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Choking a Friend to Death Not a Covered Loss
Coverage Limited to Conduct of Business of Insured
Post 4787
Jodi Greenlaw, as personal representative of the estate of her late husband Philip J. Greenlaw (collectively, the Estate), appealed from a judgment of the Superior Court granting a motion for summary judgment filed by MMG Insurance Company (MMG) on MMG's complaint seeking a declaratory judgment that it had no duty to indemnify Joseph McNeely, a close friend of Greenlaw, in a separate wrongful death action that the Estate filed against McNeely after Greenlaw's death.
In MMG Insurance Company v. Estate Of Philip J. Greenlaw et al., 2024 ME 28, No. Cum-23-228, Supreme Court of Maine (April 18, 2024) the Supreme Court interpreted the policy as written.
BACKGROUND
In 2019, McNeely operated, as sole owner, a landscaping business called Cutter's Edge Lawn Maintenance. MMG issued a businessowners insurance policy providing both property and liability coverage to McNeely (the MMG Policy).
McNeely had discussed with Greenlaw, his close friend, measuring and providing a proposal to hydroseed Greenlaw's backyard. On May 20, 2019, Greenlaw hosted "an informal social group" of men at his house. The group "met year-round on Monday evenings to share their enthusiasm for motorcycles by eating, drinking, telling stories, and taking a ride together if the weather permitted." The group also "discussed business-related topics" and "engaged in frequent business dealings." McNeely attended these meetings when he could.
McNeely and Greenlaw went to the backyard, where McNeely measured and provided pricing for the project. Greenlaw said he planned to think about the project and would get back to McNeely about it. At around 8:00 p.m., Jodi returned home, and the men, including McNeely and Greenlaw, "wereinebriated." After 10:00 p.m., Jodi asked how the measuring for the hydroseeding went, and either McNeely or Greenlaw told her about the project's progress. "Late in the evening," while "sitting and gabbing," Greenlaw initiated a wrestling match with McNeely. During the wrestling bout, McNeely put Greenlaw in a chokehold, and Greenlaw lost consciousness and died soon after, despite McNeely's efforts to revive him.
The MMG Policy, stated that MMG will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury to which this insurance applies. The MMG Policy defines an "insured" as anyone "designated in the Declarations" as an "individual . . . but only with respect to the conduct of a business of which [the named insured is] the sole owner." (Emphasis added.)
DISCUSSION
The Estate contends that "whether Greenlaw's death occurred with respect to the conduct of McNeely's business" is a triable issue of fact and that the court "erred by discounting the 'earlier business dealings' and the litany of other facts . . . when summarily finding that the 'wrestling itself was not business-related.'"
Unambiguous contract language, however, must be interpreted according to its plain meaning. The Supreme Court concluded that MMG Policy provision was unambiguous. The MMG Policy designated McNeely as an individual, and McNeely was thus covered as an insured, only with respect to the conduct of a business of which he was the sole owner.
The Supreme Court found that the trial court did not err in determining that there was no genuine issue of material fact and that McNeely's actions while he was wrestling with Greenlaw were not with respect to the conduct of McNeely's landscaping business.
Although it is undisputed that earlier in the evening McNeely had measured Greenlaw's backyard and discussed his landscaping business with several individuals, there is no contention, that McNeely's actions while wrestling with Greenlaw were to further McNeely's business. In the opinion of the Supreme Corut an ordinary person would not think that the policy's language would cover McNeely's actions while wrestling with Greenlaw.
ZALMA OPINION
Getting drunk with a friend, entering into a wrestling match at the home of the friend, and choking his friend to death, could not be part of the landscaping business of the insured even though the two discussed business before the drinking and wrestling began. Wrestling and a fatal choke hold have nothing to do with landscaping.
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Agent Binds Principal
Rejection of UIM Cover by Agent Valid
Post 4786
Brandon Lawrence appealed the trial court's order finding Progressive Northern Insurance Co. (Progressive) made a valid, meaningful offer of underinsured motorist (UIM) coverage to his agent, Ashley Outlaw.
In Progressive Northern Insurance Co. v. Brandon Lawrence and Ashley Outlaw, No. 2024-UP-127, Appellate Case No. 2020-001245, Court of Appeals of South Carolina (April 17, 2024) the Court of Appeals explained the law of agency and its relationship to insurance.
FACTS
From 2008 to 2013, Lawrence and Outlaw lived together in the same house with their son; they never married. They split the household expenses, but Outlaw paid the bills and took care of any insurance needs. On August 19, 2009, Outlaw purchased an insurance policy from Progressive to cover Lawrence's motorcycle; however, Lawrence did not discuss obtaining UIM coverage with Outlaw, nor did he read the policy, did not have any involvement in obtaining the policy, and did not have any contact with Progressive.
The application for the insurance policy was mailed to Lawrence and Outlaw. It listed Outlaw as "Married" and as an "Insured" and Lawrence as "Married" and as Outlaw's "Spouse." On September 5, 2009, Outlaw signed the application form and rejected Progressive's offer of UIM coverage. Outlaw paid the premium for the policy, and Lawrence reimbursed her.
In May 2013, Lawrence was involved in a motorcycle accident. On August 12, 2016, Progressive filed a declaratory judgment action and sought a determination that UIM coverage was offered to Lawrence through his agent, Outlaw, and that Lawrence was bound by Outlaw's rejection of UIM coverage. The trial court found Lawrence was bound by Outlaw's rejection of UIM coverage because Lawrence appointed Outlaw as his agent to obtain the policy. Lawrence testified in his deposition and at trial that he knew Outlaw was getting insurance; that he asked her to do so; and that she had his permission to do so.
LAW, ANALYSIS, AGENCY
The Court of Appeals noted that it is well-settled that the relationship of agency between a husband and wife is governed by the same rules which apply to other agencies, and no presumption arises from the mere fact of the marital relationship that one spouse is acting as agent for the other. An agency relationship may be, and frequently is, implied or inferred from the words and conduct of the parties and the circumstances of the particular case.
Therefore, the Court of Appeals held that an agency relationship existed between Lawrence and Outlaw and that Outlaw's rejection of UIM coverage bound Lawrence. Lawrence stated he assumed Outlaw would purchase UIM coverage, he did not discuss such optional coverage with her, read the policy, check to see if the policy included UIM coverage, or have any contact with Progressive himself. Lawrence gave Outlaw the authority to obtain the insurance policy, and he is bound by Outlaw's rejection of UIM coverage. To hold otherwise would allow Lawrence to benefit from Outlaw's procurement of the policy but not be bound by her rejection of UIM coverage.
MEANINGFUL OFFER OF UIM COVERAGE
Automobile insurance carriers must, by statute, "offer, at the option of the insured, underinsured motorist coverage up to the limits of the insured liability coverage . . . ." S.C. Code Ann. § 38-77-160 (2015).
Progressive's application included the words "Underinsured Motorist Coverage" and several paragraphs that explained what such coverage entailed. Additionally, the information about UIM coverage offered by Progressive was not found in a separate form, the UIM information and rejection form was included within the main application that Outlaw received and signed.
Progressive made a meaningful offer of UIM coverage to Lawrence's agent, Outlaw.
Progressive's offer of UIM coverage was made through a form it sent to Lawrence by mail. Progressive's offer of UIM coverage specifically outlined the limits. Progressive intelligibly advised Outlaw, who acted as Lawrence's agent, of the UIM coverage.
Outlaw had experience purchasing insurance in the past by regularly handling the insurance needs of the household.
ZALMA OPINION
It's sad that Lawrence was injured by an underinsured motorist and could not recover from his motorcycle policy because his "wife" rejected Progressive's offer of UIM coverage as his agent for the motorcycle policy and other insurance policies for their "family." The case ignored the fact that she lied on the application about a material fact claiming that Outlaw and Lawrence were married, when they were not. If that was a fact material to the decision of Progressive to issue the insurance it could have declared the policy void for material misrepresentation of fact or rescind the policy. Not necessary because there was no UIM cover.
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Assets Forfeited as Restitution for Murder for Profit
Insurance Companies are Victims When Wife Killed for Insurance Money
Post 4785
Secondary Beneficiaries Have No Right to Insurance Proceeds Obtained by Father as a Result of Murder of Mother
Petitioners Julian and AnaBianca Rudolph (jointly, “Petitioners”) sued by a Verified Petition for Adjudication of Interests in Property Ordered Forfeited (“Petition”) and a memorandum of law in support.
In United States Of America v. Lawrence Rudolph, and Lori Milliron, CRIMINAL No. 22-cr-012-WJM, United States District Court, D. Colorado (April 12, 2024) the USDC resolved the dispute finding the insurers, not the secondary beneficiaries were the victims of the fraud.
BACKGROUND
On August 1, 2022, Defendant Lawrence Rudolph (“Defendant”) was convicted by a jury of committing foreign murder. The jury also convicted him of committing mail fraud. With respect to Count 2, nine insurance policies paid claims out due to the mail fraud.
On May 17, 2023, the Court entered its Preliminary Order of Forfeiture, which determined which specific assets are forfeitable by Defendant. On August 21, 2023, the Court conducted the sentencing hearing as to Defendant, at which it also addressed restitution and forfeiture. The Court ordered that Defendant must pay $4,877,744.93 in restitution to the insurance company victims as set forth in the life insurance payments.
FACTUAL ALLEGATIONS
Petitioners are the daughter and son of the deceased, Bianca Rudolph, and Defendant. They petitioned the USDC for an ancillary hearing based on their legal interest, both personally and on behalf of their deceased mother's estate, in certain assets this Court has ordered forfeited to the United States.
Prior to her death, Bianca Rudolph obtained nine life insurance policies from seven different insurance carriers Petitioners are specifically listed as contingent beneficiaries on three of the insurance policies, meaning they would receive the proceeds if the primary beneficiary (namely, Defendant or the Rudolph Trust) is disqualified in any way.
Defendant began collecting on the life insurance policies almost immediately after Bianca Rudolph's death in October 2016, receiving $4,877,744.93 in insurance proceeds between January and March 2017. In doing so, he hid the fact that he murdered Bianca Rudolph. He was tried and convicted of murder and fraud in August 2022.
After the conclusion of the trial, the Government moved for an order that Defendant: (1) forfeit property identified as proceeds of his insurance fraud offense; and (2) pay mandatory restitution to the victims of his crimes.
ANALYSIS
To establish that they have statutory standing Petitioners must first demonstrate that they have a legal interest in the property to contest the forfeiture. Petitioners have the burden to prove a legal interest in the property exists.
Petitioners argued that they were the beneficiaries of a constructive trust over the assets subject to forfeiture. The Court concluded that Petitioners have not met their burden to establish that they are entitled to a constructive trust under Arizona law. As a result, they cannot establish that they have standing to contest the forfeited property.
Elements of Equitable Constructive Trust
In Arizona, a court may impose a constructive trust when title to property has been obtained through actual fraud, misrepresentation, concealment, undue influence, duress, or similar means, or if there has been a breach of fiduciary duty. The Arizona cases do say a constructive trust can be imposed in situations where it is necessary to compel one who unfairly holds a property interest to convey that interest to another to whom it justly belongs.
Party to Whom the Insurance Proceeds “Justly Belong”
The Court found that Petitioners are not entitled to a constructive trust. To establish standing for a constructive trust, Petitioners must establish that they are asserting their own rights and not those of third parties.
Petitioners reiterate that they, or trusts that ultimately benefit them, are the contingent beneficiaries of the life insurance policies, and with limited exceptions, the insurance companies agree that they are the proper beneficiaries of those policies.
Whether an Adequate Remedy at Law Exists
The Court agreed with the Government's position because the insurance companies, not Petitioners, are the victims of Defendant's fraud and have selected an adequate remedy at law: restitution. This element of the constructive trust analysis is designed for the defrauded party-here, the insurance companies.
The Court concluded that Petitioners lack standing to continue with the ancillary proceeding under Federal Rule of Criminal Procedure 32.2(c) and dismisses their Petition.
ZALMA OPINION
The fact that the Petitioners - the children of the murdered woman who was murdered by their father - sought the proceeds of his crime, the insurance proceeds. They would not have received the money if she died of natural causes. They were not the victim of the insurance fraud, they were victims of their father's criminal conduct who killed their mother but that did not give them a right to the insurance proceeds.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Insurer Immune from Malicious Prosecution Suit
SIU Report to State Made in Good Faith Makes it Immune from Suit for Malicious Prosecution
Post 4784
In The Hanover Insurance Group, Inc; and Michael Arline, Jr., v. Luke Frazier, No. 2D22-1689, Florida Court of Appeals, Second District (April 3, 2024) Luke Frazier sued The Hanover Insurance Group, Inc., and Michael Arline, Jr., an employee in Hanover's Special Investigations Unit, for malicious prosecution after Frazier was acquitted of charges of making a false statement in support of an insurance claim and grand theft arising from statements Frazier made to Hanover in connection with an insurance claim.
