ClaimSchool, Inc. – Insurance Education Insurance Education from Barry Zalma Defendants Claimed Their Fraud Was Obvious so Insurer was not Damaged GEICO Proactively Fights Fraud By Suing Providers For Damages The Coalition Hall of Shame Health Insurance Fraud Convictions Other Insurance Fraud Convictions © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or media tor for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to training available at https://claimschool.com; articles at https://zalma.substack.com, 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 https://www.rumble.com/zalma ; 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 last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Types of Warranties in Insurance Policies Express Warranty Express warranties relate to the present or past existence of particular facts relating to the risk upon the truth of which, the validity of the contract depends. [California Insurance Code § 440.] A statement of fact becomes an express warranty when the insurer and the insured comply with California Insurance Code section 443. Section 443 provides: Every express warranty made at or before the execution of a policy shall be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making a part of it. Some examples of express warranties include the following statements: “My business is a partnership.” “My building is reinforced brick.” “I have never been canceled by any insurer.” “I am 45 years old and have never smoked cigarettes.” The California Insurance Code further explains the concept of the express warranty by saying: A statement in a policy of a matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof. [California Insurance Code § 441]. The violation of an express warranty will void a policy in its entirety. [ See Aguirre v. Citizens Cas. Co. of N.Y., 441 F.2d 141 (5th Cir. 1971); Saskatchewan Gov’t Ins. Office v. Spot Pack, Inc., 242 F.2d 385, 388 (5th Cir.1957).] In the British case, A C Ward & Sons Ltd v. Catlin (Five) Ltd & Ors [2009] Commercial Court, the insurers attempted to avoid coverage on the failure of an alarm system, warranted by the insured to work. The court concluded that the warranty was not limited to the particular “protections” specified in the proposal form, nor was the Alarm Warranty confined to such alarm systems as might have been identified in the schedule. As a matter of commercial common sense, the warranties referred to whatever protections or alarms actually existed, whether identified in the policy documentation or not. As to knowledge, the court adopted the view that a breach of warranty could occur only in the event of a defect of which the insured was, or should reasonably have been, aware, and which it had then failed to remedy promptly. However, even though the alarm warranty was not effective the insured also promised that theft coverage for cigarettes & tobacco in a warehouse was not operative outside of business hours unless the stock was kept within the special secure store on the ground floor. Since they were not on the first floor the insured was not allowed to recover. Federal admiralty law requires strict construction of express warranties in maritime insurance contracts. [Travelers Prop. Cas. Co. of Am. v. Ocean Reef Charters, LLC, 396 F.Supp.3d 1170 (S.D. Fla. 2019)] Admiralty law requires the strict construction of express warranties in marine insurance contracts; breach of the express warranty by the insured releases the insurance company from liability. [Lexington Ins. Co. v. Cooke’s Seafood, 835 F.2d 1364, 1367-38 (11th Cir. 1988) that affirmed a judgment in favor of the insurer based on breach of a navigational warranty). Affirmative Warranty An affirmative warranty asserts an existing fact or condition which appears on the face of the policy or “is attached thereto and made a part thereof.” It is limited in time to the moment of the application. The following statements are examples of an existing fact or condition: “The property is protected by a fire sprinkler system.” “The roof is composition tile.” “There is a silent, central station burglar alarm system.” “I have been treated for high blood pressure.” “There is a watchman on duty at all times the business is closed.” “All business records are kept, when not in use, in a fireproof iron safe.” When an insurance policy’s full-time work eligibility requirement is an “affirmative warranty.’