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Clear & Unambiguous Exclusions Must Be Enforced Post 4843 The Plaintiff insurance company seeks a declaration that it has no duty to defend or indemnify Jacob Jackson or his wife, Stacy Jackson, for claims asserted against them in civil lawsuits which allege that Mr. Jackson sexually abused and exploited minors. In American Strategic Insurance Corp, a foreign insurer v. Jacob Jackson, individually, Inspirit Athletics, Inc, et al., No. 3:23-cv-05461-RJB, United States District Court, W.D. Washington, Tacoma (July 24, 2024) the insurer proved that criminal charges against Mr. Jackson, including for rape of a child in the third degree, child molestation in the third degree, and communication with a minor for immoral purposes are now pending in Pierce County, Washington Superior Court (“criminal case”). Trial on the criminal charges is set to begin on November 19, 2024. The Insurer moved for partial summary judgment on its claims against Mr. and Mrs. Jackson only as they relate to Jane Doe 20, as Guardian ad Litem for John Doe 20, et. al. v. Inspirit Athletics, Inc., et.al., Pierce County, Washington Superior Court case number 23-208692-4 (“John Doe 20 lawsuit”). FACTS The Plaintiff issued a homeowners insurance policy (“primary policy”) to Mr. and Mrs. Jackson. This primary policy was in effect between September 16, 2019 - September 16, 2022. In addition to the primary policy, the Plaintiff also issued an umbrella liability policy to the Jacksons. The Plaintiff accepted defense of the civil lawsuit at issue for the Jacksons pursuant to a reservation of rights. It then sued seeking a declaration that it owes no duty to defend or indemnify the Jacksons for any of the claims asserted against them in the John Doe 20 lawsuit. ALLEGATIONS IN THE UNDERLYING LAWSUIT According to the complaint filed in the John Doe 20 lawsuit, Mr. Jackson was the head boys' basketball coach for Sumner High School, located in Sumner, Washington, from 2016 to September of 2022. Mr. Jackson is also alleged to be the CEO of Inspirit Athletics, Inc. d/b/a/ Sterling Athletics (“Sterling”) a sports equipment manufacturing and marketing company. The John Doe 20 lawsuit contended that Mr. Jackson met John Doe 20 when he was around 10 years old and over the next several years showered John Doe 20 with attention and gifts of athletic equipment, Sterling clothing and gear. Mr. Jackson socialized with the family. While John Doe 20 was in the Jackson's closet, Mr. Jackson stripped naked, cornered John Doe 20 in the closet, and began masturbating in front of John Doe 20. Mr. Jackson then allegedly forced himself on John Doe 20, grabbing his genitalia and masturbating John Doe 20. The John Doe 20 lawsuit makes claims for sexual exploitation of children and false imprisonment against Mr. Jackson. INSURANCE POLICIES As stated above, there are two insurance policies which are the subject of this case: the primary policy and umbrella policy. Both policies exclude “‘bodily injury' . . . arising out of sexual molestation, ..." as well as “‘bodily injury' . . . resulting from any illegal or criminal act performed by, at the direction of, or in conspiracy with any ‘insured.' This exclusion applies regardless of whether the insured is charged with a crime.” Relevant Umbrella Policy Provisions The umbrella policy also contains several exclusions that the Plaintiffs maintain are relevant. For example, it excludes “‘bodily injury' . . . and ‘personal injury' unless such liability is also covered under the applicable underlying insurance.” The umbrella policy excludes “‘bodily injury' which is expected or intended by an ‘insured'” and “‘bodily injury' and ‘personal injury' arising out of: sexual molestation, corporal punishment or mental abuse” DISCUSSION In Washington, an insurance policy is construed as a contract and given fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance. The Plaintiff's motion for summary judgment regarding the duty to defend should be granted. The Plaintiff has no duty to defend the Jacksons in the John Doe 20 lawsuit. Neither the primary policy nor the umbrella policy (which only provides coverage if the primary policy does) could conceivably cover the allegations in the complaint. DUTY TO INDEMNIFY If there is no duty to defend, then there is no duty to indemnify. Therefore the Plaintiff's partial motion for summary judgment should be granted. Plaintiff American Strategic Insurance Corp's Motion for Summary Judgment Is Granted. ZALMA OPINION Liability insurance is designed to protect an insured only against fortuitous acts. Sexually molesting a child can never be fortuitous. It is an intentional act that is both immoral and illegal and excluded by clear and unambiguous language in the homeowners and umbrella policy. The couple should be forced to pay whatever assets they have to the families of the abused children as well as serve time in prison. Insurance is not designed to make it easy to commit crimes at all, and especially crimes against minor children. (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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Gasoline Leaking into a Natural Spring is Excluded Pollution Post 4842 In Erie Insurance Exchange v. SHRI BRAMANI, LLC; ERIC MOBERLY; KAP LEASING, INC.; KEVIN MOBERLY; MOBERLY BROTHERS PROPERTIES, LLC; AND PRADIPKUMAR PATEL, No. 2023-CA-0169-MR, Court of Appeals of Kentucky (July 19, 2024) the Court of Appeals was asked to reverse a trial court that the insurer's pollution exclusion did not exclude coverage for the negligent leakage of gasoline from one of the insured's underground fuel storage tanks onto the neighboring real property owned by Appellees. BACKGROUND The Policy Erie issued a commercial general liability policy of insurance which covered the premises and the operation of the convenience store and gas station on Lane Allen Road. The policy was in force until June 12, 2020. The policy generally provided coverage for legal liability to third parties arising out of bodily injury, property damage, or personal and advertising injury. As with most policies of insurance, the policy contains several exclusionary clauses including an exclusion of coverage for injuries or damages caused by "pollution." The Gas Leak On or about October 17, 2019, the Kentucky Division of Waste Management ("KDWM") received a telephonic complaint of petroleum odors around the Lane Allen Food Mart. A KDWM official was sent to investigate and noted what appeared to be petroleum leeching through a groundwater spring. Further investigation and testing indicated that the petroleum was coming from one of the Lane Allen Food Mart's underground petroleum storage tanks. Lane Allen Food Mart entered into an Agreed Order with the Energy and Environment Cabinet admitting that it had violated Kentucky Revised Statutes ("KRS") Chapter 224, and the statute's accompanying regulations, as related to its underground petroleum storage tanks. Pursuant to the Agreed Order, Lane Allen Food Mart consented to an assessed penalty of ten thousand dollars for the agreed-upon violations. Post-Leak Events Following discovery of the fuel leak, Moberly Brothers made a claim against Lane Allen Food Mart. Moberly Brothers alleged that the fuel leak caused it to suffer economic harm as a result of widespread, permanent environmental contamination. Specifically, Moberly Brothers asserted that the leaked fuel entered and contaminated a natural water spring located on its property, which rendered the property unfit for the bottled water facility that was planned for the property. Erie denied the claim based on the pollution exclusion contained in the policy. Erie agreed to defend the claim against the Lane Allen Food Mart under a reservation of rights. Subsequently, Erie filed a separate action against its insureds and Moberly Brothers. ANALYSIS Kentucky Courts have always strongly adhered to a policy of protecting the reasonable expectations of policyholders. Although insurance carriers have the right to impose reasonable limitations on their coverage, the question then becomes the reasonableness of the condition as a limitation on public policy as opposed to one of strict contract considerations between private parties where no public interest is involved. Most consumers would recognize that gasoline is a product that becomes a pollutant when it leaks into the ground and contaminates soil and water. Even a valuable and useful product like gasoline can become a pollutant when it contaminates a natural resource. The focus of the inquiry under the absolute pollution exclusion is not on the nature of the substance alone, but on the substance in relation to the property damage or bodily injury. Nature of the Alleged Damage. Where the purported pollutant results in "contamination, negative health or environmental effects," the exclusion is enforceable. Moberly Brothers alleges significant environmental damage to its real property due to the gasoline that leaked from the Lane Allen Food Mart's underground storage tank. Moberly Brothers alleged in its complaint that the petroleum gasoline damaged and contaminated its property and seeks damages to restore and recover the use and value of the property. This is precisely the type of pollution-related damage that falls within the scope of the exclusion. Gasoline is clearly a pollutant when it leaks from an underground storage tank and enters a neighbor's land and contaminates the water and soil thereon. Because the pollution-exclusion clause is unambiguous, the property damages suffered by Moberly Brothers are not covered by Erie's policy of insurance, and the trial court therefore erred in entering a judgment against Erie. The judgment was reversed and remanded for entry of a declaratory judgment in Erie's favor. ZALMA OPINION No insurance policy covers every potential risk of loss. Almost every liability policy has a pollution exclusion. Since gasoline, escaping into the land, is obviously a pollutant and the insured admitted to the pollution, the exclusion applied and the insurer neither owed defense or indemnity to the insureds. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Conviction for Possession of a Stolen Vehicle Post 4840 Go to my sites at https://barryzalma.substack.com/subscribe & https://zalma.com/blog Jennifer L. Martin appealed her possession of a stolen vehicle conviction, arguing that the allowed testimony violated the confrontation clause and the trial court erred in denying her hearsay objection during trial. The State concedes that it failed to prove Martin's criminal history. Martin alleged prosecutorial misconduct and ineffective assistance of counsel. In State Of Washington v. Jennifer Lorriane Martin, No. 57915-4-II, Court of Appeals of Washington, Division 2 (July 9, 2024) the Court of Appeals affirmed her conviction. FACTS Pierce County Sheriff's Department dispatched Deputy Carly Cappetto to investigate the report of a stolen vehicle. The vehicle's owner reported that he spotted the vehicle and followed it to a U-Haul store. Cappetto was nearby and also observed the vehicle pull into the U-Haul store. Cappetto observed Martin get out of the vehicle and walk over to a U-Haul truck. Cappetto approached the vehicle and confirmed that it was the stolen vehicle by checking the vehicle identification number. Martin was aware of Cappetto's presence and kept looking over at her. Cappetto observed Martin get into the U-Haul truck and drive through an alley. Cappetto followed them and waited for backup. The truck stopped at a nearby grocery store and Cappetto observed Martin get out of the truck and go inside the store. A store employee approached the deputies and told them the individual they were looking for was in the restroom and had been in there the whole time. Cappetto located Martin in the restroom and arrested her. The State charged Martin with unlawful possession of a stolen vehicle. THE TRIAL During trial, Cappetto testified to the events that led up to Martin's arrest. When testifying about looking for Martin inside the grocery store, Cappetto stated that a store employee approached the deputies and said, "the female [they] were looking for was located in the bathroom, and she had been in there ever since she came in." Defense counsel objected, stating, "I object to her reporting hearsay from the store clerk that we can't examine." The trial court overruled the objection. The jury found Martin guilty of unlawful possession of a stolen vehicle. SENTENCING At sentencing, the State only summarized Martin's criminal history without providing evidence. Martin conceded that she had a prior felony conviction for escape but argued that it washed out. The trial court concluded that the prior felony did not wash out and calculated her offender score as a one. The court imposed a low-end standard range sentence of two months. The court ordered Martin to pay $500 in restitution to the vehicle's owner for damage to the vehicle. ANALYSIS Confrontation Clause Neither a general objection nor a hearsay objection is enough to apply the Constitutional Right to Confrontation of Witnesses. During trial, Cappetto testified that while looking for Martin inside the store, a store employee approached the deputies. Additionally, Martin raised the issue of confrontation previously in her motion to suppress Wright's statements and in so doing demonstrated awareness of the issue and ability to specifically raise it. Hearsay Martin next contended that the trial court abused its discretion in allowing Cappetto to testify to the grocery store clerk's statement. "Hearsay" is a statement, other than one made by the declarant while testifying at trial, offered in evidence to prove the truth of the matter asserted. Generally, hearsay is not admissible unless an exception applies. An exception for present sense impressions and the declarant's availability is immaterial. A store employee approached the deputies and told them Martin was in the restroom and had been in there since she came in. This statement was made within minutes of the deputies starting their search for Martin and was based on the store employee's observation of what was