Barry Zalma, Inc. on Insurance Law

Title Insurer Subrogated to Rights of Defrauded Buyer In Lewis v. Fidelity National Title Insurance Company, No. A23A0030, Court of Appeals of Georgia, Fifth Division (April 26, 2023) Torriel Deyon Lewis appealed the grant of summary judgment to Fidelity National Title Insurance Company in Fidelity's fraud action against him. FACTUAL BACKGROUND When a party moves for summary judgment and supports his or her motion by submitting affidavits, depositions, or answers to interrogatories, the nonmoving party may not rest upon the mere allegations and must set forth specific facts showing that there is a genuine issue for trial. In 2007 an entity called House Rescue 911 L.L.C. ("old House Rescue 911 L.L.C.") acquired a parcel of real property. In 2010, old House Rescue 911 L.L.C. was administratively dissolved by the secretary of state. The records of the Georgia Secretary of State show that on February 3, 2017, an entity named House Rescue 911 LLC ("new House Rescue 911 LLC") was formed. New House Rescue 911 LLC's name was identical to old House Rescue 911 L.L.C.'s name except for the absence of periods between the letters LLC. Lewis was listed as the registered agent of new House Rescue 911 LLC. New House Rescue 911 LLC and Lewis were not affiliated in any way with old House Rescue 911 L.L.C. Three weeks after it was formed, new House Rescue 911 LLC purported to sell and to convey by limited warranty deed the parcel of real property that old House Rescue 911 L.L.C. had acquired in 2007. Lewis and new House Rescue 911 LLC had no basis for claiming ownership of the property and had no right to convey any rights to the property. In 2019, the purchaser of the property, Fidelity's insured, was named as a defendant in a petition to quiet title brought by the members of the administratively dissolved old House Rescue 911 L.L.C. The superior court quieted title in the petitioners' favor, and Fidelity paid its insured $66,000 under the title policy. Fidelity then sued new House Rescue 911 LLC and Lewis. The trial court entered a default judgment against new House Rescue 911 LLC and granted Fidelity's motion for summary judgment against Lewis. Lewis filed this pro se appeal. FRAUD The tort of fraud has five elements: a false representation by a defendant, scienter, intention to induce the plaintiff to act or refrain from acting, justifiable reliance by plaintiff, and damage to plaintiff. False Representation Fidelity presented evidence that new House Rescue 911 LLC never owned the property; that Lewis and new House Rescue 911 LLC had no basis for claiming ownership of the property and had no right to convey any rights to the property; but that Lewis nonetheless attested that new House Rescue 911 LLC owned the property. Inducement In the owner's affidavit, Lewis attested that he was making the affidavit "to induce [the purchaser] to purchase said real property, and to induce FIDELITY NATIONAL TITLE INSURANCE COMPANY to issue a . . . title insurance policy." And, of course, Fidelity did issue a title insurance policy. Justifiable Reliance Lewis argued that any reliance on his false representation was not justified because Fidelity did not exercise due diligence. Fidelity presented undisputed evidence that the chain of title showed that title to the property was vested in "House Rescue 911 L.L.C." A title search would not have shown that new House Rescue 911 LLC was a different entity and was not formed until after old House Rescue 911 L.L.C. had acquired the property. A purchaser of land is charged with constructive notice of the contents of a recorded instrument within its chain of title. Conversely, a purchaser is not charged with constructive notice of interests or encumbrances which have been recorded outside the chain of title. The Court of Appeal concluded that Lewis pointed to no evidence creating a question of fact on the justifiable reliance element of Fidelity's fraud claim. Personal Liability An LLC member may be held individually liable if he or she personally participates or cooperates in a tort committed by the LLC or directs it to be done. The undisputed evidence is that Lewis was a member of new House Rescue 911 LLC, that he falsely represented that new House Rescue 911 LLC owned the property, and that he signed the limited warranty deed and the owner's affidavit on behalf of new House Rescue 911 LLC. The trial court did not err in finding that he is personally liable. The judgment was affirmed. ZALMA OPINION Fraud perpetrators are not honest or reliable. They lie. Clearly new House Rescue 911 LLC, and its manager, lied to the buyer of a piece of real property it did not own and also intentionally deceived the title insurer. Mr. Lewis was personally responsible to reimburse the title insurer for the money it was required to pay to its insured and was entitled to subrogate against the fraud perpetrator. (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.

Construction Defect Experts In construction defect cases, the standard of care and its breach must generally be shown through expert testimony. Lay testimony is sometimes sufficient where the defects are of common knowledge. In construction cases and other cases involving licensed professionals, standard of care evidence in negligence matters generally must be provided by expert testimony, because the standard of care involved in construction is not an area that comes within the realm of common knowledge. Expert testimony regarding a standard of care is generally not required to establish a breach of contract rather than conduct beneath the standard of care. There are many experts involved, not only in the construction of a building, but also the investigation of any defects that surface after a building is complete. A person faced with liability for a defective structure or a potentially dangerous structure should consider involving various experts. The Construction Consultant There are few schools that teach construction except those that assist individuals to become licensed general contractors. Consequently, a construction consultant develops his or her expertise by a combination of education, training, and experience as a general contractor in the state where the property is located. He or she also usually has experience in evaluating the work of people in the construction trades. The construction consultant can also establish his or her credentials by earning a license to construct buildings (and in fact doing so), and by being well-read in the field of construction, publishing peer-reviewed articles and books in his or her fields of expertise, and testifying in court on the subject. A construction expert is a person with practical experience, rather than one whose knowledge comes from schooling alone. Such experts are considered to be the most effective in providing advice, and in convincing a jury of the correctness of their advice and stated conclusions. The Structural Engineer Structural Engineering is the science and art of designing and making, with economy and elegance, buildings, bridges, frameworks and other similar structures so that they can safely resist the forces to which they may be subjected The Geotechnical Engineer Along with the structural engineer, the geotechnical engineer is responsible for the stability of the structure. The structural engineer is responsible for the structure itself while the geotechnical engineer is responsible for the ground upon which the structure is built. No matter how strong the foundation or footings are, if the soil in which the foundation is placed is not stable, the entire structure can fail. The Forensic Roofing Consultant The forensic roofing consultant is a specialized construction consultant whose expertise is limited to roofs, roof structures, and the damages that occur when a roof fails to perform as designed. Building Code Compliance Expert The Architect The Insurance Consultant © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4

Direct Evidence Direct evidence is proof that tends to show existence of a fact in question without the intervention of the proof of any fact. It includes testimony that tends to prove or disprove a fact in issue directly, such as eye-witness testimony or a confession. Sometimes, direct evidence may not exist because records have been destroyed in a fire, destroyed by water, stolen, discarded, or eaten by vermin. If direct evidence does not exist for any reason, circumstantial evidence must be produced to prove the fraud. As important as direct evidence is to the proof of fraud or attempted fraud, but, as courts have noted in the past, it can be difficult to obtain direct evidence of something so internal as intent to commit fraud. [United States v. Washington, 715 F.3d 975, 980 (6th Cir. 2013)]. Jurors are therefore free to consider circumstantial evidence and draw reasonable inferences from it. In United States v. Hawkins (6th Cir., 2019) circumstantial evidence was sufficient to allow a jury to convict. Circumstantial Evidence Circumstantial evidence is all evidence of an indirect nature when the existence of the principal fact is deduced from evidentiary facts by a process of probability reasoning. The investigator takes circumstantial evidence and uses deductive reasoning to reach a conclusion. Circumstantial evidence and the deductions of a professional investigator are often more reliable than direct evidence like eye-witness testimony. Circumstantial evidence is sufficient to establish proof of arson and other criminal activities. [Hoosier Insurance Company, Inc. v. Mangino, 419 N.E. 2d 978, 986 (Ind. App. 1981)].

Nobody’s Been Hurt Dr. Scrooge was eighty-five-years old. He lived with his daughter and son-in-law in a remodeled tract home outside of Portland, Oregon. The doctor’s daughter had insisted that he move into her house, even though he owned one of his own, after his last heart attack. She was afraid that her father, now a widower, would succumb to his passion for chocolate fudge ice cream. Only two months before he moved to his daughter’s house Dr. Scrooge managed to consume a full gallon of chocolate fudge ice cream at a single sitting. Shortly after that, as any healthy person under the same circumstances would, Dr. Scrooge felt serious pain in his chest. There was no question that Dr. Scrooge had a heart condition. It was, however, a condition that could be controlled by medication. After moving in with his daughter, Dr. Scrooge signed an agreement with a health maintenance organization who promised him no premium and better services than Medicare. Always on a look out for a bargain, Dr. Scrooge was pleased with the plan even though it did not pay 100% of all his pharmacy charges. He had many drug samples in his house given to him by drug-salesmen. He did not expect to ever need to buy a drug. He happily filled his own prescriptions for the medication his cardiologist prescribed to keep him healthy. Dr. Scrooge’s son-in-law was a detective with the Bunco-Forgery Division of the Portland Police Department. The Portland police provided its officers with an excellent preferred provider health plan. They could use any doctor they desired and were only required to pay $5 for every prescription drug they purchased regardless of the true cost of the drug. Dr. Scrooge’s HMO required a payment of up to $25 per prescription, depending on the cost of the drug. Since he lived with them, Dr. Scrooge (although he did not actively practice) still maintained his medical license. He would, at the request of his daughter, write prescriptions for antibiotics and other benign drugs requested for the assistance of the family. Occasionally he would even go to the drug store and pick up the drugs for the family as long as his daughter gave him a $5 bill for the pharmacist. Dr. Scrooge’s cardiologist was well read. He prescribed only the most recent and most effective heart medications. The drugs he prescribed, because they were new, and no generic variations were yet on the market, were extremely expensive. Much to the shock of Dr. Scrooge they were also so new that he had none in his supply of drug samples. The drug salesmen knew he was retired and refused to provide him with any further samples. Five months after Dr. Scrooge started his plan of saving on prescription drugs, the detective was called into his captain’s office. “When was your last physical?” “About a year ago, Captain. Why do you ask?” “I’m concerned about your health, Wilson.” “No reason, Captain, my health is perfect. The doctor gave me a clean bill and said that I had cholesterol levels equal to a person ten years younger than me.” “He did, did he. Wilson, do you use a doctor named Scrooge?” “Well, I don’t really use him as my physician. He lives in my house. He’s my father-in-law.” “Wilson, I have a report here from our health insurance administrator telling me that Dr. Scrooge has written prescriptions for blood thinners, blood pressure mediation, diuretics and nitroglycerin, in your name. These drugs are only prescribed for people with a serious heart condition. Are you taking those drugs?” “Dad, have you been writing prescriptions for your heart medicine in my name?” “Yes.” “Why?” “Because they only cost $5 on your insurance plan, and they cost $25 on mine.” “Don’t you remember what I do for a living? Have you no idea what you have done? You have committed fraud in my name!” “But no one was hurt, the insurance company pays these bills all the time.” Wilson, the next day, was forced to speak to his captain and inform him that his father-in-law had attempted to save some money on his own insurance by making his prescriptions out in Wilson’s name. He convinced the Captain that, although technically the old man had committed a crime, it would serve no purpose to put him in prison at his advanced age. It might even please the old man because, in prison, he would get the medicine for free. Wilson’s record was noted, his next promotion was delayed by twelve months. His father-in-law refused to fill his own prescriptions and pay the extra $20. Because he did not have the medication to take, he had a real heart attack and was hospitalized for three weeks. Dr. Scrooge still believes that no one is hurt by insurance fraud. (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/