“ a breach of an affirmative warranty cannot be a ground for rescission of the policy unless the insurer relies on the affirmative warranty and the affirmative warranty is either material or made with the intent to deceive; or, the fact falsely warranted contributes to the loss. Plaintiff states that Wisconsin law limits an insurance company’s ability to void coverage and argued that undisputed facts do not satisfy these limits. [Stanczyk v. Prudential Ins. Co. of Am. (N.D. Iowa, 2017)]An affirmative warranty is one which asserts the existence of a fact at the time the policy is entered into, and appears on the face of said policy, or is attached thereto and made a part thereof. [Hicks v. Mennonite Mut. Ins. Co., 2011 Ohio 499 (Ohio App. 2011)] In Reid v. Hardware Mut. Ins. Co. of Carolinas (1969), 252 S.C. 339, 166 S.E.2d 317, which held that designating a residence as “owner-occupied” is an affirmative warranty, rather than a continuing warranty, and does not preclude the named insured from recovering under the policy after the premises is sold to another party. Because the insurance contract contained a description of the dwelling insured as being “owner occupied” the provision was an affirmative warranty, not a continuing warranty that the dwelling was so occupied by him at the time the contract of insurance was made. [Hicks v. Mennonite Mut. Ins. Co., 2011 Ohio 499 (Ohio App., 2011)] ZALMA OPINION Fulfillment of insurance warranties by those insured or by the insurer are important to every insurance claim investigation. It is important that every claims person or insurance coverage lawyer understand the effect of warranties and establish that every warranty made was fulfilled at the time of inception or at the time of the loss. © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to training available at https://claimschool.com; articles at https://zalma.substack.com, 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 https://www.rumble.com/zalma ; 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 last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Lawyer Lies on Application for Malpractice Insurance - Policy Rescinded Travelers issued a Lawyers Professional Liability Insurance Policy to Grimmer, Davis, Revelli & Ballif (“Grimmer Davis”). Grimmer Davis is a law firm with its principal place of business in Lehi, Utah. Matthew Grimmer was the sole shareholder of Grimmer Davis and had general managing and governing responsibilities at the firm. Grimmer is a licensed attorney with knowledge of the rules of professional conduct. Jacob Davis was an employee of Grimmer Davis. Davis is also an attorney with knowledge of the rules of professional conduct. Defendant Grimmer and Associates, P.C. (“G&A”) is a law firm with its principal place of business in Lehi, Utah. G&A is located in the same office as Grimmer Davis. Grimmer is the sole shareholder of G&A, and Davis was also employed at G&A. Grimmer made false statements in the application and in Travelers Casualty And Surety Company Of America v. Grimmer Davis Revelli & Ballif, P.C., et al., No. 2:19-cv-597-DAK-JCB, United States District Court, D. Utah (November 10, 2021) Travelers sought to rescind the policy. BACKGROUND Georgia Noel Inman and her twin brother Walker Patterson Inman III (“Patterson”) were clients or former clients of G&A and its attorneys. Patterson was also a client or former client of Grimmer Davis and its attorneys. Georgia and Patterson's father died when they were twelve years old. Their stepmother served as their deceased father's personal representative and successor trustee. However, there were allegations that she was pilfering or hiding assets from the estate. In 2013, Grimmer and G&A began representing Georgia and Patterson in the probate dispute with their stepmother in an action in Wyoming. On June 27, 2018, Georgia filed a motion to disqualify the firm Grimmer Davis and the individual attorneys Grimmer and Davis from representing Patterson in the consolidated trust cases pending in Wyoming, citing various conflicts of interest and breaches of professional duties against Grimmer, Davis, G&A and Grimmer Davis (“Grimmer Parties”). In this disqualification motion, Georgia asserted that the Grimmer Parties advocated for positions that favored Patterson and were adverse to her interests. The motion states that “Georgia potentially has claims against parties and lawyers in this litigation” and “Georgia now has viable claims, which she will be bringing to undo both the Greenfield Plantation sale and the assignment of claims”-two transactions involving Georgia, Patterson, and Grimmer. The Wyoming court appointed a Special Master in the consolidated trust cases, who issued a Report of Special Master on Georgia's Motion to Disqualify on March 5, 2019. The Special Master found that Grimmer made an audio recording of Georgia and used her confidential statement to him in a manner adverse to her best interests. Finally, the Special Master found that in refusing to pay sums due for the purchase of the Greenfield Plantation and in filing a counterclaim in related litigation in South Carolina, Grimmer was adverse to Georgia. The Special Master recommended that Grimmer and Davis be disqualified from further representation in the consolidated trust cases and that any member of any firm with which Grimmer was associated also be disqualified. He further recommended that Grimmer's pro hac vice admission be revoked. The South Carolina court also found that a material adversity existed between Grimmer, who at that time was the trustee of a trust holding assets for Patterson as the sole beneficiary, Patterson, and Georgia. INSURANCE Travelers had initially provided professional liability insurance coverage to Grimmer Davis for the policy period of March 20, 2018 to March 20, 2019. At the conclusion of that policy period, Grimmer Davis failed to submit a renewal