happening at the grocery store. The contemporaneous and spontaneous nature of the statement, including the timing, nature, and content, reduces the chance of misrepresentation or fabrication by the witness. Therefore, the statement was a present sense impression and an exception to the hearsay rule. We affirm Martin's conviction but accept the State's concession regarding the sentencing error involving proving Martin's criminal history, and remand for resentencing. ZALMA OPINION Criminals, like Ms. Martin, have by definition chutzpah or they wouldn't commit crimes. Ms. Martin caught in the act operating a stolen vehicle when the owner can see her and call in the Sheriff's office to arrest heR is less than an act of a wise person. She was caught in the act, arrested and then had the unmitigated gall to appeal based on non-existent objections and misstatements of the hearsay doctrine. He sentence was kind and a reasonable person, like Martin, with a criminal conviction history, including escape, should have accepted the sentence and left the court to deal with serious crimes, like insurance fraud. (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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Insurance Bad Faith in Disguise Fails Post 4839 Health Care Services Corp. (HCSC) moved to dismiss a suit by an insured because Montana law precludes King's breach of the implied covenant of good faith and fair dealing claim. HCSC also argued that Montana statutory law prohibited King's request for punitive damages and that the request should be stricken. In Justin King v. Health Care Services Corp., No. CV-24-32-GF-BMM, United States District Court, D. Montana, Great Falls Division (July 15, 2024) the USDC resolved the various disputes. FACTUAL BACKGROUND King, a resident of Montana, sued HCSC, a business incorporated in Illinois, for HCSC's alleged breach of contract with its insured King when HCSC denied King's claim for coverage of a back surgery. HCSC insured King under an individual health insurance policy (“the Policy”). King requested pre-approval from HCSC for a two-level lumbar disc arthroplasty (“the surgery”). HCSC denied King's pre-approval request on December 14, 2022, citing to a policy exclusion contained in the Policy. King nevertheless underwent the back surgery on October 12, 2023, at a clinic in Germany. King alleged that the Policy provided coverage for the surgery. DISCUSSION Count I: Breach of Contract HCSC argued that King failed to allege facts sufficient to state a claim for breach of contract for Count I. HCSC contends that King failed to identify the contractual provision that would have required HCSC to cover his requested back surgery. HCSC denied pre-approval for the surgery that King sought on the basis that the surgery was not appropriate, not medically necessary, and experimental. The Food and Drug Administration (FDA) approved the use of a medical device known as the prodisc L for 2-level lumbar disc arthroplasties on April 10, 2020. The FDA concluded that the 2-level lumbar disc arthroplasty was safe and effective for King's condition. Therefore, the complaint provides sufficient language for the Court to draw a reasonable inference that HCSC had breached the Policy. Count II: Breach of Implied Covenant of Good Faith and Fair Dealing HCSC argues that King's claim of breach of the implied covenant of good faith and fair dealing should be dismissed because Montana law precludes the claim. King contended that HCSC misdescribes the cause of action of Count II. The USDC concluded that King's complaint presents an insurance bad faith claim in disguise. King failed to prove the distinction between the breach of the implied covenant claim and a common law bad faith claim.. Punitive Damages HCSC argued that Montana law bars King from including a request for an award of punitive damages in the complaint. King concedes that Montana law bars the inclusion of punitive damages in an initial pleading. The USDC concluded it must dismiss the punitive damages claim in accordance with Mont. Code Ann. § 27-1-221(5). However, King may file to amend the pleading for punitive damages after discovery begins. Accordingly, IT WAS ORDERED that: Defendant's Rule 12(b)(6) Motion to Dismiss is GRANTED in part and DENIED in part. Count II of Plaintiff's complaint (Doc. 1) is DISMISSED. Plaintiff's punitive damages claim is DISMISSED. ZALMA OPINION The State of Montana does not like bad faith and claims seeking punitive damages. The plaintiff - to avoid the requirements of the state - composed its complaint to disguise its bad faith claim as a different type of tort. The attempt failed and the USDC limited the case to the simple breach of contract action and allowed that the plaintiff could amend his complaint to allege bad faith after discovery. When a plaintiff has a winnable breach of contract claim it should do so and give up the attempt to get rich with a bad faith suit. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Insurance Should Never Apply to Indemnify Insured for its Intentional Acts Post 4838 Go to my sites at https://barryzalma.substack.com/subscribe & https://zalma.com/blog Slyvia Melania Tejada de Tapia was injured at work and filed a workers' compensation claim against her employer, 74 Industries, Inc. (74 Industries), which was settled pursuant to an order approving settlement with dismissal under statute called the Section 20 Settlement resulted in the dismissal of plaintiff's workers' compensation claims with prejudice. Workers' Compensation is an exclusive remedy for an employee injured at work without fault. In Sylvia Melania Tejada De Tapia v. 74 Industries, Inc. and Velcro USA, Inc., et al. v. New Jersey Manufacturers Insurance Company, No. A-2643-21, Superior Court of New Jersey, Appellate Division (July 12, 2024) the Appellate Division explained why workers' compensation has no effect on tort law. FACTS Plaintiff suffered an injury after she was bitten or stung by an insect during the course of her employment as a sewing machine operator with 74 Industries. According to plaintiff, insects routinely infested the packages of fabric and materials that employees handled and frequently bit and stung employees. Plaintiff was hospitalized for treatment related to the infection she suffered as a result of the insect bite. The infection caused her right leg to swell and form green open sores. New Jersey Manufacturers Insurance Company's (NJM) had issued a standard workers' compensation insurance policy (the Policy) to 74 Industries and recommended settlement of plaintiff's workers' compensation claim. Prior to the settlement, however, plaintiff had also filed a complaint in the Law Division alleging intentional torts against 74 Industries. 74 Industries filed a third-party complaint against NJM seeking coverage under the Policy for plaintiff's claims of intentional wrong asserted against 74 Industries. NJM denied coverage citing policy exclusions for intentional torts and moved to dismiss 74 Industries's third-party complaint. The Law Division judge granted NJM's motion to dismiss 74 Industries's third-party complaint for failure to state a claim. NJM defended 74 Industries in workers' compensation court and eventually recommended 74 Industries settle plaintiff's case for a lump sum payment of $25,000 by way of an order approving settlement with dismissal. Prior to the entry of the Section 20 settlement, however, plaintiff had filed an action in the Law Division alleging her injuries were caused by 74 Industries's intentional misconduct under the principles explained by the Court in Laidlow v. Hariton Mach. Co., 170 N.J. 602, 14 (2002). Plaintiff had filed a series of amended complaints, each of which included the same four counts against 74 Industries. The court further found that plaintiff's allegations fell squarely within the Policy's C5 exclusion for "intentional wrongs" and rejected 74 Industries's contention the Policy was ambiguous because the C7 exclusion and C7 endorsement provided coverage for "bodily injuries" under Part Two of the Policy. DISCUSSION The interpretation of an insurance policy, like any contract, is a question of law. In attempting to discern the meaning of a provision in an insurance contract, the plain language is ordinarily the most direct route. The plain and unambiguous language in the C5 endorsement clearly covers plaintiff's intentional tort claims that result from a subjective intent to injure and those that are substantially certain to have caused injury. As the motion court acknowledged, plaintiff asserts that she was threatened with adverse employment action if she left the jobsite for medical treatment, which based on a fair reading of the complaint suggests a cause of action for coercion. Defendant's claim that it is entitled to coverage under the C7 exclusion fails because plaintiff's causes of action are founded on intentional wrongs. Lastly, the Appellate Division rejected 74 Industries's argument that public policy supports coverage for intentional wrongs as New Jersey courts have consistently held that exclusions for intentional wrongs contained in insurance policies are legally valid. Therefore there was no basis to support 74 Industries's argument that public policy favors coverage for plaintiff's intentional wrongs filed in Law Division. Therefore the court could discern no basis to conclude NJM had a duty to defend or indemnify 74 Industries against plaintiff's intentional wrong claims made in the Law Division fourth-amended complaint. ZALMA OPINION Insurance, by definition, only insures against fortuitous conduct, an accident. Intentional acts, like those pleaded by Ms. Tejada de Tapia are not fortuitous but intentional and not insurable. The insurer, to be safe, added an exclusion for intentional acts which made clear its position and the requirement of fortuity. (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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Discovery in Suits Against Insurers are Aggressive and Expensive Post 4837 The USDC conducted a discovery conference with the parties concerning their discovery disputes. Federal The discovery rules are accorded a broad and liberal treatment to achieve their purpose of adequately informing litigants in civil trials. At some point discovery yields diminishing returns, needlessly increases expenses, and delays the resolution of the parties' dispute. Finding a just and appropriate balance in the discovery process is one of the key responsibilities of the Court. In Kwame Moore v. Western World Insurance Company, Civil Action No. 3:23-cv-3029-KHJ-MTP, United States District Court, S.D. Mississippi, Northern Division (July 12, 2024) the USDC dealt with discovery disputes between parties who could not resolve their differences. THE DISCOVERY RULE Federal Rule of Civil Procedure 26(b)(1) provides that: “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefits.” FACTUAL BACKGROUND According to Defendant, “Plaintiff has failed to produce emails, text messages and other documents which Western World knows were sent to Plaintiff.” As an example, Defendant stated that in response to a subpoena, Tom Weems (a third party who provided a report to Plaintiff indicating that hail caused damage to Plaintiff's building) produced text messages between he and Plaintiff, which have not been produced by Plaintiff in response to requests for such information. Plaintiff, through counsel, asserts that he has “conducted a search of his files and has no other documents to produce” and “cannot produce documents he does not have.” Ordinarily, the representation of a party's attorney that no additional documents exist is sufficient to defeat a motion to compel absent credible evidence that the representation is inaccurate. At this time the record does not establish that Plaintiff did or did not conduct a reasonable search. Plaintiff does not explain what efforts he made to find and produce responsive information or why responsive information he once possessed is no longer in his possession. Defendant has also not made this showing. Thus, Defendant has not demonstrated that Plaintiff is unlawfully withholding responsive information despite Plaintiff's representations. Without more, counsel's representation that Plaintiff does not possess responsive information is sufficient to defeat the Motion to Compel. The denial of the Motion to Compel, however, was issued without prejudice to Defendant's right to reassert it if Defendant can show Plaintiff possesses the information, failed to conduct a reasonable search, wrongfully disposed of the information, or otherwise violated his duties in discovery. Defendant also requested that the Court compel a forensic examination of Plaintiff's computers, cellphones, and mail servers. The Court found that the request is premature. If Plaintiff no longer possesses this information, the Court cannot determine whether a forensic examination is warranted. Thus, this request was denied without prejudice. The Court also noted that Plaintiff also argued that he should not be required to produce duplicative documents which are already in Western World's possession. However, it is not a bar to the discovery of relevant material that the same material may be in the possession of the requesting party or obtainable from another source. That Plaintiff makes this objection is curious given Plaintiff's representations that he has no such information, duplicative or otherwise. To the extent Plaintiff is withholding responsive information based on this or any other objection, the Court grants the Motion to Compel. On or before July 22, 2024, Plaintiff shall produce any responsive information previously withheld based on this objection or inform Defendant in writing that he is not withholding information based on this objection. ZALMA OPINION Before I retired from the practice of law I was an active insurance litigator and dealt with multiple annoying and overbroad discovery disputes designed to cost the insurer rather than obtain information that would assist in the trial of the matter. The bludgeon of discovery became a weapon used to force a settlement unfavorable to the insurer to avoid excessive attorneys fees and costs. The court tried to calm the excesses. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Roof Damage Insurance Disputes Resolved Post 4836