Hanover and Arline defended claiming immunity from suit under section 626.989(4)(c), Florida Statutes (2011). The trial court rejected the claims of immunity and ultimately entered judgment in favor of Frazier. Hanover and Arline appealed.
THE IMMUNITY STATUTE
Every insurer admitted to do business in Florida is statutorily required to establish and maintain an "anti-fraud investigative unit" or division, commonly called a special investigations unit (SIU), to investigate and report possible fraudulent insurance acts by insureds or by persons making claims against policies held by insureds. If an insurer has knowledge or believes that a fraudulent insurance act has been committed, it must send a report to the Division of Investigative and Forensic Services ("DIFS") detailing the information it has giving rise to its suspicion. This reporting is mandatory. Upon receiving a report, DIFS conducts an independent investigation. Should DIFS's investigation lead it to conclude that there has been a violation of law, it is required by statute to report it to the state attorney.
As part of this legislatively mandated anti-fraud program, section 626.989(4)(c) provides insurers and their employees immunity from civil actions, absent fraud or bad faith, arising out of the furnishing of the information required by the statute.
FACTS
Arline, as an SIU investigator, investigated a dispute that arose after Frazier was involved in a minor collision while driving a car owned by a Hanover insured, Marvic Grant. The driver of the other car involved in the collision, Wendy Williams, filed a claim with Hanover.
Williams' claim went unresolved for almost a month while Hanover tried unsuccessfully to get a statement from Grant and Frazier. When the adjuster finally spoke to Frazier, his description of the collision and the resulting damage was different than the account Williams had provided. Frazier told Hanover that as the cars approached the toll plaza, Williams accelerated to get in front of him and the rear passenger side of her car hit the front driver's side of his car which then pushed his car into yellow posts near the toll booth causing damage to the passenger side of his car, not just the driver's side. Relying on Frazier's statement, Hanover's adjuster told Williams that he was holding her fifty percent responsible for the accident and that Hanover would compensate her accordingly. Williams told the adjuster this was unacceptable and that she intended to contact her carrier and retain an attorney.
Unbeknownst to Williams, at the time this took place Grant had filed a claim with Hanover for damage to her car, which included damage to the passenger side of the car. Williams first learned of Grant's claim when she got a subrogation letter from Hanover stating it was holding her responsible for nearly $5,000 in damages to Grant's car. Williams was stunned at the amount because the damage to Grant's car, as well as hers, had been minor.
Williams advised Hanover her belief that Frazier and Grant were acting fraudulently because they were claiming that both sides of Grant's car were damaged in the collision with her car. Hanover assigned Arline to investigate the conflicting accounts given by Frazier and Williams. Williams filed a fraud report with DIFS alleging that Frazier and Grant were claiming damage to Grant's car that was not related to the accident in which she was involved. Based on Williams' allegations, DIFS opened an investigation.
Arline, completed his investigation and concluded Grant should have filed two claims with Hanover, not one, and been subject to two deductibles. DIFS determined that there was probable cause to believe that Grant and Frazier "made material misrepresentations of fact in their claim" with Hanover in that they claimed Grant's car was damaged on the passenger side during the accident when it was not. Frazier and Grant were charged with making a false statement to an insurance company and grand theft. After a jury found Frazier not guilty, he sued for malicious prosecution against Hanover and Arline.
CONCLUSION
Absent fraud or bad faith, section 626.989(4)(c) immunizes insurers and their employees if they have done what is required by the anti-fraud statute. Frazier's evidence entirely failed to show fraud or bad faith in connection with Arline's investigation or report to DIFS. Accordingly, Arline and Hanover were statutorily immune from suit, and the judgment in favor of Frazier was reversed.
ZALMA OPINION
States like Florida realize that insurance fraud makes it difficult or impossible for insurers in the state to make a profit and provide affordable insurance to its citizens. By requiring insurers to maintain an SIU and report all suspected insurance fraud to the DIFS, it hopes to reduce the impact of insurance fraud. Acting on the report of Ms. Williams and Hanover's SIU, Frazier was arrested for fraud, tried, and acquitted. Since Hanover and its SIU reported in good faith it was immune from suit and the judgment in favor of Williams was reversed and the intent of the statute was enforced
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Criminal Tries to Get Out of Sentence
Fraudster Fails to Obtain Post Conviction Relief
Post 4783
Robert Sitler appealed from the order that dismissed his petition filed pursuant to the Post Conviction Relief Act ("PCRA"). A jury found him guilty of homicide by vehicle and the trial court, sitting without a jury.
In Commonwealth Of Pennsylvania v. Robert Sitler, No. 2946 EDA 2022, J-S20044-23, Superior Court of Pennsylvania (April 11, 2024) the appellate court refused to provide relief for Sitler.
BACKGROUND
On November 12, 2012, just before 9 p.m., Sitler was driving his truck along a two-lane road with a center turning lane. His girlfriend, Denise Dinnocenti, and her children were passengers in the truck. Sitler was driving Dinnocenti to a dance rehearsal, which started at 9 p.m.
Regina Qawasmy was driving in front of Sitler, who was following very closely behind her. As she prepared to turn right, she noticed a young man, later identified as 16-year-old Timothy Paciello, standing in the center lane waiting to cross the street. Prior to turning, Qawasmy began to decrease her speed. Suddenly, Qawasmy heard the revving of an engine and then saw a flash, which she later learned was Paciello flying into the air.
According to Dinnocenti, Sitler, while driving behind Qawasmy, sped around Qawasmy on the left and into the center lane, going 50 miles per hour in a 35 mph zone. Sitler did not see Paciello in the lane and as a result, struck him with his truck.
After striking Paciello, Sitler pulled into a nearby parking lot. He handed his keys over to Dinnocenti and instructed her and her children to tell the police that she was driving. When police arrived, Dinnocenti did as Sitler had said and told them that she was driving. At the scene and in a later written statement, Sitler likewise claimed that Dinnocenti was driving. The fraud failed because the police later recovered surveillance footage from the Sunoco gas station across the street from the accident. The footage showed Paciello walking into the center lane and then out of sight of the video. A few moments later, Sitler's truck is seen speeding down the center lane. Officer Matthew Meitzler informed Dinnocenti that there was footage of the accident. Eventually, both Dinnocenti and Sitler admitted that he was driving the vehicle.
The case then proceeded to a three-day trial, after which Sitler was convicted. He was sentenced to an aggregate term of eight and one-half to seventeen years' incarceration. In addition, on the first day of trial, Sitler entered an open guilty plea to insurance fraud, conspiracy to commit insurance fraud, false reports to law enforcement and other charges relating to the false statements about who was driving. At trial the court informed the jury about his prior vehicular manslaughter conviction.
ANALYSIS
Sitler claimed that that the lower court erred by denying relief on his claim that his trial counsel provided ineffective assistance by not objecting to the jury instruction offered by the lower court prior to admission of his prior manslaughter conviction. He asserts that trial counsel consulted with an accident reconstruction expert, but he "r[a]n out of funds" by the time of trial and was unable to afford the services of the rebuttal witness.
The PCRA court properly denied Sitler's claim for lack of prejudice because Sitler failed to demonstrate a reasonable probability that a request for funds to retain an accident reconstruction expert as a rebuttal witness would have changed the result of his trial. That proffer may have been sufficient for proving that trial counsel's failure to request indigent funding deprived him of a rebuttal witness, but it did nothing to advance Appellant's burden to demonstrate that he was prejudiced by trial counsel's failure to pursue funds for an expert rebuttal witness.
The appellate court agreed with the PCRA court that there was overwhelming evidence of Appellant's guilt and that Appellant was unable to show prejudice by demonstrating that a successful petition for rebuttal expert funds would have resulted in a different trial verdict.
For the foregoing reasons, the appellate court concluded that the PCRA court did not err or abuse its discretion in dismissing Appellant's post-conviction petition without a hearing.
ZALMA OPINION
Mr. Sitler caused the death of a teenager by driving around a car ahead of him, struck and killed a teenaged pedestrian, caused his girlfriend to lie to the police about who was driving and admitted to insurance fraud and multiple other crimes relating to the manslaughter only to have a jury convict him of the death of the teenager. He tried to reduce his sentence with claims of a poor defense lawyer and lack of funds. The court didn't buy his arguments and he will, thankfully for pedestrians everywhere, stay in jail.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Unclear Language in Policy Interpreted in Favor of Property Owner
Homeowner Is Found to be a Beneficiary of Forced Placed Insurance
Post 4782
Keith Rath was unhappy with Arch Insurance Company over coverage for damage from the Derecho (windstorm) that hit Cedar Rapids in 2020. Rath's bank holding a security interest in his home contracted with Arch to obtain a force-placed policy after Rath's homeowners insurance lapsed. When Rath sued Arch for breach of contract and related claims, Arch argued that he had no right to sue because Rath was not an intended third-party beneficiary of the contract between Arch and the bank.
Keith Rath and Dennis Faltis v. Arch Insurance Company, No. 23-0157, Court of Appeals of Iowa (April 10, 2024) read the full policy and found the language of the policy gave Rath an interest in the proceeds of the insurance policy.
FACTS
The bank is Rath's lender for a loan secured by his home. At some point, Rath let his homeowners insurance lapse in violation of the terms of the loan agreement.
When the bank learned of the lapse, it notified Rath that the insurance it bought might be "significantly more expensive than the insurance" he could obtain himself and might provide less coverage than such a personal policy. Rath then began paying monthly premiums for this insurance to the bank.
THE INSURANCE CONTRACT
The policy stated that Rath, as the "Borrower," "has no interest in this policy" yet included an endorsement expressly giving Rath a benefit. That endorsement provides that while Rath "is neither a Named Insured nor an additional named insured under the policy," he "shall be considered an additional loss payee only as respects amounts of insurance over and above the interests of" the bank in his home. The Court of Appeals concluded that there was no possible purpose for this endorsement besides providing a benefit to Rath.
The policy warns in a general statement on its cover pages that it does not "provide coverage for the Interest or equity of the Borrower." It later defines the "Named Insured" as "the creditor, lending institution, company, or person holding and/or servicing the Mortgagee Interest on the Described Location." And it expressly confirms that "[t]he Borrower is not a Named Insured under this policy and no coverage is provided, either directly or indirectly, to the Borrower." The policy's default text also defines the Borrower and then makes abundantly clear: "The Borrower has no interest in this policy."
But that last line was stricken and replaced with text from an Amount-of-Insurance endorsement that the parties added to the policy. So rather than having "no interest in this policy," under the endorsement: "The Borrower is neither a Named Insured nor an additional named insured under this policy; however, the Borrower shall be considered an additional loss payee only as respects amounts of insurance over and above the interests of the Named Insured in the Described Location."
THE STORM
In August 2020, a Derecho [A widespread, long-lived wind storm that is associated with a band of rapidly moving showers or thunderstorms. Although a derecho can produce destruction similar to the strength of tornadoes, the damage typically is directed in one direction along a relatively straight swath.] swept across Iowa, hitting Cedar Rapids especially hard. A tree fell on the house and it sustained wind damage. Among other damage, Rath believes most of the roof was damaged, along with siding, windows, and electrical systems. And so, Rath reported the damage to the bank, which made a claim to Arch under the policy. After Arch's adjuster agreed that "the dwelling sustained damage due to wind and tree impact," Arch decided that there was a covered loss of $1,222.37 and mailed a check for that amount directly to Rath.
THIS PROCEEDING
About a year after the storm, Rath sued Arch over this dispute. Rath claimed that Arch breached the insurance contract by denying proper payment for his losses and refusing to engage in the appraisal process under the policy. He also brought claims of bad faith and unjust enrichment and sought declaratory and injunctive relief related to his rights under the policy and the appraisal process.
Rath appealed the district court's grant of summary judgment and dismissal of all his claims.
Interpreting an insurance policy is a legal question. Rath's main argument that he is an intended third-party beneficiary of the insurance policy relies on the Amount-of-Insurance endorsement. The court of appeals agreed with Rath that the endorsement manifests an unambiguous intent to benefit him. Indeed, the Court of Appeals concluded that there is no other possible intent for contract provisions increasing the coverage above the bank's interest and giving Rath a right to payment.
