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How Insurance Fraud Can Succeed "This blog post 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 posted to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime." Wo Ping Chen was trained as a physician in Hong Kong. Until Hong Kong was returned by the United Kingdom to the Peoples Republic of China, he was the best known Orthopedist in the Crown Colony. Fearing problems with the new government he emigrated to Vancouver, British Columbia, Canada as a citizen of the commonwealth. He worked as an employee of the National Health Service for a year and then obtained a work visa to the U.S. and crossed the border into the U.S. only to find he could not work as a physician without a license from a U.S. state and attended a U.S. based medical school. After one year of medical school, one year of internship in a Seattle hospital and one year as a resident Chen was able to restart his life. His first effort upon receiving a license was to apply to the U.S. Government’s Medicare and Medicaid systems for a medical provider number which would give the government the ability to deposit funds electronically into his bank account without having to wait for a check to be received and collected. Dr. Wo was a very good doctor and his practice grew rapidly. He found most of his patients were poor and could only pay through one of the government programs. He was not, as in Canada, an employee. He had to live on the small amounts that Medicare or Medicaid considered proper for the work he did. Each of his invoices was scrutinized and he was never paid what he billed even though he knew, from meetings with other physicians in Seattle, he was billing reasonable and proper amounts for the services rendered. Frustrated and earning less every year than the year before, although he was working harder and longer hours, he told his tale of woe to a colleague over a hospital lunch. “Wo, my friend” the colleague responded “don’t be upset and frustrated – it is time you used the system to your benefit.” “How?” “You know the people that review your billing are not physicians, they are key punch operators. If what you bill fits within the requirements of their computer software money goes into your account in the amounts required by their computer.” “Yes,” Wo replied, “when I speak with them to challenge their decisions they speak like complete idiots.” “Use their stupidity to your benefit.” “How?” “The CPT codes.” “They just describe services.” “Yes, so if you do something for a patient that is listed as a point two raise it to a point three.” “But that would be dishonest.” “No, because they base their payment on the code and the payments are not realistic so raising the code up one level will get you paid the correct amount for the services actually rendered.” Wo took the conversation to heart and found payments deposited into his bank increased to amounts reasonable for the services he was actually rendering even if it was not as described. His billings were never questioned. The information went from Chen’s office computer to a government agency computer that automatically sent money to his account. His youngest daughter had found a husband and he was facing an expense of over $100,000 to pay for a traditional Chinese wedding and reception. He did not have the cash. He did, however, have a large list of Medicare and Medicaid patients in his data base. He knew, from experience, that no one in the US Government or their agents would check his billing. He had served the public at low rates for many years. He decided to obtain the cost of his daughter’s wedding by using his computer. He created invoices for 300 of his male Medicare patients for an office visit and complete blood test at $250 each. He dated the service carefully so he showed only ten of the 300 each day for 30 days. He did the same for 300 female patients for an office visit, a pelvic exam, and an x-ray to check for a potential broken hip, each for only $250. By the end of the month $150,000 was deposited into his account without question. He had the money for his daughter’s wedding and did not have to work for it. "This is a great country," Wo thought, they send me money when I need it without requiring that I work for it. Dr. Wo knew that the practice of Medicine is hard work. The earnings of physicians were continuously being reduced by insurers and government agencies. He was getting old. He attended two medical schools and was still borrowing money to pay off loans he took to finish school. It was time he considered funding his retirement. As part of his practice, he spent half his time at the local hospital. He had problems with his office computers and hired the Information Technology person at the hospital to fix his system on a weekend. They had become friends. The IT man finished his work at the office and sat down for some coffee with Wo. “So, how is the practice treating you, Dr. Wo?” “Not bad, but the insurance companies and government keep cutting what I receive.” “It is tough. I wish I could help you.” “You can.” Chen replied. “I will pay you $100,000 more than your fee if you give me a CD ROM with the identification information of 100,000 hospital patients who are Medicare or Medicaid recipients.” “I’m not sure I can do that Dr. Wo. I could lose my job.” “Okay, I’ll give you $150,000.” The IT man delivered the disk the next day and received $15,000 in cash from Dr. Wo as a down payment. He used the disk to submit billing for each of the 100,000 patients for the same office examination, x-rays, and a complete blood count. Two weeks later $25,000,000 appeared in his account, Dr. Wo Ping Chen paid the IT man $135,000 to complete the fee, transferred the remaining money to his bank in Hong Kong, closed his office and moved back to Hong Kong where he retired a very wealthy man. No one questioned his billing. No investigator checked on how one doctor could treat 100,000 patients in one month. It seemed no one cared. Dr. Wo did not consider himself a criminal nor did the United States Government. He just played the system knowing that it was operated by people who did not care as long as the correct boxes in the computer were checked. His crime succeeded because he was not greedy. He only did the major crime once. The computer operators at the Medicare payment offices never noticed that he did a cervical exam on an eighty-three-year-old man named Louis Jones. Insurance fraud is often successful, as it was for Dr. Wo, because the governmental entities have little incentive to even look for fraud, investigate criminal conduct, or even try to do the job for which the government employees were charged. Dr. Wo was correct, this is a great country, and it gives away other people's money to anyone with the gumption to ask. That includes my money and yours and Dr. Wo's success offends me and should offend you. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-l

Reference to Defendant's Need to Pay is not Inappropriate Mention of Insurance When I was a young adjuster 55 years ago California and every state allowed a plaintiff's contributory negligence - no matter how small - to defeat a negligence claims. In 1975 Li v. Yellow Cab Co., 13 Cal.3d 804, 119 Cal.Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393 (Cal. 1975) established the system of contributory negligence that has been followed in most states. Maryland, however, still applied contributory negligence and has refused to adopt comparative negligence. In Michael Lewis v. Pedro Romero, No. 1932-2022, Court of Special Appeals of Maryland (October 10, 2023) Mr. Lewis lost his negligence action against Mr. Romero whose vehicle struck pedestrian Mr. Lewis in a bank parking lot. Michael Lewis ("Lewis") sued Pedro Romero ("Romero") for negligence. Ultimately, the jury found that while Romero was negligent, Lewis was contributorily negligent, barring Lewis from recovering damages. FACTUAL BACKGROUND The incident occurred on October 9, 2019, outside of the Capital One Bank (the "bank") in Frederick, Maryland. The bank has two points of access for vehicles. There is a one-way, single lane road spanning the perimeter of the bank with painted one-way arrows. This road does not have any crosswalks. Both parties agreed that on the date of the incident, Romero was driving a pickup truck on the one-way road around the perimeter of the bank when he struck Lewis, a pedestrian, who was exiting the bank. Lewis testified that he walked on foot from a nearby hotel where he was staying to the bank in order to withdraw money. Lewis admitted that at the time of the impact, his cell phone was in his hand. However, Lewis denied that he was talking on the phone at the time he was struck by Romero's vehicle. ANALYSIS On the issue of contributory negligence when measuring contributory negligence, the standard of care is the conduct of an ordinarily prudent person under circumstances ordinarily. The court found that Romero met their burden of production regarding contributory negligence and that is that Romero has introduced more than a mere scintilla of evidence meaning more than a surmised possibility or conjecture that Lewis has been guilty of negligence and that Romero generated a jury issue. During closing argument, after discussing Lewis' alleged damages, Romero's counsel stated, "[Lewis] is asking you to award him [money] for the choices he has made. He wants Mr. Romero to pay him for some of these choices." The court denied Lewis' motion for mistrial. The jury returned a verdict, finding that while Romero was negligent, Lewis was contributorily negligent, barring Lewis from any recovery. DISCUSSION Maryland follows the majority rule that evidence of insurance on the part of a defendant is generally inadmissible. The Supreme Court of Maryland has also held that a mere inference that there may be insurance would not necessarily require a termination of the trial. Romero's counsel made an ambiguous comment during closing argument that Lewis wanted "Romero to pay him for some of [his] choices." There is nothing in the record to suggest that the comment surpassed the threshold of being an improper statement that warranted further consideration. WHAT IS CONTRIBUTORY NEGLIGENCE? Contributory negligence occurs whenever the injured person acts or fails to act in a manner consistent with the knowledge or appreciation, actual or implied, of the danger or injury that his or her conduct involves. Contributory negligence is defined as the doing of something that a person of ordinary prudence would not do, or the failure to do something that a person of ordinary prudence would do, under the circumstances. The question of whether the plaintiff has been contributorily negligent is ordinarily for the jury to decide. To find contributory negligence as a matter of law, the injured party's action must be distinctive, prominent, and decisive from which reasonable minds would not differ as to the negligent character. The case was properly submitted to the jury because, even when viewing the facts in the light most favorable to Lewis, the evidence establishing his contributory negligence amounted to more than surmise, possibility, or conjecture. Lewis' decision to leave the sidewalk and walk mid-way into the road while only glancing for oncoming traffic constituted a distinctive, prominent, and decisive decision from which the jury could find that Lewis was contributorily negligent. Notably, Lewis' testimony that he was "hit from behind" on a one-way road indicates that he was facing away from oncoming traffic and not looking for vehicles coming in his direction. Upon these facts, the appellate court concluded that the trial court properly submitted the question of contributory negligence to the jury. ZALMA OPINION The application of Contributory Negligence as an absolute defense to a negligence cause of action is considered, in most states, to be Draconian and that comparative negligence is fair and reasonable. Maryland is in the minority. That Maryland continues to apply the common law is appropriate and since the jury found both parties to be negligent Mr. Lewis recovered nothing from his suit. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-l

Using Sexy Pictures Without Consent Resulted in Coverage Dispute An insurance coverage dispute arising out of litigation in Texas state court. Two insurance policies are at issue, and the district court concluded that both provided the insureds coverage. The insurer appealed in The Princeton Excess and Surplus Lines Insurance Company v. A.H.D. Houston, Incorporated, doing business as Centerfolds; et al, No. 22-20473, United Stat es Court of Appeals, Fifth Circuit (October 6, 2023) FACTS This comparatively pedestrian contract dispute stems from a much more salacious lawsuit filed in Texas in 2017. Sixteen professional models (the Models) sued three Texas strip clubs (the Clubs) following the Clubs' use of the Models' likeness for advertising campaigns without the Models' consent. The Clubs' advertising material was manipulated to give the impression that the Models endorsed the Clubs or worked as strippers in the Clubs. The Models claimed they were depicted in various sexually charged social media and Internet posts encouraging patrons to visit the Clubs. According to the Models, the Clubs participated in the selection, creation, and dissemination of these advertisements. The state trial court granted summary judgment for the Models and awarded $1,405,000 in damages. The Clubs appealed. That appeal has not yet been finally adjudicated on the merits. Meanwhile, Princeton Excess and Surplus Lines Insurance Company (PESLIC) filed a declaratory judgment action. PESLIC issued two commercial liability insurance policies to the Clubs that have identical coverage provisions but contain slightly different exclusions The 01 Policy contains a "Field of Entertainment Exclusion." The 02 Policy contains an "Exhibitions and Related Marketing Exclusion" that curtails coverage for Personal and Advertising Injury subsections d. through g. As to the 01 Policy, the district court found that "the Models' pleadings in the underlying lawsuit sufficiently allege[d] that that the Clubs used [the] Models' images (i.e., their 'advertising ideas') and placed them in their own 'advertisements.'" Consequently, the district court held that PESLIC had a duty to defend and indemnify the Clubs under the 01 Policy. As to the 02 Policy, the parties disputed whether that policy's Exhibitions and Related Marketing Exclusion rendered illusory the Personal and Advertising Injury coverage. The district court agreed with the Models and the Clubs that it did and "decline[d] to give effect to PESLIC's 'Exhibition and Related Marketing' exclusion." The trial court thus held that PESLIC had a duty to defend the Clubs. The district court also held that PESLIC had a duty to indemnify the Clubs under the 02 Policy. DISCUSSION In Texas, insurance policies are interpreted by the same principles as contract construction. The words of the policy are given their ordinary and generally accepted meaning unless the policy shows the words were meant in a technical or different sense. An insurance contract is ambiguous if it is subject to more than one reasonable interpretation. Under Texas's well-established eight-corners rule, an insurer's duty to defend is determined by the claims alleged in the petition and coverage provided in the policy. The 01 policy includes coverage for Personal and Advertising Injury. But it also includes a Field of Entertainment Exclusion, which narrows the scope of that coverage. An insurance policy is not illusory merely because it does not provide coverage for a claim the policyholder