Victory Against Insurers Is Not Always Available Post 4835 Many people and their lawyers believe that suing an insurance company that denies a claim is a guaranteed multi-million dollar successful lawsuit. However, courts don't believe in such a certainty and require the litigants to promptly file their suit and allege facts that they can prove that supports their claims. In Azam Ahmed, individually and on behalf of all others similarly situated v. Cigna Health Management, Inc. et al., No. 23-cv-8094 (AS), United States District Court, S.D. New York (July 8, 2024) the USDC applied the rule of law instead of the hoped for certainty of always profiting from a suit against an insurer. FACTS Azam Ahmed claimed that Defendants Wellfleet Insurance, Wellfleet New York Insurance Company, and CIGNA Management, Inc. refused to cover medically necessary procedures in contravention of his health-insurance policy. Ahmed's breach-of-contract and insurance-law claims came years too late, and his attempt to recharacterize his contract claim as one for fraud or unjust enrichment failed. BACKGROUND In August 2016, Azam Ahmed enrolled in New York University's student health-insurance plan. The plan was issued by what is now Wellfleet New York Insurance Company and administered by what is now Wellfleet Insurance (together, “Wellfleet”). Years earlier, Ahmed had been diagnosed with a congenital birth defect, resulting in skeletal abnormalities and symptoms like headaches and joint pain. He also suffered from facial asymmetry, as well as issues with chewing, articulation, breathing, and jaw locking. In May 2017, Ahmed had surgery to address his symptoms. His preauthorization request was approved by Wellfleet via a third-party vendor that had been hired by Wellfleet to perform medical-necessity reviews. The surgery, though partially successful, did not fully resolve his symptoms, and seven months later, Ahmed's surgeons determined that a second surgery was necessary to further remedy his skeletal deformity and ongoing pain and breathing problems. Ahmed sent a preauthorization request for the second surgery to Wellfleet, which was reviewed by CIGNA Management, Inc. (Cigna) who rejected the request. Ahmed also alleged that Cigna was unjustly enriched by receiving from Wellfleet a portion of the insurance premiums paid by Ahmed while intentionally and systematically denying coverage of medically necessary services and procedures in contravention of the insurance contract under which he was due benefits. Ahmed also sought to represent a class of others whose preauthorization requests were denied. Wellfleet and Cigna moved to dismiss. DISCUSSION Ahmed brings claims for breach of contract, violation of N.Y. Insurance Law § 4226, fraud, and unjust enrichment. But the first two claims come too late, and Ahmed's factual allegations are a poor fit for the latter two. Ahmed's breach-of-contract and insurance-law claims are time-barred. Ahmed sues Wellfleet for both breach of contract and violation of N.Y. Insurance law § 4226. Both claims are time-barred. Ahmed's contract claim is time-barred because the policy imposes a three-year time limit, meaning that Ahmed brought it two years too late. FRAUD CLAIMS Just as with the contract claim, Ahmed fails to plausibly allege fraudulent concealment. He had Wellfleet's reasons for the denial, and the policy that serves as the basis for his claim. More than three years have passed since all of that. So, like Ahmed's contract claim, his § 4226 claim must be dismissed as untimely. Ahmed's Fraud Claims Must Be Dismissed. A fraud claim will not lie if it arises out of the same facts as plaintiff's breach of contract claim. First, Ahmed fails to identify any duties that are “separate” from the duty of performance. Ahmed appears to argue that the “special facts” doctrine imposed a duty on Defendants to disclose their intention to breach the contract. But this argument fails for multiple reasons. To start, the doctrine usually applies in the context of business negotiations where parties are entering a contract. Second, even if it does, Ahmed does not identify any fact that Defendants failed to disclose. Ahmed's Unjust-Enrichment Claim Must Be Dismissed. Finally, Ahmed's unjust enrichment claim against Cigna must also be dismissed. Cigna argues that this claim must be dismissed because, among other reasons, it concerns the subject matter of a valid and enforceable contract. The existence of a contract precludes Ahmed's unjust-enrichment claim. Here, by contrast, the dispute derives from conduct “in contravention of the insurance contract by a party that was acting as a subcontractor to the counterparty to the contract. The dispute arises from the actual breach of contract that Cigna allegedly facilitated. Ahmed's fraud claim is defective because intention to breach is not the kind of fact required to be disclosed under the special facts doctrine. In addition, Ahmed fails to allege that he had any relationship with Cigna prior to the denials, making it unclear whether the special-facts doctrine even applies. Ahmed initially brought this case thinking that Defendants used an algorithm to deny his preauthorization request. His claims are either untimely or are a poor fit for the doctrine he tries to cram them into. As such, Defendants' motions to dismiss were granted with prejudice. Defendants' motion to strike the class allegations was denied as moot. ZALMA OPINION Waiting more than three years to sue was fatal to almost all of Ahmed's claims. His attempt to avoid the limitation of action by claiming fraud was imaginative but unsuccessful because none of the elements of the tort of fraud applied. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

False Swearing & Fraud in Claim Presentation Voids Policy NEVER LIE TO YOUR INSURER ABOUT THE EXTENT OF DAMAGE Post 4833 An insurance coverage dispute that arose from a pipe burst in the historic Pittsfield Building in downtown Chicago. On December 17, 2016, two pipes burst on the tenth floor of the Pittsfield Building, causing water damage to the first ten floors. After the loss event, the Pittsfield Entities filed a claim for the damage with their insurer, The Travelers Indemnity Company (“Travelers”) and could not agree on the extent of damage. In Pittsfield Development LLC, et al. v. The Travelers Indemnity Company, No. 18CV06576, United States District Court, N.D. Illinois (July 3, 2024) the USDC resolved the action and Travelers' claim of fraud in the claim presentation discovered during discovery in the plaintiffs' breach of contract suit. After initial motion practice and discovery, Travelers amended it answer to assert a counterclaim for breach of contract. Travelers asserted that the Pittsfield Entities intentionally misrepresented their alleged damages by more than $1.1 million, and that the misrepresentation renders the policy void. BACKGROUND At all relevant times, Robert Danial acted as the sole managing member of the Pittsfield Entities with authority to direct the activities of all three entities. The Policy contains the the standard Concealment, Misrepresentation, or Fraud condition that declares the policy void if established. The Water Loss Event and the Pittsfield Entities' Insurance Claim The Pittsfield Entities hired Joseph Sabbagh, a licensed public adjuster to assist the Pittsfield Entities with submitting their claim and preparing their own estimate. Sabbagh inspected the damage at the Pittsfield Building on June 12, 2017, spending about five hours at the property, and then used a computer program called “Xactimate” to draft an estimate. Sabbagh estimated the total ACV of the repair and replacement work caused by the water damage at $8,593,200.40. Sabbagh's estimate included as a line-item a “Bid Item from Bluestone Environmental” for “Lead Paint & Asbestos Removal.” Travelers estimated the total loss as a result of the water damage at $401,537.95. After accounting for the $100,000.00 deductible, Travelers ultimately made payments on the claim totaling $301,537.95. Travelers' Counterclaim and the Disputed Bluestone Environmental Bid In the Complaint, the Pittsfield Entities alleged that Travelers failed to pay the actual total amount of damages owed under the Policy for the water-loss event, which they contend was $8,592,961.40. The plaintiffs' pleading notably includes Sabbagh's estimate as an attached exhibit. Danial testified that Sabbagh's estimate formed the basis of the Pittsfield Entities claim for damages and that he believed it accurately stated the amount they were owed under the Policy, less anything that Travelers had already paid. Travelers also deposed Sabbagh who testified that this was an oral estimate received over the phone from an employee of Bluestone Environmental, later identified as Tonia Williams. Deposition testimony and declarations from Bluestone Environmental employee Tonia Williams, as well as Bluestone Environmental's president and owner David O'Dea stated that while ballpark or rough estimates were occasionally given verbally, she had “not heard of” a verbal estimate ever being given for $950,000, and that the largest over the phone estimate she could recall was in the $20,000-$25,000 range. It was undisputed that Bluestone has no written record of ever providing a quote, bid, or estimate, written or oral, for the Pittsfield Building. Sabbagh testified that, if the Pittsfield Entities had asked him whether to attach his estimate to their complaint to prove their damages, he would have told them to get a second opinion. The Pittsfield Entities disclosed Stephen Harmon,was submitted as an expert on damages. Harmon based his opinions on his review of Sabbagh's estimate, conversations with Sabbagh and Pittsfield, and his review of photographs and other documentary evidence of the damage. Although Harmon could not recall the details of the bid item in his deposition, he reaffirmed that he “looked it over,” and that, in his opinion, the Pittsfield Entities were owed $1,235,000 by Travelers for that line item. DISCUSSION Travelers' counterclaim for breach of the insurance Policy is governed by the same general standards applicable to any claim for breach of contract under Illinois law. The phrase “intentional misrepresentation of material fact” does not incorporate the elements of common-law fraud and does not require a showing of such things as reliance or prejudice. Instead, all that matters is whether the misrepresentation was calculated to discourage, mislead or deflect the insurer's investigation on a topic on which a reasonable insurer would undeniably attach importance. The Pittsfield Entities Intentionally Misrepresented Their Damages The Court concluded that the Pittsfield Entities did in fact make an intentional and material misrepresentation as a matter of law. The Pittsfield Entities' repeated reliance on that figure as part of their overall damages was a material misrepresentation about their claim. The $950,000 oral estimate from Bluestone Environmental was not an actual bid or proposal for work that needed to be done in connection with the water loss event. Critically, when asked for their “proof” of that figure, the Pittsfield Entities claimed that they “have a proposal from a contractor that says it.” Danial's statement that the Pittsfield Entities “had a proposal” substantiating that they were owed $1,140,000 is simply false. The Pittsfield Entities misrepresented their damages by boldly and repeatedly asserting that they were entitled to $1,140,000 under the Policy for asbestos removal. The Pittsfield Entities' use of this illusory figure to misrepresent their damages did not stop there. Harmon's statements are deeply misleading. The obvious implication from the contention that he “reviewed the estimate” is that there was some written estimate or proposal for asbestos removal work to review. But there was not, because the estimate, if given at all, was given orally. This testimony that the figure reflects necessary work is simply false. In sum, the Court found the Pittsfield Entities misrepresented their damages by claiming they were owed $1,140,000.00 under the Policy for asbestos abatement as a result of the water loss event in December 2016. An insured that willfully makes false statements about their loss with the intent to deceive the insurer is not entitled to recover any amount under their policy. The Pittsfield Entities simply had no basis to cite the Bluestone Environmental “quote” as proof that they were entitled to payment of over $1 million for asbestos removal based on the water damage. The only conclusion that can be drawn from the Pittsfield Entities' repeated presentation of this hypothetical quote as proof of their damages, despite the fact that it had no factual connection to work that actually had to be done, is that the Pittsfield Entities submitted that false number with the intent of deceiving or misleading Travelers into paying that amount. The USDC concluded that all Plaintiff had as proof of their claim was an illusory estimate that they never bothered to verify. Travelers' motion for summary judgment was granted in full and the Pittsfield Entities' motions were denied. The Court concluded that the Pittsfield Entities violated the terms of the insurance policy by materially misrepresenting the extent of their damages. Travelers was entitled to summary judgment in its favor on its counterclaim as a matter of law, which also requires judgment in favor of Travelers. Travelers was awarded damages in the amount of $301,537.95, plus interest and costs. ZALMA OPINION Every lawyer learns that clients sometimes, if not often, lie to their lawyer. When a lie is established a lawyer has two choices, withdraw as counsel or amend the litigation to fit the real facts. After the testimony of Bluestone, Sabbagh and Harmon is should have been clear to Plaintiffs' counsel that there was no estimate for removal of asbestos and lead and the plaintiff could not prove a right to that money. Instead, they insisted on an entitlement to the imaginary and unprovable loss and continued pursuing its demands which were fraudulent when first presented to Travelers and continued with two "experts" presented to prove the amount of loss and the testimony of the Insured Danial. The court had no choice but to find that the Plaintiffs submitted a fraudulent claim for more than a million dollars based on a short phone call that was neither a bid nor evidence of damage. You can find a permanent public version of the document here: https://public.fastcase.com/H1P9uiW3J20SFp%2bGCG%2bxLfZG6JhN6pf%2foW3GKQEdmHxyncoYbpeciHUq9Jt5Y5lJb41MjTcv7zX0%2fFc8dtgVOA%3d%3d (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