ZIFL Volume 26, Issue 16 The Danger Of Litigation Financing How the UK Deals with the Scheme Timothy Schools, 61, a corrupt non-litigating lawyer called a “solicitor” in the U.K. who lived a life of luxury on an estate in Cumbria as he fleeced investors out of more than £25m is facing jail. Southwark Crown Court heard how Schools, ra n a scheme financing loans to law firms in “no win no fee” cases between December 2008 and October 2012. The jury reached a verdict on the case only after 28 hours' deliberation. Schools will be sentenced at Southwark Crown Court on Thursday 18th August and remains in custody until that date. Judge Beddoe was quoted as saying to Schools: “I simply don’t trust you to turn up. I refuse bail and you will remain in custody until Thursday.” California Claims Regulations Insurers licensed or operating in California must file their SIU annual reports by Wednesday, Sept. 28, Insurance Commissioner Ricardo Lara reminded insurers recently. Failing to file by the 11:59 pm deadline may lead to fines or other regulatory actions. Information about the annual report requirement is available on the CDI website. Insurers may access an electronic portal to file reports. Insurers licensed or operating in California must ascertain that their entire claims staff has read, understood or be trained about the California Fair Claims Settlement Practices Regulations by September 1 of Each Year and be ready to swear under oath that the Regulation has been complied with by the insurer. “California Fair Claims Settlement Practices Regulations 2022” which is now available as a Kindle Book and available as a Paper Back. Insurance Fraud is Growing Logarmithically “Soft Fraud” Insurance Soft fraud, of course, is a misnomer. Fraud is fraud – a misrepresentation or concealment of material fact, made to deceive an insurer, that actually deceives the insurer to its detriment. Those who use the term “soft fraud” attribute it to fraud of opportunity – like adding to a legitimate claim to recover deductibles or premiums paid over the years – while “hard fraud” is fraud that is pre-meditated. In the U.S., fraud attempts have risen about 22%, an amount much lower than the global average but still on plus side. Another Florida Insurer Goes Bust Weston Property & Casualty Insurance Co. is insolvent and should be placed into receivership, making it the fifth Florida property insurer this year to be dissolved, according to state regulators. The Florida Office of Insurance Regulation (OIR) on August 2, 2022 filed notice with the Department of Financial Services that the 10-year-old Weston, with about 22,000 policies in the state, “is insolvent or about to become insolvent,” and DFS should initiate delinquency proceedings. Health Insurance Fraud Convictions For example: Inform Diagnostics Agrees to Pay $16 Million to Resolve False Claims Act Allegations of Medically Unnecessary Tests Inform Diagnostics, Inc., (Inform) formerly known as Miraca Life Sciences, Inc. (Inform), has agreed to pay $16 million to resolve allegations that it submitted false claims for payment to Medicare and other federal health care programs. Inform is a clinical laboratory headquartered in Irving, Texas, that provides anatomic pathology services to physician practices throughout the United States. On April 27, 2022, Fulgent Genetics purchased Inform, and the company is now a wholly owned subsidiary of Fulgent Genetics. Other Insurance Fraud Convictions For example: Wellman Dynamics, a Creston company that manufactures large metal castings used by military contractors including Bell Helicopter, Sikorsky Aircraft and Boeing Co. will pay $500,000 in restitution to the U.S. government to settle allegations that the southwest Iowa company that makes metal castings used by military contractors in helicopters and other equipment has reached a settlement in a lawsuit alleging the company failed to test the castings and falsely certified test results over seven years. The Fifth Amendment & The Examination Under Oath In Fremont Indemnity Co. v. Superior Court (1982) 137 Cal.App.3d 554, 559, 187 Cal.Rptr. 137 the Court of Appeal concluded that the privilege against self-incrimination as to factual issues, especially application of arson exclusion, waived by filing suit over rights under fire insurance policy. The reasoning of cases such as these is that "‘[t]he gravamen of [the] lawsuit is so inconsistent with the continued assertion of [a] privilege as to compel the conclusion that the privilege has in fact been waived.’" While the Fifth Amendment privilege of a criminal defendant is absolute, a party or witness in a civil proceeding "may be required either to waive the privilege or accept the civil consequences of silence if he or she does exercise it. [Citations.]" There is a broad range of civil sanctions that may be imposed on a litigant who asserts his or her Fifth Amendment right, but the severity of such sanctions generally depends on whether the party invoking the privilege is the plaintiff or the defendant. Where the plaintiff in a civil action claims the privilege and refuses to testify, the court may dismiss the action on the basis that "`[o]ne may not invoke the judicial process seeking affirmative relief and at the same time use the privileges granted by that process to avoid development of proof having a bearing upon his rights to such relief.' [Citation.]" [Gunderson v. Wall, B204268 (Cal. App. 11/17/2009) (Cal. App. 2009)] Health Care Fraud Some Common Types of Health Care Fraud Fraud Committed by Medical Providers Double billing: Submitting multiple claims for the same service Phantom billing: Billing for a service visit or supplies the patient never received Unbundling: Submitting multiple bills for the same service Upcoding: Billing for a more expensive service than the patient actually received Reports of Convictions from the Coalition Against Insurance Fraud Fraud Convictions In Detail Barry Zalma, Esq., CFE 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. Over the last 54 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. Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; 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; I publish daily articles 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

Building Must Actually Fall Down for Collapse to be Covered Windcrest Owners Association filed a lawsuit against Allstate Insurance after the company declined a claim for property damage to a building in its condominium development. Allstate moved for summary judgment, alleging that the property damage was not covered as a "collapse" and was excluded from coverage because it resulted from faulty construction and maintenance. The trial court granted summary judgment dismissing Windcrest's claims. In Windcrest Owners Association, a Washington nonprofit corporation v. Allstate Insurance Company, an Illinois company, State Farm Fire And Casualty Company, an Illinois company, No. 82836-3-I, Court of Appeals of Washington, Division 1 (December 12, 2022) Windcrest sought payment to repair a building in severe distress as a result of wear, tear, and defective construction under a "collapse" coverage. The Court of Appeals read the full policy and applied its language to the facts presented by construction experts. FACTS Windcrest Condominiums, which consists of 15 units in two buildings, was completed in 1995. Allstate provided a commercial property insurance policy from November 2002 through 2017. In October 2018, Windcrest notified Allstate of a property damage claim based on a structural report prepared by Dibble Engineers. The report noted decay consistent with substantial impairment of structural integrity to one of the buildings. Specifically, it noted, "The capacity of the building's lateral- and gravity-force-resisting systems are compromised by decay that has been hidden by the exterior siding." Allstate, conducting a good faith investigation of the claim, retained construction consultants from Madsen, Kneppers & Associates, Inc. (MKA) to conduct an inspection and evaluation of causation of the damage at Windcrest. MKA concluded that there were sites of noted decay of structural components but no evidence of collapse "defined as an abrupt falling down or caving in," as required for coverage by Allstate's policy. Windcrest sued Allstate, alleging breach of contract and bad faith. Allstate moved for summary judgment; the trial court granted the motion and dismissed the claims with prejudice. ANALYSIS Determining whether coverage exists is a 2-step process. The insured must show the loss falls within the scope of the policy's insured losses. To avoid coverage, the insurer must then show the loss is excluded by specific policy language. An insured has the burden of proving that coverage is triggered, while the insurer has the burden of proving that an exclusion applies. Collapse Coverage Windcrest made a claim under the Allstate insurance policy. The coverage provided under an Additional Coverage Collapse applies only to an abrupt collapse as described and limited. The Allstate policy defines "collapse" as follows: “With respect to buildings: a. Collapse means an abrupt falling down or caving in of a building, or any part of a building, with the result that the building or part of a building cannot be occupied for its intended purpose; b. A building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse.” In addition to the lack of suddenness, Windcrest failed to provide evidence that the building or parts of the building fell down, fell to pieces, or caved in. Rather it still stood and was occupied. In addition the MKA study noted that there was damage to the buildings and that "there is no evidence to indicate that any parts of the building are currently . . . in a state of collapse as defined as an abrupt falling down or caving in." Indeed, a Windcrest resident and board member confirmed that no part of the building had caved in or abruptly fallen down. Windcrest produced no evidence that the structures were no longer habitable. A Windcrest resident and board member confirmed that Dibble never informed the board that the buildings were unsafe or unfit to occupy. The Court of Appeal concluded that the Windcrest buildings have not collapsed such that they can no longer be occupied for their intended purpose. In addition, the Court of Appeal noted that Windcrest had not demonstrated a collapse as defined by the Allstate insurance policy and that the collapse coverage does not apply. The evidence from both Allstate and Windcrest demonstrated that defective construction and maintenance initiated the chain of causation resulting in the loss. Allstate submitted both a report and deposition testimony from expert David VanDerostyne to support a coverage exclusion due to defective construction. The report stated conclusively that decay and deterioration occurred over an extended number of years due to "defective original construction in combination with lack of repairs and/or maintenance" in addition to a lack of a collapse. Since the evidence showed no abrupt or sudden falling down of any part of a building such that it could not be occupied for its intended purpose. As a result the policy coverage for collapse did not apply. Based on the evidence properly before the trial court, the damage to the condominium originated with faulty construction and maintenance. The Allstate policy explicitly excluded coverage for faulty construction and maintenance, as well as for any loss initiated by those excluded perils. Therefore, the Court of Appeal concluded that the trial court properly granted summary judgment for Allstate and dismissed Windcrest's claims. ZALMA OPINION Allstate provided coverage to insured's whose property collapses. However, it provided a clear and unambiguous definition of the word "collapse." Although Windcrest's expert used a technical definition of "collapse" that fit engineering practices it did not fit the definition of "collapse" in the Allstate policy. Once a contract is written an accepted by an insured the wording cannot be changed by a court to provide the coverage the insured would like and must apply the coverage written in the policy. (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.