thought it would cover. By its terms, the Field of Entertainment Exclusion eliminates coverage for most of the "advertising injuries" included in the 01 Policy's Coverage B-Personal and Advertising Injury Liability. But it expressly excepts injuries encompassed by subsection f., for the use of another's "advertising idea." The exclusion does not render coverage illusory and therefore is binding on the parties. To sum up, the Field of Entertainment Exclusion is enforceable, as the 01 Policy nonetheless will provide coverage for other claims. Coverage under the policy is thus not illusory. The Clubs took those products and used them without permission. Without more, taking and then advertising another's product is different from taking another's 'advertising idea. PESLIC, therefore, has no duty to defend the Clubs based on the 01 Policy's "advertising idea" coverage, and the district court erred in concluding otherwise. The 02 Policy, which applies to most of the Models' claims turns on the policy's Exhibition and Related Marketing Exclusion, which eliminates coverage for Personal and Advertising Injury subsections d. through g. (pertaining to advertising injuries), to the extent "such activities arise out of or are part of 'exhibitions and related marketing.'" The 02 Policy, is not illusory merely because it does not provide coverage for a claim the policyholders thought it would cover. Instead, the text of the 02 Policy is not ambiguous, and Texas law presumes that the party knows and accepts the contract terms. A lack of duty to indemnify can be inferred from a lack of duty to defend when the reasons that negate the duty to defend also negate any possibility the insurer will ever have a duty to indemnify. PESLIC does not have a duty to defend the Clubs under the 01 Policy. Its duty to indemnify under the 01 Policy depends on final resolution of the state case. As for the 02 Policy, PESLIC does not have a duty to defend or indemnify under it because the 02 Policy does not provide coverage for the claims alleged by the Models. The district court erred by concluding otherwise. ZALMA OPINION The Eight Corners Rule limits the court coverage determination to the allegations of the complaint and the wording of the policies. Since the policies clearly excluded the claims of the models there was no coverage for a defense and as to one policy the results of the appeal of the Texas state curt action can determine the duty to indemnify while the other policy does not allow coverage for defense or indemnity. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

No Insurance Policy Covers Every Possible Risk of Loss Defendant Timed Out, LLC appealed a summary judgment declaring plaintiff AIX Specialty Insurance Company had no duty to defend, and thus no duty to indemnify, its insured in an action Timed Out brought against the insured. The trial court concluded a policy exclusion for personal and advertising injuries "arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights" eliminated AIX's coverage obligations in the underlying lawsuit. In AIX Specialty Insurance Company v. Timed Out, LLC, B320255, California Court of Appeals, Second District, Third Division (October 5, 2023) the Court of Appeals interpreted the meaning of the exclusion. BACKGROUND The Policy Godtti Entertainment, the AIX insured operated a bar and nightclub where its patrons can "dance," see "live DJ performances," and attend "an assortment of events." In February 2019, AIX issued a commercial general liability (CGL) insurance policy to Godtti. The policy insures against liability for damages stemming from, among other things, certain "personal and advertising injury" offenses. The policy excluded coverage for "'Personal and advertising injury' arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights" (the IP exclusion). Timed Out's Lawsuit Against Godtti Timed Out filed a three-count complaint against Godtti for statutory misappropriation of likeness; common law misappropriation of likeness; and negligent hiring, supervision, and/or retention of employees. According to the complaint's allegations, between 2017 and 2019, Godtti knowingly used the models' "image and likeness" in "various marketing, advertising, and promotional material[s]" without the models' consent and in violation of their statutory and common law right of publicity. Godtti also allegedly failed to train and supervise its employees who "stole the [m]odels' [i]mages and used the [i]mages without [the models'] permission." AIX's Declaratory Relief Action Against Godtti and Timed Out AIX filed a declaratory relief action against Godtti and Timed Out seeking a declaration that it had no duty to defend or indemnify. AIX moved for summary judgment asserting the IP exclusion precluded any potential for coverage for the claims asserted in Timed Out's complaint. Specifically, AIX argued all claimed injuries arose out of Godtti's alleged infringement of the models' right of publicity-an "other intellectual property right[ ]" subject to the IP exclusion. The Order Granting Summary Judgment The trial court granted AIX's summary judgment motion, concluding the IP exclusion precluded coverage for Timed Out's misappropriation of likeness claims. The court entered judgment in favor of AIX. Timed Out filed a timely notice of appeal. DISCUSSION In determining whether a claim creates the potential for coverage under an insurance policy appellate courts are guided by the principle that interpretation of an insurance policy is a question of law. Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. The IP Exclusion Precludes Coverage for Timed Out's Claims Based on Godtti's Alleged Misappropriation of the Models' Likenesses Specifically, the court determined Timed Out's claimed injuries all stemmed from Godtti's alleged misappropriation of the models' likenesses and the IP exclusion unambiguously precluded coverage for those claims. Godtti's policy expressly excludes coverage for "'[p]ersonal and advertising injury' arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights." (Italics added by the court) As the California Supreme Court explained in Hameid v. National Fire Ins. of Hartford (2003) 31 Cal.4th 16, only a "widespread promotional" campaign using the image constitutes "advertising" under a CGL policy like the one AIX issued to Godtti. Timed Out's complaint alleges only that Godtti misappropriated the models' likenesses as they appeared in digital images-not that Godtti misappropriated an advertisement or advertising idea using those likenesses or images. The Court of Appeals agreed with the trial court's conclusion that Timed Out's claims arise out of an alleged infringement of the models' right of publicity and the IP exclusion therefore unambiguously precludes coverage. The IP Exclusion Does Not Render Coverage for Personal and Advertising Injury Illusory The Court of Appeals construed the IP exclusion according to its plain terms to give effect to the exclusion and AIX's obligation to provide coverage for personal and advertising injuries. Simply put, because the IP exclusion applies only to injuries "arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights," and claims such as disparagement and false light do not necessarily arise out of intellectual property rights, the exclusion does not render illusory AIX's promise to cover personal and advertising injuries under the CGL policy issued to Godtti. The judgment was affirmed. Plaintiff AIX Specialty Insurance Company is entitled to costs. ZALMA OPINION Appellate courts must interpret insurance contracts as a matter of law. The AIX IP exclusion was clear and unambiguous and fit clearly the wording and intent of the IP exclusion. The Court of Appeals had no choice, based on the facts, precedent and interpretation of clear policy wording but to affirm the trial court. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Insurance Fraudster Tries Multiple Bases for Appeal & Still Goes to Jail Brian Higgins diverted for personal use funds he received from his mortgage servicer to repair damage to his home caused by a broken fish tank. He also filed a lawsuit against two witnesses for the prosecution, accusing them of misdirecting the funds instead of himself. For his conduct, a jury convicted Higgins on three counts of mail fraud under 18 U.S.C. §§ 1341-42 and two counts of retaliating against a witness, victim, or an informant under 18 U.S.C. § 1513(e). He appealed. In United States Of America v. Brian Higgins, No. 22-3538, United States Court of Appeals, Sixth Circuit (October 6, 2023) affirmed his conviction but gave him a win by requiring the District Court to reconsider the amount of restitution he must pay. FACTS In 2007, Higgins bought a house in Dayton, Ohio, which he financed with a $900,000 mortgage. By April 2010, Higgins had defaulted on his mortgage payments and, as of October 2016, still owed almost all that he had borrowed ($891,335.37). On top of that, the house was encumbered with about $815,000 in liens, including for federal taxes over the years. Higgins's 1,000-gallon fish tank sprang a leak and caused significant damage to the home. Higgins commissioned Michael Marshall and Scott Waters, contractors and owners of United Demolition, to do the work. But during their initial consultation, Higgins detailed his plan to divert the home repair funds for his own personal use. Higgins asked the contractors to help him with his plan by falsifying documents to procure the insurance monies. Unbeknownst to Higgins, however, the contractors were confidential informants for the FBI on an unrelated matter. Higgins was initially indicted for mail fraud, wire fraud and aiding and abetting. But after learning of the contractors' roles in the government's investigation, Higgins, while under arrest, filed a pro se lawsuit against them both, highlighting their roles as informants and alleging that they were the ones who defrauded Nationstar and the insurance company. The jury found Higgins guilty of three counts of mail fraud and two counts of retaliating against a government witness. The court sentenced him to an aggregate of 3 years' imprisonment and ordered him to pay $84,113.04 in restitution. ANALYSIS The Sixth Circuit noted that the trial court did not abuse its discretion when it denied Higgins's motion for additional Funds to hire an expert accountant and argued the district court erred when it admitted evidence of about $815,000 in liens that were on his residence when he filed his insurance claim. Higgins placed both his general and specific intent at issue when he pleaded not guilty to the mail fraud charges. Evidence of a defendant's financial condition was relevant and admissible for the proper purpose of establishing motive or intent in cases involving financial crimes. Higgins's significant financial woes revealed an incentive for him to use insurance monies for his own purposes rather than their intended purposes. Trial testimony bore this out; the contractors explained how Higgins misappropriated the insurance funds for personal business ventures. The government moved to introduce the recordings to prove retaliatory intent and common plan in relation to the witness retaliation charges. The parallel between Higgins's earlier advice to another person to flip and reverse allegations of wrongdoing against an accuser of that person and his later actions in accusing witnesses in his own case of the very crimes for which he stood trial was striking. The Sixth Circuit explained that any reasonable juror would understand that his statements were not confessions to any of the crimes charged. Rather, they would grasp that this evidence might shed light on Higgins's possible intent in filing suit against the contractors. Restitution Higgins's final challenge was to the district court's May 25, 2022, order of restitution. The recommended amount equaled the total funds Higgins diverted from the insurance disbursements. The Mandatory Victims Restitution Act of 1996 ("MVRA"), 18 U.S.C. § 3663A, requires the district court to award restitution to victims of fraud. Restitution must be awarded in the full amount of each victim's losses. That said, restitution is intended to compensate victims only for losses caused by the conduct underlying the offense of conviction. The Sixth Circuit affirmed Higgins's convictions and ordered the trial court to inquire further as to the appropriate amount of restitution due to Nationstar. ZALMA OPINION People who commit insurance fraud and are caught have chutzpah without limitation. This appeal, with dozens of pages of opinion to resolve the multiple complaints about his conviction that Higgins filed, the Sixth Circuit did away with all his arguments and threw him a bone by requiring the Circuit Court to reconsider the amount of restitution even though it will probably never be collected considering the debts that may have caused him to attempt insurance fraud. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Insurer Not Required to Disclose How it Selects Limits and Premium Ira Trocki sued Pennsylvania National Mutual Casualty Insurance Company ("Penn National") for fraud related to certain insurance policies. The District Court granted summary judgment for Penn National. In Ira Trocki, trading as Jack Trocki Development, LLC v. Penn National Mutual Casualty Insurance Company, No. 22-1483, United States Court of Appeals, Third Circuit (September 13, 2023) the Third Circuit explained what is needed to prove fraud. FACTS Trocki, the owner of a real estate development and management company, purchased and renewed commercial insurance policies with Penn National through an insurance broker from 2006 to 2014. Prior to each annual renewal, Penn National provided Trocki's agent and Trocki with the renewal policy limit and premium to review. Trocki sued Penn National in federal court, bringing two claims for fraud, one for common law fraud and one for consumer fraud under the New Jersey Consumer Fraud Act ("NJCFA"). Trocki alleged that Penn National annually increased its coverage limits and insurance premiums without notice and that it was doing so to account for inflation. Trocki initially referred to this practice as "Inflation Guard," but now contends that he meant to refer to the practice of applying an automatic inflationary increase. The parties agree that "Inflation Guard," an optional coverage benefit that an insured must purchase separately, was not applied to Trocki's policies. The District Court concluded that Trocki fell short of making a prima facie case for either fraud claim. DISCUSSION Summary judgment is appropriate only if the movant shows that there is no genuine dispute as to any material fact. There is a genuine factual dispute if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. All facts are to be viewed in the light most favorable to the nonmoving party. Trocki argued that the District Court improperly granted judgment for Penn National on his claims under the NJCFA and for common law fraud. The NJCFA prohibits certain deceptive commercial behavior. For a claim under the NJCFA, a plaintiff must demonstrate: unlawful conduct by a defendant, an ascertainable loss, and a causal relationship between the defendant's unlawful conduct and the plaintiff's loss. A cause of action for common law fraud in New Jersey has five elements: a material misrepresentation of a presently existing or past fact; knowledge or belief by the defendant of its falsity; an intention that the other person rely on it; reasonable reliance thereon by the other person; and resulting damages. Trocki's argument was that Penn National applied some undisclosed inflation factor to increase the values of the properties covered by the Penn National policies. Trocki argued that the increase in building limit due to an automatic inflation increase is misleading and unclear in that it does not apprise the insured of why the building limit (and the premium) is being increased. The Third Circuit concluded that the District Court correctly found Trocki could not make a prima facie claim of common law fraud or consumer fraud under the NJCFA. To start, prior to the renewal of each policy, Penn National presented Trocki with what the new policy limit and premium would be, and Trocki had the opportunity to review, and then paid the new premium. Under New Jersey law there is no "duty to disclose" in a business transaction. Trocki was fully informed of the price and policy limits, and Penn National is not required to disclose precisely how it reached those numbers. Trocki failed to show, at a minimum, either a material misrepresentation, as required for a claim of common law fraud, or unlawful conduct, as required by the NJCFA. Judgment was affirmed. ZALMA OPINION Some people appear to believe that suing an insurance company is a perfect way to profit. Mr. Trocki renewed his policies annually, accepted the policy limits and premiums charged him, paid the premium and then after a few years decided to sue his insurers because Penn National failed to explain the methods it used to set the policy limits and premium. If he had a loss I doubt he would complain about the higher limits. The Third Circuit should have applied Rule 11 to this suit. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Other Insurance Clause Only Applies to Concurrent Policies After the trial court granted the Travelers Indemnity Company and The Travelers Indemnity Company of Connecticut's (collectively Travelers) motion for partial summary judgment finding that indemnity costs incurred by Travelers in connection with the asbestos liabilities of defendants' subsidiary should be allocated on a pro-rata time-on-the-risk basis. In The Travelers Indemnity Company et al. v. Fishbach, L.L.C., et al., 2023 NY Slip Op 04741, Appeal No. 608, Index No. 657060/21 Case No. 2023-00815, Supreme Court of New York, First Department (September 26, 2023) resolved the dispute. DECISION The appellate court agreed with Travelers that it was not liable to cover costs incurred by the insured that occurred outside of the policy period and that any costs it was entitled to cover should be allocated pro rata over the entire period during which damages (personal injuries) occurred. Finding that the appeal was controlled by Keyspan Gas E. Corp. v Munich Reins. Am., Inc. (31 N.Y.3d 51, 61 [2018]), where the Court of Appeals found that the so-called "unavailability rule," which would require insurers to bear the risk for periods when applicable insurance coverage was not available in the marketplace, was inconsistent with the contract language that provides the foundation for the pro rata approach-namely, the during the policy period limitation-and that to allocate risk to the insurer for years outside the policy period would be to ignore the very premise underlying pro rata allocation Thus, with respect to insurance policy language like issued by Travelers, which limited indemnification to losses and occurrences during the policy period the insured, and not the insurer, bore the risk for those years during which such coverage was unavailable. Defendants' contention that Supreme Court (trial court in New York) erred by failing to give effect to the "other insurance" provisions in the Travelers policies was unavailing. New York law is clear that other insurance clauses do not apply to successive insurance policies thus, despite the fact that the subject provision contains no temporal or policy period limitation, when harmonized with the definition of bodily injury, the "other insurance" provision within the Travelers policies pertains to concurrent policies that named defendants (or their subsidiaries) as additional insureds. Defendants provided no evidence that the 1990 settlement with Travelers had anything to do with litigation commenced four years later the Supreme Court correctly determined that, as "the release explicitly limits itself to current and future obligations and liabilities for premiums," it was irrelevant to the allocation of indemnity costs. ZALMA OPINION New York ignored spurious claims and applied the clear and unambiguous language of the Travelers' policies to find that there can be no coverage applied as a result of an "other insurance" clause to other insurance in effect after the termination of the Travelers' policies. Sharing only occurs when policies in effect at the same time for the same loss both have other insurance clauses that require pro-rata sharing of losses not sharing four years after settlement for a different claim after expiration of the policy. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

No Right to UM Coverage if You are not an Insured WRIT PRACTICE OFTEN UNSUCCESSFUL BUT NOT ALWAYS The Louisiana Court of Appeals was asked to do what it normally would not do: determine if the trial court erred in denying a motion for summary judgment filed by Employers Mutual Casualty Company ("Employers Mutual"). In Lee Mallahan, III v. Employers Mutual Casualty Co., et al, No. 55,136-CW, Court of Appeals of Louisiana, Second Circuit (September 27, 2023) Employers received its request. FACTS On June 1, 2020, Erick Guevara ("Guevara"), drove to Mallahan’s house who was standing in the driveway picking up worms from the pavement and throwing them into the grass, only to strike Mallahan with Guevera’s truck. Mallahan alleged the pickup truck knocked him into the air and caused him to lose consciousness. Mallahan sued on April 21, 2021 and named as defendants Guevera and Employers Mutual. As the managing member and an employee of Tadpole, LLC ("Tadpole"), Mallahan alleged that Employers Mutual provided "insurance coverage, excess coverage, umbrella coverage, or other coverage" for Mallahan's damages. Employers Mutual filed a motion for summary judgment and urged no uninsured/underinsured ("UM") coverage existed for Mallahan's injuries under the terms of the commercial auto policy or the commercial umbrella policy issued to Tadpole. The trial court ordered that Mallahan raised genuine issues of material fact and denied the motion. Employers Mutual Sought a writ from the Court of Appeals to order the trial court to grant its motion for summary judgment. DISCUSSION Employers Mutual urged that, because it made a showing that Mallahan was not an insured under the policies issued to Tadpole there was no genuine issue of material fact to preclude the granting of summary judgment. A genuine issue is one about which reasonable people could disagree. A material fact is one that potentially ensures or precludes recovery, affects the ultimate success of the litigant, or determines the outcome of the dispute. Because it is the applicable substantive law that determines materiality, whether a particular fact in dispute is material for summary judgment purposes can be seen only in light of the substantive law applicable to the case. Summary judgment declaring a lack of coverage under an insurance policy may not be rendered unless there is no reasonable interpretation of the policy, when applied to the undisputed material facts shown by the evidence supporting the motion, under which coverage could be afforded. The extent of coverage is determined from the intent of the parties as reflected by the words of the insurance policy. For Mallahan to be insured under the commercial auto policy, he must be using Tadpole's covered vehicle that Tadpole owned, hired, or borrowed with Tadpole's permission. The undisputed facts established that Mallahan was not using any automobile at the time of the accident. As a result, Mallahan is not entitled to UM benefits as he would not be considered an insured for purposes of Tadpole's Employers Mutual commercial auto policy. Tadpole's Employers Mutual commercial umbrella policy required that to be considered an insured under this policy, Mallahan must use, with permission, one of Tadpole's covered autos that he did not personally own. The policies were clear: Mallahan was not qualified as an insured; Tadpole was the named insured. Furthermore, Mallahan was not using a covered auto with Tadpole's permission when the accident occurred. In fact, no use of a vehicle was involved on Mallahan's part. Instead, Mallahan was standing in his driveway throwing worms into the grass when Guevara's Chevy truck came into contact with Mallahan's person. Employers Mutual's policies clearly define who is considered an "insured" under the policies and who is entitled to UM coverage. A contrary interpretation of the policy language would be unreasonable. The Court of Appeals concluded that the policies must be enforced as written. As a result of its analysis the Court of Appeals concluded that Employers Mutual's writ application needed to be, and was, granted. The trial court was ordered to grant Employers Mutual's summary judgment motion and to dismiss Mallahan's claims against Employers Mutual. ZALMA OPINION Contracts of insurance are interesting documents. They tell the parties to the contract what will happen in the event of injury to an insured, who is insured, and what benefits were available. Mr. Mallahan was severely injured when he - as a pedestrian standing in his own driveway - was not an insured of the Employers Mutual policy and was not entitled to UM/UIM coverage. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Duty to Defend and Indemnify Inviolate Four insurers (collectively, the appellants) appealed the district court's order finding they are required to provide insurance coverage for an incident at Hampton Inn-Albany, a hotel owned by Albany Downtown Hotel Partners, LCC (Albany), and managed by Banyan Tree Management, LCC (Banyan). The four insurance companies-Citizens Insurance Company of America and Massachusetts Bay Insurance Company (collectively, Hanover), Westfield Insurance Company (Westfield), and Starr Indemnity &Liability Company (Starr)-issued commercial general liability insurance to Banyan and Albany. In Citizens Insurance Company Of America, Massachusetts Bay Insurance Company, Westfield Insurance Company, Intervenor v. Banyan Tree Management, LLC, Albany Downtown Hotel Partners, LLC, Jane Doe, Starr Indemnity &Liability Company, No. 22-13581, United States Court of Appeals, Eleventh Circuit (September 28, 2023) the Eleventh Circuit affirmed. FACTS In 2015, an employee of Hampton Inn-Albany secretly recorded a hotel guest while she was showering in the hotel bathroom. Years later, the video was circulated, and the guest sued Banyan and Albany for negligence, premises liability, and vicarious liability, alleging she suffered emotional and subsequent physical injury (Underlying Complaint). Banyan and Albany subsequently sought coverage from their insurance providers, who disputed their duty to cover this injury, primarily arguing that the Underlying Complaint did not include allegations of "personal and advertising injury" arising out of Albany's "legitimate business," and that their policy exclusions precluded coverage. DISCUSSION Georgia law makes clear that ambiguities are to be resolved in favor of the insured noting that if the policy exclusions are ambiguous, the purported reservation of rights must be construed strictly against the insurer and liberally in favor of the insured. The appellants failed to even make a showing of ambiguity, let alone definitively establish that the Underlying Complaint falls outside their policies or that an exclusion precludes coverage. The Eleventh Circuit found unpersuasive the arguments that the hotel guest's right to privacy was not violated, and that the recording did not arise out of Banyan and Albany's business. While filming a showering guest is clearly not a "legitimate" hotel practice, when a hotel employee-who would not have had access to the room but for his authority-places the camera in the bathroom and circulates the video, the injury was undoubtedly imputed to the hotel. Accordingly, the Eleventh Circuit affirmed the district court's decision. ZALMA OPINION Hotel employees should not have the access to film a guest while she showered and then distribute the video to the world as she, believing she was taking a private shower, was clearly an illegitimate hotel practice performed by an employee who was given access by the hotel to include a camera where the victim showered. No exclusion applied and coverage was clearly applicable. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Insurer Should Get Premium for Waiver of Subrogation Evanston Insurance appealed from a judgment entered after the trial court granted summary judgment in favor of Southern California Edison Company (SCE) and against Evanston Insurance Company (Evanston) as to Evanston's claims for equitable subrogation, equitable indemnity, restitution, and declaratory relief. In Evanston Insurance Company v. Southern California Edison Company, B320392, California Court of Appeals, (September 29, 2023) Evanston contributed $25 million to settle claims by property owners against its insured, The Original Mowbray's Tree Service, Inc. (Mowbray's), which was a subcontractor of Utility Tree Service, Inc. (UTS) under UTS's contract with SCE to manage certain vegetation proximate to SCE's equipment. According to Evanston, the property owners' claims arose out of a wildfire they alleged was caused by a tree hitting power lines that were owned and operated by SCE. Evanston asserted that the wildfire resulted solely from SCE's negligence. In its motion for summary judgment, SCE argued that the following waiver provision in Mowbray's subcontract with UTS barred Evanston's claims: "Subcontractor [(Mowbray's)] waives and will require all of its insurers to waive all rights of recovery against Contractor [(UTS)] or the Owner [(SCE)], their affiliates, their directors, officers and employees, whether in contract, tort (including negligence and strict liability) or otherwise." The trial court agreed and entered judgment in SCE's favor. On appeal, Evanston contended the waiver provision is ambiguous and that the trial court erred in failing to analyze separately whether SCE's waiver defense applied to Evanston's equitable indemnity and restitution causes of action. Regardless, the Court of Appeals concluded that the plain language and context of the waiver provision demonstrated that the provision unambiguously precludes Evanston's equitable subrogation claim against SCE. FACTUAL BACKGROUND In February 2015, a wildland fire ignited in Bishop, California on property owned by the Los Angeles Department of Water and Power (Round Fire). Evanston alleged that property owners and their subrogated insurers filed at least 10 lawsuits in the aftermath of the Round Fire to recover damages. Evanston asserts that the plaintiffs in the lead action (underlying action) alleged that the fire was caused by a tree (subject tree) that contacted power lines owned and operated by SCE. The subcontractor agreement included the obligation to carry $41 million per occurrence in insurance coverage. Evanston alleged that during the underlying action, SCE, which claimed to be an additional insured under the policy, repeatedly threatened to bring a bad faith action if Evanston did not pay the full amount of the policy and it under pressure agreed to contribute the $25 million policy limit to a settlement and reserved its rights to pursue full recovery from SCE ignoring the waiver provision of the contract and Evanston's policy wording. The trial court heard and granted