The Phantom Rolls Royce Post 4832 This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime. In many states, before a car can be insured, the agent must photograph the car and its vehicle identification number. This regulation is an effective weapon against fraudulent auto theft claims and some states has been removed. THE INSURED The insured managed to purchase material damage insurance on a Rolls Royce in a state where the regulation was fully effective even though he never owned a Rolls Royce automobile. His technique was flawless. His planning immaculate. He was only thwarted in his efforts because of the actions of a dedicated and thorough investigator. To start his plan, the insured went to a Beverly Hills classic automobile dealer and took two Polaroid photographs (slightly out of focus) of a 1946 Rolls Royce. Unlike modern cars, the vehicle identification number was not in the windshield of the Rolls. It was, however, written on the specification sheet provided to him by the dealer. The insured next began the effort to create an artificial 1946 Rolls Royce. First, he visited the California Department of Motor Vehicles. He obtained from the department forms for the issuance of replacement title and registration documents. He filled the documents out using a vehicle identification number similar to the one in the showroom, but 2000 digits higher. He also filled out a sworn declaration of lost title and signed it with the name John Jones, vice president, Lincoln Savings & Loan, the lender. The Department of Motor Vehicles processed his application for lost title and registration without inquiry. A new ownership certificate showing ownership in Lincoln Savings & Loan was then issued and delivered to the insured’s post office box. The insured then filled out a Department of Motor Vehicles bill of sale, reflecting that the Rolls Royce was sold by Lincoln Savings & Loan to his neighbor for a total of $5,500.00. The Department of Motor Vehicles billed the neighbor for license plates and registration based on the value of the sale. The insured captured the mail before it was delivered to the neighbor and paid the bill with a post office issued money order. The insured then forged the signature of his neighbor on the ownership certificate transferring title to himself. A new bill of sale was again recorded, reflecting a purchase price of $45,600.00 by the insured from his neighbor. He then paid the license fees and requested plates and a certificate claiming the old license plates had been lost or stolen. At his local public library, the insured read through a classic car magazine and found that 1946 Rolls Royces in fair condition were selling for approximately $100,000. He also learned that the Classic Car Insurance Company was willing to insure classic cars (with limited use) by mail. He photocopied the application for insurance at the library photocopy machine and applied for a $100,000 policy on his 1946 Rolls Royce. The Insured attached to the application one of the Polaroid photographs he had taken at the dealership. THE INVESTIGATION Classic Car Insurance Company, taking his application on face value, issued the policy. Since the Insured advised Classic Car Insurance Company that the car was only to be driven 1,000 or less miles a year, the premium on the policy, including third party liability coverage, was less than $1,000. The insured financed the premium with a local insurance financing company and only had to make a $200 down payment. His first payment was due thirty (30) days later. Two days before the payment was due, the insured telephoned the Los Angeles County Sheriff from a Denny’s restaurant in Lakewood, California and reported his Rolls Royce stolen. He told the police he had taken it to the restaurant for lunch and when he returned it was gone. The police dutifully took down the report and began looking for the 1946 Phantom Rolls Royce. The insured made a report to Classic Car Insurance Company and immediately, in response to its request, submitted a sworn declaration of auto total theft making claim for $100,000. Classic Car Insurance Company, as required by California law, maintains a special investigation unit. When the report came in a computer search was performed. The search revealed that other claims payments and a three-year-old theft loss of a classic Mercedes Benz was reported by a person with the same last name as the insured. The old file was taken out of archives and it was determined that the vehicle was owned by the insured’s mother, but was being driven by him when it was stolen from a restaurant parking lot. The Classic Car Insurance Company had paid the insured’s mother $75,000 for the loss of her Mercedes. The coincidence was too great to ignore. The investigator began to do the work he was trained to do. He first checked the database maintained by the National Insurance Crime Prevention Bureau (NICB) and learned the following: The insured has been the reported victim of two automobile accidents and a residential burglary not reported on the application for insurance. The insured had been convicted, at age 19, of four counts of forgery of checks causing a bank to lose over a million dollars. He had been sentenced to ninety days in jail and five years of probation for this offense. The Rolls Royce Motor Company publishes a book of all vehicles manufactured by it with their vehicle identification numbers. The VIN number of the insured’s Rolls Royce was not in the book. The investigator then obtained from the Department of Motor Vehicles all of the original sales documents and was surprised to learn that the vehicle Classic Car Insurance Company had insured for $100,000 was reported by the insured to have been purchased for $5,600. Counsel was retained to represent Classic Car Insurance Company and to examine the insured under oath. At examination under oath, the insured proved himself to be a facile liar. His skill at lying under oath was no match for the facts counsel had from the SIU investigator. Counsel lead the insured down a path of lies. The insured claimed to have purchased the vehicle for $100,000 cash which he obtained from his business, an escort service. He explained he kept the cash at home because it was earnings he did not wish recorded in a bank account. He produced a bill of sale purportedly signed by the neighbor reflecting a $100,000 sale. The insured produced the ownership certificate and the registration establishing the vehicle existed. He claimed to have forgotten to bring with him the keys to the vehicle. Counsel then presented the true documents, item by item. The insured claimed that the documents recorded at the Department of Motor Vehicles were filed by the seller and he had no knowledge of the changes made by the seller. In fact, he could not understand why the seller had filed such strange documents. After counsel had established, with certainly in counsel’s mind, that the insured had sworn falsely, the examination under oath was terminated. Counsel met with the attorney for the insured, privately, and explained that the insured’s claim was in great peril. The attorney for the insured responded: “The bad faith lawsuit I told you to expect will not be filed by me.” The insured had made one serious error: he hired an honest lawyer. His lawyer and counsel for the Classic Car Insurance Company discussed possible resolution of the matter, including the withdrawal of the claim or a mutual rescission of the policy. Counsel for the insured promised to speak with his client and communicate with the insurer. The next day, the insured’s lawyer called counsel for the insurer and said: “I have conferred with my client who recognizes that his title to the Rolls is not clear. He instructed me to advise you that he is withdrawing his claim.” “I recognize that your client has a duty to report potential fraudulent claims to the State Bureau of Fraudulent Claims. We request that you do no more than you are required by law to do.” Classic Car Insurance Company saved a $100,000 claim. It spent $30,000 investigating the claim and defeating it. It was lucky. No litigation followed. It reported the loss to the state’s Fraud Bureau who now has the insured’s name on record. There has been no prosecution. No prosecution is anticipated or expected. The Fraud Bureau is simply inundated with fraudulent insurance claims and must limit its prosecutorial efforts to major crimes that exceed $1,000,000 or rings of insurance fraud perpetrators who file multiple claims. ZALMA OPINION Insurance fraud is estimated by the Coalition Against Insurance Fraud to take about $308 Billion from the insurance industry every year. That estimate is a small percentage of real insurance fraud since most fraud succeeds and like this Rolls Royce claim, are never counted as a fraud regardless how much it cost to defeat the fraud. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk The Phantom Rolls Royce Post 4832

No Right to Rescind Workers' Compensation in Mississippi Post 4831 The Supreme Court of Mississippi answered in the negative the inquiry from the United States Court of Appeals for the Fifth Circuit that certified the following question to this Court: “Does the Mississippi Workers' Compensation Act (MWCA) allow an insurer to void ab initio a workers' compensation policy based on a material misrepresentation?” The decision came in American Compensation Insurance Company v. Hector Ruiz et al, No. 2023-FC-01160-SCT, Supreme Court of Mississippi (June 27, 2024) the Supreme Court answered the question in the negative. THE WORKERS' COMPENSATION STATUTE The MWCA is silent with regard to the equitable remedy of rescission as are most statutes that have no reason for a statute to deal with equitable remedies. The statutory contractor (who will be on the hook if the subcontractor's insurer is permitted to void the policy) argued that, because the MWCA does not provide for rescission-only cancellation and nonrenewal - then rescission is not an available remedy. The insurer (who will be on the hook for millions of dollars if not permitted to void the policy) argued that, because the legislature opted not to address rescission in the MWCA, reasonably argued that the common law remedy of voiding the policy ab initio is available. The Mississippi Supreme Court noted that a workers' compensation policy is different. Not only is it governed exclusively by statute, but also it exists to pay benefits to the injured worker. Because the MWCA makes no provision for an insurer to void a workers' compensation policy based on a material misrepresentation and because the MWCA exists to ensure injured workers are compensated, the Supreme Court concluded that the MWCA does not allow insurers to void ab initio a workers' compensation policy based on an employer's material misrepresentation. BACKGROUND FACTS The employer is Hector Ruiz, doing business as Los Primoz Construction. Ruiz was performing work as a subcontractor for contractor Jesco, Incorporated, when his employee Raul Aparacio fell more than fifteen feet and severely injured himself. Ruiz had a workers' compensation insurance policy with the American Compensation Insurance Company (ACIC). ACIC initiated a declaratory action in federal court seeking to retroactively void the policy. ACIC alleged that Ruiz materially misrepresented in his application that his company did not perform work more than fifteen feet above ground. ACIC asserted that, had Ruiz been truthful, ACIC would not have issued the policy. It argued that since the statute did not change the common law right to rescind a contract it was entitled to rescind. The Mississippi Workers' Compensation Act (MWCA) Controls The Mississippi Workers' Compensation Act (MWCA) represents a wide departure from common law by providing compensation to employees accidentally injured during the course and scope of their employment, regardless of fault. This right to recovery comes at the exchange or abrogation of the common law right to recovery from a potentially negligent employer. RESCISSION IS INCONSISTENT WITH THE STATUTE Rescission is a retroactive remedy and renders a contract unenforceable from the outset. In the workers' compensation context, however, the Supreme Court found that allowing rescission is tantamount to allowing an insurer to retroactively cancel a policy rather than the common understanding that a rescinded policy never existed. The Supreme Court concluded that in Mississippi, voiding the policy ab initio is inconsistent with the "purpose" of Section 71-3-77(1)-which is to provide assurance to the commission that eligible employees are protected under the act. Finding the MWCA precludes a common law rescission action, the Supreme Court does not hold that an insurer like ACIC has no remedy against an employer who allegedly makes a material misrepresentation. The sole question is whether the MWCA permits the remedy of voiding a policy ab initio based on an employer's material misrepresentation. And to this question, the Supreme Court answered "no," it does not. COLEMAN, JUSTICE, DISSENTING: Justice Coleman noted that Mississippi has recognized and followed a robust common-law of contracts since well before the State adopted its Workers Compensation Law in 1948 and there is nothing in the Workers' Compensation Law generally, and nothing in Section 71-3-77 specifically, that abrogates the common law of contracts principle that a contract based on a material misrepresentation is void ab initio. Justice Coleman disagreed with the majority's holding and answer to the Fifth Circuit's question because, according to well-settled law, a clear statement of intent, not silence, is required to abrogate the common law. ZALMA OPINION Mississippi, like almost every state, applies the common law and its equitable remedies. One of those remedies is called rescission that finds it is unfair to require a person to fulfill the terms of a contract that is obtained as a result of a misrepresentation or concealment of facts material to the acceptance of the contract and treats such contracts as if they never existed. That common law right can only, in my opinion, be eliminated by a direct and specific action of the Legislature. By allowing rescission, the employer instead of the insurer must pay for the workers' compensation benefits owed to the injured employee, and allowing rescission might deprive that employee of the benefits does not support forcing the insurer to pay millions of dollars of benefits it would not have owed had the insured been truthful. I understand why the court did what it did but believe Justice Coleman was more in line with the law since the Legislature could have included in the statute the elimination of the right to rescission. It did not. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