Saying that Rath is not a "Named Insured nor an additional named insured" is not the same as saying he is not a third-party beneficiary. By deleting that text-while also increasing the coverage above the bank's interest and giving Rath a right to payment-the endorsement leaves little doubt that indeed Rath does now have an interest in the policy. He is an intended third-party beneficiary.
The parties fought a preliminary legal skirmish on the limited ground chosen by Arch-whether Rath is a third-party beneficiary under the contract. And because Arch lost that battle, the fight must now go on.
ZALMA OPINION
Poor wording in an insurance policy will often result in strange and confusing court decisions. The court found, because a clause allowed Rath to recover for losses over the interest of the bank made him a third party beneficiary. What the Court of Appeal ignored was that his interest was only available after the full interest of the bank were paid. The loss was only $1,222.37, much less than a mortgage loan. Since the loss was less than the amount of the banks interest, Rath had no right to that money as a third party beneficiary since the loss was less than the interest of the bank.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
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Man Bites Dog & Dog Bites Back
Third Circuit Compels Arbitration of IFPA Qui Tam Claims
Post 4781
Government Employees Insurance Co.; GEICO Indemnity Co.; GEICO General Insurance Company; GEICO Casualty Co. v. Mount Prospect Chiropractic Center, P.A., d/b/a Mount Prospect Health Center; et al, United States Court Of Appeals For The Third Circuit, Nos. 23-1378, 23-2019 & 23-2053, No. 23-1378 April 15, 2024) the Third Circuit required arbitration of GEICO's claims of fraud by health care providers under the New Jersey Insurance Frauds Prevention Act (IFPA)
BACKGROUND
The IFPA allows insurers to sue health care providers pursuing insurers with assignments of benefits from personal injury protection (PIP) claims (no fault insurance) on behalf of the state. GEICO did so against multiple health care providers who asked the court to compel GEICO to arbitrate each potential fraud claim.
GEICO sued defendants-appellants (collectively, the “Practices”) in separate actions in the District of New Jersey, alleging they defrauded GEICO of more than $10 million by abusing the personal injury protection (“PIP”) benefits offered by its auto policies. It alleges the Practices filed exaggerated claims for medical services (sometimes for treatments that were never provided), billed medically unnecessary care, and engaged in illegal kickback schemes. GEICO’s suits against the Practices each included a claim under the IFPA, which gives insurers a fraud claim.
The Medical Practices sought arbitration of GEICO’s IFPA claim, arguing both that a valid arbitration agreement covered the claim and that a different New Jersey insurance law allowed them to compel arbitration. But each District Court disagreed, ruling instead that IFPA claims cannot be arbitrated.
IFPA Claims Can Be Arbitrated.
The Practices' effort to compel arbitration under a different New Jersey law could do the same for the Practices' FAA-based request. GEICO bears the burden of persuading the Third Circuit that the IFPA prohibits arbitration. GEICO claims that every known decision has held IFPA claims inarbitrable. The Practices cite no case holding otherwise.
GEICO claims that the IFPA's antifraud mission bars arbitration. But it does not explain why arbitrating IFPA claims frustrates that goal. The United States Supreme Court has made clear that claims arising from laws empowering private attorneys general can be arbitrated. The American Arbitration Association rules give the arbitrator broad discretion to "grant any remedy or relief[.]" Am. Arb. Ass'n, Commercial Arbitration Rules and Mediation Procedures 28 (2013) (Rule 47), https://perma.cc/4Y74- WZM8.
In addition, New Jersey has a strong policy in favor of arbitration. The Third Circuit, therefore, predicted that the New Jersey Supreme Court would allow arbitration of IFPA claims. Having concluded that IFPA claims are arbitrable, the Third Circuit then considered whether the IFPA claims before it should be compelled to arbitration.
New Jersey Insurance Law Compels Arbitration.
Each Practice sought arbitration of GEICO's IFPA claim through N.J. Stat. Ann. § 39:6A-5.1(a) (the "Provision"). It allows "any party" to compel arbitration of "[a]ny dispute regarding the recovery of medical expense benefits or other benefits provided under [PIP] coverage . . . arising out of the operation, ownership, maintenance or use of an automobile". As these suits are GEICO's effort to recover medical expense claims paid through auto insurance PIP benefits, they fall under the Provision's plain text.
GEICO asserts that the Provision does not apply to IFPA claims because they deal with fraud.
First, the Provision does not have an exception for fraud, and the Third Circuit may not carve a broad exclusion from a plain statute on the Third Circuit's our own initiative.
Second, the list of claims specifically subject to the Provision suggests fraud falls under its umbrella. That group includes whether the disputed medical treatment was actually performed and whether the treatment performed is reasonable or necessary. That is the alleged fraud underpinning GEICO's IFPA claims: billing for fictitious or unnecessary care. Because the Provision's plain language is broad and does not carve out fraud, but rather explicitly includes fraud-like claims, GEICO's argument failed to persuade the Third Circuit.
GEICO's IFPA Claims Are Subject to an Arbitration Agreement.
In the alternative, the Third Circuit also concluded that GEICO's IFPA claims must be compelled to arbitration under the FAA. That statute compels claims to arbitration once a movant shows both that an arbitration agreement was validly formed and that it covers the claims at issue. To establish that an agreement was formed when (as here) a motion to compel arbitration is based on a complaint standing alone, a defendant must show that the complaint and the documents on which s it relies facially suggest that the parties agreed to arbitrate.
GEICO does not contest the Practices' reliance on two documents to suggest formation of an arbitration agreement. The first is GEICO's Precertification and Decision Point Review Plan (the "Plan"). This document, required by New Jersey law and approved by the New Jersey insurance regulator, governs GEICO's reimbursement of PIP claims. GEICO could force the Practices to prove more than a suggestion by submitting or pointing to additional facts sufficient to place the arbitration agreement in issue.
It would not have taken much for GEICO to put contract formation in play. To compel arbitration of GEICO's IFPA claims, the Third Circuit concluded it must hold that the arbitration agreement in the Plan covers them.
Nothing in the amended complaint precludes arbitration of GEICO's IFPA claims. Rather the law requires it. Therefore, Third Circuit concluded the District Court abused its discretion in denying the motion and the Third Circuit ordered arbitration.
ZALMA OPINION
Since local prosecutors failed to deal with health care providers who try to defraud insurers like GEICO, it used the qui tam provisions of the IFPA to sue the medical providers and thereby take the profit out of their crime. The health care providers compelled arbitration thereby requiring GEICO to prove fraud in each individual claim which will probably cost more than the amount of the fraud. What is needed is for the state to prosecute the fraud perpetrators or allow the fraud to continue since it may become self-defeating for GEICO to go through with hundreds of individual arbitrations. Regardless of the legal basis for the Third Circuit's decision, its practical effect is to make PIP fraud profitable and the fraudsters should sing Hosannas for the Third Circuit's decision. The criminal doctors need to be prosecuted as DOJ is prosecuting Medicare and Medicaid fraudsters.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Swimming Pool Claim Sunk
Private Limitation of Action Provision Defeats Bad Faith Suit
Post 4780
No Right to Bad Faith If No Coverage for Loss
James H. Drevs and Patricia Henderson appealed from the order of the Law Division dismissing with prejudice their complaint seeking insurance coverage for storm damage to their real property.
In James H. Drevs and Patricia Henderson v. Metropolitan Property And Casualty Insurance Company, No. A-0637-22, Superior Court of New Jersey, Appellate Division (April 4, 2024) the Appellate Division applied the private limitation of action provision of the policy.
FACTS
Plaintiffs own property in Cherry Hill, which has a home and an inground swimming pool. In 2020, the property was insured under a policy issued by Farmers Property and Casualty Insurance Company, formerly known as defendant Metropolitan Property and Casualty Insurance Company.
On or about July 6, 2020, a windstorm and significant rainfall damaged plaintiffs' home and swimming pool. Plaintiffs filed two claims for insurance coverage with defendant arising from the storm: the first claiming damage to the roof of their home and the second claiming a partial collapse of their inground pool.
Defendant undertook an investigation of plaintiffs' claims. It hired an engineering firm to investigate the cause of the partial collapse of the pool. The engineering firm concluded the pool damage was caused by excessive hydrostatic pressure from significant rainfall during the July 6, 2020 storm. The insurer’s claims coordinator sent plaintiffs a letter denying their claim for coverage of the damage to the pool.
The claims coordinator issued a check to plaintiffs for the covered portion of the loss from the damaged roof of their home.
Plaintiffs sued defendant alleging breach of contract and bad faith in its denial of plaintiffs' claim for coverage for the damage to their pool.
According to defendant, the one-year period began running again on September 14, 2020, when it denied plaintiffs' pool damage claim. Defendant argued that because the complaint was filed on May 19, 2022, a year and eight months after September 14, 2020, it was time barred.
The trial court issued an oral opinion granting defendant's motion.
ANALYSIS
The appellate court found no basis on which to reverse the trial court's order. Plaintiffs' policy is referenced in the complaint. The correspondence from defendant denying plaintiffs' pool damage claim and granting their claim for damages to their house form the basis of plaintiffs' claims. The September 14, 2020 letter unequivocally denied plaintiffs' claim for coverage of the damage to their pool. Plaintiffs produced no evidence that the parties engaged in discussions, correspondence, or any other type of interaction in the seven months between defendant's denial of plaintiffs' pool damage claim and correspondence by counsel for the plaintiffs.
It was undisputed that more than one-and-a-half years passed between the September 14, 2020 denial of plaintiffs' pool damage claim and the May 19, 2022 filing of the complaint.
A bad faith claim may not be asserted by a party who cannot establish a right to payment of the claim as a matter of law.
Because plaintiffs filed an untimely complaint challenging the denial of their claim, they cannot prove they are entitled to coverage for the damage to their pool.
ZALMA OPINION
Every first party property policy or homeowners policy contain a private limitations of action provision preventing insureds from suing one year after a loss. New Jersey, and many states, toll the running of the statute from the date of loss until the date the insurer makes an unequivocal denial of coverage. The insureds waited more than a year and a half after the denial of the claim and its suit was barred. They are not without a remedy, their lawyer knew or should have known of the limitation and failed to file suit within the period allowed nor did he seek an extension to the time to sue.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Zalma's Insurance Fraud Letter - April 15, 2024
ZIFL, Volume 28, Issue 8
Subscribe to ZIFL Here Post 4779
See the full video at and at https://youtu.be/p6L-wEbN4_g
The Source for the Insurance Fraud Professional
No Reason to Release Convicted Arsonist Early
In United States Of America v. Jonathan Paul Wiktorchik, Jr., No. 23-2564, United States Court of Appeals, Third Circuit (March 25, 2024) Federal Prisoner Jonathan Wiktorchik appealed, acting as his own lawyer, from the District Court's denial of his motion for compassionate release.
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
More McClenny Moseley & Associates Issues
This is ZIFL’s twenty sixth 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. March 11, 2024. Matthew Monson Reported That Mcclenny's Sale To Moseley Uncovered! It was common knowledge that James McClenny sold his interest in MMA to Zach Moseley. New details revealed in a recent court filing. The deal was effective March 31, 2023.
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
Now Available New Book
The Compact Book of Adjusting Property Claims – Fourth Edition
On January 2, 2024, in Kindle, paperback and hardback formats, The Compact Book of Adjusting Property Claims, Fourth Edition is now available for purchase here and here. The Fourth Edition contains updates and clarifications from the first three editions plus additional material for the working adjuster and the insurance coverage lawyer.
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
Never Lie on an Application for Insurance
Conceal or Misrepresent Material Facts Requires Rescission in Alabama
Allied World sued general liability insurer concerning policies issued to Clint Lovette (“Lovette”) and his companies. ((collectively “Lovette Defendants”) for the policy periods of March 16, 2018, to March 16, 2019, and March 16, 2019, to March 16, 2020. Allied World sought a judicial determination in its favor that it does not owe the Lovette Defendants a defense or indemnity regarding two cases.
In Allied World Surplus Lines Insurance Company v. Lovette Properties, LLC, et al., No. 2:22-cv-00738-RDP, United States District Court, N.D. Alabama, Southern Division (March 15, 2024) the USDC resolved the disputes.
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
Pro Se Plaintiff’s Qui Tam Suit Fails
Private Citizen May Not Compel Enforcement of a Criminal Law
Ronald Rothman appealed from an order of the District Court dismissing his complaint with prejudice and remanding a foreclosure proceeding to state court.