SCE's motion for summary judgment. APPLICABLE INSURANCE LAW A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness. Evanston bore the burden of rebutting the presumption of correctness accorded to the trial court's decision, regardless of the applicable standard of review APPLICABLE SUBROGATION PRINCIPLES In the case of insurance, subrogation takes the form of an insurer's right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid. An insured's contractual waiver defeats an insurer's subrogation claim. DISCUSSION The waiver provision at issue appears in exhibit B of the agreement, which is a two-page document entitled "Insurance." On the first page and under the subheading "Subcontractor's Insurance" (boldface & underscoring omitted), the subcontract required the "Subcontractor" to "obtain and maintain" certain specified "policies of insurance ...." It provided that the subcontractor waived all of its rights against SCE and that its insurer agreed to the waiver. The context of the waiver provision supports the conclusion that it encompasses claims against SCE that Mowbray's would otherwise have been able to transfer to its insurers. In sum the plain language of the waiver provision unambiguously foreclosed Evanston's equitable subrogation claim against SCE. The waiver provision was presumably available for Evanston's review when it underwrote the insurance policy for Mowbray's and it agreed to support the waiver. Because The Waiver Provision Is Unambiguous, The Court Rejected Evanston’s Arguments Supporting Its Construction Of The Provision When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is "reasonably susceptible" to the interpretation urged by the party. If it is not, the case is over. Because the Court of Appeals concluded for the reasons set forth above that the waiver provision's reference to “all rights of recovery against Contractor or the Owner" unambiguously included Evanston's equitable subrogation rights against SCE. The judgment was affirmed. Respondent Southern California Edison Company is awarded its costs on appeal. ZALMA OPINION Insurers like Evanston issuing general liability policies often, if not invariably, agree to waive the insurer's right to subrogation. Evanston's policy allowed for the waiver and had no more rights than its insured who had waived the right by a clear and unambiguous contract and caused its insurer, Evanston, to include the waiver. Evanston tried to change the meaning of the contract on appeal but was unable to explain why it had agreed to the waiver before the issuance of the policy. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library

Don't Ty to Defraud GEICO It Bites Back GEICO (collectively, “GEICO” or “Plaintiffs”) sued Defendants ALP Supply, Inc. (“ALP”), PV Supply, Inc. (“PV”), and Pal Vakula, alleging common law fraud and unjust enrichment claims. In Government Employees Insurance Company, GEICO Indemnity Company, Geico General Insurance Company, and GEICO Casualty Company v. ALP Supply, Inc.; PV Supply, Inc.; and Pal Vakula, No. 22-CV-79 (LDH)(MMH), United States District Court, E.D. New York (September 29, 2023) GEICO sought, and obtained, default judgments against health care fraud perpetrators. The GEICO Plaintiffs' moved the USDC for default judgment pursuant to Federal Rule of Civil Procedure 55(b)(2). For the reasons set forth below, the Magistrate Judge recommended that Plaintiffs' motion should be granted as to their common law fraud claims. The Court further recommended that Plaintiffs should be awarded damage. BACKGROUND In sum, the allegations focus on Defendants' multi-faceted scheme to defraud GEICO by falsely representing material information to collect benefits under New York's “no-fault” insurance laws. Healthcare service providers that do not comply with state or city licensing requirements are ineligible to collect no-fault benefits. Further, the relevant laws prohibit licensed providers from paying or accepting kickbacks for referrals. The Fraudulent Scheme ALP and PV, both New York corporations based in Brooklyn, are retailers of Durable Medical Equipment (DME) and OD. Vakula, a New York resident, owns and operates both businesses, but is not and has never been a licensed healthcare provider. From July 2019, Vakula used ALP and PV to submit and cause to be submitted to GEICO thousands of fraudulent no-fault insurance claims for medically unnecessary, illusory, and otherwise non-reimbursable DME and OD. GEICO relied on this false information to process Defendants' claims promptly pursuant to statutory and contractual obligations, resulting in payments of over $267,000. Defendants not only submitted claims to GEICO knowing that they included materially false information but also hired law firms to pursue collection of the fraudulent claims from GEICO, which resulted in expensive and time-consuming litigation against GEICO if the charges were not promptly paid in full. JOINT AND SEVERAL LIABILITY GEICO seek to hold ALP and Vakula jointly and severally liable and PV and Vakula jointly and severally liable. Here, GEICO sufficiently alleged Vakula's joint and several liability as to PV and ALP. According to the Complaint, Vakula owns and controls both PV and ALP and was directly involved in submitting fraudulent claims to GEICO through those entities. The alleged harm to GEICO is indivisible between Vakula as the owner and operator of each corporate defendant. Accordingly, the Magistrate found that joint and several liability is appropriate as to (1) ALP and Vakula and (2) PV and Vakula. COMMON LAW FRAUD In the Second and Fourth Causes of Action in the Complaint, GEICO alleges that Defendants committed common law fraud. Under New York law, a plaintiff asserting a claim of common law fraud must plausibly allege: a material misrepresentation or omission of fact made by defendant with knowledge of its falsity intent to defraud; reasonable reliance on the part of the plaintiff; and resulting damage to the plaintiff. DECLARATORY JUDGMENT Here, GEICO established that an actual controversy exists and that a declaratory judgment would afford specific and conclusive relief as to pending claims with respect to all Defendants. GEICO alleges that ALP and PV have pending bills submitted to GEICO that GEICO has no obligation to pay. Additionally, GEICO has submitted documentation of pending collections actions that ALP and PV are actively prosecuting against GEICO in New York state courts. GEICO has provided a list of the actions, including the amounts involved, the claim numbers, and the status of each action. CONCLUSION In sum, Plaintiffs established liability on their common law fraud claims only. The Magistrate judge recommended: a default judgment should be entered against Defendants for common law fraud; Plaintiffs should be awarded compensatory damages in the amounts of $112,201.74 jointly and severally against ALP Supply, Inc. and Vakula and $188,799.94 jointly and severally against PV Supply, Inc. and Vakula, with prejudgment interest to accrue at an annual rate of nine percent until entry of judgment, with revised calculations to be provided to the Court to determine the specific amount due; and a declaratory judgment should be entered that Plaintiffs have no obligation to pay any pending claims submitted by ALP Supply, Inc. and PV Supply, Inc. ZALMA OPINION GEICO seems to have given up on Departments of Insurance and prosecutors to defeat insurance fraud by proactively suing fraudsters and taking the profit out of the crime of insurance fraud. Its success in this case and others should be emulated by the insurance industry who sits back and allows fraudsters to profit from claims. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Chutzpah: Plead Guilty to Fraud, Receive Probation and Appeal the Conditions Raymundo Gonzalez appeals the condition of probation imposed after he pled no contest to one felony count of insurance fraud. Specifically, when defendant was placed on probation by the trial court, one of the conditions of probation permitted searches of computers, and hand-held electronic and cellular devices (electronic devices). No objection was raised to this condition when it was announced. In The People v. Raymundo Gonzalez, F084950, California Court of Appeals (September 25, 2023) Gonzalez sought removal of the search of electronics equipment. FACTS In the claim, defendant alleged he was injured on September 5, 2013, after pulling irrigation lines when the tire of a tractor hit him on the right foot, causing him to fall. The injury was documented, and defendant saw a doctor at the end of the day. A worker's compensation claim form was also completed by defendant and his employer's safety officer. In March 2016, defendant was examined by Dr. Stephen Choi regarding his ongoing claim. Defendant told Choi he had not suffered any prior injuries. Following a clinical exam, Choi was unable to make any specific findings regarding defendant's left arm and right foot. Choi concluded, however, that defendant had full range of motion in both shoulders, elbows, hands, and joints. Choi reevaluated defendant in November 2016. Choi ultimately apportioned 25 percent of defendant's injury to a preexisting degenerative disc disease, which was nonindustrial, and 75 percent to the injury incurred in September 2013. The Effect of Surveillance A new evaluation was completed in February 2018, after surveillance footage from November 2013, April 2015, June 2015, and September 2015 was considered. Choi asked for this reevaluation after seeing the footage, which showed defendant walking and moving as if he was injury free. Choi observed defendant working hard, picking things up from the ground, and bending and twisting his body without trouble. Choi concluded these movements should not have been possible if he truly had lower back and shoulder pain. This new evaluation determined defendant did not have any impairment or disability and did not require future medical care. A further investigation revealed defendant filed various claims for injuries while employed with other companies between 2001 and 2011. Defendant claimed he was not able to stand or walk for long periods of time and could not lift anything or bend. Defendant further stated he had never filed a worker's compensation injury claim and never suffered an on-the-job injury. All these statements were in direct conflict with what was depicted in the video footage. Defendant was charged with three counts of insurance fraud and one count of perjury. Defendant entered a plea of no contest on count 1 and counts 2 through 4 were then dismissed under the plea agreement. On August 3, 2022, the trial court sentenced defendant to probation following the plea. A condition of probation, which was imposed without discussion or objection, was an electronic search condition requiring defendant to submit to a search of his electronic devices with or without a warrant. DISCUSSION A trial court may impose and require any or all of the terms of imprisonment, fine, and conditions as it determines are fitting and appropriate. A condition of probation will not be held invalid unless it has no relationship to the crime of which the offender was convicted, relates to conduct which is not in itself criminal, and requires or forbids conduct which is not reasonably related to future criminality. Because defendant's trial counsel did not object Gonzalez claimed ineffective assistance of counsel. The Claim of Ineffective Assistance of Counsel To establish ineffective assistance of counsel defendant must show counsel's representation fell below an objective standard of reasonableness under prevailing professional norms, and counsel's deficient performance was prejudicial Unless a defendant establishes the contrary, the court will presume that counsel's performance fell within the wide range of professional competence and that counsel's actions and inactions can be explained as a matter of sound trial strategy. The court’s review of the record revealed that defendant asked the court to be allowed to travel to Mexico during his probation to visit his grandchildren, who he apparently visited often. The court allowed such travel as long as permission was obtained from probation first. It is not unreasonable to conclude evidence of travel not cleared by probation could be found on a computer or other electronic or cellular device. Was the Condition Overbroad? The possible reasons discussed provide a satisfactory explanation for trial counsel's decision not to object here. The type of evidence that might be found on a computer or other electronic devices would support the condition. Defendant's intent to travel outside the jurisdiction while on probation could also be monitored through those devices, if probation had reason to suspect he traveled or was planning to travel without obtaining permission first. Moreover the decision not to object to the electronic devices condition could be related to the decision by the trial court not to impose a jail sentence. ZALMA OPINION The facts established that Mr. Gonzalez was serial workers' compensation fraudster who was not injured but had successfully defrauded multiple employers only to be caught and prosecuted on his last attempt because investigators acquired video proving he had lied about his condition and work history that, when his doctor saw the video, was offended and cut him off. To complain about the terms of probation and take up the time of the court of appeals was unmitigated gall (Chutzpah!) and should have resulted in more than a loss of the appeal but show a violation of probation sufficient to cause him to serve jail time. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library