D & O Policy Professional Services Exclusion Post 4830 In Practice Fusion, Inc. v. Freedom Specialty Insurance Company et al., A167130, A167886, California Court of Appeals, First District, Second Division (June 21, 2024) FACTUAL BACKGROUND An electronic health record is an electronic version of a patient's medical history as maintained by a healthcare provider. The California Court of Appeals was asked to resolve a dispute over the applicability of professional services coverage exclusions in directors and officers liability insurance policies. The policies were issued to Practice Fusion, Inc., a company that develops and licenses electronic health record software for use by healthcare providers. Following investigations by the United States Department of Justice, Practice Fusion entered into a civil settlement with the United States that resolved two distinct sets of claims that alleged that Practice Fusion violated the federal Anti-Kickback Statute. Further, although the alerts appeared to healthcare providers as unbiased medical information, in some instances they were designed to encourage healthcare providers to prescribe a specific product or class of products to the benefit of the sponsoring pharmaceutical company. Practice Fusion sought insurance coverage for the civil settlement under its directors and officers liability insurance policies. The insurers denied coverage on the ground that the policies' professional services exclusions applied to the losses. Practice Fusion then sued the insurers for breach of contract. The trial court granted the insurers' motion for summary adjudication because the claims arose from Practice Fusion providing professional services to the pharmaceutical companies and its claim was barred by the professional services exclusion in the policies. The Settlement Between the United States Department of Justice and Practice Fusion In January 2020, Practice Fusion agreed to pay $118,642,000 plus interest to the United States and participating states to resolve claims arising from investigations relating to Practice Fusion's electronic health record software. Practice Fusion's Insurance Coverage Several insurers relevant to the CDS claims insured Practice Fusion under primary or excess directors and officers (D&O) liability insurance policies. The policies in an "insurance tower" provided a total of $50 million in coverage. All policies contained an exclusion that applies to all "Insureds" and bars coverage for "Loss in connection with any Claim made against any Insured . . . alleging, arising out of, based upon or attributable to an Insured's performance of or failure to perform professional services for others, or any act(s), error(s) or omission(s) relating thereto; ...." DISCUSSION At issue in this case are exclusions that apply to losses connected to claims arising from "professional services for others." The loss claimed by Practice Fusion as a result of its settlement with the United States as to the CDS alerts falls within the provisions in Practice Fusion's D&O policies exclude coverage for claims arising out of, based upon or attributable to an Insured's performance of professional services for others, or any act(s), error(s) or omission(s) relating thereto. Practice Fusion conceded it agreed to modify its software to include the CDS alerts, which were targeted for particular patients with particular conditions based on selected guidelines. The contracts between Practice Fusion and the pharmaceutical companies are premised upon Practice Fusion providing the companies with professional services. The Court of Appeals concluded that the CDS claims, which Practice Fusion settled, are claims that meet the terms of the exclusion. Accordingly, the loss connected to the settlement of the DOJ's claims regarding the CDS alerts was barred by the professional services exclusion. The contracts included as a major objective for Practice Fusion to provide the companies with services by deploying CDS alerts in its software and by "arranging for or recommending" that healthcare providers prescribe their products. ZALMA OPINION Health insurance fraud is rampant. If you read Zalma's Insurance Fraud Letter you will see dozens of convictions for fraud on government funded health care programs and multiple civil settlements like that reached with Practice Fusion. It would be ridiculous to allow a person or entity to insure for its fraudulent conduct and payment to avoid criminal prosecution. To do so would avoid the purpose of the kickback statutes and the crime that Practice Fusion avoided by agreeing to pay the Government and eliminate the fact that D&O insurance was designed to protect against fortuitous losses not intentional criminal conduct. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Insurer Sues Fraud Perpetrators to Defeat Fraudulent Claim only to Find They Did Not Respond Post 4829

Criminal Investigation of Insurance Fraud Without Indictment Not Grounds for Stay of Civil Action Post 4828 Defendant Kith Furniture, LLC's moved to stay the proceedings brought by Liberty Mutual in Liberty Mutual Fire Insurance Company v. Kith Furniture, LLC, No. 6:23-cv-01130-LSC, United States District Court, N.D. Alabama, Jasper Division (July 1, 2024) and the District Court resolved the dispute. BACKGROUND Kith's furniture plant and inventory were allegedly damaged in a tornado. While investigating Kith's insurance claim, Plaintiff Liberty Mutual Fire Insurance Company learned information that called Kith's claim into question and warranted further investigation. Kith insisted that Liberty continue making payments under the policy “during the pendency of this investigation.” Liberty sued seeking a declaration that it need not continue making payments until it concludes its investigation. Simultaneously the Alabama Department of Insurance, Fraud Bureau opened an investigation into Kith's insurance claim. Liberty amended its complaint to add a new claim alleging fraud and Liberty alleged that Kith employees “intentionally damaged” “almost $500,000 worth” of “furniture that [Kith] could no longer sell to make it look like it had been damaged in the tornado.” Kith asked the Court to stay all proceedings in this action pending the Alabama Department of Insurance's criminal investigation. DISCUSSION Kith contended that it will be substantially prejudiced by having to defend itself in this action while simultaneously facing a parallel criminal investigation. Liberty countered that, if this Court stays this action, Liberty will be substantially prejudiced by the very real risk that evidence would be lost and memories would fade. This Case Significantly Overlaps The Related Criminal Investigation. The Alabama Department of Insurance opened its criminal investigation on the very insurance claim at issue here. Kith asserted that the investigation and this case “involve the same legal theories and alleged conduct by Kith,” and are “practically identical.” Liberty dismissed Kith's assertions as “entirely speculative,” emails exchanged between Liberty and a criminal investigator tend to corroborate Kith's assertions. Kith Has No Fifth Amendment Rights. The Fifth Amendment privilege against self-incrimination does not extend to non-natural entities. Courts routinely hold parallel criminal proceedings and do not entitle corporate defendants to a stay of civil proceedings. There Are No Pending Criminal Proceedings. Among Liberty's attempts to distinguish this case from those cited by Kith, one fact stands out: here, there are no pending or imminent criminal proceedings. The record does not indicate that anyone has been indicted, charged, or arrested for any crime related to this insurance dispute. The lack of pending or imminent criminal proceedings makes any potential avoidance of prejudice to Kith or any potential conservation of judicial resources by granting a stay entirely speculative. Liberty Faces Potential Prejudice From Delayed Proceedings. Liberty argued that staying this case would be putting Liberty's civil action on the shelf to grow cold without the benefit of a criminal prosecution against Kith. Although Alabama's ongoing investigation somewhat mitigates the risk that evidence will be lost and memories will fade, the current absence of any arrests or criminal charges failed to assure the Court that Alabama's investigation will be sufficiently “brief” and “exhaustive” to shield Liberty from all prejudice. This factor weighs heavily in Liberty's favor. Therefore, Defendant Kith Furniture, LLC's motion to stay proceedings was denied. ZALMA OPINION Liberty found evidence of fraud and needed to move forward with its action before evidence became lost or forgotten. A criminal investigation without an arrest or indictment is nothing more than that: an investigation. There was no reason for a stay of the civil action. My experience makes clear that state investigations into insurance fraud seldom result in arrest or trial while a civil action asserting fraud can be brought to trial quickly without the need a criminal investigation has to prove the fraud beyond a reasonable doubt. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Rescission Appropriate When Insured Lies on Application Post 4827 Progressive Michigan Insurance Company (Progressive) appealed the order denying its motion for summary disposition and ordering reformation of plaintiff's, Janice Sherman's, automobile insurance policy even when reformation was not requested by Sherman. In Janice Sherman v. Progressive Michigan Insurance Company and JOHN DOE, No. 364393, Court of Appeals of Michigan (June 20, 2024) the Court of Appeals explained the importance of the equitable remedy of rescission. BACKGROUND FACTS On November 12, 2020, Sherman applied to Progressive for a no-fault insurance policy for two vehicles-a 2006 Cadillac DTS sedan and a 1993 Chrysler New Yorker sedan. In the application, she identified her address as 16845 Tremlett Drive, Clinton Township, MI 48035, and confirmed that the vehicles were garaged at this address. The application also failed to disclose the total number of resident relatives, 14 years of age or older, and "all regular drivers" of her vehicles then residing in her household. Progressive's litigation underwriting specialist, Janeen Copic, submitted an affidavit stating that Progressive would have charged a 7.7% higher premium had Sherman accurately disclosed the number of drivers and resident-relatives at the reported address, and a 75.5% increased premium had Sherman disclosed her permanent Detroit residence. THE ACCIDENT On July 14, 2021, Sherman was a passenger in one of the vehicles when it was hit from behind by John Doe. She was injured in this accident and asked Progressive for personal protection insurance (PIP) benefits. Progressive refused while rescinding the policy ab initio because of misrepresentations in her application. Sherman lied about the location where the cars were garaged and other individuals resided with her who she did not list on her application. Progressive estimated that, had Sherman included this additional information, it would have increased her premium by 83.2%. THE SUIT Sherman then sued Doe and Progressive claiming it unlawfully refused to pay PIP benefits and had breached her insurance contract. Sherman claimed the remedy should be tailored to the equities of the situation and needed to produce a fair result for all parties. The trial ordered that the policy be reformed to reflect the "insurance premium that [Progressive] believes it would have been entitled to had the insured listed Detroit as the residence.". SUMMARY DISPOSITION Summary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. An insurer has a reasonable right to expect honesty in the application for insurance. Indeed, it is well settled that an insurer is entitled to rescind a policy ab initio on the basis of a material misrepresentation made in an application for no-fault insurance. A misrepresentation is material if the insurer would have rejected the risk or charged an increased premium and would not have issued the same contract had it been given the correct information. Even if fraud is not established rescission is justified in cases of innocent misrepresentation if a party relies upon the misstatement, because otherwise the party responsible for the misstatement would be unjustly enriched if he were not held accountable for his misrepresentation. There was no reason in law or policy for the burden of such a risk to be placed on the insurer in preference to the insured who made the intentional material misrepresentations. The trial court's balance of the equities should have revealed misconduct by Sherman, but none by Progressive. The Court of Appeals concluded that the trial court erred by failing to recognize this distinction. By ordering the policy reformed, the trial court placed the financial burden of paying PIP benefits on Progressive, notwithstanding the fact that Sherman obtained those very same benefits by way of fraud. The trial court erred when it ordered reformation, rather than rescission and its order was reversed. ZALMA OPINION Rescission is an ancient equitable remedy that exists because it would be unfair to allow one party to a contract to profit from fraud in the obtaining of a contract of insurance. Sherman lied in the application requesting an offer of insurance about the location and available drivers which, had she told the truth, would have resulted in much higher premiums. The trial court trying to be fair wrongfully refused rescission but used another equitable remedy: reformation to require the victim of Sherman's fraud, Progressive, with the medical expenses. Neither Ms. Sherman nor anyone should be allowed to profit from their fraud. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