Vermont’s Ruling in Favor of an Insured Seeking Business interruption Coverage due to Covid is a Pyrrhic Victory In Huntington Ingalls Industries, Inc. et al. v. Ace American Insurance Company et al, No. 2021-173, 2022 VT 45Supreme Court of Vermont (September 23, 2022) the Supreme Court of Vermont reversed a decision refusing to allow an insured ship builder to recover business interruption losses as a result of government orders dealing with Covid-19 and remanded the case to the trial court to determine if Covid caused direct physical damage to property. Insured Huntington Ingalls Industries, Inc. and insurer Huntington Ingalls Industries Risk Management LLC survived dismissal of the case seeking coverage under a property insurance policy for certain losses incurred by Huntington Ingalls Industries due to the COVID-19 pandemic. FACTS Insured, Huntington Ingalls Industries, Inc., is the largest military shipbuilding company in the United States and provides professional services to government and industry partners. It employs over 42,000 people, the majority of whom work at its shipyards in Virginia and Mississippi. In March 2020, insured purchased a property insurance policy (Global Policy) from insurer Huntington Ingalls Industries Risk Management LLC, its captive insurance subsidiary and a Vermont corporation. The policy covers the period of March 15, 2020, to March 15, 2021. That same month the insurer purchased policies from multiple reinsurers to reinsure all its obligations to insured under the Global policy. Each reinsurer participated for a specified percentage of the reinsurance program. Reinsurers’ policies incorporate the Global Policy by reference, stating for example that their liability “shall attach simultaneously with that of [insurer] and shall be subject in all respects to the same risks, terms, conditions, rates, interpretations[,] and waivers” of the underlying policy issued to insured. The policy, titled “Global Property Insurance,” contains relevant provisions that all real and personal property are insured against all risks of direct physical loss or damage to property. In the “business interruption” clause, it covers “[l]oss due to the necessary interruption of business conducted by [insured], whether total or partial . . . caused by physical loss or damage insured herein.” Recovery under the business-interruption provision is limited to the extent that insured is (a) wholly or partially unable to produce goods or continue normal business operations or services during the [p]eriod of [r]ecovery; (b) unable to make up lost production within a reasonable period of time . . .; or (c) able to demonstrate a loss or reduction of Net Profit for the services or production prevented, impaired or interrupted.” The period of recovery begins on “the date of . . . loss or damage” and “[s]hall not exceed such length of time as would be required with the exercise of due diligence and dispatch to rebuild, repair, or replace the property that has been destroyed or damaged.” The period of recovery also includes “[s]uch additional length of time to restore [insured’s] business to the condition that would have existed had no loss occurred.” The policy provides that Vermont law governs its construction. THE VIRUS SARS-CoV-2 is a virus that causes the disease COVID-19. In March 2020, civil authorities across the United States began to issue orders requiring certain businesses to close and recommending people stay home to reduce the virus’s spread. Civil orders generally required businesses to adhere to social distancing, employ enhanced sanitization practices on surfaces, and follow recommendations from the Centers for Disease Control and Prevention (CDC) and state health departments. However, they allowed businesses to operate at a level needed to provide essential services. The insured kept its shipyards open but made changes to its operations to comply with CDC guidance and protect employees. In September 2020, insured and insurer sued reinsurers seeking a declaratory judgment that they are entitled to coverage under the policy for property damage, business interruption, and other losses suffered as a result of SARS-CoV-2, the pandemic, and civil authority orders. The complaint alleges the pandemic caused “direct physical loss or damage to property” when the virus adhered to surfaces for several days and lingered in the air for several hours at the shipbuilding yards. TRIAL COURT DECISION The trial court granted reinsurers’ motion for judgment on the pleadings and consequently denied all of insured’s motions. The inquiry below focused on the meaning of “direct physical loss or damage to property” under the policy. Interpretation of the Policy An insurance policy is construed according to its terms and the evident intent of the parties as expressed in the policy language. Terms in an insurance policy are interpreted according to their plain, ordinary, and popular meaning, and will enforce unambiguous terms as written. When the Supreme Court of Vermont looks to determine if an insurance policy’s undefined terms have a plain meaning, it frequently refer to dictionary definitions. First, the phrase “direct physical loss” concludes with “to property” and this is a property insurance policy, thus the analysis is framed with a focus on what is happening to the insured property. The centrality of property to this insurance policy requires that something must occur affecting personal or real property for “direct physical loss or damage to property” to occur. Although all-risk policies are generally construed in favor of coverage, risk and loss are distinct concepts. The Supreme Court concluded that direct physical damage requires a distinct, demonstrable, physical change to property. When it combined the definitions of “direct,” “physical,” and “damage” provided above, the plain meaning is evident. However, a distinct, demonstrable, physical alteration need not necessarily be visible; alterations at the microscopic level may meet this threshold. The Supreme Court considered Ashland Hosp. Corp. v. Affiliated FM Ins. Co., No. 11-16-DLB-EBA, 2013 WL 4400516, at *4-5 (E.D. Ky. Aug. 14, 2013) the USDC for the Eastern District of Kentucky concluded that disk drives altered on microscopic level due to heat exposure causing decrease in reliability constituted “direct physical loss or damage to insured property. The definition is consistent with the policy section on the period of recovery, which defines the time for which a business-interruption claim may be made. Insured may make a business-interruption claim under the policy for the period starting with the date of the coverage-triggering event and not exceeding the time needed to “rebuild, repair or replace” the damaged property and such additional time as needed to restore insured’s business to its pre-loss condition. In order for something intangible to cause a direct physical loss, the cause of the loss must be so persistent as to require intervention, rather than the mere passage of time, to satisfactorily address it. The insurance policy in this case is unambiguous and must therefore be afforded its plain meaning. The phrase “direct physical loss or damage to property” includes two distinct components, either of which will trigger coverage unless an exclusion applies: “direct physical damage” and “direct physical loss.” “Direct physical damage” requires a distinct, demonstrable, physical change to property. “Direct physical loss” means persistent destruction or deprivation, in whole or in part, with a causal nexus to a physical event or condition. Purely economic harm will not meet either of these standards. In applying the plain meaning of the policy language as interpreted in this case, the insured has the burden of proving that the losses it alleges are either “direct physical loss” or “direct physical damage” to property. THE REMAND Remanding this case and allowing further factual development in the trial court is consistent with the philosophy underlying notice pleading. Although the science when fully presented may not support the conclusion that presence of a virus on a surface physically alters that surface in a distinct and demonstrable way, it is not the Court’s role at this stage in the proceedings to test the facts or evidence. To be clear, the opinion does not state that what occurred in insured’s shipyards is “direct physical loss or damage to property” under the policy. The Supreme Court merely concluded that insured has alleged enough to survive a motion to dismiss. The Insured’s complaint contains sufficient allegations to survive a motion for judgment on the pleadings under Vermont’s extremely liberal pleading standards. Justice Carroll Dissented “As a matter of law, human-generated droplets containing SARS-CoV-2 cannot cause “direct physical loss or damage to property” under this insurance policy. No future litigation can change that reality. While I agree with the majority’s conclusion that the insurance contract term in dispute is unambiguous, I cannot agree that insured’s claim survives beyond the pleadings stage.” Accordingly, he dissented. ZALMA OPINION News stories about Vermont giving the first victory to an insured seeking business interruption coverage for losses resulting from Covid 19. The opinion was exceedingly long and dealt with definitions and interpretation of insurance policies, the essence of the decision was that the insureds alleged sufficient facts to avoid a motion to dismiss but must now go to the trial court and produce evidence and science that the virus caused direct physical damage to the property of the insured. Something courts across the country have found that there was no direct physical loss or damage. (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 and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.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 at Rumble.com. Now available Barry Zalma’s newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover and a new book on Commercial Property Insurance purchase and claims that is now available as a Kindle book here, paperback here and as a hardcover here.

Punitive Damages Limited by Reprehensibility of the Defendant's Conduct In State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, the United States Supreme Court held that "'the most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct.'" (Id. at p. 419.) Moreover, in Campbell, the high court noted that its "'holdings that a recidivist may be punished more severely than a first offender recognize that repeated misconduct is more reprehensible than an individual instance of malfeasance.'" In California punitive damages have long been a part of traditional state tort law. [Pacific Mutual Life Insurance Co. v. Haslip (1991) 499 U.S. 1, 15, 111 S.Ct. 1032, 113 L.Ed.2d 1 (Haslip)], and the states have “broad discretion” with respect to their imposition. But because a state's system for awarding punitive damages may deprive a defendant of fair notice of the severity of the penalty that a State may impose and threaten arbitrary punishments, the United States Supreme Court has found that the Constitution imposes certain limits, in respect both to procedures for awarding punitive damages and to amounts forbidden as grossly excessive. [Philip Morris USA v. Williams (2007) 549 U.S. 346, 352–353, 127 S.Ct. 1057, 166 L.Ed.2d 940 (Williams).) Although the Supreme Court declined to impose a bright-line ratio which a punitive damages award cannot exceed, the U.S. Supreme Court, guided by this history, concluded that in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. Following the high court's guidance, the California Supreme Court explained that “ratios between the punitive damages award and the plaintiff's actual or potential compensatory damages significantly greater than 9 or 10 to 1 are suspect and, absent special justification cannot survive appellate scrutiny under the due process clause. [Nickerson v. Stonebridge Life Ins. Co., 63 Cal.4th 363, 371 P.3d 242, 203 Cal.Rptr.3d 23 (Cal., 2016) © 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 Read last two issues of ZIFL here.