Zalma’s Insurance Fraud Letter – October 1, 2023 Posted on September 29, 2023 by Barry Zalma ZIFL – Volume 27, Issue 19, October 1, 2023 This, the nineteenth issue of the 27th year of publication Zalma’s Insurance Fraud Letter provides multiple articles on how to deal with insurance fraud in the United States. See the full video at https://youtu.be/ROKxfEaFpTk October 1, 2023 Another Anniversary Forty-four years ago, today I left the world of the employed and became an entrepreneur by opening my own law firm. The law practice was incorporated shortly thereafter as Barry Zalma, Inc. When I opened for business on October 1, 1979, I had no clients and no certainty that I would have any in the future. I borrowed money from the bank to carry me through the first six months, rented a small office with my wife’s grandmother’s dining room table as my first desk and my secretary brought her own typewriter. I was concerned about my ability to pay the loan with my third child about to be born. Much to my surprise, and pleasure, on October 1, 1979, at 8:10 a.m., the best claims handler in the London market, Alan Warboys, called from London and provided me with my first case as an independent lawyer to represent Certain Underwriters at Lloyd’s, London. He, and the Lloyd’s Underwriters he represented, showed faith in me as a lawyer and insurance expert. Alan is now retired but will forever be, my law firm’s first client and a good friend. Read the full article and the full 22 pages of ZIFL at https://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-10-01-2023.pdf More McClenny Moseley & Associates Issues This is ZIFL’s Fifteenth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana. Read the full article and the full 22 pages of ZIFL at https://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-10-01-2023.pdf Good News From the When committing fraud, it is usually good practice not to do it right in front of a camera. However, this Colorado hail contractor just couldn’t help himself. The sales manager for a Colorado construction company says he may have been “too aggressive” after a surveillance camera caught him appearing to fabricate hail damage during a recent damage inspection of a home in Parker. Witnesses say David Kuntz was trying to drum up business in the Newlin Meadows neighborhood of Parker, offering to inspect homes for hail damage. He said he was unaware of a surveillance camera that was rolling as he inspected one home. Read the full article and the full 22 pages of ZIFL at https://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-10-01-2023.pdf California Conference of Arson Investigators Training Seminar OCTOBER 16 – 19, 2023 How Insurers and Arson Investigators Have Taken the Profit from Arson-for-Profit by Barry Zalma on October 19, 2023 = https://netforumpro.com/eweb/Shopping/Shopping.aspx?Site=CCAI&WebCode=Shopping&msm=3263b039-c041-4cdb-84e3-5baf00e8cf8b&cst=fc9ef053-3ef4-41d3-b71a-d6a58cce08eb&ent=e8c4c8e2-68c3-479a-a942-95c2beeae6e1 Read the full article and the full 22 pages of ZIFL at https://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-10-01-2023.pdf Health Insurance Fraud Convictions Caretaker Sentenced in Case of First-Degree Assault and Vulnerable Adult Abuse Obiageriaku Iheanacho, 36, of Baltimore, pleaded guilty and was sentenced according to Maryland Attorney General Anthony G. Brown on September 19, 2023, announced the plea and sentencing for the death of 75-year-old Ellsworth Johnson-Bey. Iheanacho pleaded guilty to first degree assault and abuse of a vulnerable adult in the first degree for her role in the assault and subsequent death of Mr. Johnson-Bey. Read the full article and the full 22 pages of ZIFL at https://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-10-01-2023.pdf Other Insurance Fraud Convictions Boston Employment Agency Owner Sentenced for Tax and Workers’ Compensation Fraud Dam Ngoc Luong, 70, a Dorchester woman was sentenced in federal court in Boston for tax and workers’ compensation fraud offenses in connection with her operation of a temporary employment agency, according to officials. Read the full article and the full 22 pages of ZIFL at https://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-10-01-2023.pdf Fraud Can Defeat Life Insurance Non-Contestability Law in New Jersey In Nickie Vlado v. CMFG Life Insurance Company, No. 23-CV-3234 (JGLC), United States District Court, S.D. New York (August 29, 2023) the much heralded non-contestability clause in life insurance policies that prohibit an insurer from rescinding a policy because of fraud in the application for insurance is not limited by state law. Read the full article and the full 22 pages of ZIFL at https://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-10-01-2023.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 California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com Over the last 55 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ to consider more than 50 volumes written by Barry Zalma on insurance and insurance claims handling. Go to Zalma’s Insurance Fraud Letter at https://zalma.com/zalmas-insurance-fraud-letter-2/ Follow Mr. Zalma on Twitter at https://twitter.com/bzalma, Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921, Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg, Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ and GTTR at https://gettr.com/@zalma

Refusal to Buy Coverage Defeats Suit In Texas Windstorm Insurance Association v. Kevin Kelly and Tiffany Kelly, No. 09-22-00173-CV, Court of Appeals of Texas (September 21, 2023) the Texas Windstorm Insurance Association's (TWIA) appealed from an order granting Plaintiffs' summary judgment and denying TWIA's summary judgment motion. THE STATUTE Section 2210.208 of the Texas Insurance Code requires an offer of Windstorm and Hail Insurance policies issued by TWIA to include coverage for wind-driven rain. Coverage may be made available through an endorsement that requires the insured to pay an additional premium to the carrier to compensate the carrier for insuring against the additional risk of covering the property against the casualty of being damaged by wind-driven rain. BACKGROUND The Kellys live in Port Arthur, Texas. In 2017, the Kellys purchased a windstorm and hail insurance policy from TWIA through their insurance agent to cover their residential property. The policy insures the property against direct loss resulting from the perils of Windstorm and Hail only. The policy specifically excluded the following loss to the covered property: “6. Rain. We do not cover loss or damage caused by or resulting from rain, whether driven by wind or not, unless direct force of wind or hail makes an opening in a roof or wall and rain enters through this opening and causes the damage.” The Kellys' home was damaged by Hurricane Harvey on or about August 29, 2017. On September 1, the Kellys’ filed a notice of claim with TWIA. The adjuster hired by TWIA made the following findings: the Kellys' property sustained covered damage to the garage door tracks, damage to the roof was not caused by wind or hail, and water damage to the interior of the property did not result from a wind or hail created opening in the roof or walls, as required for coverage under the policy. TWIA issued a Notice of Claim Acceptance in Part and Denial in Part, accepting coverage for damage to the tracks on the detached garage but denying coverage from rainwater intrusion. TWIA filed an unsuccessful motion for summary judgment. The dispute centered on whether the "must include coverage for" clause is satisfied by TWIA's offering their insureds the opportunity to purchase a Department of Insurance approved endorsement, which extends the basic coverage in TWIA's windstorm and hail policy to damages caused by wind-driven rain. The trial court found that the TWIA policy issued to the Kellys improperly and ineffectively omits coverage for wind driven rain damage. ANALYSIS The Court of Appeal construes statutory language to determine and give effect to the Legislature's intent. The Court must not interpret the statute in a manner that renders any part of the statute meaningless or superfluous. TWIA argued that it complied with the Act by offering to cover losses caused by wind-driven rain through an endorsement to the basic windstorm and hail policy that it issued to the Kellys, an endorsement the Kellys did not obtain. The Act imposes no non-compliance penalty on TWIA but instead allows it to comply with the statute by offering its insureds the opportunity to obtain an endorsement that covers damage caused by wind-driven rain by paying an additional premium approved by the commissioner when purchasing a windstorm and hail policy. The Court of Appeals' reading of the statute supports the policy that led to the enactment of the windstorm statute. Under well-established rules of statutory interpretation, an appellate court may not interpret one portion of a statute so as to render another portion of the statute meaningless. Accordingly, the Court of Appeals concluded that TWIA complied with the requirements of the statute by offering the Kellys the opportunity to obtain coverage for damage caused by wind-driven rain through the purchase of an endorsement that, if purchased, would have provided coverage for losses caused by wind-driven rain. The Court of Appeals reversed the trial court's Order granting summary judgment in favor of the Kellys and reversed the trial court's Order denying TWIA's summary judgment. ZALMA OPINION Statutes requiring insurers to provide various types of insurance must be read in a manner to provide the desires of the Legislature and not provide less or more than that required by the statute. TWIA followed the statute by offering an endorsement providing wind driven rain coverage, which it offered to the Kellys' only to have them refuse the coverage and then, when damaged by wind driven rain, attempted to cure their error by litigation misinterpreting the statute. They received the coverage they paid for and did not receive the additional coverage for which they refused to pay. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

When an Obvious Arson is Just an Accident This is a Fictionalized True Crime Story of Suspected Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The stories help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime. See the full video at and at https://youtu.be/QVhXxFvk7aQhttps://youtu.be/QVhXxFvk7aQ THE FIRE Sometimes, what looks like an obvious arson for profit turns out to be an accidental fire. The insured lived near the ocean within the city limits of San Luis Obispo. Recently divorced she lived alone for many months. The divorce had caused her much emotional trauma. After twenty-five years of marriage, her husband announced he could not live with her anymore and moved out. She sought treatment for her depression. She visited with multiple psychiatrists and psychologists, who only made her life more miserable. Shortly before the divorce became final, walking aimlessly through an older part of town, she happened upon an occult bookstore. She bought a book on the power of the mind. The good book gave her a life purpose. She began to apply the principles stated in the book and found peace for the first time since her divorce. She became a regular customer of the book store. A friendship grew between her and the owner, who introduced her to others in San Luis Obispo interested in the occult and powers of the mind. She applied for, and received, a divinity degree from the Universal Life Church. She bought her first crystal ball that she used to concentrate her psychic energies after receiving the divinity degree. The occult, the powers of the mind and magic were the center of her life. She had a purpose and was no longer distressed by the loss of her husband. When the divorce was final and she gained absolute title to the land and house the book store owner moved into the house with her. As they, and their friends, concentrated their psychic energies, they became convinced that a major earthquake would strike California and destroy all who lived in San Luis Obispo. Her concentrated energies, directed through several different crystal balls, convinced her that the only safe place was a small community in Northern Tennessee. She put her house on the market and accepted the first reasonable offer of sale. Shortly before escrow closed, while the insured and her book store owner lover, slept in the master bedroom, a fire broke out in the second bedroom of the house. Awakened by a sound like a heavy rainstorm, they discovered the fire and escaped naked through the bedroom window into their backyard. Neighbors called the fire department who quickly extinguished the fire after all its contents and most of the structure were destroyed. Claim was made by the insured to her insurer and by the buyer, separately, to its insurer. They had never considered establishing who would have the risk of loss during escrow and, therefore, both maintained separate insurance policies with separate insurers. THE INVESTIGATION The investigation by the fire department revealed that the fire was suspicious. No specific cause could be found for the fire. It did burn very hot. There were marks on the floor in the second bedroom that seemed to show a flammable liquid was spread. The insurer was concerned. It demanded the examinations under oath of the insured and her book store owner lover. Both testified clearly, concisely and honestly that they had no idea why the fire occurred. Both testified, with vigor, concerning their belief in their psychic powers. Both denied adamantly any knowledge of the cause of the fire and explained why they sold the house because of what they believed was the oncoming major earthquake. They explained that they had purchased a house near Nashville because of the low taxes and the stable land below all of Tennessee. The claim made by them was unusual. Neither the adjuster nor counsel had ever received a claim for the loss by fire of three crystal balls. The value of the psychic paraphernalia was difficult to show. The fire department was convinced that an arson had taken place, but could not understand why the insured and her lover had started the fire nude. The insurer conducted a thorough investigation and retained the services of an experienced fire cause and origin investigator. He sifted through the debris and found in the debris an electrically operated bed, equipped with a polyurethane foam mattress. The investigator advised the insurer that, after examining the bed and after reviewing the testimony of the insured and her lover at the examination under oath, it was his conclusion that the fire was the result of a short circuit in the bed motor which ignited the highly flammable (and now banned) polyurethane foam mattress. He explained that polyurethane foam, when heat is applied to it, liquefies and burns vigorously. The liquefied polyurethane foam flows on floor surfaces and leaves a trail similar to that left by the spreading of a flammable petrochemical accelerant. The mystery solved; the insurer paid the insured the loss she incurred to her personal property. The two insurers split the cost of rebuilding the structure. The insured and her lover used the proceeds of the sale of the house and the insurance claim to move to the house they had found in Tennessee. They now live in a large home on ten acres of land where they have gathered with them other believers in the occult and the power of the mind. Since both the insured and her lover were ministers of the Universal Life Church, they performed their own wedding and are living content, spreading the word of the power of the mind. Their wedding ceremony was interrupted by an earthquake from the New Madrid fault registering 3.2 on the Richter scale. Since they were Californian’s the two slept through, and never felt, the minor earthquake. What appeared to be an obvious arson claim, with insureds who were far from average, turned out to be an accidental fire that resulted in an effective subrogation action by the insurer against the manufacturer of the bed. The insureds settled down to avoid a California earthquake on the cusp of the New Madrid fault. Adapted from my book "Insurance Fraud Costs Everyone" available from Amazon.com as a paperback or a Kindle book http://zalma.com/blog/wp-admin/post.php?post=292813&action=edit&classic-editor&classic-editor__forget (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Jurisdiction Chosen by Contract of Insurance Must be Followed Government Employees Insurance Company (hereinafter “GEICO”) sought review of the trial court's July 12, 2023 judgment denying its motion for partial summary judgment. In Washington Dos Santos v. USAA Casualty Insurance Company, Government Employees Insurance Company And Carrie Ann Rainey, No. 2023-C-0559, Court of Appeals of Louisiana, Fourth Circuit (September 18, 2023) resolved the dispute. RELEVANT FACTS Washington Dos Santos sued for damages asserting damages as a result of a motor vehicle accident. Dos Santos named GEICO as a defendant in its capacity as the uninsured/underinsured motorist insurer of the vehicle he was operating at the time of the accident. In his petition for damages, Dos Santos asserted that GEICO violated Louisiana's penalty statutes which require that an insurer be fair in its handling of claims and tender payment when satisfactory proof of loss is established. On April 23, 2023, GEICO filed a motion for partial summary judgment asserting that Respondent's claim under his insurance policy contract dictates that all claims are subject to North Carolina law and therefore, Louisiana's penalty statutes are inapplicable. GEICO averred that the policy was issued to Respondent at a North Carolina address; Respondent has a North Carolina driver's license; and the vehicle is registered in North Carolina. DISCUSSION To succeed in a motion for summary judgment there must be a genuine issue of material fact. A genuine issue is one to which reasonable persons could disagree; if reasonable persons could reach only one conclusion, no need for trial on that issue exists and summary judgment is appropriate. GEICO maintained the trial court erred in denying its motion for partial summary judgment because the insurance policy specifically mandates Respondent's claim is subject to North Carolina law and thus, Louisiana's penalty statutes are inapplicable. GEICO did so because Dos Santos’ policy provided, in pertinent part: “This policy is issued in accordance with the laws of North Carolina and covers property or risks principally located in North Carolina. Any and all claims or disputes in any way related to this policy shall be governed by the laws of North Carolina.” CLEAR AND UNAMBIGUOUS POLICY WORDING Dos Santos’ insurance policy mandates application of North Carolina law. The language in the policy is clear and unambiguous thus, it must be enforced as written. When the words of an insurance contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent and courts must enforce the contract as written. The language contained in GEICO's policy with Respondent are clear, North Carolina law applies to any disputes or claims. GEICO satisfied its burden of establishing that the language of the contract of insurance is clear and unambiguous and that North Carolina law applies. Therefore, the trial court's judgment denying GEICO's motion for partial summary judgment was reversed. ZALMA OPINION People like Mr. Dos Santos want to punish an insurer that fails to pay what they want so they can profit from an insurance policy. Louisiana allows an insurer to be penalized and North Carolina does not. Since the policy clearly stated that the law of North Carolina applied and the fact that the accident happened in Louisiana was irrelevant. Regardless of the desires of an insured to punish his insurer the contract wording controls the interpretation of an insurance policy. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Situs of Assault Does not Create Coverage A coverage dispute arose from the sexual assault of a special needs student aboard her school bus. National Liability and Fire Company sought a declaration that it had no duty to defend or indemnify the bus company or its school district client in a state court action brought by the student and her mother because its policy did not cover the incident alleged in their complaint. The District Court erroneously held that National had to defend both entities and later concluded it also had to indemnify them. In National Liability & Fire Insurance Co. v. Brimar Transit, Inc. Pittsburgh Public School District, No. 22-2565, United States Court of Appeals, Third Circuit (September 22, 2023) the dispute was resolved. FACTS Brimar Transit, Inc. transported students for the Pittsburgh School District under a multi-year contract. National insured the vehicles in Brimar's fleet. Among the students Brimar transported to and from school were children with special needs. One of those students-an adolescent girl named K.M.-had developmental challenges known to Brimar and the District. Traveling on the bus with her each day was a 12-year-old boy with similar challenges who had sexually assaulted K.M. multiple times, including a groping incident during gym class. The gym incident led the District and Brimar to craft a specific plan to separate K.M. from the male student on the bus: K.M. sat right behind the driver, while the male student sat in the rear. The regular bus driver followed the plan. And when she took maternity leave, her first replacement did too. A second substitute driver took over the route without following the plan and sat K.M. next to the male student. Their proximity allowed the male student to use his body weight to pin K.M. to the seat. With K.M. trapped, the male student pulled down both their pants and assaulted her from behind. Despite being only several feet away during the assault, and despite the cries of other children, the driver did not intervene or even acknowledge the attack on K.M. K.M. managed to push the male student off her a short time later, though he assaulted her again by slapping her backside as she exited at her stop. K.M. and her mother sued Brimar and the District alleging Brimar failed to tell the driver about the plan and failed to train and supervise her properly. They similarly alleged the District was negligent and should have ensured K.M.'s safety on the bus. National defended Brimar in the state court action after issuing a reservation of rights letter but declined to defend the District. National sued seeking declaratory judgment and later moved for judgment on the pleadings, urging that it had no duty to defend the defendants for two reasons. First, it had no duty to defend Brimar because K.M.'s alleged injuries did not result from the "use" of the bus and there was an abuse and molestation exclusion that should apply. Second, it had no duty to defend the District as a non-insured. The District Court disagreed with National on both counts. While this action was pending, National paid more than $500,000 to settle the plaintiffs suit. National moved for summary judgment yet the trial Court held that because National's act of settling the state court claim before critical facts and evidence developed kept the District Court from making nuanced decisions about its duties to defend and indemnify, it would need to indemnify Brimar and the District. THE APPEAL Discussion Pennsylvania law imposes separate, though related, duties on insurers to defend and indemnify their insureds. Pennsylvania courts analyze those allegations using the "four-corners" rule: if the allegations even "potentially could support recovery under the policy," then the insurer has a duty to defend its insured in the case. The Policy determines whether National had a duty to defend. Based on that provision, National offers two ways in which the District Court erred in holding it had a duty to defend. First, the complaint pleads injuries "resulting from" the sexual assault, not the "use" of Brimar's bus. And second, sexual assaults like K.M.'s are excluded by the Policy's "Abuse or Molestation Exclusion." National argued the District Court erred and urged instead that, to trigger coverage, the underlying bodily injury must be causally connected to the use of the insured vehicle as a motor vehicle. The male student's previous assaults confirm the bus was merely incidental to the sexual assault-i.e., as the situs of the attack. Because the allegations in the complaint do not forge a strong enough link between the use of the school bus and K.M.'s injuries, the Third Circuit concluded that the District Court erred in finding National had a duty to defend Brimar and the District. ZALMA OPINION The injuries suffered by KM were horrific but they were not, under any definition of the term, a result of the use of the school bus. The driver erred but the driver, nor the use of the bus, caused her injury. National should now seek to recover the money it paid, under a reservation, on behalf of the defendants. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Indian Tribe's Sovereign Immunity Limits Waived by Insurance if Claimant Complies with Waiver Requirements The Seminole Tribe of Florida ("the Tribe") appealed an order denying its motion to dismiss based on sovereign immunity. The trial court rejected the Tribe's contention that Jose Webster did not comply with the terms of the sovereign immunity waiver contained in the 2010 Gaming Compact (the Compact). The Compact required, among other conditions, that the Tribe and its insurance carrier have one year to resolve a claim after a Patron gives notice of the claim, and if the claim is not settled in that time, the Patron may file suit. In Seminole Tribe Of Florida, d/b/a Seminole Gaming v. Jose Webster, No. 4D2022-3448, Florida Court of Appeals, Fourth District (September 13, 2023) the Tribe asserted in the motion to dismiss that the defendant failed to comply with the required conditions because he sued the Tribe within one year of having given written notice of the underlying claim. The trial court denied the motion, because the last of three variations of the plaintiff's complaint filed would have complied with the Compact. As a federally recognized Indian tribe, the Seminole Tribe is entitled to sovereign immunity over all claims unless such immunity is abrogated by Congress or waived by the Seminole Tribe. Further, a waiver must be strictly construed with any ambiguities being resolved against waiver. Webster was a patron at the Seminole Hard Rock Hotel & Casino Hollywood (the "Casino") in September 2019. He claims the Tribe was negligent in failing to protect him from criminal acts which allegedly occurred at the Casino during his visit. In January 2020, Webster timely provided written notice of his claim to the facility. Two months later, Webster sued "Seminole Hard Rock Entertainment, Inc. d/b/a Seminole Hard Rock Casino." The proper defendant was the "Seminole Tribe of Florida d/b/a Seminole Hard Rock Hotel &Casino-Hollywood. The trial court denied the Tribe's motion to dismiss without prejudice. DISCUSSION The first amended complaint and second amended complaint named the Tribe, albeit each stating a different fictitious name. Those complaints alleged the same tort cause of action against the Tribe. Even if the fictitious name may be in error, the fact remains that the real party in interest, and the proper defendant, is the Tribe. The Tribe contends that Webster failed to comply with the Compact's Section VI.D.4. by filing the first amended complaint within the one-year pre-suit period set by the Compact, and Webster's failure to strictly follow the Compact's procedures bars his claim. The record does not include proof that the Tribe responded to Webster's claim within thirty days of his written notice. Therefore, although Webster's first amended complaint commenced suit against the Tribe within one year of his notice of claim his original suit did not. For the foregoing reasons, the appellate court reversed the order denying sovereign immunity and remand for further proceedings. ZALMA OPINION Sovereigns, like the tribe can only be sued if the sovereign entity agrees. The tribe agreed to waive the immunity if certain conditions were met. Webster failed to meet the requirements of the waiver compact and, as a result, he could not sue as he did. The tribe had insurance and he needed to provide the insurer with the time and opportunity to settle his claim. By prematurely suing he was unable to take advantage of the waiver. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Statute of Limitations Bars Bad Faith Claim Loann T. Phan-Kramer and Jonerik Kramer sued American States Insurance Company for underinsured motorist coverage, won, and collected. Now, they have sued American States again asserting statutory bad faith, breach of contract/good faith and fair dealing, and loss of consortium. In Loann T. Phan-Kramer and Jonerik Kramer v. American States Insurance Company, No. 2:23-cv-01867-JDW, United States District Court, E.D. Pennsylvania (September 14, 2023) the USDC took away part of plaintiffs claim and allowed the rest to proceed in a Solomon like decision. BACKGROUND FACTS On April 15, 2016, an underinsured motorist rear-ended Loann T. Phan-Kramer. She suffered a full thickness tear of her rotator cuff, as well as other neck and back injuries. At the time of the accident, American States Insurance Company insured Ms. Phan-Kramer, including underinsured motorist (“UIM”) benefits. After suing then settling with the other driver, Plaintiffs filed their UIM insurance claim with American States. American States denied that claim and Plaintiffs sued. At trial, the jury returned a verdict in Plaintiffs' favor and the insurer satisfied the verdict. DISCUSSION The Tort of Bad Faith The statute of limitations bars Plaintiffs' claim. The statute of limitations on a bad faith claim is two years in Pennsylvania. The statute begins to run when the insurer first refuses to pay the claim. When the court denied Plaintiffs' motion for leave to file a second amended complaint, the court concluded that the statute of limitations began to run on June 28, 2019, when American States denied their claim. Plaintiffs' time to file this claim expired on June 28, 2021. Therefore, American States's Motion on the bad faith claim was granted because it was barred by the statute of limitations. Breach of Contract/Loss of Consortium The Third Circuit has adopted a bright-line rule that res judicata cannot bar claims that are predicated on events that postdate the filing of the initial complaint. Because Plaintiffs' breach of contract and loss consortium claims both rely (at least in part) on American States's conduct following the filing of the initial lawsuit, res judicata cannot preclude these claims. American States acknowledged that the Amended Complaint “focus[es] . . . on the ways that American States supposedly acted in bad faith during the litigation and trial of the underlying UIM/consortium case.” Because the bright-line rule bars the application of res judicata, American States's Motion on the breach of contract and loss of consortium claims was denied. ZALMA OPINION Insurance companies, like every person and corporation, are imperfect. American States decided it did not owe UIM benefits to its insured, took the issue to trial and lost. It paid the judgment only to be sued for defending the original suit. The court found that the insured/plaintiffs filed their bad faith claim too late and dismissed that action only to allow the breach of contract and loss of consortium claims to proceed. The decision is a Pyrrhic victory for the plaintiffs since they already recovered in the initial suit the contract damages. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Insurer Not Obligated to Commit Insurance Claims Suicide Benjamin D. Markuson, Erik Saterbo, and Stephen Saterbo v. State Farm Mutual Automobile Insurance Company, an Illinois corporation; Crawford Law Group, P.A., a Florida corporation; and Larry Walker, No. 2D21-2443, Florida Court of Appeals, Second District (September 15, 2023) Benjamin Markuson and Erik and Stephen Saterbo appealed the entry final summary judgment based upon the trial court's conclusion that State Farm was under no legal duty to its insured to accept any or all of the three proposals for settlement made by Mr. Markuson. FACTUAL BACKGROUND The underlying case arises from a 2006 automobile accident involving Erik Saterbo and Mr. Markuson. At the time of the accident, Erik was operating a vehicle owned by his father, Stephen. Due to his injuries, Mr. Markuson sued the Saterbo. The Saterbos had an insurance policy with State Farm which provided policy limits of $300,000.00 against liability for bodily injuries sustained in an auto accident. And on January 15, 2009, State Farm authorized the Crawford Law Group, P.A.