In Ronald S. Rothman v. CABANA SERIES IV TRUST; IGLOO SERIES IV TRUST; U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee; WELLS FARGO BANK, N.A.; BALBEC CAPITAL, L.P.; SN SERVICING CORPORATION; FRIEDMAN VARTOLO, LLP; QUENTEN GILLIAM, ESQ., No. 23-2455, United States Court of Appeals, Third Circuit (April 2, 2024) the USCA, 3rd Circuit resolved the dispute.
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
Health Insurance Fraud Convictions
Holy Health Care Services, LLC Owner Sentenced to 3 Years In Federal Prison For Health Care Fraud Scheme
Julius Bakari, age 46, of Silver Spring, Maryland, was sentenced to 3 years in federal prison, followed by 3 years of supervised release, for conspiracy to commit health care fraud in connection with a scheme to fraudulently bill Medicaid. The defendant’s conviction stems from a scheme involving services purportedly provided by Holy Health Care Services, LLC (“Holy Health”), a mental health services provider with locations in Washington, D.C. Judge Xinis also ordered Bakari to pay restitution in the amount of the loss, $3,343,781. The sentence was imposed on April 9, 2024.
Read the full article with dozens more convictions and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
Arson for Profit
Arson for profit is the most egregious form of insurance fraud. Perpetrators of an arson for profit scheme do not consider the fact that arson can cause residents, neighbors, police, or firefighters to be injured or killed. Claims based on an arson-for-profit, are based upon the lack of intelligence or ability of the arsonist.
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
New Book Now Available from Barry Zalma
Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims. The newest book joins other insurance, insurance claims, insurance fraud, and insurance law books by Barry Zalma all available at the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/
The Tiffany Kid
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.
How a Rich Kid Became an Insurance Fraudster.
The insured grew up with his wealthy parents on the shores of San Francisco Bay in Marin County. He wanted for nothing that money could buy. He was tall, blond, blue-eyed and handsome. Debutantes pulled their sister’s hair for the chance to dance with him. Life was good, but dull.
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
Other Insurance Fraud Convictions
Benicia Contractor Pleads Guilty To Insurance Fraud for Underreporting Nearly $1 Million In Payroll
Kent Bo Fridolfsson, 67, of Benicia, pleaded guilty to six charges of insurance fraud and grand theft after a joint investigation with the California Department of Insurance, Solano County District Attorney’s Office and the Employment Development Department (EDD) revealed he underreported payroll by nearly $1 million to illegally save on workers’ compensation insurance and taxes. Fridolfsson was placed on formal probation, ordered to pay over $725,000 in restitution, and ordered to surrender his contractor’s license.
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
Insurance Fraud Schemes
Every claims person and SIU investigator must be aware of the various schemes used by insurance criminals to defraud insurers. For example, the NAIC identified the following common schemes that result in the crime of insurance fraud...
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
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. Go to the podcast Zalma On Insurance at https://podcastrs.spotify.com/pod/show/barry-zalma/support 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, 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 the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/
Read the full article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/04/ZIFL-04-15-2024.pdf
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Fairly Debatable Action by Insurer
Reasonable & Arguable Reason to Deny Claim not Bad Faith
Post 4778
William A. Lemons, Jr., M.D., a doctor who specialized in obstetrics and gynecology ("OB/GYN"), sued Principal Life Insurance Company ("Principal") for breach of contract and bad faith for its refusal to pay him disability benefits under a "regular occupation rider" provision contained in his insurance policy with the company. A jury returned a verdict in favor of Lemons on the breach of contract claim and in favor of Principal on the bad-faith claim.
William A. Lemons, Jr. MD v. Principal Life Insurance Company, No. 22-12064, United States Court of Appeals, Eleventh Circuit (April 5, 2024)
FACTUAL BACKGROUND
Lemons decided to open his own OB/GYN practice, which he called Covenant Gynecology & Wellness, P.C. ("Covenant"). In October 2015, during Covenant's business development phase, Lemons worked for Blue Cross Blue Shield ("BCBS") as an insurance claims consultant. A few months later, in February 2016, he began working at the Birmingham Metro Treatment Center, an opioid addiction treatment and recovery facility. A month later, he started working at the Fritz Clinic, another opioid treatment clinic.
In April 2016, Lemons opened Covenant and started seeing patients. He did not deliver babies or otherwise engage in obstetrics, and he did not submit any insurance claims for any obstetrics-related work. Eventually, Lemons devoted most of his time and resources to Covenant, and he reduced the number of hours at his other jobs to concentrate more on his OB/GYN practice. Lemons' solo medical practice was unsuccessful. On July 15, 2016, he closed Covenant because he was not seeing enough patients. Lemons's deteriorating health also played a significant role in his decision to close Covenant. Beginning in 2013, Lemons started developing hand tremors and was officially diagnosed with a neurological condition in March 2016.
In November 2016, Lemons completed a disability claim form and reported that, as of July 15, 2016, he was totally disabled and could no longer work as an OB/GYN. Lemons was interviewed and stated that he was working at BCBS approximately 15 hours per week, at Birmingham Metro approximately 12-18 hours per week, and at the Fritz Clinic 4 hours per week. He maintained that, at the time of his disability, his regular occupation was as an OB/GYN and, therefore, Principal should approve his claim under the "regular occupation rider." The claims person responded that because Lemons was working other non-OB/GYN jobs when he became disabled, Principal could not just look at his occupation as an OB/GYN and would need to consider his other jobs in evaluating his claim.
Principal eventually approved Lemons' claim under a "loss of earnings" provision in the policy based on the reduction to Lemons's income as a result of his disability. A few weeks later, on February 9, 2017, Principal denied Lemons's claim for benefits under the "regular occupation rider" provision. Principal explained that, because Lemons regularly worked at BCBS, Birmingham Metro, and the Fritz Clinic prior to the onset of his disability, he was not "totally disabled from all occupations that [he was] engaged in prior to [d]isability" as the regular occupation rider required.
ANALYSIS
The Supreme Court of Alabama has made clear that mental anguish damages are unavailable for breach of contract claims related to long-term disability insurance policies. Therefore, the Eleventh Circuit affirmed the district court's ruling as to Lemons's recoverable damages.
The "Benefit Update Rider" Claim
Lemons acknowledges that he did not specifically plead a separate claim related to the "benefit update rider" provision. It is undisputed that Principal sent letters to Lemons regarding the "benefit update rider" provision in 2004, 2007, and 2010. The 2004 letter explained that his benefits had increased to $10,000 per month, and the subsequent letters informed him that his benefits had been capped at that amount.
The Bad-Faith Claim
The Eleventh Circuit concluded that the district court did not err in denying Lemons' motions. At trial, Lemons testified that he spent most of his time working at Covenant prior to the onset of his disability. He admitted that he did not derive any income from his practice at Covenant and did not submit any insurance claims for OB/GYN services to patients. The jury also could have found that Principal had an arguable reason for not issuing Lemons benefits pursuant to the "regular occupation rider" policy provision because the evidence showed that Principal gathered-as part of its decisional process-information suggesting that Lemons's regular occupation was not as an OB/GYN.
The verdict in this case was not against the clear weight of evidence given the genuine issue of fact as to whether a breach of contract occurred. The Eleventh Circuit affirmed the district court's judgment.
ZALMA OPINION
Lawyers representing people whose claim was rejected in whole or in part will always include a cause of action for the tort of bad faith and seek exemplary as well as tort damages. However, if, as in this case the insurer honors the claim that was available to the insured and refused to provide benefits related to his specialty of OB/GYN because he tried but never acted as an OB/GYN and admitted he made no money from the failed practice. They paid what they owed and there was neither a genuine dispute about the coverage nor were the actions of the insurer fairly debatable.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Pro Se Plaintiff's Qui Tam Suit Fails
Private Citizen May Not Compel Enforcement of a Criminal Law
Post 4774
Ronald Rothman appealed from an order of the District Court dismissing his complaint with prejudice and remanding a foreclosure proceeding to state court.
In Ronald S. Rothman v. CABANA SERIES IV TRUST; IGLOO SERIES IV TRUST; U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee; WELLS FARGO BANK, N.A.; BALBEC CAPITAL, L.P.; SN SERVICING CORPORATION; FRIEDMAN VARTOLO, LLP; QUENTEN GILLIAM, ESQ., No. 23-2455, United States Court of Appeals, Third Circuit (April 2, 2024)
FACTS
In June 2023, Rothman sued the defendants alleging that defendants violated federal civil and criminal laws in connection with an "invalid mortgage loan." Rothman claimed that the loan was obtained by his son in 2006 to finance the purchase of a property from Rothman, that the "Notice of Settlement" for the loan was improperly recorded, and that the defendants illegally collected (or benefitted from) insurance payments on the "invalid" loan. The action was based on the False Claims Act and numerous criminal statutes, including the RICO Act. Rothman sought "declaratory judgments," nullifying the mortgage loan and the sale of the property, and requiring restitution of the insurance payments.
In July 2023, Rothman filed a letter with the District Court, seeking to remove a 2022 foreclosure action (which stemmed from an alleged default of the mortgage loan) from the New Jersey Superior Court, Chancery Division, to the District Court. In a Memorandum Order entered July 31, 2023, the District Court granted Rothman's motion to proceed in forma pauperis, and screened and dismissed the complaint with prejudice pursuant to 28 U.S.C. § 1915(e)(2)(B).
JURISDICTION
Appellees contend the Third Circuit lacked jurisdiction to review the order remanding the foreclosure matter. The complaint was not a notice of removal but rather an original action, and the District Court appropriately treated it as such.
In its Memorandum Order, the District Court considered the claims and dismissed them. That determination was final. It is reviewable by the Third Circuit. A district court cannot prevent appellate review of a final order by contemporaneously remanding a case to state court.
THE COMPLAINT
The complaint sought to hold defendants civilly and criminally liable for insurance fraud. Rothman claimed that the suit was "in the [p]ublic [i]nterest" because the defendants were depriving the "American [p]ublic and [c]itizens" of the federal funds.
The Third Circuit agreed with the District Court that Rothman, in essence, asserted a False Claims "qui tam" suit. In such cases, the Government is the real party in interest. Although a private person (the relator) may bring the suit on behalf of the Government circuit courts agree that a pro se litigant, like Rothman, may not. Nor could Rothman, as a private citizen, compel enforcement of criminal law. The District Court properly dismissed the complaint.
ZALMA OPINION
Qui tam suits are a powerful tool against insurance fraud. However, as the Third Circuit made clear, a private citizen acting in pro se may not nor may a private citizen compel enforcement of criminal law. The case established the old saying that "he who represents himself has a fool for a client."
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Who's on First?
Insurer Files Interpleader to Allow Claim Payment to Proper Competing Claims Against Funds
Post 4773
In an interpleader action arising out of a jury trial in Hanover Am. Ins. Co. v Tattooed Millionaire Entertainment, LLC, No. 2:16-cv-02817-JPM-tmp (W.D. Tenn. 2016) (“Hanover I”). In Hanover I, a jury trial was held on “insurance claims submitted to Hanover [by Defendants in the instant case] in connection with a 2015 arson fire and alleged theft at the House of Blues recording studio located on Rayner Street in Memphis, Tennessee.”
In Hanover American Insurance Company v. Tattooed Millionaire Entertainment, LLC, Christopher C. Brown, and John Falls, No. 2:20-cv-02834-JPM-cgc, United States District Court, W.D. Tennessee, Western Division (April 4, 2024) the USDC distributed the available funds.
PUBLIC POLICY CAN BAN PAYMENT
The Hanover I jury held that:
Christopher C. Brown (“Brown”) and Tattooed Millionaire Entertainment, LLC (“TME”) were indistinguishable; and
Brown/TME made material misrepresentations with the intent to deceive and committed unlawful insurance acts during the claims process, and thus Hanover was entitled to recover the advance payments made to Brown/TME.
The Hanover I jury also held that Falls did not make material misrepresentations or commit unlawful insurance acts, and thus awarded him the maximum amount covered by his policy: $2.5 million in Business Personal Property (“BPP”) and an additional $250,000 in Business Income (“BI”).
After the jury trial concluded, the USDC granted Hanover's Rule 50(b) motion for judgment notwithstanding the verdict and entered an amended judgment denying Falls' recovery. The Sixth Circuit, however, reversed the post-trial ruling and remanded with instructions to reinstate the jury verdict as to Falls, which the USDC did.