Homeowners Policy Requires Insured to Reside at Premises Shanice Currie had a homeowners insurance policy with State Auto Property & Casualty Insurance Company (State Auto). After two fires severely damaged her duplex in Milwaukee, Currie sought payment from State Auto. State Auto denied the request for coverage, claiming that the duplex was not a "residence," and therefore was not covered by the policy. Currie sued State Auto. The district court granted summary judgment to State Auto. In Shanice Currie v. State Auto Property & Casualty Insurance Company, No. 22-2517, United States Court of Appeals, Seventh Circuit (July 5, 2023) the USCA for the Seventh Circuit explained the meaning of the terms "residence premises" and "reside." BACKGROUND Currie purchased the previously abandoned duplex (the Property) from the City of Milwaukee in the spring of 2018. She proceeded to install electricity and fill the bedroom with a dresser, mirror, clothing, and a bed. Yet, at the time she acquired the policy the property had no running water, kitchen appliances, no chairs or sofas in the living room, or a front door. Where a door should be, there was a wooden board that Currie would have to unscrew to enter the Property. Strangers came and went, and Currie took no action to eject them. Apart from sleeping at the Property two or three nights per month, Currie did not stay there. She bathed, prepared meals, kept personal belongings, and received mail at her two other addresses in Milwaukee. THE POLICY The homeowners policy Currie purchased from State Auto for the Property covered “residence premises,” which the policy defined as: “The two-, three-, or four-family dwelling where you reside in at least one of the family units . . . on the inception date of the policy period shown in the Declarations and which is shown as the ‘residence premises’ in the Declarations. Because the policy's inception date was September 15, 2018, Currie needed to reside in one of the units on the Property on that date for coverage to attach. She did not. THE FIRES On October 31 and on November 2, 2018, fires broke out at the Property, causing extensive damage. Currie informed State Auto that the Property was a total loss and sought full replacement value. State Auto denied Currie's claim, explaining that the Property was never her residence. DISCUSSION Currie sued. The district court granted State Auto's motion for summary judgment. The court held that, while the operative clause in the policy-"the dwelling where you reside"-was ambiguous, "[a] reasonable person would, nevertheless, understand the clause to require plaintiff to maintain and use the [Property] as a home, even if it was only one residence among many." Given Currie's lack of legal and practical ties to the Property, the district court found that a jury could not reasonably conclude that Currie resided there. There is no statutory definition of "residence" or "dwelling" in Wisconsin with respect to homeowners insurance coverage. Because neither “occupied” nor “dwelling” are technical terms, an appellate court may ascertain their meanings by reference to recognized dictionaries. Because Currie did not use the Property as a home the court found that no reasonable jury could conclude that she resided there. The Seventh Circuit concluded that the district court correctly concluded that Currie did not "actually live" at the Property, on the inception date or at any other time, thus it was not her residence. The address was not listed on her driver's license and her mail was sent to a different location. Most telling, the Property was not secure. It had no door nor facilities to support normal life. As a matter of law, Currie's Property was not a residence on the policy's inception date nor any time before or after. It was not covered by the insurance policy, and the district court's grant of summary judgment to State Auto was proper. ZALMA OPINION Insurers will issue fire insurance on vacant property but will not do so on a homeowners policy form. To protect the insurer the homeowners policy requires the insured to reside on the property. Since the property was not sufficiently equipped for a person to reside in because it had no door, no water and no other facilities to support normal life, Currie failed to fulfill the basic requirement for coverage: residence. Had the insurer been told the truth about the condition of the property it would never have agreed to the coverage. Because of the residence condition there was no need for the insurer to accuse the insured of fraud although she probably obtained the coverage by fraud. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe toExcellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 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.

The equitable doctrine of subrogation places the subrogee in the precise position of the one whose rights are subrogated. [Wimer v. Pa. Emp. Benefit Trust Fund, 939 A.2d 843, 853 (Pa. 2007); Chow v. Rosen, 812 A.2d 587, 590 (Pa. 2002); Pennsylvania Mfrs.’ Ass’n Ins. Co. v. Wolfe, 626 A.2d 522, 525 (Pa. 1993); see also Paxton Nat’l Ins. Co. v. Brickajlik, 522 A.2d 531, 532 (Pa. 1987).] Subrogation is the remedy called into existence for the purpose of enabling a party secondarily liable, but who has paid the debt, to reap the benefit of any securities which the creditor may hold against the principal debtor, and by the use of which the party paying may thus be made whole. [ Ario v. Reliance Insurance Co., 602 Pa. 490, 980 A.2d 588, No. 3 MAP 2008 (Pa. 10/05/2009).] In an insurance situation the insurance company, after it pays a loss to its insured, obtains by equity or contract, the right to an assignment from its insureds, up to the amount paid, of the insured’s rights against third parties responsible for the loss. Texas law, like every other jurisdiction, recognizes three sources of subrogation rights: equitable, contractual, and statutory. [Fortis Benefits v. Cantu, 243 S.W.3d 642, 648-49 (Tex. 2007).] Every claim investigated by a professional claims person requires a thorough investigation of subrogation possibilities. The insurance claims person who ignores the possibility of subrogation is completing only half of a thorough investigation. The remedy arises from tort, contract or equitable remedies available to the insured as the result of a loss that, after an insurer pays, must be assigned to the insurer. In 1748, the House of Lords in England decided in Randall v. Cochran, that an insurer for an English ship that was taken by the Spanish was permitted to bring suit in the name of its insured against the administrators of a public prize fund, collected by the British government from the sale of captured Spanish ships. © 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 Read last two issues of ZIFL here.

The Tort of Bad Faith Should be Abolished or Insurers Should be Allowed to Gain Tort Damages from Insureds who Breach the Covenant of Good Faith and Fair Dealing Insurance companies are understood to be persons who operate in the United States and are entitled to all the rights, benefits and protections of the U.S. Constitution. The Fourteenth Amendment provides in clear and unambiguous language: No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. If the law allows an insured to sue for tort damages as a result of a breach of the covenant of good faith and fair dealing equal protection should allow an insurer to sue the insured for tort damages as a result of the breach of the same covenant. Some litigants cannot, under our system of constitutional law, be more equal than others. Yet, until a court agrees, insureds are more equal than their insurer. Although the courts may think so, the insured’s breach of the covenant of good faith and fair dealing is also separately actionable as a contract claim and that some forms of misconduct by an insured will void coverage under the insurance policy. (Imperial Cas. & Indem. Co. v. Sogomonian (1988) 198 Cal.App.3d 169, 182. The court in Agricultural Ins. Co. v. Superior Court, 82 Cal.Rptr.2d 594, 70 Cal.App.4th 385 (Cal. App. 2 Dist., 1999) believed that contract remedies “adequately serve to protect an insurer from the insured’s misconduct without creating the logical inconsistencies and troublesome complexities of a defense of comparative bad faith.” In so doing the California Court of Appeal ignored the logical inconsistencies and troublesome complexities of the tort of bad faith. What is good for the insured should be good for the insurer and upheld the insured’s demurrer to the reverse bad faith tort theories, and the trial court sustained without leave to amend. The Court of Appeal, explaining its decision stated: “An insurer has no claim against its insured in tort for breach of the covenant of good faith and fair dealing. A breach of this covenant is, at base, a breach of contract. A relationship including specialized circumstances of reliance and dependence is necessary to transmute such a contractual breach into a tort. © 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 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. https://zalma.com/zalmas-insurance-fraud-letter-2/ Read last two issues of ZIFL here. Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921 Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts Listen to the Podcast: Zalma on Insurance https://anchor.fm/dashboard/episodes Zalma on Insurance 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/ https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkV7pkuOtkiv6oakpgK33CNlNAYW-WBlLCOZFtgvpSdcL7R-tsWKfMVqG6fEuvmM7Hh7gUEJ7yKOdgHDbGl_cGAU%3D

Bad Faith in Arkansas Requires Proof of Dishonest, Malicious, or Oppressive Conduct Including Hatred, Ill Will, a Spirit of Revenge Owners Insurance Company moved for summary judgment as to a claim of bad faith. Separately, Owners argued the Court should make a finding that there no evidence to support a punitive damages instruction. In RMS Warehouse 1315, LLC v. Owners Insurance Company, No. 5:22-CV-5114, United States District Court, W.D. Arkansas, Fayetteville Division (July 7, 2023) the USDC resolved the bad faith issue. BAD FAITH The tort of bad faith is established in Arkansas when an insurance company affirmatively engages in dishonest, malicious, or oppressive conduct in order to avoid a just obligation to its insured. The tort requires evidence of a state of mind characterized by hatred, ill will, or a spirit of revenge. Importantly, bad faith does not arise from a mere denial of a claim; there must be affirmative misconduct. Plaintiff RMS contends its two claims of loss should have been covered under the policy of insurance it had with Owners. The first loss occurred on May 4, 2020, following a hailstorm that caused damage to RMS's warehouse. The second loss was in February 2021, after a winter storm event. RMS narrows its bad-faith claim to Owners's treatment of the winter-storm claim and explicitly states that Owners did not act in bad faith with respect to the hailstorm claim. The only evidence RMS cited in support of its bad-faith claim is the denial letter sent by insurance adjuster Brian Doherty. RMS believes Mr. Doherty “misrepresented” in the letter what the insurance policy actually provided and omitted reference to crucial portions of the policy that provided coverage. The standard for establishing a claim for bad faith is, and always should be, rigorous and difficult to satisfy. RMS betrayed a fundamental misunderstanding about the tort when, at one point in its briefing, it characterizes Owners' actions as “[a]t best... a mistake,” Neither a mistake nor a “refusal to pay a disputed claim” is tortious behavior according to Arkansas law. Summary judgment on Count II, the tort of bad faith, was therefore granted. As a consequence, RMS is not entitled to a punitive damages instruction. The Motion was granted as to Count II, and the claim of bad faith was dismissed with prejudice; as a result, RMS will not be entitled to an instruction on punitive damages. ZALMA OPINION Acting as its own worst enemy the insured's brief admitted that the insurer erred. A mistake may be sufficient to establish a breach of contract but is insufficient to prove the tort of bad faith and the right to seek punitive damages. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe 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 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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.