-the firm retained by State Farm to defend the Saterbos-to make a settlement offer to Mr. Markuson to resolve his case for the policy limits. The offer was not accepted. Instead, in 2011 and 2012, Mr. Markuson issued two settlement offers to State Farm's insureds (the first, oral; the second, written) that were largely indistinguishable in their terms. In pertinent part, Mr. Markuson's offer would have required State Farm to (1) tender the $300,000.00 policy limits to Mr. Markuson; (2) authorize State Farm's insureds to enter into a consent judgment in the amount of $1.9 million that would not be recorded or enforced against the Saterbos; and (3) authorize the Saterbos to assign their rights in any claims against their insurance agent. In return, Mr. Markuson would execute a release of all his claims against the Saterbos and a satisfaction of the aforementioned consent judgment. The proposal made no indication that State Farm would be released from any bad faith liability. State Farm declined to accept these proposals, and the case continued to trial. Following a jury trial, Mr. Markuson recovered a total of $3,084,074.00, a sum considerably greater than the coverage afforded. The settlement offers by Mr. Markuson formed the basis of a bad faith complaint against State Farm where Markuson and the Saterbos sued with a seven count complaint against State Farm, Crawford Law Group, P.A., and Larry Walker-State Farm's agent. The alleged bad faith occurred when State Farm failed to settle the personal injury action by declining three of Mr. Markuson's proposals for settlement. The trial court concluded that State Farm had no duty to enter into a consent judgment that was in excess of the policy limits "as a matter of law." The trial court found that "each of the three proposals exposed State Farm to extracontractual claims or payment" and that nothing suggested State Farm would be released by entering into the proposed consent judgments. It further found that State Farm never withdrew its offer of the policy limits. Thus, the trial court determined that "State Farm did not act in bad faith when it did not agree to or negotiate with respect to any of the three proposals." DISCUSSION Here, the thrust of the bad faith case turns on State Farm's refusal to enter into an agreement-that is, State Farm, in the plaintiffs' view, had a duty to authorize its insureds to consent to a judgment more than five times the amount of the policy limit (thereby expediting the availability of a bad faith claim) and to do so without releasing State Farm from liability. Florida law is clear that an insurer has no duty to enter into such an agreement. There is no duty because entering into a consent judgment, for purposes of expediting bad faith litigation, is indeed the 'functional equivalent' of an excess judgment. The obligation to negotiate and settle claims on behalf of its insured is defined by and bounded within the insurance contract itself; an insurer does not ordinarily have a duty to pay a claim in excess of a policy's limit. CONCLUSION The Florida Court of Appeals concluded that, as a matter of law, the trial court correctly determined that State Farm had no duty to enter such an agreement. Thus, where there was no duty to accept the proposals, declining the proposals could not serve as the basis of the bad faith claim. The circuit court erred by entering a final judgment in favor of State Farm to the extent the plaintiffs' claims raised other theories of bad faith and remanded the case to trial on the other issues. ZALMA OPINION Insurance is a means of protecting against the risk of loss for accidentally injuring a third person up to the limits of the policy. Insurers have no obligation to expose themselves to an excess verdict and the court of appeals concluded that State Farm had no duty because entering into a consent judgment, for purposes of expediting bad faith litigation, would force the insurer to pay an excess judgment when its only contractual obligation was to defend its insured and, if there is a judgement, to pay the full limit of liability. To accept the offer that the plaintiff suggested as evidence of bad faith would be to commit financial suicide and violate the clear terms of its policy. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Insurer that Pays Limit of Policy After Appraisal Did not Breach The Covenant of Good Faith & Fair Dealing Washington Street, LLC ("Washington Street") appealed a District Court order granting summary judgment to Nationwide Property and Casualty Insurance Company ("Nationwide"), which ended Washington Street's claims that Nationwide proceeded in bad faith in delaying claim payments following a fire that damaged Washington Street's property. In Washington Street, LLC v. Nationwide Property & Casualty Insurance Company, No. 22-3396, United States Court of Appeals, Third Circuit (September 13, 2023) the Third Circuit resolved the dispute. BACKGROUND In July 2019, a fire caused by a tenant's negligence destroyed an apartment building owned by Washington Street. Washington Street promptly submitted a claim for recovery to its insurer, Nationwide. Some six weeks later, in September 2019, Nationwide provided an initial claim estimate and payment, after Washington Street's attorney complained about the pace of the investigation. That initial payment ($376,342.95) was, as Nationwide acknowledged, incomplete, as it was subject to change based on additional repairs or damage found. In October 2019, Washington Street provided estimates for repairs not covered in Nationwide's initial report. Nationwide reviewed those estimates and hired a consultant to review the entire project. The consultant completed his assessment in January 2020, estimating the total cost of repairs to be $635,898.86, after which Nationwide paid an additional $208,555.91, an amount the parties accepted as bringing the total payments to $584,907.68. Washington Street was dissatisfied with that amount and demanded an impartial appraisal of the total loss. Nationwide cooperated by hiring an appraiser. Washington Street also hired an appraiser, and the two appraisers appointed an "umpire" to resolve any disagreements. In November 2020, the umpire entered an award for Washington Street: $859,670.03 for dwelling loss, $7,720.05 for business personal property, $35,306.40 for debris removal, and $74,200 for loss of income. The total amount exceeded Washington Street's policy limit of $854,700 for dwelling loss, $60,000 for business income, and $25,000 for debris removal, and Nationwide paid the full policy amount. During the appraisal, on June 3, 2020, Nationwide filed a subrogation lawsuit against the tenant who had negligently caused the fire. The subrogation investigation began in July 2019, but Nationwide did not inform Washington Street of the lawsuit until January 14, 2021. Eventually, Nationwide obtained a settlement that resulted in Washington Street receiving an additional $15,000, an amount Washington Street described as "fair and acceptable." Washington Street sued. After discovery, Nationwide moved for summary judgment and the District Court granted it. The Court held that Nationwide's handling of Washington Street's claim was "by no means a model of perfection" but it did not constitute bad faith. DISCUSSION Washington Street claims that Nationwide demonstrated bad faith by delaying six weeks to make its first partial payout, failing to make further estimates until Washington Street pressed for progress, hiring a building consultant for the alleged purpose of further delaying the process, making a still-deficient payment six months after the fire, knowingly misrepresenting its appraisal policy, delaying its policy reformation request, and filing its subrogation action prematurely. Pennsylvania provides a statutory remedy if an insurer acts in bad faith toward the insured. Bad faith requires evidence so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether or not the defendants acted in bad faith. At the summary judgment stage, the insured's burden in opposing a summary judgment motion brought by the insurer is commensurately high because the court must view the evidence presented in light of the substantive evidentiary burden at trial. Nationwide promptly investigated Washington Street's claim, and its claims specialist visited the burned building soon after the site was deemed safe. So too, Nationwide's delay of six weeks in providing the first payment appears reasonable. On August 26, 2019, the claims specialist wrote, the fact is it is a large building and although I have spent days estimating, it has been a slow process. Nationwide's first payment included a detailed estimate of property damage that was admittedly underinclusive and left the door open for Washington Street to submit further estimates once repairs got underway. Washington Street did not initiate any repairs, however. The District Court noted, "Nationwide probably could have been more diligent," but that doesn't mean that Nationwide's pace of review was unreasonable, much less that it showed disregard for Washington Street's contractual rights. Therefore, Washington Street did not show by clear and convincing evidence - the applicable standard of proof - that Nationwide acted in bad faith in processing Washington Street's insurance claim. ZALMA OPINION The tort of bad faith requires a breach of contract by an insurer that provides clear, direct, weighty and convincing evidence sufficient to enable a clear conviction, without hesitation that the insurer acted in bad faith. The evidence did not exist to establish the required clear and convincing evidence of wrong doing it only reflected a claim that took time and expertise to resolve. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

Attorneys May Not Be Sued for the Tort of Bad Faith For many years lawyers for policy holders have sued insurer's lawyers for the tort of bad faith to avoid federal court. I was sued dozens of times in spurious lawsuits claiming that drafting a denial letter was sufficient to sue me personally as the lawyer for an insurer for the tort of bad faith. In so doing the suits almost invariably drove a conflict between the lawyer and his or her client although the lawyer was not a party to the contract of insurance. The California Supreme Court resolved the issue in a case called Jerome Gruenberg v. Aetna Insurance Company et al., 9 Cal.3d 566, 510 P.2d 1032, 108 Cal.Rptr. 480, Supreme Court of California, In Bank. (June 11, 1973.) FACTS Gruenberg sued his insurers and their lawyers for the tort of bad faith after his claim for fire damage to his bar, the Brass Rail, was damaged by fire. The insurers engaged the services of defendant P. E. Brown and Company (Brown). Carl Busching, a claims adjuster employed by Brown, went to the Brass Rail to investigate the fire and inspect the premises. While he was there, he stated to an arson investigator of the Los Angeles Fire Department that plaintiff had excessive coverage under his fire insurance policies. Eventually the premises were locked, and nothing was removed until November 14, 1969, when Busching authorized the removal of the rubble and debris. Gruenberg was eventually charged in a felony complaint with the crimes of arson (Pen.Code, § 448a) and defrauding an insurer (Pen.Code, § 548). Defendant insurance companies also retained attorney Donald Ricketts who demanded in writing that plaintiff appear on December 12, 1969, to submit to an examination under oath and to produce certain documents. On November 26, 1969, plaintiff's attorney responded by letter to Ricketts explaining that he had advised plaintiff not to make any statements concerning the fire loss while criminal charges were pending. The letter also requested that the insurers waive the requirement of an examination until the criminal charges lodged against plaintiff were concluded. Ricketts refused the request and warned that failure to appear for the examination would void coverage under the policies. Gruenberg did not appear and Rickets, on behalf of the insurers denied the claim. The charge against Gruenberg were dismissed by the magistrate for lack of probable cause. DISCUSSION The Supreme Court only ruled on the sufficiency of these allegations which of course must be sustained by proper proof. Plaintiff alleged that Brown, the insurance adjusting firm, and its employee, Busching, and Cummins, the law firm, and its employee, Ricketts, were the agents and employees of defendant insurers and of each other and were acting within the scope of that agency and employment when they committed the acts attributed to them. Gruenberg contended that these non-insurer defendants breached only the duty of good faith and fair dealing. The Supreme Court concluded that the non-insurer defendants were not parties to the agreements for insurance; therefore, they are not, as such, subject to an implied duty of good faith and fair dealing. Moreover, as agents and employees of the defendant insurers, they cannot be held accountable on a theory of conspiracy. Plaintiff sufficiently pleaded a cause of action against the insurers for breach of the covenant. However, since the remaining defendants were not subject to the implied duty arising from the contractual relationship, the complaint does not state sufficient facts to constitute a cause of action against them and that the judgment of dismissal in their favor was proper. ZALMA OPINION The tort of bad faith is a mix of contract and tort. One cannot commit the tort unless that person or entity is a party to the contract of insurance. Therefore, the lawyers and adjusters were dismissed since they were charged with a tort they could not commit. I personally was sued multiple times as the lawyer for an insurer who denied a claim only to defeat those suits with a motion for summary judgment and a declaration that "I am not now, nor have I ever been, an insurer." I then, in an attempt to stop spurious lawsuits, sued the lawyers who filed suits against me for malicious prosecution. I would recommend the same to any lawyer sued for bad faith, a tort that an insurer's lawyer cannot commit. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