More Prosecution is Needed to Deter Insurance Fraud Post 4826 Thomas Orville McLaughlin II was convicted of committing a fraudulent insurance act, making a false information, and interfering with law enforcement. He appealed claiming several of the State's exhibits were improperly admitted and that a defense witness was improperly excluded. In State of Kansas v. Thomas Orville McLaughlin II, No. 124,221, Court of Appeals of Kansas (June 21, 2024) McLaughlin sought relief from his conviction for insurance fraud. MCLAUGHLIN REPORTS A HOME BURGLARY AND IS LATER CONVICTED On August 2, 2016, Thomas McLaughlin reported a burglary. He contacted law enforcement and later spoke to Officer Travis Debarge about the burglary. McLaughlin advised the officer that his storage container had been robbed and three ATVs were missing. The following day, McLaughlin also spoke to Detective Mark Montague about the burglary at his residence. During their conversation, McLaughlin presented the detective with a list of stolen items, including tools, TVs, guns, and jewelry. At trial, the State presented photographs that showed McLaughlin moving a TV and other items out of his house the night before the alleged burglary. In making his insurance claim, McLaughlin was required to provide documentation of the ATVs' purchase. At trial, Melissa Webber from Progressive testified about McLaughlin's inconsistent statements, noting how, at first, McLaughlin said that he did not have one of the ATV titles. He had claimed that the titles and bills of sale for the ATVS were not available because they were kept in a safe that was later reported stolen. Yet in the same interview, McLaughlin told Webber that the title was destroyed in a house fire a year prior. Webber had recorded her conversations with McLaughlin. The recording was played at the trial. At trial, McLaughlin's ex-wife Skye Gaskell, testified about McLaughlin's and her actions toward defrauding the insurance company. Her trial testimony also included admitting that she had lied to the insurance investigators both in their initial investigation and during her sworn statements taken in her deposition. The jury also heard evidence that Gaskell still possessed some of the reportedly stolen tools from the alleged burglary. Two of the State's witnesses-Hundley and Montague-both testified that it was McLaughlin who submitted the false documents. And it was McLaughlin who purchased the insurance for the ATVs. For each of the three ATVs, the State showed how the ATVs were not owned by McLaughlin during the period that he had claimed and presented evidence of McLauglin's actions towards his claimed ownership. The jury convicted McLaughlin of committing a fraudulent insurance act, making false information and interference with law enforcement. He was sentenced to 12 months in jail, suspended for 24 months of probation. ZALMA OPINION Considering the light sentence for a serious, planned, premeditated insurance fraud, McLaughlin had the unmitigated gall to appeal the conviction ignoring the detailed evidence of his fraud and the testimony of his co-conspirator wife who only married him for his money. More prosecutions of insurance fraud perpetrators is needed and when convicted the sentence needs to be severe to deter others from attempting insurance fraud who might be more competent at fraud than McLaughlin. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

How Insurance is Treated in Mass Tort Cases in Bankruptcy Court Post 4825 Between 1999 and 2019, approximately 247,000 people in the United States died from prescription-opioid overdoses. Respondent Purdue Pharma sits at the center of that crisis. Owned and controlled by the Sackler family, Purdue began marketing OxyContin, an opioid prescription pain reliever, in the mid-1990s. After Purdue earned billions of dollars in sales on the drug, in 2007 one of its affiliates pleaded guilty to a federal felony for misbranding OxyContin as a less-addictive, less-abusable alternative to other pain medications. Thousands of lawsuits followed. Purdue Pharma filed for bankruptcy and attempted to protect the Sackler family from individual tort actions. Fearful that the litigation would eventually impact them directly, the Sacklers initiated a "milking program," withdrawing from Purdue approximately $11 billion-roughly 75% of the firm's total assets-over the next decade. Those withdrawals left Purdue in a significantly weakened financial state. And in 2019, Purdue filed for Chapter 11 bankruptcy. During that process, the Sacklers proposed to return approximately $4.3 billion to Purdue's bankruptcy estate. In exchange, the Sacklers sought a judicial order releasing the family from all opioid-related claims and enjoining victims from bringing such claims against them in the future. The bankruptcy court approved Purdue's proposed reorganization plan, including its provisions concerning the Sackler discharge. But the district court vacated that decision, holding that nothing in the law authorizes bankruptcy courts to extinguish claims against third parties like the Sacklers, without the claimants' consent. A divided panel of the Second Circuit reversed the district court and revived the bankruptcy court's order approving a modified reorganization plan. The Conclusion In Harrington, United States Trustee, Region 2 v. Purdue Pharma L. P. et al., 603 U.S. __, No. 23-124, United States Supreme Court (June 27, 2024) the Supreme Court of the United States (SCOTUS) Justice Gorsuch writing for SCOTUS found that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against the Sacklers, nondebtors, without the consent of affected claimants. Insurance & Bankruptcy The insurance assets-meaning assets to the limits of the debtor's insurance coverage-are usually a key asset for the bankruptcy estate to compensate victims. But tort victims also use the tort of bad faith to allow them to "have direct action rights against the insurance carrier, even, in some cases, bypassing the debtor-insured." That would obviously prevent the insurance money from being used as part of the bankruptcy estate. To address those various collective-action problems, bankruptcy courts have long found non-debtor releases to be appropriate in certain complex bankruptcy cases, especially in mass-tort bankruptcies. For example, after A. H. Robins declared bankruptcy in 1985 in the face of massive tort liability for injuries from its defective intrauterine device, the Dalkon Shield, nearly 200,000 victims filed proof of claims. A plan provision releasing the company's directors and insurance company ensured that the estate would not be depleted through indemnity or contribution claims, or claims brought directly against the directors or insurer. Preventing the victims from engaging in "piecemeal litigation" against the non-debtor directors and insurance company was the only way to ensure "equality of treatment of similarly situated creditors." Therefore, the Bankruptcy Court found (and the Fourth Circuit agreed) that the release was "necessary and essential" to the bankruptcy's success. Ibid.; see 880 F.2d, at 701-702. Protecting Mass Tort Victims from Eating Up all Insurance Proceeds Without a coordinating mechanism, a victim's (or group of victims') recovery against one local entity could have eaten up all of the shared insurance assets, leaving all of the other victims with nothing. Bankruptcy provided a forum to coordinate liability and insurance assets. A non-debtor release provision prevented victims from litigating outside of the bankruptcy plan's procedures. And the provision therefore prevented one victim or group of victims from obtaining all of the insurance funds before other victims recovered. Nothing in what SCOTUS wrote in the opinion should be construed to call into question consensual third-party releases offered in connection with a bankruptcy reorganization plan; those sorts of releases pose different questions and may rest on different legal grounds than the nonconsensual release at issue in this case. Because this case involves only a stayed reorganization plan, SCOTUS did not address whether SCOTUS' reading of the bankruptcy code would justify unwinding reorganization plans that have already become effective and been substantially consummated. By confining the opinion to the question presented, it held only that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, that effectively seeks to discharge claims against a nondebtor without the consent of affected claimants. Because the Second Circuit held otherwise, its judgment is reversed and the case WAs remanded for further proceedings consistent with this opinion. GORSUCH, J., delivered the opinion of the Court, in which THOMAS, ALITO, BARRETT, and JACKSON, JJ., joined. KAVANAUGH, J., filed a dissenting opinion, in which ROBERTS, C. J., and SOTOMAYOR and KAGAN, JJ., joined. ZALMA OPINION SCOTUS concluded that the Sackler family's scheme to reduce the assets of Purdue Pharma to limit the exposure to their personal assets. The scheme failed and the Purduce Pharma insurers and the Sackler family were not protected by the Bankruptcy proceeding since their liability and assets were different from the corporation that filed bankruptcy. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

ZIFL Volume 28 Number 13 Post 4824 Subscribe to ZIFL at the link at https://zalma.com/blog. The Source for the Insurance Fraud Professional Zalma’s Insurance Fraud Letter (ZIFL) continues its 28th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma.It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ This issue contains the following articles: Arsonist Must Serve Full Sentence Chutzpah: Serial Arsonist & Insurance Fraudster Requests Shortened Sentence Arson-for-Profit is the most evil form of insurance fraud where people may be injured or die. Defendant Michael Thomas set fire to many properties in a mobile home park and then used the mail to collect insurance money. He was charged with four counts of mail fraud, went to trial and the jury convicted him on all counts. The Court sentenced him to a below-guidelines sentence of ninety months of imprisonment. His sentence is set to expire on February 11, 2025. Mr. Thomas is currently under home confinement under the CARES Act. Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf Insurers Act to Defeat Fraud GEICO CONTINUES IT PROACTIVE ACTIONS AGAINST INSURANCE FRAUD Insurers have found that states, like New York, will do little or nothing to deter insurance fraud. Determined to protect its assets and its insureds, many GEICO brand insurance companies have acted proactively against people and health care providers who are attempting to defraud them and their insureds. In Government Employees Insurance Company, et. al. v. Colin Clarke, M.D., Colin Clarke Md P.C., Svetlana Kovaleva a/k/a Melana Kay, Medical Evaluation Services & Billing, Inc., Medical Consultation Services & Billing, Inc., and John Doe Defendants, No. 1:23-CV-04605 (FB) (SJB), United States District Court, E.D. New York (June 20, 2024) the fraud perpetrators attempted to defeat GEICO’s RICO action by counterclaiming that GEICO committed fraud. Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf More McClenny Moseley & Associates Issues This is ZIFL’s thirtieth 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 with new orders from the Louisiana Federal Courts. Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf The Compact Book of Adjusting Property Claims Fourth Edition 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 this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf Insurance Fraud Report From Forbes Advisor This article was adapted from an article by Forbes Advisor that relies, in great part, on estimates of insurance fraud from the Coalition Against Insurance Fraud and the National Association of Insurance Commissioners, Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf Health Insurance Fraud Convictions Wellesley Psychiatrist Sentenced to Over Eight Years in Prison for $19 Million Insurance Fraud Scheme; Billed Insurance Companies for Thousands of Services He Never Provided Gustavo Kinrys, 53, of Wellesley, was sentenced by U.S. District Court Judge Denise J. Casper to 99 months in prison, followed by three years of supervised release. Kinrys was also ordered to pay restitution and forfeiture in an amount to be determined at a later hearing. In October 2023, following a jury trial, Kinrys was convicted of seven counts of wire fraud, six counts of false statements relating to health care matters, and one count of obstructing a criminal health care investigation. Read this article about dozens of fraud convictions and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf Louisiana Litigation Finance Regulations Gov. Jeff Landry signed a bill on June 19 and it will become law the first of August, 2024. His predecessor, Democrat John Bel Edwards, last year vetoed more expansive legislation that would have generally required third-party funding disclosures in civil cases. Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf Convictions of Other Than Health Insurance Fraud Former Camarillo Insurance Agent Sentenced To 16 Years In $1.2 Million Senior Scam Brett E. Lovett, 53, of Camarillo, a Former licensed insurance agent, was sentenced June 19, 2024 to 16 years and eight months in jail after being found guilty of 29 felony counts including grand theft, elder abuse, money laundering, and burglary. A 15-month California Department of Insurance investigation found he defrauded at least nine victims, including senior citizens, of close to $1.2 million. Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf Categories of Fraud Fraud is so common that it can be categorized in countless ways. Fundamentally, every type of fraud is either organizational or individual. All of these categories are used by insurance fraud perpetrators. Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Read this article and the full issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2024/06/ZIFL-07-01-2024.pdf