INTERPLEADER & DECLARATORY RELIEF ACTION
In the current action: “Hanover II,” Hanover filed its Complaint for interpleader and declaratory relief. Hanover claims that the $2.5 million BPP insurance awarded to Falls is subject to multiple competing claims. Hanover's Declaratory Relief Complaint seeks a declaration that the $2.5 million BPP award is null and void as a matter of Tennessee public policy. It also pleads in the alternative that the Court must resolve the various competing claims to the BPP insurance proceeds and declare to whom, and in what amount, those funds should be paid.
Stipulated to Facts
Prior to trial the Parties stipulated to the following facts during pre-trial conference:
John Falls leased Studio B at the former House of Blues studio located on Rayner Street in Memphis, Tennessee, and the equipment therein from Christopher Brown who owned TME.
Falls obtained insurance from Hanover that included, inter alia, $2.5 million in coverage for BPP and $500,000 in coverage for BI.
Brown/TME had a separate policy that covered, inter alia, the structure of the studio building.
On November 5, 2015, an arson fire occurred at the House of Blues recording studio located on Rayner Street in Memphis, Tennessee, causing substantial damage to the building and the BPP therein.
The evidence presented at the trial of the original action (Hanover I) established that Brown/TME falsified documents and submitted fake invoices, phony receipts, and doctored bank account statements in connection with the insurance claims following the fire.
In the appeal regarding the original action, the Sixth Circuit wrote: “The jury awarded Falls $2,500,000 as the amount of insurance he was owed, up to his policy limit, for Business Personal Property coverage .... The BPP payment covers the loss of the gear in Falls' studio. However, Brown is the ultimate owner of the lost gear, on which Falls had a perpetually renewable leasehold.”
The public-policy argument, an ancient equity maxim that no one should benefit from his own wrongdoing does not mean that Falls takes nothing of the $2,500,000 BPP award.
The Court's Previous Rulings
The Court ruled on several Summary Judgment motions and held that claim preclusion prevents Hanover from asserting claims or arguments against Falls regarding his interests in BPP but does not prevent Hanover from pursuing claims and arguments against TME/Brown. The Court also dismissed TME/Brown's counterclaim for conversion against Hanover.
ANALYSIS
The key determination in this case is whether and what type of interest did Falls have regarding the BPP. As the Sixth Circuit already noted “Falls had a property interest in the ‘gear,' in the form of his leasehold with unlimited renewal options. Leaseholds have been held to be insurable interests.”
Public Policy Question
Because the jury in Hanover I found Brown/TME to be interchangeable and Brown himself admitted to fraud in connection with Studio B, awarding Brown/TME any of the BPP profits would go against long standing public policy of not benefiting the wrongdoer for his own wrongdoing. Therefore, the Court held that Brown is not entitled to any of the BPP profits.
Summary of Court Findings
The Court found:
Hanover is precluded from arguing against Falls' recovery;
Falls' lease for Studio B and equipment therein did not terminate with the fire;
Loss Payable Clause modifies the language of the Schedule in Fall's insurance contract, requiring Hanover to pay BPP jointly to Falls and Brown/TME as interests may require;
Falls is entitled to recover $2,066,217.30 for the destroyed/missing BPP;
The decision in the State Court Action is not binding on this Court;
Brown/TME are not entitled to recover any part of BPP, as such recovery would violate longstanding Tennessee public policy; and
Intervenor's claim is moot, given that Brown/TME are unable to recover any of the BPP.
CONCLUSION
The Court ORDERED as follows:
Hanover SHALL pay John Falls $2,066,217.30 of the BPP;
Hanover SHALL NOT pay or credit the remaining $433,782.70 to Brown/TME; and
Intervenors' claim is DISMISSED WITH PREJUDICE.
ZALMA OPINION
Insurance disputes are often difficult to resolve as established by this case that started with a jury verdict, a judgment notwithstanding the verdict, an appeal reversing the USDC, an interpleader action to determine who was on first and could recover more than $2 million, who shall not recover because of public policy and whether any competing claims could recover anything, and Hanover was able to keep$433,782.70 because no one was entitled to the funds. It took many years to resolve and we can only hope this is the end of a case where an insurer is required to pay an innocent person when the named insured was found to have committed fraud in an arson-for-profit scheme.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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1
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Court Slaps Down SLAPP Suit
Lawyers Fraudulent Billing is not Pre-Litigation Protected Petitioning Activity
Post 4772
Strategic Lawsuits Against Public Participation (SLAPP suits) are meritless lawsuits designed to harass parties for engaging in protected activities (the right of petition or free speech). A party can move to dismiss a SLAPP suit by filing an anti-SLAPP motion. The movant must show the purported SLAPP suit arises from its protected activities; if shown, the respondent can defeat the motion by showing its lawsuit has merit.
In OC Media Tower, L.P. et al. v. Louis Galuppo et al., G062372, California Court of Appeals, (March 28, 2024) the Court of Appeals resolved the dispute.
FACTS
Plaza Del Sol Real Estate Trust (Plaza) made $67 million in loans to OC Media Tower, L.P., and OCR Land LLC (collectively, OC Media). The loans were secured by deeds of trust and promissory notes in which OC Media agreed to pay Plaza's attorney fees for any needed collection efforts. OC Media defaulted on its loans. Plaza agreed to accept a lower payoff amount (about $50.5 million), contingent on OC Media selling its encumbered real estate. During escrow, attorney Galuppo submitted an invoice stating its fees (about $25,000) for its client Plaza. At the close of escrow, Plaza was paid the agreed upon payoff amount and Galuppo was paid its stated attorney fees.
Plaza later sued OC Media for fraud and other causes of action. Plaza alleged it learned after the close of escrow that OC Media had made false statements about its real estate sale to induce Plaza to accept less than what it was owed. OC Media filed a cross-complaint against Plaza and Galuppo for fraud and another cause of action. OC Media alleged Galuppo's attorney fees were false and unsupported.
Galuppo filed an anti-SLAPP motion to dismiss OC Media's cross-complaint. Galuppo asserted its invoice stating Plaza's attorney fees was a prelitigation demand for payment (protected petitioning activity). The trial court denied Galuppo's anti-SLAPP motion because "an allegedly false invoice for payment generally does not constitute petitioning activity under the anti-SLAPP statute."
DISCUSSION
In an anti-SLAPP motion, the trial court should distinguish between speech or petitioning activity that is mere evidence related to liability and liability that is based on speech or petitioning activity.
The Court of Appeals found that the record does not support Galuppo's assertion that its invoice was a prelitigation demand for payment. Further, the basis of OC Media's cross-complaint is not that Galuppo made a tortious demand for payment. Rather, OC Media claims the amount of attorney fees actually billed by Galuppo was fraudulent.
Appellants claimed the demand for $24,433.08 in attorney fees was a communication preparatory to and in anticipation of filing litigation. In an anti-SLAPP motion, the movant bears the burden of establishing the challenged claims arise from its protected activity. The essential elements of fraud that give rise to a cause of action for deceit or intentional misrepresentation are:
misrepresentation (false representation, concealment, or nondisclosure);
knowledge of falsity (or scienter);
intent to defraud, i.e., to induce reliance;
actual and justifiable reliance; and
resulting damage.
The Cross-Complaint and Anti-SLAPP Motion
OC Media and OCR Land LLC sued Plaza, Galuppo, and Morris Cerullo World Evangelism for fraud and the common count of money had and received. OC Media alleged that prior to the close of escrow it had asked Galuppo to provide the amount of attorneys' fees and costs that Plaza had incurred in connection with the sale of the Property at 625 N. Main. OC Media stated that on October 16, 2020, Galuppo transmitted by email a document purporting to be an invoice through which it was represented that Plaza had incurred $24,433.08 in legal fees. OC Media alleged that the invoice was fraudulent.
The trial court denied appellants' anti-SLAPP motions to dismiss or strike OC Media's cross-complaint in a written order. Cross-defendants did not demonstrate litigation was genuinely contemplated and was more than a possibility at the time the invoice amount was communicated. Cross-defendants failed to establish that cross-complainants' claims or the other challenged portions of the cross-complaint arise from cross-defendants' protected petitioning activity.
Mr. Galuppo's subjective intent to file a lawsuit in the event OC Media breached its contractual obligations was merely theoretical (i.e., it was not under serious consideration); therefore, Galuppo's e-mailing of the invoice to the title insurance company was not protected prelitigation activity under the anti-SLAPP statute.
There are simply no documents from Galuppo - or any other attorney representing Plaza-directed to Harrah, OC Media, or its counsel attempting to resolve outstanding legal disputes. Therefore, the Court of Appeals rejected Galuppo's claim that the invoice was part of an ongoing series of prelitigation demands communicated to OC Media as part of a lawsuit that was under serious consideration.
OC Media's cross-complaint is not a SLAPP suit. The judgment was affirmed.
ZALMA OPINION
Galuppo attempted to avoid the position of a cross-defendant by filing a SLAPP motion by claiming his bill to his client for the sale of real property was protected petitioning activity. In fact the Court of Appeals noted that the people suing Galuppo used his billing as evidence of fraud. A false and fraudulent lawyers bill is not a protected activity subject to dismissing what is claimed to be a SLAPP suit.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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39
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Real Property Damage Required for Defense
"Property Damage" Must Be Actual Not Potential
Post 4771
Breach of Construction Contract Not an Insured Peril
After the plaintiff's motion for summary judgment was rejected and the defendant insurer's motion for summary judgment was granted the plaintiff appealed. In Westchester Modular Homes Of Fairfield County, Inc. v. Arbella Protection Insurance Company, No. AC 45433, Court of Appeals of Connecticut (April 2, 2024) the Court of Appeals resolved the dispute.
FACTS
On or about April 27, 2016, the plaintiff entered into a contract with Diana Lada L'Henaff and Jean Jacques L'Henaff for the construction of a new modular home on property located in New Canaan (property). During construction, disputes arose between the L'Henaffs and the plaintiff. Ultimately, the L'Henaffs terminated their contract with the plaintiff on December 14, 2016. The plaintiff filed a mechanic's lien on the property on or about February 3, 2017, and commenced an action to foreclose on the lien on or about April 7, 2017 (underlying litigation).
The L'Henaffs filed a counterclaim that alleged that they "desired to build a modern home and had very carefully and specifically specified the type of insulation, materials, and finishes that they required the builder that won the job to satisfy." The L'Henaffs alleged that work on the project progressed slowly and with constant problems. The L'Henaffs alleged that the plaintiff had breached the construction contract.
The plaintiff, as a named insured under a commercial general liability policy issued by the defendant (policy), filed a claim for coverage with the defendant which was refused. The defendant disclaimed coverage on the basis that the first revised counterclaim filed in the underlying litigation did not allege "property damage" caused by an "occurrence" and, therefore, it did not trigger coverage under the policy.
The trial court determined that the pleadings in the underlying litigation did not allege property damage. As to the extrinsic documents submitted to the defendant by the plaintiff, the court determined that such evidence established only the existence of possible defective work that could lead to future property damage if not remedied but that it did not demonstrate the existence of current property damage.
DISCUSSION
Because there are no factual issues in dispute in the present case, the court was only faced with the legal question whether the defendant had a duty to defend the plaintiff. Specifically, the defendant contended that the extrinsic documents suggested, "at most, that the construction deficiencies could potentially result in water damage to nondefective areas of the property if not fixed." (Emphasis in original)
The Plaintiffs alleged construction defects and did not allege damage that the defects caused to other, nondefective property. Since the plaintiffs expert testified that he had identified defective work that, if not remedied, could lead to property damage in the future but identified no damage, Plaintiffs failed to allege facts bringing the underlying litigation seeking property damage that would have required a defense.
The Court of Appeals made clear that repairs to structural deficiencies, made for the purpose of preventing physical injury to tangible property before the alleged deficiency has caused property damage are not within the insuring agreement's definition of property damage.
Because there was no indication of water damage at all. At most, the construction deficiencies could potentially result in water damage to nondefective areas of the property if not fixed. Damage to nondefective property in the form of rot or mold caused by water intrusion would be property damage within the terms of the policy language. However, the plaintiff did not present any evidence of actual damage or case law holding that the presence of water, in the absence of actual damage, amounts to covered physical damage.
The Court of Appeals concluded that the notification of the mere presence of water, without some corresponding physical damage, did not provide the defendant with actual knowledge of facts establishing a reasonable possibility of coverage because the presence of water does not constitute property damage within the terms of the policy.
Accordingly, the defendant did not have a duty to defend the plaintiff in the underlying litigation, and the court properly rendered summary judgment in favor of the defendant.