application and the 2018 policy expired. Travelers did not automatically renew Grimmer Davis' coverage. However, in April 2019, Grimmer Davis requested that Travelers issue a new policy to provide coverage retroactive to March 20, 2019, the 2018 policy's expiration date. Grimmer Davis submitted an application for insurance, dated April 18, 2019, which Grimmer signed on behalf of Grimmer Davis. In response to Question 27 on the application, asking whether “you or any member or employee of your firm have knowledge of any incident, act, error, or omission that is or could be the basis of a claim under this proposed professional liability policy, ” Grimmer Davis answered “No.” Grimmer also agreed to immediately inform Travelers if any of the information supplied in the application changed between the date of the application and the effective date of any insurance policy Travelers issued in response to the application. If Grimmer provided any changed information, the application allowed Travelers to “withdraw or modify any outstanding quotation or agreement to bind coverage.” In order to evaluate Grimmer Davis' request for a renewal policy with a retroactive effective date of March 20, 2019, Travelers required Grimmer Davis to provide a letter confirming that its attorneys were not aware of any facts or circumstances after March 20, 2019, that may give rise to a claim under the renewal policy. Grimmer Davis provided Travelers with a letter, dated April 18, 2019 (“No Known Circumstances Letter”), stating, in part, that “[a]s of the date of this letter, we are not aware of any facts, circumstances, or losses from the period of March 20, 2019 to the present as respects our lawyers' professional lawyers insurance.” Kristin Montalvo, the Travelers underwriter responsible for Grimmer Davis' account, reviewed the application and letter to evaluate the risk of insuring Grimmer Davis. She provided Grimmer Davis with a quote and Grimmer Davis accepted. On April 19, 2019, Travelers issued to Grimmer Davis a Travelers 1st Choice+ Lawyers Professional Liability Coverage insurance policy, effective March 20, 2019 to March 20, 2020. A week later, on April 25, 2019, Georgia asserted a malpractice claim against Grimmer Davis, G&A, Grimmer, and Davis based on their prior representation of her. Montalvo, Travelers' underwriter, testified in an Affidavit that if Grimmer Davis had disclosed Georgia's various claims and assertions against the Grimmer attorneys in the Wyoming and South Carolina actions, as well as those court's findings regarding ethical violations, Travelers would not have issued the renewal policy. DISCUSSION Traveler’s Motion for Summary Judgment Utah law provides for rescission of insurance policies in three circumstances. Utah Code Annotated Section 31A-21-105(2) governs rescission and provides that “no misrepresentation . . . affects the insurer's obligations under the policy unless: (a) the insurer relies on it and it is either material or is made with intent to deceive; or (b) the fact misrepresented or falsely warranted contributes to the loss.” Courts applying this statute have held that an insurer may rescind a policy where the insurer relies on a material misrepresentation made by the applicant; the insurer relies on a misrepresentation that was made by the applicant with the intent to deceive; or the applicant's misrepresentation contributes to the loss. An insurer need only satisfy one of the justifications for rescission to rescind a policy. Travelers, however, claims that it is entitled to rescind the policy under all three of those justifications. Here, Grimmer acted on behalf of Davis Grimmer and attested in the application and the “No Known Circumstances” letter that no one at the firm was aware of any facts, circumstances, or losses that could impact coverage under the policy. However, at the time Grimmer signed those documents, Georgia Inman had already repeatedly threatened substantial claims against the firm and its attorneys, and two courts had already determined that the attorneys' conduct was improper and breached professional obligations to a former client. The information Grimmer gave or failed to give Travelers occurred before Travelers agreed to issue the policy. Although the policy's inception date was backdated to pre-date the Application, Travelers only agreed to backdate the policy because of Grimmer's misrepresentations and material omissions. The inception date of the policy, which was obtained as a direct result of misrepresentations and material omissions, does not require that the terms of the policy apply to the issue. The more applicable law in this situation is Utah's rescission statute. Utah courts have recognized that the doctrine of equitable estoppel will prevent a party from taking advantage of misrepresentations made in the insurance context. Equitable estoppel may be invoked to prevent injustice where one has reasonably relied to his or her detriment on an intentional or negligent false representation by another. [Barnard v. Barnard, 700 P.2d 1113, 1115 (Utah 1985).] All the elements for equitable estoppel are met here. Grimmer made untrue statements and