Never Lie or Conceal Potential Claims From Insurer Post 4823 Plaintiff CMGK, LLC, doing business as Massage Envy, appealed from an order granting summary-judgment to defendant Certain Underwriters at Lloyd's, London Subscribing to Policy Number ME10XXXX, and dismissing with prejudice plaintiff's claims. Plaintiff sought coverage under a Sexual Acts Liability Endorsement of a claims-made-and-reported policy issued by Lloyd's to plaintiff. The court found plaintiff was not entitled to coverage and granted the motion. In CMGK, LLC d/b/a Massage Envy v. Certain Underwriters At Lloyd's, London Subscribing To Policy Number ME10XXXX, No. A-1836-22, Superior Court of New Jersey, Appellate Division (June 13, 2024) the appeal was considered based on the facts established by the motions. FACTS CMGK operated a Massage Envy Spa franchise located in Mays Landing. Emad Gus Khalifa was the sole member of plaintiff and was familiar with its operations. In 2013, plaintiff hired April Pippin as a general manager to assist Khalifa with the day-to-day management of the facility. Pippin and Khalifa performed management functions for plaintiff. The Application for Insurance Khalifa executed on behalf of plaintiff an application for the policy at issue. “This Claims Made policy applies only to those claims arising from covered incidents which occur on or after the stated retroactive date. In addition, the claim must first be made and reported to the company during the policy period or applicable extended reporting period.” (Emphasis in the policy). The Policy Defendant issued its Specified Medical Professions Professional Liability Insurance Policy to plaintiff for the policy period March 9, 2018, to March 9, 2019, and subject to a Retroactive Date of March 9, 2014. The policy included a Sexual Acts Liability Endorsement. The Sexual Acts Liability Endorsement. Prior to the effective date of the policy, the Insured represented that it had no knowledge of a Sexual Act or any fact, circumstance, situation or incident involving a Sexual Act which may result in a Claim under this policy. In 2016, plaintiff hired Steffon Davis as a massage therapist. According to plaintiff's client M.N., Davis sexually assaulted her during a massage he performed on her on September 23, 2017. Two days later, M.N. reported the alleged assault to Pippin. On September 26, 2017, M.N. went to the Township of Hamilton police station and told a police officer about the incident. According to the officer, M.N. told her "[Davis had] placed his finger between her vagina lips and cupped her breast during a massage." M.N. eventually sued. On September 5, 2018, plaintiff tendered the suit to defendant for coverage who refused to defend or indemnify the Plaintiff who sued Lloyd’s claiming Lloyd’s had breached the policy and seeking a judgment declaring M.N.'s claims fell within the coverage provided by Lloyd’s. Finding the language of the prior-knowledge clause to be "clear and unambiguous," the trial court rejected plaintiff's attempt to interpret it in a manner where an honest belief in the futility of a claim negates actual knowledge of allegations of wrongdoing. The court found the police decision not to file criminal charges does not support a reasonable belief that M.N. would not file a civil lawsuit. Khalifa's assumption or hope, purportedly based on the officer's decision not to file a criminal complaint or M.N.'s decision not to file a civil complaint sooner, that M.N. wouldn't file a claim is not enough to defeat summary judgment. Adopting plaintiff's interpretation of the policy language would have the effect of rendering meaningless the prior-knowledge clause. To avoid the application of the clause, an insured could simply assert it did not believe - in the face of all evidence to the contrary - a claim might be filed. The reasonableness of excluding claims based on prior conduct that the insured could reasonably have foreseen might serve as the basis for a future claim was apparent to the appellate court as it would be to anyone involved in the business of insurance. The Appellate Division, therefore, affirmed the order granting defendant's summary-judgment motion. ZALMA OPINION An application for insurance is a request to an insurer to make an offer of insurance. The insurer relies on the good faith of the proposed insured to accurately respond to all the inquires including any information available to the insured at the time the application is presented, of any acts that could result in a claim. Such an act, sexual abuse of a customer by a massage therapist, known to the insured but not yet grown into an actual suit must be disclosed to allow the insurer to make a well reasoned decision to offer to insure the proposed insured. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Never Lie or Conceal Potential Claims From Insurer Post 4823 Plaintiff CMGK, LLC, doing business as Massage Envy, appealed from an order granting summary-judgment to defendant Certain Underwriters at Lloyd's, London Subscribing to Policy Number ME10XXXX, and dismissing with prejudice plaintiff's claims. Plaintiff sought coverage under a Sexual Acts Liability Endorsement of a claims-made-and-reported policy issued by Lloyd's to plaintiff. The court found plaintiff was not entitled to coverage and granted the motion. In CMGK, LLC d/b/a Massage Envy v. Certain Underwriters At Lloyd's, London Subscribing To Policy Number ME10XXXX, No. A-1836-22, Superior Court of New Jersey, Appellate Division (June 13, 2024) the appeal was considered based on the facts established by the motions. FACTS CMGK operated a Massage Envy Spa franchise located in Mays Landing. Emad Gus Khalifa was the sole member of plaintiff and was familiar with its operations. In 2013, plaintiff hired April Pippin as a general manager to assist Khalifa with the day-to-day management of the facility. Pippin and Khalifa performed management functions for plaintiff. The Application for Insurance Khalifa executed on behalf of plaintiff an application for the policy at issue. “This Claims Made policy applies only to those claims arising from covered incidents which occur on or after the stated retroactive date. In addition, the claim must first be made and reported to the company during the policy period or applicable extended reporting period.” (Emphasis in the policy). The Policy Defendant issued its Specified Medical Professions Professional Liability Insurance Policy to plaintiff for the policy period March 9, 2018, to March 9, 2019, and subject to a Retroactive Date of March 9, 2014. The policy included a Sexual Acts Liability Endorsement. The Sexual Acts Liability Endorsement. Prior to the effective date of the policy, the Insured represented that it had no knowledge of a Sexual Act or any fact, circumstance, situation or incident involving a Sexual Act which may result in a Claim under this policy. In 2016, plaintiff hired Steffon Davis as a massage therapist. According to plaintiff's client M.N., Davis sexually assaulted her during a massage he performed on her on September 23, 2017. Two days later, M.N. reported the alleged assault to Pippin. On September 26, 2017, M.N. went to the Township of Hamilton police station and told a police officer about the incident. According to the officer, M.N. told her "[Davis had] placed his finger between her vagina lips and cupped her breast during a massage." M.N. eventually sued. On September 5, 2018, plaintiff tendered the suit to defendant for coverage who refused to defend or indemnify the Plaintiff who sued Lloyd’s claiming Lloyd’s had breached the policy and seeking a judgment declaring M.N.'s claims fell within the coverage provided by Lloyd’s. Finding the language of the prior-knowledge clause to be "clear and unambiguous," the trial court rejected plaintiff's attempt to interpret it in a manner where an honest belief in the futility of a claim negates actual knowledge of allegations of wrongdoing. The court found the police decision not to file criminal charges does not support a reasonable belief that M.N. would not file a civil lawsuit. Khalifa's assumption or hope, purportedly based on the officer's decision not to file a criminal complaint or M.N.'s decision not to file a civil complaint sooner, that M.N. wouldn't file a claim is not enough to defeat summary judgment. Adopting plaintiff's interpretation of the policy language would have the effect of rendering meaningless the prior-knowledge clause. To avoid the application of the clause, an insured could simply assert it did not believe - in the face of all evidence to the contrary - a claim might be filed. The reasonableness of excluding claims based on prior conduct that the insured could reasonably have foreseen might serve as the basis for a future claim was apparent to the appellate court as it would be to anyone involved in the business of insurance. The Appellate Division, therefore, affirmed the order granting defendant's summary-judgment motion. ZALMA OPINION An application for insurance is a request to an insurer to make an offer of insurance. The insurer relies on the good faith of the proposed insured to accurately respond to all the inquires including any information available to the insured at the time the application is presented, of any acts that could result in a claim. Such an act, sexual abuse of a customer by a massage therapist, known to the insured but not yet grown into an actual suit must be disclosed to allow the insurer to make a well reasoned decision to offer to insure the proposed insured. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Exclusion Does Not Invalidate Policy Post 4822

GEICO Continues it Proactive Actions Against Insurance Fraud Post 4821 nsurers have found that states, like New York, will do little or nothing to deter insurance fraud. Determined to protect its assets and its insureds, many GEICO brand insurance companies have acted proactively against people and health care providers who are attempting to defraud them and their insureds. In Government Employees Insurance Company, et. al. v. Colin Clarke, M.D., Colin Clarke Md P.C., Svetlana Kovaleva a/k/a Melana Kay, Medical Evaluation Services & Billing, Inc., Medical Consultation Services & Billing, Inc., and John Doe Defendants, No. 1:23-CV-04605 (FB) (SJB), United States District Court, E.D. New York (June 20, 2024) the fraud perpetrators attempted to defeat GEICO’s RICO action by counterclaiming that GEICO committed fraud. GEICO moved to dismiss the Clarke Defendants’ counterclaims and to strike twelve of their affirmative defenses. BACKGROUND GEICO sued Defendants for submitting allegedly fraudulent no-fault insurance claims to GEICO for services performed at Dr. Clarke’s healthcare practice, among other things. It brought claims for civil RICO violations, common law fraud, and unjust enrichment. GEICO also seeks a declaratory judgment that the Clarke Defendants have no right to receive payment for any pending bills submitted to GEICO. In response, the Clarke Defendants counterclaimed against GEICO on allegations that GEICO has – through its insurance-claim verification process, committed fraud by reporting Dr. Clarke to the New York State Department of Health, and by bringing two RICO cases against Dr. Clarke, including this lawsuit. The Clarke Defendants counterclaimed for: (i) common law fraud; (ii) aiding and abetting fraud; (iii) breach of the covenant of good faith and fair dealing; (iv) violation of N.Y. Gen. Bus. Law § 349; (v) abuse of process; (vi) and attorneys’ fees. GEICO moved to dismiss all counterclaims and to strike twelve of the Clarke Defendants’ affirmative defenses. DISCUSSION Under New York law, the elements of a common law fraud claim are: (i) material misrepresentation of a fact, (ii) knowledge of its falsity, (iii) intent to induce reliance, (iv) justifiable reliance by the claimant, and (v) damages. The fraudulent conduct the Clarke Defendants allege is simply the non-performance of GEICO’s contractual duties to process no-fault and regarding the alleged thefts committed by the Kay Defendants, and GEICO’s alleged non-disclosure of those thefts. Since the Clarke Defendants’ conclusory allegations are insufficient to plead a claim for fraud and because vague and conclusory allegations that a defendant committed theft are insufficient to plead a cognizable fraud claim. THE COVENANT OF GOOD FAITH AND FAIR DEALING GEICO argued that the Clarke Defendants’ breach of contract claim must be dismissed because they have not alleged sufficient details about the underlying contracts or how their implicit duties were violated. The Clarke Defendants conclusory allegations that they were assigned the contractual rights that GEICO owed to its insureds without any specific facts about those policies, when they were assigned, who they belonged to, what terms they contained, or on what basis GEICO denied claims submitted pursuant to their terms. Absent even minimal detail about the underlying contracts, the Clarke Defendants cannot sustain a claim that GEICO violated the implicit duties of good faith and fair dealing contained therein. Accordingly, this claim is dismissed. ABUSE OF PROCESS To the extent that their abuse of process claim is predicated on this case or any other civil RICO action, the mere commencement of a lawsuit cannot serve as a basis for a cause of action alleging abuse of process. MOTION TO STRIKE AFFIRMATIVE DEFENSES GEICO’s motion to dismiss the Clarke Defendants’ counterclaims was granted; accordingly, those claims were dismissed. Its motion to strike the Clarke Defendants’ affirmative defenses was granted with respect to the Clarke Defendants’ Third, Twenty-Second, and Twenty-Third affirmative defenses; it is denied in all other respects. GEICO’s request to stay discovery pending adjudication of this motion is denied as moot. ZALMA OPINION States like New York have made insurance fraud – like that brought in the suit against the Clarke Defendants – only to do little or nothing to prosecute the crime. GEICO, frustrated as a victim of fraud, has become proactive and works to take the profit out of the crime of insurance fraud. They, and other proactive insurers, are becoming successful in New York and other states and should be emulated by other victims of insurance fraud. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Actual Or Alleged Contractual Liability Or Obligation Of Directors is Specifically Excluded Post 4820 Paraco Gas Corporation ("Paraco"), a closely-held family corporation that distributes propane fuel and equipment, appealed a June 22, 2023 judgment of the district court dismissing its breach of contract and declaratory judgment claims against Ironshore Indemnity, Inc. ("Ironshore"), an insurance company that issued Paraco the liability insurance policy at the heart of this dispute. Ironshore issued an insurance policy for Directors, Officers, and Private Company Liability coverage (the "D&O Policy" or "Policy") to Paraco. As its name suggests, the D&O Policy provided insurance coverage for certain acts of Paraco's officers and directors. After a suit was brought against Joseph and Christina Armentano, who were Paraco officers, alleging that Joseph had transferred shares in violation of the terms of two Paraco Shareholder Agreements, Paraco sought coverage for defense and indemnity under the Policy for the suit (the "Underlying Action"). In Paraco Gas Corporation, Joseph Armentano, Christina Armentano v. Ironshore Indemnity, Inc., No. 23-1069-cv, United States Court of Appeals, Second Circuit (June 17, 2024) the Second Circuit interpreted the policy as it related to the facts. THE SUIT The district court dismissed Paraco's suit because an exclusion provision of the insurance policy unambiguously excluded liability coverage for the Underlying Action. THE POLICY The D&O Policy provides a blanket statement of coverage, followed later by an exclusionary provision for certain acts. Section III.N.'s exclusion provision reads as follows: “Section III. The Insurer shall not be liable to make any payment for Loss in connection with any Claim made against any Insured: . . . N. alleging, arising out of, based upon or attributable to any actual or alleged contractual liability or obligation of the Company or an Insured Person under any contract, agreement, employment contract or employment agreement to pay money, wages or any employee benefits of any kind." (emphasis added).” As an initial matter, Paraco conceded that nine out of the ten claims in the Underlying Action "arise out of" alleged breaches of the two Paraco Shareholder Agreements. The suit, in Count IV of the Underlying Action, sought declaratory relief stating that the Class A Shareholder Agreement remained in effect and governed the rights of Paraco shareholders, and that an agreement signed by Joseph purporting to terminate the Class A Shareholder Agreement was invalid. CONCLUSION Count IV alleges the existence of facts showing that Appellants violated the terms of the Class A Shareholder Agreement and the claim could not exist but for Joseph's alleged violation of the agreement's right of first refusal and stock transfer provisions. Thus, the claim is clearly positioned within the Policy exclusion. The Second Circuit concluded that each claim in the Underlying Action arose from an "actual or alleged contractual liability or obligation of" Paraco, Joseph, or Christina, under the relevant shareholder agreements. Thus, any legal duty Ironshore had under the D&O Policy to defend and/or indemnify Paraco did not exist because the entirety of the Underlying Action falls within the Policy's exclusion clause. ZALMA OPINION As a contract an insurance policy will always be read as written to provide coverage or eliminate coverage. Once the Second Circuit concluded that the contractual liability alleged in the underlying complaint was excluded Ironshore had no duty to defend or indemnify its insureds. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

It is Inappropriate to Argue a Win Was Wrong and a New Result is Required Post 4829 Defendant, Bankers Insurance Company (“Bankers Insurance”), moved to vacate the Panel Appraisal Award Amendment & Clarification (“Amended Award”) based on three alleged “significant errors” or “clear mistakes of fact” only to see an unfavorable response in St. Joseph Medical Clinic AMC v. Bankers Insurance Company, Civil Action No. 22-4521, United States District Court, E.D. Louisiana (June 17, 2024) BACKGROUND This case concerns an insurance coverage dispute arising from damages sustained during Hurricane Ida. At the parties' request, an appraisal panel provided an award in September 2022 (the “Initial Award”). The Initial Award provided for $1,066,798.39 (RCV) under the policy's Building coverage and $12,729.86 under the policy's Business Property coverage. Bankers Insurance disagreed with the Initial Award's inclusion of a $61,485.00 expense for “Rose Office Systems, Inc.” (“Rose Systems”) within the Building coverage. Bankers Insurance took the position in its correspondence that the Rose Systems expense should be categorized within the Extra Expense coverage, yet Bankers Insurance chose not to pursue this objection and filed an unconditional motion to confirm in May 2023. The Honorable Donna Currault presiding, denied the motion. The Court identified the possibility of double counting as a potential significant error that required clarification by the panel. The matter was remanded for that clarification. The Court identified no other errors in the award. The panel issued an Amended Award in January 2024. The Amended Award explained that the panel had included the Rose Systems expense within the Building coverage and provided its reasoning for doing so. The Amended Award further provided a complete calculation of damages for all the other coverages, including Extra Expense coverage ($0.00 awarded) and Business Income Loss ($270,409.96 awarded). The Amended Award confirms there was no double-counting. Bankers Insurance waited until May 2024 to move to vacate based on the same alleged Rose Systems error of which it was aware when it filed its prior motion to confirm in October 2022. ANALYSIS Appraisal clauses are enforceable under Louisiana law. The burden of demonstrating that the award should not be confirmed must fall upon the party challenging it. Contractually specified appraisal awards are presumed accurate. Although appraisal awards are presumed correct, a court is not bound to confirm an award that contains clear mistakes of fact. When an award reflects accidental double-counting that duplicates certain items or categories, that is the type of clear error that cannot stand. Bankers Insurance's Belated Objection To The Panel's Treatment Of The Rose Systems Expense Is Subject To Judicial Estoppel And Lacks Merit. If Bankers Insurance were to prevail on its first argument and its second argument, the Rose Systems expense would be subject to a lower policy limit. Bankers Insurance's first two arguments collapse under the weight of its prior litigation strategy. Bankers Insurance moved to confirm the Initial Award, which concluded that the Rose Office Systems expense fell within the Building coverage. Bankers Insurance made a strategy decision to abandon this objection when moving to confirm the Initial Award. The USDC concluded that Bankers Insurance's prior litigation conduct subjected it to judicial estoppel. Courts can invoke judicial estoppel to prevent a party from asserting a position in a legal proceeding that is inconsistent with a position taken in a previous proceeding. Bankers Insurance asked the Court to rule that the Initial Award set the total amount of damages in this matter, including relative to an award of $1,046,255.76 under building coverage. In this motion Bankers Insurance asks the Court to vacate the Initial Award because, it contends, the Initial Award's Building coverage determination was error. The two positions were irreconcilable. Bankers Insurance's Argument Relative To Lost Business Income Misstates The Panel's Position And Lacks Merit. Bankers Insurance's argument does not refer to any actual calculation error-merely an alleged error in terminology-and the mischaracterization of the panel's reasoning renders this argument confusing, at best. CONCLUSION Now, Bankers Insurance seeks to prevail by arguing that the Initial Appraisal suffered from a separate significant error, which has carried over into the Amended Appraisal and requires its vacatur. This attempt to “prevail, twice, on opposite theories,” renders Bankers Insurance the “quintessential ‘chameleonic litigant' against whom judicial estoppel is usually appropriate.” ZALMA OPINION Appraisals often raise disputes over the finding of the appraisers. Bankers, although it disagreed with some findings of the appraisers it moved the court to affirm the award. The court sent the dispute back to the appraisers who submitted an amended award only for Bankers, to try to have the court apply the argument it originally abandoned. Judicial estoppel disposed of Bankers' argument and the amended award was affirmed. Parties to appraisal awards should stick to their position and never change their position first accepted by the court only to ask it to do something different. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk

Requests for Admission Deemed Admitted in Arizona if Not Responded to Within 30 Days Post 4828 Rose Karam, an insured, appealed from the superior court's grant of summary judgment in favor of her residential property insurer, Mercury Casualty Co. In Rose A. Karam v. Mercury Casualty Company, No. 2 CA-CV 2023-0112, Court of Appeals of Arizona, Second Division (May 31, 2024) her suit against Mercury was defeated by admission that she had no case because she responded late. FACTUAL BACKGROUND Karam was an insured under a Mercury homeowner's policy. After suffering a fire at her home, Karam filed a property loss and damage claim under the policy, citing damage to a piano and a wall mirror. Following receipt of payments by Mercury Karam complained to Mercury that she was underpaid for personal property losses. Two years later, Karam sued Mercury for insurance fraud, consumer fraud, and breach of contract. Thereafter, on August 30, 2022, Mercury served Karam with a set of discovery requests including interrogatories and requests for admission. Karam's response to the requests for admission were due within thirty days of service she provided her responses months later on December 1, 2022. Mercury moved for summary judgment. By its motion, Mercury asserted, in part, that because Karam's responses to the requests for admission were untimely, the requests were deemed admitted. Due to those admissions-including that Karam had been fully and fairly paid for her losses, that Mercury had not breached the insurance policy, and that Karam had suffered no damages-Mercury claimed it was entitled to judgment as a matter of law on Karam's breach of contract claim. The court further determined that, even considering her actual, albeit untimely, responses to the requests for admission, Karam "failed to produce admissible evidence creating a genuine issue of fact for trial." DISCUSSION The Court of Appeals will only affirm a grant of summary judgment if the evidence produced in support of the defense or claim has so little probative value that no reasonable person could find for its proponent. Admissions Arizona Rule 36(a)(1) provides that "[a] party may serve on any other party a written request to admit . . . the truth of any matters . . . relating to . . . facts, the application of law to fact, or opinions about either; and . . . the genuineness of any described documents." The purpose of requests for admission is to expedite the trial and to relieve parties of unnecessary costs in proving facts. Once a party is served with requests for admission, failure to respond within 30 days the rule provides "[a] matter admitted under this rule is conclusively established unless the court, on motion, permits the admission to be withdrawn or amended." Karam conceded on appeal that she did not respond to Mercury's requests for admission within the required thirty-day period. Therefore the superior court did not abuse its discretion in deeming the statements in the requests for admission admitted. Karam effectively admitted that she had been fully and fairly compensated for the claims she submitted, that Mercury did not breach the insurance policy, and that she did not otherwise have damages. Those admissions - even each standing alone - defeat a claim for breach of the insurance policy. Given the allegations in Karam's complaint and her admissions made by operation of law, there remained no material issue in dispute and Karam can no longer carry her burden of proof in this action. Mercury was entitled to summary judgment and the court did not err in granting Mercury's motion. ZALMA OPINION A lawyer practicing in Arizona that does not comply with the rules concerning Requests for Admission will always lose because his opponent will always send a Request including the ultimate facts about the case. Mercury's counsel took advantage of the Arizona rule and obtained admissions that resulted in the resolution of the case in its favor. Karam is not without a remedy, she has a cause of action against her lawyer. (c) 2024 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to my substack at https://barryzalma.substack.com/subscribe Go to X @bzalma; Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg. Go to the Insurance Claims Library – https://lnkd.in/gwEYk