ZALMA OPINION
When an insured breaches the terms of a construction contract it will invariably be sued by the other party to the contract for damages resulting from the breach. Westchester Modular Homes breached its contract by creating a defective modular home that would, in the future, if defects were not cured, suffer physical damage. Since there was no physical damage to the structure - just the potential of damage - coverage did not apply and Westchester was obligated to defend and indemnify itself to the allegations of the underlying litigation.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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To Plead Fraud Plaintiff Must Identify Acts of Fraud
Suspicion of Fraud Cannot Support Qui Tam Action
Post 4770
Richard Campfield, suing for the State of California, appealed the trial court sustained the demurrer of defendants Safelite Group, Inc. and its subsidiaries, Safelite Solutions LLC and Safelite Fulfillment, Inc. (collectively, Safelite) without leave to amend. Campfield contends he adequately alleged a cause of action under the Insurance Fraud Prevention Act (Ins. Code, § 1871 et seq.) (IFPA) within the statute of limitations.
In State Of California, ex rel. Richard Campfield v. Safelite Group, Inc., et al., A168101, California Court of Appeals, First District, Fourth Division (March 29, 2024) explained the requirements to plead a Qui Tam action under the IFPA.
BACKGROUND
Campfield owns a windshield repair company that licenses and sells products for repairing vehicle windshield cracks. Safelite is the nation's largest retailer of vehicle glass repair and replacement services. Safelite also serves as the third party administrator for over 175 insurance and fleet companies, including 23 of the top 30 insurers in California and the country, for processing and adjusting policyholders' vehicle glass damage claims, and it has direct electronic access to over 20 insurance company databases.
In 2015, Campfield sued Safelite in federal district court in Ohio, alleging Safelite's continued reliance on its six-inch rule violated the Lanham Act's (15 U.S.C. § 1051 et seq.) Safelite admitted in responses to interrogatories in the Ohio action that it has never conducted studies on the safety or viability of repair of cracks longer than six inches.
Campfield filed under seal the complaint in the present action against Safelite, alleging a single qui tam cause of action for violation of the Insurance Frauds Prevention Act (IFPA). The Insurance Commissioner and the San Francisco County District Attorney declined to intervene, so in September 2022 the trial court unsealed the complaint.
Safelite demurred, arguing, among other things, that the complaint failed to allege facts constituting a cause of action under the IFPA. Campfield failed to plead his claim with sufficient particularity, and the statute of limitations barred the complaint. After briefing and a hearing, the trial court sustained the demurrer without leave to amend based on the statute of limitations and noted that Safelite had raised "substantial arguments" that the complaint had not stated a cognizable claim and that the action was barred by the IFPA's public disclosure bar. The trial court then dismissed the action.
DISCUSSION
The IFPA was enacted to prevent automobile and workers' compensation insurance fraud in order to, among other things, significantly reduce the incidence of severity and automobile insurance claim payments and therefore produce a commensurate reduction in automobile insurance premiums.
The sole cause of action in the complaint is based on Insurance Code section 1871.7, subdivision (b), which allows for the imposition of civil penalties and other remedies against anyone who violates Insurance Code section 1871.7 or Penal Code sections 549, 550, or 551. Campfield alleges Safelite violated Penal Code section 550, subdivision (b)(1) and (2).
As in any action sounding in fraud, an IFPA action must be pleaded with particularity.
ANALYSIS
To effectively state his IFPA cause of action, Campfield must allege facts showing that Safelite presented, or caused to be presented, a false statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy or prepared or made a false statement intended to be presented to any insurer or any insurance claimant in connection with, or in support of or opposition to, any claim or payment or other benefit pursuant to an insurance policy. Campfield alleged Safelite violated these provisions when it prepared and presented false statements to insurance companies either as insurers' third party administrator or as a windshield repair and replacement service.
The pleading standard Campfield must meet is not onerous. Campfield must identify every fraudulent claim at the pleadings stage. However, Campfield did not identify one example of any specific fraudulent claims. As a result Safelite did not have concrete allegations to defend against. The failure of allegations of specific fraudulent claims left Safelite with the need to guess.
A lack of discovery cannot excuse Campfield's failure to plead his IFPA claim with sufficient detail defeated his suit. The heightened pleading standard exists in part to deter the filing of complaints as a pretext for the discovery of unknown wrongs and to prohibit plaintiffs from unilaterally imposing upon the court, the parties and society enormous social and economic costs absent some factual basis.
Qui tam actions like Campfield's under the IFPA are meant to encourage private whistleblowers, uniquely armed with information about false claims, to come forward. These insiders should have adequate knowledge of the fraudulent acts to comply with the heightened pleading requirement. The IFPA is not intended to provide a mechanism for those with general suspicions of wrongdoing like Campfield to engage in discovery seeking to confirm their suspicions.
ZALMA OPINION
The qui tam provision of the IFPA is a wonderful tool in the battle against insurance fraud. It has acted as a way to defeat fraud that local prosecutors are unwilling to prosecute. Rather than putting fraudsters in prison the qui tam provision allows the relator and the state to take the profit out of the crime. However, as this case establishes, it is not a place to shop for evidence when a person only suspects, but has no specific acts of fraud. Insurers should file qui tam actions if they have evidence and should not if they don't have evidence to allege fraud with specificity.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Life Insurance Can Be Hazardous to Your Health
Insurance Fraud by Board & Care Facility
Post 4769
This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. 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 Hungarian owned and operated a board and care facility for the aging in Carson City, Nevada. He brought his younger brother over from Hungary in 1975 to help him in the business. It was only a twenty-bed facility and with little help, the two could manage the entire business.
The oldest brother was the thinker. He got an honorary PhD from the New World Society of Abundant Consciousness that ran a school in the desert just north of Pahrump, Nevada. After receiving his honorary degree for a donation of $15,000, he insisted on the title doctor.
The doctor had no training in any field. He had a high school diploma and had operated several restaurants before buying the board and care facility. He believed that the title conferred on him the right to prescribe medicine, to give psychological advice, and to do anything he pleased. He would get drugs for his patients from other than legitimate sources. He would bill their insurers as if they were prescription drugs prescribed by a staff physician.
His younger brother maintained the facility, cooked the meals for the residents, doubled as a nurse and ran the business. The doctor acted like royalty.
Since the small business required both to work if it was to make a profit, the business began to deteriorate. Cash flow was minimal. Patient services became almost nonexistent. The doctor skimmed as much money into his pocket as he could and keep the patients alive. Neither he nor his brother drew anything much more than subsistence monies from the business.
The dedicated younger brother made the business work. He began to cut personal corners. First, he decided to drop a $100,000 life insurance policy. With the reduced earnings of the business, he could not afford to pay the premium.
The doctor, who used the same insurance agent, was told of the intent of the brother to cancel. The doctor asked the agent to keep the policy in effect without his brother’s knowledge. The doctor would pay the premium as a business expense of the board and care facility.
The agent, not wishing to lose his commission, agreed and kept the policy in force, accepting premium payments from the doctor.
The younger brother suffered from severe hypertension. His controlled the disease by diet and medications. He trusted his older brother. He thought his older brother was wise and knowledgeable. He thought his older brother had, at least, the same level of expertise as any physician and trusted his brother more than a physician.
After the doctor had paid the first monthly premium on the life insurance policy, he explained to his brother that the hypertension drugs prescribed for him were dangerous. He told his younger brother that he had in the inventory of the board and care facility drugs that were more effective. Since they were in the stock of the facility the doctor could give them to his brother at no cost. The brother stopped taking his prescribed medicine and started taking the drugs given him by his brother. The doctor did not tell his brother that the drugs contained digitalis. Digitalis is a drug that, although useful in reducing chest pains in people with heart conditions, is poisonous in the amounts the doctor told his brother to take. It is even more poisonous to a person with hypertension.
Within two weeks of taking his brother’s drugs, the younger brother was found by his wife apparently dead, on his kitchen floor. Paramedics arrived and immediately began CPR. Because she did not know what to do after calling the paramedics, the wife called her brother-in-law. He arrived at the scene about the same time as the paramedics. He was hysterical and interfered with the paramedics. They had to forcibly remove him from his brother so they could perform CPR. They put the brother in an ambulance and began racing toward the emergency hospital with red lights and siren. The doctor followed and almost sideswiped the ambulance twice. They called for police help on their radio. A Pahrump police officer pulled the doctor off to the side of the road and restrained him for sufficient time to allow the ambulance to arrive at the hospital.
They could not revive the younger brother. They pronounced him dead one hour after arrival at the hospital. The doctor convinced the wife there should be no autopsy. His brother, her husband, had a severe heart condition that was well documented. He explained that there should be no reason to cut his body to satisfy a local ordinance.
The doctor convinced the brother’s family physician to sign the death certificate showing the cause of death as a heart attack. The family physician did so without evidence of such a heart attack. The family physician had not even seen the deceased within six months of his death. The family physician clearly violated the law. He thought the death certificate would help the family who appeared adamantly against the invasive procedures of an autopsy.
The widow was not an intelligent woman. She had limited education in her country of birth, Hungary. She could barely read or write the English language and spoke it with a thick accent. She relied totally on her brother-in-law. He handled the disposition of her husband’s estate. She signed whatever papers he put before her.
One paper he put in front of her was a claim form making claim on the life insurance policy. The claim form did not use the sister-in-law’s address but, rather, a P.O. box held in secret by the doctor. The insurance company, presented with an appropriate claim form signed by the widow and what appeared to be a proper death certificate, immediately issued its check for $100,000 plus interest, made payable to the widow, the sole beneficiary named in the policy.
The doctor received the check. He signed the widow’s name to it and deposited the money in his account. He used the money to pay the debts of the board and care facility and to buy a new home for himself on five acres of desert property outside Pahrump. The widow was left with nothing but debts. She sold the home she and her husband lived in since arriving in the U.S. After paying a commission to the realtor and the funeral expenses she had only $1,000 left. Her brother-in-law loaned her $10,000 which she used to buy some secondhand furniture and move into a small apartment. She met a blackjack dealer at a casino and married him so she would have some means of support.
The doctor lived in luxury for a year off the proceeds and then began planning his next insurance fraud. He has no other brothers to kill, so he decided to obtain life insurance on the residents of the board and care facility none of whom had a long life expediency.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
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66
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Never Lie on an Application for Insurance
Conceal or Misrepresent Material Facts Requires Rescission in Alabama
Post 4768
Allied World issued general liability policies to Clint Lovette (“Lovette”) and his companies. ((collectively “Lovette Defendants”) for the policy periods of March 16, 2018 to March 16, 2019 and March 16, 2019 to March 16, 2020. Allied World sought a judicial determination in its favor that it does not owe the Lovette Defendants a defense or indemnity regarding two cases.
In Allied World Surplus Lines Insurance Company v. Lovette Properties, LLC, et al., No. 2:22-cv-00738-RDP, United States District Court, N.D. Alabama, Southern Division (March 15, 2024) the USDC resolved the disputes.
FACTS
In early September 2017, the Wheelers threatened to sue Lovette Properties to recover all sums paid if the Wheeler project was not completed by the end of 2017. The Wheelers informed Lovette Properties that they were considering all available options for remedying the situation and asserted that their letter “does not constitute a waiver of any of our rights or remedies, all of which are expressly reserved.”
The 2018/2019 Policy
On April 16, 2018, Clint Lovette, on behalf of Lovette Properties, signed and submitted a “Contractor's Supplemental Application” requesting general liability insurance coverage from Allied World. In the Contractor's Supplemental Application, Lovette falsely represented: (1) that the Lovette Defendants had no losses, claims, or suits against them in the past 8 years; (2) that no claims or legal actions were pending; (3) that the Lovette Defendants had no knowledge of any pre-existing act, omission, event, condition, or damage to any person or property that might reasonably be expected to give rise to any future claim or legal action against any person or entity identified in the application; (4) that the Lovette Defendants had not been accused of faulty construction in the past 8 years; and (5) that the Lovette Defendants had not been accused of breaching a contract in the past 8 years.
The Wheelers filed an Arbitration Complaint against Lovette seeking recovery of the costs associated with completing the renovation of their house; consequential damages for the cost of repairs to the house; the costs for maintaining another household during construction; damages for mental anguish and emotional distress; and “exemplary damages to the extent permitted by law [and] ... the costs of this action, attorneys' fees, expenses, and interest on the judgment as allowed by law.”
The Adams Case
On April 15, 2020, Allison and Carl Adams (“the Adamses”) sued Lovette. In the Complaint, the Adamses alleged that Lovette Properties abandoned the project before completion and left the house in a manner that did not comply with the applicable building codes and industry standards. The Adams case was tried as a bench trial that entered a judgment for $149,214.23 in favor of the Adamses only on the contractual and negligence claims.