omitted material information to obtain a policy with a backdated inception date. Travelers relied on those misrepresentations and agreed to issue the policy with a backdated inception date. The undisputed evidence demonstrates that Grimmer knew or should have known that the information he provided to Travelers was false and given with the intent to obtain the insurance policy. Intent to deceive can be inferred from circumstantial evidence. Grimmer had threats from Georgia Inman that she would bring any claims possible against the firms and attorneys. A few weeks before applying for the renewal policy, the Wyoming court issued a ruling in favor of Georgia. That ruling was issued five days after the prior policy expired. Grimmer knew or should have known that he and his firm needed insurance coverage. However, when he applied for that insurance coverage and asked for it to apply retroactively, he did not mention any of these material circumstances to Travelers. He knew or should have known that Travelers was concerned about this kind of information when they asked for a separate letter. Nonetheless, he did not disclose the information. Georgia made complaints relating to Grimmer Davis' ongoing representation of Patterson, the alleged resulting damages to assets owned by a trust to which Georgia is a beneficiary, and their obligations to her as a former client. Defendants contend that Georgia's claims against Grimmer Davis can simply be attributed to Georgia's confusion as to the firms' names. She did admit to some confusion as to the relationship of the two firms, but she also made clear she was seeking disqualification of Grimmer, Davis and both firms specifically. She repeatedly referred to “firms” in the plural, as did the courts. There is no genuine dispute as to whether Georgia threatened claims against Grimmer Davis and its members relating to conduct that occurred after she was represented by G&A. Under the terms of the policy, a “Claim” is a demand for “money or services” against an “Insured” for a “Wrongful Act.” Georgia claimed that the damages to the trust was in March 2018, after Grimmer Davis was formed. Georgia repeatedly made such claims stemming from Grimmer Davis' representation of Patterson in 2018 after Grimmer Davis was formed and representing Patterson. Grimmer does not allege that he was unaware of Georgia's claims and assertions. The Special Master's Report and the Wyoming Court's Order clearly dealt with both firms. Even if Georgia's claims against Grimmer Davis had proved to be unmeritorious, it was clear that she intended to bring them and bring them against Grimmer Davis, Grimmer, and Davis. It does not matter whether she alleged a valid claim, only that she was threatening to bring claims. Grimmer either knew or should have known that the information he provided Travelers was false. Grimmer's representations to Travelers were material because Travelers relied on them in issuing the renewal policy and they contributed to the loss. A fact is material to the risk assumed by an insurance company if reasonable insurers would regard the fact as one which substantially increases the chance that the risk insured against will happen and therefore would reject the application. If a fact would “naturally influence the insurer's judgment in making the contract, estimating the degree or character of the risk, or in fixing the rate of insurance, ” then it is material. Defendants present no evidence to dispute Travelers' position on reliance or materiality. Defendants do not assert a material disputed fact that would prevent this court from entering summary judgment. Even if Georgia Inman erroneously made claims against Grimmer Davis, and Grimmer and Davis in their roles at Grimmer Davis, Grimmer Davis should have disclosed the existence of those claims to Travelers when it was pursuing the renewal policy. Those claims were material and Travelers relied on Grimmer Davis' assertions that there were no such claims in issuing the policy renewal. Grimmer knew of the claims and did not disclose them. The court, therefore, concludes that Defendants made misrepresentations to Travelers, Travelers relied on those misrepresentations, and those misrepresentations were material to Traveler's decision to provide insurance. Accordingly, the court concluded that Travelers is entitled to rescind the policy under Utah law. The court further declares that the policy is void and Travelers has no duty to defend or indemnify Defendants under the policy. Therefore, the court granted Traveler's motion for summary judgment. ZALMA OPINION A lawyer should know that insurance is a contract of utmost good faith where neither party may do anything to deprive the other of the benefits of the contract. In this case, a lawyer not only failed to act in good faith when applying for malpractice insurance, he acted badly by misrepresenting to the insurer that he knew of no potential action against him or his firms when, in fact, he had been so advised by Georgia and her counsel and by orders of two different courts. Rescission was the only appropriate action available to the Travelers. © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to