ZIFL - Volume 27, Issue 2 The Source For Insurance Fraud Professionals This, the second issue of 2023 of Zalma's Insurance Fraud Letter contains multiple article that will be useful to all insurance fraud professionals, claims handlers, SIU investigators and insurance coverage counsel. First is an article explaining why tax returns must be produced and can be part of any potential fraud investigator. The Insured Must Produce Tax Returns If the First Party Insurer Demands Production Every first party property policy contains a provision requiring an insured to produce all relevant documents required to be produced by the Insurer and to appear for examination under oath [California Insurance Code § 2071; NY Standard Fire Insurance policy]. The language of the California and New York Standard Fire Insurance policy, mandated to be in all policies of fire insurance issued, provides: When a finding that “no reasonable trier of fact could conclude that Herman cooperated in the investigation or settlement of the claim” where it was uncontroverted that insurer never received financial data, including tax returns and proof of income. When an insured refused to produce his income tax returns finding it was a substantial and material breach of his contractual duty to cooperate which clearly prejudiced the insurer’s investigation into possible motives for arson. Read the full article at ZIFL-01-15-2023 Free Insurance Videos Barry Zalma, Esq., CFE has published five days a week videos on insurance claims, insurance claims law, insurance fraud and insurance coverage matters at https://www.rumble.com/zalma.https://rumble.com/c/c-262921 where there are now more than 606 free videos and you can subscribe to all of the almost daily new videos. Good News from the Coalition Against Insurance Fraud Victims of a $600M disability scam — the largest-ever — may finally have their long-lost benefits restored. Attorney Eric Conn fooled Social Security into paying disability for thousands of perfectly healthy people. The Eastern Kentucky man built one of the nation’s largest disability practices through pushy self-promotion and dishonest dealings. Conn bribed a local judge, psychologist and doctors to rubber-stamp disability claims for clients, regardless of their health. Many patients weren’t even examined. Social Security stopped their disability payments while figuring out which clients were truly injured, and who was uninjured and making money from Conn’s scam. Hundreds of impoverished, truly injured people lost desperately needed disability money. Many victims were unemployed coal miners, scratching out a sparse living in pain. Conn promised he’d get them their disability checks to help pay for critical medical care. Social Security stopped coal miner Tim Dye’s checks after Conn was busted. Dye’s wife sold her jewelry and possessions from their home. She even begged for water from neighbors. Other Kentuckians lost their homes, and several committed suicide. Conn received 27 years in federal prison last year. Under a recent agreement, however, Conn’s former clients thankfully can have their disability benefits restored if they request new hearings. You can read the full article and all convictions and read the full article at ZIFL-01-15-2023 How to Add to the Professionalism of Insurance Claims Professionals Every insurer, insurance syndicate, insurance brokerage, insurance sales agency, insurer branch office, and vendors to the insurance industry should add to the libraries of their various offices or employees. To add to the professionalism of the staff of insurance professionals, the insurer should make available to each the following books that are available at reasonable prices from amazon.com, the American Bar Association, Thomson Reuters, or Full Court Press, written by Barry Zalma. Details about each book are available at Barry Zalma’s Insurance Claims Library at https://zalma.com/blog/insurance-claims-library/ Read the full article at ZIFL-01-15-2023 Why Insurance Fraud Succeed 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. Read the full article at ZIFL-01-15-2023 Health Insurance Fraud Convictions Doctor Pays $1,850,000 To Resolve Allegations That She Performed And Billed For Medically Unnecessary Cataract Surgeries And Diagnostic Tests Aarti D. Pandya, M.D. and Aarti D. Pandya, M.D. P.C. (“Pandya Practice Group”) have agreed to pay approximately $1,850,000 to resolve allegations that they violated the False Claims Act by, among other things, billing the government for cataract surgeries and diagnostic tests that were not medically necessary, tests that were incomplete or of worthless value, and office visits that did not provide the level of service claimed. You can read the full article and all convictions and read the full article at ZIFL-01-15-2023 The Great Jewel Theft The following is a fictionalized true crime story of Insurance Fraud to explain why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. This story and the more than 80 similar stories help to Understand how insurance fraud in America is costing everyone who buys insurance millions, if not billions, of dollars every year. Twenty years later, after succeeding at insurance fraud, the insured was arrested, tried and convicted of being the leader of a terrorist and criminal organization called the Armenian Mafia. He is now serving a long term in federal penitentiary. Read the full article at ZIFL-01-15-2023 Other Insurance Fraud Convictions Executed for Murder for Insurance Money Robert Fratta, 65, received a lethal injection at the state penitentiary in Huntsville for the November 1994 fatal shooting of his wife, Farah. He was pronounced dead at 7:49 p.m. Fratta, a former suburban Houston police officer was executed in January for hiring two people to kill his estranged wife nearly 30 years ago amid a contentious divorce and custody battle. Prosecutors reported that Fratta organized the murder-for-hire plot in which a middleman, Joseph Prystash, hired the shooter, Howard Guidry. Farah Fratta, 33, was shot twice in the head in her home’s garage in the Houston suburb of Atascocita. Robert Fratta, who was a public safety officer for Missouri City, had long claimed he was innocent. You can read the full article and all convictions and read the full article at ZIFL-01-15-2023 (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

Defenses to the Tort of Bad Faith A bad faith claim should be dismissed on summary judgment if there was a genuine dispute on a reasonable factual dispute or an unsettled area of insurance law. In determining if a dispute is genuine, the court does not decide which party is “right” as to the disputed matter, but only that a reasonable and legitimate dispute actually existed. [Chateau Chamberay Homeowners Ass'n v. Associated Int'l Ins. Co., 90 Cal. App. 4th 335, 348 n.7 (2001), as modified on denial of reh'g (July 30, 2001). Insurers, afraid of a bad faith judgment, should consider the fact that there can be no bad faith claim for denial of coverage if the insurer was correct as a matter of law in denying coverage. [Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 751 n.9 (3d Cir. 1999).] When a court finds that Great American was not obligated to provide coverage under the terms of the Policy, the bad faith claim similarly fails. Before succumbing to the extortionist bad faith suit and offering up millions to avoid trial the honest insurer who knows it acted toward its insured fairly and in good faith must consider that an insurer does not act in bad faith if it declines to pay sums that are reasonably in dispute. While an insured may present evidence showing that the insurer knew there might be some question as to whether there was a legitimate question or difference of opinion over the eligibility, amount or value of the claim. An insured needs to present some evidence of a clear entitlement to coverage. If the insurer is convinced the evidence does not exist providing the insured with an entitlement to coverage, it must, in good faith, refuse to pay and be willing to litigate to the highest court available to prove that it acted properly. The tort of bad faith is like the mythical vampire—it hides in the dark. The law of unintended consequences applies to the situation and the reasons for its creation – bad acts by insurers costing innocent insureds to suffer was not cured by the tort of bad faith. Rather, insurers and their customers were hurt by the fear of the assessment of tort and punitive damages, increased the cost of insurance across the country. The truth about the tort of bad faith is that it will die only if it is put into the light of day. It does not solve the problem anticipated. Rather, it created a new problem: multiple bad faith suits brought even when the reason for the denial of all or a part of a claim were made because there was a genuine dispute between the insurer and the insured or that the decision to deny was fairly debatable. Insurers seem to forget, or ignore, the fact that to establish a claim for bad faith in the insurance context, a plaintiff must show two elements: (1) the insurer lacked a “fairly debatable” reason for its failure to pay a claim, and (2) the insurer knew or recklessly disregarded the lack of a reasonable basis for denying the claim. The tort of bad faith makes a few lawyers very rich; a few insureds receive indemnity for which they did not bargain, and makes the cost of insurance prohibitive to those who seek only to receive the benefits of the contract. If the courts of the United States still believe – regardless of the evidence now available – that the existence of the tort of bad faith is a good thing and helps to deter insurers from mistreating their insureds, they must limit the use and abuse of the tort of bad faith. Policyholders and their lawyers rely heavily on bad faith claims in coverage litigation to not only get the insurer's attention, but to press for favorable settlements due to the risk of high jury awards if the bad faith claim gets that far in litigation. Bad faith lawsuits are traditionally not interested in whether the claim made by the insured was one claimed by the insured but rather are an attempt to profit from a claim – a purpose anathema to the purpose of insurance, to provide indemnity. There is no doubt that allegations that an insurer acted in bad faith gets an insurer's attention. However, if an insured can go further and specifically seek punitive damages they can get in the driver's seat of coverage litigation and change the issue from interpretation of the contract to whether – regardless of coverage – the insurer acted badly and should be punished. Sometimes, the fear of being abused by courts is the fat that in Wyoming, although typically measured by the objective standard whether the validity of the denied claim was not fairly debatable. Even if a claim for benefits is fairly debatable, the insurer may breach the duty of good faith and fair dealing by the manner in which it investigates, handles or denies a claim. [State Farm Mut. Ins. Co. v. Shrader, 882 P.2d 813, 828 (Wyo. 1994)] A fairly debatable reason to deny a claim is not a defense against torts that may flow from engaging in oppressive and intimidating claim practices. So, when making the decision to fight a bad faith suit the insurer must also be confident that it not only had a good, fair, and genuine reason to deny the claim but must also be able to prove that they treated the insured fairly and investigated thoroughly and in good faith before making the decision not to pay. If the insured’s claim was fairly debatable the insurer is entitled to deny it without risking a bad faith suit. [Blanchard v. Mid-Century Ins. Co., 933 N.W.2d 631, 637 (S.D. 2019)] Of course, an insurer does not get to determine coverage unilaterally. There must be a reasonable basis for that determination. A claimant can test the reasonableness of the insurer’s determination of no coverage in the circuit court and, if no genuine dispute exists, the bad faith claim can proceed. On the other hand, if a genuine dispute does exist governing the coverage question, the insured’s claim is fairly debatable and the tort claim for bad faith based upon the insurer’s refusal to pay the claim may not be maintained. [Travelers Indem. Co. v. Armstrong, 565 S.W.3d 550, 568 (Ky. 2018)] A reasonable basis in law or fact for denying the claim is established by the absence of a contractual obligation in an insurance policy for coverage. [Messer v. Universal Underwriters Ins. Co., 598 S.W.3d 578 (Ky. Ct. App. 2019)] When a claim is "fairly debatable," an insurer is entitled to debate it. [Anderson v. Cont'l Ins. Co., 85 Wis.2d 675, 271 N.W.2d 368, 376 (1978)] A claim is fairly debatable if it can be disputed on any logical basis, and the question can generally be decided as a matter of law by the court. The pertinent question is whether an insurer has no reasonable basis for denying a claim. A determination whether a particular claim is fairly debatable implicates the question whether the facts necessary to evaluate the claim are properly investigated and developed or recklessly ignored and disregarded. An imperfect investigation alone is not sufficient cause for recovery if the insurer in fact has an objectively reasonable basis for denying the claim. [Reuter v. State Farm Mut. Auto. Ins. Co., 469 N.W.2d 250, 254–55 (Iowa 1991); Peterson v. W. Nat'l Mut. Ins. Co., 930 N.W.2d 443 (Minn. App. 2019)] It seems clear to me that the tort of bad faith has served its purpose. It should be killed. The courts of the United States should return to the common law of contracts where the insured is provided the benefits of the contract of insurance promised by the policy. ZALMA OPINION For many years after the inception of the tort of bad faith there were few defenses - other than the basic contract terms and conditions - to defend against claims of the tort of bad faith. The "fairly debatable" or "genuine dispute" defenses have changed the law in favor of insurers and provided a potential defense that should make it easier for an insurer to defend against the tort. (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/