DISCUSSION
Allied World asserted that summary judgment in its favor was proper because the Policies must be rescinded and thus Allied World is relieved of its obligation to defend or indemnify the Lovette Defendants in both the Wheeler arbitration and the Adams case.
Rescission under Alabama Code § 27-14-7
Because of the Lovette Defendants' misrepresentations, omissions, concealment of facts, and incorrect statements in the 2018 and 2019 Contractor's Supplemental Applications Alabama statutes prevent recovery under the Policies and an insurer can rescind a policy or deny coverage if, in the application or in negotiations therefor, the insured made misstatements that either (1) were fraudulent (i.e., made intentionally with knowledge); (2) were material to the risk (although innocently made); or (3) affected the insurer's good faith decision to issue the policy for which the insured applied.
In Alabama, misrepresentation of a material fact made willfully to deceive, or recklessly without knowledge, and acted on by the opposite party, or if made by mistake and innocently and acted on by the opposite party, constitutes legal fraud.
Under the language of Allied World's policies, even if Lovette's misrepresentations were innocently made, Allied World has a right to void the policy so long as the misrepresentations were (1) material and (2) relied upon. Based on the record, it is readily apparent that the applications contain misrepresentations.
ALLIED WORLD IS ENTITLED TO RESCIND THE INSURANCE POLICIES
An insurer may void a policy if it can show that:
The insurer in good faith would either not have issued the policy or contract or would not have issued a policy or contract at the premium rate as applied for or would not have issued a policy or contract in as large an amount or would not have provided coverage with respect to the hazard resulting in the loss if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.
The key question is the good faith of the insurer in refusing to issue the policy.
To meet its burden, Allied World offers the affidavit of Preston Starr. In his affidavit, Starr states that, had Lovette given a “YES” answer to any of the questions at issue in this matter, it would have charged a higher premium for the Policy and would never have issued a Policy that provided coverage for any claims out of Lovette's work done for the Wheelers.
In addition, Starr affirmed that, whenever an applicant discloses a known incident that could arise into a future claim, C&S consistently and repeatedly attaches a “Known Claimant/Incident Exclusion” Form to the policy that documents “the name of the party alleging potential wrongdoing, the date of the alleged loss, and as many specific details as possible, so that if a claim shows up in the future on the policy, Allied World have an exclusion specifically excluding coverage for that claim.
Under Alabama law testimony from an insurance company's underwriter that is “supported by other uncontradicted evidence in the record” – such as the company's underwriting guidelines – can be sufficient to establish materiality or that a company in good faith would not have issued the policy as written as a matter of law.
For these reasons, summary judgment in Allied World's favor is due to be granted, and both Policies are due to be rescinded.
ZALMA OPINION
Alabama law, like that in most states, allows for rescission of a policy when the insured obtains a policy by concealment or misrepresentation about a material fact. Lovette did not advise Allied World of the pending claims which were material to the decision of Allied World to insure or not insure Lovette. Equity required the policies to be declared void from their inception.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
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56
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Compassion Not Available for Arsonist
No Reason to Release Convicted Arsonist Early
Post 4767
In United States Of America v. Jonathan Paul Wiktorchik, Jr., No. 23-2564, United States Court of Appeals, Third Circuit (March 25, 2024) Federal Prisoner Jonathan Wiktorchik appealed, acting as his own lawyer, from the District Court's denial of his motion for compassionate release.
THE CONVICTION
In 2011, after a jury trial in the Eastern District of Pennsylvania, Wiktorchik was convicted of arson, use of fire to commit a felony, mail fraud, and making false statements. Wiktorchik's conviction was based on a fire he deliberately set to his chiropractic office, which also destroyed four other businesses. Wiktorchik repeatedly lied to investigators regarding his involvement and changed his story on multiple occasions. He was sentenced to 204 months of imprisonment and has an anticipated release date of August 23, 2025.
MOTION FOR COMPASSIONATE RELEASE
In May 2023, Wiktorchik filed a motion for compassionate release arguing that his chronic medical conditions and the COVID-19 pandemic supported his early release. Wiktorchik, who is not vaccinated, was hospitalized in January 2021 after contracting COVID-19 and has since been reinfected at least twice. He asserted that he now suffers from "long COVID" and that each reinfection exacerbated the condition, "leading to further dehabilitating [sic] and deteriorating health conditions" for which he was not receiving proper treatment.
The District Court denied relief. It concluded both that Wiktorchik had not established any extraordinary and compelling reason for his release, and that the relevant sentencing factors weighed against release.
ANALYSIS
The Third Circuit reviews such an appeal for abuse of discretion by a district court's order denying a motion for compassionate release, including a determination that the sentencing factors do not weigh in favor of granting compassionate release. The Third Circuit will not disturb the District Court's decision unless there is a definite and firm conviction that it committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors. The Third Circuit found it could summarily affirm the district court's decision if the appeal fails to present a substantial question.
The compassionate-release statute states that a district court may reduce a defendant's term of imprisonment if extraordinary and compelling reasons warrant such a reduction. Before granting compassionate release, a district court must consider the factors set forth in the statute to the extent that they are applicable. Those factors include the nature and circumstances of the offense, the history and characteristics of the defendant, and the need for the sentence to reflect the seriousness of the offense, promote respect for the law, provide just punishment, afford adequate deterrence, and protect the public from future crimes by the defendant.
Compassionate release is discretionary, not mandatory. Therefore, even if a defendant is eligible for it, a district court may deny compassionate release upon determining that a sentence reduction would be inconsistent with the statute’s requirements.
In reaching its decision the Third Circuit was unable to discern abuse of discretion in the District Court's conclusion that compassionate release was not appropriate. The District Court appropriately considered that Wiktorchik "has a history of committing economic as well as dangerous crimes," and observed that the current offenses were committed less than a year after Wiktorchik was convicted of insurance fraud. It explained that Wiktorchik's crimes showed a disregard for the property of others, noting that other businesses were damaged as a result of the arson. In determining that the factors did not warrant compassionate release the District Court concluded that Wiktorchik received just punishment for his offenses and that adequate deterrence and the protection of the public would be undermined and at risk if Wiktorchik were released for compassionate reasons.
Wiktorchik argued that the District Court failed to give sufficient weight to his rehabilitative efforts, including his lack of a disciplinary record while incarcerated. However, even considering these efforts,
Because this appeal does not present a substantial question, the District Court's judgment was summarily affirmed.
ZALMA OPINION
Arson-for-Profit is a violent type of insurance fraud. It not only destroys the property that was insured for the benefit of the arsonist it destroys the property of other and often causes the injury or death of innocents, neighbors, and firefighters. It is a heinous crime and the defendant must serve the entire sentence to protect the public at large from his criminal acts and deter others from attempting the same crime.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Litigation Between Insurers Should be Avoided
Potential of Coverage is Enough to Require an Insurer to Defend
Post 4765
When two or more insurance companies issue policies with a potential for coverage of a claim of bodily injury they should work together to protect their mutual insured rather than litigate with the insured and the other insurers. Litigation is expensive and may result in a case they did not wish to have.
In Admiral Insurance Co. v. Track Group, Inc. f/k/a Securealert, Inc., and Jeffrey Mohammed Abed, and Certain Underwriters At Lloyd's, London Subscribing To Policy No. CJ10028219, No. 1-23-1210, 2024 IL App (1st) 231210-U, Court of Appeals of Illinois, First District, Third Division (March 27, 2024) the Illinois Court of Appeals looked to protect the interests of the insured other than the interest of the insurers.
FACTS
This appeal concerned an insurance coverage dispute between a general liability carrier and a professional liability carrier. Certain Underwriters at Lloyd's, London Subscribing to Policy No. CJ10028219 (Underwriters) and Admiral Insurance Co. (Admiral) both insured Track Group, Inc., a company in the business of electronically monitoring individuals using ankle monitors. Track Group was sued after a person wearing the ankle monitor sustained severe injuries while driving his vehicle. Underwriters had paid the costs of Track Group's defense up to the time of the decision but it argued that Admiral should share in the costs, as it believes both insurance policies provide coverage in this case. The circuit court held that Admiral did not owe coverage under the terms of its insurance policy with Track Group.
BACKGROUND
Underwriters issued Track Group a general liability insurance policy, while Admiral issued a professional liability insurance policy. Track Group sought coverage under both policies in connection with a personal injury lawsuit filed against it in Los Angeles, California. The plaintiff in that suit, Jeffrey Mohamed Abed, alleged that his leg was torn from his body after his foot, on which he was wearing the ankle monitor, became lodged between the gas and brake pedals in the vehicle he was driving. Admiral denied coverage and filed a declaratory action, contending that it does not owe coverage under these circumstances.
The circuit court granted Admiral's motion for summary judgment and denied Underwriters' motion for summary judgment.
ANALYSIS
On appeal, Underwriters argued that the circuit court erred in granting summary judgment in favor of Admiral, contending that the court's interpretation of the Admiral policy was overly narrow. Underwriters argued that Admiral policy covers the injury at issue.
Where policy language is susceptible to more than one reasonable interpretation, it is considered ambiguous and will be construed strictly against the insurer. Courts construe the policy as a whole, giving effect to each provision where possible because the court must assume that the provision was intended to serve a purpose.
According to the plain language of the policy Admiral is potentially liable for wrongful acts arising out of the provision of "professional services" and "technology products." The policy includes a general exclusion for bodily injury and property damage. However, that exclusion does not apply to bodily injury arising out of the provision of "professional services." In other words, Admiral's policy could potentially cover bodily injury arising out of the provision of "professional services."
One of the four components of the ankle monitor is an internal central processing unit. The ankle monitor can make and receive calls, generate alarms, receive radio frequency transmissions, and communicate movements to Track Group. Because the ankle monitor is an electronic device that can store, retrieve, and process data it is potentially a computer. Moreover, the ankle monitor likely constitutes "hardware." Because the ankle monitor is potentially computer hardware, the Court of Appeals held that it is potentially covered by Admiral's policy and potential coverage is all that is required to trigger an insurer's duty to defend its insured.
Because the facts of Abed's lawsuit against Track Group potentially fell within the terms of the policy the decision of the Circuit Court was reversed.
ZALMA OPINION
The court did what the insurers should have done - it read the policy which covered claims resulting from professional services or technology products. Since the ankle monitor was clearly a technology product and was claimed to be the cause of the injury that ripped off Mr. Abed's leg, there was a potential of coverage and all of the insurers owed Track Group a defense. Working together both insurers could have saved money and served their insured fairly.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
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Go to the Insurance Claims Library – https://lnkd.in/gwEYk.
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Soft Fraud
How Most Get Away With Insurance Fraud
Post 4764
For reasons known only to governmental entities some insist on categorizing fraud into both “hard” and “soft” fraud. By so doing the governmental entities that so categorize fraud make one type of fraud less heinous and less criminal than the other. Fraud, whether categorized “soft” or “hard,” are criminal and if a person is tried and convicted of fraud both can be sent to jail for the same amount of time.
The types of insurance fraud some call “soft fraud” are found in every type of claim presented to an insurer.
Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or claimant exaggerates a legitimate claim.... According to the Insurance Research Council, soft fraud is far more frequent than hard fraud. Because of the frequency of soft fraud, it adds more to overall claims cost than hard fraud does.
Soft fraud occurs when a policyholder exaggerates an otherwise legitimate claim or when an individual applies for an insurance policy and lies about certain conditions or circumstances to lower the policy’s premium.
The reality is that Soft Fraud is a criminal violation and a breach of a material condition of the policy. It contributes to increased insurance costs. As a result of increased insurance costs, millions of Americans cannot afford sufficient insurance coverage. One cannot commit an innocent or partial fraud any more than one can be partially dead. Once fraud is committed the contract of insurance is violated and voidable and the crime has been committed.
Soft fraud, in contrast, usually involves legitimate losses that are exaggerated by the policyholder. For example, if a person is in a car accident and files a claim with her auto insurance company but overstates the severity of the damage to her car. The insured did not fabricate the accident or the underlying claim, but nevertheless committed soft fraud by not being completely truthful with the insurance company.
Regardless of whether or not the fraudulent act is soft or hard, insurance fraud is a felony under the law of most states.
The discussion that follows describes the most insidious and prevalent types of soft fraud.
PADDING
Padding is found when injuries or damages are exaggerated to increase a claim’s value. It is what has been called an insidious type of fraud difficult to detect and often considered harmless by insureds, claimants, police, and prosecutors.