training available at https://claimschool.com; articles at https://zalma.substack.com, 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 https://www.rumble.com/zalma ; 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 last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Serious Injuries & Clear Liability Require Quick and Thorough Action Some lawsuits are based on clear liability and terrible facts and injuries that compel the parties involved to settle the case as quickly as possible. In such cases defending and indemnifying the insured is liable to be costly and could easily exceed the available policy limits. If the adjuster’s reaction to the fact pattern is disbelief or horror, and his or her first impulse is to trade the claim to another adjuster, these are signs that the case must be settled quickly. Bad facts and bad injuries get more expensive with time. These cases should not be aggressively defended but should rather be handled with empathy and generosity so that they can be resolved within the limits available from the insured’s policy. The worst of all cases could be an insured who admits he fell asleep at the wheel, crossed over the double line and an island and struck a tiny Ford Escape head on and rendered a paraplegic a 40 year old widower father of four minor children all of who suffered from Down Syndrome and needed constant care. The insured has a policy with only $500,000 in limits. With the admission of liability and the extent of the injuries every effort must be made to pay the limits as soon as possible. A release on behalf of the insured would be useful but the adjuster should not make the injured file suit before paying the limit, even if it must be paid without condition. Bad facts usually result in bad law. It is improper to take a chance on the insured facing an uninsured loss just to give the insurer the opportunity to create a legal precedent favorable to the insurer. The fact that more trial court judgments are affirmed than are reversed should temper the desire to file an appeal. An insurer should never experiment if there is any potential that the insured could incur an uninsured loss unless the insurer is willing to guarantee payment of any judgment regardless of the policy’s liability limits. Otherwise, the insurer will probably be found in breach of the duty of good faith if an attempt is made to change a law that will benefit the insurer over its entire book of business, and if it results in an adverse judgment against the insured in excess of policy limits. If the insurer wants to make a precedent it should enter into a written agreement with the insured to take the case to trial and promise the insured that it will indemnify him or her regardless of the verdict (whether within policy limits or not) and will reimburse all of his or her expenses. © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to training available at https://claimschool.com; articles at https://zalma.substack.com, 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 https://www.rumble.com/zalma ; 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 last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

A Video Recitation of Crisci v. Security Ins. Co. of New Haven, Conn. A jury awarded Mrs. DiMare $100,000 and her husband $1,000. After an appeal (DIMARE V. CRESCI, 58 CAL.2D 292, 23 CAL.RPTR. 772, 373 P.2D 860) the insurance company paid [66 Cal.2d 429] $10,000 of this amount, the amount of its policy. The DiMares then sought to collect the balance from Mrs. Crisci. A settlement was arranged by which the DiMares received $22,000, a 40 percent interest in Mrs. Crisci's claim to a particular piece of property, and an assignment of Mrs. Crisci's cause of action against Security. Mrs. Crisci, an immigrant widow of 70, became indigent. She worked as a babysitter, and her grandchildren paid her rent. The change in her financial condition was accompanied by a decline in physical health, hysteria, and suicide attempts. Mrs. Crisci then brought this action. The trial court found that defendant 'knew that there was a considerable risk of substantial recovery beyond said policy limits' and that 'the defendant did not give as much consideration to the financial interests of its said insured as it gave to its own interests.' That is all that was required. The award of $91,000 must therefore be affirmed. In determining whether an insurer has given consideration to the interests of the insured, the test is whether a prudent insurer without policy limits would have accepted the settlement offer. Crisci v. Security Ins. Co. of New Haven, Conn., 66 Cal.2d 425, 58 Cal.Rptr. 13, 426 P.2d 173 (Cal. 1967) ZALMA OPINION It is important that claims professionals understand why there exists a tort of bad faith. The treatment of Mrs. Crisci that drove her to suicide when a minimally $100,000 case could have settled for less than the policy limits of only $10,000 was egregious. By presenting the entire decision claims personnel can better understand why they are required to deal fairly and in good faith when defending an insured and should determine whether - if there was no limit - the settlement offer would or should have been accepted. © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