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

The Risk of Arrest for Committing Insurance Fraud is Low and Profits High People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime. The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United States. In their hometown of Volgagrad they were well-known to the local police. The brothers had conducted a crime wave in the town since they turned ten. They were involved in burglary, armed robbery, smuggling, drug dealing and prostitution. To avoid arrest and a long sentence in a Siberian Gulag, the brothers invented a Jewish mother. They were then eligible to leave as victims of religious persecution. Their application for a Visa to the United States as seekers of religious freedom was accepted immediately. The “Save Soviet Jewry” organization, who knew nothing of their criminal background, financed their trip to the United States. Upon their arrival in the United States they met with acquaintances from the Soviet criminal class who had also escaped to the United States. They learned that the police were quite effective at catching and prosecuting strong armed criminals, but had little concern for perpetrators of fraud. A Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The stories help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ¬¬¬Perpetrators than any Other Crime.

The Trigger of Coverage/Property Damage The term "trigger of coverage" means "what event must occur for potential coverage to commence under the terms of the insurance policy" and "what must take place within the policy's effective dates for the potential of coverage to be 'triggered.'" [In Re Feature Realty Litig., 468 F. Supp.2d 1287, 1295, n.2 (E.D. Wash. 2006)] After the California Supreme Court adopted a continuous trigger in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 685, 42 Cal.Rptr.2d 324, 913 P.2d 878 (Montrose) in the case of successive policies, property damage that is continuous or progressively deteriorating throughout several policy periods is potentially covered by all policies in effect during those periods, so that the insurer’s duty to defend arose under those policies. Insurers, trying to limit their coverage, revised the policy wording. Therefore, the precise question is what result follows under the language of the policies of insurance to which the parties agreed. The “continuous injury” trigger has been applied mostly in cases involving gradual release of pollutants and other environmental harms. After Montrose, the insurer revised its policies to use the language for the very purpose of "obviat[ing] the application of the ‘progressive damage-continuous trigger’ articulated in Montrose." As a result, the defendant’s policies state that property damage "which commenced prior to the effective date of this insurance will be deemed to have happened in its entirety prior to, and not during, the term of this insurance." [Ins. Co. of Pa. v. Am. Safety Indem. Co., 32 Cal.App.5th 898, 244 Cal.Rptr.3d 310 (Cal. App., 2019)] The Louisiana Court of Appeals ruled that allegations by a property owner that an environmental consultant failed to detect the presence of pollutants on its property did not trigger coverage under the consultant’s liability policies. The Court found that the “occurrence” giving rise to the claims against the insured took place years prior to the issuance of the policies in question. Reaching a decision that comports with that of a majority of the states the Louisiana court said: In order for there to be coverage under these policies, the property damage must have occurred during the policy period. The property damage was the contamination (physical injury) to the property, which was caused by previous owners and users of the site. GTL’s liability is hinged upon its failure to detect the contamination. Even if the property is not considered physically injured, property damage as defined by the policy includes “[l]oss of use of tangible property that is not physically injured.” However, that loss of use is deemed to occur at the time of the occurrence that caused it. That occurrence predated the policy by almost seven years. Accordingly, the property damage did not occur during the policy period, and coverage is unambiguously excluded. (Emphasis added.) Whenever a claim is made for damage to property it is essential that both the insurer and the party making the claim determine the date and time when the property was actually physically damaged. Claims should then be made only to the insurer on the risk (the one whose policy is in force) at the time the physical damage occurred not the one whose policy is in force at the time suit is filed. “While the term ’trigger of coverage’ is not a term used in an insurance policy, it is, as the California Supreme Court said, a convenience used to describe that which, under the specific terms of an insurance policy, must happen in the policy period in order for the potential of coverage to arise. The issue is largely one of timing — what must take place within the policy's effective dates for the potential of coverage to be 'triggered'?” [State v. Continental, 55 Cal. 4th 186, 281 P.3d 1000 (2012) (quoting Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal. 4th 645, 655 n.2 (1995).] Because occurrence policies (as distinguished from claims-made policies) cover occurrences that result in injury 'during the policy period,' the courts in California and elsewhere have concluded that the policies are invoked, or 'triggered,' when the injury takes place." [Armstrong World Indus., Inc. v. Aetna Cas. & Sur. Co., 45 Cal. App. 4th 1, 52 Cal. Rptr. 2.d 690 (1996) (collecting cases); Pennsylvania Gen. Ins. Co. v. Am. Safety Indem. Co., 185 Cal. App. 4th 1515, 111 Cal. Rptr. 3d. 403 (2010)). (“time of occurrence,” for triggering purposes, “is the time the complaining party was damaged, not the time the wrongful act was committed”) (internal quotation omitted).] The word “trigger”, as a term of art, means the event that activates coverage under one or more insurance policies. The trigger of coverage problem arises in determining exactly what must take place within the policy’s effective dates to trigger coverage. Different states apply different triggers of coverage theories, including: the manifestation trigger; the exposure trigger; the continuous trigger; and the injury-in-fact trigger (recognizing the existence of various trigger of coverage theories). No Texas state appellate court has discussed which trigger of coverage theories should apply to a first-party claim under a standard homeowner’s insurance policy based on continuing or progressively deteriorating damage to the insured’s dwelling. When the Travelers issued a policy that provides coverage for "injury or damage that . . . happens while this agreement is in effect" it limited its coverage to that temporal requirement that applies only to the injury that occurs while the policy is in effect. Travelers bargained for an injury-based trigger of coverage, not an act-based trigger. Under the policy's plain terms, Travelers must defend any claim in which covered injuries occurred between 2005 and 2011, regardless of when the wrongful causal act occurred. ZALMA OPINION Every claims person must be aware of the the trigger of coverage so that he or she can thoroughly investigate a property claim. Without knowledge of the various triggers of coverage and how the trigger applies to the fact of the loss being investigated the claims person will fail in his or her obligation to thoroughly investigate a claim and treat the insured fairly and in good faith. © 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 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/ Rhe 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

ZIFL - Volume 27, Issue 11 The Source For Insurance Fraud Professionals This, the eleventh issue of the 27th year of publication Zalma's Insurance Fraud Letter provides multiple articles on how to deal with insurance fraud in the United States. The issue begins with: Steal From the Government - Go to Jail New Statute Requires Sentencing Review In The People v. Howard Oliver, B317368, California Court of Appeals, Second District, Third Division (May 12, 2023) Howard Oliver appealed from the judgment entered after a jury convicted him of conspiracy to cheat and defraud Medi-Cal, Medi-Cal fraud; grand theft, false and fraudulent claims, insurance fraud, and four counts of tax evasion for 2012 through 2015. Oliver was sentenced to an aggregate sentence of seven years eight months in prison and ordered to pay over $2.85 million in restitution. Read the full article & full issue at ZIFL-06-01-2023 More McClenny Moseley & Associates Issues This is ZIFL’s seventh installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana. Read the full article & full issue at ZIFL-06-01-2023 Dealing with Questionable Documents Bogus receipts and the need for confirmation of purchase are closely connected, guidelines applicable to both are suggested to avoid fraudulent claims. The following guidelines are in a certain order, and it is suggested that a “by the numbers” approach be followed so that the investigation can be most effective and successful. This order is suggested because the claims person will be establishing and preserving certain evidence that will be difficult for the insured to dispute as the handling and investigation evolves. Read the full article & full issue at ZIFL-06-01-2023 Good News from the Coalition Against Insurance Fraud After initially pleading not guilty last year, Connie Jo Clampitt has been found guilty of over $7M in medical insurance fraud. Clampitt has since pleaded guilty, and both she and her partner, Terrance Barnard, were indicted for healthcare fraud. Read about many more convictions and Read the full article & full issue at ZIFL-06-01-2023 Health Insurance Fraud Convictions Boston Man Sentenced to Two Years in Prison for Benefit Fraud Fernando Mateo Valenzuela, 69 a Hyde Park, Massachusetts man was sentenced May 24, 2023 in federal court in Boston for using a stolen identity to fraudulently obtain government assistance benefits. Valenzuela was sentenced by U.S. District Court Judge Leo T. Sorokin to two years and one day in prison and three years of supervised release. Valenzuela was also ordered to pay restitution of $29,051 to the Department of Unemployment Assistance and $7,230 to the Department of Transitional Assistance. Read about dozens more convictions and Read the full article & full issue at ZIFL-06-01-2023 Other Insurance Fraud Convictions Yucaipa Driver And Wife Sentenced After YouTube Videos Of Intentional Collisions Christopher Phelps, 40, of Yucaipa, and his wife, Kimberly Phelps, 40, were sentenced after pleading no contest to felony counts of insurance fraud, child abuse and assault with a deadly weapon. This comes after a Department of Insurance investigation revealed the couple caused collisions in an attempt to collect undeserved insurance payouts. Read about many more convictions and Read the full article & full issue at ZIFL-06-01-2023 It’s Time to Subscribe to Locals or Substack For Subscribers Only I Have Published Special Insurance Videos I published on Locals.com more than 25 videos and two webinars of the Excellence in Claims Handling program. I also published on Substack.com videos and webinars of the Excellence in Claims Handling Program available only to Subscribers. The subscribers have access to all the videos and a webinar on “The Examination Under Oath A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud” among others. The videos start with the history of insurance and work their way through various types of insurance and how to obtain and deal with insurance claims; Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com; Subscribe to my publications at substack at substack.com/refer/barryzalma; Go to substack at substack.com/refer/barryzalma; Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support Read the full article & full issue at ZIFL-06-01-2023 (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 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@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