No Indemnity for City's Sole Negligence The City of Kansas City sought contractual indemnity against Occupational Health Centers of the Southwest, P.C. doing business as Concentra Medical Centers in the Circuit Court of Jackson County only to be refused by the trial court. In City Of Kansas City, Missouri v. Occupational Health Centers Of The Southwest, P.C., d/b/a Concentra Medical Centers, No. WD85602, Court of Appeals of Missouri, Western District, Third Division (September 12, 2023) the City's indemnity claim sought to shift to Concentra the costs associated with an employment discrimination claim which had been asserted against the City. The circuit court granted summary judgment to Concentra, and the City appealed. FACTUAL BACKGROUND In 2012, the City and Concentra executed Contract No. EV1227, for the performance of drug and alcohol testing on City employees. The City sent Shahidah Hazziez, a City employee, to a Concentra facility for a purportedly random drug screening. Hazziez later contended that she and other Muslim City employees had been disproportionately selected for such drug testing. Concentra notified the City that Hazziez had refused to provide a compliant urine sample and had claimed that it was due to a bladder infection. After Hazziez was fired she sued the City, as well as a number of Concentra-affiliated entities and employees. Hazziez settled her claims against the Concentra defendants. Thereafter a jury trial began against the City and defendants other than the City settled. After an eight-day trial, Hazziez asked the jury for damages because the City had discriminated against her. The only adverse employment action Hazziez identified was the termination of her employment with the City. The jury found in Hazziez's favor and against the City on Hazziez's claims for discrimination based on sex and a perceived disability. The jury awarded her compensatory damages of $172,000.00 but found that the City was not liable for punitive damages. The court subsequently awarded Hazziez attorney's fees in the amount of $303,660.00, and costs of $10,130.85. The Court of Appeal affirmed the judgment on appeal and also awarded Hazziez her attorney's fees on appeal. On remand the circuit court determined that Hazziez's reasonable appeal-related fees and expenses were $88,896.00. The City satisfied the judgment in November 2020. The City filed a third-party petition against Concentra for indemnification under Concentra's contract for drug and alcohol testing services. The circuit court entered its judgment on July 29, 2022, granting Concentra's motion for summary judgment and denying the City's cross-motion. Ultimately, the circuit court concluded that Hazziez's claims against the City were not based in whole or in part on Concentra's actions, but that the City's liability to Hazziez was based on its own actions, for which Concentra had no indemnification obligation. DISCUSSION The Court of Appeal focused on the plain and ordinary meaning of the contract itself and did not look to extrinsic evidence unless the terms of the contract were ambiguous. The City was held liable for its own actions. The claims for which the City was held liable did not arise out of or result from acts or omissions caused in whole or in part by Concentra. Concentra was required to indemnify the City for liability arising from Concentra's actions, but not liability resulting from the City's own conduct. Because the City's liability to Hazziez arose solely from its own actions, not in whole or in part from Concentra's actions, the circuit court properly granted summary judgment to Concentra on the City's contractual indemnity claim. ZALMA OPINION Insurance is designed to protect an insured for damages resulting from its negligence. Indemnity agreements, like that in the City's contract with Concentra, is designed only to provide indemnity if the City was held liable for the actions of Concentra, the indemnitor. Since only the acts of the City caused damage to Hazziez it had no right to indemnity from Concentra and could only be indemnified by its own insurance. (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; 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 – http://zalma.com/blog/insurance-claims-library/

ZIFL Volume 27, Number 18 This, the eighteenth issue of the 27th year of publication Zalma’s Insurance Fraud Letter provides multiple articles on how to deal with insurance fraud in the United States. Subscribe to Zalma’s Insurance Fraud Letter Where You Can be Notified About the two Issues a Month The Source for Insurance Fraud Professional Where You Can Read: Public Adjuster Andrew Mitchell Pled Guilty to Fraud Andrew Mitchell aka Andrew Aga on August 31, 2023, pleaded guilty to defrauding four St. Chrles Parish, Louisiana residents of insurance money following Hurricane Ida. He has remained in custody since his arrest in January 2023. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf More McClenny Moseley & Associates Issues This is ZIFL’s Fourteenth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf Crime Doesn’t – Pay it Costs “Runner” Must Pay Restitution to Insurers The Eighth Circuit was called upon to decide the amount of restitution owed by a participant in a recruitment-and-kickback scheme aimed at defrauding automobile-insurance companies. The district court ordered restitution for every chiropractic patient that Abdisalan Hussein recruited from 2013 onward. In United States of America Plaintiff v. Abdisalan Abdulahab Hussein, also known as Abdisalan A. Hussein, No. 22-1275, United States Court of Appeals, Eighth Circuit (August 23, 2023) the Eighth Circuit resolved the dispute. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf A Different Kind of Insurance Fraud Parag Bhavsar, 42, of Newark, pleaded guilty before US District Judge Madeline Cox Arleo to information charging him with one count of conspiracy to commit mail fraud and one count of conspiracy to commit interstate transfer of stolen property. Bhavsar, an Indian national admitted that he defrauded various telephone providers and insurance companies out of millions of dollars by using stolen or fake identities to submit fraudulent claims for replacement cellular devices and then reselling those devices outside the US. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf Good News From the Las Vegas man sentenced to 27 months for wire fraud and telemedicine scheme. Sergey Duman was sentenced for participating in a scheme to defraud private health insurance companies. Duman purchased Cedar Care Pharmacy in Allentown, Pennsylvania, in January 2020. For the next six months, Cedar Care effectively acted as a shell pharmacy for a telemedicine fraud scheme. During that time, an entity purporting to be a telemedicine company regularly submitted prescriptions to the pharmacy that had been written without the knowledge of the listed patient. The pharmacy then fraudulently submitted private insurance, and Medicaid claims for the prescriptions even though the pharmacy never provided the prescribed medications to patients. He faces 27 months' imprisonment for wire fraud. The Court also ordered a 3-year term of supervised release to follow the term of imprisonment and over $4.8M in restitution. The Texas Commissioner of Insurance Cassie Brown has served an emergency cease and desist order on multiple insurance companies. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf Strems Files for Bankruptcy -Will He Get His $36 Million? Scot Strems, a Florida lawyer known as “public enemy number one” by Florida’s property insurance industry after it filed thousands of unnecessary lawsuits – many of them on the same claim – has slipped into bankruptcy, putting a deep red line under an expensive and frustrating chapter in the state’s insurance litigation crisis. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf Evidence of Arson Not Needed to Defeat Arson-for-Profit Back in 2001 I examined James E. Mitchell under oath on behalf of his insurer, United National Insurance Company who admitted to misrepresenting material facts when he applied for the insurance. As a result of that EUO and the testimony of the underwriter, United National decided to rescind the policy rather than accuse him of fraud and arson for profit, but still refuse his claim for fire damage and offered to return the premium he paid. Of course, in an expression of “chutzpah” (unlimited gall) he sued only to have the court conclude the rescission was appropriate. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf Health Insurance Fraud Convictions Dentist back in jail for practicing without a license William C. Gardner used to advertise himself as the best cosmetic dentist in Albuquerque. Now he’s an inmate at the Sandoval County Detention Center, accused of “defiantly practicing dentistry” despite the revocation of his license more than three years ago. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf Rescission Results in Policy Void From its Inception ARSON FOR PROFIT IS A VIOLENT CRIME Imperial Casualty and Lloyd's Underwriters retained me in the 1980's to advise concerning the fire claim presented by Levon Sogomonian and his wife as a result of a major arson fire and explosion that destroyed their home. The investigation took more than a year, multiple days of examination under oath (EUO), death threats to the claims investigator and a bomb threat at my office, that eventually established the leading case in California concerning rescission of insurance. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.pdf Other Insurance Fraud Convictions Injured Worker Gets Help from a Friend…and a Bat According to ICW Group a Florida Truck Driver who was injured on the job made a few unfortunate decisions when she decided she wasn’t ready to go back to work and wanted to make a little extra money. She asked a friend to hit her with a baseball bat! Her friend complied, but not to the satisfaction of the truck driver. The injured worker grabbed the bat and took a few extra swings at herself for good measure. Read the full article and all of ZIFL at http://zalma.com/blog/wp-content/uploads/2023/09/ZIFL-09-15-2023.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 California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com

Rescission Results Policy Void From its Inception ARSON FOR PROFIT IS A VIOLENT CRIME Imperial Casualty and Lloyd's Underwriters retained me in the 1980's to advise concerning the fire claim presented by Levon Sogomonian and his wife as a result of a major arson fire and explosion that destroyed their home. The investigation took more than a year, multiple days of examination under oath (EUO), death threats to the claims investigator and a bomb threat at my office, that eventually established the leading case in California concerning rescission of insurance. In Imperial Casualty And Indemnity, Company v. Levon Sogomonian and Elichka Sogomonian, No. B022012, 243 Cal.Rptr. 639, 198 Cal.App.3d 169, Court of Appeal, California (Feb. 4, 1988) Levon and Elichka Sogomonian (defendants) appealed from a summary judgment entered in favor of plaintiff Imperial Casualty Insurance Company (herein "Imperial") on both Imperial's complaint and defendants' cross-complaint. FACTUAL BACKGROUND On July 14, 1982, Imperial issued a homeowner's policy to defendants which provided casualty and fire insurance protection for defendants' home. On or about October 9, 1982, defendants' home was destroyed by a fire and explosion. A second fire on October 10, 1982 a second arson fire destroyed what had not been destroyed by the first fire. Following an investigation, Imperial concluded that certain misrepresentations and a number of omissions had been made by the defendants in their application for the policy which they had submitted to Imperial on June 7, 1982. Imperial sued, seeking: Rescission of the policy ab initio, together with the judgment of the court so declaring; and repayment, with interest, of advance payments (against the then anticipated fire insurance proceeds) of $30,300 which Imperial made to the defendants on or about November 18, 1982. In its motion for summary judgment Imperial produced evidence that the defendants, in responding to questions in the policy application, (1) specifically denied (for the immediately preceding three years) any loss history and any policy cancellations or renewal refusals and (2) failed to include the following facts: That in February of 1980 (within three years of their application to Imperial) defendants suffered landslide damages to their property which resulted in a legal action for $500,000 in damages filed against them by a downhill neighbor. This claim was submitted by the defendants to their then insurance carrier, Equitable General Insurance Company; That in early 1981 defendants suffered an uninsured loss by theft of precious stones exceeding $100,000 in value; That on December 12, 1981, Underwriters Insurance Company had cancelled a homeowner's policy which it had previously issued on the same property here involved; That on March 29, 1982, defendants had presented a water damage claim to Blue Ridge Insurance Company with respect to this same property; That, on April 5, 1982, over two months prior to the submission of the application to Imperial, the defendants had been notified by Blue Ridge Insurance Company of the non-renewal of the homeowner's insurance policy which that company had theretofore issued. Subsequently, on July 19, 1982, just a few days after the issuance of Imperial's policy, defendants were informed that the reason for such non-renewal was substandard property maintenance by defendants of the same property here involved. Defendants did not ever provide such information to Imperial; That at the time of the application, there was pending a lawsuit with Equitable Life Assurance Society, wherein that company sought to rescind a health policy on the grounds that defendants had made material misrepresentations and omissions in the application for that policy; That at the time the application was made to Imperial defendants had a second mortgage on their property with Alliance Bank (the existence of a first mortgage with American Savings & Loan Association was disclosed; however, the total owed on the home was approximately $425,000 of which nearly one-half, or $200,000, was secured by the undisclosed second trust deed). Imperial offered the deposition testimony of its former underwriter who was responsible for making the decision to issue the subject policy. She testified that she relied on defendants' application and had she known the "true facts" she would not have approved the issuance of the policy. DISCUSSION In their brief, defendants effectively conceded that of the established material issues of fact claimed by Imperial, they only really disputed three. Given the state of this record and defendants' concession in their brief, the Court of Appeal was compelled to the conclusion that no factual dispute exists with respect to the fact of defendants' concealment of certain information requested by Imperial. Moreover, there is no factual dispute that Imperial issued the policy in reliance on the truth of the statements made by the defendants and that Imperial's underwriter has stated that had Imperial known the actual facts, which only came to light during the post fire investigation, it would not have issued the policy. The Court of Appeal concluded that the application submitted by the defendants to the information sought by Imperial and denied to it by the false negative answers and omissions of defendants were material to Imperial's decision to provide insurance coverage. That conclusion is the only one that reasonably can be drawn from the undisputed evidence presented. Rescission of The Policy of Insurance Bars Any Claim By the Insured Under Insurance Code Section 790.03(h). “A contract is extinguished by rescission." (Civil Code § 1688.) The consequence of rescission is not only the termination of further liability, but also the restoration of the parties to their former positions by requiring each to return whatever consideration has been received. DISPOSITION Since the summary judgment did not provide a complete restitution to Imperial and Lloyd's, the judgment was reversed, with directions to the trial court to make and enter a new order granting summary adjudication of issues which is consistent herewith. A trial was held thereafter and I testified as a fact and expert witness only to have Mr. Sogomonian threaten my life as I entered the courtroom to testify. Judgment was had in favor of Imperial and Lloyd's and they recovered all advance payments, attorneys and investigation fees. ZALMA OPINION Importantly this case established the law of the state of California with regard to rescission of insurance. Although there was evidence that the fire was created on behalf of Mr. Sogomonian no criminal charges were brought and Sogomonian continued to attempt to gain from the fire by suing the investigator. In 15 years of work all litigation was resolved, Sogomonian paid, and went on to litigate with others on various other schemes. Contrary to his hopes I survived and am now 81-years-old and still working. If you want the full details of this case see my book "Arson for Terrorism and Profit" a fictionalized novel about arson for profit available at https://www.amazon.com/dp/1653323183/ref=sr_1_2?keywords=arson+for+terrorism+and+profit&qid=1577809094&sr=8-2 (c) 2023 Barry Zalma & ClaimSchool, Inc. Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos. 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