A Video True Crime Story of Insurance Fraud hey were All-American girls. Muffy and Buffy met each other as cheerleaders in high school. They were best friends. They did everything together. The two young women shared everything from clothes to boyfriends. They decided to use insurance fraud to supplement their income and allow them to continue to live with nothing but the best in excess of their earnings. Buffy and Muffy admitted to the adjuster that the watches were never stolen in either claim. They withdrew the claim for the two watches. They still tried to convince him that the rest of their claim resulted from a legitimate auto burglary. He was not convinced. He denied the claim on the spot. He followed up with a written denial. He reported the claim to the Fraud Division who agreed it was a fraudulent claim and presented it to the local district attorney. The District Attorney refused to prosecute on the grounds that there was insufficient evidence to guarantee a conviction. Muffy and Buffy went back to work at the bank. They hired a lawyer who threatened to sue if the claim was not paid in full. Since there was no arrest the insurer felt vulnerable. It paid $60,000 to obtain a general release. Muffy and Buffy lived comfortably for a while on the money the lawyer obtained for them. They were determined to, and continued to, commit insurance fraud once every few years, to supplement their income. For Muffy and Buffy crime pays well. © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Passover A Seder for the American Family By Thea R. Zalma & Barry Zalma For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand that when G_d began to create the world there was nothing and that time, as we know it, had no meaning. G_d created all. We feel G_d gave people a conscience hoping it would help us decide right from wrong, to do our best to make good choices, to try to help others, not hurt others and to try to make right the wrongs we have done to others. The rituals that make up the Jewish holidays help remind us how thankful we are for how much we have accomplished with G_d ’s help and how grateful we are to G_d for everything we have and everything we are. Thea and Barry Zalma have created this English only Seder that works for our family and will allow you and your families to tell the story of the Exodus painlessly and with the joy and celebration it deserves so that no member of our family forgets what G_d did for us when He took us out of slavery in Egypt and led us to a promised land. https://www.amazon.com/Passover-Seder-American-Family-Zalma-ebook/dp/B0848NFWZP/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1584364029&sr=8-4 and https://www.amazon.com/Passover-Seder-American-Family-Zalma/dp/B0849TVPQJ/ref=tmm_pap_title_0?_encoding=UTF8&qid=1584364029&sr=8-4

People who commit insurance fraud think it is a crime without punishment or concern. When they are caught, prosecuted and convicted, the perpetrator is so amazed that he or she is one of the few unlucky ones who were caught that they use their ill-gottengains to fund unfounded and frivolous appeals. Peter Costas bribed dozens of people addicted to heroin and other drugs to enter rehab centers so the Red Bank, N.J. man and his cronies could illegally soak up money for lucrative referrals. Costas worked with several marketing firms to recruit potentialpatients who had robust private health insurance from New Jersey and elsewhere. Costas paid them up to several thousand dollars each. Costas stayed in touch with the patients at the rehab facilities. He instructed them to stay long enough to generate referral payments. Sometimes he directed patients to different rehab facilities month after month to generate multiple referrals. The facilities paid the marketing firms $5,000-$10,000 per patient referral, and about half went to Costas and other body brokers. Costas received 13 months in federal prison. Thousands of healthy people plus patients with diseases like Alzheimer’s and dementia were falsely told they had just 6 months to live so they could be enrolled in Medicare hospice for $150 million of fraudulent billing. Rodney Mesquias ran a hospice chain called Merida Health Care group, in Texas. In many cases, people were still walking, driving and even coaching sports when Merida’s marketers told them they were dying. Mesquias even sent chaplains to discuss last rites and prepare people for imminent death — while enrolling them at group homes, nursing homes and housing projects. People were kept in hospice for years — lining the pockets of Mesquias and his conspirators. Sometimes Mesquias had doctors do emergency surgical procedures to keep hospice patients alive and the false bills flowing. Physicians also were paid kickbacks to qualify patients for hospice. Mesquias forged medical records to create the illusion that his patients were dying. He bought luxury cars, jewelry, clothing, real estate, season tickets for the San Antonio Spurs, and bottle service at Las Vegas nightclubs. He treated marketers to parties and tens of thousands of dollars worth of booze. Mesquias was handed 20 years in federal prison. Read last two issues of ZIFL here https://zalma.com/zalmas-insurance-fraud-letter-2/