Brilliant National Services, Inc. (“Brilliant”) appealed a summary judgment rendered in favor of the defendant, Lexington Insurance Company (“Lexington”), which dismissed all of Brilliant’s claims against Lexington with prejudice and declared that Lexington has no duty to defend or indemnify Coastal Chemical Company, LLC (“CCC, LLC”). In Brilliant National Services, Inc. v. The Travelers Indemnity Company And Lexington Insurance Company, No. 2021 CA 1471, Court of Appeals of Louisiana, First Circuit (September 7, 2022) the Louisiana Court of Appeals resolved the coverage dispute. FACTS Brilliant sued Lexington (among other defendants), seeking contribution for the costs of defending CCC, LLC in a number of asbestos exposure personal injury lawsuits filed in various state courts in Louisiana, beginning in 2011. Brilliant alleged that Lexington issued a general liability insurance policy to its insureds for the period of August 20, 1986, through August 20, 1987 (“Lexington policy”). Brilliant alleged that certain plaintiffs in the asbestos lawsuits claimed that CCC, LLC was the successor to an insured entity under the Lexington policy that was alleged to have manufactured, distributed, marketed, or sold asbestos-containing products. Brilliant claimed that if CCC, LLC was found to be the successor to an insured entity under that Lexington policy, then the insured entity’s rights under the policy transferred to CCC, LLC by operation of law. Brilliant further alleged that regardless of whether CCC, LLC was the successor of an entity insured under the policy, Lexington owed CCC, LLC a duty to defend based on the allegations raised in the asbestos lawsuits and the terms and conditions of the Lexington policy. Brilliant sought declaratory judgment that Lexington owed a duty to defend CCC, LLC in the asbestos lawsuits. Brilliant also sought judgment in its favor and against Lexington for 1/7 of all attorney’s fees and costs paid by Brilliant in defense of CCC, LLC in the asbestos lawsuits, together with legal interest, costs, and all other relief to which Brilliant may be entitled. Lexington answered, raising numerous affirmative defenses and moved for summary judgment, seeking a judgment in its favor declaring that CCC, LLC has no rights under the Lexington policy; dismissing the claims asserted by Brilliant; and awarding judgment in favor of Lexington on itsdemand against Brilliant and CCC, LLC. Brilliant and CCC, LLC opposed the motion. The trial court granted Lexington’s motion for summary judgment; dismissed all of Brilliant’s claims against Lexington with prejudice; and declared that Lexington has no duty to defend or indemnify CCC, LLC. SUMMARY JUDGMENT ON INSURANCE COVERAGE Summary judgment declaring a lack of coverage under an insurance policy may not be rendered unless there is no reasonable interpretation under which coverage could be afforded when applied to the undisputed material facts shown by the evidence supporting the motion. Where the facts are undisputed and the matter presents a purely legal question, summary judgment is appropriate. DISCUSSION An insurer’s duty to defend its insured arises solely under contract. Generally, the insurer’s obligation to defend suits against its insured is broader than its liability for damage claims. An insurer’s duty to defend its insured is determined by the allegations of the plaintiffs petition, with the insurer obligated to furnish a defense unless from the petition, it is clear the policy unambiguously excludes coverage. An insurer’s duty to defend suits on behalf of an insured presents a separate and distinct inquiry from that of the insurer’s duty to indemnify a covered claim after judgment against the insured in the underlying liability case. Lexington’s Insureds In moving for summary judgment, Lexington argued that it had no duty to defend or indemnify CCC, LLC, nor its subrogee, Brilliant, because CCC, LLC is not and has never been one of Lexington’s “insureds.” The Lexington policy defined “named insured” as: “‘named insured’ means the person or organization named in Item 1 of the declarations of this policy[.]” The policy lists the “named insured” as Coastal, Inc. and Coastal Chemical Co. Coastal, Inc. and Coastal Chemical Co. were the “Persons Insured” under the Lexington Policy. The parties do not dispute that the Lexington policy expired prior to the formation of CCC, LLC’s predecessor, the second Coastal Chemical Co., Inc., which was incorporated on December 8, 1987. Because neither CCC, LLC nor its predecessor was a party to the Lexington policy, CCC, LLC cannot be a “named insured” under the Lexington policy. Furthermore, neither CCC, LLC nor its predecessor falls into the definition of “Persons Insured” under the Lexington Policy. Successor Liability Lexington argued that CCC, LLC could only be entitled to defense and indemnity under the Lexington policy if CCC, LLC or its predecessor acquired the named insureds’-Coastal, Inc. or Coastal Chemical Co.-rights and interests in the Lexington policy. Lexington explained that its policy has never been transferred to CCC, LLC or its predecessor. In 1987, Coastal Chemical Co., Inc. acquired the chemical distribution business of Lexington’s insured, Coastal, Inc. Brilliant and CCC, LLC identified the 1987 asset transfer agreement as the only documents through which the Lexington policy could have been conveyed, sold, or otherwise transferred from Lexington’s insured to Coastal Chemical Co., Inc. The 1987 asset transfer agreement documents shows a list of transferred assets and the Lexington policy is not listed nor referenced in the asset transfer agreement. Lexington avers that because its policy was not transferred from its insureds to Coastal Chemical Co., Inc. in the 1987 asset transfer agreement, CCC, LLC never acquired the policy nor any rights thereunder from its predecessor. Accordingly, Lexington argued it has no obligation to defend or indemnify CCC, LLC or its subrogee, Brilliant. The key consideration is whether the successor is in fact a “continuation” of the predecessor. The threshold requirement to trigger a determination of whether successor liability is applicable under the “continuation” exception is that one corporation must have purchased all or substantially all the assets of another. In the instant case, CCC, LLC admits that Coastal Chemical Co., Inc. did not purchase all the assets of Coastal, Inc., only all the assets “necessary to operate a chemical distribution business.” There is no dispute that Coastal, Inc. retained assets and remained in business after the 1987 asset transfer. Since the 1987 asset transfer agreement excluded the Lexington policy from the list of assets acquired by CCC, LLC’s predecessor from Lexington’s insured. To conclude that CCC, LLC acquired the Lexington policy, the appellate court would have to ignore the parties’ contract. The Eight-Corners Rule Lexington contended that the appellants could not point to any factual allegations made by the plaintiffs in the underlying asbestos lawsuits which, if assumed true, transforms CCC, LLC into a “Persons Insured” under the Lexington policy. Cases applying the “eight-comers rule” hold that an insurer owes a duty to defend if, assuming the factual allegations are true, there would be both (1) coverage under the policy, and (2) liability to the plaintiff. The allegations of the petition are liberally interpreted in determining whether they set forth grounds that bring the claims within the scope of the insurer’s duty to defend. An insurer’s duty to defend arises whenever the pleadings against the insured disclose even a possibility of liability under the policy. Although the allegations of the petition may ultimately turn out to be incorrect or untrue, the insurer would still be obligated to provide a defense. Even though the asbestos plaintiffs allege that CCC, LLC “negligently and defectively designed, manufactured, marketed, distributed, supplied, sold and used” the “asbestos products,” those allegations do not trigger coverage under the four comers of the Lexington policy. The pertinent Lexington policy provision clearly defines “Persons Insured” and includes only specific individuals. None of the asbestos plaintiffs’ allegations could, even if proven, transform CCC, LLC into an individual defined as a “Persons Insured” under the Lexington Policy-i.e., an executive officer, director, or stockholder of the “named insured” Coastal, Inc. or Coastal Chemical Co. The Court of Appeal affirmed the trial court’s judgment. ZALMA OPINION Asbestos claims have destroyed or bankrupted multiple insurers. As a result those insurers still viable are, like Lexington in this case, the targets of defendants seeking defense and indemnity for claims of injury by exposure to asbestos. In this case the Louisiana Court of Appeal could find no coverage because there was no way that they could stretch the language of the policy to make the plaintiffs fit within the definition of “insured” in the Lexington policy. No stranger to a liability insurance policy can be allowed defense or indemnity. (c) 2022 Barry Zalma & ClaimSchool, Inc. This image has an empty alt attribute; its file name is Books-by-Barry-Zalma-Esq.-CFE-1024x576.jpg 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 and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. This image has an empty alt attribute; its file name is TORTOFBAD-FAITH.png Now available Barry Zalma’s newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover. 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/

The Third-Party Liability Claim See the full video at https://youtu.be/Ia5UQlvS758 The investigation of a liability insurance claim is conducted to fulfill the promise made by the insurer to defend and indemnify the insured in the event of a contingent or unexpected loss resulting in the injury to person or property as a result of actions of the insured. To fulfill the promises made by the policy insurers must establish a professional group of insurance adjusters who are competent investigators and insurance claims people. The adjusters, at a bare minimum, with regard to third party liability claims, must be capable of fulfilling, at a minimum, each of the topics that follow. Read the Policy Establish Coverage Read the Loss Notice Meet with the Insured and Witnesses Once the adjuster has completed this basic preparation by confirming coverage, reading the policy and reviewing the loss notice, he or she should arrange to meet with the insured and witnesses. The adjuster should explain to the insured that the policy requires the insured to cooperate and assist the insurer in completing a thorough investigation of the claim being made against the insured. The explanation should include that the insurer, in order to provide the best service possible. It is the adjuster who acts in good faith on behalf of the insurer to its insureds. The insurer hired the adjuster to help the insured protect himself or herself from claims by the third party claiming injuries as a result of the negligence of the insured. The adjuster must also explain that he or she cannot provide the defense alone. The adjuster needs the assistance of the insured and is present to help the insured obtain the defense needed.