Padding can come in a variety of forms. In first party claims, an insured is generally considered to be in the best position to know the value of property for which he or she is making a claim. An insurer depends upon the insured to provide an honest description and estimate of the value of the property, and most courts hold an insured to a high level of honesty when reporting a loss to an insurer.
Padding is found in property insurance when insureds inflate the number of items lost or destroyed or exaggerate the value of the items claimed damaged, destroyed, or stolen. This can be as simple as increasing the size of a stolen television from 32 inches to 42 inches; from a cathode ray tube to flat screen; from $100 cash to $500 cash; or from two pairs of jeans to five pair.
According to an Insurance Research Council (IRC) study, approximately 90 percent of the costs of insurance fraud are the result of claims padding. Claimants add damage, injuries, and fictitious passengers to their insurance claims. The other 10 percent are the result of organized accident staging rings. Because of the sheer number of offenders, and the light sentences received by the few that are convicted, pursuing these crimes has not a priority for law-enforcement or insurers. [Whyen v. Summers, 58 Misc.3d 1223(A), 97 N.Y.S.3d 57 (Table) (N.Y. Sup. Ct., 2018)]
On third party claims the padding can be as simple as adding a week of lost earnings that, in fact, was not lost; allowing the doctor to bill for three visits not made; or going to a chiropractor who charges for x-rays not taken.
Standard fire insurance, all-risk property insurance, package first party property policies and most third party liability policies state that the policy is void if the insured intentionally conceals or misrepresents any material fact or circumstance about the insurance or a claim, whether before or after the loss.
When an insured submits fraudulent invoices to inflate a claim the insurer has the right, under the policy wording, to void the entire policy. The insured’s argument that he was entitled to recover that part of his claim not supported by fraudulent documents should be dismissed out of hand. One cannot commit a small fraud any more than a person can be just a little dead.
A slight misstatement of value normally will not be sufficient to allow an insurer to void an insurance policy for fraud unless the insured knew at the time the misstatement was made that the statement was false and the insurer can prove that the misstatement was made with the intent to deceive it. Misrepresentation, concealment, and fraud are not limited by the amount of the fraud but by the intent of the person making the claim. An insured who presents, with the intent to defraud, $1,000 in false invoices is as culpable as an insured who presents, with the intent to defraud, $1,000,000 in false claims. In both cases, if proved, the policy of insurance, by its terms and conditions, is void and the claim is forfeited.
If the differences in numbers between those presented by the insured and those presented by the insurer are honest differences of opinion or calculation errors a policy cannot, and should not, be declared void. The insured must intend to deceive and the insurer must be in a position to prove that intent and that it was deceived before it can void the policy.
Honest people deceive their insurers. They think the deception is just harmless fudging. “Soft fraud” wrongfully takes money from an insurer and is also a crime. Soft fraud, like hard fraud, raises everyone’s insurance costs. The greatest amount of money lost to fraud is lost to schemes designated as “soft fraud.” Since most soft fraud succeeds the amount it costs the insurance industry is difficult, if not impossible, to determine. Prosecuting some “soft fraud” perpetrators can put the fear of prison in the minds of the general public and save more money, in the long run, than prosecuting and convicting a single major fraud perpetrator. Unfortunately, police and prosecutors are often unwilling to prosecute cases of so-called “soft fraud” even when the evidence is damning.
Years ago, the author took the Examination Under Oath of an insurance broker who inflated a claim for damage to personal property by creating, with the use of white out paint and a photocopy machine, fake invoices for the replacement of property never replaced to collect the difference between actual cash value and replacement cost value. At Examination Under Oath the insured admitted to faking the receipts and was eventually convicted of insurance fraud and served a few months in jail for her crime.
ZALMA OPINION
Insurance fraud is working to destroy the economy and the ability of insurers to service their clients properly. States attempt to deter it by enacting statutes making it a crime to defraud an insurer and make the insurers, by statute, to investigate and enforce the crime. Yet prosecutors don't like insurance fraud cases because they are document heavy and no person has been physically injured. Prosecution of insurance fraud is anemic and prosecution of soft fraud is non-existent. Learn from this and defeat fraudulent claims by refusing to pay. You will have no help from police or prosecutors but you can deter the attempts to defraud a proactive insurer.
This blog was adapted from my book "Insurance Fraud - Volume One available on Amazon.com
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
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Go to the Insurance Claims Library – https://lnkd.in/gwEYk
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Red Flags of Insurance Fraud
Indicators of Insurance Fraud are Investigative Tools
Post 4763
Indicators of Insurance Fraud are Investigative Tools
Post 4763
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Prison Employee Commits a Crime She Was Employed to Prevent
GUILTY OF WORKERS' COMPENSATION FRAUD
Post 4762
On January 10, 2022, defendant Tiffinie Marvell Jones was convicted by a jury of one count of insurance fraud. Jones filed a motion for a new trial, which was denied. On appeal, Jones argued that there was insufficient evidence to support the verdict, that her trial counsel provided ineffective assistance, and that the trial court abused its discretion when it denied her motion for a new trial.
In The People v. Tiffinie Marvell Jones, F085205, California Court of Appeals, Fifth District (March 14, 2024) the Court of Appeals affirmed her conviction
FACTS
On January 10, 2022, Jones was found guilty by a jury. Jones was sentenced on September 30, 2022. Jones was granted probation for a term of two years. One of the conditions of probation was that Jones serve the first 180 days of her probationary period in jail.
The Prosecution's Case
Jones worked for a state prison in May 1995. She was a return to work coordinator for the prisons. If a staff member was injured, they would go through the return to work office to file workers compensation claims so the staff member could be paid while he or she was off work.
On February 14, 2014, Jones filed a DWC-1 form (an application to file a workers’ compensation claim), alleging that on February 11, 2014, a large file shelf fell on her, injuring her left thigh and below her knee.
As soon as a workers’ compensation claim is filed, the state prison informs the insurance company. The insurance company does an investigation, and either accepts or denies the claim. If it is accepted, the insurance company lets the state prison know, and the state prison will pay the injured worker for the first 52 weeks. This is referred to as industrial disability leave (IDL).
Injured workers are allowed to get a second job, but they need to report the income to the insurance company (reporting a second job, without reporting the income, is not sufficient). The insurance company then reduces the amount it pays the injured worker by the amount the injured worker makes at his or her second job.
In February of 2017, Jones began working for a real estate company as a sales associate. Jones's IRS form 1099 for 2017 from the real estate company indicated that, after certain amounts were deducted, Jones earned $25,095.
Jones did not report that she was earning secondary income to her claims adjuster at the insurance company, and the adjuster never asked. Jones did fill out a secondary employment form from the state prison, listing her secondary employer as a real estate company. It was approved on behalf of the warden on or around April 24, 2017, as required by the state prison's policy. Jones was deposed on October 11, 2017, regarding her workers' compensation claim. When asked how many houses she had in escrow, she responded, "Two." However, based on Jones's 1099 form from the real estate company, prior to the date of the deposition Jones had already closed seven home sales and earned $20,312.
DISCUSSION
When evaluating a sufficiency of evidence claim, the appellate court will review the whole record in the light most favorable to the judgment to determine whether it discloses substantial evidence-that is, evidence that is reasonable, credible, and of solid value- from which a reasonable trier of fact could find the defendant guilty beyond a reasonable doubt.
An intent to defraud is an intent to deceive another person for the purpose of gaining some material advantage over that person or to induce that person to part with property or to alter that person's position to its injury or risk, and to accomplish that purpose by some false statement, false representation of fact, wrongful concealment or suppression of truth, or by any other artifice or act designed to deceive.
There was substantial evidence from which a jury could reasonably infer that Jones knew that she was supposed to report her real estate income to the insurance company, that she did not do so, and that she lied about not having real estate income at the deposition.
The Trial Court Did Not Abuse its Discretion in Denying Jones's Motion for a New Trial
In making the determination, the trial court found that Jones "clearly received income" yet intentionally failed to disclose it. Contrary to Jones's assertion, the trial court addressed the expense evidence as to the specific intent element and found that Jones knew that she had to report her income even if it was exceeded by her expenses but intentionally failed to do so.
ZALMA OPINION
Ms. Jones lied at deposition about her earnings with a secondary employer while on workers' compensation which she knew, from her employment with the state prison, that she was required to report to the insurer about her secondary employment. Her appeal was incredible and the court refused to give any credibility to her appeal. She will spend a small time in the prison where she used to work and will go back to making more money selling real estate.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808
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Go to the Insurance Claims Library – https://lnkd.in/gwEYk
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Prison Employee Commits a Crime She Was Employed to Prevent
GUILTY OF WORKERS' COMPENSATION FRAUD
Post 4762
14
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Prison Employee Commits a Crime She Was Employed to Prevent
GUILTY OF WORKERS' COMPENSATION FRAUD
Post 4762
On January 10, 2022, defendant Tiffinie Marvell Jones was convicted by a jury of one count of insurance fraud. Jones filed a motion for a new trial, which was denied. On appeal, Jones argued that there was insufficient evidence to support the verdict, that her trial counsel provided ineffective assistance, and that the trial court abused its discretion when it denied her motion for a new trial.
In The People v. Tiffinie Marvell Jones, F085205, California Court of Appeals, Fifth District (March 14, 2024) the Court of Appeals affirmed her conviction
FACTS
On January 10, 2022, Jones was found guilty by a jury. Jones was sentenced on September 30, 2022. Jones was granted probation for a term of two years. One of the conditions of probation was that Jones serve the first 180 days of her probationary period in jail.
The Prosecution's Case
Jones worked for a state prison in May 1995. She was a return to work coordinator for the prisons. If a staff member was injured, they would go through the return to work office to file workers compensation claims so the staff member could be paid while he or she was off work.
On February 14, 2014, Jones filed a DWC-1 form (an application to file a workers’ compensation claim), alleging that on February 11, 2014, a large file shelf fell on her, injuring her left thigh and below her knee.
As soon as a workers’ compensation claim is filed, the state prison informs the insurance company. The insurance company does an investigation, and either accepts or denies the claim. If it is accepted, the insurance company lets the state prison know, and the state prison will pay the injured worker for the first 52 weeks. This is referred to as industrial disability leave (IDL).
Injured workers are allowed to get a second job, but they need to report the income to the insurance company (reporting a second job, without reporting the income, is not sufficient). The insurance company then reduces the amount it pays the injured worker by the amount the injured worker makes at his or her second job.
In February of 2017, Jones began working for a real estate company as a sales associate. Jones's IRS form 1099 for 2017 from the real estate company indicated that, after certain amounts were deducted, Jones earned $25,095.
Jones did not report that she was earning secondary income to her claims adjuster at the insurance company, and the adjuster never asked. Jones did fill out a secondary employment form from the state prison, listing her secondary employer as a real estate company. It was approved on behalf of the warden on or around April 24, 2017, as required by the state prison's policy. Jones was deposed on October 11, 2017, regarding her workers' compensation claim. When asked how many houses she had in escrow, she responded, "Two." However, based on Jones's 1099 form from the real estate company, prior to the date of the deposition Jones had already closed seven home sales and earned $20,312.
DISCUSSION
When evaluating a sufficiency of evidence claim, the appellate court will review the whole record in the light most favorable to the judgment to determine whether it discloses substantial evidence-that is, evidence that is reasonable, credible, and of solid value- from which a reasonable trier of fact could find the defendant guilty beyond a reasonable doubt.
An intent to defraud is an intent to deceive another person for the purpose of gaining some material advantage over that person or to induce that person to part with property or to alter that person's position to its injury or risk, and to accomplish that purpose by some false statement, false representation of fact, wrongful concealment or suppression of truth, or by any other artifice or act designed to deceive.
There was substantial evidence from which a jury could reasonably infer that Jones knew that she was supposed to report her real estate income to the insurance company, that she did not do so, and that she lied about not having real estate income at the deposition.
The Trial Court Did Not Abuse its Discretion in Denying Jones's Motion for a New Trial
In making the determination, the trial court found that Jones "clearly received income" yet intentionally failed to disclose it. Contrary to Jones's assertion, the trial court addressed the expense evidence as to the specific intent element and found that Jones knew that she had to report her income even if it was exceeded by her expenses but intentionally failed to do so.
ZALMA OPINION
Ms. Jones lied at deposition about her earnings with a secondary employer while on workers' compensation which she knew, from her employment with the state prison, that she was required to report to the insurer about her secondary employment. Her appeal was incredible and the court refused to give any credibility to her appeal. She will spend a small time in the prison where she used to work and will go back to making more money selling real estate.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://barryzalma.substack.com/publish/post/107007808
Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg.
Go to the Insurance Claims Library – https://lnkd.in/gwEYk
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