Expected or Intended: The Fortuity Doctrine See the full video at https://youtu.be/0hS8OhnATME The fortuity doctrine arises from the basic concept upon which insurance is founded: that insurance covers risks, not losses that were planned, intended, or anticipated by the insured. It has always been the view of insurers that losses that were expected by the insured could not be insured. To do so would have a counterproductive effect. No one would buy insurance until they were certain they would have a loss. The concept of spreading the risk on which insurance is based would be defeated. The creation of losses would be encouraged. An accident or occurrence is never present when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage. When the injury was caused by the insured’s manufacture and sale of products the manufacture and sale of products without right were deliberate and intentional acts, and there was no additional, unexpected, independent, and unforeseen happenings that caused the infringement alleged by the plaintiff or the indemnity obligation. The court concluded that the conduct giving rise to the underlying action was not an “accident” nor an “occurence” within the coverage provision. Because there was no potential basis for coverage, there is no duty to defend. The loss-in-progress rule codifies a fundamental principle of insurance law that an insurer cannot insure against a loss that is known or apparent to the insured. (See Bartholomew v. Appalachian Ins. Co. (1st Cir. 1981) 655 F.2d 27, 28-29.) The public policy rule is premised on the view that to hold the insurer liable for a progressive and continuing property loss that was discovered before the carrier insured the risk would be to impose upon the insurer a guaranty of the good quality of the property insured, which liability under the policy the insurer had not assumed. (Greene v. Cheetham (2d Cir. 1961) 293 F.2d 933, 937.) In Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 691, 693 where the existence and extent of injuries were unknown from the insured’s “standpoint,” coverage of continuous or progressively deteriorating property damage under a CGL policy did not offend the loss-in-progress rule. The fortuity doctrine or “loss in progress” rule, where damage began to occur prior to the inception of the policy, requires that, as a matter of law, no part of the loss may be insured against. The fortuity doctrine only precludes a party from insuring against a loss that has occurred or is certain to occur within the term of the policy. © 2020 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/ Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Subscribe to e-mail Version of ZIFL, it’s Free! – https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D Read last two issues of ZIFL here. https://zalma.com/zalmas-insurance-fraud-letter-2/ Go to the Barry Zalma, Inc. web site here https://www.zalma.com/ Listen to my podcast, Zalma on Insurance, at: https://podcasts.google.com/?q=zalma%20on%20insuranceZalma on Insurance –

Duties of the Public Adjuster See the full video at https://youtu.be/AoJnf_MhiQI Most policyholders do not have the in-house capability to investigate, evaluate, and negotiate significant property insurance losses. While some losses, such as a small fire loss requiring only minor repairs, may be dealt with easily, others, which involve more complex damages and different potential causes of loss, are much harder to assess. Resolving them may require expertise in understanding the scope of coverage provided by the applicable property insurance policy, scientific or other specialized background to determine the cause of a specific loss, the ability to determine the cost to repair or replace the damaged property, and the calculation of the amount of a time element (business interruption) loss. In such cases, the policyholder may engage a public insurance adjuster (PA). PA’s are licensed by almost every state and their contract forms must be approved by the state. All PAs claim to be experts on property loss adjustment; most are. They represent only policyholders in fulfilling the duty to prepare, file, and adjust insurance claims. The PA should handle every detail of the claim, working closely with the policyholder and the insurer to obtain a prompt and reasonable settlement. PAs usually charge a contingency fee, which they present to the insured as a fait accompli. But this fee is negotiable. The insured should try to lower it as much as possible. For a major loss, more than one PA will arrive at the site seeking a contract. A fee quoted by one can be reduced by seeking lower fees from the others. Rates can be negotiated from a low of 3% to a high of 40%, although the average charge is 10% to 15%. When considering a PA, the insured must take into account the fact that even if the insurer pays the full amount of the loss, the cost of the adjuster’s fee may not leave enough funds to fully repair the damaged structure.