Burden of Proof & Exclusions It is the obligation of the insured to prove that property has been physically damaged. The loss of marketability is not a peril insured under a property policy; only physical damage to tangible property is insured. In Lundstrom v. United Servs. Auto. Ass’n-CIC, 192 S.W.3d 78 (Tex. App. 2006), a case involving a leaking water pipe, the US Court of Appeal affirmed the District Court for the Eastern District of Pennsylvania and found that a leaking water pipe can bring about a loss of personal property. [Gatti v. The Hanover Insurance Company, 774 F. 2d 1151 (1985).] One of the insured’s employees noticed that the ground was saturated with water and that the water meter was spinning rapidly. This led to the conclusion that the water from the underground pipe was escaping after passing through the water meter. Confirmation of this conclusion came in the form of a water bill for $39,523.45. The insureds contended that the all risk policy should cover this expense, but the insurer disagreed and argued that this was a pecuniary loss as distinguished from a physical loss of property. The court disagreed and found coverage, stating that the insurer’s position “ignored the common sense meaning of the phrase ‘physical loss.’” The water became the property of the insured once it passed through the water meter, and therefore the subsequent escape of water was a physical loss of the insured’s personal property—the water. Coverage was denied an insured in Chadwick v. Aetna Insurance Company, 9 N.C. App. 446, 176 S.E. 2d 352 (1970), when evidence tended to show that jewelry was stolen from a jeweler by an unidentified man and woman who pretended to be customers at the plaintiff’s jewelry store. The loss was discovered during a “spot check” of the inventory approximately nine days after the alleged theft. The Chadwick court found that the facts of the case did not warrant recovery and ordered a new trial, noting that the language of the policy plainly “bar[s] recovery for unexplained losses or for mysterious disappearances, however they come to light.” © 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 Read last two issues of ZIFL here.

Consult Local Coverage Counsel When there Exists a Conflict Between Insurers Other Insurance Clauses Where two or more insurance policies may be called upon to apply to a loss, conflicts may arise involving the three basic types of other insurance clauses. Since every state seems to apply other insurance clauses differently, regardless of type, it is the obligation of every claims person faced with conflicting other insurance clauses, to seek the advice and counsel of a local insurance coverage lawyer who can explain that the major categories of conflict arise when: there is no other insurance clause in either of two primary policies; there is an other insurance clause in one primary policy but not in the other primary policy; there are similar other insurance clauses in both primary policies; or there are dissimilar other insurance clauses in both policies. Coverage counsel can then provide the claims person with advice about how to fairly and in accordance with the law of the jurisdiction apply the multiple other insurance clauses. The fairest and easiest method to share obligations to the same insured is a simple mathematical proration based on policy limits. This method will almost always be applied if there is no other insurance clause or if the other insurance clause in the policy is declared invalid or unenforceable. © 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 Read last two issues of ZIFL here.

A Video About the Waiver of the Privilege INTENTIONAL WAIVER Insurers frequently turn to outside counsel, or internal claims adjusters who are licensed lawyers, for legal advice regarding their coverage determinations on claims. In later litigation over denials of coverage or a carrier’s claims-handling conduct, a question that frequently arises is whether the advice provided by such counsel is protected from disclosure to insureds. Insurers may be obligated to disclose otherwise-privileged communications if the insurer relies on “advice of counsel” as a defense to the claim for breach of contract or bad faith. It is not unusual for insurers to assert as a defense to charges of bad-faith by claiming that their conduct was reasonable because they relied on the advice of counsel. When an insurer asserts the defense, it puts the substance of the advice it obtained at issue. By so doing most courts conclude the insurer waived the attorney-client privilege.[Chicago Title Insurance Co. v. Superior Court, 174 Cal. App.3d 1142 (1985).] UNINTENTIONAL WAIVER In Sony Computer Entertainment America, Inc. v. Great American Ins. Co., et al., 229 F.R.D. 632 (N.D.Cal. 2005) Sony Computer Entertainment Company, Inc. sued American Home Assurance Co. and other insurance companies for wrongful denial of insurance coverage in connection with two consumer lawsuits against Sony. The suits arose from claims of property damage, false advertising, and other injuries in connection with Sony’s PlayStation and PlayStation 2 products. American Home filed motions to compel responses to discovery contesting that Sony’s assertion of the attorney-client privilege at the depositions of Jennifer Liu, an attorney and Sony’s director of legal and business affairs. Sony’s Ms. Liu was designated by Sony as its person most knowledgeable for deposition under F.R.C.P. Rule 30(b)(6) regarding one of the consumer lawsuits. At the depositions, Sony’s counsel asserted the attorney-client privilege and the attorney-work product doctrine and instructed Ms. Liu not to answer questions. CRIME FRAUD EXCEPTION A waiver of the privilege also may result when the carrier is sued for bad faith and/or fraud. For example, California Evidence Code Section 956 provides: “there is no privilege under this article if the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit a crime or a fraud.” Even without a statute, the license to practice law, is not a license to commit a crime. One federal court ruled that a bad faith claim not involving fraud is insufficient to trigger the exception. In Freedom Trust v. Chubb Group of Insurance Cos., 38 F.Supp.2d 1170 (C.D. Cal. 1999) the insured argued that the privilege had been waived because the insurer denied coverage in bad faith. The court recognized that the attorney “does not have to be aware of the fraud for the crime-fraud exception to apply” and that the fraud exception includes civil fraud. The court noted a split in authority nationally as to whether a bad faith claim triggers the crime-fraud exception. © 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

Murder of Homeless Man Pay Fraudsters 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. What Happens When the Market Drops George and Adam were partners. Their business, consulting with aerospace manufacturers on preparing the reports required by the Department of Defense, had been immensely successful. For the first five years of business their billings exceeded $3,000,000 a year. They lived well. Like the average Americans they were, they spent every dollar they made and about 10% more than they made. They had no savings. They did have large credit card balances. Because they knew how important each was to the success of the partnership, they purchased Key man life insurance policies with limits of $3,000,000 each from Trustme Life Insurance Company. In 2008 the bottom fell out of the aerospace industry with the election of President Obama who cancelled space programs. Their customers stopped hiring consultants. The billings of the partnership shrank like Alice after she bit the mushroom. A Plan to Profit From Murder Adam called Fuzzy into Adam’s office at 8:00 that night. He asked Fuzzy to sit in his desk chair and shot him in the face with a 12-gauge shotgun at close range. Adam discharged one barrel on each hand to eliminated all of Fuzzy’s fingerprints. Adam then placed his wallet with all its money, credit cards and other identification in the inside coat pocket of his old suit, removed anything that might identify Fuzzy as being someone other than Adam and then drove to the airport in George’s 750 IL BMW leaving the Jaguar in the garage. At the airport, Adam, using cash, purchased a ticket in the name of Adam Smith to New Orleans, Louisiana. He had already purchased, from street vendors on Hoover Street in Downtown Los Angeles a driver’s license in the name of Adam Smith with a birth date five years earlier than Adam’s true date of birth, a social security card, a MasterCard and Visa all issued in the name of Adam Smith. The Crime Fails Adam and George were arrested and tried for the murder of Fuzzy as well as several counts of insurance fraud. The testimony of the young lady, the presence of Adam and the Los Angeles Airport recording of George’s license plate on entry and exit from the airport parking lot made their defense impossible. They were convicted. Adam and George are now spending the remainder of their lives in the State Penitentiary. The insurer recovered $4,000,000 of the $6,000,000 (George and Adam had lived well for that year and a half) and paid the lustful young woman a $400,000 reward. She lived happily ever after. (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 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. Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. 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; I publish daily articles 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/ Read posts from Barry Zalma at Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

There appears to be a growing trend in the United States where insurers file malpractice suits against counsel retained to defend their insureds. When an insurer retains a defense lawyer to represent its insured only to find they are incompetent or committed malpractice in providing the defense, rather than admit the error in choosing a poor lawyer for the insured the insurer sues the lawyer for malpractice seeking reimbursement for the amount paid to indemnify the insured. Where the insurer retained defense counsel and there was no reservation of rights, courts have allowed the primary insurer to bring a cause of action against the attorney for malpractice, finding that the attorney represents the insurer, along with the insured, where they have common interests. Insurance defense counsel must manage their potential exposure to suits brought against them by insurers who ask them to defend insureds. This should cause defense counsel to reevaluate the limits of their malpractice policies and to understand all the potential parties who may bring a malpractice claim against them. Likewise, insurers should recognize their own exposure with respect to claims of vicarious liability. They must also select defense counsel with the utmost care and diligence because they may not be able to sue their chosen defense counsel if a mistake occurs. Insurers also need to make sure that the attorneys who represent their interests make appropriate disclosures to the insured’s independent counsel. Great American attempted to sue its defense counsel for providing an incompetent defense to one of its insureds in Great American Insurance Co. v. Dover, Dixon Horn. The Eighth Circuit Court brought relief to the insurance defense bar when it refused to allow the insurer to successfully sue counsel—retained to defend an insured—for legal malpractice. The law of Arkansas only allows malpractice actions to be filed against those with whom the parties are in privity.